JANDUTTA's PATRALIPI: ASIAN ECONOMIC COMMUNITY

Asian Economic Community: intra-community macro-and-micro-economic parameters

In the absence of economic regionalization, the paradigm of globalization is likely to be operationally dysfunctional. In the contemporary world economy, a small subset of sovereign nation state economies commands hugely much larger shares of world output and trade while an overwhelmingly large number of such sovereign economies has their respective shares of world output and trade rather very marginal. Regionalization can help regional economic unions/communities enjoy competitive shares of world output and trade and thus become competitive actors in the inter-regional competitive world market, contributing to the success of globalism. Inadequacy of the post-WWII infrastructure for the global free market economy and the success of EU and the Euro-regime are noted.The21-memberAPEChasbeenexposedtothegreatgeographicaldivideofthePaci®cOcean, underscoring the fact that the divide of the Atlantic Ocean made the map of Europe differentiated from the Americas. Lessons from EU and the Euro-regime are noted. Based on an extensive empirical analyses of relative shares of world output and trade, the case for Asian Economic Community (AEC) hasbeenpresented.Themodelof3plus5,threeeconomiesinNortheastAsiaand®veinSoutheast Asia, may be the step one for the AEC.

* Tel.: 􏰀1-732-932-7054; fax: 􏰀1-732-932-1558. E-mail address: mdutta@rci.rutgers.edu (M. Dutta). URL: http://economics.rutgers.edu/home/dutta.

448 M. Dutta / Journal of Asian Economics 13 (2002) 447±491 1. Globalism and regionalism

The success of globalism with some 200 sovereign nation state economies of very diverse dimensions remains to be attained (190 members of the United Nations (UN) with Switzerland electing to be a member in 2002; 183 members of the International Monetary Fund (IMF) and The World Bank (WB); 144 members of the World Trade Organization (WTO), following admission of People's Republic of China (PRC) and Taipei to its membership in 2001). Only with regionalism, based on economic grouping of a set of sovereign nation state economies belonging to a region, as observed on the map of the world, globalism can be operationally successful. Each regional economic group can be competitive actors in the global market and thus contribute to the maximization of economic gains for all the micro-economic actorsÐhouseholds as well as business unitsÐof the world. Scholar- politician Saburo Okita (1989) spoke eloquently for the inter-dependence of globalism and regionalism. In what follows let us review the two factors which have contributed to this new economic paradigm.

1.1. The post-WWII infrastructure of globalization and the new world

The post-WWII efforts to globalization, supported by the institutional infrastructures, suchas,theUnitedNations(UN),theInternationalMonetaryFund(IMF),TheWorldBank (WB), The World Trade Organization (WTO), the International Labor Organization (ILO) and a whole host of others, have failed to produce optimum results. True, the non- participation of the then communist economies created a problem. Even, participation by the non-aligned group of countries became a point of concern. The rich and the poor economies of the world failed to make the market economy work successfully. The delinking of the ®xed gold value of the U.S. dollar on August 15, 1971 added a new chapter to the situation. The G-5, then G-7 and now the G-8 elected to take their exchange rate management problem to themselves, effectively out of the IMF system. The donor countries of the WB became an inclusive economic club.

The WTO faces a paralysis, as it has not been quite able to manage the trade issues facing the rich and the poor nations of the world, persistence of trade con ̄icts amongst the rich trading nations of the world apart. If investment did not go to economies of relative labor abundance and consequent low-wage cost per unit of product, labor moved to investment in labor-scarce economies with relative full employment and high wage rate, a la necessary modi®cation of immigration and naturalization laws. The ILO watched the process and could hardly be an actor for freedom of labor movement. The phenomenon of illegal immigration continues to be widespread, much to the agony of millions of distressed people whose labor is in demand in the countries complaining against illegal immigration. No wonder, the Presidents of Mexico and the USA recently shared their concern in this regard.

TheAsianFinancialCrisisin1997±1998openedthedebateandproducedanendless ̄ow of literature on the crisis after the crisis. A student of economics misses reading a pre-crisis research paper. One must ask the question if the post-WWII global economic system has become dysfunctional.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 449 1.2. The European Economic Union

The second factor we must consider is the successful experimentation of the new paradigm of economic regionalization in Europe in the post-WWII decades. Beginning with the European Coal and Steel Community (ECSC), effective July 1952 with Germany, France, Italy, and 3-Benelux countries, and, the Customs Union of six ECSC countries in 1953, the European Union (EU) progressed through the Treaty of Rome (1958), One Europe Treaty (1986), the Maastricht Treaty (1992) to an economic union of 15 sovereign nation economies of Europe. On January 1, 1999, 12 of the 15 EU member economies ``voluntarily surrendered'' their monetary sovereignty and adopted one currency, euro, under the management of one intra-regional central bank, the European Central Bank (ECB) with its headquarters in Frankfurt, Germany, which has unanimously adopted English as its of®cial language. The U.K., Sweden, and Denmark are the three-out members of EU who have not yet joined the Euro-regime. In 2004, 10 more sovereign nation state economies of EuropeÐthe Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, plus Malta and CyprusÐare designated to become members of the EU.

To summarize the core issues of the EU, the Economic Union has acted af®rmatively on core economic issuesÐboth micro and macro. Free intra-regional ̄ow of trade and investment and movement of labor for the 15 EU member economies must be the centerpieces of micro-economic integration. The EU is one member of the WTO and as such, the Union is represented by one member in the WTO with one vote for all 15 member economies. Adoption of one common currency with some necessary institutional provisions for ®scal policy cooperation complete the macro-economic integration for them. The three-out EU members will have to join the Euro-regime to complete the process of integration. The intelligent guess is that the issue for the three is not if to join the Euro-regime, but when to join the club. Prime Minister Blair's speech on November 23, 2001 is seen by many as an endorsement of the euro for the U.K. The issue that ONE money, euro, will lead to one Europe must remain open for years ahead (Issing, 1996). I have ventured to suggest that incompatibility of EU membership without membership of the Euro-regime will soon be too pronounced. Two points of clari®cation may be helpful. Firstly, one common currency for the Euro-regime must not be confused with the concept of a common currency area and its optimality (Mundell, 1961, 1970, 1999). Secondly, the concept of sovereignty and its divisibility between monetary and political contentsÐwarrants careful appreciation (see Dutta, 1995, 2000a, 2000b). Be it noted that the EU is not ``a fortress'' union of its membership. The EU is an economic unit open to the global economy wherein inter-regional global competition amongst the regional unions of free market economies will contribute to the maximization of economic gains for each region as well as for the world as a whole. One can argue that the EU will be the learning model for an integration of regionalism and globalism. I have argued that the core of the emerging new economic regionalization paradigm must relate to (a) a map-of-the-world view of the region and (b) an intra- regional, multilateral, cooperative effort to map an economic region on to a geographic region (Dutta, 1999).

