By VAUGHAN YARWOOD
Since the financial crisis of 1997, Japan and other northeast Asian states have talked of creating a formal grouping to coordinate economic policy and cooperation, along the lines of the Association of Southeast Asian Nations.
The economies of northeast Asia - Korea's in particular - were hit hard by the crisis and the region's policymakers did not take kindly to the International Monetary Fund's badly flawed prescriptions for recovery. Nor were they pleased by United States opposition to the idea of an Asian Monetary Fund to help bring the crisis under control.
A formal cooperative relationship is seen as one way of reducing American dominance, minimising exposure to outside financial shocks and asserting a degree of economic autonomy. It also holds out the promise of greater bargaining power at forums such as the World Trade Organisation and in negotiations with the United States.
But any such move faces serious obstacles. Unlike European states, the countries of northeast Asia have little experience in building multilateral institutions and no history of sustained cooperation. Worse, they remain divided by ideological differences and by bitter memories of conflicts.
A major reason for the area's volatility is the unique confluence of great power interests which, over the years, have enmeshed China, Russia, Japan and the United States in a web of unsatisfactory military pacts and strategic partnerships.
At the heart of things are two divided countries: China and Korea. Despite a gradual softening in relations between the two Koreas, reunification remains a distant dream. Nor does Taiwan show signs of welcoming China's political embrace, despite strengthening economic ties.
Ironically, the United States military presence in northeast Asia is tolerated in some quarters as a counterbalance to the territorial aspirations of China and the rearming of Japan.
China has repeatedly shown its determination to reassert control over its former lands, though to date it has %stopped short of force. In December, Japan %approved a $US223 billion five-year plan to re-equip with advanced weapons which will, for the first time in over 50 years, give its armed forces offensive capability.
Not surprisingly, advocates of cooperation have narrowed their focus to the less problematic area of trade arrangements - a strategy pioneered by Apec. The first sign of this came in late 1998 when the Japanese Ambassador to South Korea, Kazuo Ogura, floated the idea of a trade alliance between the two countries to counteract the powerful Western trade blocs.
This was taken a step further in mid-1999 when Japan's Ministry of International Trade and Industry added its own weight to calls for a northeast Asian trade bloc initially comprising Japan, South Korea, Hong Kong and Taiwan.
Beijing has put moves towards regional free trade on hold while it navigates World Trade Organisation membership, though it continues to explore with Japan and South Korea ways of institutionalising economic cooperation. The fact that it released $US4 billion to countries hit by the Asian financial crisis suggests that China sees the value in working towards regional stability and growth.
Some form of trade bloc makes sense. Northeast Asia is the only major area in the world not in a formal economic grouping and individual countries risk economic penalties as the EU, Nafta and other trade blocs divert investment and trade. At best, they will be forced increasingly to deal independently with common European financial, trade and foreign policies.
The rise in intraregional trade in northeast Asia in recent years suggests that the benefits of a formal arrangement could be considerable, though progress at Government level continues to be cautious. Business leaders have met frequently to move things forward, deciding two years ago in Seoul to set up a permanent body to foster economic cooperation.
Mistrust remains the main obstacle. Pessimists doubt that China, Japan and South Korea can set aside national interests, identities and prejudices long enough to give any new initiative a fighting chance of success.
It has been said that war is politics by other means. It would be unfortunate if northeast Asia was destined to prompt another maxim: that economic cooperation can be defeated by history.
* Vaughan Yarwood can be contacted at hiero@ihug.co.nz
<i>Asia view:</i> Trade bloc a tricky goal for divided northeast Asia
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