Building an East Asian Economic Community

East Asian economic cooperation has been actively pursued during the past few years, especially after the Asian financial crisis. A number of bilateral and multilateral Free Trade Area (FTA) agreements were concluded or are being negotiated. The recently published East Asia Vision Group Report provides a more concrete roadmap for an East Asian economic community. The ASEAN Free Trade Area (AFTA) became a reality on January 1, 2002, following a 10-years tariff reduction schedule. AFTA aims not only at trade facilitation but at inducing more investment. An ASEAN+3 (i.e. Japan, China and South Korea) FTA was also suggested to build an East Asian Free Trade Area (EAFTA). Japan signed an FTA with Singapore of ASEAN, while China and ASEAN agreed to create FTA within 10 years. On the financial side, the Chiang Mai Initiative created a regional liquidity fund by expanding the existing ASEAN Swap Arrangement to include all ASEAN members and augmented it by a network of bilateral swap arrangements among the ASEAN countries, China, Japan and South Korea. East Asian countries have also established a surveillance mechanism to monitor their economic performance. However, there are many obstacles in further enhancing regional economic cooperation. Structural problems involve political, economic, and cultural heterogeneities among East Asian countries. Low legalization and effectiveness of overlapping regional institutions render deeper regional cooperation difficult. Domestic instability of the ASEAN countries may hamper rapid regional cooperation. Regional rivalry between Japan and China should be an important object of observation. East Asian economic cooperation will be accelerated in the near future. Since the announcement of the ASEAN-China FTA agreement, Japan has attentively sought alliances to vie with growing China and to maintain her influence in the region. The next few years will see the emergence of a number of new bilateral and multilateral relations, both in trade and finance, in East Asia.