Remarks at the Asia Society Hong Kong Center Luncheon

Dr. William Overholt
Center for Asia Pacific Policy Chair in Asia Policy Research, RAND

Hong Kong, October 7, 2003

Speech and Q & A session.

Thank you very much and thanks to the Asia Society and the Yale Club for inviting me. I do feel like I am coming home. I was out in the harbor watching the fireworks the night before last and thinking, why did I leave this place?

The Chinese currency has become one of the great, burning, political issues in Italy, in the United States, in Japan and a strange, seemingly very technical subject has become so exciting. It has become so politically exciting that I think it is important to go back and establish some facts. I do not want to give a boring, technical lecture but let me just start off with some facts.

That the Chinese currency was a typical third world, socialist currency until the early 90’s and they let it go briefly in 1994 and it went up to substantially weaker than it is today. And they thought, “Well, this might hurt our state enterprises’ ability to repay the debt”, so they pulled it back a little bit. They intended to move fairly quickly towards complete liberalization but then the Asian crisis intervened and thought, “We do not want that to happen to us”, and so they pegged it, or they fixed it, but they always said, “We do not want a fixed currency. We want a stable currency” and the goal has always been to liberalize it completely and that is not understood overseas.

When people start arguing about what is the right value of this currency they come at it from all sorts of different directions. The ones who want to make the strongest case that it is undervalued compare what the Chinese currency will buy with what the dollar will buy and the Chinese currency will buy four times more than its equivalent in US Dollars. So by that measure it is drastically undervalued, as most third world countries are -- India is about three times -- but only part of the Chinese economy is in the world market, so you cannot really compare that purchasing power parity, as it is called.

If you look at the time when it briefly was a market currency back in 1994 and do all the economics of where it should have gone since then, you come to the conclusion that it should be about ten and a half Yuan to the Dollar. In other words, it is drastically overvalued, not undervalued. But if you look at the trade flows, the foreign direct investment flows, you would say, “Oh, this must be an undervalued currency, everybody is trying to get in there”.

What has happened to the Chinese currency compared with its trading partners? That is the most important question an economist asks and you have to look at the fact that all the other Asian currencies have devalued, and you have to compare the inflation rates, and you find that since the early 1990’s that it has actually appreciated about 10 per cent compared to the partners that it trades with around the world. So the fact that it has been fixed in nominal terms against the US Dollar does not mean that it has been static. Actually it has become quite a good deal more expensive compared to its trading partners.

So what are the pressures on it today? When you look at the indicators -- the politicians around the world only look at one side of the balance sheet and look at the huge trade and investment inflows, huge trade flows until recently -- it looks like the trade surplus is declining. You say, “Well, it looks undervalued”. If you look at the fact that they have had years and years of deflation, economists associate deflation with overvalued currencies, so the indicators point in that direction.

What are the Chinese worried about? Well they worry a lot more, if they had just opened it up, about devaluation than about appreciation. Why is that? The lesson of the Asian crisis for them was if you open up your currency and your capital markets before you fix your banks you are dead. And, sure enough, there are a couple of trillion dollars equivalent of deposits in Chinese banks. They are in insolvent banks and they are earning interest of less than one per cent.

Now, what would a sensible Chinese person do if he had the opportunity to invest in any bank anywhere in the world? Some fraction of those who were educated and had some sense of what was going on in the world would probably put money in HSBC or Citibank or somewhere outside of China, and if even a tiny, tiny proportion moved their money out you would have a sudden drastic depreciation of the currency and you could have a banking collapse that would affect all of Asia. That is what is on the Chinese policy makers’ minds.

That is very different from what most Western thinkers believe the Chinese have on their mind. What they think they have on their mind is that these Chinese are playing a game of trying to keep their currency down so they can maximize their exports and screw the rest of the world, including especially the United States.

It is possible to get some objective evidence on that subject of motivation because, when the Chinese currency was fixed where it was, where it is, back in 1994, they fixed it at an overvalued level. They deliberately pulled it back from the market value and we could tell that it was really overvalued because I would go bicycling up in Guilin and people would come up beside me on bicycles and want to give me more Chinese currency than the official exchange rate.

