Is There a Relationship between Political and Economic Integration?

By Nikola Mirilovic

Economic integration in Asia has progressed further and enjoys broader support than political integration. Whether economic integration requires political integration in order to survive, and the nature of the relationship between interdependence and conflict, remain open questions. That is the case in general as well as in the particular case of key contemporary rising powers: China and India. These questions will play an important role in understanding the prospects for conflict or cooperation in Asia. This Policy Commentary outlines the general debate on these questions and applies it to China and to India.

 The Interdependence Debate

 The main argument linking economic integration and peace is as follows. Increasing trade and international investment facilitates economic efficiency by allowing for economies of scale, and for countries to take advantage of the benefits of specialization and exchange. Once international economic links are established, governments do not want to interrupt them and suffer an economic loss. They consequently pursue stable and peaceful relations with their trading partners.

 The counterargument is that economic integration can increase the likelihood of conflict in two principal ways. First, integration can lead to trade disputes. For example, trade imbalances can lead to complaints by the country that is experiencing a trade deficit. Inflows of foreign investment can lead to concerns about excessive influence by foreigners. Read more of this post

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Caging the Dragon? Asian Regional Integration and U.S. Interests

By Brad Glosserman, Executive Director, Pacific Forum CSIS

Americans tend to be skeptical about or troubled by the notion of regional integration in Asia.

There is some basis for concern, but the advantages of integration are likely to exceed the cost to the United States.  An integrated Asia, the process of which has been shaped by the United States and like-minded partners, should strengthen the international system that Washington has labored to build over the last half century, reinvigorating and strengthening the norms and principles that have provided its foundation.

Defining “Asian integration” can be problematic for functional and geographic reasons. For my purposes, the term refers to East Asia, which I equate institutionally with ASEAN Plus Three. That narrowly conceived geographical scope allows me to demand more when it comes to functions. Meaningful integration means more than the loose confederation that defines ASEAN (its ambitions to create “communities” notwithstanding) but it doesn’t require the detailed legal framework of the European Union. At a minimum, it includes a regionwide free trade area, a political superstructure to express its collective will (no matter how sharp its teeth to demand conformity with its pronouncements) and recognition by the rest of the world that it is a meaningful political unit. Even that scaled-back objective may be too much. For many, Asian nations are too diverse, too committed to their (relatively) new sovereignty, and the benefits of integration are too diffuse to justify the costs. But if those formidable obstacles can be surmounted – and integration is proceeding, fitfully for sure, but there is progress nonetheless — most US observers worry that integration would come at their expense.

The Case Against Asia

There are three main objections to Asian integration. The first is that a regional economic unit would divert trade from the United States. Fred Bergsten (in “China and Economic Integration in East Asia: Implications for the United States”) estimates that “the United States could immediately lose as much as $25 billion of annual exports as a result of the initial static effects of the tariff discrimination that would result from truly free trade in East Asia (on the “10+3” model). These numbers could increase over time as dynamic economic effects, especially with respect to new investment patterns, are triggered.”

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