Does_East_Asian_Experience_Can_Be_Used_as_Lesson_for_Other_Developing_Countries_

Alessandra Grillo n° 396176 Emerging Economies (2011) Extended essay question c) Do the experience of the East Asian economies provide useful lessons for other developing countries aspiring to industrialization' Since 1960 Asia, the largest and most populous of the continents, has grown and has became richer faster than any other region in the world. Asia’s growth did not occur at the same rate all over the continent. The western part of Asia grew during this period at about the same rate of the rest of the world but the eastern half ( China, Hong Kong, Indonesia, Korea, Singapore, Taiwan, Japan, Thailand, Malaysia, Philippines ) had a superior performance and have been hailed as models of achievement for other emerging economies. Among the 10 East Asian’s countries the worst performer was the Philippines, which grew at about 2 per cent a year ( in per capita terms ), about equal to the average of all the others non-Asian countries. Thailand, Japan and Malaysia achieved a growth rate of 3 to 5 per cent. This growth rate is modest if we compare it to the phenomenal growth of the “ Four Tigers ” ( Hong Kong, Korea, Singapore, Taiwan ) which had annual growth rates of output per person well in excess of 6 per cent sustained for 30 years. The economic performance of East Asian countries from the 1960s to 1990s was so extraordinary and exceptional that is generally called the “ East Asian Miracle “. In the same period many other developing countries experienced an extraordinary lack of growth, most of all Africa so that someone talks about the “ Africa’s Growth Tragedy”. This contrast between the “ East Asian Miracle “ and the “ Africa’s Growth Tragedy “ is very dramatic because the two regions started both from very similar per capita income, economic structure and human development. The effects and implication of 40 years of astonishing growth ( or lack of growth ) are much more than the simple divergence in income: differences in the extent of poverty, inequality, education and health are just some of the aspects affected by growth process. Everyone agrees that the economies of East Asia, and particularly the Four Tigers, have grown spectaculary over the past years, but nobody seems to agree on why this happened. The debate on why these regions have grown so much in the past raises difficult questions about regional growth in the future and the about the aspiration of other developing countries to replicate the East asian success. At the center of the debate there are the theoretical notions of growth. The three elements that contribute to the production of goods and services are: labour, capital, and technology. Labour and capital are usually known as the factor of production and in this context we refer to the workforce and the buildings, machines, vehicles that the workforce uses in manufacturing products or in providing some services. Technology instead refers to all the methods used by labour and capital to produce a good and depends on the acquisition or development of practical skills to get the job done more quickly and more efficently. Everyone agrees on the fact that these three factors must be somehow present in an economy that is growing. What is the subject of discussion is the contribution of the factors of production relative to that of technology. Some believe that the increased use of capital and labour explain all growth; but others think that the answer to growth can be found in the more efficient use of technology. Within the growth accounting framework it's possible to describe mathematically, using a simple equation, the contributions of these three elements to the overall production of an economy. By dividing the equation by the number of workforce's people, we can derive a dynamic equation that shows how much output per person increases over time. This equation mathematically describes the contribution to higher output of the growth rate of labour participation, of capital employed per person, and of technology. This equation, if applied empirically to specific economies, can give a good idea of what proportion of increased output is the result of higher labor participation and better use of capital and what proportion is the result of technological progress. The traditional formulation of this equation suggests that the only way for an economy to achieve, over the long run, a sustained rate of growth in output per person is through a significant and sustained rate of technological progress. But why' The labor partecipation rate can be increased for a while and will increase production, but obviously it can't increase indefinetely. More growth in capital than in labor will ultimately lead to diminishing returns to capital, resulting in a fall in the growth of output even though capital continues to grow at a constant rate. Therefore an economy should keep improving its technology in order to achieve a permanent growth. This kind of growth it's called “ intensive growth “. The “ extensive growth “ means increase output by increasing inputs of labour and capital but it cannot last too long, it can work only for limited periods. The standard view about the success of East Asian countries emphasizes the role of technology in their high growth rates and focuses on the fast technological catch-up in these economies. If we assume this view, we can say that East Asian economies have succeeded because they learned to use technology more efficiently and faster than the other countries. It exists also a contrarian view that see the East Asian success as the result of investing primarly in capital and labor rather than in technology in the last decades. But there are some reasons that underline that this thesis is not really reliable: it's very difficult to estimate the rate of growth of capital stock in East Asian countries during the period