East Asia - Regional Economic Integration and Implications for the United States

Article excerpt

On May 4, 1992, the U.S. International Trade Commission (hereinafter the Commission or the ITC) received a request from the House Committee on Ways and Means to conduct an investigation under section 332(g) of the Tariff Act of 1930 on the causes of increasing economic integration in East Asia and implications of this integration for the United States.(1) On June 30, 1992, the Commission instituted investigation 332-326 in response to the request,(2) and the Commission released its results in a nine-part report in May 1993.

For the purposes of its report, the ITC defined the countries of East Asia as Brunei, China, Hong Kong, South Korea (Korea), Indonesia, Malaysia, the Philippines, Singapore, Taiwan, and Thailand.(3) The Commission examined trade, investment, and other economic data, as well as commercial and development policies of East Asian countries and their major trading partners (japan and the United States) to determine whether recent economic changes and policy measures are effectively merging East Asia's markets for goods, services, capital, and labor.(4) Case studies on three industrial sectors and the energy and environmental sectors were also undertaken to identify factors favoring or standing in the way of economic integration in the region.(5) Finally, the Commission interviewed people experienced in the regional economic and business affairs about the implications of recent trends in East Asia for U.S. trade interests and Policy.(6) What follows is a summary of the highlights of the ITC's 1993 report.

1. Interest and Concern with East Asia

East Asia has been one of the fastest growing regions of the world in recent years, with annual real gross domestic product (GDP) growth for the period of 1985-1990 averaging 8.6% in the newly industrializing economies (NIEs), namely, Singapore, Taiwan, Hong Kong, and Korea; 6.8% in the ASEAN Four (Indonesia, Malaysia, Thailand, and the Philippines); and 7.9% in China.(7) East Asia has a combined GDP that is roughly 6% of the world total. Just under 80% of this GDP is divided more or less evenly between China (population 1.2 billion) and the NIEs (population approximately 72 million).(8)

The countries of East Asia represent a diverse collection of economic and political systems and a broad range of indigenous resources.(9) The ITC found that each has struggled to modernize and develop its economy, often with the aid of some form of long-term planning or industrial policy. According to the ITC report, while national priorities and political differences have shaped strategies, the overall trend for East Asia in recent years has been away from import substitution, in which domestic industries are fostered behind trade barriers to serve markets that would otherwise be supplied by imports.(10) Most countries in the region are now moving toward export-led growth investment liberalization.(11)

However, the ITC noted the existence of factors that could constrain future investment and growth. Infrastructure has generally not kept pace with economic development, and serious bottlenecks in communication and power systems, roads, ports, and services are occurring.(12) While tariffs on thousands of products have been reduced somewhat, they have generally not been applied to sensitive items.(13) According to the ITC's findings, nontariff barriers still hinder commerce in the region, and protection of intellectual property rights (IPR) is still regarded as lax in certain countries. Investment performance requirements, shortages of trained middle managers and engineers, and the absence of long-term capital markets essential for large-scale financing are also constraints.(14)

The ITC analyzed each nation in turn, making the following major conclusions:

A. Korea

Historically, Korea's contact with other nations in Northeast Asia has not been favorable. Neighboring China has been seen as a threat to the independence of the Korean peninsula, and Korea has only recently established diplomatic relations with China. …