450 M. Dutta / Journal of Asian Economics 13 (2002) 447±491 2. Asia-Paci®c Economic Cooperation (APEC)

Combined with the pull-factor of successful industrialization at an accelerated rate for the select group of East Asian economies beyond Japan since the 1970s, plus normalization of the economic relationship with the People's Republic of China (PRC) in 1970s, and the push factor of European economic regionalization in the post-WWII decades, several sovereign nation state economies on the two shores of the Paci®c Ocean and in the South Paci®c elected to constitute the APEC in 1989 (see Dutta, 1999), and as of this date APEC membership has grown to 21 economies inclusive of Russia. They all belonged to a map-of-the-world view of a region if and only if the concept of the Lake Paci®c were true. One must note that the divide of the Atlantic Ocean became a geographical fact to ®nd the Americas not on the map of Europe.

The Paci®c Ocean, larger than the Atlantic Ocean, must be no less, if not more of, a geographic divide to provide an effective geographic sense of belonging together between the economies on the two shores of the Paci®c. APEC has little to its credit in terms of accomplishment even for the effective promotion of an intra-APEC free trade regime. They have voted for the future-oriented 10/20 paradigm and substantively shelved the issue.

Students of economics who share the paradigm of globalism and regionalism note with much care that American Hemispheric Economic Union is a subject of more intensive study. The Organization for African States recently is reported to have discussed the feasibility to ``reinvent'' itself as the African Economic Union following the model of the EU (The New York Times, 2001). Recently, the case for Australian±New Zealand economic integration with one common currency, possibly managed by one intra-regional common central bank, has been investigated (Grimes, Holmes & Bowden, 2000).

3.LessonstolearnfromtheEUmodel

See, Dutta, 1992, 1999, 2000a, 2000b, 2001; Issing, 1996, 2001; Kiyoshi, 2000; Letiche, 1997; Mazzucelli, 1997; Monnet, 1978; Schroeder, 2000.

3.1. The pan-European culture and civilization

Exclusivity of culture, religion, language, race, color have long been considered as the base fortheidentityofsomanytraditionalsovereignnationstatesandtheireconomic exclusiveness. The fact is that a modern sovereign nation state economy is colorfully touched by the multiplicity of culture, religion, language, race, color, performing arts and life-styles. Technology and knowledge defy all borders. The EU illustrates this fact of multiplicity and points to a pan-European experience, a new European life-style. Any suggestion to imply that these factors are irrelevant must be ignored. They continue to be signi®cant in de®ning the European civilization by the pan-European experienceÐa unity in diversity.

3.2. Progression to an intra-EU micro-and-macro-economic agenda

The simple commodity based, be it coal and/or steel, economic union is untenable. The Customs Union, the Free Trade Area by speci®c agreements amongst a set of neighboring

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 451

countries remains exposed to challenges. A more comprehensive economic regionalization involving a set of sovereign nation state economies belonging to the map of Europe became the order. The economic union adopted a well-formulated micro-economic agenda for intra- regionalfree ̄owoftrade,investmentandfreemovementoflabor.Thiscontributedtothe emergenceofanintra-regionalEuropeanfreemarket.However,thisEUintra-regionalfree market could not be functionally effective in the absence of an intra-regional macro- economic agenda with well-speci®ed and transparent monetary and ®scal guidelines. In 1992, the EU member countries did this by signing the Maastricht Treaty. The EU in 1998 covered 15 sovereign nation state economies of 374.3 million people with Gross Domestic Product (GDP) at U.S. $7.8 trillion (PPP), when USA had a population base of 272.7 million people with a GDP base of $8.5 trillion (PPP).

3.3. Membership of the EU anchored to the principle of inclusion, not exclusion

Member economies belonging to the map of Europe were welcome if and only if a candidate country was willing and able to accept the responsibility. In 1957 six members signed to join the EU, effective January 1, 1958. In ®ve successive stages, EU membership rose to 15 in 1995 (Table 1).

3.4. EU's competitively larger economic base warrants immediate attention

EU with a GDP base of U.S. $7.8 trillion (PPP) and a population base of 374 million has emerged as a competitive actor in the world market vis-aÁ-vis USA with a GDP base of U.S. $8.5 trillion and a population base of 273 million. Japan with a GDP base at U.S. $3.0

Table 1 EU membership

1957 Belgium 1957 France 1957 Germany 1957 Italy 1957 Luxembourg 1957 The Netherlands

1973 Denmark 1973 Ireland 1973 U.K.

1981 Greece 1986 Portugal 1987 Spain

1995 Austria 1995 Finland 1995 Sweden

Source:Fromvariousof®cialpublications.

452 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Table 2 EUÐGDP and population in 1998

Belgium France Germany Italy Luxembourg The Netherlands Denmark Ireland

GDP

236 1320 1813 1181

(PPP) U.S. $ (billion)

Percentage (%)

3.04 17.02 23.38 15.23

Population (millions) Percentage (%)

10.2 2.73 59 15.76 82.1 21.93 56.7 15.15

0.4 0.11 15.8 4.22 5.4 1.44 3.6 0.96 59.1 15.79 10.7 2.86 Portugal1451.879.92.64

14 349 124 67 1252 Greece 143

0.18 4.5 1.6 0.86

U.K.

16.15 1.84

8.33 39.2 10.47 2.39 8.1 2.16 1.34 5.2 1.39 2.26 8.9 2.38

Spain 646 Austria 185 Finland 104 Sweden 175

Total7754100374.3100

USA 8511 272.7 Japan 2903 126.2

Source: World Factbook, 1999, see also Schroeder (2000). Note: PPP, purchasing power parity.

trillion and a population base of 126 million is now a distant third. In the pre-EU regime, the four larger economiesÐGermany, France, U.K., and Italy with GDP at U.S. $1.8 trillion, U.S. $1.3 trillion, U.S. $1.3 trillion and U.S. $1.2 trillion, respectively, Japan was the second largest economy of the world, next to USA, of course a distant second to USA. But, Japan was quite far ahead of each of the big fours of EU. The global economic spectrum has thus undergone a major change (Table 2).

In 2004, with the new membership of the 10 members, EU will add to its GDP base at the 1998 GDP estimates: (PPP) in U.S. billion dollars a total of U.S. $0.6 trillionÐand a population of 75 million (Table 3).

Table 4 shows that the comparative standing of the euroÐregime with 12 in-members exclusive of the three-out members of EU, based on GDP and population, vis-aÁ-vis USA and Japan, is retained.

3.5. Shares of world trade for member economies of EU and the Euro-regime

If there were an alpha-beta-gamma economy with U.S. $10 trillion GDP base, trading with no other economies in the world, the rest of the world would have little concern for that economy and let it remain in splendid isolation. An individual economy's economic interaction with the rest of the world can be measured by its trade with others. We consider that an individual economy's share of world exports will be a quanti®able measure of its economic relationship with other economies (see Dutta, 2000a, 2000b, pp. 77±83, see also Issing, 2001).

