Abstract
Political economists have long noted that the prospects for trade liberalization diminish in a climate of economic recession. A stagnant economy intensifies the burden of adjustment for non-competitive sectors and polarizes domestic trade politics. Not surprisingly, the global financial crisis has raised concerns of a substantial protectionist backlash, through the imposition of national measures that circumvent WTO disciplines such as anti-dumping or tied stimulus packages. The impact of economic crisis on regional integration is, however, more ambiguous and has not been explored systematically. On the one hand, policymakers may be pressed to renege on trade liberalization commitments on all fronts – also weakening the momentum to negotiate or implement free trade agreements (FTAs). On the other hand, policymakers may be tempted to ‘insulate’ their region from adverse global trends and may see FTAs as more amenable to political manipulation that shelters inefficient sectors. In order to shed light on the connection between external crisis and regionalist drive, this article assesses three main challenges East Asian elites confront in devising a regional trade bloc capable of acting as a growth locomotive: institutional fit, multilateralization, and architectural design. The track record of East Asian governments of negotiating FTAs to score diplomatic points abroad and ensure political survival at home – at the expense of maximizing economic gains through far-reaching liberalization – does not bode well for the magnitude of this challenge.
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