Asia's post-Tsunami future<\/p>\n
Fan Gang, Michael Garrett and Jean-Pierre Lehmann, Project Syndicate<\/p>\n
There can be no underestimating the scale of the human
\ndevastation wrought by Asia's horrific tsunamis. Family members
\nhave been lost, homes destroyed, and livelihoods ruined. As is
\noften the case in natural disasters, the poor are suffering the
\nmost.<\/p>\n
And yet, even with damage to infrastructure such as road and
\nrail links, the tsunamis' overall economic impact is expected to
\nbe minor. In the worst hit parts of India, Indonesia, Sri Lanka,
\nand Thailand, the immediate interior was unaffected, while the
\ntourism and fishing industries -- the lifeblood of wrecked
\ncoastal areas -- account for only a tiny share of these
\ncountries' GDP, as liberalizing reforms have fueled economic
\ndiversification and rapid growth.<\/p>\n
It was not always this way. Historically, it has been
\ndifficult to convince Asians that international trade is not a
\nzero-sum-game, with Asia invariably the losers. This is one
\nreason why, after Mao Zedong's communists triumphed in China in
\n1949 and other Asian nations gained independence, most Asian
\ncountries adopted protectionist inward-looking economic policies
\naimed at building domestic strength, keeping the \"imperialists\"
\nout, and achieving self-reliance.<\/p>\n
Historical experience incites this suspicion. In 1820, Asia's
\nshare of global GDP was 60 percent, with China accounting for
\nslightly more than half. That was two decades before the first
\nOpium War. With the emergence of truly global world trade over
\nthe ensuing century and a half, Asia's economic dominance
\nwithered. By 1950, China's share of world GDP had fallen to under
\n5 percent, while all of Asia accounted for just 18 percent, the
\nbiggest chunk of which was attributable to Japan, despite its
\ndefeat in World War II.<\/p>\n
The winds of global change began sweeping through Asia roughly
\ntwo decades ago, first in East Asia, then engulfing China, and in
\nthe course of the 1990s blowing on to South Asia, most
\nimportantly India. What we are witnessing is thus not \"emerging\"
\nAsia, but the \"re-emergence\" of a continent that comprises 60
\npercent of humanity. Its two giants, India and China, are
\nespecially determined, as Indian author Ashutosh Sheshabalaya
\nrecently put it, \"to return to their nineteenth-century status,
\nwhen they accounted for well over half of world economic output.\"<\/p>\n
One result of this is that China and India are seeking to make
\na bigger impact on global economic policy. Both countries were
\nsignatories of the General Agreement on Tariffs and Trade (GATT,
\nthe precursor to today's World Trade Organization) in 1948, but
\nChina under Mao subsequently left. Although India remained a
\nmember, it was often a recalcitrant one.<\/p>\n
Asia's current share of global GDP (about 38 percent) is still
\nfar from what it was in 1820, but both countries feel that they
\ncan -- and must -- participate in calling the global shots. It
\ntook China's government a protracted sixteen years to negotiate
\nits re-entry into the GATT\/WTO, but it soon showed its mettle by
\nassuming joint leadership (along with Brazil, India, and South
\nAfrica) of the G-20, a group of primarily dynamic developing
\ncountries that threw down the gauntlet to the industrialized
\npowers at the Cancun WTO ministerial meeting in September 2003.<\/p>\n
So the Asians are coming: As markets, as states, as consumers,
\nas financiers (Asian central banks, for example, are responsible
\nfor financing America's whopping budget deficits), as scientists
\nand engineers, and as corporations. Is the West ready? In an
\narticle in the Financial Times in July 2004, Standard Chartered
\nCEO Mervyn Davies wrote, \"westerners are realizing how big Asia's
\ncorporate ambitions are.\" There is, however, a large difference
\nbetween recognizing that change may be coming and making the
\nnecessary adjustments.<\/p>\n
In contrast to the emergence of the West in the nineteenth
\ncentury, which proved such an economic disaster for most of Asia,
\nthe continent's re-emergence can have an immensely positive
\neffect on the twenty-first century's global economy, including,
\nneedless to say, the West. But this requires careful preparation,
\nadjustment and management.<\/p>\n
This is of vital importance, especially in light of the fact
\nthat Asia's populations are still booming: India, Pakistan, and
\nBangladesh will see an increase in the next fifteen years from
\n1.4 billion to 1.73 billion inhabitants, while China's population
\nwill grow from 1.3 billion to 1.42 billion. Little wonder, then
\nthat these countries accept the imperative of a dynamic, open,
\ngrowth-oriented, and job-creating global environment.<\/p>\n
Yet despite these gales of change, institutional atavism
\nprevails. Global economic policy-making remains very much a
\nWestern game. It beggars belief that China and India are not
\nmembers of the G-7. The Bretton Woods organizations -- the IMF,
\nthe World Bank and the WTO -- remain heavily Western in
\nstructure, leadership, and mentality.<\/p>\n
This is especially true of the WTO, where Washington and
\nBrussels seem more concerned at settling old scores and
\nprotecting their respective turfs than in engaging with the new
\nplayers. China will soon be the world's biggest trading power.
\nYet euroatlantic introversion still permeates the WTO.<\/p>\n
This mindset is also pervasive in Western governments,
\nindustry, business schools, and the media. None of these
\ninstitutions in the West is ready for Asia's re-emergence.<\/p>\n
History is not particularly encouraging when it comes to
\nadjusting to profound changes -- new actors and shifting balances
\nof power -- as the twentieth century tragically and repeatedly
\ndemonstrated. The tsunami that so devastated much of Asia has
\nprovided an opportunity for all key players -- in government,
\nindustry, academia, the media, and civil society -- to look at
\nAsia anew, at both the challenges and the opportunities that have
\narisen from Asia's resurgence. These opportunities need to be
\nseized with as much alacrity as the world has responded to Asia's
\nsorrow.<\/p>\n
Fan Gang, Director of the National Economic Research Institute
\nat the China Reform Foundation in Beijing, is a member of The
\nEvian Group Brains Trust; Michael Garrett is Chairman of The
\nEvian Group and Executive Vice President of Nestli SA for Asia,
\nAfrica, and Oceania; Jean-Pierre Lehmann is Founding Director of
\n\"The Evian Group\" and Professor at IMD, Lausanne, Switzerland.<\/p>",
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