As the affects of the worldwide recession become more apparent, is this the time for Asia to march forward and take over as market leaders? asks Paul Gillespie.
COULD THIS be the Asian century? Or is our present vision of what the 21st century has in store distorted by the evident changes in the international position of the United States and a misleading extrapolation of that geopolitical shift onto other world regions? What would it take, anyway, for Asia to assume such a predominant role? Does the region have the capacity to assert collective power and invent institutions able to draw other parts of the world under its influence - the hallmark of what it would take for this to be an Asian century?
Such large questions have been thrown up by contemporary events throughout the world, and not only in Asia. The US's rapid shift under George W Bush, away from its post Cold War unilateral moment to a grudging acceptance of greater interdependence, is obviously central. The transformation has been heralded and accompanied by a flood of books and articles in the foreign policy and international relations literatures with titles such as The Post-American World, The Rise of the Rest, Here Comes the Second World, culminating in Kishore Mahbubani's The New Asian Hemisphere: The Irresistible Shift of Power to the East.
Published earlier this year, this book, by a Singapore-based scholar, provocatively tracks the rise of China, Japan and southeast Asia to global economic predominance, taking account too of how a rapidly emergent India has become part of the new geopolitical regional game. He concentrates particularly on how these developments come at the expense of the US - opening himself up to criticisms that this is to misread what is in reality a levelling up process rather than a definitive transfer of power, that Asia's rise does not entail US decline or an inevitable conflict between East and West. His book is noteworthy too, for its neglect of, indeed contempt for, Europe's role. He regards Europe and the European Union as a spent force in world politics, incapable of filling the vacuum left by declining US power, whether in Asia or elsewhere.
That the credit crunch, the deepening financial crisis and now their recessionary consequences in Asia and elsewhere are a laboratory in which to test such theories is a major theme of this month's Innovation. So much of the case made for Asia's global rise is economic that this is an obvious, if unexpectedly immediate, case study - especially in light of how the region responded to the financial turmoil it went through 10 years ago in 1997-8. That taught Asian governments to be wary of solutions imposed by the IMF's Washington Consensus and to trust their own instincts for state intervention and selective protection of their resources and markets. It encouraged them to develop greater regional cooperation by agreements on currency stability and reserve-asset swaps. Both responses stood them in good stead over the last decade - although these instruments have not performed well in recent weeks, even though the crisis reveals that Asia's major economies have been better managed than the main Western ones.
But growing international economic interdependence since then has also revealed how bound up Asian states and economies are with the worldwide capitalist system. China is, after all, capitalism's ultimate manufacturing outreach destination. Some 40 per cent of its manufacturing capacity is directly foreign-owned, making it directly dependent on international markets - especially in the US and Europe. This crisis - and especially the collapse of credit-driven US consumption growth - immediately affects Chinese growth. The same applies to a greater or lesser extent in other Asian economies, including Japan, South Korea and in southeast Asia.
Will they be able individually and collectively to show that they have escaped the primary dependence on other economic centres characteristic of their earlier growth paths, as they weather this much deeper crisis? That will be a real test of their possible future influence. Their maturing industrial infrastructures show they have already made one of the necessary steps; this is all the more important when it is recalled that China and Japan combined now have 25 per cent of world manufacturing capacity, compared to the US's 23 per cent.
China has a huge potential domestic demand capable of absorbing output diverted from the US, as do Japan and other regional economies. In the same way their stronger savings and financial surpluses, invested predominantly in US bonds and Treasury Bills, can be shifted back home, or elsewhere, perhaps to euro rather than dollar assets.
This immediately raises the issue of political capacity at world and regional levels, since there is a seamless crossover between the economic and political spheres in such periods of change.
The Asia-Europe Meeting in Beijing on October 24-25th brought together 43 EU and Asian states in impressive unanimity on the need for a new and more inclusive framework of world financial regulation.
It will boost the influence of both regions at the G20 summit in Washington on November 15th to consider such reforms. This good timing justifies the efforts on both sides to develop their relationship since the first ASEM meeting in 1996. Preparedness is everything at this time.