under study. Especially in the case of the “ Four Tigers “ , for which there are not good datas before 1960, it is extremely difficult to estimate the capital stock at that time. To estimate how much capital was available in 1960, dubious assumption have to be made about the depreciation rate of capital stock and about how much investment flowed in during the years of explosive growth beginning in 1960. Foe example what are the depreciation rates of different types of capital ( buildings, industrial machinery, computers )' Are they equal for all countries and for all industries or are they higher in faster-growing economies' What method is being used to estimate investment flows in the past' Additional interpretation problems come from estimating the share of national income attributable to capital and the share attributable to labour. Does the same amount of capital produce the same income in all countries and in all industries' Is the amount of effective work proportional to the hours that people work, or does working extra hours lead to diminishing returns' Should different types of work be summed together' Because of this unanswered and maybe unanswerable questions, these studies that emphasise the contribution to growth of capital and labour and depreciate that of technology should not be considered as definitive. For sure, in the economic growth of East Asia played an important role the public policies but there are three different schools. The first one emphasise the primacy of free markets, the second one embraces the view that the government get the basic right, but in addition advocates selective interventionist policies, particularly in developing countries, the last one denies the possibility of coming to any conclusion about the effects of public policy or of selective interventions on economic growth. According to this last school, all the debate brings you nowhere. The first school, basing its view on the neoclassical approach to economic growth, espouses an underlying belief in classical liberalism. The possibilities of production in any economy at any time are determined, according to this school, by the availability of physical resources and of innovative technology. The economic growth rate in the long run, is determined by the rate of technological progress. Since it regards markets as efficient, this school mantains that governments should confine theirselves to providing public goods ( police protection, hospitals, roads, highways, bridges and so on ) and to getting the basics right and should abstain from any further intervention in the market. This school wants to restrict the role of governments in the economy. It would assign to governments both a macroeconomic and a microeconomic function. In their macroeconomic side, governments should ensure stable and low inflation, avoid excessive budget deficits, promote the integrity of the financial and banking system, strive for realistic and stable exchange rates and provide for open markets. On the microeconomic side, governments should ensure property rights, law and order and adequate provision of public goods. They should avoid high taxes rates, price controls, and other distortion of relative prices. Advocates of this view, see the East Asian success as the natural outcome of these policies. The second school does not share the neoclassical belief in the efficiency of the markets and it asserts that, especially in the poorer countries, markets work imperfectly. In poor countries production creates externalities ( unintended, undesirable effects, such as pollution , credit is limited and firms on the market savage one another and the public through unfair trade practices. The revisionists recommend an activist government that will moderate the excess of the market and assist the orderly development of the economy by acquiring technology and by allocating funds for useful projects that promise a good rate of return. Summers and De Long ( 1991 ) sum up this view : “The government should jump-start the industrialization process by transforming economic structure faster than private entrepreneurs would”. Advocates of this view see the success of East Asia as confirming their conviction. The third school, rejecting both the neoclassical and the revisionists, claims that we cannot say anything meaningful about selective interventions because we cannot properly identify how such policies spur economic growth. There are four main reason of this skepticism. First, in analyzing successful policies, there is clear selection bias. Success has lot of fathers while failure is an orphan. We know that East Asian economies have been successful and that therefore government intervention did not inhibit growth. Consequently these interventions in these economies are widely studied. On the other hand economists do not find unsuccessful economies attractive to study and so they do not study at government intervention in these kind of economies. Second we cannot answer to this question : “ How fast would these economies have grown if these policies had not been in place' “ Third, public policy in the successful East Asian economies is far from homogeneous. Variation is very big in the specific sectors and in the targeted industries for selective intervention in different countries. Rodrik (1994) remarks that the East Asian model encompasses highly interventionist strategies ( Japan and Korea ), as well as non interventionist ones ( Hong Kong and Thailand ); explicitly redistributive policies ( Malaysia ), as well as distributionally neutral ones ( most of the rest ); clientelism ( Indonesia and Thailand ) as well as strong, autonomous states ( Japan, Korea, Singapore ), emphasis on large conglomerates ( Korea ) as well as on small, entrepreneurial firms ( Taiwan ). This range of strategies, all followed almost always successfully, suggest that it's very difficult to find a