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Pacific Basin Developing Countries: Prospects for the Future.

By Marcus Noland. Washington, D.C.: Institute for International Economics, 1990. Pp. xvi, 2 2.

A few years ago governors of Southern states issued a clarion call warning us about the failure of American education to prepare our citizens for competing in the world market. "We know neither the globe nor the cultures of people who habit it. . . . We are no longer isolated by the large oceans on either side of our nation. Our economic and political future depends on the ability to communicate with the understand people across national boundaries [3]. Perhaps a partial answer, albeit quite incomplete, to such a warning is a small research volume. The Pacific Basin Developing Countries, written by Marcus Noland, currently a professor at the University of Southern California and a Research Associated of the Institute for International Economics. This thin book is actually one piece of a trilogy of research projects on the countries located in the Pacific rim [1, 2]. Noland sets out to undertake two major tasks: (a) analyzing the impact of prospective changes of the newly industrialized countries (NICs)--Hong Kong, Singapore, Taiwan, and Korea--and of other four countries of the Association of South East Asian Nations (ASEAN)--Indonesia, Malaysia, Philippines, and Thailand--on the world economy; and (b) interpreting the implications of those changes for the global economy in general, and for the United States in particular.

To achieve this end, Noland structures his book in three concise parts. The author begins in Part I [ch. 1-3] with a review of the cultural past of the Pacific Basin countries, the historical evolution of their economic public policies and their regime of trade. Part II [ch. 4-5] is more technical: the author presents an econometric projection of trade patterns of these countries in the year 2000. Here, he discusses the future developments in the world economy that might affect the projected trade outcomes of these eight economies. Finally in Part III [ch. 6], he reserves the last chapter of the book for an analysis of the impact and possible implications of present and projected trade developments of the Pacific Basin for the United States from an economic adjustment standpoint and from a international policy perpective.

Although slim in weight, this volume contains much worthy information. The author's analysis of the eight Pacific Basin countries has been cogently presented with neat figures, diagrams, and numerous tables showing past historical and projected future trade composition and pattern by major product group, industry, and region, and the real effective foreign exchange rates. Between 1963 and 1988, these countries have more than tripled their share of the world trade. Led by the four NICs--Hong Kong, Korea, Singapore and Taiwan--the Pacific Basin developing countries have achieved the highest growth rates per capita income in the world. The analysis of prospective changes in trade specialization and growth of these countries leads Noland to believe that such important economic changes will pose a serious threat to some American industries but will create positive opportunity for others, especially in the high-technology area. Noland offers some policy recommendations to enhance further the growth of the Pacific Basin region, and to promote better harmony in trade relations with the United States in particular, and with the world, in general.

Today, disillusionment with the very idea of state planning, ownership, control of the means of production has become widespread in many parts of the world. Yet, despite such an ideological shift, many economies still remain largely incapable of a satisfactory transition to a free market economy. What steps should be taken then? Obviously, no one would expect to find an answer to that question in the present Noland book. However, by following closely Noland's analysis of the four NICs of the Pacific Basin on the areas of government policy, export-led growth strategy, free market inclination, and financial liberalization policy, the reader may unravel some parts of that jigsaw. The puzzle here is why the four economies of the NICs flourish vigorously while other four ASEAN countries, more or less similar in resources and population, progress at much slower pace, and even stagnate, as in the case of the Philippines.

I like the way this book is organized with the three basic issues properly arranged and precisely defined in three separate parts. It is a carefully researched work, and yet, it is also a very readable treatment of the complex problem of trade, growth and change. The connective chapters and the fullness of the analysis succeed in transforming this rather small volume into a very useful source of understanding of the developing economies of the Pacific rim. However, I have some quibbles to make.

First, there is something lacking in the treatment of trade relations and their impact among countries in the region. For instance, Japanese economic presence in the region is readily perceptible. It is ironic that during the World War II era, Japan with its military might and its imperialistic determination could not establish Japan's hegemony over the Southeast Asia. Yet today, without a single shot but only with its economic ingenuity and efficiency, Japan has undisputably succeeded in spreading its presence and influence over the region. But the author did not explore this topic thoroughly and deeply even though this is a matter of great importance that will have significant impact in future trade, growth and development of many countries in the Pacific area. The other flaw is a technical one. It deals with too much confidence in econometric projection as the foundation for many policy recommendations. Models are only reliable as their assumptions. Trade patter projections are based on the principle of trade specialization. In this sense, Noland is correct in assuming that trade specialization, and therefore, trade pattern projection, evolves in a reasonably systematic and predictable way, if the prevailing macroeconomic conditions of these countries and the world remain fairly stable. However, in a ten-year time horizon, several important factors, not just national income, relative resource endowments, will bring changes. For instance, the flow of capital or international technological transfer may emerge on the scene. Consequently, both trade balances and trade patterns must make some adjustments in response to these changes. Therefore, the projected trade developments will be subjected to significant alterations.

On balance, this is a good book, despite its lack of depth in some areas of analysis. The statistics and economics are sound; the reference sources are rich enough [pp. 215-20]; the results are carefully reasoned and interpreted. It is a small but highly readable book, full of trenchant observations on the present and future state of trade development of the Pacific Basin economies. This book should appeal to students interested in development and trade of the Pacific region, and also to laypeople just looking for a clear, precise assessment of present and future prospects of Southeast Asia. Noland's book represents a good set of topics and coverage. The historical observations and empirical findings are interesting and useful enough to make the book worthy of reading.

For the professionals in the field, I doubt that they would give their "cover to cover" attention to the book. These people would rather focus on a selected chapters covering specific issues such as trade patterns of the Pacific Basin countries and their impact on the global market. For the beginners and laypeople who will get a precise and clear understanding of the developing countries in the Pacific Basin region, this book is certainly a worthy addition to their collection.

All in all, despite its shortcomings, Noland's book still remain a good one. It is useful primer on the economies of those people on the Pacific rim who boast an illustrious heritage, and who, for several decades in the past, were confined to a colonial backwater, and who are now vigorously reasserting themselves in the world scene. Dominique N. Khactu University of North Dakota


[1]Balassa, Bela and John Williamson. Adjusting to Success: Balance of Payments Policy in the East Asian NICSs., rev. ed. Washington, D.C.: Institute For International Economics, 1990. [2]--. Economic Policies in the Pacific Area Countries. Houndmills, U.K.: Macmillan. (forthcoming). [3]Southern Governors Association. Cornerstone of Competition: The Report of the Southern Governors Association Advisory Council on International Education. Washington, D.C.: Southern Governors Association, November 1986.
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Author:Khactu, Dominique N.
Publication:Southern Economic Journal
Article Type:Book Review
Date:Apr 1, 1992
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