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Resenha nº 0472001

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Resenha nº 0472001 Powered By Docstoc
					                                                                                        Relatório nº 038/2003
                                                                       Quinta-feira, 06 de Novembro de 2003

                                       Special Report Asia
O NEGÓCIO É A CHINA
Uma das alavancas do futuro do Brasil está na China, a mais formidável oportunidade de negócios surgida
nas últimas décadas no cenário mundial. Enquanto as demais economias enfrentam retração, a China se
consolida como uma indústria de 1,3 bilhão de pessoas que fabricam, consomem e exportam dia e noite.
O único país que ainda mantém ritmo acelerado de crescimento conseguiu elevar seu PIB para US$ 1,2
trilhão no ano passado e anunciou crescimento de 8% somente neste primeiro semestre, apesar da Guerra
do Iraque. No Brasil, o gigante asiático saiu da 12ª posição no mercado das exportações para a segunda,
ultrapassando parceiros tradicionais como Argentina, Holanda e Alemanha. E mais: nos próximos cinco
anos, ela será a maior compradora de produtos brasileiros, passando os EUA.
Empresas de todo o mundo sentem o impacto da China, mesmo que não operem nem mantenham
negócios no país. Portanto temos a oportunidade de aproveitar a investida chinesa, de nos tornarmos seus
parceiros com investimento de capital e joint ventures nos dois países.
Os chineses não querem ser apenas compradores de produtos brasileiros: desejam participar do sistema
produtivo para garantir qualidade, fornecimento de longo prazo e preços competitivos. Eles participam
como sócios na criação de rebanhos, nos frigoríficos e nas exportações, assim como na produção da soja
e de seus derivados (óleo e farelo), açúcar, álcool, softwares, eletrônicos etc. O mesmo se aplica ao Brasil
na China, com investimentos em parcerias tais como aviões, soja, software, veículos, máquinas.
O país que se destaca no cenário econômico mundial tem 5.000 anos de história. Mas, nas últimas três
décadas, passou por mudanças radicais na política, crise financeira em 1997 e reformas econômicas cada
vez mais profundas para satisfazer os requisitos da Organização Mundial do Comércio. Desde 1978, o
crescimento anual do PIB foi de 9%, em média, o que implica um salto cumulativo de 700%. No comércio
exterior, a expansão anual foi de 15% -ou 2.700% no total.
No ano passado, a China ultrapassou pela primeira vez os EUA em investimento estrangeiro direto e se
tornou uma poderosa combinação de mão-de-obra disciplinada e barata com grande contingente de
pessoal técnico e de incentivos fiscais para atrair investimentos; e, ainda, uma infra-estrutura capaz de
realizar operações eficientes de produção e exportação.
Com a abertura da economia chinesa, quem ganha são as multinacionais. Primeiro, porque as empresas
100% chinesas -salvo exceções como a Konka (televisores) e a Huawei (telecomunicações) -ainda não
têm capacidade para competir fora do país em outra base que não a mão-de-obra de baixo custo.
Segundo, as empresas chinesas ainda têm uma gestão peculiar, que valoriza mais o tato político do que
as modernas técnicas de gestão. Terceiro, a China sempre recorreu a barreiras tarifárias para proteger a
indústria nacional e exigia do investidor a formação de joint ventures para entrar no país. Mas, com a
admissão na OMC, as barreiras tarifárias serão reduzidas, as exigências de exportação eliminadas e
poucos setores ainda exigirão joint ventures.
Empresas de todo o mundo sentem o impacto da China, mesmo que não operem nem mantenham
negócios no país
O desafio das multinacionais seria transferir para a China seu know-how de gestão e reduzir custos por
contratar mão-de-obra barata, a ponto de gerar vantagem competitiva.
Às empresas que buscam uma fatia do bolo chinês, lembro que há riscos, como o atraso na implantação
dos requisitos da OMC; porém nós, brasileiros, temos uma grande vantagem sobre os EUA e os países
europeus. Entendemos bem como funciona a negociação chinesa e o ritual do "guanxi" -a prática de
cultivar relações pessoais, muito valorizada na Ásia (e também na América Latina). Em território chinês,
deve-se apreciar o relacionamento pessoal construído ao longo do tempo, mesmo nos assuntos
econômicos e políticos comuns.




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Diante do crescimento econômico da China e do seu avanço no mercado mundial, o Brasil não pode
deixar de enxergar essas oportunidades. Sairão na frente não só empresas que aproveitarem a China
como fonte de produtos de baixo custo, mas também as que vêem nesse país a oportunidade de exportar -
e, nesse campo, nós nos destacamos não só pelos produtos básicos (café, suco de laranja, álcool, carnes,
soja), mas também pelos manufaturados- e, finalmente, aquelas que pretendem lá se instalar para
abastecer o próprio mercado chinês.
Muitas empresas nacionais já iniciaram esse caminho. Nos dias 4 e 5 de novembro, uma delegação
brasileira aportará em Xangai e Pequim para reunir, na mesma mesa, empresários brasileiros e chineses.
Esses encontros foram agendados pelo Banco da China, pelo Banco de Desenvolvimento da China e pelo
Banco Santos. A intenção é estreitar ainda mais as relações entre os dois países, para gerar negociações
futuras.
As reuniões vão anteceder a 22ª Cúpula de Negócios da China, evento do Fórum Econômico Mundial, que
acontece em 6 e 7 de novembro, e no qual o Brasil foi convidado a apresentar um painel inteiro. Durante
essa cúpula, o presidente Manoel Cintra Neto anunciará a abertura do escritório da BM&F em Xangai e o
ministro Roberto Rodrigues discutirá agricultura, suprimento alimentar e diminuição das distâncias entre
Brasil e China, em apresentação organizada pela BrasilConnects.
Essa importante participação brasileira na cúpula chinesa mostra que a China também nos reconhece
como forte parceiro comercial e de grande potencial de expansão no agronegócio. (Edemar Cid Ferreira,
economista, é presidente do Banco Santos e do Conselho da BrasilConnects. (Folha de São Paulo,
31/10/03)


MISSÃO VAI À CHINA PARA AMPLIAR O MERCADO
O ministro da Agricultura, Pecuária e Abastecimento (Mapa), Roberto Rodrigues, embarcou no fim de
semana para a China com o objetivo de ampliar a fatia dos produtos agrícolas brasileiros em um mercado
de 400 milhões de consumidores potenciais. Ele chefia uma delegação de vinte empresários brasileiros
que participará de seminários de negócios em Shangai e Pequim e se reunirá com o ministro da
Agricultura da China, Du Qinglin. Ao Brasil interessa aumentar as exportações de soja, carnes, frutas,
pescados e bebidas, além de algodão.
Com previsão de crescimento de 7% do Produto Interno Bruto (PIB) este ano, a China, com uma
população superior a 1,3 bilhão de habitantes, é um mercado em expansão. Em 2001, ocupava o 11 lugar
entre os importadores do Brasil. Atualmente, além de ser o principal destino da soja nacional, já é o
terceiro maior importador de produtos agropecuários do País. De janeiro a setembro deste ano, as
exportações do agronegócio brasileiro para o mercado chinês cresceram 84,5%, com um faturamento de
US$ 1,823 bilhão ante US$ 988,5 milhões em igual período de 2002. Em volume, os embarques
totalizaram 6,9 milhões de toneladas, ante 4 milhões de toneladas nos nove primeiros meses do ano
passado.
Carro-chefe da agricultura brasileira, a soja também puxa as exportações para a China. De janeiro a
setembro deste ano, o faturamento do complexo soja naquele mercado chegou a US$ 1,369 bilhão, o
equivalente a 6 milhões de toneladas, ante US$ 752,3 milhões - 3,63 milhões de toneladas – do mesmo
período do ano passado. Os embarques do produto representam hoje 75% sobre o total exportado para
aquele país. Em seguida, aparecem papel e celulose (12%), couros (4,8%) e madeiras e suas obras
(4,7%). Esses quatro grupos de mercadorias são responsáveis por 96,5% das vendas do agronegócio para
a China.
"As perspectivas de crescimento das oportunidades de negócios entre o Brasil e a China são animadoras",
disse Rodrigues. "O mercado chinês tem grande potencial de expansão para o agronegócio brasileiro",
acrescentou. Rodrigues participará dos seminários "Overview on Brazil", no dia 4, em Xangai, e no dia 5,
em Pequim. Nos dias 6 e 7, ainda em Pequim, o ministro estará no "China Business Summit", organizado
pelo World Economic Forum. Nesse período, Rodrigues encontra-se com o ministro Du Qinglin.
De acordo com Roberto Rodrigues, o Brasil tem interesse e condições competitivas para ampliar o
comércio com a China. "Nossa missão àquele país tem o objetivo de estabelecer as bases comerciais e
sanitárias com vistas a acordos bilaterais e parcerias entre os dois países. Queremos identificar potenciais