simple explanation of the East Asian Miracle. Forth, it's impossible to establish the correct direction of causality: in successful economies we can usually find policies that encourage low fiscal deficits and good educational systems. But are these policies responsible for the success of the economy , or is the success of the economy responsible for the policies' Observing that a specific variable is present along growth it's not necessarily a proof that the policy generates growth. For example, it is much easier for a government to maintain a healthy fiscal position when the economy is growing and tax revenues are on the increase than when the economy is stagnant and demand is strong for deficit-creating social expenditures, such as unemployment compensation. Is a small deficit a result or is it the cause of economic growth' Conventional wisdom relates education to wealth. But which causes which' When an economy is booming a government can afford generous subsidies for education. Moreover the demand for education increases when an economy is growing and the population is becoming richer. Furthermore, when an economy experiences rapid technological changes, the advantage of educated over uneducated workers will be greater than when the economy is stagnant. Therefore there will be an increase in the demand of education by individuals who would like a better job in the dynamic economy. In this way, by the way, further education constitutes an advantage for specific individual relative to other individuals but does not necessarily improve the macroeconomic prospects of the economy. All these example do not have the goal of proving that government policies are unimportant, but want to demonstrate that we can still understand just a little about the relationship between public policies and the extraordinary rate of growth of the East Asian economies. Other countries should be really careful in replicating East Asian policies because not understanding the causality between growth and industrialization has proved to be a costly mistake for many poor countries that pushed for rapid industrialization in a futile effort to boost economic growth. Among the many reasons suggested to account for the East Asian success, the investment rate and the export orientation are very important factors. These are often called as the “engine of growth” because their strenght seems to be pulling the whole economy forward. Moreover, they seem to generate beneficial spillover effects for the rest of the economy. If the hypothesis is valid the government should start the engines of growth, and if certain sectors continue to contribute to economic progress, while others do not, then government should assist the economy's forward motion by promoting the “good” sectors. Therefore, it should encourage and support investment and exports, using policies instruments as direct subsidies or preferential allocation of credit to promote these activities. The view that investment and exports are the engine of growth is based on the argument that most East Asian countries that experience phenomenal growth rates also enjoy impressive rate of investment and are successful exporters. The other argument as regard investment is that an high invest rate increases the capital stock ( things used to create wealth ) and that this can permanently increase the growth rate through economies of scale ( e.g. bigger factories, more efficient factories, larger markets ) and other beneficial side effects. For what concern exports, export orientation increases the openness of an economy and, by exposing it to foreign technology and foreign competition, provokes a rapid rate of technological progress. Most economists and policy makers appear to agree that policies promoting openness to international trade are most likely to be conductive to growth. This consensus has been shaped by the sharply contrasting experiences of East Asia and Latin America. In both regions, non tariff and high tariff barriers were used to promote industrialization and growth in the period following World War II by the substitution of domestically produced goods for imported goods. However, the most advanced East Asian countries abandoned a pure import-substitution strategy in the 1950s and 1960s in favour of policies promoting openness, whereas similar efforts by a number of Latin American countries in the 1960s and 1970s were not sustained. The implications of the differences in growth strategies are apparent from a comparison of economic performance in the Four Tigers of East Asia with that of four major Latin America economies ( Argentina, Brazil, Mexico and Chile ). Between 1965 and 1993, real GDP in the East Asian economies grew at an average annual rate of nearly 9 per cent, more than twice as fast as their Latin American counterparts. The more rapid growth in East Asia can be associated with much greater openness. As we can see from the table below, both exports and imports grew about twice as fast in East Asian economies as they did in Latin America, a discrepancy similar to that of the relative GDP growth in the two regions. In addition, East Asian economies have maintained higher ratios of exports and imports to GDP than have Latin American economies. INDICATORS OF OPENNESS ( in percent ) | |Real export |Real import |Exports/ |Export/ |Import/ |Import/ | | |growth(*) |growth(*) |GDP (1965) |GDP (1990) |GDP (1965) |GDP (1990) | |Japan |08.07.00 |06.07.00 |10 |9 |9 |7 | |Korea |18.01.00 |15.06.00 |5 |13 |13 |28 | |Hong Kong |12.01.00 |12.02.00 |46 |114 |64 |114 | |Singapore |12.00.00 |11.05.00 |99 |153 |125 |177 | |Taiwan |14.03.00 |13.02.00 |19 |41 |22 |32 | |Average |14.01.00 |13.01.00 |50 |84 |67 |88 | |Argentina |04.04.00 |04.04.00 |6 |12 |5 |4 | |Brazil |08.07.00 |07.04.00 |7 |8 |5 |5 | |Chile |07.04.00 |05.06.00 |12 |21 |13 |27 | |Mexico |06.06.00 |07.01.00 |6 |16 |7 |19 | |Average |06.08.00 |06.01.00 |8 |13 |8 |14 | (*) 1964-93, annual rate Most people that are interested in East Asia are tempted to ask the question : are these lessons transferable to other regions' The answer of this question must take somewhat a complex form, instead of a simple yes or no. For sure, if trasfer were defined literally as the implementation of replicas of East Asian institution in developing countries of other regions, then it would not make any sense. Since situations in each country and region are different, it is easy to understand that direct replication of the East Asian model is unlikely to succeed. The concrete institutional forms associated with East Asian success very a lot across individual countries for good reason. Achieving analytically similar results in different historical, cultural and political context requires adaptive reverse engineering. Policies may be sometimes transferable in the mechanistic sense of replication, but institutions rarely are. Individual East Asian countries discovered multiple specific routes to industrial transformation whose analytical commonalities hardly seemed evident while the process of institutional construction was under way. Once the idea of transferable lessons is understood as an invitation to innovation that takes advantage of the logic of East Asian institutions, the possibility of exploiting East Asian experience became plausible. The East Asian development experience and the Japanese experience of economic cooperation in the region can offer the following suggestions for other countries outside East Asia. In the current development strategy featuring MDGs and PRSP, the close relationship between poverty reduction and economic growth is widely recognize as a general principle. At the operational level, however, budgeting and aid modality discussion over pro-poor policies are quite active, while the formulation and implementation of growth strategies which are concrete, feasible and specific to individual poor countries have hardly begun. This imbalance should be corrected by strengthening the support for concretizing the growth strategy for each poor country. To realize growth through trade and investment, the criteria for good governance should be redefined. Similarly for donors countries, the selectivity criteria for allocating aid resources across different developing countries need to be revised as we shift the purpose of economic cooperation from improving health, education and environment to initiate growth under international integration. For growth political stability and social integration are absolutely necessary. Beyond that we need a strongly committed and economically literate leadership, an administrative mechanism to execute economic policies consistently, and popular support for growth oriented development strategy. What is really clear from East Asian experience is that economies that have adopted outward oriented trade strategies have experienced economic performance superior to those that have not. This suggest that other emerging markets should pursue a development strategy that relies on integration with the world economy, rather than one that relies on insulation. This approach is criticized by “export pessimists”, who maintain that export oriented industrial development is bound to fall sooner or later because markets for labor intensive manufacturers are limited and increasingly constrained by protectionist policies in industrial countries. However, pessimism about the opportunities for exports flies in the face of empirical evidence and ignores the dynamics of international trade. Other countries in East Asia have steadily increased their exports of manufactures to industrial countries and, more particularly, to each other in the form of burgeoning intra-industry trade. It is also clear that growth policies in some East Asian countries did involve protectionist and interventionist elements. The interventionist model keep on being favoured by some recently emerging Asian economies, such as China. However, the decision by members of the Association of Southeast Asian Nations ( ASEAN ) to create a free trade area points to an awareness of the benefits of more liberal trading arrangements. In addition the appeal of interventionism has declined considerably in a number of the more advanced Asian economies, notably Japan and Korea, which are energetically pursuing reforms that will give much greater play to market forces, particularly in the financial sector. Three important problems associated with an interventionist growth strategy suggest that other emerging economies should be really careful in considering it. First, East Asian experience reveals that government intervention may not be effective in picking “ winners “, and mistakes can be very costly. A particular concern is that, in response to political or other pressures, or due to lack of incentives to focus on profitability, government intervention may subsidize loss-making enterprises rather than investment in the productive sectors. Reliance on market forces reduces the risk of inappropriate resource allocation. Another difficulty related to such strategy is that closing domestic markets to the imports while encouraging exports and generating big trade surpluses involve many measures that international trade agreements do not permit, and are also less likely to be tolerated by major trading partners. Finally, as it has been recognized by the policymakers of the most advanced East Asian economies, industrial policies may succeed in promoting certain types of firms but may discourage the type of innovation and entrepreneurship needed to achieve higher levels of development. It is clear that the development of the world's most innovative industries today ( e.g., electronics and biotechnology ) need flexibility and intense competition that only the freest markets can provide. As I said at the beginning, while East