Comment on “American Economic Relations with Asia”

Анотація

In Noland's (2009) paper, he is concerned that “[t]he weaknesses of both the multilateral trade and financial institutions have provided impetus for regional and plurilateral initiatives in both the trade and financial fields” in Asia and that the current global financial crisis may accelerate the fragmentation of the global economy, with Asia holding the key. Noland's conclusion is that Asia's choice will partly turn on the policies of the USA, the most constructive course for the USA being to overcome the politicians' trepidation and re-emphasize global liberalization through the World Trading Organization (WTO) while also working through the G-20 process in order to work out a “grand bargain,” a làGoldstein and Xie (2009), of reforming the international financial institutions as an effective safety net in exchange for international surveillance on the exchange-rate policies of China and other Asian economies. While I fully agree with the author's policy prescription for the USA, I would like to supplement his analysis by making a few points about what Asia should do in support of the liberal global trade and financial system. I start by noting a premise that seems to run through his paper that regional institutions and practices are essentially an alternative to global arrangements and that Asia would be undermining the global institutions by opting to go for regional cooperation. Thus, for example, Noland sees a serious risk in a potential Asian Monetary Fund (AMF) of undermining the International Monetary Fund (IMF) as a global institution. I differ. I believe that the global institutions will never be perfect. Noland himself, in fact, shows how difficult, if not impossible, it would be to rectify the problem of Asia's underrepresentation in the governance of the IMF. He also argues that the WTO process may have become too unwieldy to deliver much. I believe that, under this reality, regional arrangements can and should play the role of supplementing the global arrangements and that, after the Asian financial crisis of 1997–1998, the ongoing global financial crisis or Asia's exposure to it reaffirms the need for such arrangements in Asia. The progress on this front has been far less than satisfactory. An Asian free trade area, whether an Association of Southeast Asian Nations (ASEAN) Plus Three free trade area, an ASEAN Plus Six free trade area or a Free Trade Area of the Asia–Pacific, if it would come to be considered as a serious possibility, could help relaunch and accelerate the progress toward multilateral trade liberalization through the Doha Round and beyond. But there has only been a talk while there has been a proliferation of bilateral or subregional free trade agreements, which are likely to serve as stumbling blocks, rather than building blocks, toward a regional free trade area. The progress has been steady but slow with the Chiang Mai Initiative (CMI) regarding the size and multilateralization of the bilateral swaps, while just too slow has been the progress on policy surveillance. A crisis always brings opportunities with it. The current global financial crisis should be seized as an opportunity for Asia to launch serious efforts toward a regional free trade area and also to accelerate the progress on the CMI toward an AMF. Conscious international efforts should be made, however, in order to ensure that the regional arrangements would serve as complements rather than competitors to the global ones. In order to ensure such relationship, it is important that the global institution be first reformed and strengthened in regard to their weaknesses discussed by Noland. So for now, the Asian governments should give priority to the efforts to reform and strengthen the global institutions. The launching of the G-20 summit has opened a major new avenue to these efforts for Asia, for it enables the Asian governments to push such reform by working as a caucus and through the Asian participants in the process. The Asian countries should work closely with one another, as well as work with the USA, in order to make the most of the G-20 summit as such and, further, to make it a permanent institution as a “new steering committee” for the world economy. The cause of maintaining a liberal global economic order will be better served by the G-20 with Asia playing an active role in it as a major partner to the USA. The key to a healthy and durable trans-Pacific partnership will be a collaborative and forward-looking USA–China relationship. Concerning the grand bargain argument, an effective and lasting solution to the problem of China's large and persistent current-account surplus, however, would be for China to enhance the domestic engine for economic growth, relative to exports, by investing vigorously in various physical and institutional infrastructures at home addressed to the need to improve the quality of the people's lives. A silver lining in the current global financial crisis is that it could trigger such rebalancing of the economic growth strategy in China and elsewhere in Asia. International dialogue at Asia–Pacific Economic Cooperation and elsewhere should encourage such rebalancing.

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