EAEC: Still a valid prospect?

EAEC: Still a valid prospect?

By Paridah Abd. Samad

KUALA LUMPUR (JP): Surprisingly, or perhaps not surprisingly,
ASEAN is still championing the EAEC (East Asia Economic Caucus)
cause. ASEAN foreign ministers at the end of their annual meeting
in Subang Jaya, Malaysia on July 25, 1997 expressed "satisfaction
at the progress of EAEC" and at the increasing cooperation among
potential EAEC members and expressed the hope that the caucus
would soon be formally instituted for the benefit of its members.
An informal ASEAN summit which will be held in Kuala Lumpur from
Dec. 14 to 16, 1997 will invite China, Japan and South Korea, a
de facto collection of the EAEC membership.

The issue of EAEC has risen again after a lapse of some time.
Hopefully, the rise of the issue is not related to the closing
term of the present secretary-general of ASEAN, Dato' Ajit Singh.
With the idea of the EAEC originating from Malaysia, Dato' Ajit
Singh, a Malaysian, is morally obliged to push the EAEC agenda up
among the highest priorities of ASEAN.

But EAEC is not only championed by Malaysia. The importance of
its existence has been agreed by all ASEAN countries, but,
unfortunately, it is misunderstood by the West, especially the
U.S. which wasted no time persuading Japan not to join the
caucus.

Japan has played a significant role in delaying the formation
of EAEC. Indonesian Foreign Minister Ali Alatas said that "EAEC
cannot yet be launched as there are still objections from several
sides raising doubts on the part of potential members of EAEC".

The Malaysian proposal for the formation of EAEC in December
1990, represented a stronger push from ASEAN for economic
cooperation within the region. The EAEC proposal was clearly
prompted by ASEAN's fear of the increasingly protectionist trade
blocs in the European Community and North America.

In an atmosphere of increasing protectionism from the U.S. and
the EU, the high dependence of ASEAN exporters on the American
and European markets will expose them to the vagaries of
Washington and Brussels trade policies and practices. It is
important for the ASEAN economies to become far more integrated
in respect to trade, investment and technology. At the same time,
the EAEC proposal was also meant to take advantage of the
momentum of the region's economic take-off and to rely on
countries such as Japan to lead the caucus.

In recent years, while Western economies were almost stagnant,
ASEAN registered an average growth rate of about seven percent,
making it one of the most dynamic regions of the world in terms
of economic growth. As such, ASEAN has become more confident in
any decision regarding regional interests. ASEAN, particularly
Malaysia, which believes that Western superiority is a thing of
the past, would prefer Japan to take the lead in asserting
Eastern superiority over the West, particularly in trade and
economic fields. Malaysia wanted Japan to take leadership of its
proposed EAEC, an idea which also reflected Malaysia's dislike of
the U.S. domination of APEC. For Malaysia, Japan has not only the
economic muscles, but also historical tradition in being the
first Asian country to defeat a European power -- Tsarist Russia
in the Russo-Japanese War of 1904-1905.

The rapid economic growth of ASEAN and its Asian counterparts
over the past ten years has invited a great deal of interest from
the U.S. and also the EU wishing to participate and to contribute
in the political and economic performance of the region. More
interestingly, this happens at a time when these two regions,
especially the U.S., are facing some difficulties with their
internal economic performance.

It is crucial for the U.S. to promote APEC. The U.S. with
massive trade deficits and foreign debts wants to transform the
country from consumer-orientation to export-orientation.
Washington appears to believe that a commitment to a fast-growing
regional market is the key to U.S. economic recovery. Through
APEC, the U.S. would explore trade arrangements with the ASEAN
Free Trade Area (AFTA), the North American Free Trade Area
(NAFTA) and the Australia and New Zealand Closer Economic
Relations (CER).

With APEC, bilateral economic relations between the U.S. and
Japan have been significantly extended to the larger dimension of
the Asia-Pacific region. In the current situation when U.S.
bilateral trade relations with Japan are becoming more difficult,
a broader framework, the Asia-Pacific, transcends a mere
bilateral relationship between these two countries to bring it to
a more significant level.

As a matter of fact, the rise of ASEAN has caused its status
to continue to gain prominence in Japan's diplomatic strategy.
Japan's ASEAN strategy is to rely on economic cooperation as a
means to gradually expand and deepen its political and security
relations within ASEAN. This is partly to gradually secure a
dominant role in the region while becoming a world political
power.

The initiative of EAEC fits well with Japan's own long time
dream in regard to its long-term Asia-Pacific economic strategy.
In fact, the idea of EAEC and also ARF (the ASEAN Regional Forum)
was essentially first initiated by Japan. Japan has been uneasy
about the U.S.'s attempt to dominate APEC and has hoped to curb
such attempts by forging closer economic arrangements with ASEAN.
It is the Japanese nature to always be in a position of
uncertainty and not to show a firm stance on certain issues.

Ironically, due to the U.S. boycott of EAEC, which again
confirms the character of uncertainty of Japan, Japan has, until
today, not formally endorsed EAEC, although there appears to be
significant unofficial Japanese sympathy and support for the
idea. Malaysia is very disappointed by Japan's lack of courage in
defying Washington's opposition to EAEC.

What are the future prospects of EAEC? At a conference
organized by the Japan Institute of International Affairs (JIIA)
in Tokyo in April 1997, Prof. Michael Leifer, an analyst on
ASEAN, from the London School of Economics said that he could not
see any prospect for EAEC. And yet, the issue of EAEC is
officially coming to the fore again.

And at the informal ASEAN summit to be held in Kuala Lumpur on
Dec. 14 this year, China, Japan and South Korea, a de facto
collection of the EAEC membership, will be invited. The issue
seems to be significant, at least until the end of this year.

After this, the pursuance of the issue will depend on the
interest of the new secretary-general, Rodolfo C. Severino, who
will replace Dato' Ajit Singh at the end of the year. He
currently serves as Undersecretary of Policy for Foreign Affairs
of the Philippines.

Malaysia turns 40 and faces "mid-life pains" (this term quoted
from Reuter) as the result of multi-faceted problems in
dimensions beyond those anyone could have imagined. The financial
turmoil that has struck some ASEAN countries recently has seen
the ringgit nosedive. Stocks are not faring much better, while
some investment analysts, foreigners and locals alike, are of the
opinion that the economy is overheating.

In Mahathir's speech celebrating the nation's 40 years of
independence, he said turmoil on the stock and currency markets
had cut the country's per capita income to US$4,200 from $4,600.
In the aftermath of the regional currency crisis which brought
the ringgit to its lowest level against the dollar since it was
officially floated in 1973 and share prices on the Kuala Lumpur
Stock Exchange (KLSE) to four-year lows, deep in its heart,
Malaysia might still hope that EAEC could be the mechanism to
fortify the economic strength of its member countries.

In hoping for EAEC to become a reality, Malaysia might
confidently impress on other nations that the caucus could be a
significant instrument for member countries to cooperate and help
each other in economic difficulties, and also prevent outsiders
such as U.S. fund manager George Soros from systematically
attempting to destroy Malaysia and other successful ASEAN
economies for political reasons. Being part of ASEAN, new member
countries like Vietnam, Laos and Myanmar would definitely like to
see the caucus directly and indirectly helping to overcome their
economic difficulties.

Dr. Paridah Abd. Samad, is a senior lecturer at ITM Shah Alam,
Malaysia and was previously visiting research fellow at the Japan
Institute of International Affairs (JIIA), Tokyo, Japan.