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THE RISE OF ASIAN EMERGING COUNTRIES IN THE
GLOBAL ECONOMY
Implications for the Multilateral/Regional Trade Regime
Brigitte Lévy
University of Ottawa
Globalization, widely cited as the dominant international economic trend of the
post-World War II era, has stimulated the opening of the world economy. The
main feature of globalization, and especially of its intensification in the 1980s, is
increasingly fierce competition among countries and among multinational
corporations (MNCs).
This article first considers the process of competitive liberalization, which has
driven the trend toward free trade and which has contributed to further
integration of world economies. It illustrates that the trading system is highly
competitive, with nations from North America, Europe and Asia seeking to sustain
economic growth through greater reliance on export trade and through MNCs’
global value chains of production. The first section emphasizes that regionalism
has strengthened worldwide, with the major economic players tending to focus on
regional agreements, and more recently, on bilateral agreements.
Next, the article discusses regionalization patterns, with an emphasis on the
integration taking place in Asia. The major trade bloc in the region, the Association
of Southeast Asian Nations (ASEAN), is focusing on increased integration into the
global economy. In recent years, it has been promoting trade agreements with
Japan, South Korea, and the emerging Asian countries of China and India, among
others. Therefore, the article considers whether a new economic pole is emerging
in Asia.
Last, the difficulties in concluding the Doha Development Round of World Trade
Organization (WTO) negotiations and the stalling of those negotiations from July
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vol. 3; n°1 (dec. 2007) : Europeanization – Globalization. Europe’s Role in International Development
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2006 to February 2007 point to an urgent need for global governance and
supportive institutions. This article looks at critical issues in the global system,
such as full participation of all players (particularly emerging and developing
countries) in the decision-making process of international institutions, and the
pursuit of sustainable development. Also, the impact of different cultures of trade
will be important factors to consider in order to understand the emerging new
world order.
1.
THE INTERPLAY OF GLOBALIZATION AND REGIONALIZATION
Globalization is not a new phenomenon, but it is more pervasive today than in the
past. Understanding globalization patterns is key to explaining the dynamics of
global trade and of trade blocs. According to Ignatieff (1993), the global economy
has existed since 1700. However, in the early period of international trade,
development was curtailed by the mercantilist policies of the 17th and 18th
centuries. By the middle of the 19th century, trade barriers were being dismantled
and technological improvements were advancing dramatically. Three waves of
globalization characterize the past two centuries: 1870 to 1914, followed by a
retreat to nationalism from 1914 to 1945; 1945 to mid-1980s, fuelled by trade and
growing foreign direct investment (FDI); and mid-1980s to the present, driven by
global expansion of MNCs.
In the second wave of globalization, stimulated by the end of World War II,
integration between developed countries grew rapidly. Capital movements
increased, mainly in the form of FDI, with ownership and control residing with
MNCs, which became the engines of internationalization. New industrialized
countries (NICs), such as Hong Kong, Taiwan and South Korea, small in
geographical terms and poor in resource allocation, grew rapidly, while embracing
trade liberalization. The third wave of globalization, from the mid-1980s to the
present, encompasses many novelties. It was marked by the collapse of the
communist bloc and the entry of Eastern European countries into the European
Union (EU). Trade openness and FDI policy incentives in developing countries,
coupled with technological improvements in the ICT sector accelerated
globalization. This gave way to new trade patterns characterized by the rise of
service offshoring. Reduction in transportation costs and improvements in
transportation logistics accelerated that process. To better assess what the rise of
Asian emerging countries means for the global economy, focus needs to be on this
current phase of globalization. The literature on globalization (economic, political
and social) is extensive. For the purposes of the article, only research findings of
particular relevance to this paper will be examined here.
Lévy — The Rise of Asian Emerging Countries in the Global Economy
3
Reid (1996) has captured the quintessence of the latest wave of globalization.
According to that author, in 1989, three powerful forces converged: one economic,
one technological and one political (the fall of the Berlin Wall). Globalization was
the fruit of that convergence. The subsequent widespread liberalization movement,
despite the recent difficulties of the Doha Round, has increased FDI. Furthermore,
the opening of China (in the mid-1980s) and India (in the 1990s) to the global
economy accelerated these trends. Today, China has become the world’s largest
manufacturer, and India has grown rapidly as a service provider.
Friedman (1999) has described globalization as the dominant international system
that replaced the Cold War system. He believes that globalization is inevitable and
irreversible, given the power of the market system, coupled with advances in
technology. This point of view has gained acceptance among many governments,
institutions and research scholars. However, in the last decade, regionalization has
strengthened around the world and has become a subset of globalization. For
Rugman (2005), globalization remains more myth than reality, and government
regulations and cultural differences have actually divided the world into regional
blocs and what Ohmae (1985) has called the Triad − the EU, Japan and North
America, which all compete for dominance in their regional markets. Similarly,
MNCs develop regional strategies to take advantage of segmented markets.
The world trading system is dominated by the activities of the Triad and especially
of MNCs (Figure 1), and strategic regionalism can be seen as a subset of
globalization. Authors such as Boyer and Drache (1996) perceive the shift in
decision-making to regional organizations as an attempt by governments to evade
national political processes. This would be the case for the North American Free
Trade Agreement (NAFTA) and the European Monetary Union (EMU). Such
arrangements prevent domestic checks on globalizing processes from being
exerted. According to these authors, rather than put the brakes on globalizing
trends, regional economic agreements may actually accelerate them. In this view,
integration is an attempt to make an economy more competitive so that it can join
the ranks of major financial, technological and trading powers such as the US, the
EU and Japan. In such a context, many trade experts tend to view the multilateral
and regional processes that have taken place over the past two decades as
complementary rather than conflicting.
Today, the main objective of economic integration remains the transformation of a
number of national economies with geographic boundaries into one big united
space. The rationale for regional groupings, as distinct from global integration,
includes the traditional arguments for regional co-operation (territorial size,
economies of scale, and so on) but includes new concerns and uncertainties in the
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current transformation of the global economy. The sustainability of trade, which
involves the production process of goods being traded, and the social and
environmental conditions under which they are produced, are key issues. Also,
trade blocs struggle with questions of how far they should integrate in
jurisdictional and geographic terms. Those questions will be particularly important
for Japan, China and India within the context of further integration in the Asian
regional framework.
While cross-country trade linkages have been rising steadily in the last four
decades, cross-border capital flows began to surge only in the mid-1980s. FDI is the
main driver of globalization, and the location of MNCs increasingly reflects three
developments: policy liberalization, technical progress and evolving corporate
strategies. Today, MNCs account for some 31% of world exports, and their
affiliates employ 57 million people and produce nearly 10% of world gross
domestic product (GDP). MNCs tend to be well positioned in many countries
where technology, management skills, brand names, large-scale operations, and
sophisticated flows of information within affiliates are important to their success.
