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Thursday, Feb. 22, 2007

SOUTH KOREAN JOURNALIST SYMPOSIUM

DIFFERENT 'DREAMS' MAKE INTEGRATION A NIGHTMARE

Japan, South Korea can pull Asia together


Staff writer

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Japan and South Korea should work together to save the flagging efforts to seek tighter economic integration in Asia, where key players seem to lack a common blueprint for the region's future and push for their own separate agenda, veteran journalists from South Korea told a recent symposium in Tokyo.

News photo
Hong Kwon Heui (right) of The Dong-a Ilbo speaks while his copanelists Kim Chang Kyoon (left) and Go Gwangchul listen during the Feb. 9 symposium at Keidanren Kaikan in Tokyo. SATOKO KASAWAKI PHOTOS

As part of such efforts, the two countries need to reopen the mothballed talks for a bilateral free trade agreement -- even though South Korea is now preoccupied with the FTA negotiations with the United States, they told the Feb. 9 event.

Six senior writers from South Korean newspapers took part in the symposium organized by Keizai Koho Center under the theme, "The roles of Japan and South Korea in Asia," after a weeklong tour in Japan that included meetings with business leaders, lawmakers and journalists.

Hong Kwon Heui, an editorial writer at The Dong-a Ilbo, said it is encouraging that Prime Minister Shinzo Abe has announced a policy of seeking economic partnership accords and deeper ties with as many countries in Asia as possible. However, Asian countries face multiple challenges as they pursue greater economic integration in the region, he pointed out.

Mutual dependency among East Asian economies has increased in recent years, making it increasingly important for the countries to build a regional economic community, he said. "But the region today lacks a blueprint for its future, and its key players seem to share one bed but have different dreams," Hong said.

Japan, which has advocated a broad economic community that covers the whole of East Asia, considers the Association of Southeast Asian Nations as a key player and also reaches out to India and Oceanian countries, Hong said.

Meanwhile, Tokyo views South Korea and China as just two of the multiple partners for cooperation -- but not the main partners, he said.

News photo
Yukiko Fukagawa

China, which set a goal in 2001 of concluding an FTA with ASEAN within 10 years, has positioned itself as the core of an Asian economic integration, although it accepts ASEAN's role as the concept of a regional community expands to include India and Oceania, Hong observed.

South Korea, for its part, has advocated closer cooperation in Northeast Asia while also pushing for the so-called ASEAN-plus-three framework involving Tokyo, Seoul and Beijing, he noted.

Going it alone

Discussions on a Northeast Asian FTA involving Japan, South Korea and China started in 1999 but have made little headway, Hong said.

Hong also noted that the region's interest in the ASEAN-plus-three framework, or even the recently-launched East Asia Summit, appears to be waning. The regional summit held in the Philippine island of Cebu in January did not draw much public attention except for an energy deal, he pointed out.

Instead of jointly pursuing the ASEAN-plus-three framework, Japan, South Korea and China are separately looking to deepen their individual ties with ASEAN, he added.

The major reason behind this slowing momentum, Hong said, is the battle between Japan and China for leadership in the region. Japan wants to stop China's influence in the region from expanding further, and neither is ready to cede the position as the regional leader to the other, he added.

Right after taking office in September, Abe visited China in what Hong described as a "strategic compromise" to normalize ties that had been severely strained under his predecessor Junichiro Koizumi.

However, chances of a fundamental reconciliation between Japan and China may not be too high, and they cannot be expected to jointly take the leadership in Asia -- like France and Germany did in the postwar integration of Europe, Hong noted.

Then what can Japan and South Korea do?

Hong urged Tokyo and Seoul to try more aggressively to build up the atmosphere for economic community building in East Asia.

And for that goal, Hong said, they must make greater efforts to overcome recurring bilateral frictions that derive from Japan's 1910-1945 colonial rule of Korea.

Japan does not sufficiently understand South Korea's sensitivities toward history issues while South Korea's excessive reactions to those issues have in turn rubbed the Japanese government and people the wrong way, he noted.

Although private-sector exchanges between the two countries have made progress, "that will not be enough and measures need to be taken to institutionalize" their mutual opening-up, and thereby reduce the uncertainties over bilateral relations, Hong said.

Hong said the two countries should at least reopen the long-stalled bilateral FTA talks.

The talks were launched in 2003 but have been suspended since November 2004 after the two sides disagreed over liberalization of Japan's agricultural market. Japan and South Korea have "blamed each other for the lack of progress" and are unable even to find possible clues to reopening the negotiations, he said.

