Responses to Regionalism in East Asia

That the processes of globalisation have been a defining feature of contemporary society is beyond doubt, and within this East Asia stands as a vivid example of a region transformed by these global shifts (Dicken, 2003). Globalisation is a much used and contested term but is employed here to describe the deepening integration of global (capitalist) economic activity facilitated by the rapid development of information and communications technology (ICT) and the underlying trend of neo-liberalism. The union of these two forces has resulted in global, if widely uneven, economic expansion. Globalisation may also be seen as a continuation of the constant struggle between states and markets and although it has been claimed that states are increasingly losing out to other economic actors in this process, the multinational enterprise (MNE) in particular, the growing trend towards regionalism appears to reaffirm the continuing relevance of states as central units of analysis. Indeed, regionalism, a defining feature of the late 1990s and early twenty-first century, is a state-level process.¹ At the same time, in East Asia² this political process has emerged, at least in part, as a response to globalisation and the deepening régionalisation of economic activity. This interaction between régionalisation and regionalism, between private and state actors, is a key dynamic of the East Asian political economy today.

The twin aims of this chapter are to review the relevant literature and subsequently to construct a robust analytical framework upon which the study can reside and proceed. The central thrust of this chapter is that the rapid transformation of the IPE as observed in East Asia in the late 1990s and early twenty-first century necessitates a revised approach to the regional activities of Japanese MNEs. Accordingly, the approach taken in this study builds upon the theoretical insights gained from the existing body of work as reviewed below but assigns a more explicit role to political economy (contextual) considerations by defining a regional nexus as the central locus of investigation. The approach thus locates firm-level empirical research in a broader, regional context in an attempt to gain a clearer, richer understanding of the contemporary reality.

This chapter seeks to document and analyse key trends and issues in the contemporary East Asian political economy (EAPE) with a particular focus on ASEAN. Two key aims are identified: first, to present a descriptive account of events and trends in the post-crisis region and second, to analyse the emergence of a nascent East Asian economic entity.¹ An underlying theme, first enunciated in Chapter 1, is that this analysis points both to a radical transformation of the EAPE and further, that this transformation necessitates a modified, holistic approach to any investigation of MNE activity in the region. To facilitate these aims, this chapter considers six key trends and issues that taken as a whole constitute this radical transformation: stalled multilateralism, deepening regional economic interdependence, responses to the crisis in the fields of finance, politics and trade liberalisation, and the significance for the region of China’s continuing economic ascent. A final brief section offers a summary and some concluding thoughts.

Chapter 3 investigated a range of trends, issues and processes observed in post-crisis East Asia that cumulatively suggest a transformation of the region’s political economy. This chapter will concentrate on analysis of Japan’s links with and policies towards East Asia in the context of this transformation. By doing so the unit of analysis shifts from the regional to the national before, in subsequent chapters, shifting once more to the corporate level. A first section reviews Japan’s role in East Asian development and its promotion of the developmental state concept through ODA¹ and FDI in the period up to the AFC. Consideration is given to critical approaches to Japan in East Asia, notably the benign partnership versus embraced Asia debate. Subsequent sections consider the contemporary situation by utilising the framework established in Chapter 3. In other words, Japan’s economic and political relationships with East Asia are analysed in terms of its responses to stalled multilateralism, the AFC, deepening regional economic interdependence and the rise of China.

Chapter 5 concludes the review of the research context and prepares the ground for the presentation and analysis of empirical data in subsequent chapters. This chapter considers the automotive sector from a global, national and regional perspective. Given the scale and complexity of the automotive sector, these sections do not attempt a business history or comprehensive overview of the myriad issues that may be observed. Rather, the aim is to survey the industries and pertinent trends so as to locate the subsequent presentation of empirical data in the broader, global perspective.

The following three chapters report on how three leading Japanese automotive manufacturers are responding to regionalism in East Asia. As outlined in Chapter 1, data was collated through use of questionnaires and interviews held in Japan and elsewhere in the region with corporate executives. This qualitative data is supported by company and industry statistics where appropriate. Chapter 6 first builds upon the industry level overview found in Chapter 5 with a brief overview of the firms surveyed¹ before offering some comment on the construction and nature of the questions asked. The main body of the chapter then reports these responses for each firm before a final concluding section. Both Chapters 7 and 8 follow a similar format. Taken as a whole these three chapters afford a valuable insight into how key actors in East Asia are reacting to the transformation of the region’s political economy as outlined in previous chapters.

This chapter builds upon the examination of East Asian strategy, production and management found in Chapter 6 by investigating the nature of the East Asian investment environment as perceived by Japanese automakers. Four areas are identified: the AFC, China, investment promotion schemes (namely BBC/AICO and AFTA), and current investment/disinvestment plans. More specifically, questions in these four areas elicited responses on how the crisis had impacted on immediate and more longer-term strategy and also on the position of host governments with regards to inward investment and trade and investment facilitation schemes such as AFTA. Firms were then asked to consider the validity of the assertion that investment in China represented investment lost by ASEAN economies before being invited to comment on new investments in the region and also any planned cases of disinvestment due to a reorganisation of production networks.

This penultimate chapter records responses to questions in three areas: regionalised production, trade, and regional economic integration. In the initial section the localisation of production and the maintenance of production networks in the region were first considered before attention focused on the impact of China’s growth on existing production networks. Finally, firms were asked to comment on the trend of relocating production from Japan to the region (the so-called ‘hollowing-out’ phenomenon). Trade structures were then examined with particular attention given to the increasing liberalisation of intra-regional trade, exports, the changing structure of host markets, and any instances of ‘reverse imports’. The final section elicited responses on broader scenarios for regional economic integration and how specific FTAs might impact on the organisation of production. Within this firms were asked to comment on the validity of a statement suggesting that Japanese auto manufacturers preferred discriminatory regional arrangements as a defensive measure against increasing foreign competition.