During the 2012 U.S. presidential elections, the topic of what to do about China’s trade practices, which have been criticized for violating World Trade Organization rules and giving China an unfair comparative advantage, surfaced repeatedly. Discussions about U.S. relations with Asia often turn toward China’s growing economic and political strength in the region.
However, the tone was different at a recent panel discussion about the U.S. economic partnership with the Asia-Pacific region such as the possible Trans-Pacific Partnership (TPP) Agreement. Some of the panelists and speakers argued that other countries throughout Asia should not be ignored. In other words, East Asia as a whole presents significant economic opportunities to the United States. So is East Asia an important economic player in the global market? Will East Asia be the economy of the future? (For this purposes of this blog post, East Asia refers to those countries defined as East Asian nations plus those categorized as Southeast Asian nations.)
Karen Lanyon, Australian Consul-General in Los Angeles, thinks so. At the US-Australian Dialogue: Partners in the Asia-Pacific event at the University of Southern California on Tuesday, Lanyon said that supporting the TPP makes “economic sense, because East Asia will be the economy of the future in the next century.”
Yet, China is an East Asian country and the largest economy in the region with a gross domestic product (GDP) of US$8.2 trillion. An Organization for Economic Cooperation and Development (OECD) report predicts that China will replace the United States as the number one economy in the world by 2016. One could argue that East Asia’s significance is driven by the economic powerhouse of China. If China’s economy remains strong, it may be the reason for East Asia’s future economic strength.
Of course, a member in the audience raised the question about China’s influence. Australian Ambassador to the United States Kim Beazley responded, “It’s not about China.” I agree.
Other countries are experiencing rapid economic growth and a growing middle class with greater purchasing power throughout East Asia. Therefore, it would be worthwhile to also look at the opportunities presented in other countries throughout the region.
For example, Indonesia’s middle class is expected to triple by 2030. An expanding middle class means that more people within that country have the purchasing power to buy foreign goods, i.e. products exported to that country.
Additionally, the economies of Indonesia, Malaysia, Philippines, Thailand and Vietnam combined grew twice as fast as China from 2005 to 2009. These same five countries are projected to maintain a 5.8 percent growth rate through 2015, whereas China’s growth projections have declined to 7 percent. Two of these five Southeast Asian nations, Malaysia and Vietnam, are a part of the TPP negotiations. Provided that the TPP talks conclude successfully, U.S. exporters will have special access to these fast growing markets.
Longer-term economic projections for the region show that Japan and Indonesia will remain among the top 20 largest economies. Indonesia’s economy is predicted to grow substantially by 2030 and 2050. Japan’s economy will grow, but it will drop down in rank as it is surpassed by India and Brazil. Although China’s economic growth has slowed down in recent years, it is still projected to remain the largest economy in the world by 2050 (Table 1).
Table 1: Actual and Projected GDP of Top Three East Asian Economies 2012, 2030, 2050 (GDP PPP) (US$billion)
(based on 2011US$bn)
(based on 2011US$bn)
Source: World Bank, World in 2050 The BRICS and Beyond: Prospects, Challenges and Opportunities (January 2013)
This is not the first time that East Asia has been considered an economic success. Hong Kong, Singapore, South Korea and Taiwan reached GDP growth rates of 7 percent by the 1990s. However, these same countries were hit hard by the 1997 financial crisis and the global economic recession of 2008.
With such history, I will not even attempt to predict which economy will be the economy of the future in the next century. Perhaps, East Asia may continue to show economic growth and an expanding middle class by the mid-21st and start of the 22nd centuries. It is safe to say that East Asia will not be alone, considering that a number of emerging market economies from various regions such as Latin America and Sub-Saharan Africa have also been labeled as important economies of the future. For instance, economists have questioned whether Sub-Saharan Africa is the next Asia because of its impressive economic growth rates. (I argue that Sub-Saharan is merely the new Sub-Saharan Africa. See my other posts on the opportunities and challenges of Africa’s economic growth.) Therefore, it is difficult to pinpoint one country or one region as the “economy of the future.”
In sum, East Asia is among a number of important markets in the global economy. The fast economic growth rates and growing middle class in countries throughout the region present additional opportunities and challenges beyond China. East Asia, like many other regions composed mostly of developing economies, has the potential to be one of several economies of the future. At least trade deals, such as the TPP, serve as a vehicle to form beneficial partnerships with East Asia.
Do you think East Asia is important to US political and economic interests? Why or why not?
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.