We could also look at which way illegal capital was moving and it was moving out of China, and it was moving out of China until very recently. In fact, through the first quarter of 2001 there was net capital flight and the black market was in the direction of saying the currency was overvalued. So from 1994 to early 2001 the affect of this Chinese currency policy was to keep their currency overvalued compared with the market, and since then it has gone the other way. The black market dried up in the middle of 2001. Last year illegal money started flowing in, not out, and this year the amount of money illegally sneaking in to China is in the tens of billions of dollars. We do not know whether it is 30 billion, or 40 billion, or 50 billion, but it is very big numbers. So it does look undervalued by those criteria right now, but that certainly was not what the policy was designed to do, and that is not what the policy has done during the vast majority of time when this policy has been in place.

So the currency does look a little bit overvalued, or undervalued, but not a lot. The current account balance for this year looks like something close to zero. We will not know until the end of the year, but China is not running huge current account surpluses. It is running surpluses with the United States and, of course, that is what Americans focus on, but on a global basis it has surpluses with some places and deficits with others, runs huge deficits with places like Taiwan, and if you added up all the American trade that is eventually connected to China you would probably find that it was much closer to balance, but the way the accounting is done gives this illusion of this huge, huge deficit.

What is the politics of this situation? Well, if you look domestically at China, the state enterprises -- which in some cases have substantial foreign debts -- all want the currency to be stronger, and in Brazil or Argentina that would be decisive. The big companies pressure the government and they keep the currency overvalued.

The interesting thing about China is that the Communist Party has disconnected itself from its old economic base and it does not care that much about the interests of the state enterprises. The exporters, of course, want to go in the other direction but the Chinese government really is not listening either to the exporters or to the indebted state enterprises. It is just worried about its banks. It is worried that, if it opens up, then the money will flee the banks and they would have an Asian crisis-type disaster.

Well, what about the pressures from outside China? The weakening US Dollar and the fact that the Asian countries all kept themselves basically fixed against the US Dollar made most of the upward pressure push on the Europeans, so they got mobilized. Now the Euro is just not quite back to where they said it should be when they started it and their economic problems largely result from excessively high interest rates and lack of labor mobility at home and that kind of thing, but it is very convenient to focus on the Chinese.

Japan has been saying for quite some time -- the Vice Minister of Finance has been very outspoken -- that China is the cause of Japan’s deflation; the Chinese currency is the cause of Japan’s deflation … saying this for more than a year now and trying to mobilize other countries to pressure the Chinese. You can do some fairly simple economic calculations that show that the absolute maximum effect of the Chinese currency on Japanese deflation would be somewhere between 0.1 and 0.2 percentage points out of a total deflation of 3.5 percentage points. So it is hard to find it, it is so small.

Similarly, the United States has had what is widely advertised by the National Association of Manufacturers and some of the labor unions as a manufacturing job crisis -- 2.7 million jobs lost -- and they blame this on undervaluation of the Chinese currency. There are some problems with that position.

One problem is that, if you look at just the domestic developments that would affect employment in the United States, the recession -- or just take one, the fact that productivity is growing faster than the economy. If your economy is not growing at all and your productivity is rising rapidly then you are going to be able to do the same amount of work with fewer people, so you are going to lose jobs. If you go over the last few years and run the calculation as to how many jobs should be lost, just from the productivity rising faster than the economy, we should have lost more jobs than we have. The mystery is why there are so many jobs.

The other problem of this perspective is that the figure of 2.7 million manufacturing jobs lost comes from surveying the big companies and what happens in the United States and all other economies -- the same thing happens in China -- is that over time big companies shed jobs and smaller companies create jobs. So that survey that is always cited by the manufacturers’ groups and the labor unions gets the big companies’ losses, but it does not capture the small companies’ gains. If you survey households -- which brings just about everybody into the net -- the net job loss in the recession, or the total job loss has been about 220,000 which is very, very, very small for a recession.

So there have not been that many jobs lost and, even if you take the exaggerated numbers of jobs lost, they were not caused by the Chinese currency. And if you think about it for a minute, you have got some guy, some skilled worker in Sichuan that is earning $30 a month and his counterpart, who fixes my car in Santa Monica in California, earns $34 an hour. Now, if you move the Chinese currency 20 per cent, the Chinese guy goes to $36 a month and the American guy is earning $34 an hour. Is that going to shift a lot of jobs back to the United States? Probably not.

The other thing is that the impression is that, if you shift the Chinese currency up 20 per cent, that that full difference between $36 and $30 will flow into the price in the United States, but it does not work that way. The majority of things that China exports are made with imported parts.

