Relational ontology and the politics of boundary-making: East Asian financial regionalism

Abstract

In this article, I seek to demonstrate the analytical utility and value-added of ‘relational ontology’ for studying region-making and regional institutional developments. Relational ontology stands in sharp contrast to the dominant individualistic ontology found in mainstream theories of regionalism. I make the case theoretically and empirically that relational ontology offers a better analytical fit with the investigation of regionalism. Analytically, the crux of relational ontology is the notion that the structure of identity and interests emerges and develops relationally in the process of one’s making contact with and subsequently marking boundary with others in relevant contexts. More concretely, I develop a three-stage analytics of boundary-making. The analytical framework proposes three sequential stages of ‘proto-boundary’, ‘yoking’, and ‘rationalization’ towards the making of a boundary that creates ‘inside’ by defining ‘outside’. This boundary-making practice is empirically observable in the politics of membership when regional institutional buildings occur. I illustrate the validity of the relational analytical framework with a case of the exclusive East Asian financial regionalism. My empirical focus is on the institutional development of the Chiang Mai Initiative (the CMI/CMIM (Chiang Mai Initiative Multilateralization)) over the past 15 years, a regional financial safety net in East Asia. In terms of membership, the ASEAN plus Three (China, Japan, and Korea) developed it while excluding the United States from membership.

Keywords

ASEAN Plus Three boundary-making collective identity East Asian financial regionalism relational ontology

Introduction

As Peter Katzenstein (2005) noted, one of the key characteristics of world politics is the rise of regionalism in the face of globalization. The European Union’s recent economic and societal troubles notwithstanding, serious regional institutional-building efforts can be observed elsewhere in Africa, Latin America, Central Asia, Middle East, and East Asia (Powers and Goertz, 2011). In this context, one of the most conspicuous phenomena in East Asian¹ economic relations in the wake of the Asian Financial Crisis (AFC) is the development of what Grimes (2009: 2) calls ‘East Asian financial regionalism’. Under the auspices of ASEAN Plus Three (APT), East Asian financial regionalism has been supported by three major initiatives: the Chiang Mai Initiative (CMI) in 2000, which was subsequently redesignated as the Chiang Mai Initiative Multilateralization (CMIM) in 2010 and which acts as the framework for a regional financial safety net; the Asian Bond Markets Initiative (ABMI, 2002), which targets regional financial market development; and an agreement to conduct in-depth research on the feasibility of an Asian Currency Unit (ACU, 2006) in order to reduce currency volatility.

What is most striking about this regional institutional development is the exclusion of the United States. This exclusion is puzzling for two main reasons. First, the decision to spurn US input is unique in the history of East Asian economic cooperation. From the establishment of the Asian Development Bank (ADB) in 1966 through the Pacific Economic Cooperation Conference (PECC) in 1980 to the Asia-Pacific Economic Cooperation (APEC) in 1989, all major regional economic institutional-building efforts have included the United States. Indeed, East Asian states have in the past actively sought US participation in the regional make-up of the Asia-Pacific due to their structural economic dependence on the US market and US investment (Kim and Lee, 2004: 207–212). The failure of then Malaysian Prime Minister Mahathir’s East Asian Economic Caucus (EAEC) proposal in 1995, which excluded the United States, to garner support from other regional states is a case in point. Second, the exclusion of the United States seems to go against East Asian states’ immediate material interests. The inclusion of the United States, the largest investor in the global economy and home to the most advanced technical expertise in terms of financial market development, could have made it much easier for APT to institutionalize the CMIM (e.g. greater access to bailout funding) and the ABMI (e.g. more expertise and investment from the United States in developing capital markets). In short, post-crisis East Asia seems to have moved from a ‘regional complex’ to a ‘regional society’ or a ‘regional community’ capable of ‘articulating the transnational interests of the emerging region’ (Hettne and Söderbaum, 2000: 3–4).

What explains the development of this exclusionary form of East Asian financial regionalism? In addressing this question, I seek to demonstrate the analytical utility of relational ontology in the study of region-making and regional institutional development. Relational ontology refers to a philosophical position in which the relations between entities are ontologically more fundamental than the entities themselves. This contrasts with individualist ontology, in which entities are ontologically primary and their relations ontologically derivative. I make the theoretical and empirical argument that relational ontology provides a better analytical fit for the study of regionalism than the dominant individualistic ontology present in mainstream theories of regionalism, such as (neo)functionalism, neoliberal institutionalism, and realism.

With this in mind, I suggest an alternative three-stage analytical framework for boundary-making that helps to capture the relational processes of making and sustaining a regional boundary. This analytical framework proposes three sequential stages – ‘proto-boundary’, ‘yoking’, and ‘rationalization’ – that lead to the formation of a clear boundary by defining what is meant by ‘outside’, thus establishing the ‘inside’ of the boundary. I develop this framework by drawing on Jackson and Nexon (1999), Abbott (2001), Tilly (1995, 2004), and Bucher and Jasper (2016), among others. Because none of these works alone cover the full range of collective boundary-making processes, I combine their insights within the three-stage framework. More specifically, I build on Abbott and Tilly for the proto-boundary and yoking stages and Jackson and Nexon, and Bucher and Jasper for the rationalization stage. I also explore the possibility of translating this three-stage framework into a more formal matrix of induction and deduction in order to generate empirically testable hypotheses. In particular, I offer three hypotheses for empirical analysis of the rationalization stage concerning the exclusion of the United States, the CMIM’s surveillance system, and the CMIM’s delinkage portion of bailout funding from International Monetary Fund (IMF) approval.

