Fears on impact of Asian crisis overblown, says WTO

Fears on impact of Asian crisis overblown, says WTO

GENEVA (AFP): Fears that limping Asian economies will export
their way back to health, harming business in developed
economies, are unjustified, the World Trade Organization said in
a report issued yesterday.

But a slowdown in Asian and U.S. economic growth rates could
lead to a cut in global trade of two to three percentage points
in volume terms in 1998, the WTO report on 1997 trade
developments warned.

Exports of goods globally jumped by 9.5 percent in volume
terms last year, the second-best result in 20 years and above WTO
forecasts.

Many pundits worry that the recent round of Asian currency
devaluations will lead to a flood of cheap imports into rich
countries, damaging some of their industries, slowing economic
growth and boosting unemployment, the WTO said.

"These fears would seem to be largely unjustified as far as
countries outside the Asia region are concerned."

The WTO concluded that exports from Malaysia, Thailand,
Indonesia, South Korea and the Philippines, countries battered by
the turmoil, would grow this year but not as rapidly as might
have been expected given the massive falls of their currencies
against the dollar

The five countries as a whole account for just 3.6 percent of
global gross domestic product, around seven percent of world
trade, and six percent of global foreign direct investment.

Asia as a whole accounts for 8.6 percent of U.S. imports and
five percent of West European imports. Japan, in contrast, takes
16 percent of the region's imports.

Thus, even if Asian exports to the West rise by 20 percent,
"this would not cause a significant problem" for the trade or
current account ledgers of foreign countries, the study said.
The study acknowledged that excess capacity due to slack domestic
demand could be switched to producing exports.

Other factors, such as healthy export track records in the
most seriously hit Asian economies and the fact that
multinationals played a big role in their foreign trade,
supported a strong export-led recovery.

But a financial liquidity crunch, the high costs of financing
trade, expensive imports and the fact that Asian countries
transacted the bulk of their trade with each other all undermined
export prospects.

External factors could also limit Asian export growth, the
study said.

North America's GDP growth would probably slow this year,
implying slower import demand growth while uncertainty hangs over
economic prospects of the two biggest Asian import markets, Japan
and China.

Japan, which recorded sluggish import growth last year, is
mired in recession, according to the latest figures, and a slump
could further cut Japanese purchases of Asian goods.

Japanese imports last year grew by a meager 2.5 percent,
barely higher than the 1996 level.

If the Asian financial crisis is a largely confined to the
five countries in question, the repercussions "should not result
in more than a small dent in global economic growth," the report
said.

As slower growth in North and South America and Asia is
expected to be offset partly by stronger growth in Europe, "a
decrease in global trade of two to three percentage points may be
expected."

"This, however, would still leave the rate of global trade
expansion above the rate recorded in the first half of the
1990s."