About 90 of the world’s 100 largest non-financial MNCs in terms of foreign assets
are based in the Triad, but MNCs from emerging countries are making inroads.
With the increasing mobility of capital, differences in domestic policies create
policy-arbitrage opportunities, with firms seeking to locate in the countries with
the most favorable policy environment and the most cost-efficient production
structure. Now, fully integrated into the global value chain, emerging countries
from Asia are not only becoming a manufacturing production base, but also
potential players in global markets, as supported by the following data.
A recent study by the Boston Consulting Group (2006) considers the role of emerging
MNCs from rapidly developing economies. The top 100 that exemplify the new
competitors from emerging countries have several characteristics. They have US $
715 billion in combined revenue and earn 28% of their revenue from international
operations. That portion will likely increase to 40% by 2010 according to the report.
MNCs in emerging countries are involved in activities in nearly all sectors:
industrial goods, consumer durables, resource extraction, technology, and business
services. Of those 100 corporations, 70 are from Asia (44 from China and 21 from
India), 18 from Latin America, and the rest from Russia and Turkey. While
established players may have competitive advantages in terms of business
knowledge, innovation, industrial property, brands, and design, multinationals
from emerging countries enjoy competitive advantages including low-cost
resources, as well as the home-market environment advantages that come with
being located in the fastest growing economies. Government incentives may also
come into play.
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Although most FDI flows are among developed countries, FDI flows among
developing countries are also growing. In 2004 they accounted for 25% of world
FDI stock and 39% of inflows (UNCTAD, 2006). In 2004, developing countries
attracted an estimated US $ 255 billion of FDI inflow, increasing their FDI stock to
more than US $ 2.5 trillion. However, the FDI flows were concentrated in only a
few major countries, such as China (UNCTAD, 2005). In developing Asia and
Oceania, more than 40% of FDI flows are intraregional, with Hong Kong (China),
China and Singapore as the leading investors. The distribution of FDI among
sectors illustrates how it can contribute to development. The share of services in
the FDI stock of developing countries is estimated to have risen from 47% in 1990
to 55% in 2002, with a parallel fall in the share of manufacturing, from 46% to 38%
(UNCTAD, 2004). In Asia, the share of FDI stock in services is estimated to have
risen from 43% in 1995 to 50% in 2002, while falling in the manufacturing sector
from 51% to around 44% and remaining small in the primary sector.
Empirical evidence suggests a positive link between the level of openness and
economic growth (Dollar and Kraay 2002; Baldwin, 2003). Figure 2 illustrates the
rising openness to trade. Kose, Prasad and Terrones (2005) demonstrate that trade
linkages have spread broadly but that only a small group of emerging economies
have undergone significant financial integration, as measured by gross capital
flows across their borders. This is the case of China and India today, where there is
a positive link between rates of economic growth and financial integration. FDI
inflows in China increased from US $ 25 billion in 1990 to US $ 53.5 billion in 2003.
That year, China received more FDI inflow than the US. This points to the fact that
governments of traditionally less open countries, like India and China, now see
liberalized trade and investment flows not as a threat but as an opportunity.
Indeed, the opening of the Chinese economy, combined with a large pool of skilled
workers, low wages, and an undervalued currency, attracted large amounts of FDI
into the country. China’s inward FDI orientation in 2003 was more than double the
G7 countries’ average of 16%. China’s inward FDI stock as a percentage of GDP
increased from 0.6 in 1980 to 35.6 in 2003. Also, China’s outward FDI stock
increased from US $ 2.5 billion in 1990 to US $ 37 billion in 2003 and has continued
to rise. According to The Economist, as of March 2005, China had over US $ 650
billion in reserves, which enabled it to make major investments around the world.
The current account surplus is expected to narrow to 5.3% of GDP in 2007, from
7.1% in 2005, as China improves foreign access to its services sector (The Economist
Intelligence Unit, Country Report: China, Sept. 2006).
Latin America is attracting new Chinese investments, mostly directed at securing
natural resources, such as Venezuelan oil and natural gas. Exports to China are
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also providing the region with an opportunity at a time of declining US FDI in the
region, helping to keep the mining industry alive and providing much-needed
foreign currency to service foreign debt. China has partnered with Brazil to
establish a rail link to the Pacific to cut the costs of transporting iron and soy beans.
It is also making similar investments in Chile’s ports. US MNCs that were deeply
involved in Latin America are more focused these days on high-tech business ties
with Asia. As for FDI in China, although it makes up only around 10% of total
investment, it is having a strong influence on the export sector. In 2005, foreign
MNCs with China-based investments accounted for 58% of China’s exports.
In India, real GDP per capita grew by an average of 3.6% per year from 1980 to
2000. According to projections by Goldman Sachs, GDP per capita is expected to
triple by 2020. India provides a large pool of skilled knowledge workers and is a
source of raw materials. It is also an attractive market in which to invest and offer
expertise. The dismantling of tariffs and restrictions on FDI since 1991 has
accelerated openness to the global economy. According to the India Central
Statistical Organisation, data for 2006 point to an annual GDP growth rate of 8.3%
in 2006/07 and 7.6% a year in 2007/08 and 2008/09. Growth in exports of goods
and services will be supported by a strong performance in the ICT sector. Import
growth will continue at a rapid pace, driven by an increase in domestic demand for
oil, intermediate inputs and raw materials, as well as consumer goods. India’s
import boom led to a current account deficit in 2005 of US $ 11.9 billion (1.5% of
GDP). However, services exports will continue to grow strongly as ICT and
business-process outsourcing attract western MNCs to India. The share of the
services sector in India’s economy expanded from 37% of nominal GDP in 1981 to
more than 50% of GDP in 2002 (UNCTAD 2004).
Economic reform in India has brought some successes, and efforts are being made
to improve the country’s ties with other nations. For example, China has become a
key trading partner, and closer ties have been formed with Brazil, South Africa,
and the EU (including the UK). India has also signed a number of free-trade
agreements with countries as far away as Chile. However, privatization, reform of
that country’s financial sector and opening of its labor market to FDI deserve
further attention. Also, India’s infrastructure still needs improvement. Internal
issues related to the caste system and difficulties in managing a huge democracy
pose threats in terms of possible social unrest.
How MNCs might adjust investment strategies in response to opportunities arising
from China’s deepening integration into the global economic system and what
consequences this might have for developing countries in areas such as Southeast
Asia as FDI recipients remains to be studied (as pointed out by Buckley, Clegg,
Lévy — The Rise of Asian Emerging Countries in the Global Economy
7
Cross et al 2005). In the same vein, India’s deepening integration and growth is
raising the issue of the importance of both countries in the Asian regional network
(see Section 3).
