What is "Asia"?

Map of Eurasia Continent

From a historical perspective, the idea that Europe and Asia were different “continents” came from the ancient Greek view that the lands to the east of Greece somehow made up a single, organic whole called Asia, while the lands to its west made up another whole, known as Europe. This view eventually became the modern Western understanding of Europe and Asia as separate continents.

The idea of Asia as a distinct continent is problematic in both a geological and cultural sense. Geologically, there is no particular distinction between Europe and the rest of Asia; together, they sit on the same geological plate, the Eurasian plate. The Ural Mountains, which are traditionally considered the boundary between Europe and Asia, are moreover not very distinct and are hardly an impediment to the movement of peoples. South Asia, which lies on a separate tectonic plate and is separated by the far more formidable Himalayas, is actually physically much more distinct from the rest of Eurasia than Europe is (South Asia is also not too dissimilar in size to Europe, minus Russia).

Culturally, Asia is also a problematic concept. What is Asia, other than a way of setting apart a group of non-Western cultures from the West? The West, is fairly well defined – to put it simply, it is a civilization that arose from Roman civilization, Christianized, and then went through developments such as the Renaissance, Enlightenment, and Industrial Revolution. But what, really, is Asia? It consists of cultures as diverse as Japan and the Arabs, who really have no more in common with each other than with Europeans. It can in fact be strongly argued that Islamic civilization is, in many ways, more similar to the West because of their related religious origins than to China. This is not to say that there are no common histories or cultures in Asia; rather Asia has many regions, each as distinct as Europe, which share their own commonalities, such as East Asia (Chinese civilisation and states influenced by Chinese culture such as Japan and Korea) or South Asia. Between these civilisations, there was, of course, some interaction so it is reasonable to see all of Europe and Asia as an interconnected system with specific sub-regions.

It is important, in fact, to not worry too much about the exact definition of regions or continents, since doing so often creates mental boxes that obscure rather than clarify reality. A few decades ago, the idea of pan-Asian solidarity or brotherhood became popular in many parts of Asia, but this was the result of Asians internalizing a Western construct. It led to some beliefs, for example, in India that Indian and Chinese interests or patterns of thought were similar when, in fact, this was not the case.

Connections between regions are also often obscured by the tendency to classify and separate territories into regions. It is not as if there is a sudden break in the cultures, or even genetics of people who live next to each other who happen to inhabit countries separated into different regions. For example, Greece is in Europe while Turkey is considered to be part of the Middle East (which is geographically in Asia, technically). Notwithstanding this, Greeks tend to exhibit cultural traits much more similar to those of the Turks than to Europe’s Swedes (for example). Iran and Afghanistan, meanwhile, share a common heritage and language but they are placed in different regions in most classification schemes, with Iran being part of the Middle East and Afghanistan in South or Central Asia. All this obscures the connections between regions in Europe and Asia and the fact that they generally gently transition into other cultures without there being huge breaks.

A much more accurate way of looking at Europe and Asia is to consider them, geographically, all part of a single large landmass. However, since the major divisions within this landmass are cultural and civilizational, the descriptive terms within this landmass would have to reflect this fact. Thus, this landmass would either have several continents of which Europe would be one, or would have several regions, including Europe and many others. Different manners of division could emphasize civilization (Western, Islamic, Hindu, Confucian, and so on in Samuel Huntington’s sense) or common zones of interaction (the Mediterranean, for example). However, the simplest shorthand manner of describing Asia is to define it as a physical continent (including Europe) with approximately seven evolving regions, which balance geography and culture, and do not follow exact political boundaries: Europe, the Middle East (including North Africa), South Asia, Central Asia, Russia, East Asia, and Southeast Asia, with several transitional zones in between.

The GeoTradeBlog does not believe that Asia holds any valid geographical or cultural meaning as a single whole. Rather, it sees a single geographical landmass, Eurasia, with separate and distinct regions, which is not to diminish the fact that these regions have all shared many common cultural and historical events and trends. Maybe dominant civilisations will always be defined by what they are, while others are given common identity by what they are not. In which case, as some nations in Asia rise to global ascendancy the notion of Asia will undoubtedly fade away.

