East Asian Financial Regionalism in Support of the Global Financial Architecture? the Political Economy of Regional Nesting
Grimes, William W., Journal of East Asian Studies
East Asian financial regionalism has advanced significantly since the rejection of Japan's Asian Monetary Fund proposal in 1997. Key ASEAN+3 initiatives include the Chiang Mai Initiative, which is designed to provide emergency liquidity to economies experiencing currency crisis, and the Asian Bond Market Initiative, which seeks to develop regional bond markets. Surprisingly, these initiatives--despite the assertive "regionalist" rhetoric that has surrounded them and their intellectual origins in the analysis of the 1997-1998 Asian financial crisis--are explicitly designed to complement existing features of the global financial architecture, including IMF conditionality and global financial standards. The nesting of East Asian financial regionalism within the global financial architecture results from the political-economic interests of the leading economies of the region. In the absence of a major change in the political-economic environment, nesting is a stable equilibrium and is unlikely to change.
KEYWORDS: Chiang Mai Initiative, Asian Bond Market Initiative, financial regionalism, Japan, ASEAN+3, institutional design, East Asia
East Asian regionalism is again a hot topic among Western scholars. (1) In recent years, books have sought to "remap" it, to place it in the context of an "American imperium," and to explain either its construction or its "stunted" nature. (2) In contrast with an earlier generation of works that examined the possibility of an exclusionary Japan-led bloc, (3) recent works situate East Asia as an integral region within a global commercial or political system. Although suitably couched in caveats and despite some concerns of a "spaghetti bowl" of overlapping trade agreements, the increasing consensus is that the ideal of "open regionalism" espoused by the Asia-Pacific Economic Cooperation (APEC) forum, so often derided as a mere catchphrase when popularized in the 1990s, is a reasonable approximation of East Asia's present and future.
This article, while broadly agreeing with that assessment, seeks to advance our understanding of East Asian regionalism in three ways. First, it focuses on the relatively understudied area of financial regionalism, (4) whose dynamics differ considerably from trade-based regionalism. Second, it demonstrates that current efforts are broadly supportive of the global financial architecture, (5) despite a rhetoric of self-help and suspicion toward the International Monetary Fund (IMF) and financial globalization in general. Third, it offers a political economy explanation of why this is so. This explanation is in explicit opposition to "regionalist" explanations that emphasize the role of identities and ideals in the development of regional institutions.
To support this argument, I first sketch the relevant context, then develop the theoretical argument and explore alternative explanations, map out financial regionalism efforts to date, analyze their degree of conformity with relevant aspects of the existing global financial regime, and consider what sorts of changes in core political variables might tend to support or erode the current trend toward complementarity with the global financial architecture.
Much of the US academic and policy debate to date has focused on the establishment of free trade agreements (FTAs) and economic partnership agreements. This is certainly an interesting turn in the trade policies of the countries of East Asia, but the focus on trade obscures the growing impact of efforts on the financial side. Since the 1997 Asian financial crisis (AFC), serious efforts have begun to deepen financial regionalization in East Asia and to create institutions to avert future currency crises.
East Asian financial regionalism is developing in a rather different economic context from that of regional trade efforts. As is widely known, the East Asian region enjoys a high and growing share of world trade while also seeing an increasing proportion of intraregional trade. …