South East Asia in tandem with East Asia is likely to be the arena of future US-China power tussle. If China indulges in strategic and military brinkmanship, localised armed conflicts may occur. The major powers need to intensify the cooperation efforts and stop revival of Cold War mentality that further destabilises the region.

The Asia-Pacific encompasses numerous countries including Australia and New Zealand in the South and its locus in the Association of South East Asian Nations (ASEAN). In a world where a bulk of the consumers in most countries reside outside the country’s border, Asia Pacific Economic Cooperation (APEC) itself comprises 40 per cent of the global population. Many of these economies are growing faster than the world average and have together generated 56 per cent of global GDP in 2010. While the ASEAN sponsored ASEAN Free Trade Area (AFTA) is gaining momentum, the East Asia Summit (EAS) too has focused on issues of trade, energy and security. Non-traditional security issues that affect the well-being, dignity and survival of humanity too need to be addressed. Future success of the region will depend upon improved global integration with the world becoming flatter in every aspect. Cooperation in the region is overshadowed with strife in the South China Sea and lack of appropriate regional security arrangements. With world seaborne trade pegged to reach 41,800 billion tonne by 2014, half the global super tanker traffic transiting this region and lack of a multilateral approach to combat maritime security challenges holistically; strife and conflict are likely to heighten in the Asia Pacific region.

Regional Groupings

Asia is a region with large standing armies, four declared nuclear weapon states, countries engaged in production and export of missiles and seven of the 10 most populous countries of the world. Its demography, civilisation and political diversity, provide additional volatility. It is estimated that in the next 25 years, Asia will account for 57 per cent of world GDP even though recession in the West affects the region. South East Asia derives its geostrategic significance by virtue of its location of sitting astride the waters that connect the Indian and the Pacific Oceans and strategic chokepoints of the Malacca, Lombok and Sunda Straits. Sea lines traversing Asia-Pacific carry 50 per cent of global trade and 33 per cent of global oil. More than 550 million people inhabit South East Asia and regional economies total to more than $1 trillion ( Rs. 50,00,000 crore) . Economies of the US and its allies in the region depend on security of the sea lanes and stability of the region. About 97 per cent of Indian trade is by sea and the $60 billion ( Rs. 3,00,000 crore) annual India-China trade is predominantly by sea. Major subregional groups are like ASEAN and South Asian Association for Regional Cooperation (SAARC) and cross-subregional blocs are ASEAN Free Trade Area (APTA), APEC, Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), etc. Bilateral trade pacts are being pursued for deep integration. Subregions are also building up network with other countries and regions separately, for example, ASEAN+3, ASEAN+6, ASEAN-China, ASEAN-India. Though trade is the main vehicle of collaboration, other areas are also included in the cooperation activities.

ASEA, established in 1967 as a geopolitical and economic organisation of 10 countries of South East Asia, has expanded over the years, aiming for accelerated economic growth, social progress, cultural development, protection of regional peace and stability. Post the East Asian Financial Crisis of 1997, there has been better integration between the economies of ASEAN as well as the ASEAN+3 countries (China, Japan and South Korea). The bloc has also focused on peace and stability in the region, ratifying the South East Asian Nuclear-Weapon-Free-Zone Treaty. The idea of East Asia Groupings, mooted in 1995, resulted in a number of East Asia Summits (EAS) involving ASEAN, + 3 countries and countries that have Full Dialogue Partner status of ASEAN and signatories to the Treaty of Amity and Cooperation (TAC). EAS focuses on multiple issues of energy, finance, education, natural disaster mitigation, environment, climate change, sustainable development and mutual appreciation of each other’s heritage and history leading to initiatives like revival of Nalanda University in India, a Track II study on a Comprehensive Economic Partnership in East Asia (CEPEA) and establishment of an Economic Research Institute for ASEAN and East Asia (ERIA). Adoption of the “Singapore Declaration on Climate Change, Energy and Environment” led to mobilising financial support, capacity building, development of clean technologies, exchange of scientific and technical expertise, joint studies, promotion of public awareness and development of policy measures. China plays a significant role in South East Asia with its development making economic gains and strategic inroads in South Asia. The ASEAN-China free trade agreement signed in 2010 is well-known, as is also its participation in a lot of subregional cooperation arrangements.

India-ASEAN cooperation covers numerous fields like trade and investment, science and technology (including IT, biotechnology, advanced materials, space sciences and their applications), tourism, human resource development, education including language training, transport, infrastructure, health and pharmaceuticals.

Trade

Building regional architecture and institutions to sustain growth, deepening in-ternational integration and managing accompanying risks of economic and political instability through global systems is a priority. Measured in purchasing power parity terms, Asia’s share of global GDP will amount to around 31 per cent in 2020, with China accounting for over 14 per cent. Hence, China and India will substantially impact the world economy. The scale and weight of income growth in Asia will have a huge impact on trade in goods and services globally and within the region. The income growth cannot be sustained without continuing to maintain the openness to international trade and private capital flows that has already helped successful growth. Trade is an engine of driver in ASEAN and East Asia, but South Asia still has to cover more distance. At present, every state has enormous autonomy over trade matters—from taxes to procedures. Through unilateral liberalisation process many of the Asian economies achieved high growth. Due to the diverse nature of economies, integration process through economic cooperation has become complicated and slow. That does not imply that Asian economies need to wait for further convergence. Initial conditions are important but not decisive for integration.

APEC has facilitated growth of participants by optimising interdependence among Asia-Pacific economies and enhancing a sense of community, aimed at improving regional trade, economic performance and linkages for prosperity of the people in the region. It has helped to reduce tariffs and other barriers to trade across Asia-Pacific, reducing business transaction costs by about 10 per cent and creating an environment to ensure safe and efficient movement of goods, services and people across borders through policy decisions, and economic and technical cooperation.

Free Trade Areas (FTAs) enable free internal trade while external tariffs against outside countries differ among member nations. These factors create the “trade creation effect” and the “trade diversion effect” through respective actions of a shift in the geographic location of production from higher-cost to lower-cost member nations as well as a shift in the locus of production of formerly imported goods from lower-cost non-member nations to higher-cost member nations.