Future of Regional Cooperation in Asia and the Pacific
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Future of Regional Cooperation in Asia and the Pacific

Bambang Susantono, Cyn-Young Park

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eBook - ePub

Future of Regional Cooperation in Asia and the Pacific

Bambang Susantono, Cyn-Young Park

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About This Book

This book reviews progress with regional cooperation and integration in Asia and the Pacific and explores how it can be reshaped to achieve a more resilient, sustainable, and inclusive future. Consisting of papers contributed by renowned scholars and Asian Development Bank staff, the book covers four major areas: public goods, trade and investment, financial cooperation, and regional health cooperation. The book emphasizes how the region can better leverage regional integration to realize its vast potential as well as overcome challenges such as the coronavirus disease (COVID-19) pandemic.

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PART 1
REGIONAL PUBLIC GOODS

“International cooperation is vital to keeping our globe safe, commerce flowing, and our planet habitable.”
Angus Deaton, 2015 Nobel Laureate in Economics

1

Regional Public Goods: Conceptual Foundations

Scott Barrett
Throughout history, humanity has endeavored to improve the human condition. Over the last several decades, almost every conceivable measure of well-being has improved, including life expectancy at birth, infant mortality, literacy, civil and political freedoms, and the material standard of living. These have not always improved steadily. Reversals have happened; for example, civil and political freedoms have recently fallen in some countries (Freedom House 2018). Improvements have not been uniformly distributed (per capita incomes have not converged, either domestically or internationally) and some countries have advanced much more than others. Overall, however, the improvements achieved in recent decades have been remarkable.
Another remarkable observation is that data on these key constituents of human well-being are prepared and presented at the country rather than at the local or regional levels. The reason, of course, is that national institutions are primarily responsible for these outcomes. Institutions like property rights systems, the rule of law, and contract enforcement—all established at the national level—play a fundamental role in making markets efficient and, therefore, in raising the material standard of living. National governments also impose taxes, a necessary arrangement for the supply of national public goods. Perhaps the first responsibility of a state is to provide national security—a national public good—and income taxes historically have been introduced to finance wars. Today, of course, taxes finance many other national public goods that contribute to human well-being. These range from crime control to systems of sanitation and from a road network to clean drinking water.
Taxation is a constraint on individual freedoms, but one that the citizens of every free country willingly accept. In the absence of taxation, national public goods would need to be financed voluntarily, but it is the nature of public goods that everyone obtains the benefits of provision whether they contribute to its provision or not. Under a pure voluntary system, individuals have an incentive not to contribute, or to contribute very little—the “free rider” problem. Compulsion allows the state to provide what individuals on their own cannot provide.
Regulation is another means by which governments supply national public goods. The public good of clean air, for example, is typically supplied by pollution regulation, not public financing. And while taxation is needed to finance national defense, in many countries, especially in times of war, this is supplemented by conscription. Similarly, during a public health emergency, individuals suspected of being infected, and of posing a danger to others, can be placed under quarantine. Even without an epidemic, governments routinely require that children be vaccinated. This is not just to protect these children. It is to prevent the conditions that would allow an epidemic to emerge and threaten others: a public good.
Coercion—whether for the purposes of taxation or regulation—can also be used for malevolent purposes. It can be used to subjugate and exploit a population, to reap windfalls for an elite, and to build militaries that threaten a state’s neighbors. The purposes to which government powers can be put depend on the sources from which a government derives its authority—whether from the gun or the ballot box. This is one reason democratic institutions are important; the threat of losing an election creates an incentive for governments to serve the interests of citizens. Other government institutions, such as a constitution and independent judiciary, further restrain abuses of power and help prevent a majority from stepping on the rights of individuals and minorities. Although the focus of this chapter is on regional cooperation, it is important to recognize from the outset the importance of national institutions, not least for the way they shape the behavior of the main players in the international arena and determine their ability to act. National institutions help to determine a state’s interests (whether it is representative of a broad swathe of the population, say, or beholden to a particular group). They affect the ability of an executive to negotiate agreements with regional neighbors. National institutions also determine whether a state can deliver on its promises. A state that is unable to supply national public goods is also unlikely to be able to contribute to the supply of regional public goods, at least where external assistance is not provided.
