The Political Economy of the Asia Pacific Editor Vinod K. Aggarwa l, University of California, Berkeley, CA, USA Vinod K. Aggarwal Min Gyo Koo ● Seungjoo Lee Chung-in Moon ● Editors Northeast Asia Ripe for Integration? Prof. Vinod K. Aggarwal Prof. Min Gyo Koo University of California Yonsei University Berkeley Asia Pacific Economic Dept. of Public Administration Cooperation Study Center 134 Shinchon-dong, Seodaemun-gu (BASC) Seoul 120-749 802 Barrows Hall Korea Berkeley CA 94720-1970 [email protected] USA [email protected] Prof. Seungjoo Lee Prof. Chung-in Moon Chung-Ang University Yonsei University Dept. of Political Scienc e Dept. of Political Science 221 Heukseok-dong, Dongjak-ku 134 Sinchon-dong, Seodaemun-gu Seoul 156-756 Seoul 120-749 Korea Korea [email protected] [email protected] ISBN 978-3-540-79593-3 e-ISBN 978-3-540-79594-0 Library of Congress Control Number: 2008932377 © 2008 Springer-Verlag Berlin Heidelberg This work is subject to copyright. 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Cover design: WMXDesign GmbH, Heidelberg, Germany Printed on acid-free paper 9 8 7 6 5 4 3 2 1 springer.com Preface How will Northeast Asia’s economic and security institutional architecture evolve? Predicting the future is always hazardous busi- ness, often left to seers and wizards. Yet at the same time we believe that by examining the recent history of Northeast Asia from a theoreti- cally informed perspective, while we may not always correctly forecast the future, this exercise can still provide useful insights for policy- makers and academics. To this end, this book examines how critical changes over the last twenty or so years have transformed the institu- tional organization of the region. Specifically, we consider the impact of what we term the “triple shocks”: the Cold War’s end, the Asian financial crisis, and the terrorist attacks of September 11, 2001. We examine how the impact of these key changes has played out in the context of China’s rise, Japan’s economic problems, American neglect of Asian developments, the fall of the Soviet Union and subsequent resurgence of Russia, and the changing dynamics of the two Koreas. Examination of changes in Northeast Asia’s institutional landscape is not new. Yet we believe that this book breaks fresh ground by providing a theoretical framework that facilitates the exploration of key countries’ foreign economic and security policies in a comparable manner. By examining the significant variables that influence national responses to these individual shocks, and through consideration of the impact of cumulative changes in the region in the post-triple shocks period, we believe that we can better gauge likely future institutional trends in the region. The East Asia Foundation (EAF), based in Seoul, Korea, has gen- erously supported this book. With its financial support, we were able to hold a conference at the University of California at Berkeley, co- sponsored by the Berkeley APEC Study Center (BASC), in December 2005. This opportunity to discuss first drafts of our papers, and our sub- sequent interactions, have greatly benefited from the support of the EAF. It has proven instrumental in allowing us to clarify our thoughts v i Prefa ce and assemble this volume. Aside from the academic exchange sup- ported by this funding, this meeting also allowed us to create a network of ties among the scholars who either contributed chapters to this vol- ume or who commented on this work. Our meeting in Berkeley was extremely fruitful as a result of the comments that the book’s contributors received from Crystal Chang, Myung-koo Kang, Jin-Young Kim, Elaine Kwei, Kenji Kushida, Hong Yung Lee, and Jehoon Park. Without their incisive criticisms and sug- gestions for improvement, this book would have been much the poorer. We would like to particularly single out the help we have received from Seung-Youn Oh, who not only provided logistical and organi- zational support for the conference, but also lent her expertise as a discussant. The work of the staff at BASC proved crucial. Three former and current project directors—Jonathan Chow, Edward Fogarty and Kristi Govella—have shepherded the transformation of rough conference papers to carefully edited and structured book chapters. They not only furnished the contributors to this book with the collated comments of the discussants, but more importantly, with their own set of comments that pushed all of us to work harder and meet their high standards. Kristi’s management of the publication process has greatly eased the editors’ workload. In this task, she has been ably supported by the work of Robert Chen, Cindy Cheng, Ross Cheriton, Nathan DeRemer, Michelle Haq, Vaishnavi Jayakumar, Andrew Kim, and Anne Meng, undergraduates who work at BASC under the auspices of the Berkeley Undergraduate Research Apprenticeship Program. We would like to thank Niels Peter Thomas of Springer Verlag for supporting the publication of this book. We also hope that this volume will be a valuable edition to the book series entitled The Political Economy of the Asia Pacific that Vinod K. Aggarwal is editing for Springer. We, of course, remain responsible for any errors or omissions. Vinod K. Aggarwal Berkeley, California Min Gyo Koo Seoul Korea Seungjoo Lee Seoul Korea Chung-in Moon Seoul Korea Contents Preface...............................................................................................v Contributors....................................................................................xi Abbreviations................................................................................xiii 1 Economic and Security Institution Building in Northeast Asia: An Analytical Overview....................................................1 VINOD K. AGGARWAL AND MIN GYO KOO 1.1 Introduction............................................................................1 1.2 Northeast Asia’s Changing Institutional Map........................3 