Friday, March 2, 2007

Two Chinas, two Asias

I spent Friday afternoon at the headquarters of the Keidanren -- a classic example of Tokyo-style brutalism if I've ever seen one -- at a symposium convened by the World Trade Center Tokyo and the Tokyo American Center on "China's Rise and the Emerging Architecture of Trade and Investment in the Asia-Pacific Economy." Keynotes by a Chinese and an American academic, with a panel of veteran Japanese diplomats.

The discussion ended up being very interesting, addressing the many varieties and possibilities of trade agreements in East Asia.

But I'm not going to summarize the discussion here. Rather, I found the contrast with the talk I attended earlier this week, on the evolving situation in the Taiwan Straits, jarring, but illuminating.

It seems that at present, two Asias exist side by side -- with observers seeing the Asia they prefer to see. The business leaders, academics and diplomats gathered at the Keidanren today prefer to see the Asia characterized by ever-deepening economic, political, and cultural integration, the "spaghetti bowl" of organizations and agreements, including ASEAN, ASEAN + 3, the East Asian Summit (ASEAN + 6), APEC, the Chiang Mai Initiative (connected to ASEAN + 3), the ASEAN Regional Forum, and a host of bilateral free trade agreements. It's an Asia marked by increasingly dense trade and investment ties within the region. At the heart of this Asia is China, the new "workshop of the world," which has become one of the world's biggest traders since joining the WTO, and has enthusiastically embraced regionalism. This is the China that showed up at Cebu earlier this year.

But then there's the other China -- the China that reacts defensively to US calls for military transparency (not to mention the ASAT test) -- that was the focus of Randy Schriver's talk on Wednesday. That's not to say that Schriver only described the belligerent China; if anything, his view, and the view of China in the Armitage-Nye Report, is much more balanced than the seemingly unbridled optimism I heard today. In any case, this second Asia contains the risk of conflict, as it is characterized by ethnic tensions, arguments over history, the possibility of zero-sum competition for energy (the Sino-Japanese conflict over EEZs in the East China Sea, for example), the potential for a nuclear arms race in Northeast Asia, and concerns about China's military buildup, especially as directed at Taiwan. This Asia is by no means inevitable, but every time China shows its belligerent side, the shadow of this conflictual Asia threatens to darken the bright, shining Asia of ever thicker regional ties.

I give the US government credit for not overreacting in recent years to the shadows of the latter Asia -- but sooner or later it is going to have to exert substantial effort to ensure that the former takes a shape that is in the interests of the US (i.e., an Asia that does not harden into a trade bloc that excludes the US). Having a hedge against the latter outcome, in the form of enhanced alliances with Japan and Australia and deeper ties with India, Vietnam, and other regional partners, is fine, but it can only be one facet of US Asia policy.

So I'm with Georgetown's Dennis McNamara, one of the keynote speakers on Friday: it is time for the US to begin working at shaping the cooperative Asia as best it can in a direction that favors the US. (See this Asahi interview for a summary of McNamara's views on this subject.)

But it is important to remember that the decision as to which Asia -- cooperative or conflictual -- will emerge will depend largely on decisions made in Beijing.

1 comment:

Ivo Cerckel said...

“So I'm with Georgetown's Dennis McNamara, one of the keynote speakers on Friday: it is time for the US to begin working at shaping the cooperative Asia as best it can in a direction that favors the US. (See this Asahi interview for a summary of McNamara's views on this subject.)”

Don’t you know that the US and its dollar are toast and that ASEAN Plus Four will use the gold yuan?

March 02, 2007
Paul Krugman: The Big Meltdown
Paul Krugman, looking back to today from March 2, 2008, analyzes the recent drop in U.S. stock prices and what it might mean for our economic future

In April 2007, nine practical consequences of the unfolding crisis will converge:
1. Acceleration of the pace and size of bankruptcies among US financial organisations: from one per week today to one per day in April
2. Spectacular rise of US home foreclosures: 10 million Americans out on the street
3. Accelerating collapse of housing prices in the US: - 25%
4. Entry into recession of the US economy in April 2007
5. Precipitous rate cut by the US Federal Reserve
6. Growing importance of China-USA trade conflicts
7. China's shift out of US dollars / Yen carry trade reversal
8. Sudden drop of US dollar value against Euro, Yuan and Yen
9. Tumble of Sterling Pound

The Second Great Depression
Now, 77 years later, Greenspan has led us sheep-like to the same precipice. The economic dilemma we’re facing could have been avoided if the expansion of personal credit had been curtailed by prudent monetary policy at the Federal Reserve and if wealth was more evenly distributed as it was in the ‘60s and ‘70s. But that’s not the case; so we’re headed for hard times.

