Economic Interdependence and Challenges to the Nation-State: The Emergence of Natural Economic Territories in the Asia-Pacific
Jordan, Amos A., Khanna, Jane, Journal of International Affairs
The political economy of the Asia-Pacific region is undergoing momentous changes, including the advent of natural economic territories (NETS) that are springing to life throughout the region. Variously called "growth circles," "growth triangles" or "sub-regional economic zones," the phenomenon is marked by intensified trade, investment and technology flows among contiguous localities or territories of three or more countries. While trade among neighbors is certainly not new, the emerging breadth and depth of the economic interaction among these various sub-regions has led some to argue that trade boundaries are superseding political boundaries. Indeed, in some cases, sub-regions of nation-states are developing economic links with neighbors that may be more vital than links with the political centers of power that govern them. This has raised the question of whether there is an emerging disjuncture between economic relations generated "from below" and political authority administered "from above."
It is important to pause here to define "natural" since this terminology has caused debate and some confusion among scholars. The term NETs, as coined by Robert A. Scalapino, applies to natural economic complementarities that cross political boundaries; "natural" does not imply lack of government involvement but can include government action that removes barriers to realize pre-existing complementarities.(2) In each case, however, the private sector plays the major role. The corollary of this thesis is that government action or political will alone cannot create or halt border-area interactions; it can only enhance market conditions that are rooted in natural complementarities.(3)
A recent confluence of domestic, regional and international factors have made NETS a viable mechanism for economic growth and integration. The economic maturation of a number of Asia-Pacific economies in the 1980s meant, for the first time, that there were increased complementarities among them to exploit.' The failure of command economies, worldwide and regionally, led to market liberalization policies that created more opportunities at the local level, in contrast to policies that were previously highly regulatory and state-centric. The reduction in political tensions in the post-Cold War era has also altered the foreign policy calculus in the region, resolving border conflicts and easing apprehension from cross-border trade and investment. Domestic trends toward democratization and/or political decentralization have also helped to create a favorable trade environment.
These factors, combined, have led to the development of some nine de facto or nascent NETS in the region, at various stages of development and with differing degrees of public- and private-sector involvement; yet all are generating innovative means of economic interaction that have limited consonance with traditional economic controls and political arrangements. It is a phenomenon particularly suited to the Asian context, where there is a strong predilection for informal agreements rather than legalistic and binding treaties, and for incremental rather than bold systemic change. NETS are emerging in Asia because they allow states to experiment with economic reform policies and to gradually expand them if successful. NETS also allow states to experiment with cooperating with each other, which they approach cautiously given the region's varying levels of economic development, its different socio-political systems and its complex security and political relationships. As a result, Asian states may find NET cooperation particularly attractive at a time when official mechanisms for economic cooperation - such as the Asia-Pacific Economic Cooperation (APEC), the East Asia Economic Caucus (EAEC) and the World Trade Organization (WTO) - are proving slow to achieve consensus on a regional (or global) economic framework for trade and investment.(5) Thus, the use of NETs allows states to proceed along their own paths of economic growth and development without the need to agree on overarching regional goals. …