Introduction

The economic success of the East Asian region during the past four decades and its proven resilience during times of crisis demonstrate that regional integration, supported by both open trade and regional cooperation, is a key factor for sustained growth and development. However, the current financial crisis is threatening the East Asian region's phenomenal success, ushering in an economic slowdown, if not recession, across the globe. In general, regional governments are conscious that closing national borders in response to the crisis would only lead to inefficiencies and lower the chances of riding out and bouncing back from the crisis. As such, the economies in the region have remained committed to free and open trade, and the regional governments have a renewed interest in deeper regional cooperation to help manage shared risks and common interests. Even areas most governments have been disinclined to consider in a regional context, such as investment and services, are now being openly discussed.

The 1997 Asian financial crisis prompted rounds of bilateral and multilateral agreements in the East Asian region, and created mechanisms for regional cooperation, particularly the Association of Southeast Asian Nations (ASEAN) +1, ASEAN +3 (APT), and the East Asian Summit (EAS). These regional cooperation initiatives helped spur trade, investment, and financial reforms that deepened Asia's growing and wide-ranging links. At the national level, regional cooperation helped lock-in reforms within domestic economies that led to the creation of a coherent and efficient environment for doing business within that economy. At the global level, regional cooperation helped Asia, especially its developing economies, secure a role in decision making for various issues relating to the region's economy and politics. Asia's outstanding economic performance can be attributed to its pursuit of open and flexible regionalism.

Latin American countries and the Caribbean, on the other hand, have not displayed the same success as the Asia and Pacific region in integrating their economies and securing a stronger role in the global economy. Unlike the Asia and Pacific region, and in particular East Asia, the Latin American and Caribbean region has not embraced open regionalism and has not been aggressive enough in looking for third markets (United Nations Economic Commission for Latin America and the Caribbean [UNECLAC] 2008). Latin American markets remain fragmented and the business environment needs to be restructured to make it more attractive for foreign direct investment (FDI).

The idea of linking the dynamic Asia and Pacific region with Latin America and the Caribbean has been explored in various fora. The main challenge for establishing this connection is how to strengthen trade and investment links between the two regions. A lack of coherent and sustained policies, poor infrastructure support, and high transportation costs have dampened previous attempts to integrate the two regions.

There are many opportunities for growth and development between the two regions once appropriate policies and support systems are in place. The potential is especially vast in the infrastructure, energy, banking, tourism, and logistics sectors. Efforts to expand trans-regional cooperation would not only be valuable for improving the regional value chain, but could also help enhance innovation and competitiveness, especially for Latin America and the Caribbean. Moreover, the current global financial crisis has increased the array of cooperative opportunities as governments and industries in both regions seek ways to deal with the crisis.

Interregional cooperation between the two regions would be very challenging since they are divided by substantial geographic distance and are characterized by profound disparities in economics, politics, culture, and history. Nonetheless, it is certainly worth considering, given the mutual benefits that can be derived from this cooperation.

This paper explores the potential for regional cooperation between the Asia and Pacific region and Latin America and the Caribbean. The first section provides an overview of regionalism and how it has evolved as a strategy to manage regional externalities. The second section provides a background on Asian regionalism and the factors for its success. The third section deals with prospects for interregional cooperation between the Asia and Pacific region and Latin America and the Caribbean. The fourth section provides the conclusion and some recommendations on how to build a partnership between the two regions.

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