National public goods may be paramount to improving human well-being, but every person’s well-being is also shaped by the actions of governments other than their own. The need for national defense, for example, depends on the nature of external threats. A country’s defense requirements depend on the weapons systems possessed by its potential enemies. Arms control can thus be mutually beneficial. A country’s security also depends on whether it can rely on friendly states to come to its aid in the event of an attack: the international public good of collective security. Even better, the promise of assistance, if credible, can deter an attack, and so reduce the need for a buildup in armaments. This is important to individuals not only because security contributes directly to well-being but also because savings in defense spending can be shifted to supply other public goods.
The focus in this chapter is on regional public goods—public goods that are supplied by states situated in geographic proximity to one another and that primarily benefit the states belonging to this region. However, it is as well to note the connections among the different levels of public good. Regional public goods often cannot be supplied unless (at least enough) states within the region also possess the capacity to supply national public goods. Indeed, the provision of regional public goods is often built upon the foundations laid by states within the region supplying national public goods (regional disease elimination, for example, depends on each state within the region being able to control the disease domestically). Similarly, the supply of global public goods often demands minimal state and regional capacity. For example, the effort to eradicate polio globally was initiated only after the disease had been eliminated from large regions of the world, such as the Americas. Regional polio elimination served as a stepping-stone to global eradication.
The powers vested in national governments are not available at the regional and global levels. Action at the international level must be voluntary. Of course, volunteerism also operates at the national level; intervention by government is not the only means by which public goods are provided. However, states exist and have taken on larger roles because state provision of public goods often succeeds better than volunteerism. These same powers do not exist at the regional level. The most advanced regional institution is the European Union (EU), but the EU lacks the authority to tax EU citizens directly. Some decisions within Europe can be made by qualified majority, but some, such as fiscal measures, require unanimity. Why are regional bodies constrained in this way? The reason is that the values of the citizens of different states vary, and the citizens of few if any states would be willing to have their fates determined directly by others. This is not to say that sovereignty is immutable. Examples of restraints on sovereignty include qualified majority voting in the EU (every member state is bound by the decision of a qualified majority, whether the state voted with the majority or against it) and decisions by the United Nations (UN) Security Council in the area of peace and security. Such examples, however, are exceptions. And even these arrangements only persist because they are self-enforcing. A state exercises its sovereignty in deciding to join an organization like the EU. Even after joining, a state retains the right subsequently to withdraw from the arrangement—a right the United Kingdom has exercised.
The consequence of sovereignty is that the supply of regional public goods depends on the willingness of states in the region to contribute to their supply voluntarily.
It should not be assumed that unilateralism will fail to supply critical public goods. The United States (US), for example, developed the world’s two polio vaccines on its own and for its own self-interests, and because these vaccines were never patented, they have been available to the whole world to produce (the knowledge of how to make the vaccine is the public good; once made, a vaccine is a private good).
It also should not be assumed that multilateralism is destined to fail. As explained later, the incentive for states to cooperate varies from situation to situation. In some cases, success requires nothing more than coordination.
In other cases, however, true cooperation, supported by enforcement, is needed. Even in these cases, cooperation can succeed, provided certain prerequisites are satisfied. First, it must be possible for each party to observe whether others have fulfilled their promises. Monitoring is essential. Second, parties must interact so that any observed violations of an agreement can be punished. Reciprocity is essential. Third, punishments must be credible, meaning that it must be in the interests of the parties harmed by a violation to impose the punishments they had promised to impose, should the agreement be violated. Finally, the magnitude of these punishments must be large enough to deter any party from violating the agreement in the first place.
The first two of t...

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