Abstract

A. Globalization and Economic Growth in East Asia
The global economy surged ahead after World War II, bringing forth a rapid growth in international trade. The growth was spectacularly fast in the last two decades of the last century. Trade volumes soared from US$3.88 trillion in 1980 to US$13.41 trillion in 1998, posting an annual increase of 6.73 percent. Countries around the world, as a result, became more dependent on trade for growth in their gross domestic product (GDP). Trade accounted for 48 percent of their GDP in 1998, phenomenally higher than the 28 percent registered 19 years before. The trend toward heavier reliance upon foreign trade has been more impressive among almost all major world powers. Globalization is the wave of the future.

1. Globalization and Three Trade Blocs
With globalization well under way, a number of important trade blocs have emerged in the world. The top three of them are Western Europe, Asia and North America. Western Europe’s intra-bloc exports represented 30.9 percent of the world total in 1995. Those in Asia and North America accounted for 13.5 percent and 5.7 percent of the global aggregate respectively in the same year. In other words, the intra-bloc exports of the group of three constituted one half – or 50.1 percent, to be more exact – of the total global merchandise exports in 1995. In that year, on the other hand, inter-bloc exports from Asia to North America accounted for 6.3 percent of the world total. The similar sales from Asia to Western Europe represented 4.4 percent of the global total, while those in reverse came to a slightly lower 4.3 percent. They were the world’s top three in the ratio between inter-bloc exports and the global aggregate. Exports from Western Europe, Asia and North America to the world (both within the blocs and without) reached 44.8 percent, 26.5 percent and 15.9 percent respectively – and a combined 87.3 percent – of the 1995 global total. That left merchandise exports of the rest of the world at a mere 12.7 percent. This clearly indicates the dominance of the three blocs in international trade. The trade blocs – Western Europe, North America with the United States as its leader and Asia led by Japan and newly industrialized countries of the region – have formed the world’s three economic centers. 
2. Asian Bloc 
Intra-bloc exports of Western Europe, Asia and North America accounted for half of the world total again in 2000. Although inter-bloc exports of the group of three remained just as important as they had been in 1995, the first year of the millennium saw Asian merchandise shipments to North America and Western Europe as well as European sales to North America growing fast in their share in the global export trade. What is worthy of note is that in the five years – from 1995 to 2000 – Western Europe’s share of intra-bloc exports in the global total shrank by 4.2 percentage points and its foreign sales lost 5.3 points in their proportion to the world’s export trade. In the meantime, the corresponding ratios of North America’s intra-bloc exports showed little change. Asia, despite its financial crisis in 1997, remained strong in the export trade in the same half decade. Judging from the fact that exports from Western Europe have been on the decrease while trade relations between North America and Asia are being further strengthened, we can safely say the center of international trade is beginning to shift from the Atlantic region to the Pacific.

3. Foreign Investment in China 
Globalization has catalyzed an international division of labor. Global foreign direct investment (FDI) is soaring as a result. World Bank statistics show the international FDI’s, which represented 0.77 percent (US$198 billion) of the world’s GDP in 1990, reached 1.08 percent (US$309 billion) in 1995 and further rose to 2.15 percent (US619 billion) in 1998. The world’s two top FDI nations are the United Kingdom and the United States. In 1999, FDI’s in the United States and the United Kingdom totaled US$276 billion and US$82 billion respectively, whereas those from the two countries amounted to US$151 billion and US$199 billion. What merits attention is that the People’s Republic of China has become the largest FDI-receiving country of the developing world. China received US$40.4 billion in FDI in 1999, following only the United Kingdom, the United States and Sweden. This clearly shows that China’s market potential is great enough to attract substantial foreign investment.

