Economic Partnerships: Asia-Pacific Region
Growth Prospects Strong In Asia-Pacific Region.
Turmoil in the Asian markets in 1997 and 1998 spilled into emerging markets in Latin America and Eastern Europe, as well as many developed economies, underscoring the breadth and depth of linkages among capital markets worldwide. Prior to the crisis, many developing Asian markets had experienced years of spectacular growth, with some countries posting double-digit real GDP growth rates for much of the decade.
The output growth rate for Asia’s emerging economies during the 1990s was especially strong: a 7.4-percent average annual growth in real GDP, compared to developed countries’ 2.6 percent average. The emerging Asian economies also boasted the world’s highest savings and investment rates, and low levels of government spending as a percentage of GDP.
Propelled by high savings levels and even higher investment rates, many Asian countries are dedicated to improving education, modernizing infrastructure, and raising the production of their industries. With their rapid per capita income growth and expanding consumer base, these markets offer some of the best investment and business opportunities for the U.S. securities industry and its clients. Yet the Asian markets have been some of the most difficult for U.S.-based securities firms to enter.
Since broker-dealers face obstacles to entering many of these markets, the securities industry supports U.S. trade officials’ efforts in the Asia-Pacific Economic Cooperation forum to expand business opportunities in the region.
Many of the APEC developing countries face tremendous economic and social demands. Their combined infrastructure costs alone, for example, will exceed $1.5 trillion over the next decade. Each country’s private and public sectors cannot possibly raise the capital for the telecommunications projects, power plants, transportation equipment, water systems, and sanitation facilities they need.
contributions by multilateral development banks. This potential has generated considerable interest from the U.S. securities industry and its individual, institutional, and corporate client base. The ability of U.S.-based firms to access the world’s capital markets has already produced financing for several critical projects in APEC countries.
Integrating China Into The Global Economy
Among the dynamic and growing Asian markets, China promises to be an economic powerhouse. The combination of a large population (almost 1.3 billion people), and an apparent government commitment to free up the private sector and tap international capital markets led to real economic growth in GDP of 9.7 percent per year in the 1990s. As China reaches bilateral agreements with most of its trading partners to meet the terms of entry into the WTO, explosive growth will be supported by extensive liberalization measures.
Increased trade flows, along with the entry of many sectors of American business into China, have solidified the importance of the economic relationship between the two countries. For that reason, the U.S. securities industry sought the permanent extension of normal trade relations with China, the de-linkage of human rights concerns from future trade status consideration, and admittance of China into the WTO.
Economic Partnerships: In Latin America
The Latin American markets are important to the U.S. securities industry and its customers. A Free Trade Area of the Americas agreement would further develop this fledgling economic partnership. Latin America is a market of more than half a billion people whose incomes are rising and who are buying American products. More than 40 percent of the region’s imports come from the United States, and thousands of U.S. firms have majority-owned affiliates in the region. U.S. investors have also been active in Latin American stocks.
In the 1990s, Latin American shares received 11 out of every 100 U.S. investment dollars earmarked for foreign equities. The removal of financial services barriers in the Americas would create the cornerstone for economic and financial stability and integration within the region through the efficient allocation of capital.
Economic Partnerships: In Conclusion
As world leaders in their sector, U.S. financial services firms are important to the overall international competitiveness of the U.S. economy. As the U.S. share of global output shrinks, access to foreign markets is essential. U.S. securities firms need to follow their clients abroad to remain competitive, as traditional goods-producing clients enter foreign markets and expand globally. U.S. employment and economic output depend on open markets and the free flow of capital worldwide.
It is imperative that the United States:
- achieve a global trade pact that further liberalizes the flow of capital under the auspices of the WTO;
- promote more open markets by enhancing regulatory transparency;
- create a global passport to allow broker-dealers to work in many countries that have similar standards and regulations;
- work with APEC to expand opportunities, particularly in corporate underwriting and asset management; and,
- remove impediments to pension fund management opportunities worldwide by eliminating nontariff barriers that give local managers a competitive advantage over foreign ones.