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compradores não só para soja, mas também para calçados, carnes, frutas, bebidas, pescados e
confecções", afirmou.
Na agenda das negociações agropecuárias entre os dois países constam seis temas. O Brasil quer que a
China conclua a análise de risco de pragas para poder exportar frutas cítricas para aquele mercado.
Também pretende que os chineses terminem a avaliação do sistema sanitário brasileiro de produção de
gado, suínos e aves para ampliar os embarques de carnes. Já a China tem interesse em vender milho,
tripas, frutas e pescados para o Brasil, quinto maior importador de produtos chineses. (Gazeta Mercantil,
03/11/03)


BRASIL E CHINA DEBATEM RELAÇÕES COMERCIAIS
Esta semana, quatro eventos em Xangai e Pequim vão reunir lideranças empresariais dos dois países.
Brasil e China - que junto com a Rússia e a Índia formam o grupo BRIC, iniciais dos quatro países que, em
2025, responderão por mais da metade do PIB do G-6 (França, EUA, Grã-Bretanha, Japão, Itália e
Alemanha), segundo projeta o banco de investimentos Goldman Sachs - serão tema de quatro eventos em
Xangai e Pequim, nesta semana. O World Economic Forum (WEF) realiza quinta e sexta-feira, na capital
chinesa, a 22ª Cúpula de Negócios da China, com a participação de Roberto Rodrigues, ministro da
Agricultura, Manoel Cintra Neto, presidente da BM&F, Rubens Ricupero, secretário-geral da Organização
das Nações Unidas para o Comércio e o Desenvolvimento (Unctad), e João Baptista Galvão, engenheiro
que reduziu a poluição de Cubatão na década de 80. A BrasilConnects, que representa o WEF no Brasil,
levará Galvão para apresentar aos chineses o caso de Cubatão. A China pretende aplicar na região de Xi‟
an, desequilibrada pelo uso desordenado do carvão mineral, tecnologias despoluentes usadas no Brasil.
Nesta semana também, o presidente do Conselho da BrasilConnects, Edemar Cid Ferreira, assinará
contrato com Zhu Chengru, vice-diretor do Museu Imperial da Cidade Proibida, para a realização de uma
mostra sobre arte plumária e arqueologia da Amazônia naquele palácio, em 2004. A exposição faz parte
de uma carta de intenções assinada em 2001 entre os governos dos dois países, durante visita oficial à
China do então presidente Fernando Henrique Cardoso. Naquela ocasião, foi definida a vinda da
exposição "Guerreiros de Xi‟ an e os Tesouros da Cidade Proibida para o Brasil. A mostra chinesa foi
inaugurada em fevereiro deste ano.
Seminários de negócios
Amanhã, em Xangai, e quarta-feira, em Pequim, o seminário "Um panorama do Brasil" reunirá lideranças
empresariais brasileiras e chinesas, o Bank of China, principal do país, e o China Development Bank,
equivalente ao BNDES. Os encontros serão promovidos pelo Banco Santos. Roberto Rodrigues, Edemar
Cid Ferreira, Sebastião Cunha, diretor da área internacional do Banco Santos, e o advogado João Ricardo
Azevedo Ribeiro, sócio do escritório de advocacia Mattos Filho, apresentarão aos chineses um quadro da
economia brasileira e as oportunidades de negócios entre os dois países.
China, o segundo parceiro
A China já é o segundo mercado para as exportações brasileiras e, desde março, ultrapassou parceiros
tradicionais como Argentina, Holanda e Alemanha. De janeiro a maio deste ano, as vendas do Brasil para
o mercado chinês somaram US$ 1,77 bilhão, um aumento de 229,7% em relação ao mesmo período do
ano passado. Do superávit total acumulado pelo País no período, de US$ 8 bilhões, US$ 1 bilhão foi
resultado do intercâmbio com os chineses. Em 2000, o comércio bilateral somou US$ 2,8 bilhões, ante
US$ 600 milhões em 1990. Predominam nas vendas brasileiras produtos primários, principalmente a soja,
mas os manufaturados e semi-manufaturados de maior valor agregado ganham espaço.
Em 2000, 68,2% das exportações do Brasil à China foram de produtos básicos, mas já houve um
decréscimo dessa categoria para 54,9%. De acordo com o Banco Santos, o momento atual é chave para
as indústrias brasileiras introduzirem suas marcas no mercado chinês.
Busca de interesses comuns
Na avaliação do WEF, os dois países poderiam ser parceiros em muitas áreas, mas até agora poucas
oportunidades foram exploradas. Nesse sentido, a Cúpula de Negócios buscará respostas para as
seguintes questões: quais interesses comuns existem entre Brasil e China? Como a comunidade

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empresarial pode ajudar na tarefa de construir um relacionamento mais compatível com o tamanho das
duas economias? Ambos têm muito em comum. O comércio exterior brasileiro e chinês está crescendo e
os dois países são economias importantes para a alocação de investimentos estrangeiros.
São membros ativos da Organização Mundial do Comércio (OMC) e mercados potenciais enormes para as
vendas americanas e européias. Ambos também estão juntos no G-20 - países em desenvolvimento que
combatem os subsídios agrícolas na Rodada de Doha da OMC. Brasília e Pequim têm 70 acordos
bilaterais, a maioria formalizada nos últimos dez anos. Recentemente, a China ultrapassou o Japão como
o maior importador de soja brasileira. As firmas chinesas também estão interessadas nas matérias-primas
do Brasil, especialmente minerais, e na produção agrícola do País.
Brasil e China são percebidos como aliados. O ex-presidente chinês, Jiang Zemin, visitou o Brasil duas
vezes, em 1993 e em 2001, com "grande sucesso em estreitar a amizade e a cooperação entre os dois
países", diz o embaixador brasileiro em Pequim, Affonso Celso de Ouro Preto.
Há uma cooperação importante em tecnologia e em projetos de pesquisa. Um acordo firmado em 1993
levou à construção conjunta e ao lançamento de um satélite de recursos terrestres, o CBERS-1 em 1999.
Na ocasião, o ex-ministro da Ciência e Tecnologia, Ronaldo Sardenberg, comentou que "a cooperação
bilateral futura em tecnologia poderá se expandir por áreas como biologia, engenharia genética humana e
agricultura". No mês passado, foi lançado em Taiyuan, a 800 quilômetros de Pequim, o CBERS-2. Em
2002, a Embraer e a AVIC II, da China, lançaram programa conjunto para desenvolver jato regional de 30
a 40 lugares.
A China, entretanto, com sua capacidade de produzir itens industrializados baratos, assusta os industriais
brasileiros, sobretudo os da área de calçados. Eles temem a expansão das vendas mundiais do país
asiático. A fatia chinesa das importações americanas de sapatos aumentou de 16%, em 1990, para 63%,
em 2000, enquanto a participação do Brasil no mercado americano encolheu de 11% para 8%, no período.
O WEF escolheu como tema, para a sua Cúpula de Negócios 2003, a China sob nova liderança. Seis
meses depois da troca de presidente - o atual é Hu Jintao, eleito em 15 de março - o empresariado
internacional quer saber sobre o estilo do novo governo e as prioridades do país.
Durante dois dias, painéis com a participação de empresários e autoridades chinesas e ocidentais
abordarão os assuntos da atualidade que envolvem a China: mercado de capitais, reforma das estatais,
telecomu-nicações, indústria automobilística, investimentos diretos estrangeiros, agricultura, comércio
exterior e perspectivas da OMC pós-reunião ministerial de Cancún, governança corporativa, relações com
a Rússia e Estados Unidos, transformação do setor bancário, propriedade intelectual, futuro dos negócios
na China, mercado imobiliário e as perspectivas da mídia chinesa. "Encurtando a distância entre a China e
o Brasil" é o tema de um dos painéis, na próxima sexta-feira. (Gazeta Mercantil, 03/11/03)