An analysis of basic economic factors has convinced us that globalization of the world economy has contributed to the development of the Asian trade bloc and East Asia, where China is fast becoming a hub, possesses an increasingly strong potential for growth. Joseph E. Stiglitz, a winner of the Nobel Prize in economics, points out that if there are still breaks in the clouds over the gloomy world economy, they can only be found in China and India, where economic growth is simply amazing. According to WTO (World Trade Organization) statistics, the People’s Republic of China, where FDI’s have continued to pour in, exported 3.9 percent of the global outbound trade and imported 3.44 percent of the inbound total in 2000, ranking as the world’s seventh largest exporter and its eighth top importer. Japan, Taiwan, South Korea, the United States and Germany were China’s top five suppliers in that order.


B. Opportunities and Challenges for East Asia
Globalization provides East Asia with opportunities and challenges. While spurring a strong economic growth and contributing to the formation of the Asian trade bloc, globalization has compelled the countries of the region to cope with the negative impact of a worldwide depression on their domestic economies. The financial crisis of 1997 and the current global economic downturn have slowed down international trade, thereby delaying a quick recovery of the export-oriented East Asian economies and adversely affecting their growth. It is time for East Asian countries to make a strategic change. They must stop pursuing an individual economic take-off. They should instead work for stable economic growth through greater intra-bloc and worldwide trade. This new approach – pursuit of "mutual benefits through symbiosis" – will enable them to meet successfully the challenges which globalization has posed. The change in strategy requires the following reforms: 
a. Better Financial and Economic Structure
The financial crisis of 1997 has made the world realize the portentous importance of the soundness in a nation’s financial and economic structure to the regional, and even worldwide, economic order. Economic troubles in one country will spill over to its neighbors, affecting even the entire progressively more interdependent world, where the importance of that soundness cannot be overemphasized. Besides, globalization, albeit helpful to economic and trade development, exposes nations of the world to the pressure of market opening. A sound economic and financial structure will help them reduce the risks their market opening incurs.
b. Asian Monetary Fund (AMF)
Japan, Southeast Asia’s largest creditor nation, proposed to form an Asian Monetary Fund (AMF) in the wake of the financial crisis of 1997. Kiichi Miyazawa, Japanese prime minister at that time, advanced a plan to raise US$30 billion for the AMF. Under what has come to be known as the new Miyazawa Plan, the fund would be equally split to satisfy the long-term and short-term capital needs of countries in financial crisis. It was hoped that the AMF would bring about mutual economic assistance among East Asian countries, stabilize their foreign exchange rates and revive regional trade. The Miyazawa Plan did not materialize because of opposition from some of the countries of the region.
Now that Asia has finally recovered from the crisis of 1997, while South America is getting into another round of financial troubles, we deem it necessary to consider forming the AMF again, particularly at a time when the International Monetary Fund (IMF) finds it hard to acquire a better understanding of the overall financial needs of East Asia. The Asian economy as a whole has already developed to such an extent as to fulfill every requirement for the establishment of the AMF. One basic requirement – contributions to the AMF – can be easily met, for East Asian countries, where a savings rate is high and trade surpluses are piling up, have accumulated large foreign exchange reserves. Their similarity in culture, economic structure and social order makes it easier for the AMF to understand Asian problems better than the IMF and come up with solutions that conform to the conditions of each country in need of help.
At a 1998 meeting of the APEC Business Advisory Council (ABAC), Taiwan proposed a "Collateralized Bond Obligations (CBO)" plan, which would, through risk-sharing and the strengthening of credit standing, improve the investment value of both state and private bonds and induce a steady inflow of international long-term capital to needy nations. The CBO plan was supported in principle by Japan, Singapore, Brunei, the Philippines, Indonesia, Thailand, and Malaysia. American representatives at the ABAC meeting voiced their willingness to further study its feasibility. If the ABAC adopts the CBO plan, Taiwan will give whatever support is necessary for its implementation.
c. Better Economic Cooperation 
Economic cooperation will gradually replace mutual competition in the course of globalization. Closer cooperation comes about with the help of economic organizations, regional and worldwide. Among the regional organizations are economic communities and free trade zones. And economic competitiveness results from closer cooperation. Of the three trade blocs Western Europe has the most integrated regional economic cooperation scheme. The European Union has evolved from the European Economic Community (EEC). After the NAFTA (North American Free Trade Agreement), a Free Trade Area of the Americas (FTAA) is emerging on the New Continent. Asia is a latecomer, but plans are afoot for closer regional economic cooperation. An agreement has been reached between the People’s Republic of China and the ASEAN (Association of Southeast Asian nations), under which a free trade zone will be jointly formed in 10 years. Another free trade zone – encompassing China, Hong Kong and Macao – will be set up in 2007. Japan is proposing to found an East Asian Free Trade Zone by 2010. All these developments point to the fact that the foundation has been laid for regional economic integration in Asia.
d. Strong Domestic Market 
East Asia largely depends on fast-increasing foreign trade for continued economic growth. Consequently, the region relies heavily on foreign markets, the U.S. market in particular. When major foreign markets weaken in a recession, East Asian countries invariably suffer. Their domestic economy is prone to adverse impact from an economic downturn in foreign land. It is advisable that they develop domestic markets to alleviate any such impact as may result from a downturn in the business cycle in importer nations. One example suffices. Three countries of the region – Indonesia, Thailand and the People’s Republic of China – have large domestic markets. Each of them is in possession of rich natural, tourism and other resources as well. If they make better use of these resources to develop new industries, not only can they lessen their reliance on foreign sales of finished products, whereby lowering the risk of an overseas business cycle, but will also attain a balanced industrial development and create new job opportunities.

