Growing Together: Economic Integration for an Inclusive and - escap

Factors contributing to Asian
dynamism
Economic success in Asia, in particular in East
Asia, was due to many factors. Importantly,
these countries invested significantly in
human resources, while supporting the
private sector and promoting technology
and innovation. They also aimed for
macroeconomic stability, while achieving
pragmatic balances between the roles of
states and markets and between export
promotion and import substitution.
Other factor that contributed to the region’s
dynamism was access to technology, finance
and markets of the Western advanced
economies. Japan, for example, received a
great boost from procurement by the United
States in the wake of the Korean War. Later, the
Republic of Korea benefited from the United
States procurement in the wake of the war in
Viet Nam. Similarly, during the Cold War era,
the NIEs of Taiwan Province of China; Hong
Kong, China; and Singapore, all close allies of
the United States, received substantial help
from the West in the form of ready markets
for their products. The NIEs also benefited
greatly when the advanced economies of
the West, and later Japan, relocated some of
their industrial production, especially labourintensive
manufacturing.
Subsequently, many of these industries moved
to China, which offered cheaper labour. And
during the first decade of this century, China
was able to take advantage of a buying spree
by American consumers, which enabled it to
generate enormous external trade surpluses.
Over the same period, India too was able to
benefit from Western outsourcing, notably for
information technology (IT) services.
Until 1995 and the completion of the Uruguay
Round of the General Agreement on Tariffs
and Trade (GATT) negotiations, most Asia-
Pacific developing economies were able
to take advantage of multilateral trade
agreements without having to offer much in
return. Seeking to build productive capacities
and export-oriented industries, they were, for
example, free to protect infant industries and
offer subsidies, while requiring that foreign
investors meet requirements on local content
and export performance. 8 They were also able
to exploit relatively soft intellectual property
protection regimes. 9 In addition, during
this period they did not face constraints on
the use of natural resources or the threat of
climate change.
A challenging new context for the
region
Now these developing economies face a
very different global environment. Firstly, the
growth of imports of the United States and
the euro zone economies from Asia and the
Pacific is unlikely to revert to the pre-crisis
trend. These Western economies, which are
still recovering from the 2008 global financial
crisis, face a subdued and uncertain outlook 10
and have large public debts and ageing
populations. They also have limited carbon
space. Having contributed about 70 per cent
of the current global stock of greenhouse
gases, they will have to drastically reduce
their share of emissions. As a result, although
the advanced economies of the West will
remain important markets, they are unlikely to
remain the Asia-Pacific region’s main engine
of growth.
In addition, since the completion of the
Uruguay Round of the GATT, Asia-Pacific
countries have faced a restricted policy
space with tightened intellectual property
regimes and reduced opportunities for
imposing performance requirements on
foreign investors. Nor is there much prospect
of further multilateral trade liberalization. The
WTO Doha Round has been in a stalemate for
more than a decade. Indeed, the trend seems
to be towards greater protection in the form,
for example, of penalties on outsourcing,
rising visa fees for immigrant workers, the
imposition of countervailing duties on
developing country products and unilateral
carbon taxes on foreign airlines. 11
At the same time, the faster-growing emerging
economies in the region need to deal with
surges of short-term capital inflows which
threaten the stability of financial and capital
markets. 12 The more vulnerable economies
also face the prospect of reduced inflows from
development assistance, which fell globally
between 2010 and 2011 by 3 per cent. 13
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