The Alianza del Pacífico signs a historic agreement

Alianza del Pacífico countries in blue and observer states in brown

The Alianza del Pacífico agreement signed on 10  February 2014 aims to eliminate most trade and non-trade barriers between Perú, Chile, Colombia and México and also improve the mobility of capital and people. It will also reduce members’ export dependence on single goods (in the cases of Peru, Chile and Colombia) or single markets (as in the case of Mexico), and will create economies of scale that will make it easier to compete with Asian markets.

The Landmark agreement

The landmark framework agreement covers a wide range of topics, ranging from the elimination of trade and non-trade barriers on 92pc of the goods traded within the bloc to the adoption of measures to improve the mobility of capital and people. The countries making up the trade bloc have a combined population of over 210m people, a total GDP of US$2trn (and a per-head GDP in excess of US$10,000) and account for around 40pc of all foreign trade and inward foreign investment flows to the Américas (not including the US). The Alianza del Pacífico is due to increase shortly with Costa Rica just been accepted to begin the formal membership process.In addition, the Alianza del Pacífico’s goal of strengthening ties with the Asia-Pacific region means that a broader trade bloc in the Américas will join ongoing talks to create the Trans-Pacific Partnership (a free-trade area comprising Australia, Brunei, Chile, Canada, Japan, Malaysia, México, New Zealand, Perú, Singapore, the US and Vietnam). 

A massive opportunity

The recent agreement has been welcomed in the countries of the Alianza del Pacífico, where it as seen as a massive opportunity for achieving complementarities among its members. México is set to strengthen its intra-bloc exports of value-added manufactures, such as automobiles and metal-mechanics goods. Colombia is expected to benefit from increased exports of basic manufactures, such as processed foods, clothing and leather. And Chile and Perú are likely to boost their cross-border sales of agro-industrial goods. 

Furthermore, the Alianza del Pacífico constitutes an opportunity to build strong intra-bloc competitive advantages to penetrate Asian markets. This would be achieved through the creation of productive chains that generate economies of scale. According to a study by the Inter-American Development Bank (IDB), these chains could include the production of fibres and carpets by Perú and Chile; phosphates and detergents between Mexico and Perú; wood, paper and cardboard between Chile and Colombia; and chemicals and plastics between Colombia and México. 

But there will be challenges ahead

The Alianza del Pacífco’s success also hinges on its capacity to put in place accords in other, non-trade related areas. Progress has been made on the elimination of visas, the establishment of joint embassies in many Asian countries, and the subscription of agreements to promote education, tourism, small and medium enterprises and infrastructure investment. 

However, advances have been limited in more complex areas, such as the harmonisation of customs procedures, rules of origin and tax and financial sector regulation. The lack of progress in the latter two areas, for example, is delaying the implementation of the Mercado Integrado Latinoamericano (MILA, which aims to create a single stock market between Chile, Colombia and Perú and México).

Finally, although it is clear that the Alianza del Pacífico does not have political motivations, Mercosur comprised of Argentina, Brazil, Paraguay, Uruguay and Venezuela and the Alianza Bolivariana para los Pueblos de Nuestra America (ALBA) which includes Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, St Vincent and the Grenadines and Venezuela are likely to see the recent advances as a threat to their political ideology and existence.

APEC Indonesia 2013

APEC Family Photo of Leaders

APEC continues to go from strength to strength, with an ever-expanding agenda, and an impressive share of the world economy held by its 21 members: this year, APEC accounts for 55pc of global GDP, 44pc of trade and 40pc of the world's people which shows just how dynamic and prosperous the region is becoming.

APEC's aim was never to be a negotiating forum. Its guiding principle is “concerted unilateralism”, that is, it has no power to force its members to do anything; it merely seeks to inspire good policy by example and co-ordination. This is where APEC's real accomplishment lies within a region not accustomed to working and coordinating together in a similar way to the the EU regional supranationalism integration. Instead APEC has developed many technical committees doing useful work in areas such as trade facilitation. It helps foster habits of consultation and co-operation. And, furthermore, its Leaders’ meetings provide an opportunity for useful and sometimes informal bilateral talks.

