Can economic cooperation and integration promote regional peace and security?

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Author: M Chatib Basri, University of Indonesia

At a time when the world desperately needs global cooperation due to the COVID-19 pandemic, increased geopolitical tension, economic nationalism, and fear of supply chain disruption are making it more difficult.

The potential for economic recovery is visible, but the recovery will be heavily dependent on global vaccine access. Vaccination delays may also contribute to the pandemic’s resurgence. As a result, the process of recovery has become increasingly difficult, particularly for developing countries with limited capacity for economic stimulus. Vaccine nationalism creates a situation akin to the prisoner’s dilemma in game theory. The bottom line is that people might choose not to cooperate, even when cooperation would see better outcomes.

These issues can only be resolved through collaboration and collective action and global cooperation, including economic integration, is now even more relevant and important. International cooperation is critical and the G20 forum is a possible avenue for the cooperation that is needed.

But Russia’s invasion of Ukraine has increased geopolitical and economic uncertainty. Economic sanctions imposed on Russia have caused oil and gas prices to skyrocket, jeopardising global economic recovery. The invasion of Ukraine has heightened tensions between the United States and Russia. China appears to be tacitly supporting Russia, a stance that will almost certainly exacerbate China’s tensions with the United States and affect the Asia Pacific region’s geopolitical balance.

The disruption to supply chains has also raised concerns about putting trust in economic interdependence. During the Global Financial Crisis, Asian countries that maintained or even increased their domestic demand as a percentage of GDP were in a better position to weather the global economic downturn. Indonesia’s integration into the global economy, for example, is less than that of export-oriented countries in its region such as Singapore or Taiwan. But that doesn’t provide justification for shutting down and turning inward. Turning inwards does not resolve supply chain issues. Due to limited domestic capacity, most Asia Pacific countries cannot easily be economically independent or self-sufficient. And even for those that do have the capacity, production costs will be higher.

Economic integration plays a critical role in promoting peace and security as the opportunity cost of interdependence reduces the likelihood of war. A study by Cali and Oliver of the World Bank shows when trade leads to higher incomes, states are less likely to forgo them to engage in conflict. Another study by Lee and Ju, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that increased bilateral trade interdependence is significant in promoting peace. Increased bilateral interdependence and global trade openness are key elements in promoting peace.

The question is how to deal with tension in Southeast and East Asia without any regional security architecture. Existing security cooperation is primarily bilateral. When it comes to negotiating with superpowers, bilateral cooperation weakens ASEAN countries individually. Under these conditions, ASEAN centrality and economic integration appears the best alternative in maintaining regional peace and security

ASEAN, of course, has its own internal fragilities because several member countries have their own divergent political and economic interests: this is the challenge for ASEAN. This is where ASEAN’s role as a leader comes into play. Indonesia’s role in this context is critical. Because of its size and political position, as well as its hosting of the G20, Indonesia should be expected to play a key leadership role. And Indonesia demonstrated this when it pushed for the formation of the RCEP in 2011. Absent military cooperation in ASEAN and East Asia, economic integration offers an alternative solution for East Asian countries, particularly ASEAN, to promote peace and geopolitical stability.

ASEAN has in fact been able to play an important role in maintaining Southeast Asia’s peace since its formation. During the Cold War, for example, ASEAN attempted to mitigate the negative impact of geopolitical tensions between the United States, the Soviet Union, and China. ASEAN was successful in bringing Vietnam, Laos, Cambodia, and Myanmar into the organisation in the 1990s. Now conflict resolution must focus on regional economic cooperation and trust building. ASEAN is currently attempting to follow its old formula in promoting regional peace and security.

Can this formula work, and how long can geopolitical tensions in Southeast Asia and East Asia be contained? The Regional Comprehensive Economic Partnership (RCEP) is a test case. RCEP has the potential to alleviate security tensions because of ASEAN’s significant role in mediating geopolitical issues and tensions between the United States and China. At the same time, the United States’ role in maintaining the region’s geopolitical balance is also critical.

Because of its cooperative scope and membership, and their relatively neutral position towards the United States and China, RCEP has a strong chance of promoting peace and security. From a geopolitical standpoint, RCEP is an ASEAN initiative that was proposed when Indonesia assumed the ASEAN chair in 2011. It is not a China initiative, which makes it less politically sensitive. RCEP is relatively neutral in terms of preserving the region’s geopolitical balance and ‘politically acceptable’ to the United States. RCEP is also the first economic partnership to include China, South Korea and Japan in a single agreement.

Through a coordinated effort to build trust and confidence among its members, RCEP’s success has the potential to lead not only to opportunities for regional economic cooperation and integration, but also to a more peaceful and stable region. The war in Ukraine, with its impact on geopolitical tensions, and the urgency of cooperation in overcoming the COVID-19 pandemic, highlight the importance of RCEP’s position in Asian regional security.

M Chatib Basri is a Senior Lecturer at the Department of Economics, the University of Indonesia, and formerly Indonesian minister of finance.

This article appears in the most recent edition of East Asia Forum Quarterly, ‘East Asia’s Economic Agreement’, Vol 14, No 1.

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