According to Baldwin (2006), the subset of globalization – regionalization − is here
to stay. Given current regionalization patterns, and considering trade flows as a
whole, Chortareas and Pelagidis (2004) come to the preliminary conclusion that the
dominant tendency is the increase in trade within bilateral and regional trade
agreements (RTAs). Today some 40% of world trade takes place within RTAs, and
that figure is projected to grow (UNCTAD 2005). The Global Economic Prospect 2005
(World Bank 2005) illustrates how the dramatic proliferation of regional and
bilateral trade agreements (230 by late 2004) is reshaping the architecture of the
world trading system. These agreements affect the multilateral trading system and
raise questions about their political, sociological and strategic importance. Many
countries are pursuing RTAs because of the cumbersome WTO negotiation
process. Among the 148 WTO members as of January 2005, 140 had concluded
preferential trade agreements with other countries.
One advantage of RTAs is that they create opportunities to lower costs in areas
other than tariff and non-tariffs barriers to trade (Table 1). Open regionalism − a
tool conceived in the 1990s to achieve more effective insertion into the global
economy − is expected to bring economic growth. It is also challenging the way
distributive policies can be implemented in order to counter social and economic
inequalities. Also, to improve trade and foreign-investment perspectives for their
MNCs, many countries are establishing bilateral treaties with each other. The
proliferation of bilateral and regional arrangements, which are second-best
alternatives to comprehensive multilateral agreements, gives rise to another set of
issues related to differences in norms and institutions and in social and cultural
values, as well as to issues of sovereignty. It also reflects the significant difficulties
in liberalizing trade and investment flows multilaterally.
According to data compiled by Targowski and Korth (2003), the world’s largest
market at the end of the 1990s was NAFTA, which comprised 26% of world GDP,
followed by the European Union (22%) and then by China (11%) and Japan (8%),
which, taken together were close to the EU in importance. The remaining 187
countries, including the Asian Tigers, India and Brazil, accounted for only 33% of
the world market. What remains to be seen is how a possible acceleration of
growth in India and Brazil and increasing exports and FDI from China will affect
those data. By 2004, China had become the sixth largest economy and the leading
recipient of FDI.
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Today, a trend continues toward the concentration of FDI and related MNC
activities in a minority of rapidly developing countries. Indications are also strong
that FDI has grown more rapidly in the services sector than in the primary and
manufacturing sectors (UNCTAD 2006). To an increasing extent, FDI serves global
and regional markets in the context of international production networks. Rapid
growth in China and India is helping sustain the commodities boom that is driving
growth, particularly in Latin America, Russia and the Middle East. Emerging
markets will drive global growth and the future path of regionalization. Therefore,
the rise of emerging countries like China and India has implications for the trend
toward regionalization, and for the multilateral trading system.
The Doha Round of global trade negotiations, which covers everything from goods
and services to investment rules, government procurement and competition policy,
is under stress, particularly over continuing disagreements on agricultural
subsidies. Issues of concern to developing countries such as access to cheap generic
drugs to combat AIDS and malaria are also raising challenging questions in terms
of intellectual property and human needs. According to the Trade and Development
Report 2006 (UNCTAD 2006: 79), export and income gains expected to result from
the Doha Round appear to be modest and concentrated in a few countries: in the
likely Doha scenario, only six countries (Argentina, Brazil, China, India, Indonesia
and Thailand) would receive 73.3% of the benefits to developing countries.
Emerging trends are resulting in growing global disparities as nations compete for
investment and join the global economy. The role of multilateral institutions in
global economic governance will be addressed in the last section of the article.
Section 3 considers evolving development strategies within the world of trade
blocs, and the role of Asia in that process.
2.
GLOBAL COMPETITION, TRADE BLOCS AND ECONOMIC INTEGRATION IN ASIA
Many countries perceive further integration into the global marketplace as a path
for development and growth, and they view regionalization as part of that process.
Forming a trade bloc provides insurance against future disruptions of commerce
with selected economic partners (Whalley 1988). It is also a way to remain
competitive in a tripolar world economy (Lévy 1995). Today’s extremely connected
international system is continuously forging high levels of transnational activities.
Offshore production and outsourcing, both in the manufacturing and services
sectors, have added new dimensions to competitive dynamics worldwide. As
mentioned earlier, opportunities have emerged for developing countries such as
China and India to climb the development ladder. Time will tell how they will
position themselves in the cluster of regionally integrated countries in Asia.
Lévy — The Rise of Asian Emerging Countries in the Global Economy
9
The attitude of economists to trading blocs, whether they be common markets or
regional free-trade areas, has been based on traditional views that have strongly
endorsed global multilateral trade. Perhaps the most widely held conclusion in the
abundant literature on trade blocs is that such arrangements are second-best
solutions after free trade, which would better improve a country’s welfare. Lévy
(2006) provides an overview of the levels of integration that member countries may
adopt and a discussion about whether the regionalization process creates building
blocks or stumbling blocks. Based on current evidence, the integration agreements
now under way in Europe, North America and Australasia will likely increase
integration between each of the regions concerned and the rest of the world,
because those agreements extend the network of trade and investment
relationships beyond the region. Japan’s largest market is the US, and a significant
proportion of Japanese exports to China today is ultimately destined for the US.
South Korea and Taiwan are more integrated with the US than with Japan. At the
same time, Japan’s trade with the whole of Asia is greater than its trade with North
America.
The economic power wielded by Japanese-based MNCs is already present across
much of East Asia, and no formal framework is in place. So, despite the
intraregional expansion of the EU and NAFTA, there is a considerable degree of
integration taking place between regions. Economic integration in Europe, the
Americas and Asia provides a degree of insight into some structural elements that
are shaping the global environment. The deepening and strengthening of regional
economic integration are in part driven by initiatives such as the EU and NAFTA,
but also by fundamental factors including advances in ICT and their
dissemination, the globalization of trade flows and economic competition, and
unique political geographies.
A look at the integration taking place in the Americas reveals that concerns about
industrial competitiveness have played a major role in regionalization. Over the
last four decades, Latin American countries (LACs) have been involved in 13% of
the RTAs currently reported to the WTO. All but 5 of the 27 agreements have been
reached over the past decade. In the 1990s, RTAs and 43 investment treaties were
concluded by LACs participating in fora such as NAFTA; the Latin American
Integration Association (LAIA, the former LAFTA); the Caribbean Community and
Common Market (CARICOM); the South American Customs Union of Mercosur;
and the Group of Three (G3), consisting of Colombia, Mexico and Venezuela.
NAFTA members also signed many bilateral agreements, including Mexico’s freetrade agreement with Costa Rica (1995), the G3 (1995), Nicaragua (1998), Israel
(2000), EU (2000), Chile and Uruguay (2004), and Japan (2005). Canada increased
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its ties with Israel (1996), Costa Rica (1997) and Chile (2003). Negotiations are
under way with the Andean community countries, the CARICOM, Singapore, and
South Korea. Further ties are being forged with the EU, and preliminary
discussions are taking place with Japan. The US is involved in bilateral agreements
with many countries, including Israel, 1985; Jordan, 2001; Chile and Singapore,
2003; Bahrain, Morocco, and Central American countries, 2004; and Australia in
2005. All NAFTA countries are also part of the proposed Free Trade Area of the
Americas (FTAA).
