International Friction and Cooperation in High-Technology Development and Trade Papers and Proceedings (1997) / Chapter Skim
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The Multilateral System and National Economic Strategies
The Multilateral System and National Economic Strategies
Pages 25-45
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From page 25... ...
We have three speakers this morning. Bruce Scott will talk about the different national economic strategies around the world and how they impact growth.
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From page 26... ...
Economic Research and Forecasting at IBM for 14 years. Producer versus Consumer-Oriented Economies Bruce Scott, Harvard University ~ approach the issue of economic strategies from a business school and a mix of business administration and economics.
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From page 27... ...
By the time Richard Nixon had decided "we are all Keynesian," these ideas were clearly obsolete. So, what was once the familiar form of economic strategy has now become completely obsolete in an open trading system: pumping up demand simply leads to increased imports and a trade imbalance that is unsustainable.
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From page 28... ...
At the time of Adam Smith and David Ricardo, cotton textiles became the first industry in history that began at approximately 7~/2, and it is where we traditionally date the beginning of the industrial revolution. Are you better off to have an advantage in an industry that grows 1~/: than one that grows 7~/2?
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From page 29... ...
One obvious question is, if I look at the world economy, where is the opportunity? The answer is that, as we have opened the trading system, world trade has grown much more rapidly than GDP [gross domestic product)
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According to this resource allocation scheme, economic strategies can be inward oriented, outward oriented, or neutral. An inward orientation means import substitution and a protectionist regime.
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He established a point that should be obvious to anyone who has operated in international economic competition. Yet, it is one which has escaped notice in American political discourse and, it seems, in American economics departments.
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From page 32... ...
I mean instead that there are three subdimensions of this scale issue that make the contrast in economic theories and economic styles particularly important in East Asia. Sustained growth: One of these subdimensions is the sustained rapid growth of East Asia, which means that, whatever happens, there will be a disproportionately large impact on the rest of the world.
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From page 33... ...
To me, the most interesting economic story of the last decade is the unintended consequences of doubling the value of the yen in 1985 and 1986. That was the catalyst for creating an integrated East Asian system, as Japanese companies used their newly valuable yen to invest in the rest of the region and integrate a Pan-Asian production base.
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From page 34... ...
Barriers: A third aspect of what I call their political ideology is the barriers within many Asian societies to democratic pressures that might make them more consumer oriented in the long term. Americans have a long track record of predicting the imminent collapse of Japan's productive system because consumers will rise and revolt, salaried men will stop working, the youth will revolt, etc.
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From page 35... ...
So, if the trading differences between the United States and East Asia aggravate this main tension, that has a strategic effect. The "right way": A third subtheme here is an emerging ideological confrontation between the United States and East Asia about the "right" way to organize society.
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From page 36... ...
Thank you. Consequences for the International Economic System Lawrence Chimerine, Economic Strategy Institute I agree with the observations that James Fallows made about East Asia and, quite frankly, about economic thinking in the United States and its slowness in adapting to what is happening in the real world on trade issues.
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From page 37... ...
Unfortunately, a lot of economists have naturally assumed that the causality goes completely from savings to trade. Identities tell you nothing about the direction of causality, but if you have a structural trade deficit caused by closed markets overseas or foreign predatory trade practices, or other factors, it is ultimately going to depress savings in your country and probably raise savings in those countries that have adopted such measures.
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From page 38... ...
This is a clear sign of the structural nature of the trade deficit. Do you remember hearing that when the exchange rate was at 200 yen to the dollar, that at 180 we will get rid of this trade imbalance?
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From page 39... ...
The trade deficit is becoming a structural problem with most of East Asia and, in fact, almost two-thirds of our trade imbalance is now with East Asia, a large fraction of which is structural in nature. Also, the Japanese run trade surpluses with almost everyone, high-saving countries, low-saving countries, high-budget-deficit countries, low-budget-deficit countries, etc.
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From page 40... ...
They want free trade, but they want real free trade, two-way free trade, the type of free trade that we will all benefit from. That is not what we have had in this country, and in my judgment the Clinton administration is correct in trying to force open foreign markets and, until that happens, maintaining effective trade laws in the United States.
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The dilemma that we face is that, for most countries, the economic strategies have been overwhelmingly import substitution, what I characterize as inward looking. Pursued too long, they perform badly everywhere.
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From page 42... ...
I am a supporter of the multilateral approach, but it is not clear that the WTO is going to have jurisdiction over the type of trade practices that the Japanese regularly use. If you go back and look at the Uruguay agreement, many of theese practices were not even addressed.
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From page 43... ...
Basically, you have a world economy where the immobile factors of production compete for the mobile factors, and it is apparent that this locational competition is at the center of modern international economics, not David Ricardo from 200 years ago. And there are interdependencies among these three levels of competition.
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From page 44... ...
In other words, the issue of translating the learning effects involved in the change of sectoral specialization is a much more complicated matter than just looking back at an historical example, which can be easy to categorize. We have to face up to the fact that, currently, the definition of "sectors" as high technology and low technology is becoming more and more difficult.
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From page 45... ...
I was working in London at the time when the first discussions took place about the appropriateness of having a fixed exchange rate regime in the European Community. There were intense discussions about whether the United Kingdom should be part of such an arrangement.
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