Top Stories from the Editorial/Opinion pages of the International Herald Tribune, 
Monday, November 17, 1997 

East Asians Need Tough Love

By Gerald Segal 
- 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 response. 

 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 capitalist economy. 

 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.