A CHINA PEDE RECIPROCIDADE
Brasil e China assinaram um protocolo sobre defesa sanitária que permitirá evitar conflitos comerciais na
área mais importante do intercâmbio: o agronegócio. Pelo protocolo, firmado entre a AQSIQ -
Administração Estatal para Inspeção, Qualidade e Quarentena - da China e o Ministério da Agricultura, o
Brasil vai também estudar o pedido chinês de reciprocidade para reduzir o saldo bilateral negativo do país.
A China quer exportar alho, tripa suína e milho, e reclama que a soja importada do Brasil contém terra com
ervas daninhas que podem prejudicar as lavouras chinesas. O secretário de Política Agrícola do Ministério
da Agricultura, Ivan Wedekin, explicou que "ao Brasil interessa o jogo grande".
Isto significa continuar exportando soja e outros produtos, como carnes bovina e de aves para a China,
vendas que ainda não foram liberadas, e que o governo pretende flexibilizar sua posição em relação ao
milho e à tripa suína, desde que cumpridas determinadas condições.
"O governo vai conversar com os empresários brasileiros para evitar problemas", antecipou Wedekin, que
assinou o protocolo com os chineses na semana passada, em Pequim.
A importância da China para as exportações brasileiras de soja é destacada pelo presidente da
Associação Brasileira de Agribusiness (Abag), Carlo Lovatelli. A China, explica o dirigente, absorve 34%


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dos embarques de soja em grão do Brasil e 17% das vendas de óleo, o que representará, em 2003, 7
milhões de toneladas de soja em grão e 400 mil toneladas de óleo. Em 2004, estima, quantidades
semelhantes deverão ser mantidas.
Brasil tem grande vantagem na balança bilateral agropecuária, principalmente com venda de soja. A China
já havia reivindicado a exportação de US$ 18 milhões em alho para o Brasil, no ano passado, mas o setor
privado brasileiro pressionou para que a importação representasse a metade desse valor. De janeiro a
setembro, os chineses colocaram no mercado brasileiro US$ 8 milhões em alho, segundo contabilizou
Wedekin.
Quanto à tripa, a China terá de assegurar que as exportações são de animais livres da peste suína
clássica. O milho chinês será autorizado a ingressar desde que receba um tratamento com inseticida,
disse o secretário de Política Agrícola. Os chineses pedem ainda facilitação para exportar maçãs e duas
outras frutas: lichia e longan.
Brasil, por frutas cítricas
O Brasil, em contrapartida, quer a abertura do mercado chinês para as suas exportações de frutas cítricas:
"Apresentamos novas informações para o processo de aprovação das importações de cítricos pela China",
informou. Wedekin participou ontem, com o ministro da Agricultura, Roberto Rodrigues, de um seminário
em Xangai sobre o Panorama da Economia Brasileira promovido pelo Banco Santos em parceria com o
Bank of China e o China Development Bank. Hoje e amanhã, em Pequim, Rodrigues se reunirá com
autoridades chinesas.
Segundo comprador de soja
A China é o segundo maior comprador da soja brasileira, depois do conjunto de países da União Européia.
Neste ano, o país asiático importou US$ 1,37 bilhão (6 milhões de toneladas), o dobro do volume adquirido
no ano passado.
O saldo negativo chinês no comércio agropecuário com o Brasil é significativo: de janeiro a setembro deste
ano, o Brasil vendeu US$ 1,81 bilhão e comprou apenas US$ 51 milhões. Em 2002, o País exportou US$
1,36 bilhão e importou não mais do que US$ 78 milhões.
Diante do desequilíbrio na balança e da distância que a China vem acumulando entre a renda urbana e a
rural, o governo chinês está tendo atitudes mais firmes com seus parceiros em matéria de contrapartida e
por isso faz reivindicação ao Brasil.
Segundo Carlo Lovatelli, "os chineses tendem a comprar mais de nós do que de outros. Eles sentem uma
aproximação maior com o Brasil", acredita o presidente da Associação Brasileira d e Agribusiness. "A China
também está viabilizando nossa soja transgênica. Não importa se transgênico, o chinês quer garantir o
suprimento".
Na avaliação de Lovatelli, a China tem menos possibilidade de expansão de seu cultivo de soja do que o
Brasil, que ainda pode incorporar 90 milhões de hectares para a produção da oleaginosa. Na China há
falta de água, diz o empresário. Entretanto, o país asiático "dita o mercado de grão" e quer se tornar o
grande fornecedor de farelo de soja para a Ásia.
O interesse chinês é importar o grão de soja e processá-lo, enquanto o Brasil quer vender mais óleo, com
valor agregado. "As grandes multinacionais estão colocando fábricas de óleo na China", o quarto produtor
mundial, comenta Lovatelli. A China produz 15 milhões de toneladas e consome 32 milhões de toneladas.
Traz 17 milhões de toneladas. do exterior, das quais 7 milhões do Brasil. Os EUA, segundo Wedekin,
estão pressionando os chineses a aumentarem suas compras de soja americana. (Gazeta Mercantil,
05/11/03)


CHINA ELEGE EUROPA COMO SUA PRINCIPAL PARCEIRA ECONÔMICA
A China deseja que a União Européia (UE) torne-se sua principal sócia econômica e comercial, segundo
afirmou o primeiro-ministro da China, Wen Jiabao, ao fim da reunião de cúpula realizada ontem e que
inaugurou uma nova etapa nas relações bilaterais.


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O presidente da Comissão Européia (CE), Romano Prodi, o presidente em exercício da UE, Silvio
Berlusconi, o representante da Política Externa, Javier Solana, e o comissário de Comércio, Pascal Lamy,
reuniram-se com o presidente Hu Jintao, Jiabao e suas delegações durante cinco horas "frutíferas". Os
acordos de cooperação chinesa no projeto Galileu (Sistema de Navegação por satélite desenvolvido pela
UE) e o memorando de entendimento sobre o Estatuto de Destino Aprovado (EDA), que facilita o turismo
chinês no grupo da UE, firmados ontem, foram qualificados de "pedras fundamentais" da nova etapa.
Os líderes comunitários e chineses concordaram, além disso, em estabelecer um mecanismo de diálogo
na política industrial destinado a facilitar as condições para as indústrias e a suavizar o comércio com a
contribuição das empresas da China e da UE.
Jiabao expressou na coletiva final a satisfação da China pelo processo de integração política e econômica
européia "já que uma UE forte será um pólo muito importante para o estabelecimento da paz e da
estabilidade", disse Jiabao.
Intensificação de visitas
Segundo o comunicado final, serão intensificadas as visitas de alto nível (Jiabao foi convidado a ir a
Bruxelas e Prodi voltará para Pequim no segundo trimestre do próximo ano), o diálogo político e o
fortalecimento da cooperação econômica e comercial, além da multilateral.
"As relações são cada vez mais maduras, estáveis e estratégicas, e nosso interesse em impulsioná-las
está refletido no fato de nosso primeiro Livro Branco sobre política exterior ser dedicado à UE", afirmou
Prodi. "Fomos muito honestos e colocamos sobre a mesa as dificuldades políticas e econômicas, incluindo
a situação dos direitos humanos e o embargo de armas, e dizemos que trabalharemos para alcançar
posições comuns", ressaltou.
Wen Jiabao interviu para dizer que a intensificação do diálogo facilitará ainda mais o entendimento mútuo
e que a UE compreenderá que não é um trabalho fácil promover o desenvolvimento para 1.3 bilhão de
pessoas.
"A reforma e a abertura não só trouxeram grandes mudanças à vida diária da população chinesa, aos
aspectos materiais e culturais e ao processo de diálogo empreendido (a 16ª reunião será realizada em
novembro em Pequim). Elas ajudarão a compreender que avançamos na reforma política e na melhora do
mecanismo democrático", acrescentou o primeiro-ministro.
Berlusconi afirmou na coletiva que "como empresário" percebe "a realidade de um comércio bilateral que
nos nove primeiros meses de 2003 superou o total de 2002 e alcançará a cifra de € 150 bilhões em 2007 e
de € 200 bilhões em 2013". (Gazeta Mercantil, 31/10/03)