Empirically, I show that exclusive East Asian financial regionalism emerged out of the confrontation between East Asian states and the United States in various international forums in the 1990s. A regional boundary for East Asia in terms of financial governance surfaced in relation to the neoliberal United States as an external other. The three cases I examine to illustrate this emergent proto-boundary for East Asia are the East Asian development model debate within the World Bank in 1993, the East Asian coalition in opposition to Western members at the APEC Osaka Meeting in 1995, and Japan’s Asian Monetary Fund (AMF) proposal in 1997.² East Asian states yoked these events together in the formation of APT between 1997 and 1999. I finally illustrate how APT has rationalized the maintenance of the East Asian boundary in light of the development of the CMI/CMIM over the past 15 years. The CMI/CMIM is widely regarded as the most important institutional development in terms of defining post-crisis East Asian financial cooperation.³

In so doing, I aim to make three interrelated theoretical and empirical contributions to the existing literature on constructivism and East Asian regionalism. First, the suggested three-stage analytical framework offers a relational mechanism in an empirically verifiable way that ties the formation of collective identity to the concrete institutional manifestation of regional cooperation. To the best of my knowledge, previous constructivist undertakings of regionalism have not sufficiently explored this link. Second, this theoretical specificity helps tackle the puzzle of what constitutes ‘East Asia’ in regional financial cooperation. In the study of the development of exclusionary East Asian regionalism, there have been contending claims regarding the source(s) of East Asian identity in previous constructivism-inspired research. But this issue (empirical indeterminacy) has remained unsolved in the absence of an appropriate analytical framework to assess the validity of each claim. My three-stage framework thus offers an analytically systemic way of tackling this empirical puzzle. Finally, my empirical analysis challenges the conventional wisdom that exclusive financial regionalism in East Asia only began after the AFC of 1997–1998. Although it is undoubtedly true that important institutional developments occurred after the AFC, I contend that the seeds of exclusive financial regionalism predate the AFC.

To clarify the scope of my argument, I will discuss here what this article does not set out to do. First, I do not make any claims about the ‘real’ intentions or motivations behind the cooperative efforts of East Asian states. Although this issue is pertinent to our understanding of East Asian financial regionalism, the primary goal of this article is to describe the processual aspects of regional institutional building. Similarly, I do not claim to offer a definitive link between East Asian collective identity and the particular institutional form of, say, the CMI/CMIM. This article does not detail the negotiations between East Asian states in relation to the institutionalization of the CMI/CMIM; rather, I limit my empirical analysis to the identification of the parameters guiding the institutional preferences of East Asian states in the politics of regional boundary-making.

This article is structured as follows. Section ‘Conventional explanations and a relational analytical framework’ develops a relational analytical framework for the institutionalization of regional cooperation through the politics of inclusion and exclusion. Before doing this, however, some limits to the existing arguments regarding exclusive East Asian financial regionalism are suggested. Section ‘Empirical illustration’ describes the development of East Asian financial regionalism in light of this relational framework. Section ‘Conclusion’ concludes the article by suggesting future research directions.

Conventional Explanations and a Relational Analytical Framework

The limits of trios: Neorealism, neoliberalism, and constructivism

Many neorealists assert that exclusive East Asian financial regionalism is the result of a strategy by East Asian states to counterbalance the United States in an effort to alter the international/regional power structure (e.g. Grimes, 2009). In contrast, neoliberals posit that it is the product of attempts by East Asian states to either reduce the transaction and information costs associated with intraregional economic interdependence or pressure from the private sector (e.g. Henning, 2013; Hiwatari, 2003).

Although these rationalist accounts are suggestive, they have not been sufficiently corroborated by empirical evidence⁴ and do not reflect the facts behind the emerging East Asian financial regionalism. For example, there were no meaningful indications of change in either the military or the economic power structure of the region before or after the AFC (Ravenhill, 2002: 169–172). Given this, the exclusion of the United States is even more puzzling when considering the fact that most East Asian states were military allies of the United States at the time and many remain so.

In addition, because of the lingering negative effects of the economic difficulties surrounding the AFC, intraregional trade in East Asia dramatically declined following the crisis, although the overall export volume for each state in the region consistently increased (Katada, 2009). In other words, East Asian states came to rely more on external markets for their exports. As such, this material incentive for interregional trade could have led East Asian states to pursue a regional arrangement that would include as many important external trading partners as possible in their attempt to capitalize on these external markets. The exclusion of the United States, which was the destination for the bulk of East Asian exports, would not follow from this line of analysis.