The best estimate I was able to get from the World Bank was that about a minimum 50 per cent, but probably about 75 per cent of Chinese exports are from imported goods. In other words, a Nike shoe that costs $100 would have $75 of imports behind it. Actually, the reality with Nike is -- and Zhu Rongji used to complain about this -- that out of a $125 shoe, China gets $2. So you do not get a $36 effect out of moving the Chinese currency, you get a $1.5 effect. It is miniscule.

So the economics does not work but the politics is very strong and the view is that, in Japan, or Europe, or the United States, “Well, we can admit that our economic programs are not working fast enough, or we can blame it on the Chinese” and in an election year it is a lot easier to blame China.

In the United States, in contrast for instance with the Japanese Finance Ministry, they are trying to make the public statements stand up economically and be extremely responsible. So Greenspan will testify that, “Well, this huge inflow of money is going to cause a lot of problems, domestically, for China and China might want to think about the consequences of that and start thinking about moving its currency”.

If you look at the testimony of the Under-Secretary of the Treasury, Taylor -- who is a very good economist -- or of Snow, it is very precise, and very careful, and there is a tremendous effort not to cause trouble for China, but the politics is not something they want to confront head on, and the risk, of course, is that the politics gets out of control in the United States, in Japan, in Europe. The Italians have become fanatics on the subject. The Po Valley in particular has gotten focused on this. We have got one governor in the United States that said that the person she endorses for President will be solely based on his position on the Chinese currency.

Initially, Secretary Snow said that what the Chinese are doing is bad, but what the Japanese are doing is okay because the Japanese have problems. And then somebody reminded him that the Chinese had some problems too, and since then everything has been phrased, you know, “We think all countries ought to have market or market-driven currencies”. Japan has shot itself in the foot a little bit because an awful lot of the pressure has actually fallen on the Japanese Yen, even though all the political rhetoric has fallen on the Chinese currency.

One view in Washington is that it is good that this pressure is focused on the currency because nothing is going to happen on the currency. Whereas, if it gets focused on textiles and steel and trade issues, then we have a setback for trade liberalization and we do not want that, but that is happening very fast. The game is shifting very quickly.

I was in Beijing last week and one big American company said that they had been promised that within 30 days the Bush Administration will put quotas or tariffs on brassieres and gowns -- I do not know how brassieres got singled out -- but things are happening, it is moving, and American companies are getting scared that they will put huge amounts of investments in China and then they will be blocked either by tariffs or quotas from actually importing those back for use in their stores, and so many companies are drastically cutting the total percentage of their goods that they are willing to source from China. You cannot see this in the numbers yet, but it is happening. I do not know how far it will go, but it is serious if this continues too long.

A little insight, Washington Beltway view on how the politics of this has evolved… for a while the major newspapers simply reflected the press releases of the National Association of Manufacturers and the unions and still most of the news columns do, but then in September you had The Wall Street Journal and The New York Times come out with very, very balanced, careful, economically-sound editorials, even while their columnists were writing these stories about “Currency is 40 per cent overvalued and this is costing 2.7 million American jobs”, and so forth.

At the end of September, on September 24th, the National Association of Manufacturers split on the subject, because a lot of these big companies are importers and so, Jerry Jasinowski, the leader, stepped back and he said, “Hey, we are not going to take a strong position as an organization”. So it is getting more complicated, but still the pressure is on because there are key Congressmen in key districts that are in a very difficult position and they are not going to give up on this issue.

And the Democrats --now, whoever is out in the United States finds it very convenient to beat up on China. Reagan did this in his campaign; he was going to improve relations with Taiwan. Clinton did this; he was going to take away MFN. Current President Bush did this. The only one who did not do it was his father, because his father had spent his life in international affairs and appreciated the potential consequences of this game. George W came in saying, you know, China is a strategic adversary. There are still people in his administration who take that view but all of these presidents got concrete experience, learned that these positions have unfortunate consequences, and George W now has a very sound kind of balanced policy and you have Colin Powell saying it is the best relations we have had with China in many years. There are people over at the Pentagon who would not endorse that. We have multiple foreign policies in the United States.