As Professor [of Corporate Strategy and International Business] Linda Lim, Director of the Centre for Southeast Asian Studies at the University of Michigan, puts it in her Foreword to
Philip Kotler, Hermawan Kartajaya, and Hooi Den Huan,
“Think ASEAN - Rethinking toward ASEAN Community 2015”,
McGrawHill, 2007,
private actions can and should initiate a process of market-led regional integration that is likely to be not just quicker, but also more efficient [than a government-initiated process], as a result.

After attending the ASEAN Business and Investment Seminar (BIS) in Cebu - Philippines in December 2006 and reading the book I just quoted,
I wonder whether the ASEAN market is not primarily a market which is going to be “exploited” not by SMEs (Small and Medium-Sized Enterprises), but only by big businesses (Multi-National Corporations - MNCs) which are already operating internationally.

That’s why it’s up top ASEAN’s discussion partners within ASEAN PLUS THREE (Japan, Korea and China) and ASEAN PLUS FOUR (Plus Three Plus India) to take the lead in fulfilling the wishes of His Excellency Ong Keng Yong, Secretary-General of ASEAN. In His Excellency’s December 09, 2006 address to the ASEAN BIS Seminar in Cebu – Philippines, His Excellency pleaded for the
the integration of the economies of ASEAN and for the maintaining of ASEAN in the centre stage, making the ASEAN concept real in the minds of people,.

Let me first say this: I am a firm believer in Freedom (and Truth) and thus in the freedom of contract. Nobody can thus be prevented from concluding a contract whereby the partners set up a corporation which eventually becomes a MNC.

I have no problems with private corporations where the partners’ liability does not disappear.

The problem is however that whereas I cannot give legal personality to my dog or my car, the granting of the privilege of legal personality to the PUBLIC corporation at present results in the partners that make up the corporation not being fully liable for the actions of their corporate tool
(Professor Frank van Dun, “The Modern Business Corporation versus the Free Market?”, versus Market.pdf )

When I see that the quoted book refers several times to a corporation with such ASEAN roots as McDonald’s Hamburger Restaurant, I have my deepest doubts as to the real intentions of some of the promoters of ASEAN.

ASEAN wants to integrate the economies of its member states and wants to maintain ASEAN in the centre stage, making the ASEAN concept real in the minds of people, said His Excellency Ong Keng Yong, Secretary-General of ASEAN, in His Excellency’s December 09, 2006 address to the ASEAN BIS Seminar in Cebu - Philippines.

Will giving MNCs more leeway to “exploit” the ASEAN market make the ASEAN concept real in the minds of people? Will that maintain ASEAN in the centre stage? I don’t think so.

It is humbly submitted that having an ASEAN PLUS FOUR currency in one’s wallet would really make the ASEAN concept real in the minds of people and would maintain ASEAN in the centre stage.

I therefore wonder whether, as I said in the paper “A Currency for the ASEAN market – Freegold”, which I made available to the participants at the ASEAN BIS seminar in Cebu – Philippines in December 2006, it would not be time to realise that these objectives can only be achieved if ASEAN does not tolerate currencies' exchange rates dominating trade but adopts the opposite policy of allowing ASEAN to consolidate (store) its produced wealth in Freegold.

Do we cling to the dollar-IFMS (International Financial and Monetary System) or do we opt for ASEAN Freegold, for the ASEAN gold-euro, the gold yen (which will of course be called the gold rupee or gold yuan in other pleases)?

Nothing prevents ASEAN PLUS FOUR from copying what the European System of Central Banks (ESCB) is doing and keep gold (the Mona Lisa) in the strong rooms (the Louvres) of its central banks and marking it to market price on a quarterly basis. Every individual in an ASEAN PLUS FOUR nation would then be free to copy the concept of Freegold. By the same token, the ASEAN PLUS FOUR concept will have been made real in the minds of people and ASEAN PLUS FOUR will have been maintained in the centre stage. How else could ASEAN possibly integrate the economies of its member states?

This, Freegold, is the total opposite of the absurd IMF virtual SDR-situation

Special Drawing Rights (SDRs) is a potential claim on the freely usable currencies of International Monetary Fund members.
It is neither a currency, nor a claim on the IMF.
SDRs are defined in terms of a basket of major currencies used in international trade and finance.
At present, the currencies in the basket are the euro, the pound sterling, the Japanese yen and the United States dollar.
The amounts of each currency making up one SDR are chosen in accordance with the relative importance of the currency in international trade and finance.
The determination of the currencies in the SDR basket and their amounts is made by the IMF Executive Board every five years.