The escalation of negotiations on regional integration in Latin America and the
continent is widely attributed to the Enterprise for the Americas Initiative,
launched by President George W. Bush in June 1990. This plan to establish a freetrade zone “from Anchorage, Alaska, to Tierra del Fuego” fit in well with the
worldwide trend toward globalization and regionalization. At the Miami Summit
of the Americas in December 1994, leaders from throughout the Americas agreed
in principle to establish a free-trade area by 2005 covering 850 million people and a
GDP of $9 trillion. At the summit, Chile was officially invited to join Canada,
Mexico and the United States as the next member of NAFTA, but substantive talks
on Chile’s accession ended when US negotiators could not gain “fast-track”
authority to implement trade agreements. Chile subsequently negotiated separate
free-trade agreements with the US, Canada and Mexico.
Singer (1993: 68) stated that, from the Latin American perspective, the chief
attraction of a FTAA would be that it would prevent the marginalization of the
LACs that would occur if the three big regional blocs in North America, Europe
and Japan (along with other Asian NICs) were to become inwardly focused and
frustrate the process of global liberalization. Singer also reminded stakeholders
that the analysis of the FTAA should not concentrate solely on technical, financial
and economic issues but also on human issues. Globalization has sped up
development and improved the well-being of many people, but in some cases it
has increased poverty, unemployment, marginalization and the exclusion of
certain social groups (Latin American Economic System [SELA], 2000).
In contrast to many of the agreements that LACs negotiated in the 1960s, the
agreements of the 1990s − including the proposed FTAA − are based on open
regionalism and on liberalizing trade regimes. During this period, the LACs taking
part in integration efforts focused primarily on defining new legal frameworks to
invigorate and increase regional trade. The integration process increased trade
among LACs − mainly in the Mercosur countries (from 9% in 1990 to 25% in the
early 2000s); but it did not diversify trade, remaining largely centered on the US in
most regions. After dismantling many of their trade barriers, LACs have seen large
Lévy — The Rise of Asian Emerging Countries in the Global Economy 11
trade deficits with the US and with Europe. Since Mexico joined NAFTA, its trade
with Europe has decreased as a share of total trade, falling from 8.8% in 1993 to 6%
in 2000. The EU responded by negotiating a free-trade agreement with Mercosur,
Chile and Mexico in 2000. Most likely, trade data in Latin America will evolve
under the influence of new ties being forged with China and new inward policy
development taking place in countries such as Argentina, Bolivia and Venezuela.
Mercosur is the only part of Latin America (except Cuba) where the EU’s economic
influence has surpassed that of the US, Mercosur’s largest trading partner and
largest source of FDI. With a population of 180 million, Brazil is by far the largest
economy in Mercosur, whose member countries are home to some 220 million
people. Brazil accounts for 70% of the trade bloc’s GDP and for most of its
industrial production. Mercosur is not just an economic project; it is also a political
one, strengthening peaceful co-existence between Argentina and Brazil. In
addition, it has given its members greater power in international fora and
multilateral trade negotiations. What remains to be seen is how regionalism in
Latin America will be influenced by new regionalization patterns in emerging
Asia, the politics of its trade partners in the EU and the US, and further
developments in the multilateral trade and investment regime.
At present, the United States would like the FTAA to open up services and
government procurement and to tighten rules to protect investment and
intellectual property. Brazil, the co-chair of the FTAA talks, would rather have
these issues dealt with at the WTO. The questions of agricultural subsidies and
anti-dumping measures (used mainly by the US) are adding more pressure to the
pursuit of further hemispheric integration. This has led the United States to
establish free-trade agreements with many other countries around the world.
An important question about the deepening of integration in North America is
whether to expand NAFTA internally by further reducing trade barriers among the
three existing partner countries and, if so, how. For the Conference Board of
Canada (2001), the advantage of a customs union − which would eliminate trade
barriers between the three countries but keep separate policies toward nonNAFTA countries − is that there would be no economic need to police the borders,
although public safety and immigration concerns would still mandate restrictions.
The drawback is that transnational institutions must be created to devise and
adjust the common rules for doing business with the rest of the world, as is
happening in the EU.
The EU is an important player in the current regionalization process, representing
the most highly developed regional agreement locally and in the international
12 EUROSTUDIA 3:1
trading system. It has been studied extensively, and many authors have
contributed to the literature on the role of the EU in the regionalization process.
For the purposes of this study, a summary of some of the major characteristics of
the integration that took place in Europe over the past five decades is useful.
First, the enlargement process (increase in membership) of the EU is quite
impressive. Established by the Treaty of Rome in 1957 with 6 founding members,
the EU has since undergone many enlargements and now has a membership of 27.
Second, a deepening process (building an institutional and policy framework)
went hand-in-hand with the enlargement of the EU. The main purpose of
European economic integration was, after the war, political. Over time, powerful
economic pressures have also been brought to bear. The introduction of a common
external tariff (a customs union) was completed in 1968 and led to the common
market structure with free movement of capital and labor and the elimination of
non-tariff barriers to trade (“Europe 1992”). The drive toward a single market was
motivated by a concern that Europe was having problems competing, both in
mature sectors, particularly against the NICs, and in high technology sectors,
against the United States and Japan. The desire to take advantage of scale
economies in a more unified Europe was considered by many to be important. The
integration involved in the single market led to renewed pressure to reduce
monetary barriers to integration. This resulted in the implementation of the
European Monetary Union in 2002.
In 2004, when EU membership grew from 15 to 25, the expansion was
unprecedented in terms of the number of countries involved and in terms of their
background. Except for Cyprus and Malta, the other eight countries belonged to
the former Soviet Union and had to make many adjustments to their
administrative procedures and economic policies. Also, their level of development
was behind those of the then-15 members. Therefore, from an institutional point of
view, many challenges lie ahead for the deepening of the integration process in the
EU, as demonstrated by the debate over the constitution (2004). Soon, many
political and economic resources will likely be devoted to strengthening the
European institutions and integrating economic and monetary policies.
Overall, the EU economic integration has been a success. Per-capita GDP rose more
than five-fold in the past 30 years, while population rose almost 80%. On the trade
front, European integration generated a 50% increase in intraregional trade above
levels that would probably have been achieved otherwise. This tends to support
Lévy — The Rise of Asian Emerging Countries in the Global Economy 13
the hypothesis that, overall, integration has a positive effect; however, some issues
remain to be studied.
First, a look at the network of regional agreements built around the EU reveals that
half of extra-EU trade consists of trade with regional partners: European Free
Trade Association members; the countries of Eastern Europe; and southern
neighbors, namely, Mediterranean and Africa-Caribbean-Pacific countries.