M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Table 3 EU plus 10 in 2004ÐGDP (PPP) and population

GDP (PPP) U.S. $ (billion)

Cyprus 10 Czech Republic 117 Estonia 8 Hungary 75 Poland 263 Slovenia 20 Latvia 10 Lithuania 18 Malta 5 Slovakia 45

453

Population (millions)

0.8 10.3 1.4 10.2 38.6 2.0 2.4 3.6 0.4 5.4

Total57175.1

Source: World Factbook, 1999, see also Schroeder (2000).

Inmypapers(Dutta,2000a,2000b)Ihavepresenteddataonannualexportshareofeach member economy of EU for 1970 through 1997. Over the three decades, the individual export shares for the four larger economies of Germany, France, U.K. and Italy vary within the range of 5% and 9% of world exports. For the 11 other EU members individual export shares vary within the range of 1±3%, their respective shares of world export being rather marginal. Germany has much more ̄uctuations. EU is one trading unit with one membership of the WTO, as referred to earlier. The 15-member EU share of world exports for the same period ̄uctuate around 40% of world exports. For the Euro-regime the share

Table 4 The 12-member Euro-regimeÐGDP and population in 1998

Spain Austria Finland

10.2 59 82.1 56.7

0.4 15.8 3.6 10.7

646 39.2 185 8.1 104 5.2

GDP

(PPP) U.S. $ (billion)

Population (millions)

Belgium 236 France 1320 Germany 1813 Italy 1181 Luxembourg 14 The Netherlands 349 Ireland 67 Greece 143 Portugal1459.9

Total6203300.9

USA 8511 272.7 Japan 2903 126.2

Source: World Factbook, 1999, see also Schroeder (2000). Note: PPP, purchasing power parity.

454 M. Dutta / Journal of Asian Economics 13 (2002) 447±491 Table 5

Shares of world exports in 1999

Shares of world exports Exports of goods and services (% of GDP) Imports of goods and services (% of GDP)

Euro-regime USA Japan

18.9 15.2 9.1 16.9 10.3 10.7 15.9 13.2 9.1

Source: Issing (2001, p. 3). Note: World exports is net of intra-Euro-regime trade ̄ows.

varies around 35% of world exports. No correction for intra-EU trade ̄ows have been made. All trade are in 1995 U.S. dollar. Table 5 presents the ®gures presented by Professor Issing. One concludes from Table 5 that the Euro-regime of 12 in-members of EU has a competitively large share of world trade as well as a larger share of exports and imports of goods and services as a percent of GDP vis-aÁ-vis USA and Japan. In Table 6 we present the shares of world GDP in 1999 and of population in 2000. It shows that the Euro-regime commands competitive shares of world GDP (PPP) with a substantively larger population base. Obviously the competition in the world market must be related to the leading actors at present in the market. The importance of competitive open market has been the primary lessons in economics. To the extent the world competition will be more effectively operational by the EU and the Euro-regime, it will help the process of optimization of economic gains for all micro-economic actorsÐhouseholds and business unitsÐbelonging

to all the economies of the world. I have argued that the two simple parameters based on an individual economy's shares of

world output and exports may determine its competitive position in the world market, denotingthetwoasGDPi/GDPwandXi/Xw.TheEUpresentsanovelparadigm.European experiment points to the fact that these industrialized economies could hardly be able to command competitive shares of world output and exports. The new regime of information technologyismuchmorecapitalintensive.Thus,themodelofregionaleconomicunionis pragmatic and preferred. Assuming other things equal, two of the world's most populous economiesÐChina and IndiaÐwith relatively large endowments of natural resourcesÐmay independently do the miracle in the future. But other things are seldom equal, hence, the argument for learning from the European model must prevail (Dutta, 1999, 2000a, 2000b).

This will also make the globalization model effective. Or, a select set of af ̄uent economies or economic groups with commands of larger shares of world output and trade will face an overwhelmingly large number of sovereign nation state economies each with marginal shares of world output and trade and their challenge to the order of globalization will be played on the streets of Seattle, Ontario, Washington DC, Rome, Paris, London,

Table 6 GDP shares (PPP) in 1999 and population in 2000

Shares of world GDP (%) (1999) 16.2 Population (2000) (million) 302

Source: Issing (2001, p. 3).

Euro-regime

USA Japan

21.9 7.6 272 127

Table 7 Shares of GDP (PPP) and world exports (%)

Euro USA Japan

GDP (1999)

16.2 21.9 7.6

World exports (1999)

18.9 15.2 9.1

Population (2000) (million)

302 272 127

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 455

Total45.743.2701 Rest of the world 54.3 56.8

Table is constructed for the paper. Data from of®cial sources.

and Geneva. Will there be many more ``secluded'' places to convene conferences on globalization? Taking the WTO, now with 144 sovereign nation state member economies, three of themÐthe Euro-regime of EU, USA and Japan with 700 million people in 2000, command about one-half of world output and trade (Table 7). One way to make globalization realistowelcometheEU/euromodelandpromoteregionaleconomicunionswith competitive shares of world output and trade, which will provide effective support to the paradigm of globalism.

3.6. Richer and poorer member economies in EU compact

Eleven of the ®fteen member economies of EU are relatively more advanced in terms of industrialization and af ̄uence, while fourÐGreece, Spain, Portugal, and Ireland lag behind. All four of them are members of the Euro-regime. EU set up the European Fund to undertake projects for intra-EU structural reforms so that all member economies would be able to compete in the EU free market. Indeed, drawing upon OECD ®ndings, Schroeder (2000, p. 26) presents an instructive progress report showing that Ireland, Spain, and Portugal have made substantialprogresstowardclosingtheirincomegapwithGermanyintermsofpercapita income(seeTable8).HereisasuccessfulcatchingupprocesscontributingtoEUscores.

3.7. Freedom of labor movement

Intra-regional free movement of labor in EU came in two stagesÐwork permit and totally free movement. Any and all warnings of chaos proved to be untrue. Millions of workers from poorer member economies did not move to richer and more industrialized, hence

Table 8 GDP (PPP) per capita (%)

1987 1998

Germany 100 100 Portugal2066 Spain 42 75 Ireland 47 84

Source: Schroeder (2000, p. 28).

456 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

relatively labor-scarce EU economies. It is equally true that all corporations from the richer and relatively labor-scarce, high wage economies did not move their manufacturing units to the labor-abundant, relatively low-wage rate EU member economies, creating employment havoc in their respective home economies. Rather, a harmonized movement of investment from the relatively savings-surplus member economies to create employment where labor was relatively abundant and unemployed along with some movement of labor from the high- unemployment economies to low-unemployment economies contributed to a market- induced balance in the labor market.

