The Rule-Based International Order: Discourse and Reality in East Asia (short version)

The rule-based international order or the liberal international order, has recently garnered increasing attention recently. This post-World War II order is generally defined as a free open market, trade and liberal globalization system. Such an order has been argued to successful develop countries economically and socially, create global prosperity and ensure peace. In recent years, politicians, analysts and academics fear this order is under attack with the rise of national ideologies and governments with isolationist economic policies. There is a projected fear that the opposition to this ruled-based order will adversely affect political and economic achievements in regions like East Asia. I present a history of East Asian development different from the discourse of the liberal international economic order, and that the worry the order is under attack should be approached.

Different approaches to East Asian development

The history of East Asia development has been often depicted in two versions. The main discourse depicts East Asian countries with open, free market economies, minimum government regulations and willing to enact free trade agreements. The governments of the East Asian Tigers, namely Singapore, South Korea, Japan and Taiwan, intervened in their economies only to provide market-friendly policies. It was this form of development which resulted in extremely high economic growth, documented in reports such as the World Bank’s 1993 report,The East Asian Miracle: Economic Growth and Public Policy.

The other school of thought argues that rapid East Asian development was rather a result of active government intervention and investment in national economies. These governments spent on building national infrastructure, social services such as education and transport. These governments did endorse foreign investment and trade, but judiciously enacted tariffs and subsides to ensure local companies could develop before competing with multi-national companies. This perspective has been argued by institutional economists such as Ha-Joon Chang in his 2007 book “The East Asian development experience: the miracle, the crisis and the future”.

The impact of the discourse of the liberal international order

There has constantly been a debate between both sides how East Asia successfully developed. We can infer from the above that, firstly, the free market, liberal globalization approach mirrors the characteristics of the rule-based, liberal international order which allegedly is under attack. Second, with the worry that the liberal order is under attack, the government intervention approach has largely faded from the scene. The international order is therefore framed as the means to successful East Asian development and extrapolated as a core development template for countries to follow. Those that posit that the international order is being challenged recently also warn countries not enact protectionist policies like tariffs, reduce government intervention and allow the more private sector initiatives and leave the market economy to itself. In effect, countries are informed not to follow the active government intervention approach school of thought.

While the private sector and market economy are drivers of economic growth, the absence of any government intervention would adversely affect countries, especially those with at lower stages of development. Fixed open trading rules would also place the local companies in developing countries on an unequal playing field with foreign companies. A contemporary example is the cancelled Trans-Pacific Partnership free trade agreement, which aim further reduce tariffs and government controls for services across the Pacific region. While this may boost economic growth, it would have exposed East Asian indigenous companies to unfair competition with larger foreign firms from developed countries.

Moreover, there has not been any fixed ‘rule-based’ economic order. Leaders in developed countries or regional bodies like the United States and the European Union have warned countries not to enact tariffs. Yet, as Joseph Stiglitz and Andrew Charlton noted in the book “Fair Trade For All: How Trade Can Promote Development”, published 2005, developed countries historically enacted their own tariffs to prevent developing countries from exporting agricultural products. Developed countries have also historically imposed strict intellectual property rights, again preventing pharmaceutical firms in developing countries from gaining knowledge and entering the market.

This is not to argue for constant government intervention or for countries to embrace tariffs and inward-looking economic policies. It is not to argue that the private sector and a market economy is detrimental to development or economic growth. To the contrary, it shows that there is not a unitary liberal international order that should retained and not challenged. It indicates that there is some hypocrisy with those arguing to preserve the international order while not adhering to the rules themselves. In sharp contrast, carefully targeted government intervention in the economy would in fact allow East Asian developing countries to successfully develop as opposed to the proponents of the rule-based international order.

Towards an East Asian future with the liberal international order discourse

Today’s Asian Tigers have open market economies, have large external economic investment and have open free, low or zero-tariff trade agreements. Nevertheless, these developed countries still do require strong government-led interventions to sustain their individual economies. Governments also, as Ha-Joon Chang argues, ideally should o spend on social welfare systems to prevent workers from financially suffering from any external economic shocks. East Asia and other regions also have the burden to forge equitable development as highlighted in the Sustainable Development Goals or SDGs. These goals again require judicious government spending in the economy, infrastructure and other public sectors. This again is in contrast to the tenets of the whole order.

The rule-based liberal international order, while allegedly being challenged, is more of a discourse rather than a blueprint for economic growth and success. Rather than following its discourse or lamenting about its impending downfall, East Asian countries should recall its history and work with government and private sector policies for successful economic development.

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