East Asian Economic Integration Strategy East Asian Economic Integration Strategy April 2008 Kyung Tae LEE

1 EUASEANN. E. AsiaNAFTA Functional Integration Socio-culture Political-Security Institutional SUM Avg Comparison of the Regional Integration Regional Integration Index Souce: “Political-Economy APPROACH TO North-East Asian Integration“ KIEP, 2008.

2 Comparison of the Regional Integration N. E. Asia and ASEAN lag behind EU and NAFTA in overall integration  N. E. Asia is a bottom laggard, particularly in political-security dimension  But both N. E. Asia and ASEAN moves faster than NAFTA N. E. Asian economic integration is driven by market-oriented trade and investment N. E. Asia falls four behind in institutionalizing the integration process

3 N. E. Asia : Stumbling block → Building Block Institutionalize Free Trade & Investment  Japan-China FTA is a Stumbling block  Use Korea – Japan, Korea – China FTA as building blocks  K–J FTA, K–C FTA negotiation is likely to start in 2009  Japanese reaction is of our interest Upcoming 1st C-J-K Summit meeting needs to discuss C-J-K FTA  Upgrade ongoing trilateral joint studies to include government officials

4 AFTA and NEAFTA Leads to EAFTA ASEAN and N. E. Asia share the Driver’s Seat  N. E. Asia with 90% of total east Asia GDP should assume the of co-drivers  Provide stronger impetus to add momentum for accelerated move towards EAFTA

5 Three pillars of Integration : Simultaneous Drive FTA, Monetary Cooperation, Sectoral Cooperation  These three pillars work together to build trust for real gains of the integration  Multilateralize CMI → Asian Monetary Fund ↑ Regional Surveillance Develop regional capital market (ABZ) → de-dollarize FX transactions → Foreign Exchange rate stability Develop regional capital market (ABZ) → de-dollarize FX transactions → Foreign Exchange rate stability

6 Three Pillars of Integration : Simultaneous Drive Multilateralize development assistance → East Asian Marshall Plan Substantiate energy and environmental cooperation talk-shop into tangible cooperative scheme Region-wide and harmonious efforts for behind-border barriers elimination

7 Open Regionalism Aim at comprehensive and higher-level liberalization  Go beyond the existing bilateral FTAs in the region Continue to have FTAs with countries outside the region Building block for FTAAP

8 Path-Finder Approach All of the ASEAN? ASEAN plus three? ASEAN plus six? Economic gains : the more the numbers, the greater the gains Feasibility : Path-finder approach is more desirable Political games : No optimum solution, Just discard it

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