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.