U.S. victory in Vancouver Asian summit: IMF strings and freer trade endorsed as way back to growth.

November 29, 1997

WHETHER the Asian financial crisis will abate, following the Asian Pacific Economic Cooperation (APEC) summit of 18 powers, is an open question. The decisions went Washington's way. Congress may have tied President Clinton's hands, but it was not evident at Vancouver.

Basically, two decisions were made. The first is that any bailouts will be through the International Monetary Fund (IMF), not bilaterally or through a new and more lenient emergency fund. The $57 billion IMF commitments to Thailand and Indonesia, and the $20 billion more that South Korea seeks, carry strings.

In countries where the failures are in private enterprise, IMF strictures require greater regulation of banks, prudent lending, currency support, reducing corruption and liquidating insolvent firms. Where capitalism has been nurtured by protective governments with favoritism toward cronies, this entails abrupt change.

The second decision was to proceed full speed on trade liberalization. That was not automatic. Countries with slowed growth are tempted to revert to protectionism. APEC leaders specified nine areas for negotiations to reduce trade barriers. U.S. firms would get new markets if Pacific Rim countries opened to them. But while this was a victory for President Clinton, the U.S. cannot take part if he lacks fast track authority from Congress to cut deals without congressional revision.

And even though the reliance on IMF lending is a U.S. victory, Congress did not provide Mr. Clinton the $3.5 billion for the U.S. share of enlarging the IMF's emergency kitty. That is a dangerous position to take.

Beyond that, the U.S. nominated Japan as the locomotive of Asian recovery, an honor Prime Minister Ryutaro Hashimoto declined. The optimistic view is still that Japan is among the rescuers, not the rescuees. Otherwise, the Asian crisis will get worse before it gets better.

The slowdown in Asia will curtail American growth, with the pain felt on the Pacific Coast. Asian countries will import fewer goods and sell more at lower prices. The U.S. trade imbalance will take another hit. So far, financial markets are convinced this will be a restrained and orderly scaling back of growth. If they remain confident, with long-range optimism intact, this will have been a successful APEC summit.

Pub Date: 11/29/97

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