C. Taiwan's Opportunities and Challenges in East Asia
Taiwan has a vital role to play in East Asia. With the rise of China as an economic power, one unique advantage Taiwan has to bolster that role is that its people and those on the Chinese mainland belong to the same race and speak the same language. Taiwan has superior opportunities to ride on the wave of globalization. Prior to 1992, Taiwan relied heavily on the American market. China has since replaced the United States as Taiwan’s chief market. In the meantime, industry has been upgraded in Taiwan. The successful upgrading has been made possible, after Taiwan shed most of its traditional labor-intensive industries through outbound investment in China and Southeast Asia. Exports the high-skilled labor-intensive industries shipped in 1993 accounted for 27.62 percent of Taiwan’s total overseas sales in that year and soared to 49.53 percent in 2000. That ratio surpassed the one between the exports by low-skill labor-intensive industries and Taiwan’s total overseas sales in 1994. We call this the first golden cross. Two years later, in 1996, we visualized our second golden cross – the first ratio surpassing the one between exports by medium-skill labor-intensive industries and the total outbound sales. 
Taiwan’s lead in globalization has eroded after the change of government in Taipei in 2000. Relations across the Taiwan Strait have deteriorated since the Democratic Progressive Party came into power. The quick change for the worse in cross-Strait relations has impeded progress in economic exchanges between Taiwan and China. As East Asia expects to form an economic bloc with the ASEAN and China at its center, what occurs in cross-Strait relations will crucially affect Taiwan’s future economic development. As a matter of fact, we have been trying hard to participate actively in all regional and international economic organizations. Most of them, however, have barred Taiwan from participation. As Taiwan and the rest of East Asia have become so economically interdependent, any regional organization without our participation will meet with difficulty when it starts enforcing regional development plans. We look forward to more openness in East Asia. It is our hope that East Asian nations, while planning for regional development for the future, will let every country in the region participate.

D. Conclusion
Globalization provides East Asia with opportunities as well as challenges. Only through untiring efforts to seek steady regional as well as worldwide economic growth can East Asian nations hope to live together in common prosperity. While cementing intra-regional economic ties, East Asia needs to strengthen cooperation among nations of the region and with the other two trade blocs. Taiwan looks forward to serving as a relay station on the high road of economic interchange between Asia and the rest of the world. Taiwan also wants to be an Asian operation center for the world economy. It is hoped that a win-win situation can be achieved through economic and trade exchanges.

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