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Research Report

SHAPING THE ASIA-PACIFIC FUTURE: Strengthening the Institutional Architecture for an Open, Rules-Based Economic Order

Olin Wethington
Robert A. Manning
Copyright Date: Jun. 1, 2015
Published by: Atlantic Council
Pages: 40
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Table of Contents

  1. (pp. 7-7)
    Jon M. Huntsman Jr.

    The world is at an inflection point, and the Asia-Pacific region is playing a key role in this historic transformation. The rise of Asia and the re-emergence of China is rippling through both regional and global institutions. Ever since the US clipper ship Empress of China sailed to Canton in 1784, the Asia-Pacific region has been an important part of American foreign policy. Today, of course, Asia has taken off, and US trade with the region has grown to new heights. The Obama administration’s “rebalance to the Asia-Pacific region” is but the latest US effort to underscore the importance of...

  2. (pp. 13-14)

    A global diffusion of wealth and power, from the West and North to the East and South, is unfolding, posing potentially profound challenges to the open, rules-based global order under which the world economy has flourished since 1945. Nothing better illustrates this trend than the shift of the world economy’s center of gravity to the Asia-Pacific region.

    This economic transformation in the Asia-Pacific region has been building for half a century. It began in the 1960s, when Japan’s economy took off, followed by the growth of the four “Asian Tigers” (South Korea, Singapore, Hong Kong, and Taiwan) in the 1980s,...

  3. (pp. 15-20)

    The shift in economic momentum and wealth to Asia has been broad-based. China’s economy alone grew from $200 billion in 1980 to $10.3 trillion in 2014. Asia now boasts a $21 trillion economy, including the world’s second largest (China) and third largest (Japan) economies. The ten ASEAN nations, most less developed or middle income, together have an economy worth more than $2.3 trillion.³

    The economic dynamism of Asia has been due in no small part to the fact that Asians are increasingly trading with, and investing in, each other. As the Asian middle class has grown, consumption of goods and...

  4. (pp. 21-22)

    Given the perceptions and trends summarized above, what long-term economic and financial institutional architecture should governments seek to build in the Asia-Pacific region by 2030? In other words, what rules should guide the economic conduct of states, and how should the countries of the region embody those rules in institutions and arrangements that provide long-term durability?

    Broad options can be framed. For example, should the region soften the historic effort to build an open, rules-based order and instead give political priority to finding lowest-common denominator accommodation with rising powers in the face of new realities and pressures? Or should the...

  5. (pp. 23-24)

    The sinews of US global leadership have been the multiple dimensions of unparalleled US assets—economic and financial strength, technology, entrepreneurial innovation, military and diplomatic capabilities, natural resources, and the appeal of US culture, and political and social values. In this sense, domestic and foreign policies are deeply and inexorably intertwined. Current domestic problems notwithstanding, no other nation has the panoply of components of national power possessed by the United States, nor is any likely to do so by 2030. Yet, most of the current and emerging global problems cannot be addressed unilaterally by the United States or any other...

  6. (pp. 25-29)

    For the last seventy years, the Bretton Woods institutions—the International Monetary Fund and the World Bank—have provided the overall institutional architecture for the global economy, and the Asia-Pacific region as well. Over time, other institutions have been added, including the World Trade Organization and the various regional multilateral development banks such as the Asian Development Bank. The major shareholders of the IMF and World Bank have shown themselves able to adapt those institutions to changing global economic circumstance—from the termination of gold convertibility of the US dollar in 1971, to the oil price shocks of the 1970s,...

  7. (pp. 30-33)

    Over the past seventy years, both bilateral government financing and multilateral development banks have supported development and infrastructure financing in the Asia-Pacific region. The Bretton Woods arrangement in 1945 created the global World Bank Group to address poverty and development on a multilateral basis. On a regional basis, the Asian Development Bank was established in the 1960s to complement the World Bank architecture.

    Historically, the United States and Japan have been the two largest bilateral donors of official development assistance (ODA), and their official export credit agencies have also been significant sources of infrastructure and project finance.

    During the past...

  8. (pp. 34-39)

    For the past seven decades, international trade has been the engine of world growth and global integration. It was governed by the companion to the Bretton Woods financial institutions, the General Agreement on Trade and Tariffs (GATT), succeeded in 1995 by the World Trade Organization and led by the United States. International capital flows and investment, along with an open trade system, led to what is now viewed as the “golden age” of trade—1950-73, when trade grew by 8.2 percent per year, nearly double that of global economic growth.37 Worldwide, global trade in goods and services grew from $2.7...

  9. (pp. 40-40)

    US leadership in a world in the midst of historic transformation is no easy task. However, it is both necessary and possible. Americans tend to view the past seventy years of US predominance in Asia as the norm, the natural state of things. However, Asians see the post-World War II period as a serendipitous happenstance of history. They well understand and appreciate that the US security guarantee has underpinned stability, and that US leadership of an open trade and financial system, US investment, and relatively open markets have facilitated the Asian economic miracle.

    Yet, Asians are fearful that the wheels...