3.8. Fluctuations of exchange rate: euro vis-aÁ-vis U.S. dollar

Much has been written about the euro±dollar exchange rate ̄uctuations. It is too soon to make a de®nitive judgment in this regard given the fact that euro has been a legal tender just over 24 months, when euro has not been a medium of exchange, but has functioned as a store of value and unit of account. The issue of euro±dollar exchange rate ̄uctuations has, of course, been subject to much speculation. The concept of equilibrium exchange rate is subject to much debate. Researchers have reported the euro±dollar exchange rate ̄uctuations both in termsofnominalrateandeffectiverate(Coppel,Durand&Visco,2000).Comparative productivity in the real economies of the two currency regimes in late 1990s also warrants much attention. True, the value of euro against dollar has fallen 24% over the past 24 months. A study on the ̄uctuations on dollar over the past 24 years may shed some more light.

Further careful research on this problem will shed light on these ̄uctuations. The fact that euro has been successfully introduced as a medium of exchange as of January 1, 2002 will also be an important factor.

4. Asian Economic Community (AEC)

Let us review the lessons from the EU and Euro-regime.

4.1. The map of Asia is as real as the map of Europe

The pan-Asian culture and civilization is as real as the concept of pan-European culture and civilizationÐthe message is unity in diversity. The grim history of intra-regional hostilities and wars in Europe and Asia cannot be allowed to stand in the way of the continentaleconomicunity.

4.2. Any effort toward AEC must be based on a comprehensive intra-regional micro-and-macro-economic agenda

Much has been talked about the potentials of a free trade area, which cannot be functionally operational without free ̄ow of investment and some form of free movement of labor. This intra-Asian micro-economic structure must be supported by the intra-Asian

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 457

macro-economic framework. A replication of the EU model is not a necessary condition, but the EU model as it evolved over a period of time almost one-half of one century presents a comprehensiveeconomicagendaforAsiaandforothercontinentaleconomicregionaliza- tion.

4.3. Membership of the AEC must be anchored to the principle of inclusion

In Europe the initiative in 1958 came from the six European States, mostly in Western and CentralEurope.Overtimeitsmembershipgrewto15sovereignnationeconomies,andin 2004, it is projected to be 25. In Asia, three East Asian economiesÐJapan, Korea, ChinaÐ plus the original ®ve members of Association of South East Asian Nations (ASEAN)Ð Singapore, Malaysia, Thailand, Indonesia and PhilippinesÐappear to have under study a 3 􏰀 5 intra-regional economic integration model. Will Taiwan be invited to join AEC? Will the ®ve other ASEAN members be invited to join AEC? Will AEC over time reach out to South Asia and South Paci®c? These are issues, which must remain to be addressed in the future. That is the lesson from EU.

4.4. Uniformity of the level of industrialization of prospective member economies of AEC, even of the group of 3 􏰀 5 has been an issue of concern

Beyond Japan, most of these economies have been traditional, agriculture-dominant economiesandmaynotbereadyforanintra-regionaleconomicintegration.Uniformity, relative uniformity, of the level of industrialization of EU's member economies has not been subject of research. Let us explore this issue. Based on sectoral shares of GDP (PPP) in 1999, Issing (2001) presents a comparative pro®le of the Euro-regime, USA and Japan (see Table 9). In Table 10 we present the pro®le of industrialization for the select economies of Northeast and Southeast Asia.

Table 11 presents comparative GDP shares of the three sectors of the economies of Northeast and Southeast Asia selected for this study and of 15 EU economies for 1988 and 1997 and the trend of industrialization is evident. A comparison of the 1970 ®gures of the above countries will point to the fact that these Asian economies have progressed to a higher level of industrialization at an accelerated rate since 1970s. They are no longer agriculture- dominant,traditionaleconomiesandtheyhaveprovedmuchtothesurpriseofmanythat industrialization in Asia can progress beyond Japan.

Table 9 SectoralsharesofGDP(PPP)1999

Agriculture Industry Services

Euro-regime USA Japan

2.8 1.6 1.8 28.5 27.3 36.4 68.7 71.1 61.9

Total100.0100.0100.0

Source: Issing (2001).

458 M. Dutta / Journal of Asian Economics 13 (2002) 447±491 Table 10

SectoralsharesofGDP(2000)

Japan Korea China Taiwan Thailand Singapore Malaysia Indonesia Philippines

Agriculture Industry

1.8 36.4 14.2 37.8 11.9 64.0

2.4 34.6 9.9 44.5 0.1 33.2 8.7 46.8

16.7 43.5 19.9 34.4

Service Total

61.9 100 48.1 100 24.1 100 63.0 100 45.7 100 66.6 100 44.6 100 39.8 100 45.7 100

Source: Asian Development Bank (2001). Note: Figures for Korea 1980.

Table 11 SectoralsharesofGDP(1998and1997)

Country name

Indonesia Malaysia Philippines Singapore Thailand China Hong Kong, China Japan

Taipei, China Korea Finland Sweden Denmark The Netherlands Belgium Luxembourg France

Germany

Region

Agricultural sector

Industrial sector

Service sector

ASEAN 22.48 ASEAN 19.32 ASEAN 22.96 ASEAN 0.39 ASEAN 16.18 NORTHEAST ASIA 25.66 NORTHEAST ASIA 0.32 NORTHEAST ASIA 2.67 NORTHEAST ASIA 5.04 NORTHEAST ASIA 10.10 EU 6.53 EU 3.24 EU 4.35 EU 3.92 EU 1.88 EU 1.93 EU 3.34 EU

1997

39.58 44.21 49.10 65.32 48.97 30.93 85.17 61.07 62.14 51.57 61.69

n.a. n.a. n.a.

71.54 104.00 71.53

44.19 66.37 25.06

n.a. 64.38 n.a. n.a. 60.66 n.a.

1988

1997

16.09 11.15 18.69

0.15

9.73 19.09 0.12 1.74 2.55 5.35

n.a. n.a. n.a. n.a.

1.13 0.80 2.25 1.09

1988

37.27 35.51 35.16 38.07 34.58 44.13 27.64 40.73 44.84 43.13 37.10 34.79 27.96 28.65 30.27 n.a. 29.80 n.a.

1997

44.33 44.64 32.21 34.53 41.30 49.99 14.71 37.18 35.32 43.08 n.a. n.a. n.a. n.a. 27.62 n.a. 26.21 n.a.

1988

40.25 45.17 41.88 61.53 49.24 30.21 72.04 56.61 50.13 46.78 56.37 61.98 67.68 67.43 67.85 98.69 66.87 n.a.

Italy Spain PortugalEU5.85n.a.38.69n.a.55.47n.a.

EU 3.61 EU 5.30

2.63 n.a.

34.02 35.07

30.50 n.a.

62.38 59.63

Greece EU 13.06 n.a. 22.56 Ireland EU 9.76 n.a. n.a. Austria EU 3.13 n.a. 32.52 United Kingdom EU 1.78 n.a. 37.03

n.a. 64.35 n.a. 61.19

68.07 66.67

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 459

This point, as it has often been the issue of debate, merits further investigation. In Table 11, we present the pro®le of industrialization of Northeast and ASEAN-5 and EU based on two time points, 1988 and 1997. We present the pro®le based on annual date of sectoralsharesofGDPforthesamesetofeconomiesforsometwodecadessince1980.(See Fig. 17, through Fig. 25.)

