Economic Preconditions for Asian Regional Integration

Abstract

Recent developments in Europe and North America suggest that the world is now under a tide of new regionalism. This paper asks whether conditions are favorable or unfavorable for regional economic integration in Asia. By referring to statistical indicators and applying by various statistical methods including a principal component analysis we reach the following tentative conclusion: Economic conditions for regional integration in Asia are at least as favorable as those in unifying Europe. Preconditions for a free trade area in Asia is satisfied. However since Asian countries depend heavily on trade with the United States and Japan a free trade area that hinders the trade with these countries would not be practical. Preconditions for a currency union in Asia are also met. In the case of a currency union however it is not clear whether Asian countries would be benefitted by linking their common currency to a major currency such as the dollar or the yen. (authors)