Academic journal article The Journal of East Asian Affairs

Taking Stock of Monetary Regionalism in East Asia: A Glass Half-Full or Half-Empty?

Academic journal article The Journal of East Asian Affairs

Taking Stock of Monetary Regionalism in East Asia: A Glass Half-Full or Half-Empty?

Article excerpt

Abstract

Since the turn of the new century, East Asian countries have taken a series of important steps to launch and strengthen institutional mechanisms of monetary and financial cooperation to enhance the region's resilience to financial instability. Central to these efforts have been the Chiang Mai Initiative (CMI) and its recent multilateralization, a self-managed reserve pool designed to serve as a vehicle for providing regional liquidity support. Despite the significance of these developments, however, progress toward a common framework of monetary cooperation has been slow, its institutionalization shallow, and its prospects uncertain. Beyond a general consensus on the need for greater cooperation, regional actors remain deeply ambivalent toward the extent and depth of institutionalization. This article provides a critical assessment of the progress made so far, the obstacles that remain, and the prospects for the emergence of a more fully institutionalized framework of monetary cooperation in East Asia. I argue that while the CMI and its multilateralization represent a notable break from the past, fundamental political cleavages surrounding its direction are yet to be resolved, and as a result monetary regionalism in East Asia still remains more of a glass half-empty than half-full.

Key Words: East Asian regionalism; Chiang Mai Initiative; CMI multilateralization; financial regionalism

Earlier studies of regionalism in East Asia, especially those taking a comparative approach, almost always entailed some discussion of the common clich?s associated with the region. Among them were the characterization of regionalism in East Asia as a primarily market-driven phenomenon, the consequent shallowness of its institutionalization and the stunted extent of its multilateralization, and the absence of clear political leadership and trust that make it a daunting task for the region to overcome these obstacles (see Stubbs 1995; Katzenstein 1997; Haggard 1997; Rozman 2005). In contrast to these earlier views that tended to put more emphasis on the limits of East Asian regionalism, recent scholarship sheds a more sanguine light on the progress East Asia has made toward regional cooperation, with some justification: there has been a flurry of institution-building activities since the turn of the new century that has led to an unprecedented level of regional cooperation in East Asia (see Stubbs 2002; Bisley 2007/2008; Frost 2008; Dent 2008; ADB 2008; Chey 2009; Green and Gill 2009).

For the optimistic proponents of East Asian regionalism, the fact that the region has made not-so-negligible progress toward more formal and institutionalized cooperation is perhaps not that surprising. What may surprise some, however, is where this progress has been made the most. Whereas 15 years ago, most discussion of East Asian regionalism revolved around the rapidly growing intraregional trade and investment that were giving rise to regional networks of production, these are not the areas where multilateral institutionalization has unfolded recently. Rather, it is in the monetary and financial affairs that East Asian countries have made the most tangible progress in terms of both the relative depth of institutionalization and extent of multilateralization. In matters of trade and cross-border investment, cooperation in the region has been pursued primarily through a patchwork of bilateral and sub-regional arrangements without any overarching multilateral framework. This is a rather unusual departure from regionalism elsewhere, in that the emergence of an institutionalized regional trading and investment arrangement typically precede institutionalization in monetary and financial cooperation. East Asia has been sidestepping this, endorsing a "noodle bowl" of sub-regional and bilateral trade and investment arrangements while pushing harder to ground monetary and financial cooperation in a firmer, more encompassing institutional framework (Baldwin 2007; Solis and Katada 2007; ADB 2008, ch. …

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