Nonetheless there is a basic asymmetry between the EU and their Asian partners that casts doubt on their capacity to work together coherently. Despite the EU's cultivation of inter-regionalism the European model of regional integration is very different from the Asian one. Common institutions, sovereignty sharing, majority voting, a transnational court and supranationality are the main features of the EU's regionalism. In the economic sphere the single market, the eurozone, the stability and growth pact and the Lisbon process create a more and more integrated regional economic infrastructure with a distinctive balance between central direction and national autonomy.
Nothing like this is to be found in Asia, notwithstanding the substantial progress made recently by the Association of Southeast Asian Nations (Asean) to co-ordinate their policies, together with their developing co-operation with China, Japan, South Korea (Asean+3), and now India, Australia and New Zealand (Asean+6). The intrusive rules applying in the EU would be seen as a quite unacceptable breach of sovereignty in the Asian context. Although the committee of wise men advising on reform of the Asean Charter looked closely at the EU model, their recommendations for change fall well short of it and what has actually been accepted by the Asean governments is even further away from EU integration.
Many analysts of regionalism argue that for this reason the EU is a referent rather than a model in Asia. It is a singular approach that cannot be exported to much more diverse parts of the world like Asia which lack Europe's specific historical reasons for integration and have much lower levels of inter-state trust. Thus China and Japan are qualitatively less reconciled than France and Germany, notwithstanding their close economic interdependence. Hard security matters much more in Asia than Europe, giving the US a larger role. Nor is nationalism as discredited in the largest Asian states as in their European counterparts. Many smaller Asian states value their sovereignty all the more because it has been so recently won from European colonialism. And they lack the administrative capacity required to implement an EU-style integration of policy processes.
Hence Asia's "new economic regionalism", based on integrated cross-national production and supply chains by multinational companies gradually supplemented by free trade agreements, is sharply contrasted in the policy literature with the EU's older variety based on an internal market and a single currency. As the political scientist Alberta Sbragia argues, the literature on comparative regionalism is ill-defined, ambiguous as between whether economics, security or politics should be given analytical priority, and often fall far short of real comparative research methods.
This means we should be wary of grandiose statements about the regionalisation of world politics in which the EU is seen as the gold standard to which others aspire or will be driven by the nature of globalisation. We may not be comparing like with like.
Paradoxically this makes the EU simultaneously weaker and stronger internationally. Both elements make it less likely - as seen from 2008 - that this will be an Asian century.
Much of the EU's developing foreign policy profile, based on soft power projection of norms and multilateral rules, assumes other world regions, including Asia, are likely to develop in a similar manner as Europe's. That would give the EU an evidently growing exemplary strength as the century unfolds. But if this is a misconceived extrapolation of European developments the EU's influence may in practice be less than expected, at least in the medium term, in other regions.
However by virtue of its closer integration and resulting economies of scale vis-à-vis the US, the EU is in a much stronger position than Asia to influence the shape of emerging world institutions at these forthcoming negotiations. These are much more likely to usher in a multipolar than an Asian-centred world. This means, pace Mahbubani, that Europe and the EU will become stronger international players. It also raises the question of whether it is pushing geographical determinism too far to talk of Asian, European or American centuries, as distinct from an emergent global order in which each region will have a specific interest and profile.
In the medium term the EU-US side of the US-EU-Asia triangle of world power and influence is stronger than the US-Asia one by virtue of much deeper trade and investment relationships and closer interests and values. But even an Obama victory tomorrow will not reconcile the US and EU over this medium term, since many of those interests and values are diverging. That makes a stronger EU-Asian relationship mutually advantageous and therefore more likely in coming years.
Paul Gillespie is Foreign Policy editor of The Irish Times. He is a member of the advisory committee of the Asian Studies Ireland Association. The association will be launched at a conference on "The Rise of Asia and the Challenge for Europe" in University College Cork on November 13th and 14th