Publication in Economics, Politics and Public Policy in East Asia and the Pacific

ASEAN’s Pattaya problem

Author: Donald K. Emmerson, Southeast Asia Forum, Stanford University

The turmoil in Thailand is about domestic questions: who shall rule the kingdom, and what is the future of democracy there? But the crisis also raises questions for the larger region: who will lead the Association of Southeast Asian Nations (ASEAN), and what is the future of democracy in Southeast Asia?

In mid-2008, Thailand began its tenure as ASEAN’s chair. The chair is expected, at a minimum, to host successfully the association’s main events, most notably the ASEAN Summit and multiple other summits between Southeast Asia’s leaders and those of other countries.

Accordingly, Thailand had planned to welcome the heads of ASEAN’s other nine member government plus their counterparts from Australia, China, India, Japan, New Zealand, and South Korea in a series of meetings in the Thai resort town of Pattaya on April 10-12. (The other nine are Singapore, Malaysia, the Philippines, Vietnam, Myanmar, Laos, Brunei, Cambodia and Indonesia.)

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OECD policy brief on emerging economic giants

Author: Andrew Elek

The Organisation for Economic Co-operation and Development (OECD) has published a useful policy brief on trade policy developments in the BRIICs (Brazil, Russia, India, Indonesia, China and South Africa) (available here).

The report documents the considerable reduction in border barriers to trade by these economies. An interesting table on page 5 of the report assesses the relative contributions of unilateral, multilateral, preferential liberalisation and the contribution of donors policy conditionality. They attribute most of the opening to unilateral action, mostly before the late 1990. Since then bilateral and regional trade negotiations have increased in relative importance.

However, the table describes these as ‘trade-light preferential trade agreements’, noting that:

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Japan: combating botchan rule

Author: Tobias Harris

The Japanese political establishment is debating how to combat an infestation that has penetrated Nagata-cho and is allegedly gnawing away at the foundations of Japanese democracy.

I’m speaking, of course, of Japan’s hereditary politicians, who constitute roughly a quarter of the members of the two houses of the Diet.

The debate has grown out of an internal LDP debate. Earlier this month, Nakagawa Hidenao and Suga Yoshihide announced the creation of a new study group with the stated purpose of issuing recommendations for the LDP’s electoral manifesto — but triggering speculation as to whether Nakagawa is once again looking to undermine the Aso government.

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Japan should resuscitate its feeble diplomacy

Author: Yoichi Funabashi

Amid the global economic crisis, Prime Minister Taro Aso is engaging in top diplomacy at full throttle.

After flying to London to attend the Group of 20 summit, Aso traveled to Pattaya, Thailand, for the abbreviated East Asia Summit.

He hosted an international conference in Tokyo of nations providing assistance to Pakistan.

And today, Aso flies to China, and then Europe, before he welcomes Russian Prime Minister Vladimir Putin after the Golden Week holidays in May.

However, regardless of how high and far Aso flies, the concept and message of Japanese diplomacy is not being conveyed forcefully because the instability of the domestic economy and political sector has left that diplomacy in a feeble state.

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Low expectations for Aso’s trip to Beijing

Author: Shiro Armstrong

Taro Aso is in China today and tomorrow for his second visit since he became Prime Minister of Japan. His first was for the Asia Europe meeting (ASEM) last October where the bilateral relationship was obviously not the main event.

The trip is important as the main topics up for discussion are North Korea and North East Asia’s response to the global financial crisis.

It comes just a little over a week after Aso stirred controversy by sending an offering to Yasukuni shrine. The shrine is a symbol of Japanese militarism and expansion and visits by leaders invites an angry response from China and Korea (see more here). Aso didn’t go as far as visiting the shrine himself which would have been taken as a significant insult to Japan’s neighbours so everyone can breathe easy for now.

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Japan: a perfect storm for security policy change?

Author: Tobias Harris

The great puzzle in Japanese security policy is why despite the consensus within the LDP in favor of a more robust, independent security and persistent worries about North Korea and China among the public at large Japan has failed to spend more — or the same — on defense and made legal and doctrinal changes that would enable Japan to meet threats originating from its neighbors.

Will 2009 be a turning point at which Japan opts for a new security policy?

The response to North Korea’s rocket launch has been revealing. As I have already discussed, LDP conservatives have responded to the launch by dusting off old proposals and pushing for them with renewed vigor. Abe Shinzo is back in the spotlight. The conservatives, marginalised when public discussion focused solely on the dismal state of the Japanese economy, have been experiencing a bit of a surge going into the Golden Week holiday.

