reading nov 19 - international cooperation Flashcards
Nonhegemonic or Hegemonic Cooperation?
Institutional Evolution of East Asian Financial Regionalism
intro
Yong Wook Lee
goal: explore key institutional features of East Asian financial cooperation
CMI = Chiang Mai Initiative = East Asia’s effort to institutionalize cooperation in constructing a regional financial safety net
- CMI is institutionalized in the form of nonhegemonic cooperation by the ASEAN plus Three countries
AIIB = Asian Infrastructure Investment Bank
- appears to be promotion of China-centered regional financial cooperation that deverges from nonhegemonic cooperation
nonhegemonic cooperation = intestate institutional cooperation with the absence of a single actor/state that has a veto power and is predominant in setting its agendas
= contrary to theoretical expectations mainstream IR literature (neorealism and neoliberalism)
international financial and monetary order
current financial order = since 1980s
dialectics of change and continuity arise with the institutionalization of practices (standard setting) through the process of rule-making and rule-transformation
2008 global crisis -> possibility of change: hegemony of the dollar is eroding + Euro sees massive challenges (other monetary alliances + promoting internationalization of other currencies)
financial order: frequent financial crises = downside of financial market liberalization
-> discussions on establishing regional financial crisis prevention mechanism
Institutional cooperation in East Asia for regional financial cooperation
ASEAN = Association of South East Asian Nations
APT = ASEAN plus Three: Korea, China and Japan
ADB = Asian Development Bank
2013 NDB = New Development Bank
Asian financial crisis 1997-98
-> East Asian financial regionalism: attempts to reduce currency volatility, to create frameworks to contain financial crises and to develop local financial markets
APT supported/created:
Chiang Mai Initiative / Chiang Mai Initiative Multilateralization = CMI/CMIM
= effort to institutionalize cooperation in constructing a regional financial safety net
Considering AMF (Asian Monetary Fund)
AMRO = ASEAN plus Three Macroeconomic Research Office 2011 = monitor and advice macroeconomic policy and performance + 2013 international institution status (first in the region)
3 institutionalized cooperation schemes APT:
1. 2010 Asian Bond Market Forum (ABMF) = to standardize local/national rules and norms of bonds' interaction 2. 2011 Credit Guarantee Investment Facility (CGIF) Regional Settlement Intermediary (RSI) = still underway when article written
non-hegemonic to hegemonic cooperation?
nonhegemonic cooperation =
continuum between two levels:
- maximum: no single hegemonic actor capable of setting agendas unilaterally/predominantly or exercising veto power for major institutional decisions
-> IMF and WB examples of hegemonic cooperation (US dominance) - minimum: decoupling of the contribution size of a state to an institution from the voting power that state wields (most institutions with QMV = symmetry in vote shares?
the chiang mai initiative and its multilateralization
CMI = chiang mai initiative 2000
- framework to contain and manage financial crises
- bilateral currency swap arrangements
- aimed to ensure rapid provision of short-term liquidity to crisis-affected states, but bc bilateral it takes many negotiations with diff countries -> takes too much time for this goal
CMIM = chiang mai initiative multilateralization 2009 (Bali)
- multilateral currency swap scheme (took effect in 2010)
- = historic agreement: departure from ASEAN Way: norm of unanimity
- idea in 2005 out of functional need -> 2006 working out details + quicken proces of CMI (all states had to convene in 2 days to decide on disbursement funding + reinforced in Kyoto 2007
multilateralization required 3 additional meaningful institutional changes:
- increase membership all ASEAN countries rather than just 5)
- make it dollar-based
- must decide within a week if a country gets short-term liquidity support (with 2/3 QMV)
challenges: finalize surveillance + set lending conditionalities (still underway)
- key conditions
!regional character necessary, otherwise would just be regional office of the IMF, no existence CMIM
-> 2011 AMRO (ASEAN+3 Macroeconomic Research Organization) to monitor
CMIM as nonhegemonic institutional arrangement
CMIM now: self-help and support mechanisms + capital flow monitoring + policy reviews + coordination + collective decision-making
institutionalizing -> nonhegemonic characteristics
!it first glance hegemonic: weighted voting roughly corresponds to financial contribution size + misalignment
it is nonhegemonic:
- veto power requires 1/3 of voting shares under CMIM (no country has that in the current arrangement)
- every member veto power on new members: requires consensus
- equal distribution of agenda-setting power: annual meeting agendas are set by the co-hosts (one from ASEAN countries an one from China, Japan or Korea)
- e.g. Korea: smallest voting share, no disadvantage with veto power or agenda setting (could even argue it is therefore in advantage)
AIIB
Asian Infrastructure Investment Bank (institutional arrangement not yet concluded)
- proposal 2013 by Xi Jinping, first meeting 2015
- also western states seriously considered and/or signed up to join the AIIB
- initial exclusion US and Japan (hard relation with Japan-led Asian Development Bank)
- goal = finance large-scale eco infrastructure investment (other organizations (ADB, WB, IMF) unable to help sufficiently)
- AIIB is a sequel to the New Dev. Bank agreed by the BRICS
has potential to assume hegemonic form of Chinese-led cooperation
- goes against China’s stance of constructing nonhegemonic cooperation, e.g. consensus decision making Shanghai Cooperation Organization
3 Chinese ideas to boost influence in the AIIB
