Call for healthy regional integration

“At the same time, there are two important caveats to this assertion,” he said. “First, public policy should encourage constructive working relationships and networks both within and among regions, and, second, the business community has an increasingly important role to play in the debate regarding the future of the international economy, and it should take that role very seriously.” 

McDaniel was speaking on the release of a special comment titled “The Future for Asia Pacific Economic Integration: A Global Perspective”. The report is based on a speech he delivered on Saturday at the Asia-Pacific Economic Cooperation CEO Summit and the associated Apec Business Advisory Council meetings held in Beijing.

Looking at the development of markets in Asia, McDaniel noted that current financial-market infrastructure is insufficient to support the next stage of economic growth or to meet the huge challenges of financing essential to urban development. 

“How to finance this demand is one of the central questions, and there are two important facets in this discussion,” he said.

First, Asian financial markets, particularly the bond market, are less developed and less integrated with one another than North American and Western European markets. Consequently, the flow of resources from one economy to another is sometimes hindered – because of differences in such matters as legal and administrative systems or regulatory regimes. 

Second, in instances where resources do flow freely, for example when individual Asian countries are more tightly linked with those outside of Asia, their economies are exposed to exogenous volatility. 

“The combination of the above two factors and the desire to provide domestic companies with the benefits of a larger regional market may be driving the increasing interest in joining regional organisations,” McDaniel said. 

On a more practical level, regional organisations find it easier to reach economic and trade agreements, simply because a smaller group can form consensus faster than a larger more diverse group. Within the Asia-Pacific region, business leaders are currently discussing or implementing several regional ideas for increased integration, he noted.

In addition, the challenges that arise from increased interdependence of economies – combined with diverging visions of how to integrate still-powerful nation-states – are stimulating discussion about the prevailing international system.

Here, public policy has a crucial role to play in promoting a healthy rebalancing to encourage companies, countries and regions to build constructive and open networks rather than protectionist barriers, he said. 

According to McDaniel, one feature that would be critical to the sustained success of a new global approach is an inclusive debate: public-policy makers should be open to perspectives and views from various and disparate sources. There should be a clear framework: market participants should be able easily to understand the specifics of the rules that govern their businesses. Once adopted, rules should be applied consistently and coherently, irrespective of region or market sector. Finally, the legitimacy of any rule set rests on its fair and impartial application.