This seems to indicate that SDRs constitute the reserve of the inexistant IMF-currency.

Article IV, Section 2, of the IMF Articles of Agreement says that exchange arrangements may include inter alia (under (b) (ii)) cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members.

Freegold is the opposite of this absurd (virtual) situation.

The IMF wants its members to use/take the SDRs as reserve.

We, the ASEAN PLUS FOUR - People in the know of the fact that the dollar-International Financial and Monetary System (IFMS) cannot be expected to start making the CONCEPT OF GOLD-WEALTH-RESERVE public, want Freegold as reserve.

In this situation, the IMF has no more role (to fulfil) except that of bailing out the US.

In this situation, Freegold in the European (and ASEAN PLUS FOUR) Systems of Central Banks (EA4SCB) have the same role to fulfil as the Mona Lisa in the Louvre.
A wealth reserve in the strong room (the Louvre) of a Monetary Union with a currency, the euro.

Every individual, not the ASEAN PLUS FOUR, is now free to copy the concept of Freegold (Freely priced gold, no longer “fixedly” priced gold) as wealth reserve (no backing or redeemability).

Just like anybody can come to ASEAN PLUS FOUR and determine for herself what is the nature of the ASEAN PLUS FOUR economy and can then appreciate and/or copy it.

ASEAN PLUS FOUR is a UNION which is in the process of being set up around a currency system-in-the-make on euro lines.

ASEAN PLUS FOUR knows that Free Trade is not possible without Free Migration. That’s why for the moment, ASEAN is working to facilitate intra-ASEAN migration for skilled labour.
The ASEAN PLUS FOUR gold yen will be introduced
on the sidelines of the June 2007 Cebu ASEAN, ASEAN PLUS FOUR and EAST ASIAN TOURISM SUMMITS,
after the Greater Depression will have started in the US. (see section 2)

(East Asia = Asean Plus Four plus New Zealand and Australia = ASEAN PLUS SIX
The currencies in the latter two countries are called dollars
(and thus follow the (mis-)fortunes of the US dollar).
Like the pound sterling, those currencies will collapse together with the US dollar.
That’s why the gold ASEAN will be limited to the ASEAN PLUS FOUR
will NOT extend to East Asia or ASEAN PLUS SIX.)

In the meantime, the People’s Bank of China is wondering into what to diversify its foreign exchange reserves.
Stop doubting, Beijing! Go gold!

ASEAN PLUS FOUR knows Free Trade is impossible without Free Migration.

That's why ASEAN is concentrating on tourism to introduce free migration for skilled labour through the backdoor.

The gold yuan will display to the world not only that tourism opens the backdoor to allow Free Migration of Skilled Labour but also that as Governor of Jilin Province, China, Wang Min, said
in his Welcome Address to the EAST ASIA INTER-REGIONAL
“Tourism serves as the messenger of peace and also as a bridge in enhancing FRIENDSHIP and cooperation.”

International politicians seem to assume that trade is a HOSTILE PROCESS; that it is a concession granted to FRIENDLY NATIONS; and that when it is withheld from unfriendly nations it does harm, without harming the withhholder.
Even the words sometimes used “protection”, “sanction”, “embargo” and the like – suggest hostility.
They carry the implication of warfare – of doing something to restrain someone,
(W.M. Curtis, «The tariff idea » (originally published in 1952) in: Richard M. Ebeling and Jacob C. Hornberger, eds., « The Case for Free Trade and Open Immigration », Fairfax, Virginia, USA, The Future of
Freedom Foundation, 1995, 37, p. 38 – all capitalisation mine)

That’s why FRIENDSHIP, and thus TOURISM through free migration, is at present still so important for Free Trade in ASERAN Plus Four.

That’s why ASEAN is concentrating on tourism.

That’s how ASEAN PLUS FOUR will set up a UNION OR COMMUNITY (around a currency system)
not as was being argued on February 23, 2007's ASIA TIMES ONLINE’s
ASIA HAND by Shawn W Crispin
in his article « One step forward, two back for ASEAN»
an economic bloc.

In my ears the words « economic bloc » carry too much hostility, this time not vis-a-vis other ASEAN-members as argued in the Asia Times article, but vis-a-vis non-members such as the four of ASEAN Plus Four who will nevertheless be part of that community.

This gold yuan will establish a real ASEAN PLUS FOUR COMMUNITY or UNION.

Ivo Cerckel de Siquijor