Another problem with the rationalist reasoning is that the private sector in the East Asian region was at best ambivalent about government initiatives targeting exclusive regional groupings (Hund, 2003; Ravenhill, 2002: 173–174). Moreover, the primary drivers of post-crisis financial cooperation were policy elites comprising government officials (from the Ministries of Finance in each state) and policy experts in international finance (Bowles, 2002; Tsunekawa, 2004), thus further weakening the claims of strong private sector influence.

A number of constructivist-based studies have also attempted to explain the exclusionary nature of post-crisis East Asian financial cooperation. For example, Bergsten (2000), Deiter and Higgott (2002), Stubbs (2002), Terada (2003), and Yu (2003) all identify the establishment of APT as a clear, institutional manifestation of a deepening sense of regional ‘we’ consciousness. They commonly point to the importance of East Asian states’ shared experience of the AFC, which sparked a ‘shared’ humiliation and resentment of the US-led IMF response to the crisis.⁵ The AFC thus fostered a sense of common identity. The new push by East Asian states for an exclusive form of East Asian financial regionalism after the AFC was anything but the effect of a consolidated East Asian regional identity. These identity arguments seem to better explain the new interests that prompted East Asian states to pursue exclusionary East Asian financial cooperation.

However, the problem is that these works do not come to a consensus on what constitutes ‘East Asia’ as a regional identity construct with significant causal power in their analysis of East Asian financial regionalism. The factors underlying the formation of a specific East Asian identity that have been suggested thus far include common recent historical experience (e.g. colonialism and the surge of nationalism), key common cultural traits or Asian values (e.g. the acceptance of hierarchy and respect for authority), export-oriented and mercantile approaches to economic development (i.e. developmental states), and cross-cutting patterns of foreign direct investment (FDI).⁶ Clarifying the content of ‘East Asia’ is crucial to the analysis of the decision by East Asian states to exclude the United States from their regional institutional building. This is because the content of collective identity dictates who is included or excluded when constructing a region (Abdelal et al., 2009; Hopf, 2002). As such, this underspecification of what actually constitutes East Asian collective identity makes it more difficult both to explain where exclusive East Asian financial regionalism originated from and to make reasonable predictions about where it is likely to head in terms of its institutions.

I argue that this lack of consensus on East Asian collective identity in constructivist works is the result of the underutilization of relational ontology. This observation resonates with both a rationalist charge and constructivist self-criticism that empirical constructivist works are still individualistic in practice (Bucher and Jasper, 2016: 2–3; Jackson, 2003: 227–228; Kowert and Lego, 1996: 469). It means that empirical constructivist research tends to treat identity as an independent causal variable while insufficiently problematizing the questions of where and how this identity emerged. By taking social structures (be they ideas, norms, or identities) as exogenously given, constructivist research unwittingly undermines the proclaimed ontology of identity and interests as a product of intersubjective and contingent social interactions. In this context, the underspecification of East Asian collective identity in previous studies is due largely to their failure to situate the formation of East Asian self-understanding in historically specific relational settings or issue-specific relational settings. As a result, an analytical framework that captures the relational processes through which collective identities and interests are defined and redefined when constructing a region is called for.

An alternative relational analytical framework

Based on the discussion above, I propose a relational analytical framework that explicates the development of exclusive East Asian financial regionalism by linking it to the relational processes involved in the construction of a regional boundary by East Asian states. This framework breaks the linkage down into three stages: proto-boundary, yoking, and rationalization. Doing so allows the relational processes and mechanisms to be empirically verified in a systematic way.

According to Tilly (2002: 41), relationalism, which is situated between individualism and holism, is ‘the doctrine [in which] transactions, interactions, social ties, and conversations constitute the central stuff of social life’. Following from this, it can be recognized that:

a substantial part of social reality consists of transactions among social units, that those transactions crystallize into ties, that they shape the social units involved, that they concatenate into variable structures. Identity will then become not an essential feature of an individual or a group but a characteristic and consequence of social interaction. (Tilly, 2002: 47; italics added)

In this vein of relationalism, Tilly (2002: 46) claims that politics entails ‘a choice among ontologies’. Political actors organize a significant part of their social interaction around ‘the formation, transformation, activation, and suppression of social boundaries’ (Tilly, 2004: 213).

As such, the crux of relational ontology in analytical terms is the notion that the properties of individual actors are not fixed. Rather, they always change in relation to significant others as a result of interaction. This notion can be logically linked to the multiple identities, roles, and interests that an individual actor is associated with in their world. The structure of identity and interests emerges and develops relationally in the process of an individual making contact with and subsequently marking boundaries with others in relevant contexts (Hall, 1999; Wendt, 1992). In this regard, Qin’s (2016: 4) concept of ‘actors-in-relation’ is pertinent. Qin argues that this concept is a useful heuristic for social studies where ‘the primary unit of analysis should be relations rather than actors per se’ (Qin, 2016: 4; italics original). It is because ‘An actor, at the moment of her existence, is simultaneously relational and the actor’s meaningful action can only occur in the relational web’ (Qin, 2016: 4).

