Development: Intra-regional Trade, Industrialization and the Developmental
3.1 Intra-Asian Trade as a Key Agent of Regional Industrialization
This chapter discusses Asia’s regional path of economic development, focussing on trade, industrialization and the developmental state. It is an attempt to understand the regionally specific context in which current emerging economies (especially India, Southeast Asia and China) industrialized from a long-term historical perspective.
In my previous work I suggested that the growth of intra-Asian trade was faster than that of world trade or Asia’s trade with the West between 1880 and 1938 (Sugihara 1996,2005: see Fig.3.1and Table3.1). This was in sharp contrast to many parts of Africa, Middle East and Latin America where the local economies were integrated into the metropolis-led international economy as a satellite. Asian countries involved in this intra-regional trading network included a number of Euro- pean colonies in South and Southeast Asia, as well as countries of East and South- east Asia under unequal treaties and the treaty port system. They interacted with one another much more than other developing worlds did, through the growth of Indian, Chinese and other Asian merchant networks. It was these networks, together with the Japanese trade associations and government efforts to help them to compete with Asian networks (see Sugihara1994), that facilitated the Japanese exports of labour- intensive manufactured goods to other Asian countries. The growth of intra-Asian trade was instrumental to Japan’s labour-intensive industrialization.
After a heavy intervention of the emergence, development and abrupt collapse of the Yen bloc in the 1930s and the first half of the 1940s, intra-Asian trade recovered
the West
c.m. p.p.
India l.m. Japan p.p.
l.m. p.p. l.m.
l.m. (l.m) p.p. l.m. →p.p.
Southeast Asia p.p. China
l.m.
p.p.
Fig. 3.1 Intra-Asian trade, c. 1880–1938Source and notesc.m. capital-intensive manufactured goods, l.m. labour-intensive manufactured goods, p.p. primary products. Since the late nineteenth century India exported cotton yarn to China in large quantities, but from the end of the 1910s, it was replaced by the exports of raw cotton. China exported a small amount of silk textiles in turn.
Sugihara (1996): slightly revised
Table3.1ThegeographicalcompositionofIntra-AsianTrade,1883,1898,1913,1928,1938(£million) 188318981913 theWestAsiaTotaltheWestAsiaTotaltheWestAsiaTotal IndiaEx.44.45(68)17.02(26)65.85(100)42.71(63)20.93(31)68.15(100)96.01(63)41.85(27)152.69(100) Im.34.69(85)5.12(13)40.97(100)33.51(75)6.37(14)44.52(100)91.55(75)26.61(22)122.25(100) Southeast AsiaEx.14.98(58)6.70(26)25.62(100)15.19(39)14.70(37)39.25(100)56.83(55)42.17(41)104.05(100) Im.13.54(57)8.35(35)23.66(100)15.95(51)14.17(46)31.05(100)48.04(58)31.66(38)82.50(100) ChinaEx.17.7876)3.96(17)23.25(100)15.47(60)8.85(34)25.80(100)29.17(48)31.41(52)60.92(100) Im.8.55(47)9.29(51)18.02(100)13.46(51)12.51(47)26.62(100)38.51(45)53.38(62)86.13(100) JapanEx.5.23(80)1.20(18)6.53(100)8.54(51)8.04(48)16.90(100)33.05(45)36.49(50)72.64(100) Im.3.70(71)1.52(29)5.23(100)14.69(52)13.53(48)28.36(100)33.98(43)42.03(53)78.82(100) TotalEx.82.44(68)28.88(24)121.25(100)81.91(55)52.52(3)150.10(100)215.06(55)151.92(39)390.30(100) Im.60.48(69)24.28(28)87.88(100)77.61(59)46.58(36)130.55(100)212.08(57)153.68(42)369.70(100) Totalintra-Asiantrade (1)33.7760.96167.3 Totalworldtrade(2)1531.642003.484020.06 (1)/(2)(%)2.223.044.16 (continued)
