Asia Pacific in an Era of Trade Blocs

Asia Pacific:  A View on its Role in the New World Order
Michael Dobbs-Higginson,
Heinemann

ASIA is the flavour of the year, but few commentators actually know enough about the region to get behind the statistics and the propaganda.  Michael Dobbs-Higginson, the former head of Merrill Lynch's Asian operations, has spent most of his adult life in one Asian country or another, and brings both intelligence and experience to his subject.  Asia-Pacific is, he points out early, a personal view rather than an academic analysis;  but many ways has more of value to say than any number of almanacs and professorial theses.

He sees the next century as an era of trade blocs:  an expanded EEC and a NAFTA group, perhaps extended to include parts of Central and South America.  Faced with these adversaries, Asian countries will have little choice but to form an association of their own.  The developing and newly-developed economies are dependent on exports, especially into Western Europe and the United States.  By themselves, none of the Asian countries -- not even Japan -- can maintain their economic success.  They need either secure markets within the region, or the bargaining clout that an association would provide.

Dobbs-Higginson examines each of the Asian countries, assessing their prospects and evaluating the gains each might make from a supranational grouping.  South Korea, Taiwan and Singapore have shown a remarkable capacity for hard work and cohesion;  Thailand, Malaysia and Indonesia have used their resources and large populations to build thriving, broad-based economies.  The Philippines, strengthened by several years of political stability, has started on the road to prosperity.  Even Vietnam has established a framework for growth.

There are a few special cases:  Laos, Burma, Cambodia and Papua New Guinea are likely to remain on the margins of the boom;  shackled by political conflict and uncertain of their direction.  North Korea is likely to remain a wild card, possibly becoming even more unpredictable as its leadership structure crumbles.

Significantly, Dobbs-Higginson also looks at India, often neglected in assessments of Asia.  Until recently, it has been burdened with attempts to impose Soviet-style economic planning, and there is not yet firm evidence that its move towards liberalisation has taken root.  Another serious problem is its increasingly radical sectarianism, which may yet pull the country apart.  But Dobbs-Higginson points out that India has huge potential, and has developed high standards of technology in surprising area.  Another advantage it enjoys is a network of Indian expatriates spread across the pacific, providing not only a source of capital and local expertise, but a "connecting tissue" for the region.

India could also provide a balance to China, although China has its own problems.  Apart from the question of Deng's successor, there is the issue of whether Beijing can govern a country where economic warlordism is rampant.  The old order is breaking down, with everyone in business for themselves:  the military, the Ministry of Finance, even small village communities.  Dobbs-Higginson cites the case of a local mayor who taxes his constituents in order to build a new road to a factory he owns.

He notes that China's new prosperity is concentrated in the coastal cities and in the Special Economic Zone linked to Hong Kong.  The growing chasm between the nouveau riche and the peasant culture has the potential to tear China apart -- an event which would send shock-waves throughout the region and the world.  But Dobbs-Higginson retains a sense of optimism regarding China:  its people recognise that the future of their country will be determined by the next few years, and are likely to pull back from the abyss.  And, in terms of economic integration with the region, the presence of Chinese communities throughout South-East Asia could be an "economic backbone" that will play a key role in the future.

The third of the big players is Japan, another country experiencing traumatic change.  Dobbs-Higginson believes that Japan is now recognising that its natural base lies in Asia.  The recession has forced the sale of many overseas assets, often at a loss, in America and Europe, but Japan is going to great lengths to retain its assets in Asia.

In this sense, the new Japanese Government represents a change in attitudes, and a shift away from the LDP collusion-style of politics which emphasised the importance of the US market.  Even if the eight-party governing coalition does not hold together, there is unlikely to be a return to the old ways.

SCEPTICAL OF APEC

Despite his view that a community of Asian nations is desirable -- even inevitable -- Dobbs-Higginson has little faith in APEC.  Initially, he says, APEC represented an opportunity for Australia to play a leading role in the politics of the region.  But allowing the initiative to be taken over by the United States was a major tactical error.  Now the Asian focus has been lost, and the entry to South American countries will cloud APEC's development even further.

He believes that there is already an organisation which could provide the framework for a larger association within a specifically Asian context.  He points to ASEAN as having all the building blocks in place, with committee structures on the environment and security, for example.

ASEAN also has a high degree of credibility, having politically matured over a long period and representing some of Asia's most successful economies.  He sees these elements as essential for the future, and the absence of them as the reason why other attempts at community-building, such as the East Asian Caucus put forward by Mahathir, have foundered.

ASEAN's Free Trade Association could provide the means for other countries to come in without being a threatening presence to the existing members.  The AFTA could also be an avenue for Australia to move into Asia in a structural way.  He argues that the integration of the Australian economy into the region has reached the point where there is a need for co-operation at the government level.

Yet Australia cannot and should not try to become a de facto Asian country.  Indeed, its European cultural heritage could allow it to become a valuable bridge to the West.

Asia Pacific is not without its faults.  Dobbs-Higginson sometimes focuses too much on philosophical attitudes:  his analysis of South Korea, for example, stresses the importance of an ordered Confucian social system but makes no mention of the US aid program of the 1950s or the preferential trade arrangements granted by many Western countries.  Similarly, he deals with the problems of cultural conflict but does not examine the weakness of the capital markets in many Asian countries -- a factor which is likely to prove a significant hindrance to further progress.

But Asia Pacific remains a fascinating book, and anyone who has ambitions to understand the future of the region should be aware of its ideas.