A close review will point to the fact that GDP shares from agricultural sector of all these economies are declining and shares of industrial and service sectors are moving upward. The secondimportantpointistotakenoteofthattherearevariationsinthehistoricalprogression of the pro®le of industrialization for member economies in each group, inclusive of EU. For example in 1980, Greece a member of EU started with a 14% share of GDP from the agricultural sector and in 1995 this share came down to 12%Ða very modest decline. Greece'sshareofGDPfromitsindustrialsectordidnotmoveupwardwhileitsshareof

Table 12 GDP and trade of Euro countries in 1987 and 1997

Germany n.a. n.a.

Ireland 34.20 0.15 Italy 847.05 3.61 Luxembourg 5.75 0.02 The Netherlands 218.97 0.93

GDP/% of world GDP

EXPORT/% of world

1987 1997

export

IMPORT/% of world import

1987 1997

1987

1997

57.17 105.99 1.42 1.44 118.56 194.74 2.94 2.65 29.28 44.58 0.73 0.61 224.18 356.38 5.56 4.85 n.a. 652.80 n.a. 8.89 21.56 56.72 0.53 0.77 168.89 276.69 4.19 3.77 12.22 19.32 0.30 0.26 149.98 242.99 3.72 3.31 Portugal90.19149.8519.5637.6420.2545.24

Austria 122.93 0.52 Belgium 165.16 0.70 Finland 75.04 0.32 France 855.32 3.64

189.38 0.49 245.65 0.63 107.87 0.28 1260.55 3.25 1858.89 4.79 78.15 0.20 1234.40 3.18 15.33 0.04 350.71 0.90

56.65 104.61 1.45 1.40 126.66 209.20 3.23 2.79 30.69 57.81 0.78 0.77 215.74 404.39 5.50 5.40 n.a. 701.48 n.a. 9.37 21.30 66.95 0.54 0.89 170.77 317.79 4.36 4.25 12.42 22.28 0.32 0.30 155.86 271.58 3.98 3.63

0.38 0.39 Spain 410.98 653.25 1.75 1.68

0.50 0.50 73.26 167.73 1.87 2.24

0.50 0.62 67.40 162.31 1.67 2.21

Total4071.316160.931327.202362.631286.142169.05

17.33 15.88

USA 5006.72 8149.82 21.31 21.00

World total 23,492.08 38,800.99

33.86

400.50 10.22

31.56

1064.95 14.23

31.89 29.53

572.73 1200.38 14.20 16.34

4032.52 7346.28

3919.67 7485.47

Source: World Bank 2001 Yearbook. Note: (1) GDP is PPP-adjusted international billion $; (2) export and import are in 1995 constant billion $ U.S. at market price; (3) export is not adjusted for intra-EU trade.

460 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

GDP from its service sector moved up from some 10 points over the same period. In Northeast Asia, China's pro®le substantially differs from that of other economies in the group, albeit Hong Kong in this group has a very special economic structure. In Southeast Asia,apartfromSingaporewhichhasitsspecialeconomicstructure,Thailandpresentsa pro®le noticeably different from that of other four member economies. In addition, a third

Table 13 GDP and trade of EU countries in 1987 and 1997

Austria Belgium Denmark Finland France Germany Greece 99.73

0.42 Ireland 34.20 0.15 Italy 847.05 3.61 Luxembourg 5.75 0.02 The Netherlands 218.97 0.93

GDP/% of world GDP

EXPORT/% of world

1987 1997

export

IMPORT/% of world import

1987 1997

1987

1997

57.17 105.99 1.42 1.44 118.56 194.74 2.94 2.65 41.08 63.13 1.02 0.86 29.28 44.58 0.73 0.61 224.18 356.38 5.56 4.85 n.a. 652.80 n.a. 8.89 18.18 34.34 0.45 0.47 21.56 56.72 0.53 0.77 168.89 276.69 4.19 3.77 12.22 19.32 0.30 0.26 149.98 242.99 3.72 3.31 Portugal90.19149.8519.5637.6420.2545.24

n.a. n.a.

122.93 0.52 165.16 0.70

189.38 0.49 245.65 0.63 132.01 0.34 107.87 0.28 1260.55 3.25 1858.89 4.79 149.76 0.39 78.15 0.20 1234.40 3.18 15.33 0.04 350.71 0.90

56.65 104.61 1.45 1.40 126.66 209.20 3.23 2.79 45.47 69.26 1.16 0.93 30.69 57.81 0.78 0.77 215.74 404.39 5.50 5.40 n.a. 701.48 n.a. 9.37 15.27 23.14 0.39 0.31 21.30 66.95 0.54 0.89 170.77 317.79 4.36 4.25 12.42 22.28 0.32 0.30 155.86 271.58 3.98 3.63

75.04 0.32 855.32 3.64

0.38 0.39 0.50 0.50 Spain 410.98 653.25 73.26 167.73 1.75 1.68 1.87 2.24 Sweden 135.99 187.75 66.31 113.83 0.58 0.48 1.69 1.52 United Kingdom 832.98 1239.96 223.39 372.88 3.55 3.20 5.70 4.98

0.50 0.62 67.40 162.31 1.67 2.21 62.86 93.05 1.56 1.27 228.58 386.06 5.67 5.26

Total5502.777853.501824.192940.571778.642734.35

23.42 20.24

USA 5006.72 8149.82 21.31 21.00

World total 23,492.08 38,800.99

46.54 39.28

400.50 1064.95 10.22 14.23

3919.67 7485.47

44.11 37.22

572.73 1200.38 14.20 16.34

4032.52 7346.28

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 461

pointremainstobenoted.InNortheastAsia,severalmembereconomieshavetheir respective shares of GDP from their respective service sectors moved upward, demonstrating their pro®les of post-industrialized economic structure and their progressive advancement to the matured stage of industrialization. Japan of course is the leader.

4.5. AEC's economic base in terms of its shares of world output and trade

AEC's economic base in terms of its shares of world output and trade will merit much discussion.Severalissues,intra-AECstructuraleconomicreform,freemovementoflabor, ̄uctuations of Asian money vis-aÁ-vis euro and U.S. dollar can be addressed independently. In Tables 12 through 17, we present GDP (PPP) in billion and export±import ®gures in 1995 constant U.S. $ billion. Our presentations cover data for 1987 and 1997, so that we have a pen- picture of the time pro®le of change over the decade. In response to the comments of a reader, our trade analysis in these tables includes both exports and imports, even though we have argued individual economy's share of world export will be a suf®cient parameter, since the global trade inclusive of exports of all trading economies will cover imports by all trading member economies. Relative shares of an individual economy and of an individual region, as designated in the study, have not varied very much. It is noted that AEC beginning with the 3 􏰀 5 model will have a competitive share of world output and trade (see Tables 14 and 15).