Another concern relates to the parallel movement toward regionalism in America,
described above, and in Asia, described below.
The idea of a trade bloc emerged in Asia in the 1960s, with the formation of
ASEAN. In 1967, Indonesia, Malaysia, the Philippines, Singapore and Thailand
started a formal framework for economic cooperation. They were later joined by
Brunei, Cambodia, Laos, Myanmar and Vietnam. It was the Cold War that brought
the original five ASEAN countries together as a purely economic grouping
subscribing to the ideals of peace, freedom and democracy. The organization has
accomplished the objective of ensuring political stability, but it has not worked as
well as a means of economic integration. The explanation for the difficulties to
lower tariffs and increase intra-ASEAN trade can be traced to its members’
development philosophies, which are polar opposites. Malaysia and Singapore
have generally followed an open development strategy based on export growth;
Indonesia and the other poorer members have pursued a protectionist importsubstitution policy. As a result, the poorer members have not found it politically
expedient to move quickly to free trade − even with other ASEAN members.
Given the uneven distribution of natural resources among the countries of Asia,
and the wide differences in industrialization and wage levels, there is − in theory −
a good basis for increasing trade through comparative advantage. Trade patterns
are moving steadily toward greater interdependence, and technology transfers are
being actively pursued. The main mechanism underlying this increasing
interdependence in the Asia-Pacific region is the transfer of industries, particularly
manufacturing industries, from early starters to latecomers. The countries that
have comparative advantage in mature industries such as textiles and steel have
changed from Europe, the United States and Japan to the ASEAN and Asian NICs
(with some of those countries belonging to ASEAN). This process, known as the
“flying geese pattern” of industrial development, has been extended to developing
the electronics and automotive industries in ASEAN countries. In industries such
as electronics and fine chemicals, where new products and technology emerge
constantly, MNCs have played an influential role. And, when demand for new
products is limited by the domestic market, export orientation is necessary from
the beginning.
14 EUROSTUDIA 3:1
With the strengthening of regionalization during the third wave of globalization,
members agreed to reactivate integration efforts by introducing a new ASEAN
Free Trade Arrangement (AFTA), at the ASEAN summit in January 2002. The
preferential tariff reduction has since been extended to 15 selected industrial
product groups, with the elimination of internal tariffs over 15 years. In AFTA’s
early days, the five principal members differed markedly from each other in their
level of development, population, economic organization and development
strategy, resource endowment, and political structure. The striking feature
common to the five, however, was their strong growth performance during the
1970s and 1980s. All in all, the trade and growth performance of the five compares
favorably with the record of NICs such as Hong Kong, South Korea, and Taiwan.
During the 1990s and 2000s, the ASEAN 6 1 countries slightly increased their share
of internal trade, but remained quite dependent on external exports markets. In
2003, intra-ASEAN 6 exports represented 24% of total exports (compared with 22%
in 1993) and intra-ASEAN 6 imports, 20% (compared with 18% in 1993). The data,
compiled from the ASEAN 2004 Statistical Yearbook, indicate that the economic
integration undertaken to that point did not contribute to a significant rise in
intraregional trade as a share of total trade. However, when compiling trade data
for the East Asian region (including for Japan, Korea, China and Hong Kong) for
the year 2000, Park (2002: 78) finds that a distinguishing feature is the relatively
high intraregional trade intensity in the region. The intraregional export share for
the East Asian region was 41.5% in 2000 (that figure is lower than the 47.5%
reached in 1996, the year before the 1997 Asian crisis: the crisis-affected East Asian
countries directed more of their exports to Europe and North America because of
decreased purchasing power in the region). The three northeast Asian countries −
Japan, Korea and China − have been driving the high and increasing trade
intensity for the region.
New economic trends are emerging in Asia. The rapid growth of trade and
investment by ASEAN members over the past two decades reflects the shift of
economic growth and influence from East Asia southward. Led by the economic
power and political stability of Singapore, ASEAN nations are increasingly
becoming the trading and financial centers for North American and European
firms marketing to Asia, especially to China and India. In 2003, the main export
markets of the ASEAN 6 countries, excluding intraregional trade (22.8% of exports
and 20.4% of imports), were the US (14.2%), the EU (13.3%), Japan (11.8%), Hong
Kong (6.7%), China (6.4%, compared with 5.1% the previous year), and South
1
The ASEAN 6 are Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand
(countries for which statistical data is available).
Lévy — The Rise of Asian Emerging Countries in the Global Economy 15
Korea (4.0%). The main import markets of origin are Japan (16.3%), the US (14.0%),
the EU (12.0%), China (7.8%), South Korea (4.2%), and Taiwan (4.4%).
At the 10th ASEAN summit (Laos, November 2004), the ASEAN leaders discussed
regional and international political and economic issues. They signed the ASEAN
Framework Agreement for the Integration of Priority Sectors, aimed at building
ASEAN into a single market and production base by 2020. These reforms are
expected to accelerate economic integration through lower barriers to the flow of
goods, investments, services and skilled labor. The importance of regional
integration and the narrowing of the development gap have been reaffirmed.
Today, China’s impact as an investment partner on Asian trade is growing. For
2006, ASEAN’s share of China’s import sources is 11%, and its export share to
China is 7.5%.
Shu and Zeng (2006) demonstrate that in some respects, China is already well
integrated with the rest of East Asia, as a tightly integrated supply chain network
has emerged since the1980s. According to Kojima (2000), China may be seen as the
latest goose in the “flying geese” pattern. Its sheer size has made it the final
destination for the production process of the entire region. Exports from China act
as a platform for the exports of other East Asian economies to the US or the EU.
This integrated supply chain puts China at the centre of the production network in
East Asia. This pattern will likely evolve, given China’s capacity to move rapidly
up the manufacturing chain to the services sector.
Investment flows between ASEAN countries and China also reflect some degree of
integration. FDI from ASEAN countries to China has increased fifty-fold from
1990. Today, ASEAN countries’ FDI in China is comparable to that from the top
five outflow countries: the US, Japan, the UK, France and Germany. Given the size
of China’s economy, the central role it plays in the production network and FDI
flows, further regionalization in Asia can be expected, with China as a major pole.
China is becoming a strategic partner for ASEAN by providing it with access to
capital, technology and a huge consumer base. Also, an increasing number of
Chinese firms are investing in ASEAN countries because of low transportation
costs and access to much-needed resources.
On the global production front, China may be the next automotive powerhouse in
Asia (as Japan and South Korea were in the 1980s and 1990s). The Conference
Board of Canada (2007) underlines the rising importance of China: in the
automotive sector, a CSM Worldwide forecast places Chinese production at 4.3
million units in 2005 and 8.4 million by 2010. This would make China the third
largest producer after the US and Japan, and China could become the main driver
16 EUROSTUDIA 3:1
of the global auto industry chain in the next two decades (followed closely by India
and smaller emerging economies, notably Thailand). China became a net exporter
of automobiles in 2005. For the time being, most Chinese auto exports go to the
Middle East, Russia and Southeast Asia. One day, Chinese auto exports will come
to the North American and European markets.
