01 June 1990 - 03 June 1990

The Growing Economic Power and Influence of East Asia: Implications for Governments

Chair: Sir Leslie Fielding KCMG

This conference, intended to address a wide field, albeit limited to a geographically defined area, ran almost immediately into problems of definition. In practice discussion ranged over the whole Pacific area, with glances to Thailand, Burma and even India, and to the East, to Ontario.

The first agreed point to be made was the diversity within the area. To the question whether Japan’s path to economic success, for example, could be a model for other countries, the answer was no, although inevitably Japan would be seen as an example, and, involuntarily perhaps, the economic leader. We noted that while the four newly industrialised economies (NIEs) (or newly industrialised countries (NICs)), South Korea, Hong Kong, Taiwan and Singapore, were discussed together and sometimes even regarded as in the same category as Japan, in truth Japan accounted for 11% of world GNP while these four together accounted for only 4%. This diversity was particularly marked in such areas as income per head, life expectancy, students completing secondary education and resources applied to research, and was even greater if other countries in the region were considered. Nevertheless, all the NIEs showed high growth, strong domestic structures and strong export orientation. Demographically they were mature societies, tending towards a down-turn. Labour costs were no longer low, which accounted in part for the drive towards direct investment elsewhere (if Japan’s labour costs were taken as 100, those of the Philippines were 20 and of the US 80).

Other factors too needed to be considered. For example, in Singapore and Hong Kong, pressure on land was intense and food could become a problem: they were not balanced economies.

Other general points were: the pace of change, which made forecasting more than usually risky, the absence, despite the fact that many of the major conflicts since 1945 had taken place in Asia, of any generally perceived threat, though individual countries might have concerns over particular neighbours (and there might be some residual concern in particular countries over possible Japanese domination despite assurances that Japan sought no such thing); the probable, indeed certain, reduction, though not disappearance, of the US military umbrella (given effect through bi-lateral agreements as well as through ANZUS and at one time SEATO), under which the prosperity of the region had grown so dramatically; and the inevitable accretion of influence deriving from economic power, regardless of the intentions of the possessor of that power.

There was much discussion of China in one of the groups, though less in the plenary. The point was made that the shock of the Tiananmen Square massacre in June 1989 had probably been greater outside the region than within it, with the possible exception of Hong Kong. Cautious optimism was expressed that despite that setback, economic and probably political reform in China would go forward, particularly in the coastal provinces, especially if the elderly leadership passed on, but that greater economic autonomy was most unlikely to lead to political separation.

The point was made that we must watch Taiwan: the time had perhaps come for an opening up there, lest isolation of such a dynamic economy led to trouble.

The future of Hong Kong was discussed: here also cautious optimism was expressed by some though others who were optimistic about China were less so about Hong Kong. Economic growth in the coastal provinces, especially Canton, where Hong Kong’s investment was greatest, should ease Hong Kong’s passage. It would be further eased if there were renewed liberalisation in China. Prudence in Hong Kong’s reaction to events in China could serve to reduce Chinese suspicions. Meanwhile, Britain and other countries could help by offering the possibility of future emigration, without requiring immediate physical removal. There had always been emigration from Hong Kong, as well as immigration into it: the problem was one of degree.

There was some discussion of North Korea whose predictable reaction to the meeting between Gorbachev and President Roh of South Korea emphasised the dilemma the North faced: they could not afford to open up since the regime depended on insulating the people, but unless they did, they faced a bleak economic future and increasing isolation.

There was remarkably little discussion of the role of the Soviet Union which had been re-trenching in the Pacific. The Kuriles remained the major issue between it and Japan, but Japan could afford to play that long.

US-Japanese relations took up much time. There was some debate whether the real issue was the US trade deficit - the success of Japan and the NIEs was largely dependent on the US market - or the threat, as seen by American public opinion, of Japanese direct investment, despite the benefits it brought. No conclusion was reached. (The pros and cons of foreign direct investment are to be the subject of a future Ditchley conference.) However, in general it was agreed that on the one hand Japanese business needed to adapt better to the host country’s ways, to be good corporate citizens, and, on the other, host countries needed to adapt to Japanese management styles. In the context of the Strategic Impediment Initiative (SII), it was remarked that Japan had undertaken certain specific commitments, which it would probably honour, while the US had accepted certain broad principles which they would probably not apply: the faults did not all lie on Japan’s side.