Table 14 GDP and trade of East Asia countries in 1987 and 1997

1987

China 1247.26 5.31

1997

3880.21 10.00 153.22 0.39 291.40 0.75 703.96 1.81 3199.26 8.25

1987

46.53 1.19 76.43 1.95 71.41 1.82 67.36 1.72 316.41 8.07

1997

190.82 2.55 230.66 3.08 141.26 1.89 203.76 2.72 572.10 7.64

Hong Kong, China Taipei, China Korea Republic Japan 1971.91

15.86

Euro 4071.31 17.33 EU 5502.77 23.42 USA 5006.72 21.31

World total 23,492.08

21.21

6160.93 15.88 7853.50 20.24 8149.82 21.00

38,800.99

14.75

1327.20 33.86 1824.19 46.54 400.50 10.22

3919.67

17.88

2362.63 31.56 2940.57 39.28 1064.95 14.23

7485.47

10.95

1286.14 31.89 1778.64 44.11 572.73 14.20

4032.52

16.03

2169.05 29.53 2734.35 37.22 1200.38 16.34

7346.28

GDP/% of world GDP

EXPORT/% of world export

IMPORT/% of world import

1987 1997

49.06 160.65 1.22 2.19 69.23 238.86 1.72 3.25 50.54 136.81 1.25 1.86 52.31 183.54 1.30 2.50 220.38 457.62 5.47 6.23

77.79 0.33 148.40 0.63 280.49 1.19

8.39 Total3725.858228.04578.141338.61441.521177.48

Source: World Bank 2001 Yearbook. Note: (1) GDP is PPP-adjusted international billion $; are in 1995 constant billion $ U.S. at market price; (3) export is not adjusted for intra-EU trade.

(2) export and import

462 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Table 12 presents ®gures on GDP and trade of the 12 Euro countries and of USA. Table 13 relates to same data sets relative to all 15 EU member economies. It is instructive to note that GDP ®gures (PPP) of 10 of the 15 EU countriesÐ Austria, Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, the Netherlands, Portugal, and Sweden as late as in 1997 remain less than 1% of world GDP. While the United States maintains a share of 21%. Following economic integration EU and Euro shares come to be 16% and 20%, respectively, in the same year. The net result is the economic units across the AtlanticÐEU and USAÐbecome competitive actors in the world market. This competition will contribute to the maximization of the economic gains for micro-actorsÐhouseholds as well as businesses in all economies in the world. Trade shares of EU and of Euro-regime, as the two tables show, are much larger than that of the U.S., but the respective shares are large enough to ensure effective competition.

Table 14 deals with relevant data for East Asian economies, China, Hong Kong, Taipei, Korea, and JapanÐand offers a quick comparison with those of the Euro-regime, EU and USA. Table 15 covers ASEAN-5 and also adds ®gures for the same three economic units, EU, Euro-regime and USA. Table 16 presents the related data sets for South Asian economies and for the Euro-regime, EU and USA. Finally, Table 17 presents Australia/New Zealand plus the Euro-regime, EU and USA.

It is evident that in 1997, the shares of world GDP and world export and imports for the select group of Northeast Asia and Southeast Asia (Tables 14 and 15) add up to (21X21 􏰀 4X06)

Table 15 GDP and trade of ASEAN countries in 1987 and 1997

1987

Indonesia 270.64 1.15 Malaysia 63.39 0.27 Philippines 165.92 0.71 Singapore 28.14 0.12 Thailand 143.09 0.61

1997

644.82 1.66 185.76 0.48 276.50 0.71 77.95 0.20 390.37 1.01

1987

28.29 0.72 26.40 0.67 13.39 0.34 38.18 0.97 20.55 0.52

1997 1987 1997

GDP/% of world GDP

EXPORT/% of world export IMPORT/% of world import

Total671.191575.41126.81388.92125.05416.48

2.86

Euro 4071.31 17.33 EU 5502.77 23.42 USA 5006.72 21.31

World total 23,492.08

4.06

6160.93 15.88 7853.50 20.24 8149.82 21.00

38,800.99

3.24

1327.20 33.86 1824.19 46.54 400.50 10.22

3919.67

5.20

2362.63 31.56 2940.57 39.28 1064.95 14.23

7485.47

3.10

1286.14 31.89 1778.64 44.11 572.73 14.20

4032.52

5.67

2169.05 29.53 2734.35 37.22 1200.38 16.34

7346.28

Source: World Bank 2001 Yearbook. Note: (1) GDP is PPP-adjusted international billion $; are in 1995 constant billion $ U.S. at market price; (3) export is not adjusted for intra-EU trade.

62.06 0.83 94.11 1.26 36.57 0.49 122.66 1.64 73.50 0.98

28.79 75.16 0.71 1.02 19.09 95.62 0.47 1.30 13.58 43.75 0.34 0.60 43.34 129.93 1.07 1.77 20.25 72.02 0.50 0.98

(2) export and import

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 463 GDP and trade of South Asia countries in 1987 and 1997

Table 16

GDP/% of world GDP

1987 1997

Bangladesh 94.67 170.82 0.40 0.44 India 904.62 1962.31 3.85 5.06

EXPORT/% of world

1987 1997

1.38 5.21

export

IMPORT/% of world import

1987 1997

2.62 7.26

Source: World Bank 2001 Yearbook. Note: (1) GDP is PPP-adjusted international billion $; are in 1995 constant billion $ U.S. at market price; (3) export is not adjusted for intra-EU trade.

Table 17 GDP and trade of ANZ countries in 1987 and 1997

GDP/% of world GDP EXPORT/% of world export

1987 1997 1987 1997

Australia 251.35 425.30 41.72 83.92 1.07 1.10 1.06 1.12 New Zealand 45.65 68.69 12.68 19.19 0.19 0.18 0.32 0.26

0.04 0.07 15.70 45.10 0.40 0.60

0.06 0.10 27.40 63.04 0.68 0.86 Nepal13.3427.270.341.280.601.83

0.06 Pakistan 114.35 0.49 Sri Lanka 28.67 0.12

0.07 0.01 0.02 229.05 5.76 9.30 0.59 0.15 0.12 56.31 2.49 5.29 0.15 0.06 0.07

0.01 0.02 9.91 14.12 0.25 0.19 3.70 6.70 0.09 0.09

Total1155.652445.7625.6866.1844.2392.96

4.92

Euro 4071.31 17.33 EU 5502.77 23.42 USA 5006.72 21.31

World total 23,492.08

6.30

6160.93 15.88 7853.50 20.24 8149.82 21.00

38,800.99

0.66

1327.20 33.86 1824.19 46.54 400.50 10.22

3919.67

0.88

2362.63 31.56 2940.57 39.28 1064.95 14.23

7485.47

1.10

1286.14 31.89 1778.64 44.11 572.73 14.20

4032.52

Total297.01493.9854.40103.1150.64112.24

1.26

Euro 4071.31 17.33 EU 5502.77 23.42 USA 5006.72 21.31

World total 23,492.08

1.27

6160.93 15.88 7853.50 20.24 8149.82 21.00

38,800.99

1.39

1327.20 33.86 1824.19 46.54 400.50 10.22

3919.67

1.38

2362.63 31.56 2940.57 39.28 1064.95 14.23

7485.47

1.26

1286.14 31.89 1778.64 44.11 572.73 14.20

4032.52

1.53

2169.05 29.53 2734.35 37.22 1200.38 16.34

7346.28

Source: World Bank 2001 Yearbook. Note: (1) GDP is PPP-adjusted international billion $; are in 1995 constant billion $ U.S. at market price; (3) export is not adjusted for intra-EU trade.