Chinese firms are strengthening their position in global supply chains and are
becoming integrated into North American and European MNCs. The Wanxiang
Group, China’s largest auto parts suppliers, includes General Motors, Ford (facing
a decline in the North American market) and Volkswagen among its customers. It
also has strategic alliances with Bosch and Visteon, and has acquired, established
or merged with 30 companies in eight western countries. Cars made by Japan’s
Honda Motor Co. in China are already directed to the European market. China is
actively encouraging the emergence of its own sophisticated auto parts industry
through its Automotive Industry Policy of 2004. In fact, both China and India are
drawing huge amounts of investment in the automotive sector. The implications of
the rise of those two countries in the global economy in terms of the trend toward
regionalism and in terms of the multilateral trade regime deserve further study.
Current data provide some insight.
The three dominant economies of East Asia (Japan, South Korea, and the
newcomer − China) have no formal trade agreement linking them yet. However,
for certain trade categories, Japan and South Korea now have closer economic ties
with China than with the US. Southeast Asia, including Japan, is more and more
tied into Chinese global production chains, as described earlier, in the automotive
sector. The increasingly integrated East and Southeast Asian regions have a current
combined GDP of US $ 8.6 trillion and a potential aggregate growth rate of around
5%. This new emerging pole is fast approaching the growth rate of the EU. Also, in
January 2007, leaders of Asian nations agreed on an integration process similar to
the creation of the EU. In a meeting in Cebu, Philippines, they endorsed the plan
for a trade zone with geographical coverage from India to New Zealand.
The 16 countries that would be part of the proposed free-trade area are the 10
ASEAN countries, plus Australia, China, India, Japan, New Zealand and South
Korea. With China and India being the powerhouse economies in Asia and the
world, such an agreement could give ASEAN the regional economic cohesion and
strength it has wanted to achieve since the 1960s. What remains uncertain is how
nations will bridge the cultural and political barriers that could compromise the
emergence of the new Asian economic pole. What will remain of the Asia-Pacific
Economic Co-operation (APEC) forum and its similar plan? What will be the
Lévy — The Rise of Asian Emerging Countries in the Global Economy 17
implications for the multilateral trade regime? These questions will be of strategic
importance for the future of the global economy.
So far, intraregional trade in major RTAs reflects the industrial change that has
taken place over the last decade, with the share of manufacturing in exports from
East Asia having increased from about 52% in 1981 to 88% in 2001 (World Bank,
2005: 46). Figure 3 illustrates China’s export performance from 1989 to 2004. In
recent years, foreign demand for ICT-related services has been an important driver
behind the acceleration of service output, particularly in India, but also in China
and most likely in the longer run in other Asian countries. Today, many MNCs
enter into services offshoring activities in order to gain access to a rapidly growing
market and to skilled workers. Because these new activities are technologyintensive, industries in the developed world may restructure further, while
emerging Asian countries will play a larger role in the production chain. This new
competitive environment will change the nature of regionalism and
multilateralism.
The pursuit of regionalism raises the issue of the move toward a tripolar world
composed today of Europe and the Africa-Caribbean-Pacific countries; NAFTA
and the Caribbean countries, and parts of Central and South America through the
proposed FTAA; Japan and the Pacific Rim, and possibly ASEAN +3, which could
form an enlarged East Asian bloc (unless further extension takes place in that
region). The importance of preferential trade in the region increased dramatically
with the signing of a free-trade agreement between ASEAN countries and China,
and further developments are expected, including the proposed free-trade area of
16 Asian nations. For the time being, whether ASEAN +3 or ASEAN +6 will give
member countries the bargaining power they seek in their economic relationships
with the other regional trading blocs of the EU and the NAFTA remains to be seen.
A major influence will be the role of China as a trade and investment partner in the
region. Cultural and political factors will also come into play, both externally (such
as relations between China and Japan) and internally (social stability in Asian
emerging countries). As Haas (2005) points out, “There are a lot of things that
could derail China, from a Taiwan crisis to simple domestic instability if its
political system proves unable to deal with the dynamism of what is happening
economically.” According to that author, what distinguishes Asia is that many
countries, including China, Japan, India, and Korea are growing to varying degrees
economically. Therefore, emerging Asian countries are going through a
transitional period, and stability is required for them to further their integration
process.
18 EUROSTUDIA 3:1
3.
GLOBAL INTERDEPENDENCE AND SUSTAINABILITY OF THE TRADING SYSTEM
Globalization is a phenomenon that is likely to continue. However, new forces are
shaping the economies of the world and raising challenging questions about the
governance of the multilateral system. Despite the apparent setback to
multilateralism in international trade (and to diplomacy, as witnessed in the leadup to the war in Iraq that started in 2003), the international system remains highly
connected and continues to forge high levels of transnational activity.
The drive toward global integration continues. At the same time, social cohesion
defined as an unlimited, multidimensional concept that seeks to mould society into
a coherent − but not homogeneous − whole, is becoming more important. This
notion, which originates with the work of Emile Durkheim (see Putnam 2001), is
today linked to social policy development. In this view, social cohesion depends on
a sense of belonging − to a family, a social group, a neighborhood, a workplace, a
country, and even a continent, as in the case of the EU. The concept of social
cohesion is gaining significance in considerations of global, regional and local
policy issues, and in terms of governance of society as a whole.
As pointed out by UNCTAD (2006: 207), conceptually, no clear distinction can be
made between institutions and governance. Institutions are part of governance
structures, but they have a wider reach than governance structures. They
encompass both formal and informal social structures and mechanisms, including
rules and regulations that affect the behavior of individuals and the functions of
the state. Most of the current debate on the role of institutions in economic
development emphasizes their function in promoting market efficiency. Part of the
failure of the “Washington Consensus,” which dominated the policy agenda of the
World Bank and the International Monetary Fund (IMF) in the 1980s, has been
attributed to the absence of supporting institutions in most developing countries.
As a result, new concepts have emerged or are making a comeback in the postWashington Consensus period. The pursuit of economic growth must be
sustainable. To achieve that goal, the right social conditions must prevail and other
elements must be integrated into the framework of analysis of global trade
patterns.
Difficulties in liberalizing trade and investment flows at the global level are
challenging the role of multilateral institutions in promoting global governance.