In fact, the constructivist understanding of regionalism echoes this relational ontology at least on a conceptual and theoretical level. According to the constructivist theorization of regionalism, regionalism involves the politics of identity. On the one hand, regions themselves are politically and socially constructed and contested. On the other hand, any regionalism inevitably draws lines, creating borders between members and nonmembers. Regionalism thus requires boundaries to differentiate insiders (i.e. members) from outsiders (i.e. non-members).⁷ A regional sense of ‘we-ness’ demarcates insiders from outsiders and determines the boundaries of a region.

The issue, however, is how to empirically and analytically capitalize on these relational theoretical insights. As detailed above, the challenge facing constructivist empirical research on regionalism does not lie in the shortage of theoretical apparatus, but rather in devising an alternative analytical framework that is empirically amenable to relational social ontology. The resultant framework should be able to guide empirically verifiable analysis on which East Asian collective identity distinguishes ‘us’ from ‘them’ when constructing an exclusionary form of financial regionalism.

Given the relational ontology present in the continuous two-way process in which a region and member states are constitutive of each other, a practical problem arises as to where and how to start any analysis of the relational circle. One solution is to start it with boundaries, with the rationale being that boundaries always link the two main elements (i.e. states and region) together. Boundaries ensure that the process by which states and region influence each other is continuous and reciprocal. This article is by no means the first to suggest this analytical strategy. In fact, other studies that have explored the emergence, development, and transformation of collective identity (Abbott, 2001; Barth, 1969; Tilly, 2004) have pointed out the utility of this analytical approach.⁸ Abbott (2001: 261), for example, claims that:

It is wrong to look for boundaries between preexisting social entities. Rather we should start with boundaries and investigate how people create entities by linking those boundaries into units. We should not look for boundaries of things, but for things of boundaries. (Italics added)

In this vein, I combine insights from Jackson and Nexon (1999), Abbott (2001), and Bucher and Jasper (2016) to present a three-stage framework for regional boundary-making and its associated institutional practices. The three sequential stages of the framework are the emergence and maintenance of a boundary (‘proto-boundary’) as a critical basis for the formation of a regional collective identity (‘yoking’), which informs the regional practice of institutional building (‘rationalization’). As such, a sense of ‘we-ness’ (or a regional boundary) is empirically observable from the politics of inclusion and exclusion in the formative processes of establishing regional institutions.

The starting point for Abbott’s analysis is the understanding that boundaries come before entities. Initially, only ‘sites of difference’ among individuals exist in the form of a potential boundary set, and these sites locally and randomly interact. Local interaction gradually produces stable dimensions of difference composed of two sides (Abbott, 2001: 265). These two sides are not yet social entities in any meaningful sense because they do not differentiate themselves based on a single, defining dimension of difference. Proto-boundaries emerge when these locally random sites of difference ‘line up into some kind of extended opposition along some single axis of difference’ (Abbott, 2001: 269; italics added). Fully fledged social entities eventually form via yoking, which is defined in terms of ‘connecting up two or more proto-boundaries such that one side of each becomes defined as “inside” the same entity’ (Abbott, 2001: 272). As such, the establishment of an entity (or collective identity) is a relational process built upon constructing a single whole out of local oppositions and differences (‘things of boundaries’). In particular, yoking (‘the process of connecting up’) requires conscious collective agency, without which collective identity cannot emerge, regardless of the size and intensity of any differences (Abbott, 2001: 271).

Rationalization, the final stage of the proposed analytical framework, is about ‘giving reasons’ why an emergent collectivity should be tolerated and maintained (Jackson and Nexon, 1999: 314). Rationalization is the process of imbuing a newly yoked collective identity with an enduring quality capable of reproducing itself. The endurance of a social entity means that the entity has an ability to affect social causation (Abbott, 2001: 273–274). As such, rationalization implies the act of embodying collective identity in an institutional form. In this way, collective identity, which emerges out of boundary-making practices, can then become the foundation of institutional expression and practices. Rationalization (or ‘acts of identification’ in Bucher and Jasper’s words) is ‘the temporal fixing of meaning and the political process of boundary-drawing, which characterize political and foreign policy decision-making processes’ (Bucher and Jasper, 2016: 7). Similarly, Barth (1969: 15) observes in his study of ethnic identity that it is the ‘ethnic boundary that defines the group, not the cultural stuff that it encloses’ (italics original). He argues further that a group maintains its identity by ‘determining membership and ways of signaling membership and exclusion’ (Barth, 1969: 15). The continual expression and validation of a particular collective identity are thus threaded through the politics of membership.

Extending this line of thought further, I suggest that it is possible to create a matrix of induction and deduction from the three-stage framework in order to generate empirically testable hypotheses. The key to this is that induction will function as the basis for the generation of deductive hypotheses. As such, constructing the matrix starts with induction. Induction begins by analysing the formation of a proto-boundary, which is predicated on the emergence of ‘a single axis of difference’ out of the extended opposition of local sites of difference. In the case of exclusionary East Asian financial regionalism, induction can be applied to analyse the series of confrontations between East Asia and the United States in various international and regional forums. The induction here aims to uncover the ‘single axis of difference’ arising from the deepening regional movement against the United States. When inductively analysing this situation, it is important not to make a priori assumptions about the existence of a conception of shared identity among East Asian states.