1.27

2169.05 29.53 2734.35 37.22 1200.38 16.34

7346.28

IMPORT/% of world import

1987 1997

39.49 93.00 0.98 1.27 11.15 19.24 0.28 0.26

(2) export and import

464 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

25.27% of world GDP, (17X88 􏰀 5X20) 23.08% of world export, and (16X03 􏰀 5X67) 21.70% of world imports. It follows that the AEC will thus be able to add to the level of effective competition in the world market. The process will further contribute to the maximization of world economic gains. The principle of inclusion will progressively lead to the admission of economies of South Asia and South Paci®c to the AEC. The learning model will be the EU as it movesontoEuropeanizationofEuropewithEuropeaneconomiesinonecontinentalunit.

We follow the above analyses by graphic presentations which show the annual data for the 1975±1999timeperiodfortheeconomiesofAsia,individualeconomyandeachsub- regional totalÐNortheast Asia exclusive of Japan, Northeast Asia inclusive of Japan, Southeast Asia-5, Northeast and Southeast Asia-5, South Asia-5, Northeast exclusive of Japan, Southeast-5 and South Asia-5, Northeast, Southeast, Euro and USA, Northeast, exclusive of Japan, Southeast-5, South Asia-5, Euro, USA, without speci®c graphic presentations for the EU. We move from the decade based analyses presented in Tables 12 through 17 to an extended analysis based on annual data over a quarter of a century and our objective is to capture any substantive variation in relative shares of world output and trade fortheindividualsovereignnationeconomies,thesub-groupstheybelongto,thesumofthe sub-groups, and its relevance for the Euro-regime and USA. The graphic presentations refer to the two parameters, shares of world output and world export, as we have argued at the outset.

Fig. 1 relates to shares of world GDP for Northeast AsiaÐChina, Hong Kong (China), Korea, Taipei (China), and of the group. Fig. 2 relates to the shares of world exports for the above economies and of the group. Fig. 3 covers shares of world GDP of the above group inclusive of Japan. Fig. 4 refers to shares of world export of the above group inclusive of Japan. Fig. 5 deals with shares of world GDP of ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore, and Thailand and the group total). Fig. 6 covers shares of world export for the above group of economies. Fig. 7 covers shares of world GDP of Northeast inclusive of Japan and Southeast-5. Fig. 8 records shares of world export for the economies in Fig. 7. Fig. 9 describes shares of world GDP for South Asia-5ÐBangladesh, India, Nepal, Pakistan, Sri Lanka and the group. Fig. 10 presents shares of world export for the economies in Fig. 9 and its total. Fig. 11 presents shares of world GDP for the three sub-regional groups, NE, SE and South Asia. Fig. 12 does the shares of world export for the groups in Fig. 11. Fig. 13 presents shares of world GDP for the groupsÐnon-exclusive of Japan, SE, Euro, and USA. Fig. 14 presents the shares of world export for the groups in Fig. 13. Fig. 15 presents of shares of world GDP of the groups in Fig. 13 plus South Asian total. Fig. 16 records shares of world export for groups in Fig. 14 adding South Asian total.

Theannualdatabasedgraphicpresentationcoveringthetimeperiod1975±1999showa patternfortheregionalsharesofworldoutputandexportinsupportforthecasewearguefor regionaleconomicintegration.

In section 4.4, we have discussed the issue of divergent levels of industrialization of Asia's newly industrialized/industrializing economies and its relevance for the integration of Asian economic community. In Table 10 we have presented the level of industrialization of the selected economies of Northeast and Southeast Asia in 2000. Table 11 presents related data at two discrete time points, 1988 and 1997 for ASEAN-5, Northeast Asia-5 and

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 465

Fig. 1. Share of world total GDP: Northeast Asia countries (exclude Japan). Note: GDP is PPP-adjusted international billion $.

466 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 2. Share of world total export: Northeast Asia countries (exclude Japan). Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 467

Fig. 3. Share of world total GDP: Northeast Asia countries (include Japan). Note: GDP is PPP-adjusted international billion $.

468 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 4. Share of world total export: Northeast Asia countries (include Japan). Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 469

Fig. 5. Share of world total GDP: ASEAN-5 countries. Note: GDP is PPP-adjusted international billion $.

470 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 6. Share of world total export: ASEAN-5 countries. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 471

Fig. 7. Share of world total GDP: Northeast Asia and ASEAN. Note: GDP is PPP-adjusted international billion $.

472 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 8. Share of world total export: Northeast and South Asia. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 473

Fig. 9. Share of world total GDP: South Asia countries. Note: GDP is PPP-adjusted international billion $.

474 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 10. Share of world total export: South Asia countries. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 475

Fig. 11. Share of world total GDP: three Asian regions. Note: GDP is PPP-adjusted international billion $.

476 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 12. Share of world total export: three Asian regions. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 477

Fig. 13. Share of world total GDP: four groups. Note: GDP is PPP-adjusted international billion $.

478 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 14. Share of world total export: four groups. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 479

Fig. 15. Share of world total GDP: Five groups. Note: GDP is PPP-adjusted international billion $.

480 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 16. Share of world total export: ®ve groups. Note: Export and import are in 1995 constant billion $ U.S. at market price. Source: World Bank 2001 Yearbook.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 481

Fig. 17. EU: share of agricultural sector of GDP. Source: World development indicator 2001, Asian Development Bank Key Indicator 2001.

482 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 18. EU: share of industrial sector of GDP. Source: World development indicator 2001, Asian Development Bank Key Indicator 2001.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 483

Fig. 19. EU: share of service sector of GDP. Source: World development indicator 2001, Asian Development Bank Key Indicator 2001. Note: In some years Luxembourg's share of service sector of GDP were more than 100%. Further data check.

484 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 20. Northeast Asia: share of agricultural sector of GDP. Note: Taipei, China's industrial sector includes mining, manufacturing, electricity, gas and water, and construction. Its service sector includes trade, transport and communications, ®nance, public administration and others.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 485

Fig.21.NortheastAsia:shareofindustrialsectorofGDP.Note:Taipei,China'sindustrialsectorincludesmining,manufacturing,electricity,gasandwater, and construction. Its service sector includes trade, transport and communications, ®nance, public administration and others.

