Top Stories from the Editorial/Opinion pages of the International
Monday, November 17, 1997
East Asians Need Tough Love
By Gerald Segal
TOKYO - What can the United States and Europe do to help East Asia
recover from its financial and economic problems? The issue will be raised
at the annual summit of the Asia-Pacific Economic Cooperation forum, in
Vancouver next week. Senior European officials planning an Asia-Europe
meeting of heads of government in London in April are also preparing their
The best answer must be ''tough love'' - helping Asians help themselves
by carrying out the tough reforms demanded by global economic institutions.
East Asian woes are likely to have relatively little impact on
the economies of industrialized nations in North America and Europe. Assuming
that South Korea's bubble does not burst, thus further deflating Japan,
Asia's economic travails will take less than 0.5 percent off the GDP of
the United States and the European Union in 1998.
Because exports from developing East Asia compete very little
with exports from the developed world, cheaper imports from Asia will mean
that America and Europe gain from lower inflation. Some 17 percent of American
exports go to non-Japan Asia; the comparable figure for Europe is less
than 10 percent. The damage to their export industries from the looming
economic slowdown in East Asia will thus be limited.
But it would be myopic for America and Europe simply to focus
on how they stand to gain from Asian problems. It is in times of crisis
that key relationships are formed. Now is the opportunity to create stronger
ties with East Asia.
The difficulties facing East Asia should give Americans and Europeans
confidence that the region is not a source of invincible economic super-heroes.
Protectionist sentiment should ease as it becomes clear that there is no
Asian economic miracle built on unique Asian values.
The crisis also shows that East Asia is not a monolith and that
there will be increasing competition among the economies of the region,
which will provide new opportunities for creative investors.
Unwelcome Western warnings about the need for unpleasant medicine
in East Asia should now be heeded.
East Asian countries must implement thorough reform, especially
of the financial sector. Crony capitalism must end. There should be greater
transparency in economic policy and greater pluralism and accountability
in the region's political systems.
These are the bedrock values of successful capitalism. The so-called
healthy fundamentals of Asian economies are now in the emergency ward.
Failure to reform could leave East Asia as damaged as Latin America was
in the early 1980s.
Now is the time for a concerted American and European defense
of open multilateralism in trade and finance. IMF conditionality is precisely
the kind of tough love that Asians need to reform their economies. The
recent IMF deal with Indonesia looks like doing more good in that way than
a decade of Asian values and Asian solutions.
The battle against the notion of Asian solutions to Asian problems
is connected to the struggle to bring China into the international community.
Beijing resents being told that it must accept the rules of the World Trade
Organization and tolerate implicit constraints on national sovereignty.
The West must make plain to China and advocates of ''East Asia for Asians''
that, with all due respect, there is no avoiding the basics of Western-created
institutions and the Western norms that underpin the success of the global
The writer is director of studies at the International Institute
for Strategic Studies in London and director of Britain's Pacific Asia
Program. He contributed this comment to the Herald Tribune.