The resultant ‘single axis of difference’ then functions as grounds for the creation of testable hypotheses with which yoking and rationalization can be empirically investigated. These hypotheses should specify how a region is defined, is maintained, and changes within the politics of regional boundary-making and the associated practices of exclusion and membership. Taken together, induction and deduction can produce empirically testable hypotheses that highlight the processual, interactive development of the kind of relationally defined collective self-understanding or groupness that makes certain regional collective actions possible. As discussed below, the divide between East Asian states and the United States on the role of the state in economic development and stability constituted the single axis of difference. A regional boundary for East Asia was forged in terms of financial governance when East Asian states coalesced into a single whole by externalizing the more neoliberal United States.

Empirical illustration

In what follows, I illustrate the historical evolution of exclusionary East Asian financial regionalism in light of the three-stage analytical framework. For the proto-boundary stage, I present three cases: the East Asian development model debate within the World Bank in 1993, the East Asian coalition in opposition to Western members at the APEC Osaka Meeting in 1995, and the AMF proposal in 1997 by Japan, with the support of other East Asian states. For the yoking stage of the framework, I highlight the formation of APT by East Asian states. Finally, the rationalization stage is reflected in the development of the CMI/CMIM. Given the limited space, the following empirical discussion of 30 years of institutional development cannot be much more than illustrative.⁹ Nevertheless, I present an analytical narrative that highlights the elements of boundary changes.

Stage 1: Proto-boundary formation

The World Bank and the East Asian development model

The key analytical feature of the proto-boundary stage is to identify locally random sites of differences and to show how these differences merge into a single axis of difference with an emerging regional line of demarcation. In this regard, ‘sites of difference’ between East Asia and the United States began to appear in the 1980s when the United States initiated a neoliberal drive for economic development. The Washington Consensus, a term coined in 1989 by John Williamson to describe this push, symbolized the neoliberal drive by delegitimizing the role of government intervention while encouraging free market forces such as liberalization, deregulation, and privatization. As a result, the World Bank and the IMF, the twin pillars of international development and finance in the global economy, started to incorporate neoliberal ideas into their policy prescriptions and lending conditionality (structural conditionality). The global economy seemed to move towards the universal law of economic forces.

Against this backdrop, Japan began to question in the late 1980s the validity of the neoliberalization of the global economy in terms of promoting the economic growth of individual countries. In particular, the United States and Japan strongly opposed each other within the ADB in the late 1980s and early 1990s. During this period, Japan, often in collaboration with the ADB’s Asian directors, argued against US attempts to universally apply the neoliberal model to East Asian states.

Japan’s questioning, with the support of East Asian states, of the applicability of the US neoliberal model to Asian economic reality represented a relatively modest division between East Asia and the United States.¹⁰ It was not until the World Bank’s publication of The East Asian Miracle in 1993 that Japan and the other East Asian states started to loosely identify themselves as part of a whole in opposition to the United States, via the idea of an East Asian development model.

Beyond the ADB, the United States and the World Bank sparked a confrontation with Japan on the appropriate model for economic development. The World Bank, for example, severely criticized Japan’s Official Development Assistance (ODA) programme for encouraging state-led industrialization (e.g. in the provision of subsidized targeted credits for the industrialization of recipient countries). This criticism stung Japan, who in return pressured the World Bank to conduct a thorough study of East Asian experiences of economic development. Japan included Japan, Korea, Hong Kong, Singapore, Taiwan, Indonesia, Malaysia, and Thailand as part of East Asia, all of who (with the exception of Taiwan) were to be future members of the East Asian financial region. As a result, The East Asian Miracle: Economic Growth and Public Diplomacy was published in 1993. For the purposes of this article, The East Asia Miracle situation is historically important because the concept of East Asia was first introduced in terms of its developmental identity.

The APEC Osaka meeting and the East Asian coalition

Since its establishment in 1989, APEC has been subject to disagreement between the United States and East Asian member states in terms of its main institutional purpose. The United States has preferred to use APEC as a forum for facilitating trade and investment liberalization, while the East Asian states tend to assign more weight to its role in developmental cooperation. US liberalization efforts bore fruit with the Bogor Declaration in 1994, which laid out a liberalization timetable for the member states. The Bogor Declaration was, however, not wholeheartedly welcomed by every state.

Against this background, Japan hosted the annual APEC meeting in Osaka in 1995. The major issue in Osaka was whether to set more specific goals for the APEC liberalization process based on the Bogor Declaration. The East Asian member states had become increasingly wary of the US-led liberalization agenda because it essentially meant they would have a much reduced role in the management of their own economy. In Osaka, they were presented with the choice of whether or not to endorse US free market ideals.

