The Real EastAsia Edge

THE REAL EASTASIA EDGE Erland Heginbotham Xn their recent book, The EastAsia Edge, Roy Hofheinz and Kent Calder have harkened to the prognoses of Orwell's 1984, in which "EastAsia" eclipses the United States as a world economic power, with the decline and fall of the American dream proceeding apace. The EastAsia Edge helps us understand the unique qualities that have transformed the region into the dynamic economic force that we see today.1 The book, however, addresses individual East Asian countries. In this paper, I will address the dynamics of the economic relations within the region which, in my view, augment the effectiveness of these countries as a competitive force. The East Asian edge exists, to be sure, but it cuts two ways. The fateful question for all of us—Asians and Americans alike—depends on the response of the United States. Will it be resilient and positive, thereby stimulating greater world competition and growth, or will it be protectionist and naive, thus inviting retaliation, retrenchment, and economic crisis? The outcome will also depend, in part, on Asian sensitivity to the speed and intensity with which their economic competitiveness has affected the North Atlantic economies, which are still struggling to 1. Roy Hofheinz, Jr., and Kent E. Calder, The EastAsia Edge (New York: Basic Books, Inc., 1982). Erland Heginbotham is presently a professional staff member for international economic policy on the Senate Foreign Relations Committee. Mr. Heginbotham was also the founding director-general of the U.S. Foreign Commercial Service, and has served as deputy assistant secretary of state for East Asian and Pacific affairs and as vice-president of the Overseas Private Investment Corporation. Mr. Heginbotham's article on "The Role of the U.S. Private Sector in ASEAN" will appear in a collection of papers on Asia to be published by the University of California Press. 15 16 SAIS REVIEW recover from the prolonged economic stagnation and outmoded competitive policies. The United States' response—both private sector and governmental—are crucial in this regard. So I will also present some possible responses to the East Asian challenge. East Asia possesses a unique combination of comparative advantages . These lend the region a dynamism that will be unmatched by other parts of the world for the rest of this decade. ThatJapan is the hub of this dynamo is universally recognized, but the inner workings are less well understood by Western observers. The region's success owes less to the industrial policies designed by the masterminds of Japan's Ministry of International Trade and Industry (miti) than to the complementary resource endowments of the region, with the poorer, less-developed countries possessing the greatest natural resources. These, plus the mutual attractions of the differing development stages within the region, are an important part of East Asia's competitive edge. There are three tiers of economic development within the region. Japan—technologically advanced, highly industrialized, but resource deficient—constitutes the first. Japan's record-breaking growth from the mid-1960s to 1980 has produced numerous internal and external tensions that have steadily increased its dependence on other parts of the Asian-Pacific region; for energy, low-cost labor, food, land, pollutionfree spaces, and, surprisingly, for sustaining its economic growth. Korea, Taiwan, Singapore, and Hong Kong comprise the second tier. These rapidly industrializing countries (for the purposes of this paper, Hong Kong will be considered a country) have seized the baton of rapid growth, benefiting in the meanwhile from the speed and momentum of Japan's growth. The second-tier countries have capitalized on their comparative wealth in abundant low-wage, disciplined, and education -hungry labor. Their labor pool, however, has quickly been absorbed into the burgeoning industrial sector. Management, technology, and labor skills all improved radically with the rapid increase in wage rates. They and the Japanese also benefited from the inflows of foreign investment, management, and technology. Four members of the Association of Southeast Asian Nations (asean), Thailand, Malaysia, Indonesia, and the Philippines, constitute the third tier. They possess abundant natural resources and large pools of unskilled labor, in addition to considerable energy resources and land. In the early 1970s foreign direct investment greatly accelerated the exploitation of oil and...