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Research Program Brown Bag Seminar
Non-Resident Senior Fellow, East-West Center
Professor of International Economics, Johns Hopkins University, SAIS-Bologna
January 8, 2009 12:00 noon – 1:00 pm
Asian economic integration has been growing rapidly in recent years, in large part driven by market forces. In response to this "regionalization," Asian economies have also concluded a large number of free-trade areas (FTAs) with regional and extra-regional partners. Many more are in the works, including the possibility of a "Free-Trade Area of the Asia-Pacific" (FTAAP) between APEC member states. In addition, there have been some initiatives in the area of financial cooperation, but these have been far less ambitious than the FTAs.
The financial turmoil that erupted in September 2008 (with the collapse of Lehman Brothers and the nationalization of large chunks of the US financial sector) will certainly have important ramifications for the Asian economies. While the region was not heavily invested in "toxic assets," it has been dependent on external demand for economic growth since the Asian Crisis of 1997-1998. With the United States, the EU, and Japan all in recession, the prospects from growth are far bleaker than they have been in a decade.
How will this financial crisis affect the trend toward FTAs and various forms of financial cooperation in the region? Will it have a tendency to bring the region closer together—as was the case with the first Asian Crisis—or will it make cooperation more difficult, e.g., with the region's economies becoming more globalization-shy? This paper approaches these questions from a variety of perspectives, including tapping the experiences of other regions. It concludes that there is reason to believe that, while many scenarios can be painted, it is likely that, given the current state of economic development and policy approaches in Asia at present, the current crisis will likely have the effect of enhancing cooperation, particularly (but not exclusively) in the area of finance. The paper also produces a series of policy recommendations as to how the region should respond.
Michael G. Plummer is Professor of International Economics at The Johns Hopkins University, SAIS-Bologna, and (non-resident) Senior Fellow of the East-West Center. He is Editor-in-Chief of the Journal of Asian Economics and President, American Committee for Asian Economic Studies (ACAES). Previously, he has held teaching and management positions at Brandeis University and the East-West Center. He has also been a Fulbright Chair in Economics (Viterbo) and Pew Fellow in International Affairs (Harvard University). His main academic interests relate to international trade, international finance, and economic integration, especially in the Asian context. He has published extensively on Asian economic integration, particularly in the ASEAN context, and has a forthcoming book (2009), ASEAN Economic Integration: Trade Foreign Direct Investment, and Finance. Professor Plummer serves on the editorial boards of the Asian Economic Journal, World Development and the ASEAN Economic Bulletin. His Ph.D. is from Michigan State University.