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Asia looks to Japan, U.S. to offset China's new economic might

June 11, 2001

Leaders meet in Tokyo to discuss challenges to region such as free trade, Korea unification, security issues

East Asian economic integration demands a delicate balance against China's emergence as a regional superpower, and leaders of 12 Asian nations said they are looking to Japan and the U.S. to provide just the right counterweight. At an international conference hosted by Nihon Keizai Shimbun Inc. last week in Tokyo, leaders in government, business and academics said guidance by Japan and the U.S. will be crucial to ensure peace and sustained economic development in the Asia-Pacific region.

Speakers at the 7th International Conference on Asia on "The Future of Asia," proposed a multi-layered framework to promote intra-Asia economic cooperation.

Prime Minister Junichiro Koizumi said that the Japan-U.S. security alliance will be the basis of his administration's Asian diplomacy, while Japan will strengthen ties with other Asian nations on bilateral and multilateral platforms. Koizumi said that he hoped ongoing structural reforms in Japan will concur with reforms in other Asian nations and create a wave of reforms throughout the region.

Asian leaders said that they must learn to cope with the challenges of globalization and regionalism.

Phan Van Khai, prime minister of Vietnam, said: "A factor that is indispensable for Asian economic recovery is the cooperation among ourselves and between us and regional partners. With importance attached to intra-Asia cooperation, we do not mean to isolate ourselves. On the contrary, we participate actively in global institutions with profound awareness of objective trends, opportunities and challenges of globalization."

Warning that excesses of globalization have marginalized many poor countries, Malaysian Prime Minister Mahathir Mohamad said, "globalization need not be accompanied by total deregulation." Mahathir proposed the creation of an international currency, on which rates of exchange for local currencies should be based, and used for payment of all international trade. "Currencies must never be traded as commodities," he said. "No one country should dominate international finance and commerce."

The Asia policy of the U.S. administration under President George W. Bush was cited as a key factor in regional security. Noting changes from the previous Clinton administration, Karl D. Jackson, former assistant to the U.S. vice president for national security affairs, said the Bush administration will move significantly closer to Japan and its democratic allies in Asia. "From Tokyo's viewpoint, warmer winds will blow from Washington but more will be expected from Japan," he said.

While the Bush administration will continue to seek engagement with China, there won't be much talk of a "strategic partnership" with China and Bush has already extinguished part of the strategic ambiguity regarding Taiwan, Jackson said.

That is, there should be no doubt that the U.S. will interpose itself if there is any attempt to use force across the Taiwan Straits, while continuing to oppose any attempt by Taiwan to become independent, he said.

Preserving peace

Domingo Siazon, former secretary of foreign affairs of the Philippines said that "the continuing presence in East Asia of the U.S. as an Asia-Pacific power is nonetheless essential for the preservation of regional security."

Noting China's rise as a regional power, Siazon said, "Chinese adventurism would destabilize the whole region, but a cooperative China that plays by international rules would have enormous potential for good."

He called for the U.S. and China to broaden the areas of peaceable cooperation and to reduce any areas considered grounds for dangerous competition, while working together with the rest of East Asia.

Korean reunification

On the prospects of reunification of the Korean Peninsula, Park Jae-kyu, former minister of unification for South Korea, said that it will require changes in North Korea, which are inevitable and already under way.

Park stressed that cooperation among South Korea, the U.S. and Japan is of utmost importance in achieving peaceful reconciliation on the Korean Peninsula.

The need for a new regional framework in Asia was reiterated by participants throughout the two-day conference. Supachai Panitchpakdi, the incoming director general of the World Trade Organization acknowledged that existing regional arrangements based on trade issues have been ineffective in resolving the Asian economic crisis.

Supachai called for a new regionalism in Asia that is consistent with WTO guidelines of multilateralism. He suggested the new Asian regionalism be based on four parallel approaches: free trade, monetary regionalism, investment and economic development, and existing arrangements of subregional economic cooperation.

Already, Asian nations are initiating a series of subregional and bilateral free-trade negotiations and contemplating a possible East Asian free trade area. Japan is expected to conclude a free trade agreement with Singapore, later this year.

The bilateral agreement will be the first of its kind for Japan. Seiken Sugiura, Japan's senior vice minister for foreign affairs, said that the move should be the first step in creating a framework of free trade and economic exchange for all Asia.

Many nations in Asia are also devising a network of currency-swap agreements and cooperative exchange-rate systems to defend themselves against fluctuations in the currencies of the major developed countries, under the Chiang Mai Initiative announced last May by the members of Association of Southeast Asian Nations (ASEAN) plus three (Japan, China and South Korea).

Hun Sen, prime minister of Cambodia, said that such a "self-help mechanism is expected to become an effective instrument to prevent and resolve economic and financial crises in the future."

Hot competition

Increasing competition among Asian economies, accentuated by China's rise as an economic powerhouse, was also a common concern among conference participants.

Thanong Bidaya, Thailand's former minister of finance, advocated promotion among regional economies of free and open competition, which he believes would enable each economy to develop its own niche.

Thanong also pointed out that China has a distinct advantage over its Asian neighbors in terms of competition for foreign direct investment, owing to the nation's vast consumer market.

Koji Nishigaki, president of NEC Corp. said that he is awed by the rapid development of China's information-technology sector. Nishigaki said that Japan has to recognize the seriousness of the situation quickly and to concentrate its resources in high-value-added areas.

(The Nikkei Weekly June 11 Issue)

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.