The Asian dragon may yet bite back

Between The Lines


By Greg Ansley


CANBERRA - A new dragon is stirring in Asia. The rumblings are at present deep and ill-defined, but they are beginning to be heard in Australia as the nation takes greater stock of the chaos wrought around it by the great crash.

Hopes that the bottom of the economic trough has been plumbed have been stoked by the Asian Development Bank's (ADB) latest forecast of a rise in regional growth this year from 2.6 per cent to 4.4 per cent.

But real recovery will depend on exports - and these may be slow coming. Plummeting currencies were matched by a massive net outflow of private capital - $US55 billion last year - and a dramatic shrinking of credit for manufactured exports.

Markets for Asian products have also softened, which makes the Asia Pacific Economic Co-operation forum summit in Auckland and the coming World Trade Organisation (WTO) negotiating round both more significant and more sensitive.

The Europeans have disappointed everyone with their reforms to the Common Agricultural Policy and their advance negotiating position for the WTO.

Washington has made the appropriate pro-free trade noises from the White House, but against a loud background clamour of protectionism in the Congress.

And a welter of claims and counter-claims afflict not only the Atlantic, but also old allies such as Australia, New Zealand and the US, embracing a cornucopia of commodities running from beef and lamb to salmon, bananas and steel. So far at least, most Asian countries continue to support liberalisation.

But signs of frustration showed through the ADB's latest Asian Development Outlook, which took the industrialised world to task for hypocrisy, demanding painful remedies in Asia - often with the vast political and social consequences of job losses and business failures - while succumbing to their own domestic protectionist pressures.

The consequences of this, warns US-based intelligence consultants Stratfor Systems Inc, may be deeper than immediate pique.

Its 1999 Global Intelligence Unit forecast predicts that resentment at the need for US investment and credit, and the control that will flow to corporate America as a result, will create a backlash against the West's domination of the global economy.

Stratfor predicts Asia will begin to resist demands for trade reforms, set up its own institutions to supplant existing global bodies and increasingly introduce regional solutions, including an Asian Monetary Fund, with the Yen as a reserve currency.

Support for this hypothesis came this week from Rodolfo Severino, secretary-general of the Association of South East Asian Nations, who said in Australia that the organisation had begun detailed study of a single Asian currency unit to rival the Greenback and the Euro.
We live in interesting times.