What came out of the Osaka meeting was the embryonic form of an East Asian developmental alliance. Instead of the more structured, rule-binding liberalization advocated by the United States and Australia, the liberalization process that emerged from the Osaka meeting was ‘voluntary, unilateral, consensus-based, non-binding, lacking common timetables, and uncertain as to comprehensiveness and comparability of members’ effort’ (Rapkin, 2001: 389). In addition to the ASEAN countries, China, Japan, and Korea (the ‘Plus Three’ members of APT) joined forces to restore balance to the overall APEC agenda, which they claimed had become too heavily weighted towards liberalization. As an illustration of this, Yoshiro Sakamoto, Vice-Minister of International Affairs of the MITI at the time, claimed that ‘Japan should keep step with the rest of Asia by agreeing only to those U.S. proposals that are acceptable to the whole of Asia’ (Oga, 2004: 304).

In the context of an emerging sense of ‘we-ness’ in East Asia, the Osaka meeting provided a venue for future APT members to develop a nascent sense of what they could achieve collectively within the confines of East Asia. As Webber (2001: 357) aptly puts it, ‘The creation of an at least limited sense of identity among East Asian states can be attributed to the perception of sharing a common opponent in APEC conflicts’. At the same time, however, the sense of we-ness around the concept of East Asia at this stage should not be overstated. After all, Mahathir’s proposals for an EAEC/Grouping between 1990 and 1995 did not generate sufficient enthusiasm among most East Asian states.

The AMF

As noted above, the most significant institutional development in East Asia after the AFC was the emergence of an Asia-only form of regional economic cooperation that excluded the United States. On this score, Japan’s AMF proposal during the AFC in 1997 was a watershed because Japan, with strong support from other East Asian states, explicitly excluded the United States from membership. As such, the AMF proposal played a pivotal role in consolidating an East Asian collective identity in relation to neoliberal United States. This episode crystallized into a single axis of difference from among the previous local (or regional) oppositions to neoliberal United States, thus forming a proto-boundary.

In summary, Japan’s AMF proposal was a consequence of its struggle with the United States and the IMF over how the AFC should be managed. However, Japan’s uneasy relationship with the United States and the IMF did not arise spontaneously. After all, Japan insisted that it be allowed to provide the Thai government with financial assistance on the condition that the Thai government would seek IMF help first. Japan’s serious consideration of creating the AMF came only after ‘the discursive demolition of the Asian development model’ by the US Treasury Department (Robert Rubin and Lawrence Summers) and the IMF (Hall, 2004). Sakakibara, Vice-Minister of the Ministry of Finance (MOF), who was known as the architect of the AMF proposal, recollected from his conversations with Rubin and Summers:

… I was saying from the outset that this [the Thai crisis] was a crisis of global capitalism. But in 1997, Larry’s view and Bob Rubin’s view were that it was an Asian crisis, and especially Asian policy management was the problem–Asian governments, Asian corruption and collusion, and the Asian structured economic system, which is close to the structure of the Japanese …¹¹

In this context, after several consultations with East Asian states, Japan (via the MOF) decided to launch the AMF as a regional financial mechanism for the rapid disbursement of funds to crisis-affected countries. The AMF was envisioned, at least in the short term, as a way to defend the Asian model of economic development against the US-led imposition of neoliberal economic order on crisis-affected countries via the IMF. Sakakibara later noted that the exclusion of the United States was intentional so that the Asian leaders could discuss regional financial problems without US pressure,¹² and ‘it was the desire to create a policy alternative to the IMF prescription that motivated the proposal to create the AMF’ (Sakakibara, 2001: 2).

The AMF was not realized in the face of strong US and European opposition. However, Japan’s AMF proposal, sponsored by other East Asian states, represented a concrete manifestation of a regional collective identity that demarcated insiders from outsiders. By excluding the United States from membership for the first time in the context of regional financial cooperation, it helped mark a boundary for East Asia. Indeed, the original members of the envisioned AMF are now part of APT.

Yoking

APT

Yoking stage highlights that state actors come to define a regional entity by yoking proto-boundaries and turning axes of differences into a specific form of institutional practice. State actors’ conscious efforts to build a regional we-ness should thus be the focus of empirical examination. In other words, proto-boundaries will remain as they are if there is no political intervention or collective will of state actors to connect them together. I show below how East Asian political leaders reoriented their policy action from passive to action promotion of APT after their shared experience of the AFC. This point stresses that APT did not inevitably evolve into becoming the centre of East Asian financial cooperation.

APT, which became the institutional nucleus of post-crisis East Asian financial regionalism, had modest beginnings. For example, no joint statement was issued by the attending heads of government at its first Summit Meeting in 1997 in Kuala Lumpur, and the name ‘ASEAN Plus Three’ itself was rarely used during the first two meetings. It was not until the third Summit Meeting in Manila, in November 1999, that a ‘Joint Statement on East Asia Cooperation’ was issued for the first time by the 13 heads of government. It can be said that the AFC was an essential foundation for the sharing of common experience, thus enhancing the significance of the APT forum. Thus, it is important to identify the make-up of this common experience which helped to precipitate the move towards exclusionary East Asian financial regionalism.

