Economics, Politics and Public Policy in East Asia and the Pacific
Author: Razeen Sally, ECIPE
The last economic era, roughly from 1980 to 2008, was the most successful combination of globalisation, growth and prosperity in history.
The West benefited, but, more importantly, this was when ‘the Rest’ came on board: ‘underdeveloped countries’ cast off post-colonial isolation and embraced the world economy. Read more…
Author: Razeen Sally, ECIPE and LSE
World trade is recovering from its steepest fall since the 1930s — part of the biggest ‘deglobalisation’ since the Great Depression. Trade liberalisation has stalled globally and there is a climate of defensiveness on trade policy.
The West’s financial crisis translates into a deeper-than-normal recession and a slower-than-average recovery. In contrast, most emerging markets retained reasonably solid banks and balance sheets. That enabled them to rebound quickly, not least through fast ‘reglobalisation.’
Author: Razeen Sally, ECIPE
It is almost a decade since China’s accession to the WTO. Back then, like a small or medium-sized economy, China imported ‘global order’: it absorbed pre-existing, mainly US-designed policies, rules and institutions.
Now China is one of the Big Three, alongside the USA and EU. It is the world’s second-largest economy (at market prices) and its leading exporter of goods. It is the biggest post-crisis contributor to global growth. Read more…
Author: Razeen Sally, ECIPE
2009 was a crisis year for international trade, which suffered its steepest decline since the 1930s. Protectionism returned, reversing an almost three-decade trend of trade liberalisation.
But, contrary to expectations, it has not returned with a vengeance, rather creeping to the surface in subtle ways. Time, therefore, to take stock of trade policy after the crisis, and consider its outlook at the beginning of this century’s second decade. Read more…
Author: Razeen Sally, ECIPE
It is perhaps time to revive the idea of a transatlantic free trade area (TAFTA). This is the gist of two papers, one by ECIPE’s Fredrik Erixon and Gernot Pehnelt, the other by GEM-Sciences Po’s Patrick Messerlin and Erik van der Marel. A TAFTA initiative was floated in the 1990s, only to sink; and the Transatlantic Economic Council (TEC), established at the initiative of Chancellor Merkel to tackle regulatory barriers, has become bogged down in micro-detail and hardly made progress. Sure, political obstacles are great, but it is worth stepping back to coolly assess costs and benefits, and then decide whether to go ahead with a new initiative.
First, consider the context of US and EU trade policy, especially in light of the global economic crisis. Read more…
Author: Razeen Sally, ECIPE
The EU views China with a combination of awe, ignorance, fear, confusion and ambition. It is awed by China’s rise. It is largely ignorant of China. Real knowledge of China, and Asia more generally, is pathetic in Brussels, as it is in all European capitals with the partial exception of London. European sophisticates constantly disparage American insularity, but knowledge of Asia is far superior inside the Beltway, and in think tanks and universities in the United States, than it is anywhere in Europe. Ignorance mixed with arrogance is not an American preserve; it is found in abundance on the Old Continent, as any visit to a Parisian intellectual salon will reveal.
Then there is fear of China, especially when relations with it are viewed in militaristic, zero-sum terms. Perhaps that reflects an atavistic French world-view. And confusion reigns, for the EU, being a non-nation-state hybrid, has no foreign policy towards China and is often undermined by the foreign policies of its big three member-states (UK, France and Germany). Last, despite these drawbacks, the EU’s ambition is to be a privileged interlocutor and at the top table with China. That reflects the EU’s self-image as a ‘power’ in the world. Read more…
Author: Razeen Sally, ECIPE
This is the season for regional-integration initiatives in Asia. Two new initiatives were tabled at the East Asia Summit in Hua Hin. The new Japanese prime minister, Yukio Hatoyama, wants an East Asian Community. The Australian prime minister, Kevin Rudd, has proposed an Asia Pacific Community.
Both ideas seek to further regional economic integration, but their membership and content remain unspecified. There is talk of folding the ‘noodle bowl’ of free trade agreements (FTAs) in Asia into region-wide FTAs: a Northeast Asian FTA, comprising China, South Korea and Japan; an ASEAN Plus Three (APT) FTA that would unite northeast and southeast Asia; and an ASEAN Plus Six FTA that would subsume APT and India, Australia and New Zealand. There are also east-Asian initiatives on financial and monetary cooperation. Read more…
Author: Razeen Sally
The Indian election result surprised everybody, but the response to it was predictable.
Business and the media share a new optimism that Dr. Manmohan Singh and his ‘dream team’, now about to lead a strong, stable Congress government, will roll out the market reforms that eluded them during the last five years.
First the good news. The election result has clipped the wings of venal, populist caste-based parties in north India, and dealt a blow to Hindu chauvinism coming from the opposition BJP. Indian secularism and cohesiveness have emerged stronger. But the prevailing bullishness on economic reforms is misplaced.