486 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 22. Northeast Asia: share of service sector of GDP. Note: Taipei, China's industrial sector includes mining, manufacturing, electricity, gas and water, and construction. Its service sector includes trade, transport and communications, ®nance, public administration and others.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 487

Fig. 23. ASEAN: share of agricultural sector of GDP. Source: World development indicator 2001, Asian Development Bank Key Indicator 2001.

488 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

Fig. 24. ASEAN: share of industrial sector of GDP. Source: World development indicator 2001.

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 489

Fig. 25. ASEAN: share of service sector of GDP. Source: World development indicator 2001, Asian Development Bank Key Indicator 2001.

490 M. Dutta / Journal of Asian Economics 13 (2002) 447±491

EU-15. In Figs 17 through 25, we make graphic presentations of levels of industrialization. Figs. 17±19 present EU-15 economies' shares of GDP from agricultural, industrial and service sectors, respectively. Figs. 20±22 relate to the comparable sets of data for Northeast Asian economies. Finally, Figs. 23±25 describe the pro®le of the select group of Southeast Asianeconomies.Inthegraphicpresentations,basedonannualdatafor1980±1998,efforts have been made to capture changes in the pro®les of industrialization of these economies, which could have been missed in our review of related data at one time point (Table 10) or at two discrete time points (Table 11). Needless to add what has been done here is much less than what remains to be done.

5. Conclusion

The conclusion for economic integration in Asia can be supported by the empirical evidence, based on the two parameters, its share of world output and trade vis-aÁ-vis the respectivesharesofEUandUSA.Indeed,eachindividualAsianeconomy,inclusiveof China and India, the two billion-plus population economies of the world, has marginal shares of world GDP and of world exports. Historically, for years, Japan enjoyed the second largest ranking, next to USA, in terms of shares of world output and trade. After euro and EU, Japan has become a distant third. An Asian regional economic integration will be a plus fortheparadigmofglobalism.The3􏰀5modelmaybethepromising®rststep(seealso, Kojima, 2000; Letiche, 2000).

Acknowledgments

My sincerest thanks are due to Lawrence R. Klein, who taught me economics, econometrics and the linkages of the world economies, to Robert J. Alexander, who has persistently encouraged me to pursue my studies in economic regionalization in Europe and Asia, a ®eld of study for which I have made a commitment, and to Daniel Tantum, Kiseok Lee and Amiya Sharma for their generous cooperation lent to me at successive stages of my studyonthissubject.MyveryspecialthankstoWenhuiWeiforhishelpfulresearch assistance for this paper. An earlier version was presented at the joint session, sponsored by American Economic Association (AEA) and American Committee on Asian Economic Studies(ACAES)attheannualmeetingsofAEAinAtlanta,GA,01-06-02.

I must acknowledge my sincerest gratitude to John M. Letiche, Kiyoshi Kojima, Shinichi Ichimura, Terutomo Ozawa, James T.H. Tsao, Tzong-shian Yu, Mei-chu Hsiao, Frank S.T. Hsiao, and Richard Hooley who very kindly read and made extensive comments on the earlier version and helped my work for the revision. For views expressed here and for all errors persisting, I remain responsible. This paper is the revised version of my presentation at the conference on Asian Economic Cooperation In The New Millennium: China's Economic Presence, sponsored jointly by American Committee on Asian Economic Studies, BeidaSchoolofEconomicsÐPekingUniversityandChinaReformForum,inBeijing, People's Republic of China, May 27±29, 2002.

References

M. Dutta / Journal of Asian Economics 13 (2002) 447±491 491

Asian Development Bank. Asian Development Outlook (p. 213). Coppel, J., Durand, M., & Visco, I. (2000). The European Monetary Union, the euro, and the European policy

mix. Journal of Asian Economics, 11.1, 31±63. Dutta, M. (1992). Economic regionalism in Western Europe: Asia-Paci®c economiesÐmacro-economic core and

micro-economic optimization. American Economic Review, Papers & Proceedings, 82.2, 67±73. Dutta,M.(1995).Macro-economicsÐsupra-nationalmacro-economiccore.InM.Dutta(Ed.),Economics,

econometrics and the LINK, essays in honor of Lawrence R. Klein (pp. 59±73). Amsterdam: Elsevier. Dutta, M. (1999). Economic regionalization in the Asia-Paci®c: challenges to economic cooperation (p. 318).

Cheltanham, U.K.: Edward Elgar Publishing. Dutta, M. (2000a). The Euro revolution and the European Union: monetary and economic cooperation in the

Asia-Paci®c region. Journal of Asian Economics, 11.1, 65±88. Dutta, M. (2000b, September). European Union and the Euro revolution (mimeo). Seminar given at George

Washington University, Washington, DC. Dutta, M. (2001, October 18). EU and the Euro revolution: revisiting the theory of optimum currency. Seminar

given at University of Colorado at Boulder (mimeo). Grimes, A., Holmes, F., & Bowden, R. (2000). An ANZAC dollar? (p. 133). Wellington, NZ: Institute of Policy

Studies, Victoria University of Wellington. Issing, O. (1996). Europe: political union through common money. London, U.K.: Institute of Economic Affairs.

Occasionalpaper#98. Issing, O. (2001). The euroÐthe experience of the past 2 years. Journal of Asian Economics, 12.1, 1±20. Kiyoshi,K.(2000).The`` ̄yinggeese''modelofAsianeconomicdevelopment:origin,theoreticalextensions,

and regional policy implications. Journal of Asian Economics, 11.4, 375±401. Letiche, J. M. (1997). Maastricht: prospect and retrospect. Journal of Asian Economics, 4.1, 191±206. Letiche, J. M. (2000). Lessons from the euro zone for the East Asian economies. Journal of Asian Economics,

11.3, 275±300. Mazzucelli, C. (1997). France and Germany at Maastricht: politics and negotiations to create the European

Union. New York: Garland Publishing. Monnet, J. (1978). Memoirs (English translation). Mundell, R. A. (1961). A theory of optimum currency area. American Economic Review, 51.4, 657±665. Mundell, R. A. (1970). Uncommon arguments for common currencies. In Johnson, Swoboda (Eds.), The

economics of common currencies Allen and Unwin (pp. 114±132). Mundell, R. A. (1999). Updating the agenda for Monetary Union. In Blejer et al. (Eds.), Optimum currency

areas: new analytical and policy development. Washington, IMF. Okita, S. (1989). Policy approaches to the problem. In L. Emmerij (Ed.), One world or several? (pp. 41±50).

Paris: OECD Development Center. Schroeder, J. (2000). European monetary and economic integration: present state and future expectations.

Journal of Asian Economics, 11.1, 23±29.

Sunday, May 29, 2011

ASIAN ECONOMIC COMMUNITY