Onwards, and not inwards, is the way: Chris Patten argues that the West must not respond to Asia's economic success with protectionism

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The Independent Online
Just as the market forces in Europe have become more sluggish, if not - in some countries - downright sclerotic, prolonging the woes of recession, so Asian markets have boomed and soared and roared. First there was Japan, then the so-called new dragons of Hong Kong, Taiwan, Singapore and South Korea.

Today in Asia, especially eastern and southern Asia, it is increasingly difficult to find any country without at least a modicum of dragon-like potential.

The result is that Asia is the fastest growing region on earth, with confident forecasts of 5 to 6 per cent growth a year for the next 10 years.

That is twice as fast as forecasts for America and over half as much again as the best projections for Europe. The region is likely to account for a third of world production by the year 2010, compared with a quarter now.

The huge backdrop to this picture is China - a China where real GNP has grown by something like 9 per cent a year for the last 14 years and which, if it continues to grow as fast for the next 20 years, would become the biggest economy on earth sometime between 2010 and 2020.

Any and every rational assumption suggests that the outlook for Asia is exciting. Well over 2 billion people discovering market economics has to be a very good thing. A combination of better economics, better education, better health care and - we must hope - better government should ensure brighter days for Asia, and therefore for the rest of us as well.

Which is, I think, the first point that Britain, the old lion with a wealth of experience, should set itself to make from Brussels to Geneva to Washington and back again. Because the initial point of contention is whether for Asia to do well is good for others. Protectionists, mercantilists, 'managed traders' and the rest beg to differ.

While Asian countries show their paces at market economics, the temptation will grow for North America and Europe to shut our dockyard gates to their goods, our stock rooms to their food.

Protectionism in America is fuelled, first, by middle-class dudgeon. The standard of living of the striving middle class is unlikely to rise by much, with the proceeds of higher productivity in the economy going to meet the soaring costs of professional services, security and government regulation.

Second, I doubt whether American politicians will be able to resist the temptation from time to time of appealing to the nationalist instincts of their voters over the foreign ownership of industry and property.

Third, there will continue to be - such is America's openness - substantial immigration into the United States, and a significant proportion of the population will live in Third World conditions in the beaten-up areas of First World cities. The problems and costs of this are likely to encourage the protection of, for example, low-paid workers' jobs from foreign competition.

In Europe, I suspect the appeal of protectionism may have similar though not identical roots. First, there is the 'yellow perilism' threat to the post- war welfare settlement. There are those in the European Union today who seek to justify protectionist policies directed against emerging nations in Asia or Africa or South America, on the grounds that as these emerging nations do not have the same level of social infrastructure as the rich nations of Europe, their competition is somehow unfair.

This amounts to the absurd and callous proposition that to be poor is somehow to have an unfair trade advantage. Such an argument attempts to turn the theory of comparative advantage on its head by proclaiming a doctrine of permanent advantage.

Second there is old-fashioned Euro-mercantilism. We must safeguard the identity of European industry - the makers of cars and tractors, sewing machines and refrigerators, power stations and aeroplanes. Once it was American know- how and ownership that we railed against; today it is more likely to be Asian. But technology gaps can't be bridged by slamming doors.

Better, perhaps, for Europe to look at investment and enrolment in tertiary and technical education, and at the comparative mathematical abilities of youngsters in our schools and of their peer groups in Korea or Japan.

The third argument is at once cosy and flesh-creeping. Europe's very identity is threatened: our farms and our cottage industries, our factories and our city streets - where Japanese videos and Third World oil-seeds lead the way, hordes of North Africans and Slavs will surely follow.

There are some eloquent spokesmen for this protectionist case: none more so today than Sir James Goldsmith. The Goldsmith vision is in many ways idyllic, crafted perhaps to appeal particularly to French public opinion, but probably attractive to a wider audience.

Goldsmith may be sparing with his policy recommendations, but he is sweeping in his analysis of the threat to the 'useful toil' and 'homely joys' of French men and women, and by extension other men and women in Europe. He sees the traditional values of a cohesive society, with low unemployment, prosperity for all, and a proper balance between urban and rural living, under attack.

His first core proposition is moral. Economic growth is not the only measure of success. Look at the United States - its economy grows and so do its social problems, from drugs and violence to marital break-down and racial tension. We should not be dazzled by economic indicators; other things matter more in life.

I sympathise with that. Who sensibly wouldn't? It is not Sir James's fault that the super- rich, blameless and generous to a fault, are never the most convincing exponents of the simple, austere virtues.

Economic growth can wreck the stability of communities just as it can imperil the balance of nature itself. But no growth can be just as dangerous, often more so. What we require, whether on the bare mountain slopes of Eritrea, the flooded plains of Bangladesh, or the crumbling streets of Watts or Hackney, is sustainable economic development.

Here there is a real problem, though I don't believe it justifies Goldsmithian remedies. It has long been a cliche of growth advocacy to argue that when the economic tide comes in, all the boats rise. In other words, when a country gets richer - its productivity rising and its competitiveness increasing - all improve their standard of living. This is no longer true.

In a global economy where capital and some forms of technology can be rapidly transferred, goods can be made readily wherever the cost of manufacture is lowest.

So with more manufacturing being sourced in poorer countries, the supply of unskilled workers has enormously expanded. The result is falling wages or rising unemployment for the unskilled in richer countries. To give an example, while per capita GDP in the United States has grown, many individual wages have fallen.

But the answer is not to try to protect low-paid jobs by shutting out competition from developing countries. What we have to do is to raise the skill level of the urban poor. Their best hope lies with better teachers and trainers, not with protectionist trade officials.

There is a further issue around which I should like, deferentially, to tiptoe. Some suggest that if we are to develop a good, vigorous and commercially advantageous relationship with Asia, we had better leave our principles and values at home when we pack our bags, and recognise that there is an Asian way of doing things which requires us to make some fundamental adjustments in the way we behave and think.

Now I am a huge admirer of much that is happening in the region where I now make my home. There is a 'can do' attitude, a belief in progress, in making life better, that should come as welcome adrenalin to any European politician. Hard work and education are rightly lauded.

All that said, I do puzzle about what exactly is meant by 'the Asian way', and believe very strongly that, without wishing to proselytise, we should not resile from what we believe is right about our way.

Whence comes the oriental philosophy which sparks Asia's success? No longer those well known Asians, Marx and Lenin. So is it Confucius? Should we compare and contrast Confucianism and Western values? Is this where we will find the great divide, where we can hunt down the cultural secret of Asia's booming success? It would be a surprise if this were so. After all, it has often been argued in the past - by Max Weber, for example - that Confucian- based cultures retarded the development of successful capitalism. I do not therefore find very convincing the exclusivist cultural explanation for Asia's success.

Some Asian leaders and journalists define Asian values as a serene quartet - hard work, strong families, home ownership and morality. I happen to believe in all that myself. So does Margaret Thatcher. So does John Major. Are we all inadvertently expressing Asian values? Or is a lot of hooey talked and written on the subject?

This is an edited excerpt from a lecture given by Christopher Patten, Governor of Hong Kong, to the Swiss Bank Corporation last night.

(Photograph omitted)