UE DIZ QUE DÉFICIT COM CHINESES NÃO É PROBLEMA
A União Européia (UE) não considera o déficit comercial com a China um problema, e dá maior
importância ao volume do intercâmbio, calculado em €115 bilhões, com um aumento anual de 17%,
informou na última sexta-feira o comissário europeu do Comércio, Pascal Lamy. Segundo enfatizou Lamy,
"o déficit de € 50 bilhões é mais uma preocupação, mas não é um problema (como para os Estados
Unidos) que a China incremente sua participação de mercado na UE, sempre que possamos fazer o
mesmo nesse país."
O comissário assinalou, durante a sexta-feira, na Câmara Européia do Comércio na China, a extraordinária
troca de experiências comerciais bilaterais entre Europa e o país asiático, nos últimos quatro anos. "Se em
1999 o comércio chinês com o resto do mundo não superava o da Bélgica e Holanda, atualmente a China
é nossa segunda fonte de importações, aproximando-se dos EUA, e é a quinta destinação de nossas
exportações", disse Lamy.
O representante do bloco europeu informou que a enorme competitividade chinesa não está apenas no
câmbio do yuan, congelado pelo governo de Pequim, mas em uma combinação de fatores, como os 550
mil engenheiros que se formam a cada ano no país, os altos investimentos do exterior, a mão-de-obra
barata e bem treinada, e uma classe média que ainda não consome como a dos países desenvolvidos.



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Entretanto Lamy observou que, dentro da UE, cresce a pressão de certos países membros a favor de uma
reavaliação do yuan. (Gazeta Mercantil, 03/11/03)


BANCO SANTOS VAI ABRIR ESCRITÓRIO NA CHINA
O Banco Santos vai abrir um escritório na China. Segundo Edemar Cid Ferreira, presidente do banco, a
unidade ficará em Xangai, a principal cidade comercial do país, com 13 milhões de habitantes, localizada
na costa leste. A unidade deve ser aberta no início do segundo trimestre do ano que vem. Quatro
executivos do banco já estão na China para cuidar do projeto.
Ferreira ressalta que o escritório tem como objetivo financiar operações de comércio exterior entre a China
e o Brasil. Em três anos, o comércio entre os dois países deu um salto. A China passou da 12 posição
entre os maiores compradores de produtos brasileiros para o segundo lugar, ultrapassando parceiros
tradicionais do Brasil, como a Argentina, a Holanda e a Alemanha, de acordo com os dados mais recentes
do ministério do Desenvolvimento, Indústria e Comércio Exterior.
Entre os principais produtos da pauta de exportação brasileira para a China estão a soja, aço, o minério de
ferro, carros. O perfil dos produtos exportados, porém, está mudando: em 2000, por exemplo, 68,2 % das
exportações brasileiras para a China eram de produtos básicos. Hoje, esse número caiu para 54,9%. Nos
primeiros nove meses deste ano, as exportações brasileiras para a China bateram em US$ 3,4 bilhões
frente a US$ 2,5 bilhões em igual período de 2002.
O presidente do Banco Santos acredita que, em cinco anos, a China será o principal parceiro comercial do
Brasil, ultrapassando os Estados Unidos. "A China ainda é muito dependente de produtos agrícolas", diz.
Seminário
Dentro da estratégia de promover as relações comerciais dos dois países, o Banco Santos vai apoiar dois
eventos que acontecem este mês na China. O primeiro será um seminário, "Um Panorama do Brasil -
Overview on Brazil", que começa amanhã em Xangai e continua no dia seguinte na capital Pequim. Entre
os participantes está o ministro da Agricultura, Roberto Rodrigues. O banco também participa como
convidado da 22ª Cúpula do Fórum Econômico Mundial (WEF), que acontece nos dias 6 e 7 de novembro.
Segundo Ferreira, o banco está levando para a China 25 empresários brasileiros, a maioria do setor
agrícola, mas também alguns do setor de tecnologia. O presidente da Bolsa de Mercadorias e Futuros
(BM&F), Manoel Felix Cintra Neto, também está indo. A BM&F também vai abrir um escritório na China
com o objetivo de oferecer operações de „hedge‟ (proteção) para os investidores.
Tecnologia
Outro projeto do Banco Santos é usar sua experiência em tecnologia para o desenvolvimento de softwares
para o sistema financeiro chinês. "Os bancos brasileiros estão entre os melhores do mundo em
tecnologia", diz.
O Banco Santos será a primeira instituição privada brasileira a abrir um escritório na China. O Banco do
Brasil tem uma agência em Hong Cong e está instalando uma representação em Xangai. Entre as
empresas, a Vale do Rio Doce e a Embraer estão entre as que mais negociam com os chineses.
O Banco Santos já tem um escritório em Nova York. No Brasil, a instituição é um banco de médio porte,
que atua em um nicho específico, o chamado „middle market‟. Em ativos, o Santos é o sétimo maior banco
privado brasileiro, com R$ 6 bilhões. (Gazeta Mercantil, 03/11/03)


BAOSTEEL PLANEJA CONQUISTA DO MERCADO INTERNACIONAL
A Baosteel, maior siderúrgica chinesa, que lidera no Brasil o projeto de construção da usina de placas do
Maranhão, em sociedade com Vale do Rio Doce e Arcelor, anunciou ontem uma estratégia agressiva de
internacionalização. Durante palestra no Congresso Latino Americano da Indústria do Aço (Ilafa), Xu
Lejiang, diretor e vice-presidente do Shangai Baosteel Corporation, deu seu recado a um plenário repleto
de representantes do setor de todo o mundo: "Vamos fazer da Baosteel uma multinacional com negócios
livres e atacar o mercado internacional. O trabalho é árduo, mas estamos preparados".

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A Baosteel, segundo seu relato, já está trabalhando numa reengenharia para desenvolver a nova
estratégia. O plano é organizar subsidiárias independentes compondo unidades estratégicas de negócios
para ter uma base acelerada de produção e atingir 30 milhões de toneladas anuais de aço bruto em futuro
próximo, contra atuais 19,4 milhões de toneladas.
Lejiang destacou que pretende consolidar três centros de produção de aço - carbono, especiais e
inoxidável - para atender aos setores automobilístico, de eletrodoméstico, construção naval e oleodutos
incluindo os destinados a indústria do petróleo e construção civil.
Apesar desses planos, o executivo admitiu que a China vai continuar importando aço e minério de ferro do
mundo para atender a demanda criada por seu crescimento econômico. O país cresce impulsionado por
três fatores que são o processo de urbanização, a política de exportação e a recuperação do consumo.
Este ano o Produto Interno Bruto chinês deverá crescer 8% e somar mais de US$ 1,3 trilhão.
A expectativa da Baosteel é de continuidade de crescimento da produção siderúrgica chinesa. Atualmente
o país já se classifica como o 10º produtor mundial de aço. Este ano, a produção local deve somar 210
milhões de toneladas de aço bruto, devendo produzir 250 milhões em 2005 e atingir 340 milhões de
toneladas em 2010, conforme projeções da Baosteel.
Lejiang ressaltou que apesar dessa dinâmica de crescimento a indústria siderúrgica chinesa vive
problemas de escassez de matéria-prima (minério de ferro) e choque de qualidade, sofre de distribuição
desequilibrada e fragmentada das usinas de aço (as pequenas, com produção de 2 milhões de
toneladas/ano são responsáveis por 75% da produção de aço local) e tem enfrentado problemas
ambientais. "A solução para a indústria chinesa do aço será uma reestruturação total do setor, como já
estamos fazendo na Baosteel", previu Lejiang. (Valor Econômico, 05/11/03)