Table3.1(continued) 19281938 theWestAsiaTotaltheWestAsiaTotal IndiaEx.135.93(58)65.52(28)232.92(100)63.93(52)33.07(27)122.12(100) Im.118.36(59)64.46(32)200.43(100)54.14(47)40.91(36)114.27(100) SoutheastAsiaEx.142.42(53)90.92(34)269.44(100)94.22(51)46.40(25)183.37(100) Im.96.84(56)59.13(34)173.10(100)63.90(55)35.73(31)115.99(100) ChinaEx.56.80(39)84.23(58)144.93(100)19.11(29)47.35(72)66.18(100) Im.72.45(41)104.70(60)174.85(100)26.31(25)92.66(87)106.97(100) JapanEx.93.03(41)120.71(53)228.74(100)38.18(17)170.12(74)230.75(100) Im.93.23(36)138.37(53)260.18(100)69.92(32)125.86(57)221.32(100) TotalEx.428.18(49)361.38(41)876.03(100)215.44(36)296.94(49)602.42(100) Im.380.88(47)366.66(45)808.56(100)214.27(38)295.16(53)558.55(100) Totalintra-Asiantrade(1)434.96381.63 Totalworldtrade(2)6725.024626.29 (1)/(2)(%)6.478.21 SourcesandnotesSugihara(1996,pp.14,96–97).Worldtradetotalfor1883and1898werecalculatedfromLewis(1952,pp.106–107),andareveryrough estimates
Table 3.2 Growth of Intra-Asian trade, 1950–2014 (billion dollars) (1) World exports
total
(2) Asia exports total (3) Intra-Asian trade total
(3)/(2) (%)
1950 58.0 (100.0) 10.7 (18.4) 2.9 (5.0) 27.1
1955 93.9 (100.0) 13.4 (14.3) 4.0 (4.3) 29.9
1960 128.9 (100.0) 18.3 (14.2) 5.9 (4.6) 32.2
1965 188.2 (100.0) 25.7 (13.7) 9.1 (4.8) 35.4
1970 320.7 (100.0) 44.4 (13.8) 15.6 (4.9) 35.1
1975 887.4 (100.0) 143.4 (16.2) 49.8 (5.6) 34.7
1980 2018.1 (100.0) 332.6 (16.5) 135.9 (6.7) 40.9
1985 1987.0 (100.0) 424.2 (21.3) 167.7 (8.4) 39.5
1990 3601.2 (100.0) 805.4 (22.4) 357.3 (9.9) 44.4
1995 5325.1 (100.0) 1460.6 (27.4) 764.8 (14.4) 52.4
2000 6385.6 (100.0) 1456.8 (22.8) 738.9 (11.6) 50.7
2005 10369.0 (100.0) 2285.5 (22.0) 1330.0 (12.8) 58.2
2010 14937.3 (100.0) 4495.3 (30.1) 3073.9 (20.6) 68.4
2014 18442.9 (100.0) 5603.2 (30.4) 3905.9 (21.2) 69.7
Sources and notesTakanaka (2000). For figure from 2000 onwards, IMF, Direction of Trade Statis- tics Yearbook. The former work is based on UN commodity trade statistics, which is slightly wider in the scope of coverage than the IMF data, but the differences are small. Intra-Asian trade total refers to the value of exports from ten Asian countries (Japan, four NIEs, four ASEAN countries and China) and their imports from the smaller Asian countries (adjusted by FOB-CIF conversion)
fast among a much smaller number of countries in the post-war period. India, China and many Southeast Asian countries and North Korea withdrew from the regime of free trade, and a relatively small number of countries along the western Pacific coast (Japan, South Korea, Taiwan, Hong Kong and Malaya-Singapore among others) were integrated into the U.S.-led world economy. We then saw the high-speed growth of Japan, NIEs and ASEAN 4, followed by the reintegration of China, Southeast Asian countries (which joined ASEAN later) and India in the second half of the twentieth century, which led to a full recovery of the intra-Asian trading zone that existed in 1928. In the early post-war period the share of U.S. (and other Western countries) in Asia’s trade was large, and its influence was dominant. However, the U.S. share rapidly declined, and was replaced by the growth of regionally-driven trade. In 2014 the share of intra-Asian trade in Asia’s exports was as much as 70%, a figure comparable to intra-E.U. trade (see Table3.2). It has been by far the most dynamic section of world trade for the last half century.