As noted by my discussion on the AMF and by many other scholars, the common experience that fostered a sense of we-ness was East Asian states’ shared ‘image of the region in adversity besieged by outsiders “ganging up” in their attempts to exploit the difficulties that East Asian governments faced’ (Ravenhill, 2002: 175). At the centre of this humiliation was the IMF’s US-led demolition of the East Asian economic model as a representation of crony capitalism. This cemented East Asian states’ binary sense of ‘us’ and ‘them’ by placing them in diametrical opposition to the neoliberal perspective of the causes and consequences of the AFC.

This binary perspective can be observed in a series of speeches and statements around this time from East Asian political leaders. For example, remarks by Thai Deputy Prime Minister Supachai reflect the binary nature of identity: ‘We cannot rely on the World Bank [or] the International Monetary Fund but we must rely on regional cooperation’.¹³ In late 1998, Korean Prime Minister Kim Jong Phil called for an independent AMF by endorsing the ‘East Asian development model’.¹⁴ Korean President Kim Dae Jung also claimed that APT:

would also be able to speak for the region in discussions with other major economic blocs, such as the European Union and the North American Free Trade Agreement. Why should Asia, alone among the ‘three poles’ of the global economy, not have its own grouping?

In the fourth APT Summit in Singapore in November 2000, Singaporean Prime Minister Goh firmly stated that it was important that the leaders of the 13 countries were starting to think of themselves as ‘East Asian’.¹⁵ One quote in particular summarizes the emerging sense of East Asian identity in financial cooperation:

If we are lax in these efforts [the APT process] towards integration, we may invite more region-wide upheavals similar to the currency crisis. It is therefore important to understand how and in what sense this region, including Japan, is a community with common fate.¹⁶

As documented above, the development of the APT shows the importance of state actors’ conscious choice in building an institutionalized cooperation in East Asia. On closer inspection, it is clear that East Asian political leaders seriously invested in APT and looked to elevate it into a central role after their shared experience of the AFC. These historical processes are captured by Peter Hall’s (2005: 153) notion of ‘a funnel of causation, in which a broad interpretation of major events and an associated set of preferences are developed in tentative terms and then consolidated as successive experiences are interpreted in the same terms’

Rationalization

How then was the rationalization of East Asian collective identity (i.e. the political process of boundary-drawing) institutionalized in the development of the CMI/CMIM? I draw three specific hypotheses from the discussion above (i.e. from the sites of difference through to proto-boundaries and yoking). First, one expects to observe the continued exclusion of the United States from membership in the development of the CMI/CMIM. Second, policy initiatives for East Asian financial regionalism should focus on developing regulatory mechanisms allowing for the role of the state in managing US-led globalization, such as mechanisms for monitoring capital flow and surveillance. Finally, the CMI should continue to shift away from the IMF in terms of lending practice. Noting that these hypotheses are not meant to be fully tested in this short article, I demonstrate that the three hypotheses are empirically corroborated in terms of the parameters of exclusive East Asian financial regionalism. First, APT continues to exclude the United States from membership. Second, regulatory regionalism has also been observed in consideration of the CMI/CMIM’s gradual shift from ‘minimizing financial instability’ (i.e. short-term liquidity provision) to ‘managing’ regional financial cooperation (i.e. monitoring capital flow and providing regional surveillance). Finally, the IMF-delinked portion of the CMI/CMIM fund has gradually but steadily increased from 10% to 30%.

The CMI and CMIM

The CMI was first conceptualized during the APT Summit in 1999 when the finance ministers of APT agreed to enhance ‘self-help and support mechanisms in East Asia’. The APT Finance Ministers’ Meeting in 2000 realized this in the form of the CMI. Subsequently, the CMI arranged a network of bilateral swaps among the central banks of East Asian countries to provide a ‘balance of payment support’ and ‘short-term liquidity support’. Thus, the CMI was initially envisioned as a first-order defensive mechanism that provided regional foreign exchange liquidity support (Amyx, 2004: 211–212).

APT further strengthened the CMI in Istanbul on 6 May 2005. The Istanbul initiative doubled the size of the currency swaps under the CMI from the original US$39 billion, increased the amount of emergency liquidity available without IMF approval from 10% to 20%, and transformed bilateral swaps into two-way swaps, with the aim of making them multilateral in the future.

On the heels of this Istanbul meeting, the East Asian states’ efforts to multilateralize the CMI began in earnest. From May 2006, APT started to work on the details of multilateralizing the CMI (Chey, 2009: 452). This was a response to practical, functional needs. Since its inception, one of the core institutional purposes of the CMI was to ensure the rapid provision of short-term liquidity to crisis-affected states in order to more expeditiously curb financial crises in their initial stages. As such, at stake was the CMI’s capacity to rapidly disburse necessary funds. The bilateral nature of the CMI’s swap arrangements would prevent it from delivering on this particular institutional promise. In order to activate a network of bilateral swap arrangements, an individual state has to bilaterally negotiate with partner states. A series of bilateral swaps takes considerable time to process, thus making it almost impossible for that state to receive timely financial support from the CMI.

