Toward an East Asian Community It seems clear that the countries of East Asia are heading steadily if slowly toward the creation of a regional community, or at least an East Asia Free Trade Area (EAFTA). It will take considerable time to reach that ultimate goal. The process will undoubtedly suffer setbacks along the way, as has happened in the parallel regional integration experiences in Europe and the Western Hemisphere. The eventual entity may not be formally called an “East Asian Community” or even an “East Asia Free Trade Area” nor be managed by a set of centralized institutions as in Europe. The final configuration may indeed be a messy combination of bilateral and subregional compacts rather than a single neat agreement à la European Union or even the North American Free Trade Agreement (NAFTA).
But the rest of the world, and many Asians themselves, may not realize the progress that East Asia is making toward construction of a functional regional economic zone. Virtually every possible combination of the core Asian group—consisting of the original members of the Association of Southeast Asian Nations (ASEAN) along with China, Japan, and Korea—is already engaged in active integration efforts. Some have already concluded free trade agreements (FTAs), such as Japan-Singapore and (much more importantly) China-ASEAN. Other FTA pairs are in advanced stages of negotiation, such as China-Thailand and Japan-Korea. More subregional compacts are likely as Japan and Korea compete to emulate China’s agreement with ASEAN as a whole. Intergovernmental and government-mandated studies have already developed blueprints for the most ambitious variants on the theme, a Northeast Asia Free Trade Area (comprising China, Japan, and Korea) and a full EAFTA
These steps toward regional trade integration are of course being complemented by parallel monetary steps. Contrary to the experiences in other regions, initial steps toward monetary integration have preceded trade integration in East Asia. The Network of Bilateral Swap Arrangements, which subsequently became the Chiang Mai Initiative, could eventually evolve into an Asian Monetary Fund (whether it is ever called that or not). The recent adoption of a currency basket by China could pave the way toward the next phase in this process, adoption of a common currency basket by the main countries in the region.