Comment on “Instability in Europe and its Impact on Asia”

• Published date: 01 July 2018
• Author: Sayuri Shirai
• DOI: http://doi.org/10.1111/aepr.12225
• Date: 01 July 2018

Comment on “Instability in Europe and its

Impact on Asia”

Sayuri SHIRAI†

Keio University

JEL codes: F02, N14, N15

Accepted: 24 February 2018

Kaji (2018) focuses on the dilemmas driven by European integration. While the

European Union has enjoyed substantial benefits generated through economic integra-

tion, the integration has given rise to three unintended consequences: (i) growing anti-

integration sentiments and BREXIT; (ii) skepticism about the benefits of the free mar-

kets (especially migration); and (iii) enhanced protection of incumbents (regular

workers) vis-a-vis nonregular workers in the process of promoting the welfare state.

These consequences resulted in pessimism, but the public mood has become more posi-

tive since 2017 thanks to the limited breakthrough of “populism”in the elections con-

ducted in the Netherland and France. It is my view that anti-integration modes are

likely to attenuate in the foreseeable future due to a series of new developments –the

integration initiatives under French President Emmanuel Macron, Macron’s good rela-

tionship with German Chancellor Angela Merkel, the German Social Democratic Party’s

pro-European views, as well as growing criticism in Europe against protectionism and

the anti-immigration motions under US President Donald Trump’s leadership.

If the Franco-German initiative fails, I agree with Kaji’s assessment that it would

deter sustainable economic growth in Europe. However, the impact of the failure on

the Asian economy might be limited contrary to Kaji’s view. This is because Asia is the

fastest growing region in the world and economic/financial integration within Asia has

been rapidly taking place. Kaji could have elaborated more thoroughly on how Europe

and Asia have become connected not only through trade linkages, but also through

financial linkages. For example, Asian capital markets have enjoyed substantial capital

inflows from Europe especially after the global financial crisis. Kaji (2018) would also

have benefited from having paid greater attention to the growing role of China in

deepening Asia–Europe integration. The presence of China has risen due to China’s

growing economic size; rapidly growing financial markets; the One Belt One Road and

Asian Infrastructure Investment Bank (AIIB) initiatives; and various efforts by China’s

government to deepen financial integration with the world and Europe (such as RMB

currency swap arrangements, the establishment of RMB clearing banks, and the

†Correspondence: Sayuri Shirai, Faculty of Policy Management, Keio University, 5322 Endo

Fujisawa, Kanagawa 252-0882, Japan. Email: sshirai@sfc.keio.ac.jp

260 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12225 Asian Economic Policy Review (2018) 13, 260–261