Some of the difficulties can be traced to the increase in GATT/WTO membership
(23 members in 1947 and 150 members in 2007), and to the different policy views of
members (two thirds of them being from developing countries today). Since the
conclusion of the Uruguay Round in 1994, and since the beginning of the WTO,
Lévy — The Rise of Asian Emerging Countries in the Global Economy 19
developing countries have expressed concerns about the implementation of the
agreements. One main reason is that while many developing countries have
chosen to become more open economically, they continue to confront
protectionism in industrialized countries. Average tariff rates in industrialized
countries are low, but they maintain barriers in areas where developing countries
have a competitive advantage: agriculture and labor-intensive industries. The G20
group of countries, which includes Brazil, China, India and several African
countries, led the way at the Cancun Ministerial Meeting in 2003 for developing
countries to demand more concessions on the part of industrialized countries,
particularly in their highly protected and highly subsidized agricultural sector,
where industrialized countries’ farm subsidies amount to more than Africa’s GDP.
According to the World Bank (2002), protection in industrialized countries costs
developing countries more than US $ 100 billion per year, twice the total volume of
aid from North to South.
Also, developing countries were not keen on the introduction of an agreement to
liberalize FDI and to replace the “spaghetti” pattern of bilateral investment treaties
with a coherent global policy framework, possibly threatening to displace the
concessions on FDI that they currently have. Only multilateral trade negotiations
that benefit developing countries will help them emerge from the Doha Round
with the sense that they have attained a fair balance of benefits and costs (Stiglitz
and Charlton 2005). Although economic theory tends to demonstrate that small
and poor countries gain on balance from multilateral liberalization in the WTO,
those gains depend on significant improvement in market access. In the context of
an inclusive globalization framework, trade should be viewed as a means to
development. Furthermore, national governments must intervene to correct
market failure or to achieve social justice by making sure that the benefits of
growth are spread as widely as possible.
As mentioned earlier, difficulties in liberalizing trade and investment flows at the
global level are having an impact at the regional level as well, with the burgeoning
of bilateral trade agreements, while negotiations between partners stall. For
Baldwin (2006: 1512), one way forward for the world trade system would be to
foster the “multilateralization” of free-trade agreements through the WTO, which
is well-placed to play a constructive role in that process. Time will tell whether
such a path to global free trade is possible, given the current difficulties in
negotiating both at the multilateral and regional levels. No single superpower
today can handle alone the strategic issues related to trade, the transition to free
market ideology, economic crisis, wars or ethnic conflict, environmental
degradation, and poverty. Nor can international organizations easily cope with
any of these critical issues.
20 EUROSTUDIA 3:1
In 1996, Muegge anticipated two contrasting scenarios for the global economy. The
first involved a pattern of increasing disparities, widespread poverty and
transboundary pollution, and, consequently, national and international conflicts.
The second, which was less pessimistic, consisted of a process of sustainable socioeconomic development involving all countries and population segments, including
those that were marginalized. A decade later, for such a scenario to become a
reality, the international institutions of the 21st century need vision and political
commitment. At the global level, decision makers will have to define the
operational terms and conditions of the new world order and solve conflicts that
emerge between nations, regions and firms.
In the past decade, globalization (along with regionalization, its subset
phenomenon) has advanced further, but its outcome for development and income
distribution is still a matter of debate. Policy reforms undertaken by developing
countries in the last wave of globalization were strongly influenced by the IMF and
the World Bank, which emphasized liberalization. In addition, the policy agenda
put forward by the Washington Consensus, came under scrutiny, given the lack of
progress on the poverty front. In the early 1990s, the issue of poverty in the
developing world, and its linkages with adjustment policies in the globalized
economy, began to receive further attention (World Development Reports of 1990–
1995). The globalization debate, which was dominated in the past by issues of
third-world periphery being exploited by the capitalist-centred and import
substitution development policies (Amin 1977; Prebish 1972), was captured by civil
society. Later, international organizations and governments of developed countries
entered the debate, which culminated in the formulation of the Millennium
Development Goals (MDGs) of 2000.
Today, the concept of global governance is gaining currency and significance as the
world recognizes the need to deal more effectively with the opportunities and
threats unleashed by economic globalization and the regionalization of trade. As
Sen (2000) puts it, “it is time to scrutinize globalization for the challenges it poses
as well as the potential it offers.” The prospects of governance are going to be
shaped by how multilateral institutions, governments and MNCs address and cooperate on environmental, human rights and social issues. These issues call for a
social dialogue closely related to liberalizing FDI policies and the role of MNCs.
Within the development framework, non-governmental organizations (NGOs) are
elemental to the reform process. Multilateral institutions have forged connections
with them. Civil society also influences MNC behavior (The Economist 2005), but it
has no power in establishing the rules of the game in international relations.
Lévy — The Rise of Asian Emerging Countries in the Global Economy 21
A number of researchers, as well as international organizations themselves, have
argued that the architecture of the international financial system needs reform, as
emphasized in the UNCTAD Trade and Development Report (2001a). Competition
between countries for investment produces inequalities. At the same time, the
interdependence of the world’s economies creates a better awareness of the need to
expand prosperity to all. The IMF, the World Bank and the WTO often play
determining roles in shaping national economic and social policy. In response to
criticism of their role in perpetuating global inequality, they have made some
recent attempts to harmonize their policies with the goals of poverty reduction,
conflict avoidance and environmental sustainability. Achieving those goals will
require strengthening the role of these institutions in targeted policy areas and
making them accountable to the public. Along with the United Nations (UN), they
must play a more active role in global governance, if the MDGs are to remain the
focus of global trade. As Endoh (2006) demonstrates, the conclusion of RTAs is the
result of a political decision-making process on economic issues, and this process is
highly affected by the quality of governance as well as by economic circumstances
in the countries involved.
Today, the forces of globalization require closer regional integration for countries
and firms to be competitive in the global economy. This imperative is made more
urgent by the disturbing trend of intensifying protectionism and trade distortion in
the developed world. The Doha multilateral trade negotiations have suffered a
major setback since their launch in 2001, while the overall impact of the Uruguay
Round of trade negotiations (1986–1994) on the multilateral trading system is
mixed. It brought about some significant institutional changes, which were
expected to result in relatively better governance of the world trading system
under the WTO, but the progress has been limited. The Sixth Ministerial
conference of the WTO in Hong Kong in December 2005 produced an agreement to
end export subsidies, but the deadline of April 30, 2006 for establishing “full
modalities” on all outstanding issues (a clear agenda to end export subsidies and
the question of market access from developed countries to developing countries, in
particular) was not met.
A failure of the Doha Round could reinforce protectionism among major trade
partners and accelerate the trend toward bilateral and regional trade agreements.
The setback in multilateral negotiations partly illustrates that many developing
countries are concerned about extensions of the WTO’s authority into issues
beyond trade. According to Rodrik (2001), this explains the rise of bilateral trade
agreements even though they are second-best solutions, especially if they are
pushed into by developed countries with the promise of other benefits. Achieving
consensus between rich and poor WTO members by tackling economic
22 EUROSTUDIA 3:1
development issues and balancing the decision-making process within the
institution can only be achieved through a new culture of trade. Recent
globalization has been a force for poverty reduction, despite disparities, and has
helped some large poor countries, such as China and India, narrow the gap with
rich countries.