Well, I would just conclude where Greenspan and Snow have concluded in their own minds that the real issue is not Japanese deflation, or American jobs, or European growth rates. The real issue is how China handles this incredible flood of money because you have got $60 billion of foreign direct investment coming in; you have got maybe $30 billion, $50 billion, $60 billion of illegal money sneaking in. All my Chinese friends in Los Angeles are saying, “Ah, with this American policy I had better buy an apartment in Shanghai right now”.

And we still cannot measure the numbers of all this money going in, but you can already see the banks flooded with money; the Shanghai property market rising a little faster than is healthy; too many loans going to small steel mills that will never make it; both sides of the car industry being funded in ways that could create a bubble, and this is a great turning point for China.

China is a country that goes from great turning point to great turning point. There is always one. A decade ago it was inflation and whether they could get that under control. But this really is a crucial turning point because what the other Asian countries did at this point was to say, “Look at what good and great policy makers we are. The Bangkok property market is taking off; the Hong Kong property market is taking off; the Japanese stock market is taking off. This proves that our miracle is real and we are going to take over the world”, and the right approach is, “this is an enormous danger”. This is an enormous danger. There is not a huge bubble there now but there could be in a year or two and, if you let this bubble go and it bursts, that affects the economy for years and years and years, and it affects political credibility, the leadership, for years and years and years. In short, this is the Asian crisis.

And the question is will China have an Asian crisis because of all this inflow and the bubble? I have enormous respect for the people who are advising the Chinese leaders and I think they understand this issue, but we have to watch and see because they have got their -- America is not the only country with pressure groups and we have not seen the policies. What they need to do is keep the currency where it is for a relatively short period of time, and drastically fix their banks, and use all sorts of stop-gap measures: letting some money flow out through qualified foreign investments from China; raising interest rates; raising the banks’ reserves; mopping up this money; putting controls on real estate lending; getting tough on these inappropriate loans the banks are making.

I will give you a test case to see how it is going. You have got a lot of officials saying, “The banks are getting much better. The percentage of non-performing loans is going down”. Well, the old, non-performing loans are still there, but what they are doing is making so many new loans that the denominator is getting big and, of course, the week after you make the loan it is still good, but there is a risk two years from now that that ratio will get out of control. The more officials you see giving that speech, saying things are getting much better, the more they are in trouble; and the more you see them saying, “We have got to crack down. This is a problem”, the more confident you can be. My guess is the latter is the way it is going to go, but we need to watch it.

Thanks.

QUESTION: I have two questions. One, of the job losses in the United States -- 2 million, 3 million, whatever it is -- I would like to know what percentage, you know, the economists feel were actually lost to overseas jobs of the total, and you alluded to some of the other reasons.

The second is, you know, this is phase one of jobs moving overseas and the changing of the whole global economic picture, if this continues -- not only in the United States, but Europe -- a lot of the jobs -- even Mexico, I understand is losing a lot of jobs to China and India -- where are we going with this thing? I know Hong Kong, at one time, lost something like one million jobs to China in the manufacturing sector, but we also got back to full employment in terms of a service economy. How can the other countries deal with the continuing loss of these jobs in the longer period of time?

DR WILLIAM OVERHOLT: Well, interesting you should mention Hong Kong. There was this great fear of hollowing-out, and what happened, Hong Kong hollowed-out almost completely. All the manufacturing went over the border -- somebody in this room is going to stand up and say David Pong has still got his steel mill and a few other things -- but almost all of it went over and what happened, Hong Kong’s unemployment rate went to somewhere between 1.2 per cent and 2.1 per cent because Hong Kong ended up doing what it had a competitive advantage for, and Hong Kong people became unbelievably wealthy.

Unbelievably, because when I started coming to Hong Kong, Hong Kong per capita incomes were a fraction of British and by the time of the hand-over it was double the British. It was because Hong Kong let hollowing-out happen and the United States has -- if you compare the United States, which has let hollowing-out happen in the past generation, with Germany and France and others who have been more protectionist and have not, the United States unemployment rate is about half of theirs because they are doing what they are good, what they have a competitive advantage at.

If you look at total job creation in the United States, as compared with the more protectionist countries, in Germany and France for the last couple of decades it is absolutely flat. If you look at the United States it is like this, and there is a little blip for the recession, but the little blip down is so small that when people like us look at the curve 20 years from now, you will not even be able to find it.

So we are losing jobs at the things we are bad at. Americans cannot competitively make towels. Americans can competitively make semi-conductors, and software and the teachers and middle level managers of Walmart, we are very good at those things. And so the important thing is to let this hollowing-out happen.

