[Nasional-m] Ignoring economic strategy plays into China's han

[Ambon]

IHT

 Ignoring economic strategy plays into China's hands
  Hilton L. Root The Washington Post Saturday, August 17, 2002


East Asia

WASHINGTON Secretary of State Colin Powell's recent visit to Asia was meant
to reassure countries assisting the U.S. anti-terror effort, but it may have
had the opposite effect by highlighting how much U.S. interests have
diverged from the region's.
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In emphasizing the same anti-terrorist theme for both South Asia and East
Asia, the administration seems to underestimate the continuing effect of the
1997 financial crisis in East Asia. A one-dimensional approach would be
unfortunate in a region that welcomes broad U.S. engagement and cannot
imagine its future without a strong U.S. role. It would also facilitate
China's expanding leadership in the region.
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A comparison of East Asia with the Middle East shows why the Bush
administration should recognize the need for nuances in its foreign policy.
While Middle Eastern and South Asian leaders sacrificed their nations'
well-being to pursue geopolitical agendas, East Asia's leaders grounded
their claims to political legitimacy on their economic success.
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East Asian governments are pursuing key structural changes to ensure healthy
growth - including steps to open labor markets, protect intellectual
property, contain corruption and attract new investment. The assumption
throughout the region is that political stability depends on bolstering
growth.
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Given that China is now imitating this East Asian formula and emerging as
the region's economic anchor, many Asian business leaders consider China a
more reliable player in regional security than Japan. By not addressing
regional economic stability vigorously, the United States invites more
active regional leadership by China.
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U.S. policymakers should understand that Japan's leadership role is one of
the region's most troubling uncertainties, and that the 1997 crisis began a
quiet shift in the regional balance of power. East Asian leaders recall that
Japanese banks withdrew significant amounts of capital from the region,
exacerbating the 1997 crisis. Tokyo has also said that if necessary it will
defend Japanese economic interests before regional needs, even undertaking
radical devaluations of the yen.
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Meanwhile, China is filling the leadership vacuum left by Japan. It acted as
the responsible party in the '97 crisis, refusing to devalue and thereby
helping prevent a cycle of competitive devaluations. Today, as sponsor of
regional free-trade discussions, Beijing continues at every possible
opportunity to link itself to the region's future growth.
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U.S. policymakers preoccupied with the impact on U.S. trade of China's
accession to the World Trade Organization often ignore the influence it will
have on interregional trade: making the region more dependent on China.
While the percentage of trade between the region and Japan has been stable,
China's share has grown dramatically. By contrast, Japan's prosperity
depends more on shifts among the Group of Seven industrialized countries
than on the Asian economies.
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Many would suggest that an ascendant China might jeopardize the region's
democratic aspirations, but Japan itself has been ambiguous in its support
of democracy. In its overseas assistance Tokyo places little emphasis on
building strong civil institutions. In a world where shared values keep
trade disputes from becoming culture clashes, Japan is overlooking an
important opportunity to build regional unity.
.
Meanwhile, China is subtly moving toward a capitalism that depends more on
corporate governance than does Japan's system and that also seems more
willing to open its economy to foreign investment.
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U.S. policy will be more effective if it becomes more sensitive to the
structural economic changes occurring in East Asia. A central objective of
U.S. policy must be a responsible China committed to strong international
economic organizations.
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This does not mean abandoning Japan. East Asia will find most comfort if the
United States sits down with China and Japan to work out the basis for
trilateral cooperation that will provide the bedrock for future security and
growth in the region.
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The writer, who was a senior adviser to the Treasury during the current Bush
administration, is a senior fellow at the Economic Strategy Institute. He
contributed this comment to The Washington Post.