1.3 An Institutional Bargaining Game Approach and the Evolution of Northeast Asian Regionalism...............9 1.4 Overview of the Book..........................................................27 1.5 Conclusion............................................................................30 2 South Korea’s Regional Economic Cooperation Policy: The Evolution of an Adaptive Strategy.......................37 SEUNGJOO LEE AND CHUNG-IN MOON 2.1 Introduction..........................................................................37 2.2 Gains from Bilateral Security Alliance and Multilateral Trade Policy: Re-examining Cold War Legacies.................39 2.3 The Emergence of South Korea’s Regional Policy in the Early Post-Cold War Period: Achievements and Limitations.....................................................................40 2.4 The Asian Financial Crisis and Changes in South Korea’s Regional Policy....................................................................43 2.5 The Roh Moo-hyun Government’s New Regional Policy...48 2.6 Conclusion............................................................................57 viii Contents 3 Rhetoric or Vision? Chinese Responses to U.S. Unilateralism.................................................................63 KUN-CHIN LIN 3.1 Introduction.........................................................................63 3.2 The PRC’s Position in the Cold War Institutional Equilibrium:1978-1989.......................................................68 3.3 Negotiating New Regional Arrangements in the Post-Cold War Era: Sharpening the Survival Instinct of the Leninist Party-State...................................................70 3.4 After the Financial Crisis: First Opportunities for Chinese Leadership of Asian Regionalism.......................................78 3.5 After 9/11: Broadening China’s Strategic Leeway.............83 3.6 Winding Roads Ahead: Scenarios for China’s Grand Strategy...............................................................................96 4 Under Pressure: Japan’s Institutional Response to Regional Uncertainty.........................................................109 SAORI N. KATADA AND MIREYA SOLIS 4.1 Introduction.......................................................................109 4.2 Economic Shocks and the Persistence of Security Constraints.........................................................................110 4.3 Japan and the New Regional Trade Architecture..............118 4.4 Japan and the New Regional Financial Architecture........130 4.5 Conclusion.........................................................................140 5 North Korea’s Strategy for Regime Survival and East Asian Regionalism..................................................149 SANG-YOUNG RHYU 5.1 Introduction.......................................................................149 5.2 North Korea’s Development in the Cold War Equilibrium.......................................................................150 5.3 Early Attempts at Integration after the End of the Cold War.................................................................151 5.4 Aftermath of the 1997 Asian Financial Crisis...................155 5.5 Post-9/11 North Korean Regionalism: The Gaesong Special Economic Zone and the Six-Party Talks..............157 Contents ix 5.6 Security and Trade: Reluctant Coexistence Under a Fragile Equilibrium.........................................................166 5.7 North Korea and East Asian Regionalism.........................174 6 Impassive to Imperial? Russia in Northeast Asia from Yeltsin to Putin...............................................................179 TAEHWAN KIM 6.1 Introduction........................................................................179 6.2 The International Domestic Nexus: An Analytical Framework.........................................................................180 6.3 Post-Cold War: Neofeudal Governance and External Drift....................................................................................183 6.4 Post-Financial Crisis: Breaking Up the Neofeudal Coalition.............................................................................191 6.5 Post-9/11: The Neoabsolutist Coalition and Russian Neomercantilism in Northeast Asia...................................196 6.6 Scenario Analysis...............................................................206 6.7 Conclusion..........................................................................208 7 Security in Northeast Asia: Time for New Architecture?............................................................................213 ELLEN L. FROST AND DAVID C. KANG 7.1 Introduction........................................................................213 7.2 Changes in the External Environment................................216 7.3 Other Changes in the Regional Environment.....................221 7.4 The Adequacy of Existing Institutions...............................232 7.5 Institution-Building in Northeast Asia...............................236 7.6 Conclusion..........................................................................240 8 The Future of Northeast Asia’s Institutional Architecture..............................................................................245 VINOD K. AGGARWAL, MIN GYO KOO, AND SEUNGJOO LEE 8.1 Introduction........................................................................245 8.2 An Institutional Bargaining Game Approach: Initial Shocks, Goods, Individual Bargaining Situations, and Institutional Fit............................................................247 x Contents 8.3 Cross-National Developments..........................................251 8.4 The Future of Economic and Security Institutional Building in Northeast Asia................................................257 Index.............................................................................................263