Asian crisis has little effect on U.S. However, some observers fear crash's fallout may hurt economy in long run

December 14, 1997|By NEW YORK TIMES NEWS SERVICE

Two freighters carrying logs from the Weyerhaeuser Corp. in the Pacific Northwest steam idly at sea near South Korea, their cargoes undelivered -- perhaps undeliverable.

Just as the ships approached port, the Korean buyers refused to pay for wood they no longer needed to build homes and furniture they can no longer sell while Asia's financial crisis spreads.

Tiffany, enjoying brisk jewelry sales on Fifth Avenue, is hurting in Hawaii; the Japanese tourists who normally visit and buy there are doing neither lately.

And Reebok International, the shoe giant, reports that its sales to Asia's consumers are way off. Take the Rockport shoe boutique, a Reebok subsidiary, in Seoul's upscale Myondong neighborhood. With few customers to serve, sales clerks spend their time shining the shoes on display.

"People come in here and they realize this is an American brand and they don't buy," said Kim Myung Chal, the store manager.

Hundreds of stories like these are bringing the Asian financial crisis home to corporate America. So far, the effects have been small for most companies. Weyerhaeuser, Tiffany and Reebok may be hurting in the Pacific, but their sales worldwide are still rising.

All the setbacks at worst only seem to be nibbling at the overall U.S. economy.

Some companies even expect to profit from the turmoil by selling products in America that are ever cheaper to make in Asia with the region's falling currencies.

The national economy, in the view of many experts, is simply too big and complex to be brought down by what happened in Asia.

"My line is always 'America has 130 million workers,' " said Paul Krugman, an economist at the Massachusetts Institute of Technology. "You can go out there and find stories that affect a thousand companies and a million workers, and it is still not important in the larger picture."

But while the effect thus far appears to be marginal for most American companies -- a Weyerhaeuser official says the undelivered logs might cost the company several hundred thousand dollars, a pittance for a company with more than $11 billion in annual revenue -- the cumulative effect on the American economy as a whole could be harsh in the end.

Some of the damage might show up at first as good news for consumers in the form of falling prices for Asian goods sold in America.

But more Asian imports -- and they are already rising -- could swell the U.S. trade deficit to a damaging level and shrink American operations that make similar goods -- textiles, electronics, furniture and auto parts, for instance -- or push companies to move more operations abroad.

Many forecasters expect the Asian crisis to slow the growth of the American economy by only half a percentage point, to about 2.5 percent in 1998. But a few are talking about a decline of one percentage point, enough to cut job creation and make the low unemployment rate edge up gradually.

There is a more dire scenario -- that the panic in Asia becomes infectious, scaring American investors sufficiently to bring down stock prices. That would make millions of Americans feel less wealthy, undermining the consumer confidence that has sustained two years of strong economic growth.

"The Asian crisis, although a small thing, becomes the pin that pricks the stock market bubble in America, assuming there is a bubble," Krugman said.

Pub Date: 12/14/97

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