The Economics of East Asian Integration
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The Economics of East Asian Integration

A Comprehensive Introduction to Regional Issues

Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai

This study is intended to be the most comprehensive textbook on economic integration in East Asia. It introduces the reader to various issues related to the topic such as institutional building of FTAs; production networks and the location choice of MNEs; R & D and innovation; infrastructure development and transport costs; international migration and service trade; monetary integration; regional disparity and poverty. It also deals with critical energy, environmental and agricultural concerns. Each chapter contains ample data and rigorous analyses, complemented by illustrative box articles.
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Chapter 19: New Challenges and Directions for East Asian Integration

Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai


Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai As previous chapters have emphasized, de facto integration has thus far preceded de jure integration in East Asia. Making effective use of the heterogeneous economic conditions in the region, East Asia has developed a highly integrated export platform and has become a world factory, in which a broad range of intermediate goods are exchanged closely through intra-firm or intra-industry trade (Chapters 1, 4 and 5). This development has been attained mainly through market forces, the role of formal institutions being limited until the late 1990s (Chapters 11 and 12). Although there is room to make East Asia a more efficient ‘world factory’, especially through the involvement of latecomer countries, the region has reached a critical stage where further enhancement and development will require the establishment of region-wide formal institutions. On the one hand, a number of region-wide problems of critical importance have emerged. These include the stability of the financial and monetary system, the further promotion of free trade and investment, support for less developed countries or regions, energy and environmental problems, SARS and other epidemics that have originated in East Asia, as well as various issues of regional security. On the other hand, the current world financial crisis triggered by the collapse of the American financial market has revealed that East Asian exports have relied excessively on extra-regional demand. We need to seek a more balanced development strategy to overcome the current crisis so that growth can proceed in a sustainable manner....

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