Since the Doha round of world-trade talks more or less came to a stand still with almost no hope of moving forward in the foreseeable future, APEC’s ambitions have spread into other areas. This year its motto is “resilient Asia-Pacific: Engine of Global Growth”, and its three main themes are the Bogor goals; improving “connectivity” (infrastructure, harmonising procedures and making it easier for people to travel); and “sustainable growth with equity”.

APEC's core interest has always been trade liberalisation. Twelve of its members (including two of the three biggest economies, the US and Japan, but not China) are pursuing the Trans-Pacific Partnership (TPP), an ambitious “21st-century” free-trade pact, covering areas such as labour, government procurement, state-owned enterprises, intellectual property and e-commerce, as well as traditional merchandise trade.

Meanwhile, eight TPP members (but not the US), along with four other APEC members (including China) as well as India and three other non-APEC countries are talking about yet another regional trade group, the Regional Comprehensive Economic Partnership.

The Latin American member economies, Chile, Perú and México are also pursuing the "Alianza del Pacífico" in the hope that a stronger regional alliance will give them more bargaining power in their trade relations with China. 

All, this adds up to a very dynamic Asia Pacific region. Hence a possible further grand aim for APEC over the next decade may be to try to co-ordinate these parallel processes, in the hope of bringing them all together in a grand Free Trade Area of the Asia-Pacific eventually. This is a role that APEC is well prepared for given its twenty or more years of existence across the Asia Pacific region and its technical expertise on trade liberalisation.

The New Global Middle Class

The new global middle class in the 21st century

The New Global Middle Class

Since the beginning of the 21st century there has been a massive expansion of the new global middle class. This has not occurred in a vacuum. The BRICS and second tier countries such as Brazil and Turkey have made the headlines for their rise in income and high annual GDP growth but this is only part of the story, with increasing wealth has also come a massive rise in development. According to the OECD, Brazil's middle class has risen from 29pc of the population in the 1980s to 52pc in 2009 almost doubling. In Turkey's case, income per capita nearly tripled between 2002 and 2011 bringing more and more people into a growing middle class and increasinging the ranks of the global middle class.

According to the Brookings Institution, there are now 700 million more people with $US10-100 per day to spend than there were in 2003. Moreover, what they call the global middle class is expected to grow by another 1.3 billion over the next ten years. This new phase of creating a global middle class brings major benefits for the global economy. Instead of the somewhat one-sided trade pattern of the last two decades, it means greater well-being for households in “developing countries” and opportunities for more producers in the advanced economies.There has also been a massive re-alignment of world trade between what has been tradionally called South-South countries. Trade between South-South countries currently stands at around 30pc.

As a result there have been tectonic shifts in the rebalancing of the world in development terms. It is no longer clear which countries are “developed” and which are still “developing”. This re-alignment has in turn brought a massive expansion of human capabilities and provided choices to people entering the new global middle class that they clearly did not have in the 20th century. This point is well illustrated in the 2013 UN Human Development Report 2013. The Report highlights the fact that progress on human development has accelerated in the last decade and all of the 40 countries analysed in the Report are doing better than expected.

Why have some countries done better than others?

Interestingly several factors have influenced the overall outcomes of accerlating people's accession into the global middle class when comparing the different experiences of countries on a global level.

In countries where the State has taken a long term perspective on development, people have been accelerated in to the middle class. In some countries the state has actively promoted job creation, this has also helped to sustain the creation of the middle class. Where the state has enhanced investment in health and education – these policies have greatly helped to assist people to move into middle class. In Turkey, for example, the Government decided to provide healthcare for all and target the poor. In Brazil, the Government managed to expand education by matching the funds available across regions and municipalities. In México, the state provided cash transfers for social policy interventions.

Some countries have also taken an active role in nurturing the industrial capacities and by actively investing in people which has allowed them to make the most of trade opportunities in global markets.

What is the flipside?

Interestingly a new global middle class made up of educated, inter-connected youth will increasingly demand far greater accountability. This point has already been illustrated by large-scale demonstrations in Brazil and Turkey which are a direct result of the creation of an enhanced middle class and both countries' economic success over the last decade.

