Asia Regionalism: Politics, Institutions and Multilateralism C Asia Regionalism: Politics, Institutions and Multilateralism C. Randall Henning Institute for International Economics and American University Presentation for the Seminar “Thinking Globally, Acting Regionally: Asian Economic Integration,” at the Annual Meetings of the Asian Development Bank, Hyderabad, India, May 4, 2006.

Overview: Political prerequisites for regional integration in Asia. Role and importance of institutions. Relationship between regional and multilateral cooperation.

Aspirations for political integration do not explain European regionalism. Economic projects received greater support than political projects Interstate violence became “unthinkable” a long time ago Enlargement motivated by other factors

Analysis of political motivation should Carefully distinguish between: ambitions for political union, desire to avoid security conflict and war, and political agreement on economic measures and the institutions necessary to implement them. Example of the creation of the European Monetary System.

Lessons for integration in Asia: Regional integration cannot take place in the face of interstate violence. Ambitions for political integration are not necessary. Political agreements on the economic measures and institutions are necessary. Good news for East Asia.

Networks versus Institutions: Network approach to regionalism CMI demonstrates limits of networks Networks perform some useful functions for regionalism But they cannot perform most of the key functions of institutions

Specifically, networks cannot: Provide information broadly Monitor compliance of member states with agreements Define cheating Approve retaliation Facilitate issue linkages Broker agreements among member states Adjudicate conflicts among networks

Neoliberal institutionalism (Kahler 1995) stresses the importance of Delegation Issue linkage Domestic politics

Lessons for Asia: Networks alone are not sufficient. Stronger institutions are also necessary. Networks and institutions are complementary Governments should focus on delegation, domestic politics, and Pareto-improving cross-issue bargains. Secretariat and a “Council”.

Criteria Financial arrangements should be deemed consistent with multilateral arrangements when they: create no substantial conflict with members’ obligations under the Articles of Agreement; are at least as transparent as the financial and monetary rules and operations of the IMF; adopt and apply sound rules of emergency finance; and lend on sound conditionality.

Procedures and principles Members states should agree: to report and disclose the details to the IMF. to submit their arrangements for review by the Executive Board. that regional financial facilities shall not undercut IMF conditionality that regional financial regulation and private-sector involvement must be consistent with stabilization efforts of the IMF.

Soft form: Code of conduct Hard form: Amendment to the Articles of Agreement

Equitable for ASEAN+3? -- CMI would pass the test, with transparency -- Applies to other regions as well -- Benefits for East Asia a. Simplifies intra-regional bargaining b. Alleviates external suspicions c. Legal cover for sound arrangements.

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