1989 Reports

A Pacific Free Trade Area?

Drysdale, Peter; Garnaut, Ross

This paper takes as the central objective of international economic diplomacy in the Pacific region, the preservation and enhancement of the conditions for continued economic growth in the style of recent decades. The international system that has supported vigorous trade expansion is under threat from several directions: tension between the United States and Japan (and to a lesser extent between the United States and Taiwan and Korea) over large trade and payments imbalances; the prospect of increased economic introversion in Europe as 1992 approaches; the accommodation of new patterns of comparative advantage in the Asian newly industrialised economies (NIEs) as they compress into a few years adjustments to a decade of rapid economic growth; and the new challenge of managing the emergence of China, with its partially reformed centrally planned system, as a major player in Pacific economic relations. It is important for peace and political stability, too, that the environment of relatively open economic relations that made a realistic alternative to autarky available to China at a crucial point in its political history, is preserved to provide similarly reliable alternatives for the states of Indochina, the Soviet Union and the Democratic People's Republic of Korea (DPRK), at a time of opportunity for progress on reducing longstanding sources of conflict.