SNOW EVITA ACUSAR A CHINA DE MANIPULAR CÂMBIO
O governo americano irritou congressistas do país ao deixar de classificar a China e outros países como
"manipuladores cambiais", denominação defendida por políticos e lobbistas da indústria dos EUA que
acusam esses países de prática comercial injusta.
Em seu pronunciamento anual à Comissão de Bancos do Senado, o secretário do Tesouro, John Snow,
apresentou ontem um relatório que afirma que "nenhum parceiro importante dos EUA se encaixa na
qualificação técnica de manipulador cambial", o que poderia gerar retaliação comercial dos EUA.
Membros da comissão reagiram ao relatório, acusando-o de ter reduzido a gravidade do assunto. "A China
está trapaceando", disse o senador republicano Jim Bunning, que exortou o governo a dar um sinal mais
forte contra esses países. O senador democrata Charles Schumer, que propôs recentemente uma
sobretaxa para produtos importados da China, foi mais enfático. "Esse relatório tenta dá uma falsa
aparência à China, que de fato está manipulando o yuan."
A indústria americana e políticos de ambos os partidos criticam o governo chinês por manter o câmbio fixo
a uma patamar que favoreceria as exportações chinesas e, portanto, promove uma distorção no comércio
internacional.
Snow disse que Washington está trabalhando ativamente para que Pequim ponha fim ao câmbio fixo, que
já dura uma década. "Essa política não é apropriada para uma grande economia como a chinesa e deve
ser mudada", afirmou o secretário. Mas reiterou que a mera existência do câmbio fixo não é razão
suficiente para os EUA rotularem o país de manipulador.
Para analistas, a ofensiva do governo Bush é eleitoral e visa atender lobbies protecionista devido à perda
de emprego na indústria dos EUA. A China nega usar o câmbio para favorecer seus produtos e diz que até
há pouco tempo o comércio entre os países era equilibrado, apesar do câmbio fixo. (Valor Econômico,
31/10/03)


BRASIL DISPUTA COM OS EUA MERCADOS RUSSO E CHINÊS




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A briga é mais acirrada para vender soja e frango. Os Estados Unidos estão pressionando a Rússia e a
China para que elas comprem mais carne de frango e soja americanas numa tentativa de reduzir a
participação brasileira naqueles mercados.
"É um jogo de poder", disse, em Xangai, o ministro da Agricultura, Pecuária e Abastecimento, Roberto
Rodrigues.
A pressão sobre os dois países, que o governo brasileiro vem detectando em seus encontros com
autoridades chinesas e russas, ocorreu na seqüência da reunião ministerial da Organização Mundial de
Comércio (OMC) em Cancún, no México, cujo colapso o representante de Comércio americano, Robert
Zoellick, atribuiu ao Brasil por ter liderado o G-20, países em desenvolvimento que se opõem aos
subsídios agrícolas concedidos pelos ricos.
Ficou claro, porém, que o colapso da reunião de Cancún não foi provocado pela ação do G-20, mas pela
proposta européia de reintroduzir na negociação os chamados temas de Cingapura, como investimentos e
compras governamentais.
Roberto Rodrigues, que participa hoje, em Pequim, da Cúpula de Negócios da China, promovida pelo
World Economic Forum (WEF), disse que "a postura americana mais agressiva de ir em cima da Rússia e
da China para tirar o Brasil (dos mercados de soja e de frango) foi depois de Cancún, porque o Brasil
capitalizou o G-20". Para o ministro, esse "é um antijogo democrático".
Faltando poucas semanas para terminar a Cláusula de Paz, que os países ricos, subsidiários, querem
prorrogar para não ficarem sujeitos a investigações na OMC, e com a ambição na Área de Livre Comércio
das Américas (Alca) reduzida, as fichas acabam se concentrando na negociação União Européia-
Mercosul, diz Rodrigues.
Em seu raciocínio, seria preciso que os dois blocos, na reunião técnica de meados deste mês, na Europa,
com a participação de ministros de comércio, ampliassem as negociações agrícolas como um sinal político
para fazer avançar a convocação de uma ministerial da OMC antes de 15 de dezembro, quando a Rodada
de Doha será retomada.
"Não que seja mais fácil negociar com a Europa, é que sobrou essa negociação como uma chance de abrir
e isso contaminar a OMC e a Alca", afirma o ministro.
Ele propôs à sua colega alemã, Renate Künast, que recentemente participou de uma reunião da Comissão
Mista Brasil-Alemanha, em Goiânia, o agendamento de um encontro ministerial da OMC antes de 15 de
dezembro. Para o ministro, o Mercosul e a União Européia deveriam "dar um sinal claro de flexibilização e
a partir daí haveria a ministerial da OMC". Essa reunião, acredita, poderia contaminar positivamente as
negociações dentro do contexto da Cláusula de Paz, que vai até 31 de dezembro.
"Para a Alemanha, é muito relevante que as coisas se flexibilizem mais rapidamente. Da mesma forma que
a ministra disse que iria conversar com a UE, passei o assunto para o Itamaraty conversar com o G-20. Eu
me surpreenderia muito se os países interessados na abertura comercial não convocassem uma
ministerial, pois a Cláusula de Paz acaba em dezembro.
E os países em desenvolvimento vão usá-la como tesouro de barganha. Sem a cláusula, eles ficarão
sujeitos a painéis."
Roberto Rodrigues diz que com o término da Cláusula de Paz não haveria interesse em um painel na OMC
relacionado a subsídios à soja "porque os preços estão altos", mas se caírem para US$ 7 por bushel
(estão em US$ 7,7 o bushel), enquanto o produtor americano está recebendo uma grande vantagem,
porque isso é mais do que evidente na Farm Bill (lei agrícola dos EUA), certamente surgirão painéis".
O ministro compara a UE e os EUA: a primeira é "protecionista declarada e efetiva"; já os americanos
"dizem que não são protecionistas e são. Enquanto eles aumentaram a proteção via Farm Bill, a UE fez a
reforma da Política Agrícola Comum (PAC)". Rodrigues disse que a proposta do Brasil na reunião entre o
Mercosul e a UE será a mesma do G-20: abertura nos três pilares - acesso a mercado (cotas, tarifas),
apoio doméstico e subsídio às exportações.
O ministro da Agricultura está convencido de que "é preciso abrir o comércio mundial agrícola para reduzir
a diferença entre ricos e pobres e fazer crescer a democracia universal". Em sua opinião, "o comércio