And the other thing is it does not hollow-out. The image of all the jobs leaving is a nice image. American manufacturing unemployment is exactly what it was in the early 1960’s. American manufacturing output has absolutely gone through the roof because we do it so much more efficiently now.

So the reality is if you want to keep unemployment down in the long run, you let these lower end jobs go.

Oh, by the way, I want to add just one more footnote. The loss of American manufacturing jobs is, as I mentioned, largely phony. It is largely statistical. China has lost 25 million manufacturing jobs, ten times the largest estimate for the United States.

Again, you talk to people in the West about that: “How can that be because all of our jobs are going there, so they must be increasing?” No, productivity and efficiency are rising in both places and so manufacturing jobs are being lost in both places but it is much faster in China. The social strains in China are much bigger than they are in America, or Japan, or Europe. Sorry.

QUESTION: Given the external political pressures on China, do you think it is likely that China will start to widen the band at which the Renminbi trades?

Or the other scenario people talk about is to peg against a basket of currencies as opposed to US Dollars. Any thoughts on that?

DR WILLIAM OVERHOLT: Those are widely proposed. The problem with pegging it against a band is kind of the flip-side of what happened with Argentina and Brazil, or Brazil. In that case, you know, they created a band; it goes bang against the bottom of the band, and then bang. In China’s case it will just go bang against the upper end of the band and then the pressures will start all over again. And so it does not solve anything for them. A band is going to be three per cent or five per cent and those kinds of moves are not going to resolve any of the pressures.

Basket is intellectually attractive because you are measuring your currency against all of your trading partners instead of just one. The problem is in the practicalities of managing a basket. It is very complicated to manage a basket. Thailand is the Asian experience of a basket. The trading that is involved to keep things balanced is tremendously complicated. It invites huge speculative pressures. It is un-transparent. There is an enormous incentive for people to make money out of the non-transparency of it. So if they have to do something, the obvious thing to do is just re-fix it at a different level.

There are problems with that too. First of all, it may not reflect the market because the actual market, as I mentioned, it may be that money would flow out and the then currency would depreciate.

The other thing, the arguments the Hong Kong authorities have always had about the Hong Kong peg. Once you re-peg you just invite every speculator in the world to speculate on the next re-peg. So it is complicated.

The best option, if they are going to fix the banks quickly and if they cannot hold back the tide, is probably a one time re-peg.

QUESTION: Bill, you correctly addressed the whole issue of the recycling of the hot money flows back into China. From your perspective, having been a China expert, what is actually holding up the reform of the Chinese banking system because they have certainly had their examples of why you should be reforming -- Latin America, East Asia -- what is holding it up from your perspective?

DR WILLIAM OVERHOLT: Well, I think all third world countries have this image of critical sectors that you just cannot allow to either be taken over by foreigners or to implode, and of all the sensitive sectors, banks are the most sensitive, and if you let it get out of control you are done. We have seen that all over the world. So they are right to be careful but I think they know that it has to be fixed.

Their theory has been, “To fix the banks we have to fix their customers first and the state enterprises”, and they have moved heaven and earth. They have taken social strains that no other country in the world has been able to accept, so they have been moving. You cannot criticize them for how fast they have been moving.

It is the opposite of what the Koreans did. The Koreans said, “We will crash the banking system and let the new, better banks keep the pressure on the table”. But now it is time. They have got to move or they are going to be in trouble. Hopefully, they will take the example of industries like the car industry, which was supposed to be crushed by WTO. Instead, WTO forced prices down, created a mass market and it is the greatest thing that ever happened to the car industry; probably the greatest thing that ever happened to any car industry anywhere in world history.

If they do revolutionary reforms of the banks along the South Korean model, they will do very well indeed. If they dither about it for a couple more years, they are in difficulty.

QUESTION: What is your view on the collateral effect of all this on the Hong Kong dollar? I mean, we saw obviously a lot of movement in the market in the last few weeks; some criticism of the Hong Kong Monetary Authority for not realizing that that may happen. Is that just a proxy market for pressures on the Renminbi and what is your longer term view of the Hong Kong dollar peg? Thanks.