The Asian economies are growing more rapidly than those of any other part of the
world, and their integration into the global economy poses a significant challenge
to the global system. Increased export competition from China in many industrial
sectors (such as textiles) has been adding pressure to the WTO system. Also, the
globalized economy is creating challenges when it comes to promoting a system of
stable exchange rates to ensure a predictable trade environment.
For many countries, joining a trade bloc means that their access to important
markets will be preserved and that their competitiveness abroad will not be
undermined. The trade dynamic is inducing the proliferation of bilateral free-trade
agreements and of regional agreements, as evidenced by the negotiation of
NAFTA in the midst of the Uruguay Round and by the increase in ASEAN+
negotiations during the Doha round. Those agreements may be necessary to restart
the WTO process or they may further complicate it. They point to adjustment
problems, at the global or regional level which are not manageable purely through
market forces. In the globalized economy, governance issues are raising the
question of the way forward through a universal WTO and supporting financial
institutions (along with member states’ promoting sustainable economic growth
and enforcing rules of law for MNCs), or an array of bilateral agreements at the
midst of regional poles reflecting the move toward a tripolar economy.
One aspect that stands out from the trade dynamics examined in this study is that
the global economy is one step ahead of its institutional framework. The
governance of the global system will result from the actions of its main players,
whether they are the governments of developed, developing and emerging
countries, or MNCs. Moving forward in the multilateral/regional system will
require a consensus which can only be achieved by integrating development issues
of relevance to emerging and developing countries into the WTO, and into the
major trade blocs that are now in place or that are yet to come. With differences in
economic and social development, and in political influence, among countries of
the world, the pursuit of bilateralism, particularly under the impulse of developed
countries, may well pose a serious threat to the multilateral trade regime.
Lévy — The Rise of Asian Emerging Countries in the Global Economy 23
4.
CONCLUSION
With globalization and regionalization, economic and social policies, as well as
politics, are becoming inextricably intertwined. The transnational economic space
that globalization has created is linking political and social space across national
boundaries, and this development needs organized responses. In the 21st century,
many countries are facing the challenges of continental integration, and many
countries (such as those in Africa) are still left out of the globalization process.
Emerging countries from Asia, in particular China and India, are creating both
threats to and opportunities for the multilateral trade regime and are adding a new
dimension to the regionalization process.
If regionalization is here to stay, the rules of the game should include goals
centered on equity, as well as on economic growth, as major development
objectives. Similarly, at the multilateral level, globalization with equity should
become the main governance objective. Development, marginalization and security
issues call for co-ordinated action and new inclusive forms of global governance.
At the same time, what “good” global governance really implies and whether it
has a universal set of values and standards is now an issue of importance and
urgency that requires a multilateral solution based on co-operation among nations.
What will emerge in the long run of the interplay of the multilateral and regional
trade regime is uncertain. For the time being, focusing on improving standards of
living around the world by taking care of economic, environmental and societal
problems partly brought on by the globalization process is the way forward for
both trade regimes. In order for the multilateral and regional trade regimes to be
sustainable, attention must also be paid to the MNC as an agent of change through
the implementation of corporate social responsibility. Global governance
approaches will define the frontiers of the next wave of globalization and its
impacts on the cultures of trade.
24 EUROSTUDIA 3:1
Figure 1: FDI stocks among the Triad and economies in which FDI from the
Triad dominates, 2001 ($ billions)
Partners associated with the US: Argentina, Azerbaijan, Bolivia, Canada, Chile,
Costa Rica, Ecuador, El Salvador, Honduras, Iceland, Israel, Mexico, Paraguay,
Russian Federation, Saudi Arabia, Singapore, Switzerland, Trinidad and
Tobago, Venezuela
United States
Total outward stock:
1,382
EU
Total outward stock:
3,172
Partners associated with the EU: Albania,
Argentina, Armenia, Australia,
Bangladesh, Brazil, Bulgaria, Cape Verde,
Chile, Croatia, Czech Rep., Dominican
Rep., Egypt, Estonia, Hungary, Islamic
Rep. of Iran, Kenya, Latvia, Lebanon,
Lithuania, Mauritius, Morocco, Myanmar,
New Zealand, Nigeria, Norway, Peru,
Qatar, Russian Federation, Slovakia,
Slovenia, South Africa, Swaziland,
Switzerland, Syrian Arab Rep., TFYR
Macedonia, Tunisia, Turkey, United Arab
Emirates, Yemen
Japan
Total outward stock:
300
Partners associated with Japan: Oman,
Qatar, Rep. of Korea, Singapore
Total outward stock of Triad: 4,854
Estimated share of stock in Triad: 69%
Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and
International Perspectives, Figure I.14, p. 24.
Lévy — The Rise of Asian Emerging Countries in the Global Economy 25
Figure 2: Rising openness to trade
Trade (exports and imports) to GDP ratio (percent)
90
80
70
60
50
40
30
20
10
0
East Asia and
Pacific
South Asia
Middle East and
North Africa
1982
1992
Sub-Saharan
Africa
Latin America
and the
Caribbean
Europe and
Central Asia
2002
Source: World Bank, 2005, Global Economic Prospects 2005: Trade, Regionalism and Development,
Washington D.C., World Bank, p. 18.
26 EUROSTUDIA 3:1
Figure 3: Export performance, percentage change in market share since 2000
Source: World Bank, 2005, p. 9.
Lévy — The Rise of Asian Emerging Countries in the Global Economy 27
Table 1: RTAs cover many fields besides merchandise trade
U.S.
U.S.-Jordan
U.S.-Chile
U.S.-Singapore
U.S.-Australia
U.S.-CAFTA
U.S.-Morocco
NAFTA
EU†
EU-South Africa
EU-Mexico
EU-Chile
EU-Med.
Agreements
South-South
MERCOSUR
Andean
Community
CARICOM
AFTA
SADC
COMESA
Standards
Customs
Intellectual
TransCoope- Services
port
Property
ration
No
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes*
Yes*
No
Yes
Yes
No
Yes*
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Other
Japan-Singapore Yes
Canada-Chile
No
Chile-Mexico
Yes
Investment
Dispute
Settlement
Labour
Competition
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
No
No
Yes
No
Yes
No
Yes*
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Source: World Bank, 2005, p. 35.
†
While EU agreements mention cooperation in most of the subject areas, only those in which specific
commitments are undertaken receive a “Yes” rating.

Implementation steps are to be agreed on at a later date.
28 EUROSTUDIA 3:1
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Amin, S. (1977), Imperialism and Unequal Development, Sussex, England: Harvester
Press
Baldwin, R. E. (2006), “Multilateralising regionalism: Spaghetti bowls as building
blocs on the path to global free trade”, The World Economy, Vol. 29, Issue 11,
pp. 1451-1518
Baldwin, R. E. (2003), “Openness and growth: What’s the empirical relationship?”,
NBER Working Paper, pp. 95-98
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