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Wednesday, December 21, 2005

Taipei Times - archives

Taipei Times - archivesTaiwan deserves a seat at the EAS table
By Darson Chiu and Alex Hsu 邱達生、許峻賓

Monday, Dec 19, 2005,Page 8

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If free trade is all about playing the game of comparative advantage, then regional integration is all about playing the power game, while wearing the mask of trade liberalization.

The first East Asian Summit (EAS) was held in Kuala Lumpur, Malaysia, last week. As predicted, Taiwan -- one of the Asian Tigers -- was not invited. The EAS included ASEAN, joined by China, Japan, South Korea and other countries. The ultimate goal of the EAS is regional integration. However, the integration process is a long way from being all-inclusive. How can the summit's goal be achieved without involving key players such as Taiwan?

The idea of East Asian integration is not a new concept. It actually arose out of the increased self-awareness of East Asians some 40 years ago, when the most developed country in the region, Japan, started to interact with developing countries in the region. Japan imported raw materials and exported manufactured goods, and initiated low-end technological cooperation. Afraid of being sidelined due to its World War II aggression, interested in East Asian markets and suffering from a lack of natural resources, Japan gave East Asian self-consciousness a wake-up call by economic means.

The "interactions" between Japan and East Asian developing countries generated an interdependent relationship. Through the fundamental rules of supply and demand, existing East Asian frameworks have been serving as the foundation supporting the global value chain. When it comes to the global economic system, regional phenomena can easily trigger a chain reaction. In order to prevent events like the 1997-1998 East Asian financial crisis from happening again, countries in this region have realized the significance of economic and financial cooperation.

The concept of East Asian integration should advance economic and political stability in the region. In addition, the concept should promote the competitiveness of regional enterprises through the development of efficient production networks and financial markets.

It is true that the concept is fragile without sufficient economic incentives. In response to the trends of globalization and regionalism, East Asian integration is anticipated. According to a report from the World Bank, "ASEAN plus three [including China, Japan and South Korea]" will be able to give a boost to the real GDP growth of all contracting parties. Given the fact that strong economic ties exist between Taiwan and other East Asian countries, the benefits could be further optimized if Taiwan was included in the arrangement.

From a trade and economic standpoint, there is no reason to exclude Taiwan. However, lacking common roots, the idea of East Asian integration can only emerge if East Asians come to share a common vision of the future and are happy with their roles in such a vision. But the current reality is that East Asia is still far from fulfilling that vision.

Political conflicts can be alleviated through economic incentives. No matter what style of regional integration is currently taking place, we cannot ignore its potential benefits for contracting parties and the likely impact on non-members. In the spirit of fair trade, no one should be left out of integration initiatives, especially when these initiatives serve the function of community-building to optimize the benefits of globalization. Given that its total trade with other Asian countries amounts to more than US$203 billion, Taiwan deserves to participate.

If opportunities for participation don't exist, Taiwan should create them. By taking advantage of its location, Taiwan could serve as the hub between northeast Asian and southeast Asian business networks.

Darson Chiu and Alex Hsu are assistant research fellows at the Taiwan Institute of Economic Research.

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