DR WILLIAM OVERHOLT: When I was at Bankers Trust we used to love it when people thought there was a connection between the Chinese currency and the Hong Kong dollar. We in Hong Kong -- often the pressure -- well there was pressure for revaluation, pressure for devaluation. Every time there were people who would say, “Well, before there wasn’t a connection but now Hong Kong is more tightly connected with China and so if one moves, the other has to move”, and you get the kinds of pressures you see today, and we just absolutely cleaned up. It is wonderful that there are still people out there who think that there is such a tight connection. Any of you who are currency traders, you can make a fortune out of this. I got my promotion to managing director out of it.

The second part of your question was what is going to happen to the Hong Kong dollar. I cannot tell you what Joseph Yam is going to do, except in the short run he is going to keep it right where it is.

I see the Hong Kong dollar peg as the world’s most expensive political risk insurance policy. In September 1983 this economy nearly went down the tubes. The banks were going; there were runs on the grocery stores; there was a run on Maria’s Cake Shop; the currency went from, what, five point eight to nine point something almost overnight. It was the end of the world and the peg fixed that.

And then a few years later I found myself debating the chief government economists and, you know, this costs too much; this cannot continue with this, it is irrational. And then Tiananmen Square happened and the equity market came down by half, the currency was solid, the banks were solid, no runs on the cake shops, and I publicly apologized to him. He was right. Hong Kong needed that insurance policy.

As long as there is this risk of big things happening across the border that can just shake this place to the roots, Hong Kong needs the peg, even though it involves this incredibly painful adjustment every time. But if they get through fixing the banks they are home free, the way...(tape change)...and at that point the insurance policy is not worth the price and the only sensible thing to do is just float.

QUESTION: Could you talk for a little bit about the pressures on the Yen and why you think the Japanese government let America force them to devalue from 1.20 to 1.10 and why they stopped at 1.10, and what do you think happens next?

DR WILLIAM OVERHOLT: I am not sure exactly what the internal decision-making process was, but they had a logical problem and a cost problem.

The logical problem was when they are beating up on China and demanding these G7 statements, it is very, very difficult not to -- it is very, very difficult to do the intervention two days after you sign on to that kind of pressure on China for doing the same thing. Now they go ahead and intervene.

The other thing, if you go back a full year, they have spent somewhere between $95 billion and $100 billion on currency intervention and that is getting big, and expensive, and potentially dangerous. I actually think that they are at risk of going drastically the other way; that if their reform process got well under way, if a lot of companies started getting into more trouble -- and a surprise is still possible in the banking system and the corporate system -- that the Yen could go the other way to the point where it is worth half of what it is today.

You have got a lot of the same situation I talked about with China, with all this money pent up. The difference is that Japanese are less willing to think about putting their money abroad than the Chinese are. Partly because the experience of the last two generations, there has been a steady rise in the Yen, and every time they started investing offshore they got punished. They got punished in a way that they cannot forget. But the currency situation is a very volatile and dangerous one and I think they are going to continue intervening, and I think it is going to turn out to be a bad mistake.

QUESTION: Bill, do you think all these discussions and debates now would have any impact on our understanding of the combination currency, would that have any implication? This is an old issue, but I do not know whether that is something you want to comment on.

DR WILLIAM OVERHOLT: Combination currency; look at the problems the Europeans are having. They have got, essentially, all trade barriers eliminated -- that is a slight overstatement -- but most barriers to the movement of labor eliminated and France has just, essentially, opted out of the disciplines necessary in the long run to keep the currency together. It is a hellish problem keeping that together.

Now you can look at Asia and trade barriers are huge; the barriers to movement of people are huge; the volatility of the currencies that need to be brought together is huge; and the potential range of variation of the Yen is somewhere between probably 95 and 230.

Are you going to be able to create a common currency in practice? Absolutely not. Not in my life time.

Why all the talk? If you talk to the people who are the real movers they all say, “We know there is no chance of a combination currency. We want to continue this process of organizing, common currency discussions, the currency swaps to stabilize the currencies. Those swap amounts are so miniscule that they could never have any affect on currency markets at all and everybody in the market knows that.

So are these people idiots? No, they are very, very smart, but the goal has nothing to do with stabilizing currencies, or creating a combination currency, or in many cases, reducing trade barriers. It has to do with having an excuse to organize a secretariat so that the next time an Asian crisis comes along there is somebody organized to argue with the IMF and the US Treasury, and that is seen in places like Thailand as a vital national interest.

So it is one of these situations of the real goal being very different from the stated goal.

Thanks.