Asian countries were experiencing a spectacular growth, Africa, and particularly Sub Saharan Africa, was experiencing a tragedy in terms of growth. There is not a general agreement on which are de determinants of growth for the African experience, but there might be lessons that Africa could learn from the East Asia performance. In particular Namibia, due to its recent independence, should and could look at the East Asian experience to avoid to repeat the same errors of other SSA. The East Asian success surely deliver some important lessons: The need for a macroeconomic stability, the importance of education and human capital, the promotion of manufactured exports and a more equitable and re-distributive economic growth. Namibia seems to follow some of these prescriptions, but some other SSA are far away from this model. Sachs and Warner, 1997, give lot of weight to trade policies and they argue that African countries should open their markets because the African economies that adopted Ea policies ( trade openness, higher government savings and institution quality ) performed better than the rest of the region. Nonetheless , SSA still suffer from other structural factors related to geography (landloked state, Dutch disease and illness), but all these constraints could be addressed and the economic growth is not prevented. They estimate that Africa could have reached a per capita rate of growth of GDP of 4.3% if it had followed the policies adopted by East Asian countries, still considering the adverse geographical location of SSA. Rodrick in 2003 said that geography is not a destiny and its negative effect can be overcome by good institution and governance. Other two experts ( Levine and Easterly ) said that ethnic diversity has a big effect, both direct and indirect, on the magnitude of the growth gap between East Asia and Africa, and they also say that ethno-linguistic fractionalisation played a fundamental role in Africa's growth tragedy. However the non ethnic variables (some policy indicators about financial distress, government spending, political instability, human capital ) explain only 2.6% of the 3.4% of the estimated growth differentials between SSA and East Asia. Generally the main reasons of the slow African growth are found in a broad class of government policies less prone to free markets, to investment in human capital and in infrastructure than in East Asia. Nowadays a part of the gap between the different per capita GDP in East Asia ans Sub Saharan Africa can be due to the initial different conditions, much more favourable for East Asia, and to structural factors related to geography, but this isn't all. What is more likely to have caused the divergence process between the two regions is the adoption of “good policies” in one case and “bad policies” in the other case and it's not clear which are the factors behind the institution quality. For sure the exogenous factors are not the only cause of Africa's growth tragedy and they are not even the most important. Botswana, although it its geographical position, its unfavourable initial conditions and its bias to Dutch disease, was the country with the highest rate of per capita GDP growth in the last four decades in the world. One possible explanation can be found in the low level of ethnic diversity and in the limited effect of colonialism, which both collaborate to allow the reach of a sense of nationality and good institution; but also in the adoption of some of the East Asian policies, especially for what concerns the international trade. Botswana was and its still able to manage the wealth deriving from its abundant resources thanks to its good institutions, but these institutions emerged in part as a result of a unique juxtaposition of historical conditions and political factors, which cannot obviously be replicated. Botswana experience is not isolated and outlines that some structural factors are not so determinant and that there are some African countries with a lot of natural resources that could look at this experience. The lesson from East Asia is that other developing countries must be willing to invest resources, both political and economic, in the construction of a capable state apparatus. A clear commitment to reforming the bureaucracy, and a willingness to devote continual effort to preserving its competence lay at the root of East Asian success. According to UNCTAD's study the East Asian success is the result of active government interventions, working closely with the private sector, but also willing to promote it, discipline it, to promote industrial savings and investment, industrial upgrading by acquisition and adapting and generating new technologies. East Asian experience can provide useful lessons to other developing countries for what concern the need of establishing a dynamic interaction between exports and investment in industrialization process; the possibilities of mobilizing and making full use of natural resources endowments and abundant unskilled labour, and need for moving up the technological ladder to raise productivity and per capita incomes. The diversity of East Asian experience shows the range of options avaiable in pursuing the outward- oriented strategies. Outward oriented development is a dynamic process where investment, imports, exports and industrial upgrading are clearly inter twined. Such a process is consistent with varying degrees of import substitution and export orientation, and with concentration on different products and markets. At the early stage of development FDI can contribute to development by creating employment, facilitating transformation of natural resources into current revenue and generating foreign exchange. The most important advantage in hosting FDI in addition to bringing in of capital is that FDI brings in a host of assets and capabilities already full operational. But the central big control exercised