It was noted that foreign direct investment was growing, most notably from Japan, but also from South Korea and elsewhere, both in the region, e.g. Thailand, Indonesia and Singapore, but also in Latin America and Europe. This, it was felt, was not part of governmental strategy - indeed many questioned whether even in Japan there, had ever been a central strategy: it arose from individual businesses and finance houses pursuing competitive advantage. One speaker however stressed that technology was the key: Japan’s technological lead would inevitably give it world economic domination, which he believed was Japan’s goal; and the widening lead made it increasingly difficult for the competition to catch up.

There was disagreement over the future of regional groupings, in particular of the Asia-Pacific Economic Cooperation Council (APECC) and the Pacific Basin Community initiative. Some, while accepting the diversity of the region, believed a common point of view, at the least, and similar cultural traditions tended to bring the East and South East Asian countries together. Any grouping should not become a closed trading bloc - indeed it was noted that in relation to trade with the rest of the world, intra-regional trade had grown much more slowly in the last decade - and Japan certainly would remain a global as well as regional actor. There would be value in such a grouping as a forum for leaders to get to know each other, and, despite the diversity of threat perception, some saw advantage also in some such grouping in the security field, especially if it could address also de-stabilising economic and social issues. Japan, though not aspiring to the role of hegemon, would nevertheless be forced to provide leadership (a quality which domestically, it was noted by some, seemed to be outside the Japanese tradition and without which it had done very well). The US and Australasia, where perhaps the greatest interest in such groupings existed, as well as South East Asia should be involved and, one suggested, Europe too - the need for European governments (business was already much engaged) to pay more attention to East and South East Asia was strongly pressed by several. The role of ASEAN was largely discounted.

Tourism played a part and was a two-way process. Japan’s cultural influence within the region was noted and the opportunities it gave, provided Japan used it wisely and sensitively There was scope in Japan for better education in past history and current events, with a view to producing better-informed public debate of global issues.

However, the rest of the world needed to act with due modesty: European models, whether of democracy or of regional organisations, were not necessarily adaptable to Asia. While the protection of fundamental rights must be of concern, there could be a variety of ways of securing it: it was notable that the East Asian “tigers” had achieved their success under various forms of more or less authoritarian regime. With prosperity would come demands for political liberalisation and greater concern for the quality of life, trends already noticeable in Japan, South Korea, Taiwan and elsewhere.

Finally, it was interesting that the IMF and the GATT were scarcely mentioned, and the UN not at all.

This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression. 

Conference Chairman: Sir Leslie Fielding KCMG
Vice Chancellor, University of Sussex (1987-); UK Member, High Council of European University Institute; Hon President, University Association for Contemporary European Studies; Founder Member, the Japan/EC Association (JECA)


Professor Robert O’Neil

Chichele Professor of the History of War, University of Oxford and Fellow, All Souls College, Oxford; a Governor, the Ditchley Foundation
Dr Jenny Corbett
Nissan Institute of Japanese Studies, Oxford; Nissan Lecturer in the Economic and Social Development of Contemporary Japan and Faculty Fellow, St Antony’s College, University of Oxford

Mr Robert F Cooper MVO

Head, Policy Planning Staff, Foreign and Commonwealth Office; Member, Programme Committee, the Ditchley Foundation
Dr Peter Ferdinand
Head, Asia-Pacific Programme, The Royal Institute of International Affairs
Sir Sydney Giffard KCMG
Retired from Diplomatic Service. Ambassador to Japan (1984-86)
Mr Ian Hartigan
Regional Co-ordinator (East Asia), British Petroleum Co pic, London
Professor Christopher Howe
Professor of Economics with reference to Asia, University of London; Member, Economic and Social Research Council Research Development Group; Chairman, Japan & SE Asia Business Group
Mr Jurek Martin
Foreign Editor, The Financial Times, London
Mr Robin McLaren CMG
Deputy Under Secretary of State, responsible for Asia and the Americas, Foreign & Commonwealth Office
Mr John A Morrell
Chairman, Baring International Investment Ltd, Director, Baring Asset Management Ltd; a Governor, the Ditchley Foundation
Mr Hugh Norton
Managing Director, British Petroleum Co pic
Sir John Swire
Honorary President and Director, John Swire & Sons Ltd; Director: Swire Pacific Ltd; Member, London Advisory Committee, Hong Kong and Shanghai Banking Corporation; Euro-Asia Centre Advisory Board