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mundial tem que aumentar porque é a única forma de os países desenvolvidos, que sofrem problemas de
estagnação econômica, gerarem empregos. Esse é um conceito, e com relação a ele, havia uma
expectativa grande de que em Cancún pudesse haver facilitação de comércio".
Outro conceito, na visão de Rodrigues, é que em uma economia globalizada, "o crescimento tem um efeito
negativo: exclusão social e concentração de riqueza. O crescimento da exclusão social se transforma em
ameaça à democracia e à paz mundial. O maior desafio do século XXI é reduzir a brecha entre ricos e
pobres para melhorar as condições de paz mundial", diz.
Em Cancún, continua, "a expectativa era de uma flexibilização da questão agrícola, que não aconteceu. A
expectativa aumentou com a reforma da PAC da União Européia, porque foi um sinal político importante".
De acordo com o ministro Roberto Rodrigues, o que esteve "por trás do imobilismo em Cancún" foram
"razões de caráter político-eleitoral: eleições nos Estados Unidos em 2004 e diferenças de política agrícola
em relação à União Européia (UE). Táticas externas ao interesse de um país se sobrepuseram. Questões
de caráter cultural inibiram. Para nós, Cancún não foi um fracasso, foi uma frustração", afirma ele.
A expectativa é de que a Alca e o processo de negociação Mercosul-EU "fossem o desaguadouro. A Alca
não aconteceu. Os americanos colocaram limites pouco ambiciosos e o Brasil aceitou, ao reagir tirando da
Alca assuntos como serviços, propriedade intelectual, investimentos e compras governamentais. A Alca se
tornou um processo pouco expressivo", diz Roberto Rodrigues.
Os conceitos, em sua opinião, "estão prejudicados porque não houve flexibilização agrícola. As
esperanças de uma abertura agrícola ficaram prejudicadas em Cancún e postergadas para a Alca". As
fichas acabam se concentrando, agora, na negociação entre a União Européia e o Mercosul. (Gazeta
Mercantil, 06/11/03)


BRASIL E RÚSSIA NEGOCIAM AS COTAS DE CARNE
Brasil e Rússia fazem uma rodada de negociações hoje em Genebra sobre as concessões que Moscou
deve fazer para melhorar o acesso das exportações brasileiras, em troca do apoio brasileiro para entrar na
OMC.
Um dos temas que a delegação brasileira vai insistir, mais uma vez, é por maior cota (com tarifa reduzida)
para as exportações de carnes de frango, porco e de gado. A alocação das cotas esboçada pelos russos
privilegia as exportações da União Européia e dos Estados Unidos.
Mas, ontem à noite, o vice-ministro Maxim Medvedkov deixou claro que Moscou não tem intenção de
aceitar a demanda feita pelo Brasil.
Esta semana, na OMC, apenas os europeus e os americanos não reclamaram da alocação das cotas. Em
Washington, Allen Johnson, principal negociador agrícola americano, disse que os produtores americanos
terão garantido 74% das importações russas de frango, 4% de carne de gado e de 9 a 11% para porco.
"Esse acordo garante que as nossas exportações para a Rússia atinjam níveis históricos e ainda tem mais
espaço para crescer", afirmou Robert Zoellick, negociador comercial chefe dos EUA. (Valor Econômico,
31/10/03)


DEFLAÇÃO AMEAÇA ABORTAR A RECUPERAÇÃO NO JAPÃO
O crescimento da economia japonesa em dois anos e meio não foi suficiente para servir de consolo ao
presidente da Kao, Takuya Goto. As vendas de sua empresa - a maior fabricante de xampu, pasta de
dente e outros produtos domésticos do país - tiveram queda de 4% nos seis meses terminados em
setembro, apesar dos preços reduzidos.
"A deflação continua", reclama Goto. "O setor varejista está desenvolvendo campanhas desesperadas
para promover as vendas, e isso significa que os preços não irão parar de cair tão cedo."
As vendas no varejo do Japão caíram 2,2% em setembro em relação ao ano anterior - o 30º mês
consecutivo de queda. Os salários, por sua vez, apresentaram a maior queda do ano em outubro. Em
resposta, grandes cadeias japonesas estão fechando lojas que não registram lucros.

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Economistas como Takehiro Sato, da Morgan Stanley no Japão, acreditam que a recuperação econômica
do país provavelmente estagnou no terceiro trimestre, na medida que o desemprego em alta e a queda
nos salários levaram o consumidor a fechar a carteira. A expectativa é que a expansão do PIB deverá
desacelerar de uma taxa anualizada de 3,9%, no segundo trimestre, para 0,2% entre de julho a setembro.
Segundo estimativa dos responsáveis pela política econômica do governo, o núcleo do Índice de Preços
ao Consumidor - que exclui os preços de alimentos - deverá cair 0,3% no ano fiscal que terminará em
março de 2005. A projeção levou o banco central do Japão a se comprometer em manter as taxas de juros
no país próximas de zero.
"O fim da deflação no Japão ainda está muito, muito longe", diz o gerente de fundos Masahiro Kami.
"Teremos que esperar ao menos três anos até que os preços subam novamente."
O crescimento econômico no Japão não será sustentável até que o premiê Junichiro Koizumi consiga pôr
fim à queda de preços que aumentou o valor da dívida, reduziu o valor dos ativos e deixou os
consumidores japoneses relutantes em gastar parte de sua poupança de US$ 13 trilhões.
"Ainda não vimos provas suficientes de que a economia está dobrando a esquina, porque os gastos em
consumo ainda não decolaram", disse Katsuyuki Tokushima, vice gerente-geral da divisão de finanças e
investimentos da Nippon Life Insurance.
Os gastos em consumo têm sido um motivo de apreensão econômica desde abril de 1997, quando o
governo japonês aumentou as taxas de consumo de 3% para 5%. Desde então, o crescimento trimestral
do consumo ultrapassou o patamar de 1% em apenas duas ocasiões.
Depois de três recessões em 12 anos, a economia japonesa está menor hoje do que em 1997. Os gastos
em construções de estradas, pontes e outros projetos ajudar a impulsionar a economia, mas criaram um
déficit público de US$ 6,32 trilhões do PIB. É o maior déficit entre os 30 países-membros da OCDE
(Organização para Cooperação e Desenvolvimento Econômico).
Koizumi, que enfrentará eleições legislativas cruciais para o seu governo neste domingo (leia matéria
abaixo), garante que vai mudar isso. O premiê japonês prometeu cortar gastos dispensáveis de trabalhos
públicos, pôr fim a mais de US$ 400 bilhões em empréstimos poderes e vender empresas estatais como a
construtora Japan Highway Public Corporation.
"Não acredito que nada irá mudar depois das eleições", disse Akihide Kinugawa, da T&D Asset
Management, em Tokyo. "A economia está no pico e irá esfriar um pouco no ano que vem." (Valor
Econômico, 05/11/03)


CORÉIA PROPÕE ACORDO DE COMÉRCIO AO MÉXICO
O primeiro-ministro da Coréia do Sul, Goh Kun, pediu para o governo mexicano realizar um estudo
conjunto para determinar a viabilidade de um acordo de livre comércio entre os dois países, informaram
ontem os meios de comunicação locais. O México e a Coréia do Sul realizam, separadamente, uma
análise sobre a conveniência de firmar um tratado comercial e o diretor de negociações Multilaterais e
Regionais do Ministério de Economia, Gerardo Traslosheros, disse que o resultado do estudo mexicano
será conhecido dentro de algumas semanas.
Em uma reunião com empresários dos dois países, Goh Kun afirmou que os benefícios de um eventual
tratado de livre comércio bilateral vão se traduzir não só em termos de incremento do intercâmbio, mas
também no aumento dos investimentos no México por parte das empresas sul-coreanas.
Asiátios prometem investir
"Chegou o momento de empreender um estudo conjunto entre os dois países", disse Goh, que esta
semana visita a capital mexicana para participar de uma reunião organizada pela Organização das Nações
Unidas (ONU) e pela Organização para a Cooperação e o Desenvolvimento Econômico (Ocde).
Ele destacou que a Coréia do Sul e o México devem aproveitar a sinergia produzida entre economias cujas
indústrias são complementares e indicou que a Coréia do Sul dispõe de meios para converter-se em uma



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ponte para os empresários mexicanos que tenham a intenção de fazer negócios nos vizinhos do Leste
Asiático. O intercâmbio comercial bilateral já alcança US$ 2,5 bilhões.
Contudo, o presidente do Conselho Coordenador Empresarial mexicano, Héctor Rangel, disse que o
governo deve deter sua marcha e trabalhar mais em temas como a competitividade e as reformas
estruturais pendentes antes de continuar assinando tratados de livre comércio.
O México é membro do Tratado de Livre Comércio da América do Norte (Nafta, em inglês) junto com os
Estados Unidos e o Canadá. Além disso mantém um acordo de associação política e cooperação com a
União Européia (UE), negocia outro com o Japão.
O país desenvolve agressiva aproximação comercial com países latino-americanos, por meio de acordos
de redução de tarifas com economias como as do Mercosul. Nos últimos anos, foram fechados acordos
setoriais com Brasil e Argentina, por exemplo, que se beneficiaram com a abertura do mercado mexicano
para exportação de automóveis.(Gazeta Mercantil, 06/11/03)


