Top Stories from the Editorial/Opinion pages of the International
Tuesday, January 27, 1998
Next, a Western Era With Europe Sharing the Leadership
By Gerald Segal International Herald Tribune
TOKYO - After the fall of the Berlin Wall and the collapse
of the Soviet Union, we spoke of a post-Cold War world. What we can now
foresee, amid Asia's financial crisis, is a period dominated by the West.
A key feature of these early days of the new Western era, and
one of the great surprises to come out of Asia's crisis, is just how limited
the trend toward globalization really is. The European and American economies
will each lose less than half a percentage point of GDP because of the
Sales in Asia, minus Japan, are less than 8 percent of European
and American total sales in foreign countries. As the U.S. investment bank
Morgan Stanley has pointed out, American firms sell more in Italy than
in Indonesia, Thailand, Malaysia, the Philippines and China combined.
Asian investment in Europe remains tiny. Even in Britain, which
attracts half of Asian investment in Europe, total Asian investment amounts
to a mere 7.5 percent of foreign investment and Japan accounts for nearly
all of it.
The new Western era is not tripolar. Japan was unable to take
a lead during Asia's crisis. Its failed effort to organize an Asian financial
solution to the crisis in the second part of 1997 was vivid evidence of
the absence of an indigenous global power in Asia.
The power brokers came from the United States and Europe. The
result was a decision to use the IMF, a Western-designed institution, to
organize the rescue.
China, although much touted as a ''peer competitor'' of the United
States, was barely to be seen. Beijing's leaders have looked on in horror
as Asia crumbled before the power of the Western-designed and -dominated
global capitalist system.
After the exercise of overwhelming U.S. military power in the
Taiwan Strait in 1996, China can be in no doubt about Western strength.
An obvious problem will be dealing with the resentment that will
fester in Asia as the West imposes tough economic conditions. Western demands
for political reform will also grow stronger, and harder to answer, as
it becomes clear how much economic fundamentals depend on changing political
Europeans and Americans also have reason to worry that they will become
economically flabby without the fear of Asian competition. Current European
efforts to reform welfare systems owe a great deal to concerns about Asian
competition, even if in reality Europe's economies compete more with other
developed countries than with Asia.
Trans-Atlantic relations that were glued by the Soviet threat
and then the Asian challenge are also at risk. Europe and the United States
have had some success in shaping the new rules for international trade
in information technology, and non-Western powers play no significant part
in shaping the norms and institutions of the economy of the future. But
with reduced worry about Asia, the European Union and the United States
are falling out over how to manage information services, encryption and
modernized accounting standards - all vital features of the economic systems
of the future.
Expect trans-Atlantic ties to become harder to manage just as
they are becoming more important. It is worrying just how little thought
has been given to the strategic implications of the major change that will
take place in the global financial system at the start of 1999 when Europe's
single currency is established.
With the euro, Europeans expect to minimize their vulnerability
to currency fluctuations and intend to be an equal of America in managing
the global financial system.
Asian countries will learn that playing off Europeans against Americans
is one way to manage the new Western era.
The writer is director of studies at the International Institute
for Strategic Studies, in London. He contributed this comment to the International