Growing middle classes are far less tolerant when it comes to governments performing inadequately. Delivery of services, such as education and health, is poor in both Brazil and Turkey. In its last scorecard on educational attainment referred to as the Program for International Student Assessment (PISA), the OECD found that Turkey and Brazil ranked especially poorly in maths and science. In maths, Turkey ranked 41st out of 62 countries, while Brazil was in 55th place. In science, Turkey was 40th and Brazil 50th. In the UNDP's 2013 Human Development Index, Brazil ranked 85th and Turkey 90th out of 186 countries. It is not clear what the implications of the current protests will be for these two countries.

Much will depend on how the democratically elected leaders of Turkey, Prime Minister Erdogan and the President of Brazil, Dilma Rousseff react to these challenges. The aspirations of the middle class are colliding with the current capacity of these countries to deliver.

Conclusion

In order for the new global middle class to be sustainable it has been shown that countries with less inequality do better and improve far more as more people are added to the middle class. Furthermore educating women to adulthood has been shown to be key to reducing fertility rates. Another key point is that in order to reap the benefits of youth bulge that exists in so many emerging economies, job creation for the young is also key.

Finally participation and inclusion is essential to stability and social cohesion – this in itself is what will ultimately sustain the new global middle class.

The Américas and China – Alianza del Pacífico

Map of Alianza del Pacífico

La Alianza del Pacífico (Pacific Alliance)

The four countries of the Alianza del Pacífico formally established in June 2011 - México, Colombia, Chile and Perú - together account for 35pc of GDP in América Latina, 50pc of exports from the continent and together their population exceeds 200 million people which gives them a similar magnitude of scale to Brazil (located on the Atlantic side). It also means a new model of regional integration focusing on strengthening institutions to create a regionally integrated trade area, oriented towards the free movement of goods, capital, services and people towards the key markets in ASEAN countries and China. México, by far the largest of the four countries sees an opportunity to diversify its exports from the US to Asia. Currently México sends around 77pc of its exports to the US. But there are considerable opportunities for México's Agricultural-food, footwear and textile sectors to export to Asia. Costa Rica attends the Alianza del Pacífico as an observer, and it is highly possible that it will seek to become a full member in the foreseeable future. Panamá too has expressed interest in joining. In the last 15 years or so in América Latina, several trading blocs have been established from MERCOSUR to ALBA, but the Alianza del Pacífico is different, it is the first to see itself as a truely regional integration project.

Xi Jin Ping's习近平 First Visit to the Américas

On his way back from a trip to the Américas, the new Chinese President Xi Jin ping 习近平 will meet US President Barack Obama, in California on 7-8 June 2013. But first President Xi Jin Ping 习近平will spend a week from 31 May to 6 June visiting México and Costa Rica. It is no coincidence that the Alianza del Pacífico decision to seek further regional integration was formally agreed ahead of Xi Jin Ping's 习近平visit. This visit will provide México's President with the possibility to begin to re-balance the trade relationship with China. Interestingly Xi Jin Ping 习近平will also visit Costa Rica (another potential member of the Alianza del Pacífico) as well as Trinidad and Tobago. The visit to Trinidad and Tobago is significant as it will be the first visit of a President of China to the English-speaking Caribbean. Costa Rica is China 's second largest trading partner in Central America while China is the second largest trading partner of Costa Rica. In recent years, bilateral trade between the two countries has grown rapidly. In June 2007, China and Costa Rica established diplomatic relations. In November 2008, Chinese President Hu Jintao visited Costa Rica and announced the launch of China-Costa Rica free trade negotiations. The China-Costa Rica free trade agreement (FTA) came into force on 1 August 2011. 

Finally, when Xi Jin Ping 习近平 meets the US President, the meeting will not take place in Washington or on the Atlantic coast, instead the symbolism of the meeting taking place in California could not be clearer, it highlights the increasing importance of the Pacific over the Atlantic.

Nicaragua's proposed new canal between the Atlantic and the Pacific

The Nicaraguan government has recently stated publicly that it would like to construct a new canal with links between the Atlantic (Caribbean coast) and the Pacific Ocean. It has already started working with a Chinese company on a canal construction project. 

Map of the Proposed Nicaragua Canal Route

The idea is that the Nicaraguan canal would not be in competition with the Panamá canal, which is currently undergoing full expansion, instead, the Nicaraguan project would be focussed on receiving vessels up to 250,000 metric tons, the locks would be 460 meters big with a capacity to take boats with a depth greater than 20 meters. 