ASIAN ECONOMIES IN THE PINK
Car sales are revving up, United States orders for electronics are climbing and demand from China is off
the scale. Even Hong Kong's hotels are filling up again.
A check list of Asia's economies reveals a region that is largely fighting fit. Worries about Sars, the Iraq war
and tumbling share prices that depressed spirits in the spring have been replaced by confidence that most
countries can ride the wave of an unfolding global recovery and enjoy the year ahead.
The latest reason for optimism was a fifth consecutive month-on-month gain in US orders for information
technology, a reliable leading indicator of Asian export growth and further evidence of a long-awaited pick-
up in capital expenditure.
"It was one of the strongest figures we've seen in a long, long time and it bodes well for a continuation of
the Asian recovery," said P.K. Basu of Robust Economic Analysis, a Singapore consultancy.
Expressed as a rolling quarter-on-quarter change to iron out monthly volatility, the rate of increase in IT
orders excluding semiconductors picked up to 8 per cent last month from 7.2 per cent in August and 5.6 per
cent in July, Goldman Sachs said.
With encouraging signals that Asia is gaining pricing power as well as benefiting from improving volumes,
Goldman said the report reinforced its optimistic view of Asia's prospects.
Andy Xie Guozhong of Morgan Stanley calculates the combined exports of the mainland, Taiwan and South
Korea have been growing at a year-on-year rate of more than 20 per cent for the past five quarters.
Behind the acceleration was a falling cost of capital, which was encouraging big firms to invest again, Mr
Xie said.
"Since this part of the world makes most of the world's IT goods, the global capex revival could prolong the
strength in Asian exports," he said.
He expects the cycle to peak when stock markets start pricing in a rise in US interest rates, something he
said was probably two quarters away.
Economists are also taking heart from strong data closer to home, which have confirmed suspicions that
weakness seen in August was either a lull or an aberration.
"Everybody anticipates that the US manufacturing cycle is turning and will be quite strong and that it will be
the same story in Asia. But the data so far at least had been a little bit spotty," said David Fernandez of JP
Morgan Chase in Singapore.
This week though, Japan and South Korea reported that industrial production last month rose 3 per cent
and 2.9 per cent respectively from August. Consumption has also been roaring ahead, with retail sales in
Asia growing at an annual pace of more than 20 per cent in the third quarter, according to JP Morgan.



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The surge largely reflects a bounce back from the deadly Sars outbreak earlier in the year, which prompted
consumers to stay at home instead of going shopping and travelling.
Singapore Airlines returned to the black on Wednesday with profits for the September quarter that were
triple analysts' expectations, while Hong Kong's average hotel occupancy rate in August jumped to 88 per
cent, the highest so far this year.
Hong Kong hotels and retailers are benefiting from an influx of tourists from the mainland, whose numbers
rose 43 per cent in August to a record of 946,122 after visa restrictions were eased.
Surveying the dangers to the region's rosy outlook, economists point to the political uncertainty created by a
string of elections next year, the possibility that US pressure will force Asian currencies higher and lagging
investment rates.
But asked what he thought were the biggest risks facing Asia, Mr Basu said: "China, China and China."
Like Hong Kong's hotels, Asia increasingly depends, one way or another, on the health of the world's sixth-
largest economy.
Mr Basu said Asia's exports to China have grown by more than 50 per cent so far this year, reflecting the
country's voracious appetite for energy and raw materials as well as a growing number of firms using China
as a production platform.
So, businesspeople are watching with their hearts in their mouths to see whether China's high-flying
economy glides to a soft-landing or comes down to earth with a thud.
Opinions are decidedly mixed. Mr Basu said it would be difficult for China to choke off inflows of hot money
that, if unchecked, risked creating damaging asset bubbles.
But Jim Walker of CLSA Emerging Markets points to Japan's achievement in sustaining 8 to 12 per cent
real gross domestic product growth a year for much of the 1946-1973 period to back up his hunch that
China - now at a comparable stage of development - is not doomed to overheat and then slow sharply.
"Much more probable, given the changes to property rights and the path towards a market system that
China is steadily taking, is that a high growth trajectory is much more sustainable than mainstream models
of economic growth would otherwise suggest," Mr Walker said. (South China Morning Post/China,
03/11/03)


IMPORT-HUNGRY CHINA DRIVES WORLD GROWTH
China, criticised by some US lawmakers and executives who say its cheap exports are destroying jobs, is
becoming an economic boon for much of the rest of the world - because of its imports.
China's purchases of goods from abroad surged 41 per cent in the first nine months of 2003, positioning it
to pass Japan this year as the world's third-largest importer, behind the US and Germany. The buying
spree has helped boost prices for producers of commodities from metals to agricultural products and
increased profits of Asian companies including steelmakers and manufacturers of construction equipment.
"China has become the engine of global growth," said Donald Straszheim, a former Merrill Lynch chief
economist who heads his own economic consulting firm in California. "Everyone expects the US to be the
global locomotive, but this time the Chinese are playing a major role as well."
The Chinese economy, the world's sixth largest, is expanding at an estimated 8 per cent annual rate, three
times as fast as the Group of Seven industrialised economies. At US$1.24 trillion, China's gross domestic
product is just about 10 per cent that of America's $11 trillion and almost a third the size of Japan's
economy, the world's second biggest.
"By our estimates, Chinese economic growth accounted for 17.5 per cent of total world GDP growth in
2002, more than four times its 4 per cent share in the global economy," said Stephen Roach, chief
economist for Morgan Stanley in New York. "If anything, China's global impact appears to have increased in
2003."



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South Korea's Posco, the world's fourth-largest steelmaker by production, and Japan's Komatsu, the
world's No 2 maker of construction equipment, both attribute higher profits partly to sales gains in China.
China also is providing a market for raw materials and components from neighbouring economies such as
South Korea, Taiwan and even Japan, which now consider the nation a major customer along with the US.
China's emergence as a contributor to world growth has been lost in the US amid assertions that the
country is draining US jobs and refusing to buy US exports. While China's economy has flourished, the US
has lost 2.6 million jobs since President George Bush took office, half of them since the last US recessi on
ended in November 2001.
Commerce Secretary Don Evans last week denounced China as a closed market and predicted that the US
trade deficit with the world's most populous nation will reach a record US$130 billion this year.
While China is running a trade surplus with the US, it has a deficit with the rest of the world. Last year,
China bought US$352 billion of goods and services while exporting $388 billion - a worldwide surplus of
$36 billion. When its trade surplus with the US - $103.2 billion in 2002 - is subtracted, China posted a $67.2
billion deficit with the rest of the world.
This year, China's global surplus is expected to shrink to US$18 billion, reflecting $477 billion in imports and
$495 billion in exports, according to Hong Liang, economist for Goldman Sachs Asia in Hong Kong. After
excluding its surplus with the US - expected to be at least $121 billion - China's deficit with the rest of the
world would total $103 billion.
China will probably overtake the US to become the European Union's biggest trade partner by 2010, the EU
forecast on Friday. Trade between China and the 15-member European Union reached 115 billion euros
(HK$1.03 trillion) last year and may expand to US$200 billion by 2010, EU and Chinese government
leaders said.
With Japan's economy still growing at just 1 per cent in the quarter ended in June, China also has become
an economic leader for the rest of Asia. Over the past four years, China's net purchases from Southeast
Asian countries have risen to US$25 billion - or 2 per cent of the region's entire output - from $1 billion in
1997. This buoyed export-dependent countries at a time when their other major market, the US, was
emerging from the recession, Ms Liang said.
"I think China more or less saved Asia last year," she said.
Asian countries that once depended on the US or Japan as their primary markets are "re-orienting
themselves" to be "more complementary to the Chinese economy", said Lael Brainard, a senior fellow at
the Brookings Institution, a research organisation in Washington. Perhaps the most visible part of China's
leap forward in import buying has come in commodities, Mr Straszheim and other economists said.
"Platinum, grain, naphtha, you name it - prices of any commodities with a China factor are soaring," said
Akira Kamiyama, a fuel trader at Mitsui in Tokyo.
Posco said last month that China had overtaken Japan as its top export market, accounting for 23 per cent
of the company's foreign sales. Posco's new chief executive, Lee Ku Taek, has made sales to China a
priority.
For Nippon Steel, Japan's biggest steelmaker, shipments to China now account for 20 per cent of the
company's total exports, up from 10 per cent in previous years, Akio Mimura, the company's president,
said.
Japan's Komatsu doubled its sales of mining and construction equipment to China in the three months that
ended June 30, boosting profits for that period almost six-fold, the company reported.
"On an average day, we'd knock back between eight and 11 inquiries we can't meet for iron ore, mainly out
of China," said Barry Eldridge, managing director of Perth-based Portman, Australia's third-biggest iron ore
producer. "We could double or triple production and still sell it."
China is the largest buyer of soybeans from the US, the world's top producer, and has become Asia's top
importer of African crude oil, buying about half the 1.1 million barrels a day shipped to the region.