Given that the two countries have the potential to work together in many areas, including energy cooperation and the security threat from North Korea's nuclear and missile programs, "it is a shame that we cannot even restart the talks -- even if conclusion of the talks would likely take more time," Hong said.

Hong said that Japan seems focused on the economic impacts from an FTA with South Korea. But economic benefits are only a part of what an FTA will bring, and Tokyo should look more at the political and social benefits from such an agreement with South Korea, he added.

Another panelist, Go Gwangchul, head of the international news department of the Korea Economic Daily, predicted that the FTA talks with Japan were unlikely to reopen at least until 2008 -- after the election of President Roh Moo Hyun's successor at the end of this year.

Common Asian currency

Go suggested that a long-term perspective is important when Asia discusses regional economic integration, saying that it took half a century for Europe to introduce a common currency.

The idea of a common Asian currency -- modeled after the euro and possibly used by ASEAN plus Japan, China and South Korea -- has been studied in the last few years, Go said.

The Asian Development Bank has also considered a plan to create a regional currency unit -- short of introduction of an actual currency -- and publish its exchange rate with the currencies in use by countries in the region, he said.

Go noted that introduction of a common currency in Asia will bring a variety of benefits -- such as reducing exchange rate volatility among member countries and giving further momentum for the creation of a regional bond market.

A common currency would serve as a defense against potential speculative attacks from outside the region while turning the region's economies more homogeneous, he said.

Despite such anticipated benefits, technical and political obstacles remain and the ADB project has not moved much forward. No consensus has been reached on which standard the common currency unit would be calculated -- whether it should be the participating countries' gross domestic product or their external trade, Go said.

Political problems include the question over whether the Hong Kong dollar and the Taiwan dollar would be included in the scheme while the wide gap among Asian countries in terms of the level of their economic development or industrial structure poses obstacles to the very concept of a single regional currency, he said.

And here again, there does not seem to be a consensus on which countries should take the lead in the project, Go noted.

South Korea, for example, has benefited from the rise of China as an economic powerhouse but also sees it as a threat while Japan wants to keep in check the growing influence of China in regional affairs, he pointed out.

Japan, for its part, is unquestionably the major economic power in Asia, but there are questions as to whether Tokyo, which has traditionally prioritized relations with the U.S., enjoys the political and social respect of its fellow Asian countries as the leader in a regional project like currency integration, Go said.

Does this all mean that a common currency in Asia will be a dream after all? Go said he did not think so, given that economic ties among countries in the region have become much tighter than in the past.

For example, Japan, China and South Korea are closely tied together because each of the three economies is one of the top trading partners of one another, he pointed out.

"If the three countries have the will to build the world's leading economic bloc, they will be able to overcome the political and technical obstacles," Go told the audience.

Go noted that it took 45 years for Europe since the 1957 Treaty of Rome to introduce the euro in 2002. European countries with their history of political and social hostility toward each other accomplished economic integration over a long period of time, so if Asia has the will to do it, a common currency may be achievable -- not immediately but perhaps in the future, he added.

No threat, no unity

Yukiko Fukagawa, a professor at Waseda University's political science and economics faculty who served as moderator in one of the symposium sessions, meanwhile said that East Asia with its unique background does not necessarily need to follow the European Union as a model when it considers its future.

Fukagawa said Japan and China, which are often on a collision course on various issues, realize that there are limits to what governments can do to integrate this region.

They both know that it would not be easy to institutionalize economic integration in Asia, that integration should be left to market forces, and that governments can only follow what has been achieved by market forces, she told the audience.

The momentum for regional integration emerged after Asia was hit by the 1997 financial turmoil -- the first time that everyone in the region shared a sense of crisis, she said.

So it is inevitable that the momentum has since faded because Asian countries have strongly recovered from the crisis and they do not currently face a common external threat, she noted.

The integration of Europe made economic sense because European countries needed to unite to survive the competition from Asia and the U.S., but Asian nations today do not face such pressures, Fukagawa noted.

But Asia may again face such pressures, she warned, if the huge macroeconomic imbalances between the U.S. and Asia explode -- possibly in the near future.

It is not known how long the current situation -- Asian nations continuing to finance the large current account deficits incurred by the U.S. -- will be sustainable, and Asia will again face a common external threat if the situation develops into a sharp depreciation of the dollar -- the reverse of what happened 10 years ago, Fukagawa said.



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