Optimists assume that Dr. Singh and his colleagues are genuine reformers who were shackled by unstable coalition politics in the last government. My view is that they are bogus reformers who lacked the character, competence and courage to take advantage of reform windows of opportunity. Rather, they sat comfortably in office, and relied on a combination of reforms done by the previous BJP-led government and a very favourable global economic environment to deliver record growth rates – for which they claimed credit. Messy coalition politics was an excuse to do nothing.
Author: Razeen Sally
The Sri Lankan government is close to completing an emphatic military victory over the Tamil Tiger rebels. Sri Lanka’s president, Mahinda Rajapakse, must follow up his military victory with a just settlement for the Tamil minority. If not, terrorism will go underground and ethnic conflict will continue to fester. But just as importantly, Sri Lanka’s economy needs radical change. Peace and development go together.
Sri Lanka’s economy has fallen far below its potential. At independence in 1948, the country formerly known as Ceylon was at peace, had a stable parliamentary democracy and was Asia’s second-wealthiest nation. Its prospects were golden. It had a prospering plantation economy, and, by developing-country standards, a well-developed infrastructure, an efficient public administration and judiciary, and significant achievements in health and education.
Author: Razeen Sally
In a few weeks Indians go to the polls to elect a new government. The Congress Party is standing on the record of the government it has led since 2004. But elections are taking place when the Indian economy has taken a sharp turn for the worse, in a climate of global economic crisis.
This exposes the pathetic, do-nothing, zero-reform record of prime minister Manmohan Singh and his government. More generally, it lays bare India’s huge reform gaps and its brittle, decaying institutions. Finally, it deflates the ‘India hype’ peddled by smooth-talking upper-caste politicians, ambassadors, businessmen, management consultants and indeed some academics.
A word about India Hype. It highlights high-end services and now manufacturing sectors with their globalising, world-beating companies. But it overlooks huge reform deficits in agriculture, services and manufacturing, all hobbled by high external protection and draconian domestic restrictions that prevent productive labour-intensive employment. It talks of ‘Chindia’, the notion that India plays in the same league as China as an emerging superpower and should be bracketed as such.
But this is pure myth. China plays in a league of its own; India and the other so-called BRICS play in a far inferior league. Not least, it glosses over the record of the present Congress-led government.
Author: Razeen Sally
The Association of Southeast Asian Nations (ASEAN) recently held its annual summit in Thailand. ASEAN leaders signed an FTA with Australia and New Zealand; promised to achieve an ASEAN Economic Community (AEC) by 2015; and pledged to keep borders open to trade, services and investment. In light of the global economic crisis, they agreed to refrain from erecting new trade barriers and to take “assertive action” against protectionism. ASEAN is also armed with a new “charter”. The ASEAN Charter gives the group a common legal personality; it contains (minor) institutional innovations; and it houses an ASEAN Political-Security Community, an ASEAN Socio-Cultural Community and the afore-mentioned AEC.
What are we to make of the new-look ASEAN? Outsiders have long belittled ASEAN for its internal divisions and lack of integration. ASEAN rhetoricians counter that with its brand-new Charter, its AEC blueprint and new FTAs, ASEAN has reached a watershed. In future it will spur intra-regional integration, be a viable collective force in wider Asian and international relations, and collectively counter common challenges – not least the present global economic crisis.
I remain very sceptical. Read more…
Authors: Fredrik Erixon and Razeen Sally
World leaders have sounded alarm bells against a repeat of the 1930s, when titfor-tat protectionism followed hard on the heels of the Wall Street crash. But they are fighting the wrong enemy. Current events suggest a different, but still vexing, scenario: the creeping protectionism of the 1970s, rather than the spiraling protectionism of the 1930s.
In the 1970s, oil-price hikes and other shocks triggered inward-looking, mercantilist policies, including in Europe and the United States. Immediate policy responses were not overly protectionist: There was no equivalent of America’s 1930 Smoot-Hawley tariff. But escalating domestic interventions on both sides of the Atlantic exacerbated economic stress and prolonged stagnation. Not least, they spawned protectionist pressures. Industry after industry, coddled by government subsidies at home, sought protection from foreign competition.
The result was the ‘new protectionism’ of the 1970s and 1980s.
Author: Razeen Sally, LSE
Yet another attempt to salvage the Doha Round of trade negotiations has collapsed. This time, though, the collapse may be terminal. Trade ministers could not agree to broad headline cuts in protection on trade in agriculture and industrial goods. This failure is regrettable. But it was predictable. The Doha Round had a terrible gestation in the wake of Seattle. Induced labour followed after 9/11 — in the desire to restore confidence in the world economy. Then the Round was born deformed and disfigured, with an impossibly large, unwieldy and contradictory agenda. It has been on life support ever since.
The Doha collapse reflects a deeper malaise. Policies governing international trade and investment have become hopelessly outdated. They are stuck in anachronistic twentieth-century mindsets, institutions and regulations, increasingly disconnected from today’s business realities. Read more…