With this in mind, on 12 May 2009 in Bali, Indonesia, the finance ministers of APT agreed unanimously to multilateralize the CMI. APT finalized the details of the new multilateral currency swap scheme and successfully addressed the five key issues (total fund size, form of funding, legal modality, proportion of each state’s contribution, and decision-making processes/voting share). The total size of the fund was set at US$120 billion, funded by self-reserved reserve pooling. Legally, it acted as a single, legally binding contractual agreement, with individual contributions set at US$38.4 billion for China and Japan, US$19.4 billion for Korea, and the remaining US$23.8 billion split among the ASEAN countries. In terms of voting share, China, Japan, and the ASEAN countries would each have 28.4% and Korea 14.8%. The CMIM took effect on 24 March 2010. Since then, the APT increased the portion of the fund delinked from IMF approval from 20% to 30% in 2012, and this is expected to increase further from 30% to 40% in 2018. APT also doubled the CMIM’s total fund size in 2011; it now stands at US$240 billion.

Another major institutional development was the finalization of a surveillance institution. The APT launched the ASEAN+3 Macroeconomic Research Office (AMRO) in Singapore as a regional surveillance unit on 26 May 2011. A sister institution to the CMIM, the AMRO’s institutional purpose is to monitor and offer advice on the macroeconomic policy and performance of member states. In May 2013, APT unanimously agreed to grant the AMRO the status of an international institution status, officially becoming the first financial institution with this status in East Asia on 19 February 2016 after domestic ratification by the member states.

Taken together, the development of the CMIM underlines that the three hypotheses resonate with the rationalization of East Asian collective identity drawn from empirical studies of the preceding proto-boundary and yoking stages. What started out as a simple mechanism for addressing short-term liquidity difficulties in the region has become an institutionalized framework for region-wide dialogue and cooperation. The CMIM now reflects not only self-assistance and support mechanisms but also capital flow monitoring, policy reviews, coordination, and collective decision-making. The CMIM may well be institutionally heading towards becoming a revived version of the AMF.

Conclusion

This article has tracked the development of East Asian identity in relation to the United States in various institutional settings in light of a three-state analytical framework incorporating proto-boundaries, yoking, and rationalization. My findings suggest that the analytical framework is useful for the study of exclusive East Asian financial regionalism. In general, the framework can be extended to the formation of collective identity in other relational settings.

The relational framework, however, requires further development and elaboration to provide a fuller account of East Asian financial regionalism. The framework, as it currently stands, captures only the processual aspects of region-building and does not include an analysis of motivations. A combinatorial analytical framework that integrates process with motivation is thus called for. An analysis of motivation is particularly important for the stage of yoking. There would be also cases where a region reaches the first stage or second stage of the framework but does not continue onto the next stage. As such, future studies may want to further specify conditions under which the three stages can be fully completed.

My empirical findings indicate that, as long as East Asian identity is defined in relation to the United States in terms of competing perspectives on the neoliberal economic paradigm, the exclusion of the United States from East Asian financial cooperation will continue. This demonstrates how relational ontology works to shape the conception of a region and its distinctive institutional development through the practice of boundary-making. Finally, one further empirical implication for the future development of the CMIM can be offered in light of the above analysis. A critical issue facing the CMIM is the setting of lending conditionality for the release of funds. Protracted discussion on lending conditionality is currently under way. The issue here is how to align this with ‘East Asian’ characteristics in the context of the IMF’s one-size-fits-all programme. Were it not for the establishment of different lending procedures and lending conditionality reflective of the unique conditions in East Asia, the rationale for the existence of the CMIM would weaken. In fact, if this were the case, it would likely function as a regional branch of the IMF without autonomy (Lee, 2015: 103–105). Flexibility in terms of local economic needs and conditions, accessibility, the speed of disbursement, and the prevention of moral hazard are all key to the design of CMIM lending conditionality.

Footnotes

Acknowledgements

I thank Yong Soo Eun for organizing Hanyang–Routledge Workshop for the completion of this article. I also thank the workshop participants for their comments. Three anonymous reviewers’ constructive criticisms are much appreciated. My thanks extend to Wook Hee Shin for his shared interests in the study of relational ontology. National Research Foundation of Korea supported this research (NRF-2015S1A3A2046903). Korea University Grant also supported the completion of this research (K1706381).

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: National Research Foundation of Korea supported this research (NRF-2015S1A3A2046903). Korea University Grant also supported the completion of this research (K1706381).

Notes

ORCID iD

Yong Wook Lee

Author biography

Yong Wook Lee is Professor in the Department of Political Science and International Relations at Korea University (Seoul, Korea). His research examines how identities, norms, and power affect and are affected by states and their practices within domestic and international contexts. HIs works appeared in various academic journals, including International Studies Quarterly, Review of International Political Economy, and Review of International Studies. He is presently finishing up a book on East Asian financial regionalism. This project is a sequel to his earlier book, entitled The Japanese Challenge to the American Neoliberal World Order: Identity, Meaning, and Foreign Policy (Stanford University Press 2008). Prior to Korea University, he taught at Brown University and the University of Oklahoma. He can be reached at yongir@korea.ac.kr.

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