Detailed Map of possible routes for the Nicaragua Canal

The exact route of the Nicaragua canal is still to be determined but some experts believe that the project could be developed using the recommended routes of a multidisciplinary study presented in 2006 by the then President Enrique Bolaños. This study recommended the canal be built on the Caribbean coast of Nicaragua, near Bluefields Bay City, and then go along rivers within Nicaraguan territory and then through the Great Lake of Nicaragua, over a distance of 280km.

This is a mammoth project that will require considerable investment not only to build the Canal, but also in construction of port infrastructure, railway infrastructure and potentially airport runways too. The Nicaraguan government sees the canal as a pipeline for oil crossing from the Caribbean Sea to the Pacific across to the markets in Asia but it will be used for all trade.The Geo-Trade Blog will continue to follow closely developments on the new canal. 

Most interestingly, this mega project adds more evidence that world focus is increasingly moving away from the Atlantic and the focus in the 21st Century is on building the infrastructure and diplomatic ties with the Pacific.

New Trade Routes through the Arctic between Asia and Europe

 

Map of new shipping routes between Asia and Europe Source: The Economist

New Shipping routes between Asia and Europe 

The ice in the Artic is melting away at a record-breaking rate opening up new possibilities for shipping routes. Measurements taken in August 2012 found the levels of Arctic sea ice were at their lowest levels since satellites began measuring the ice in 1979. In 30 to 40 years, it is quite possible that there will not be no summer ice at all. This has led to an increased interest in shipping in the Arctic. New shipping routes opening up due to the melting ice could cut shipping times between Asian and European ports by up to a third. It is possible that the first commercial trade voyage could take place as early as summer 2013 led by China, and the potential value of goods travelling the new Arctic routes could become highly significant.

Xue Long 雪龙 expedition throught the Northern Sea Route 

China has been taking a strong interest in the region over the last decade, building a physical presence and using diplomacy and trade ties to engage in the region. The Chinese ship Xue Long (Snow Dragon) 雪龙 became the first ship to sail the Bering Sea after crushing the ice across the Arctic Ocean in August 2012. The icebreaker sailed all along the Northern Sea Route into the Barents Sea and returned by sailing a straight line from Iceland to the Bering Strait via the North Pole.

China has also set up a multidisciplinary research base with 18 researchers called the Yellow River Station on Svalbard the Norwegian archipelago (See map above) since 2004. The Xue Long 雪龙 voyage in summer 2012 was a culmination of China's research so far and a test of the Northern sea route to check out the feasibility of it becoming a new shipping route through the Artic that could link Asian and European ports. China has also recently commissioned a new 120m icebreaker ship to be built by a company in Finland to further its Arctic research. 

New Asian permanent observers on the Arctic Council in 2013 

The rules of the Arctic Council state that only countries with territories in the Arctic can become full members of the Artic Council. Nevertherless at the biennial meeting of the Council on 15 May 2012 in Sweden, 5 Asian countries: China, Japan, South Korea, Singapore, India and Italy became permanent observers. China, sees itself as a “near-Arctic state”, and had been seeking to become a permanent observer since 2006 (it had previously has its application rejected three times). But this time with Iceland's support and with the possibility of China and Iceland setting up a new Arctic forum, the members of the Arctic Council decided to widen the Council to include their Asian counterparts.

Interestingly, most of the new joiners were already observers on an ad hoc basis. The six new members will not have speaking or voting rights. But they will be able to influence decisions in the council’s six working groups with their expertise, research and potential funding of initiatives in the Arctic. China, for example, has led five marine expeditions in the Arctic since 1999, including the Xue Long 雪龙 voyage in summer 2012. Japan and South Korea may decide to conduct their research with their own icebreakers ships too. The new Asian observers will bring fresh new ideas to the Arctic region and advance the use of new faster trade routes between Asia and Europe over coming years. The Geo-Trade Blog will continue to follow developments in the Arctic.

Trade in the 21st century

Global Trade patterns in the 21st Century are changing

The trade bargains to be had

In an ideal world a big trade deal would be global. This is because gains such as dismantling trade barriers for all is much better than lowering them on a regional basis. But since the Doha round of multilateral trade talks collapsed in 2008, in its place have sprung up three possible regional deals to be done. The first two are of great significance for the future of global trade. The third is of lesser significance.