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Vietnam: dangers and opportunities

Author: Suiwah Leung

The year 2008 was testing for Vietnam. Between March and August of 2008, with inflation running at some 28 per cent p.a., fuelled by significant capital inflows the year before, the Government had to implement strong stabilisation policies in order to cool the overheated economy (see my analyses from last year).

By November 2008, these policies had to be reversed in order to support economic growth in the face of deteriorating global conditions. And yet, Vietnam still posted real growth of 6.25 per cent for the year, albeit at the slowest pace since 1999. Perhaps more encouragingly, the authorities showed a degree of flexibility in policymaking that needs to be maintained, and enhanced, for Vietnam to face the near-term challenges posed by the global recession.

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Silence after abrogation of Fiji’s 1997 Constitution

Author: Jon Fraenkel, State, Society & Governance in Melanesia Program, ANU

Last week, there was international outrage at the decision by Fiji’s military-backed government to abrogate the constitution, sack the judiciary and suspend elections until 2014.

Yet the reaction within the country has been much more muted. Whereas in Thailand and Madagascar, protestors have rallied to the defence of governments ousted by coups, in Fiji there has been a sullen – if begrudging – acceptance of the 27-month old military regime, despite its preparedness to now tear up the country’s fundamental laws. A few courageous barristers turned up to protest outside courts in Suva and Lautoka when they re-opened after the Easter break, but this was nothing like the reaction in Pakistan, when furious lawyers took to the streets in their black gowns to demand the reinstatement of their Chief Justice.

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Chinese and Australian approaches to climate change

Author: Andrew Elek

If the presentations from Chinese and Australian speakers at recent ANU forums are anything to go by, there is hope of convergence towards a global solution to mitigating climate change. A progress report on negotiations leading up the Copenhagen summit indicated that a global target to limit the proportion of GHG in the atmosphere may be agreed, with all major emitters making some commitments within a legal framework.

A lot of work remains ahead within any framework agreed in 2009. But ideas canvassed at the Canberra sessions suggest that it may be possible to agree on the need for developing economies to go beyond measurable, reportable and verifiable mitigation action. The next step will be to set economy-wide commitments for all significant emitters.

Difficult burden-sharing negotiations will be needed after Copenhagen. Any attempt to measure and allocate responsibility for long-term historical emissions is doomed to failure. But it may be possible to agree on emissions budgets from 1990, based on the principle of equal emissions per head. Developed economies could also accept a fair, therefore high, share of the responsibility for financing costs of technological change and adaptation to already inevitable climate change.

My full report below, over the fold:
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The Asia Pacific Community concept: right task, wrong tool?

Author: Hugh White, ANU

The launch of Kevin Rudd’s Asia Pacific Community was marred by failures of preparation and presentation. But we should look past these to consider the proposal on its merits, and we should do that in severely practical terms. What purposes is it intended to serve, and how well does it serve them?

It is important to approach these questions with an open mind. The region already has lots of regional multilateral forums, but as circumstances change, the region’s needs for international dialogue and cooperation change too, and so should its institutions. We should not for a moment assume that the forums that have served us well in the past will do so in future.

When Kevin Rudd first launched his APC proposal, the purpose he suggested it would serve would be to manage the transformation of Asia’s international system to accommodate the growing power of China and India. This is undoubtedly a major and urgent priority. It might be worth reminding ourselves exactly why that is so important, and why it might prove to be quite hard.

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The Asian noodle bowl: is it serious for business?

Authors: Masahiro Kawai and Ganeshan Wignaraja, ADBI, Tokyo

There is a lively debate going on about the impact of free trade agreements (FTAs) on East Asia’s business between those who view the agreements as a harmful Asian ‘noodle bowl’ of trade deals and others who see net beneficial effects in terms of regional liberalization and a building block to multilateral liberalization. A lack of enterprise-level data has made it difficult to resolve the debate. Providing new evidence from surveys of 609 East Asian firms (in Japan, Singapore, Korea, Thailand and the Philippines), our new study seeks to address the critical question of whether the Asian noodle bowl of multiple overlapping FTAs is harmful to business activity particularly small SMEs.