Dr Graeme McDonald

President & Chief Executive Officer, Asia Pacific Foundation, Vancouver (on secondment for three years from Northern Telecom Canada Limited)

Professor Fran
çois Joyaux
Professor of international relations with reference to Far East, University of Paris
M Alain Vernay
Economic Adviser to General Director, Le Figaro and Head of Japan/East Asia desk; Adviser to Institut Français des Relations Internationales (IFRI)

Professor Joachim Glaubitz

Senior Research Fellow, Asian Affairs, Stiftung Wissenschaft und Politik; Professor of International Relations, University of Munich
Professor Reinhard Drifte
Professor Dr Dieter Schneidewind

Member of the Board, Wella AG; Economist; Lecturer, University of Duisburg; President, German Asia-Pacific Society

Mr K C Kwong

Deputy Commissioner, Hong Kong Government Office, London

Mr Ichiro Fujisaki

Political Counsellor, Embassy of Japan, London
Professor Haruo Shimada
Economics Department, Keio University, Tokyo
Mr Yoshinori Yokoyama
Director, McKinsey & Company Inc., currently Manager, Tokyo Office. Since 1975 consultant: on total company strategy, globalization strategy, corporate restructuring and reorganisation for major Japanese corporations, including financial institutions and manufacturing companies

Mr Sang Hoon Cho

Counsellor, Embassy of the Republic of Korea, London

Mr Robert A Cornell

Deputy Secretary-General, Organisation for Economic Co-operation and Development. Professor Reinhard Drifte, Professor of Japanese Studies, University of Newcastle and Director, Northumbrian Universities’ East Asian Centre, Department of Politics, University of Newcastle

Dr Mark Borthwick

Executive Director, Pacific Economic Cooperation Conference
Dr Robin Broad
Assistant Professor, International Development Program, School of International Service, American University; Term-member, Council on Foreign Relations; author
Mr Roger A Brooks
Director, The Asian Studies Center, The Heritage Foundation, Washington DC; Consultant on Defense and Defense-industrial issues to Under Secretary of Defense for Research and Engineering (USDRE) and various aerospace firms in the US and Western Europe
Professor John Campbell
Associate Professor of Political Science and Associate, Center for Japanese Studies, University of Michigan; specialist in Japanese politics, decision-making and social policy.
Mr John Cavanagh
Co-Director, World Economy Project, Institute for Policy Studies; author
Dr Richard L Drobnick
Director, International Business Education & Research Program, Graduate School of Business Administration, and Research Associate, East Asian Studies Center, University of Southern California; Member, US National Committee for Pacific Economic Cooperation and Export Advisory Council to US Department of Commerce; Director: California Council for International Trade, Hong Kong Association, and Japan-America Society of Southern California
Mr Charles D Gray
Executive Director, Asian-American Free Labour Institute (Executive Director); Representative of AFL-CIO, Committee for Pacific Cooperation
Professor Lawrence B Krause
Professor, Graduate School of International Relations & Pacific Studies, University of California San Diego; Coordinator, Pacific Economic Outlook Project for Pacific Economic Cooperation Conference
Mr George Melloan
Deputy Editor (International), The Wall Street Journal (New York) responsible for the editorial pages of The Wall Street Journal Europe and the Asian Wall Street Journal and writing on global affairs
Dr Robert Oxnam
President, The Asia Society; Member: Association of Asian Studies, National Committee of US-China Relations, US National Committee for Pacific Economic Relations, Council on Foreign Relations
Mr Paul S Slawson
Chairman and CEO, Inter-Pacific Group; Trustee, Asia Foundation; Member, Council on Foreign Relations, US National Committee for Pacific Economic Cooperation
The Hon Adlai Stevenson III
Lawyer, Mayer, Brown & Platt, Chicago

Mr Attila Karaosmanoglu

Vice President, Asia Regional Office, The World Bank, Washington