Distinguished Speaker Seminar: Manoranjan Dutta – European Union and The Euro Revolution and Asia; The Asian Economy and Asian Money

Manoranjan Dutta, Professor of Economics, Rutgers University discussed lessons from the European Union that Asia can draw to sustain its growth momentum at a distinguished speaker seminar on 28 February 2008. He started his lecture by pointing out the paradigm of the European Union, which is unity in diversity. He elaborated it by saying that while there is diversity in language, religion and lifestyle in Europe, there is unity in geography; that is, European countries belong the map of Europe. The call to make the family of Europe free from war and destruction led to the Europeanization of Europe.

Turning to the economics of the European Union (EU), Professor Dutta argued that individually, no member state can deliver the best for its citizens. But as a union, EU can deliver more for its citizens and can compete in the world market. As of 2006, the share of the EU-27 in the world GDP accounted for almost 30 percent, which was higher than that of the U.S.A. More importantly, the income gap among member states had narrowed during the period 1971-2006.

Professor Dutta reviewed the historical progress of the EU starting from the establishment of the Benelux Customs Union in 1944 up to the formation of the EU in 1992, with free flow of trade, investment and labor, mutual standardization and accreditation, and common trade policy with the rest of the world. Interestingly, the free movement of labor within the EU has not caused mass migration from one member country with relatively low income to another with relatively high income. Then, the Eurozone came into existence with the official launch of the euro in 1 January 1999. Eleven EU member states adopted one common currency and the European Central Bank, thereby eliminating exchange risk in the Eurozone.

Turning to Asia, Professor Dutta pointed out that the process of the Asianization of Asia is progressing well. The Asian Financial Crisis of 1997-1998 has prompted the Asianization of Asia, as countries in the region searched for a coordinated fiscal and monetary policy response to the crisis.

Dutta also discussed the potential of industrialization of Asian economies beyond Japan. Japan has of course been recognized as a mature industrialized economy. The fact that Asia’s pre-industrialized agriculture-dependant traditional economies have made relatively rapid progress to industrialization and internationalization needs to be mentioned. From the perspective of regionalization, he pointed out that the industrialization of Asia has increased intra-Asian trade and investment flows. He also argued that due to the need for intra-Asian macroeconomic stability, the region must have shared monetary and fiscal policies.

Professor Dutta takes the view that the Asia-Pacific Economic Cooperation (APEC) has delayed the Asianization movement in that APEC has failed to deliver the result of greater intra-APEC free trade. In Asia alone, it is difficult to have standardization and mutual accreditation of goods and services in trade; so, it is much more difficult to achieve it in a larger grouping of countries such as APEC. He pointed out that just as the Atlantic is a natural divide between Europe and the Americas, so must the Pacific be a natural divide between Asia and the Americas. He noted the emergence of sub-regional compacts such as the Association of South East Asian Nations (ASEAN), Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERA), South Asian Association for Regional Cooperation (SAARC) and the East Asian Free Trade Area (EAFTA), but none have competitive shares of the world GDP and trade. He ended his presentation by saying that Asian economic cooperation is in progress and nothing can stop it. He admitted that there are problems along the way, but that they can be solved as was done in Europe.