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83. The United States and the Aborted Asian Monetary Fund
- ISEAS–Yusof Ishak Institute
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The United States and the Aborted Asian Monetary Fund 415 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 83. THE UNITED STATES AND THE ABORTED ASIAN MONETARY FUND RICHARD HIGGOTT Reprinted in abridged form from Richard Higgott, “Regionalism in the Asia-Pacific: Two Steps Forward, One Step Back?”, in Political Economy and the Changing Global Order, 2nd ed., edited by Richard Stubbs and Geoffrey R. D. Underhill (Ontario: Oxford University Press, 2000), pp. 254–63, by permission of the author. The abortive exercise, in the wake of the Thai and Korean currency crises, to set up an Asian Monetary Fund (AMF) is instructive . While it drew material and rhetorical support from a range of regional states, the United States refused to support it. To be capitalized initially at $100 billion, the AMF was to provide emergency regional support and avoid what many leaders saw as the humiliation of the IMF telling them how to readjust to the new circumstance. A proposal for an AMF made up only of East Asian states was in many ways an exercise in ‘thinking East Asian’ not dissimilar to the setting up of the East Asian Economic Caucus (EAEC) within APEC.1 Interestingly, and in contrast to the development of the EAEC proposal, Japan was willing to lead the proposal for an AMF. It took the initiative in trying to persuade the United States that it was additional to, not incompatible with, the IMF. But the proposal was insufficiently thought out and, with the benefit of hindsight, destined to fail. It was underwritten by, and verbally accompanied by, a large dose of ‘Asian Way’ hubris among its ASEAN supporters. Regional leaders had still not understood the power of the global financial markets, but the proposal’s most naive failing was to underestimate the strength of the opposition from the United States and the IMF, which felt it would not only undermine their ability to impose tough conditionality on loans but also act as a veritable threat to American interests and influence in Asia. Of course, other factors were salient, but the US desire for the IMF to control adjustment funding prevailed and its dominant role in the process was endorsed at the Vancouver APEC summit in November 1997. This may, however, be a turning point for APEC. By opposing the proposal (more) seeds of polarization in the relationship between the Asian and Caucasian members of APEC were sown. The exhortatory liberalization rhetoric of the Vancouver APEC meeting only superficially concealed a 083 AR Ch 83 22/9/03, 12:58 PM 415 416 Richard Higgott By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville deeper schism between the two edges of the Pacific. The economic turmoil reinforced the notion that the Asia-Pacific is an artificial construction of region, the longterm salience of which may well have been affected by the economic downturn and regional resentment at the US- and IMF-led responses to the crisis. The euphoric expectation of the 1993–6 period — that APEC would provide firm institutional ties to mitigate interregional tensions between Asia and the United States — was clearly wishful thinking of a high order. Advocates of APEC championed ‘open liberalism’ in the region, assuming that it was benign and its enhancement uncontested. Much of the discussion on APEC throughout the first half of the 1990s saw only the benefits of free trade and none of the pitfalls of dramatic increases in deregulated, unrestricted capital mobility. APEC always found its strongest intellectual and political support among the American, Australian, and Canadian members. During the heyday of Asia-Pacific growth, the Asian members were willing to go along with its emerging program, although not necessarily at the pace the Caucasian members wished. In the post-crisis era things have changed. Thus, APEC — rather than being a potential instrument for trade liberalization at the Asia-Pacific level in which a harmony of interest developed between the member states — is seen in some policy communities of East Asia as but another forum in which the United States can hammer home its claim for further capital market liberalization. Added to the problems now facing APEC, the failure of the AMF leaves us with an open question. Is it more or less likely that there will be further initiatives to provide some kind of regional economic cooperation , in general, and financial policy coordination, in particular? The answer is twofold. In the short run...