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The markets are leading Asia to ruin

Europe’s successful politically-led integration model is showing Asia the way ahead – if its leaders would only be willing

TOKYO

WHILE Europe goes from strength to strength as a united continent with a strong economy and a currency to match, Asia continues to wander directionless waiting fearfully to see whether it will be spared the fate of sliding with the US into recession. The contrast could not be greater and the coming trials of the global economy may vindicate Europe’s politically-led integration model while damning Asia’s market-led version.

Two events in Tokyo over the past week have highlighted the differences of approach. On the European side, a confident Hans Poettering, president of the European Parliament, came to Japan bearing tidings that the new European Constitution (the Treaty of Lisbon signed last December) is expected to be fully ratified and go into force on Jan 1, 2009.

The Constitution will mark the culmination of a truly remarkable chapter in European history that will see 27 countries representing a market of 500 million people emerge. Not just a ‘single market’ with integrated economies and a common currency and monetary system but also with its own effective foreign policy and with credible defence and security systems, as well as its own Parliament and executive branch, of course.

It will be a united Europe stretching from the Mediterranean to the Baltic and from the Atlantic Ocean to the Black Sea – a Europe that embraces countries at many different stages of economic and political development, speaking a multitude of different languages and with myriad cultural traditions. Even some of the smallest ‘transition’ economies such as Slovenia have been able to adopt the euro.

A few days before Mr Poettering brought the good news of Europe’s latest advance to the Foreign Correspondents Club of Japan in Tokyo, I heard Japanese Minister of Economy, Trade and Industry Akira Amari declare proudly that Japan is ready to ‘consider economic partnership agreements with large markets such as the United States and the European Union’ – a rather modest ambition compared to Europe’s achievements If Tokyo does conclude a free trade or economic partnership agreement with the US, there is no doubt that this will draw Japan more closely into America’s sphere of influence, in the economic and perhaps political sense. It remains to be seen then whether any conflict of interest could arise for Tokyo in negotiating an agreement with Brussels. But the real casualty could be any hope of real Asian unity.

Japan’s philosophy, and that of at least some other Asian countries, boils down to this: go where the markets are, and the market knows best.

This applies not only to their pursuit of mega export markets in the US and elsewhere (rather than building an ‘internal’ market as Europe has done so successfully) but also to their own misguided view that the ‘market-led’ model is the best way to achieve greater economic integration among their own economies. This conception is a wrong one, as Mr Poettering implied.

‘If you want to progress with unification, then it must be on the basis of law,’ he said. ‘Without that, you go nowhere. Political decisions should lead to a legal basis.’

In other words, tackle the process of economic and political integration boldly from the top down by political agreements, statutes and institution building, as Europe has done, rather than timidly leaving it all to businessmen, as Asia is doing (with the exception now of Asean).

The usual excuse offered by Asian policymakers for the lamentable lack of progress in knitting together this region into a coherent and strong whole is that it took Europe 50 years to get there – so, have patience. But what is never started is certainly never finished, and there are no signs yet of any comprehensive plan for Asian unity. There are just a lot of competing countries and alliances, dealing with each other and with the outside world.

Another excuse is that Asia is too diverse culturally and ethnically to follow Europe’s example, and that its member countries are at too different stages of economic development to be able to contemplate integration in the foreseeable future.

Europe’s achievement of unity in diversity has given the lie to this claim, and it is always possible for integration to take place at ‘two speeds’ or more, as accession to the euro under the Maastricht Treaty has proved.

If these arguments do not convince Asian leaders that they need to start talking seriously to one another about market and community building, then events that are likely to unfold during the remainder of this year almost certainly will.

The US will slide inexorably into recession, and Japan will be not far behind. China could slow abruptly under the impetus of reduced external demand and internal restraints, and then the rest of Asia will follow. Only then will the need for a true Asian market (and currency) become apparent.

 

Source: Business Times 7 Feb 08

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