The Tran-Pacific Partnership (TPP) was launched in June 2005 between 11 Pacific countries, it includes the US, México, Canada, Chile, Perú, Singapore, Malaysia, Brunei, New Zealand and Australia. It is currently into its 16th round of negotiations and the approximate value of trade is around $US1.492bn. Japan and South Korea are not involved in these negotiations as yet but if they were to join the TPP countries would account for around 30pc of global trade in goods and services. Interestingly, the TPP has aspirations to do much more than cut tariffs. Its goal is to develop a far bigger joint rule book, from regulation to competition policy. One study estimated that a deal could raise the region's GDP by more than 1pc.

To compete with the TPP is another regional trade agreement the Regional Comprehensive Economic Partnership (RCEC) that has just been launched in 2012, it includes the 10 ASEAN countries plus China, Japan, India, South Korea, New Zealand and Australia. This deal represents an approximate value of trade around $US1,412bn even without the US' involvement. Hence there are two competing Pacific regional deals to be done: One with China plus Pacific countries and one between Américas countries (US + Canada, México etc) and Asian countries. The risk here is that both these deals could split the world into competing regional blocks where each country would need to decide who the more important business partner is: China or the US. But this could be avoided by making sure that both deals are easily knitted together and easily opened to others by basing the deal on a similar template, avoiding unnecessarily restrictive prescriptions and by creating a set of rules that both China and the US can embrace.

Finally, there is a third smaller agreement on the horizon that is being pushed hard by Europe, called the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU. It was announced in February 2013 but it has not been formally launched. It's estimated value of trade would be less than half of the other two Pacific deals estimated at around $US618bn. It is not entirely clear what the purpose of this deal would be as the US is already engaged in the TPP negotiations. It would appear that Europe is slightly displaced in the 21st Century and is seeking to counter the Pacific regional deals with an Atlantic deal but this sounds rather like wanting to turn the clock back to the 20th century rather than looking forward to the realities of the 21st century.

Why free trade is good

Since the failure of the Doha Round in 2008 the WTO has struggled to rebuild interest in trade liberalisation. But, interestingly, global trade has grown faster than world output since 2010. One of the biggest problems is that decades of talks and treaties in the 20th century have exhausted many of the easy targets of trade liberalisation with the consequence that no new grand achievements are possible without resolution of some of the stickiest of trade issues. Furthermore, protectionism that has been largely held at bay, so far, throughout the economic crisis is beginning to become apparent in some places in the US and Europe. The video below offers a 1951 view of global trade and illustrates why we need free trade agreements: 

 

China and the other BRICS

But the fundamental strain on the multilateral system is the shifting economic balance of power. Emerging markets came into their own early in the Doha round that started in 2001, by rejecting the unappealing offers from the US and Europe. In fact the BRICS have become much more active over the last decade so much so that China's new President Xi Jin Ping习近平 announced that as part of his first foreign trips abroad he would be attending the fifth BRICS Summit on March 26-27 in Durban, South Africa after visiting Russia, Tanzania, and the Republic of Congo. This re-enforced the importance that China is attributing to its relationship with fellow BRIC countries, placing it on on a similar par to its strategic relationships with Russia and Africa.

The main outcome of the BRICS' Leader's Summit was to endorse plans to create a joint foreign exchange reserves pool. This proposal underscores frustrations among the emerging market economies at having to rely on the World Bank and the International Monetary Fund which are seen as reflecting the interests of the US and Europe. The UN Development Programme Report 2013 highlights this point and suggests that emerging economies need their own institutions to support their growth. The Report goes so far as to say that 20th century institutions do not meet the teutonic changes taking place in the so called "South" in the 21st century.

Conclusion

Freer trade and open markets is how the world has always grown and become richer and more developed from ancient times, therefore in the 21st century with the lions' share of growth of middle classes in the emerging world, it is a no brainer for the US and Europe to break down barriers to enhance trade with the emerging economies of the world. In fact the tables have turned and the US and Europe, for the first time in a while, now need the emerging economies as much as the emerging economies once depended on the US and Europe.