Introduction

North-East Asia, or the North-Western Pacific Rim, covers the five countries of South and North Korea, China, Japan, and the Commonwealth of Independent States (formerly the USSR). It would be inappropriate to include China and the CIS, which are of continental scale, in the same spatial dimension with Japan and Korea because China has almost ten times the population of Japan and is a hundred times the size of South Korea in area. Therefore, North-East Asia is operationally defined to include South and North Korea, Japan, parts of China (including the provinces of Hebei, Shandong, Liaoning, Jilin, and Heilongjiang and the cities of Beijing and Tianjin), and parts of the Far-East Economic Zone and East Siberia Economic Zone in the CIS. Approximately 400 million people (or 8 per cent of the world population) are concentrated in the region thus delineated and more than one-fifth of the world's gross national product is generated here (table 14.1).

The détente between the East and the West that started in the 1980s, especially reconciliation between the capitalist and socialist countries, foretells the coming of the Pacific era. Ideological confrontation is now regarded as a remnant of the Cold War. Moreover, changes in the world economic order have been pressuring the North-East Asian countries to work out a new economic regionalism. The countries in North-East Asia have many complementarities and could provide each other with necessary resources and share experiences by being at different stages of economic development. The Russian Far East and China's three north-eastern provinces have abundant natural resources. The Siberian areas, in particular, are endowed with potentially great untapped resources, which Japan and South Korea need in order to gain a competitive edge over other industrialized countries.

Table 14.1 Country profile of North-East Asia, 1989

Sources: Russia, Far East - John Sallnow, "The Soviet Far East," Soviet Geography 30, 1989; China -China Statistical Yearbook, 1991; World Bank, World Development Report 1991.

a. Beijing, Tianjin, Hebei, Shandong, Liaoning, Jilin, and Heilongjiang.

Moreover, the countries in North-East Asia share many historical legacies and cultural commonalities beyond being simply neighbouring states. These countries have followed divergent paths for more than four decades since World War II. China, the CIS, and North Korea have followed an orthodox socialist path of development and its consequent urbanization pattern, whereas Japan and South Korea have kept to a typical capitalist track of economic and urban growth. After half a century of divergent development, new dimensions are emerging in North-East Asia. The idea of a North-East Asian Economic Community patterned after the European Economic Community (EEC) has been widely discussed in political and academic circles, and is nowadays becoming more than wishful thinking. As the world has begun withdrawing from ideological confrontation and is heading for an era of multinational economic cooperation, many concepts such as a North-East Asian Economic Zone, a Yellow Sea Economic Zone, an Organization for Pacific Trade, Aid, and Development, and a Pacific Economic Cooperation Conference have been suggested.

Although the total volume of foreign trade among the countries in North-East Asia was only US$62.4 billion in 1990 (table 14.2), the region is emerging as one of three economic blocs in the world next to the European Union and the North American Free Trade Area (NAFTA). The rate of increase in trade surpasses that of other economic blocs in the world. In addition to the existing trade relationship between Japan and South Korea, which accounts for 98 per cent of the regional total, one of the significant developments is that China became the third-largest trading partner with South Korea in 1991. As shown in table 14.3, between 1985 and 1989 trade volume (exports and imports) increased more than three times between South Korea and China, and more than five times between South Korea and the former USSR. In order to meet increasing trade, the ports of Pusan and Inchon in South Korea recently opened direct cargo routes with Shanghai, Tianjin, and Dalian in China. Moreover, direct passenger services run twice a week between Weihei and Inchon. The coastal trade that once thrived across the Yellow Sea and the Sea of Japan is expected to be revived again. For example, as of September 1990, 26 South Korean joint ventures were operating in China. Although the total amount of South Korea's direct foreign investment in China is meagre at US$25 million compared with Japan's US$2,036 million (Kim, 1991a; Sekiguchi, 1991), it is likely to increase very rapidly, in particular in labour-intensive export manufacturing, as rising wage and other production costs in South Korea provide great incentives to move South Korean capital to locations with cheaper labour costs in order to maintain a competitive edge in international trade.

Table 14.2 Foreign trade among North-East Asian countries, 1990 (US$100 million)

Source: Korea Trade Promotion Corporation Newsletter, 1990.

Table 14.3 Trend of South Korean trade (exports and imports) with China and the USSR, 1985-1989 (US$ million)

Sources: South Korean Ministry of Trade and Industry and Korea Trade Promotion Corporation.

In 1989, the volume of trade among the North-East Asian countries accounted for 14 per cent of total foreign trade in the world. With the relaxation of political tensions and improved multilateral relations, exchanges of science, technology, and culture will surely follow. Diplomatic relations between Soviet Russia and South Korea have been normalized. Since early 1991 China and South Korea have opened trade offices with the function of issuing visas. Full diplomatic ties were established in August 1992. The prime ministers of South and North Korea at their fifth-round meeting on 13 December 1991 in Seoul signed an agreement on reconciliation, non-aggression, exchange, and cooperation between the two Koreas.