Trans-Pacific Rebalancing
Post-event Statement
|
The conference on Trans-Pacific Rebalancing was held on 3-4 March 2010 at ADBI in Tokyo. The participants included members of the core study team, resource persons who commented on the various draft reports, and a broader audience including government officials of Asia and the United States, multilateral agencies, and academics.
The conference was divided into five sessions. The first session discussed the magnitude of global imbalances focusing on Asian countries and the US, the role of exchange rates in the process of global rebalancing scenarios, and circumstances under which countries would eliminate persistent current account surpluses and deficits. The participants agreed that global rebalancing would not occur automatically, and hence appropriate policy actions would be needed by all countries especially those that have large payments surpluses and deficits.
The second session focused on how exchange rate changes can affect rebalancing Trans-Pacific trade, and how the US economy and its external balance might progress in the future. This session included a debate on the suggestion that the US should consider following other countries in the use of capital controls intended to force limits on the current account imbalance.
The third session discussed the growth rebalancing challenges faced by Japan and the People's Republic of China (PRC). Both countries have been heavily dependent on exports. It was argued that “green” industries may provide a second avenue of growth for Japan while further liberalization of factor markets would help rebalancing external imbalances in the PRC.
Session 4 presented the fact that the abrupt shrinkage of external demand in Asia has raised questions about the trade-dependent growth strategies in emerging Asia. The session focused on specific rebalancing issues in ASEAN, India, and Korea. For ASEAN and India, participants agreed that there is a clear for stimulating domestic demand through investment, particularly, investment in infrastructure. In the case of Korea, one of the measures discussed was the need to reduce corporate savings and to raise the reinvestment rate, particularly in the services industry.
The final session was devoted to a panel discussion which further explored challenges faced by the world towards achieving global rebalancing. The panelists concluded that it is important to discuss the global rebalancing issue in the context of achieving strong and sustainable growth in the world, which requires an international collective action.
|
Purpose
The purpose of this conference is to discuss issues related to trans-Pacific rebalancing. The participants in this workshop will include members of the core study team members, other resource persons who will comment on the various draft reports, and a broader audience including interested government officials of Asia and the United States, multilateral agencies and academics.
Background
Sustained economic growth can contribute significantly to poverty reduction. Indeed, countries that have enjoyed economic growth for long periods of time have witnessed marked declines in poverty incidence. But an economic and financial crisis could frustrate this development. Even though countries can recover quickly from the crisis, they may not return to the same growth path as before the crisis, thus delaying further the economic development process. Because a crisis can have long-term developmental implications, ADBI is keen on making a contribution to the understanding of the causes of a crisis and to the formulation of policy measures that ADB's developing member countries (DMCs) could adopt to avoid a crisis.
The current financial crisis and global economic downturn did not originate in Asia, and, indeed, Asian countries in structural terms are generally in good shape. Nonetheless, Asian economies and financial markets have felt the impacts of the crisis. The most obvious areas of impact have been exports and equity markets, which have declined sharply across the region, but stresses in currency and credit markets have emerged as well, and domestic demand has softened. This sensitivity has been heightened by the export-led growth strategies followed by many countries.
ADBI is planning a series of conferences related to the crisis, including identifying its likely impacts on Asian countries, developing scenarios for growth re-balancing away from exports, and developing recommendations related to macroeconomic policy, structural and institutional innovations, regional integration and financial reform. This conference will focus on issues related to trans-Pacific rebalancing.
The primary objective of the research project is to examine factors that would achieve balanced, sustainable growth in the two regions, the United States and Asia, and the policy implications of these adjustments in both regions. The ongoing global financial crisis is forcing adjustment to trans-Pacific payments imbalances, but in a disruptive way accompanied by excessive contraction of economic activity and rising unemployment. This is clearly not a desirable way of reducing imbalances. From medium-term perspectives various policy changes may be needed to ensure that this rebalancing process promotes growth in both regions in a sustainable way. The study focuses on several issues including the appropriate levels of domestic S-I balances, the scope for policy changes to affect these balances, and the magnitude of exchange rate changes required to switch the allocation of demand between domestic and foreign sources and of supply between tradables and nontradables sectors. Why is saving so low in the United States and what will be the effect on consumption of the recent wealth losses and of debt decumulation? Can the government budget deficit be brought back under control? What would be the required change in the real exchange rate to bring about the re-alignment of resources? On the Asian side, why is saving so high? How is the high saving distributed among the household, business, and government sectors? What needs to be done to promote domestic growth? Can growth be sustained at a high rate without a large stimulus of exports to the U.S. market?
Outputs
ADBI working papers
ADBI Research Policy Brief
Partners
Brookings Institution
|
About ADBINews & EventsSpecial ProgramsPartnerships
News and Events
Back to Top