The surveys suggest that the Asian ‘noodle bowl’ does not seem to have severely harmed the region’s business activity to date. Use of FTA preferences (22 per cent of responding firms) is higher than expected from previous studies. Furthermore, only 27 per cent of responding firms said that multiple rules of origin significantly added to business cost. As more FTAs under negotiation take effect and the complexity of the Asian ‘noodle bowl’ increases, however, the impact on business is likely to intensify. Implementation of key policies and closer public-private sector cooperation can help mitigate negative effects and facilitate a more SME-inclusive business response to FTAs. Suggestions include: encouraging MFN liberalization, rationalisation of rules of origin, upgrading origin administration, increased awareness of FTA provisions, improving business participation in FTA consultations and SME support.

See the full ADBI working paper here

Obama’s Japan policy: Benign neglect at work?

Author: Tobias Harris

After President Barack Obama met with Prime Minister Aso Taro at the White House in February, I suggested that ‘the administration may be prepared to follow through on an unstated policy of benign neglect: having given Japan its assignments (civilian reconstruction in Afghanistan, progress on realignment, etc.), the administration will now turn its attention elsewhere.’

In recent weeks there have been several more indications that this is the Obama administration’s preferred course of action on Japan policy. It is increasingly clear that the new administration will place less emphasis on the prevailing agenda of alliance transformation that pressures Japan to revise its constitution and play a more assertive security role regionally and globally, an approach to the alliance that requires more effort than the Obama administration will be capable of mustering for the foreseeable future — effort that would be wasted on a Japan in the midst of political transition and uncertain about what role it will play as a security actor, if any.
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Japan’s economic disaster: addressing some misperceptions

Author: Ed Lincoln, Leonard N. Stern School of Business, New York University

Japan is currently facing the worst economic downturn since 1945.

Although this is a statement that is factually correct, it is also somewhat misleading. In the fourth quarter of 2008, the economy shrank at a stunning 12.1 per cent quarter-on-quarter annualized rate (that is, the amount by which the economy would shrink if the drop in GDP from the third quarter to the fourth quarter were to continue at the same pace for three more quarters).

The economy will certainly not continue to shrink at that rate, but economic forecasts for the calendar year 2009 are in the range of a decline in real GDP between 5 and 7 per cent. In terms of economic growth, this would clearly be the worst performance since 1945, and is larger than the expected decline in the United States.

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Chinese media on recent Thai politics

Author: Ryan Manuel

The reactions of Thailand’s commanding northern neighbour have been heavy on the minds of Western media during the events of recent weeks.

As the BBC noted in the aftermath of the protests that postponed the ASEAN Summit:

Mr Abhisit had to make a grovelling phone call to apologise to Premier Wen, who, despite diplomatically saying he understood the prime minister’s actions, must have been thinking: ‘This could never happen in China.’

Yet an attempt to calculate exactly what Grandpa Wen thought of the events in Thailand is difficult. Coverage of the Thai situation in the Chinese media has been fairly limited. The august China Daily, and Xinhua have shared the same daily stories (usually a brief 300 word coverage of the respective event) for the past week with stories on 13 April (‘Water Festival not so happy’); 14 April (‘Protesters go home’); 16 April (‘ASEAN summit must be held – Abhisit’); 17 April (‘Yellow-Shirt leader shot; Thai gov’t says additional loan needed to boost post-political-crisis economy’) and 19 April (‘Thai PM: time for solving political crisis, not for cabinet reshuffle’).

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Japan’s conservative-in-chief

Author: Tobias Harris

Fresh from his trip to Washington, D.C., Abe Shinzo has thrust himself into the debate over how Japan should respond to North Korea’s rocket launch this month.

On Tuesday he delivered an address to the new study group led by Yamamoto Ichita (discussed in this post) that calls for an ‘investigation’ into the development of conventional deterrent capabilities that would enable Japan to strike at bases in North Korea.

Abe endorsed the group’s aims and stressed the importance of permitting collective self-defense for the sake of strengthening the alliance. Of particular interest is that Abe argued that acquiring the technological capabilities to strike North Korea and the legal framework that would enable Japan to use its new capabilities would strengthen the alliance.

I suppose it is possible to argue that any improvement in Japan’s capabilities would strengthen the US-Japan alliance, but I find that argument fallacious. It is easy enough to imagine how Japan’s having the ability to strike North Korea directly would undermine the alliance by posing the risk that Japan might entrap the US in a shooting war not desired by Washington. After all, look at the differences between the official US and Japanese responses to this month’s launch.

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