(veto and agenda setting power + direct control investment decisions and policies)
!all are uncommon in International Financial Institutions
- funding size: China funds half
- Executive Committee: China full discretion selection/appointment members + that it would be center of AIIB functions
- function without a permanent member-based board of directors + board of directors only a discussion forum
establishment of board of directors is a minimum condition for institutional autonomy to exist at all
the CMIM and institutional challenges
2015-2020/25 best chance for East Asia to attain regional financial cooperation bc all major stakeholders strive for such cooperation
- China: improbable to overtake US national power by 2020 -> for peaceful rise China needs to construct cooperative relations with East Asian countries both practically and symbolically
-> mutual trust = favorable local conditions -> China can act better
-> also bounds other countries, could work in Chinese favor
-> policies through CMIM can get legitimacy -> sustains nonhegemonic influence
-> learning effect of global leadership - Japan + ASEAN: want to institutionally constrain China
- Korea: financial stability
challenge: need for more robust institutionbuilding efforts from the APT to turn the CMIM into an Asian Monetary Fund (full-fledged regional institution)
- need to clarify the logistics of activating the CMIM in times of financial crisis: agreement on lending prescriptions and conditionalities
- re-establishing CMIM relationship with IMF: need for more IMF de-linkage (30% funds for emergency bailout are linked to the IMF)
AMRO (surveillance functions) crucial
East Asian financial and monetary cooperation is at a crossroads, waiting for major decisions to be made for its future
*APT disagreement on pace, scale and other details of the future of the CMIM
will nonhegemonic cooperation continue despite China’s rise? it is fair to say it will be sustained (institutions are hard to change once established)
- still, change possible if China employs strategy of voice and exit (increase vote share + bypass CMIM)
the AIIB and China-led hegemonic cooperation -> will it be hegemonic?
AIIB institutionalization may not go acc to China’s plan: India decided to join bc China said its framework could be debated + Korea would only join when AIIB meets international standards of IFI governance + members want mechanism to guarantee that Executive Committee exists of experts and professionals
-> China tuning down proposals
AIIB future direction, comparatively via example China’s policies toward NDB
*diff with NDB: no substitute to Chinese funding + greater diversity (harder to form united front against China) + most member states likely to be recipients of investment
- China attempted to make NDB China-led by offering largest financial contribution (expected largest voting shares) BUT other BRICS members checked China’s ambition
- NDB institutionalization: each BRICS equal distribution, except on Contingent Reserve Arrangement (China large contribution)
- governance structure: NDB no diff from most IFIs, presidency rotates + equal distribution of authority
- NDB cooperation = closer to CMIM style nonhegemony
China needs to balance 3 goals: status in world politics + institutional efficiency AIIB and institutional democracy of the AIIB
conclusion: theoretical reflection and future studies
can existing theories account for both forms of cooperation?
- rationalist institutional design approach
= can explain hegemonic cooperation, weak for evaluating nonhegemonic cooperation
Koremenos, Lispon and Snidal = focus on organization types of institutions
- international institutions = explicit arrangements, negotiated among (rational) international actors that prescribe/proscribe, and/or authorize behavior
- 5 dimensions of institutional design = membership, control, flexibility, scope, centralization
- control: how collective decisions are made: individual control decreases as N increases + asymmetry control increases with asymmetry of contributors + individual control increases with uncertainty about the state of the world
-> only basis for nonhegemonic cooperation = equality of contribution -> can’t explain CMIM (nonequal contribution, non-veto and equal agenda-setting)
= ill-equipped to identify rationality behind nonhegemonic cooperation
alternative investigative approaches for nonhegemonic cooperation
constructivism: attention to collectively-held ideas, norms and identities in shaping the ways in which states define what they want and pursue
-> variation in hegemonic/nonhegemonic cooperation can be analyzed in terms of how collective preference among MS is the outcome of collective ideas/visions, appropriateness/norms, and shared identities
challenge = study empirically: focus on context-sensitivity + non-arbitrary interpretation of data
relationship between regional and global financial orders
3 layers that would structure interactions of regional and global orders in shaping the future direction of global financial governance
- depth, degree and direction of change in existing neoliberal institutional framework
- extent of the emergence and solidification of the increasing nr of regional financial and monetary systems
- relational characteristics of the financial and monetary order developing at the global and regional level
examples suggest foundation of international economic order through regions
- European global expansion early C19 -> international eco order tended to take the form of an expanded regional order (argument that Europe spearheaded neoliberal financial liberalization)
- post-Cold war dev. regional order-making efforts = regional competition to ensure a bridghead in the changing international eco order
-> will an emerging East Asian regional financial order be a platform for global financial governance?