by TNCs to maintain over their “assets”, may limit or totally prevent development of an indigenous production and export capability. But the choice ( by host countries to FDI ) of industries or part industries to host is likely to be important. Wheather a spillover could become the basis of broader development, depends on the kinds of incentives made available as well as relative bargaining power of TNCs and host county governments. This is particularly true for technological assets, an area where TNCs have strong economic reasons to keep innovative work centralized at home or in a few advanced countries. The effort of host governments to build domestic capacity in this area could create potential conflicts. Investment policy The role of physical investments as one of the main determinants of growth is theoretically central in many economic models and it’s empirically very well established by now. It’s very well known that East Asian countries have maintained very impressive investments ratios during their high-growth periods. Less well understood is how this have been possible. The most conventional explanation of high investments in the East Asian countries is that they could invest a lot because they saved a lot. As for the cause of savings, many believe that if was due to their Confucian culture that emphasizes frugality and abstinence from instant gratification, but the critical limitation of this interpretation is that, like many other simplistic ‘cultural’ explanations, it attributes a recent phenomenon (high savings) to a millennium-old cause (Confucian culture). Alternatively, it has been argued that high savings in these countries were due to high real interest rates, but by now there is a rather widespread consensus that this explanation is not supported by evidence. In the end it is doubtful whether it is high savings that is causing high investments, rather than the other way around. Although there is an ongoing theoretical dispute on the relationship between savings and investments, there is a growing opinion that investment, rather than savings, is the prime mover in the saving-investment-growth dynamic. Therefore, while we should not dismiss the importance of saving policies played in raising savings in East Asia, we need to concentrate also on how high and productive investments were made possible in the East Asian model. Many commentators emphasize that political and economic stability is very important in encouraging investments. Political and/or economic instability obviously shrink potential investors’ time horizon, and discourage commitments of resources to projects whose returns are far in the future and often uncertain but which may be crucial for modern industrial development. More recently, however, there has been a tendency among the mainstream economists to interpret the issue of stability very narrowly and basically reduce it to the achievement of very low inflation (below 5%). And in this contest East Asian countries have been often paraded as examples of the investment-boosting effect of low inflation. However, the East Asian experience, especially those of Japan and Korea during their earlier periods of development, do not lend much support to this argument. At least until the late 1970s, the Japanese and Korean states have pursued what can be called ‘pro-investment macroeconomic policy’, which put emphasis on maintaining high levels of investment, if necessary at the cost of moderate inflation For example average rate of inflation (measured by the average annual growth of the consumer price index) in Korea were 17.4% in the 1960s and 19.8% in the 1970s, which were higher than the inflation rates found in many Latin American countries, for whose ‘trouble’ inflation is often blamed, during the same period. Even when they pursued ‘stabilization’ programmes, their macroeconomic policy was fine-tuned to ensure that it did not kill off investors’ confidence (and thus investments), if necessary at the cost of allowing more inflation – a policy pattern that has obviously been broken in Korea recently due to the International Monetary Fund (IMF) conditionality on low inflation and budget balancing following the 1997 crisis. The question of replicability has been a persistent theme in the debate on East Asia. In the early days of the debate, when the mainstream economists recommended the supposedly ‘free market, free trade’ model of East Asia to other developing countries, many dependency theorists pointed out that there were too many historical, geopolitical, and perhaps cultural idiosyncrasies that made the model generally inapplicable, although they did not question the main stream characterization of the model itself. Later, when it became clear that the East Asian countries did not succeed on the basis of ‘free market, free trade’ policy, the mainstream economists adopted the dependency-style argument that they had so vehemently disparaged earlier and argued that the East Asian model could not be replicated, because its success was based on certain unique conditions which other countries did not possess (World Bank 1993 is the best example). We are going to examine two arguments that have recently became very popular. The first argument emphasise the importance of a competent bureaucracy in successfully administering the kinds of ‘sophisticated’ industrial and trade policies that the East Asian countries have used. The second emphasises the difficulty of using the East Asian-style ‘non-market-conforming’ trade and industrial policy instruments in the new international trading regime that came out of the Uruguay Round negotiation which established the World Trade Organization (WTO). How plausible are these arguments' In response to the first argument, it should be admitted that a competent bureaucracy is certainly needed for an effective administration of East Asian-style trade and industrial policies.