Why has the growth of intra-regional trade been such a persistent tendency for the last hundred and thirty years? Our hypothesis is that there has been a dynamic rela- tionship between the growth of intra-Asian trade and industrialization on a regional scale. That is, the growth of intra-Asian trade from the late nineteenth century helped Japan’s labour–intensive industrialization, which in turn provided cheap manufac-
tured goods such as cotton textiles and sundries to Asian peoples, and made the commodity composition of intra-Asian trade increasingly industrialization-driven. In the interwar period China went through import-substitution industrialization, which urged Japanese manufacturers to find more processed or higher-value added products for exports. Under the regime of ‘selective’ protectionism, Japanese manufacturers further increased the exports of textile machinery to China, which started regional industrialization. This was an original ‘flying geese’ (Akamatsu1962), which has become a basic mechanism of progressively including higher value-added commodi- ties and commodities made with the more advanced technology in intra-regional trade. The regional drive also targeted at opening up new markets for modern manu- factured goods. Asian merchants and producers exploited the opportunity to identify local tastes and consumption patterns and to create a diverse range of demand for cotton cloth and sundries across Asia and beyond (think of exports of Indian and later Japanese cotton cloth to Southeast Asia and East Africa).
The post-war diffusion of industrialization, beginning in Japan and spreading to other Asian countries, has followed the same interactive path between intra-regional trade and industrialization, first among a small number of countries under the regime of free trade, and gradually embracing others [think of Asian textile complex in the 1980s in which Japan produced rayon [yarn], Taiwan wove it, and Hong Kong made it an apparel and exported it to the United States. See Arpan (1984: 112–117, 136–149, 159)]. Again, we do not see such a dynamic relationship in Africa, Middle East or Latin America in this period. South Africa and Brazil proceeded with industrial- ization without accompanying regional integration. It is only in Asia that economic nationalism has embraced regional integration on a regional scale. This trend contin- ues to this day, most recently in the shape of the ASEAN Economic Community, and in spite of the emergence of China as a hegemon. By now labour-intensive industries reached many low-income countries (Sugihara2013b).
This chapter is concerned with how such a distinctive feature has emerged. The key concept is intra-regional trade, as distinct from both local and long-distance trade. It created a regional division of labour between a commercial agricultural region and a proto-industrial region, and embraced industrialization by broadening the commod- ity composition of their trade. Its main career has been merchant networks, rather than the modern organization with the head office and a visible (Chandlerenian orga- nizational) organizational structure, and both types remain important as careers of trade to this day. Intra-regional trade did not involve state monopolies such as Euro- pean East India Companies, a product of mercantilism, but went hand in hand with the government policy of promoting trade and industrialization. In Southeast Asia, merchant networks were often responsible for the state formation in port cities and their hinterlands, which in turn provided institutional foundations of these networks.
Where the power of the state was weak, merchant networks themselves organized schools, hospitals and social functions, to facilitate personal networks and informa- tion flows. Today they exist in the forms of overseas Chinese business associations, for example.
Implicit in these statements is that adopting a single country-based framework (e.g.
Japanese history, Indonesian history) and considering intra-regional trade as a minor
modification of such a framework are insufficient for the understanding of the context in which “emerging economies” reached the current level of development. What needs to be explained is how Asia as a region acquired global economic significance.
In the next section, I describe the pre-industrial roots of intra-regional trade and its relationships with the state, which governed the mobilization of resources. I argue that basic demographic profiles of these countries have been formed during the early modern period, and that China and India respectively developed a path, which was able to hold a very large population. It was a sustainability-driven, rather than growth- driven, path. In the nineteenth century and the first half of the twentieth century regional integration took place under the Western impact, which led to the growth of intra-regional trade and labour-intensive industrialization. Population growth became more regional, with a modest rise in living standards, especially in the maritime parts of Asia.
A fully-fledged industrialization, with a rapid rise in living standards, followed in the second half of the twentieth century. In the third section I discuss the post-war dynamics of intra-Asian trade and industrialization, focussing on the mobilization of labour and capital. Labour-intensive industrialization entailed the improvement of the quality of labour and livelihood, expressed in the Human Development Index, while capital- and resource-intensive industrialization was accompanied by the improved access to global resources. In Japan the developmental state promoted national land development plans, and fostered capital- and resource-intensive industries in the seafront industrial complex along the Pacific coast. The development path of the countries in the Western Pacific rim at least partially became resource-intensive and growth-driven. In the most recent period, China extended this seafront model to a more comprehensive resource nexus model, which would enable the integration of the non-maritime parts of the country and the Eurasian continent into its growth orbit. This development requires a fuller mobilization of less tradable resources, such as water and ecosystem services, putting pressure on local resources and rais- ing questions about environmental sustainability. In the fourth section I discuss the importance of local resource constraints for the developmental state seeking both industrialization and environmental sustainability. The final section summarizes the main points of this chapter.