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"The growth potential for China and so for commodity companies is enormous," said Brian Parker, who
helps manage US$4.3 billion as a strategist at Citigroup Asset Management Australia in Sydney. "The
engine of growth China has become is really quite staggering."
In 1998, China consumed 11.1 per cent of the global aluminium supply; this year, it will use 18.6 per cent
and by 2005, 21.4 per cent, according to figures compiled by John Mothersole, Washington-based
commodities specialist for Global Insight, a Massachusetts economic forecasting firm. By comparison, he
said, the US consumes 20.3 per cent of world aluminium supplies - down from 26.7 per cent in 1998 - and
that is expected to fall to 20 per cent by 2005. The trend is similar for copper, zinc, nickel and
semiconductors.
"The country is gradually becoming wealthier," said David Thurtell, an economist at Commonwealth Bank of
Australia in Sydney. "As the economy becomes more market-based, incomes are going to increase,
boosting demand for consumer goods. There's also a lot of construction going on. It's sucking in all sorts of
commodities."
China's import binge began in 2000, when its economy was 13 per cent smaller and the impact on world
prices less noticeable, according to Nicholas Lardy, a former Yale University China expert who is now a
senior fellow at the Institute for International Economics, a research group in Washington.
As domestic demand rises and the nation drops import barriers, its role as a global customer can no longer
be overlooked, he said.
"There's no one else that even comes close," Mr Lardy said, referring to the rate of increase in China's
appetite for global imports.
"They've been a big driver of global trade expansion and a significant force in promoting the recovery."
This has boosted costs for US and European customers of the same commodities. US buyers of scrap
metal are finding that prices have soared to US$130 a tonne from $70 just a year ago, said Joseph Innace,
director of World Steel Dynamics, a research firm in New Jersey.
Pulp prices have risen by 13.7 per cent this year, lumber by 46.5 per cent, steel scrap by 27.6 per cent,
rubber by 6.5 per cent, non-ferrous metals by 19.7 per cent, fibre by 15.3 per cent and chemicals by 2.6 per
cent, according to Mr Mothersole. Such price increases won't have much impact on inflation in the US
because normally only 10 per cent of commodity price gains filter through into producer prices of finished
goods, he said.
"Strong Chinese growth is good for everybody," said Ira Kaminow, chief economist at Capital Insights
Group, a Washington economic advisory firm. "It helps spur the world economy, and it will ultimately make
China a better trading partner." The price increases are not all China's doing, he said. The economic
recovery in the US and the rest of Asia are also pushing up commodity costs.
With some exceptions, China's buying has not helped US exporters. While the US bought $113.6 billion of
Chinese goods last year, China purchased $20.1 billion in American-made products. The nation appears on
course to boost its import buying from the US by more than one-fourth this year, according to Commerce
Department statistics.
China is now the world's largest recipient of foreign investment, having attracted US$53 billion in 2002. It
has increased its holdings of US Treasury bonds by $55 billion over the past three years, making it the
third-largest foreign holder, and it soon will be second only to Japan.
"I don't see how [Commerce Secretary Don] Evans can go over there with a straight face and say they have
a closed economy," Mr Lardy said, citing figures showing that China's growth in imports from around the
world this year will exceed US$100 billion. (South China Morning Post/China, 04/11/03)


GLOBAL RECOVERY TO FIZZLE OUT AS US, CHINA COOL DOWN, SAYS ANALYST
The nascent global economic recovery was unsustainable with the twin engines for growth -- the US and
Chinese economies - headed for a slowdown, Morgan Stanley's top economist warned on Wednesday.



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Stephen Roach said at a seminar in Singapore organised by the US-based financial giant that the US
economy was on a "very, very shaky footing" despite a stunning 7.2 per cent expansion in third quarter
gross domestic product (GDP).
"The world's growth engine does not have much fuel left in the tank. It suffers from the pitfalls of
structural imbalances as well as a significant cyclical overshoot in growth," he said.
Mr Roach cited the ballooning current account deficit, falling savings rates and high debt levels as the main
reasons for the gloomy US forecast.
The US current account deficit was a record US$540 billion in the first half of the year, which is 5.1 per cent
of GDP and expected to worsen.
Private sector debt is also at record levels, net domestic savings have dropped to an all-time low of 0.5 per
cent in the June quarter and the trade deficit with key trading partners, such as China, is growing.
Mr Roach said US consumer demand, which has driven the growth, was also likely to pause after a blowout
during the summer.
"I suspect that Asia, which is heavily involved in sourcing aggregate demand in the US, will feel the
pressure of that pullback in US demand," he said.
Falling US consumer demand would also have tremendous implications for the rest of the world because
from 1995 to 2002, the United States accounted for 96 per cent of the cumulative increase in global GDP,
he said.
Roach said huge volumes of imports by China had made the world's most populous nation of 1.3 billion
people the second biggest engine for world economic growth after the United States.
But he said China's high-flying growth, officially put at 8.5 percent in the first three quarters of this year,
should slow down to seven percent in 2004, and could result in declining imports particularly from Asia.
Mr Roach said signs of China's economy cooling included a slowdown in bank lending that should affect the
property markets. The impact could spill over into capital expenditures and infrastructure spending.
"[All these factors] will change the Chinese import dynamics so that the Chinese impact on Asia - which has
been so important - is going to shift gears and shift gears significantly. I don't think Asia is prepared for
that," he said.
Chinese imports from Asia, which stood at 40 per cent this year, should be halved to 20 per cent next year,
he said, highlighting the need for the region to diversify.
Asia should "continue to focus on more balanced sources of demand whether they are internal or external,"
he said.
"Asia needs balance, diversification, multiple sources of growth. I just don't see that evident today."
Mr Roach said 73 per cent of the growth in Japanese exports in the first eight months of 2003 went to
China, with South Korea reporting 40 per cent, Taiwan 99 per cent, Malaysia 30 per cent and Singapore 25
per cent.
Mr Roach said Japan, which is the world's second-biggest economy, had fallen behind China as a driver of
global economic growth.
He said its economic recovery was also in grave doubt because of a continued failure to implement major
structural reforms. (South China Morning Post/China, 05/11/03)


THE NEXT TRANSFORMATION
A quarter of a century ago, China first embraced capitalism in the region girdling Hong Kong - the Pearl
River Delta. Hong Kong's capital and manufacturing skills have infused the delta; in turn the delta's
explosive growth has enriched Hong Kong. Yet the benefits of full partnership remain elusive, in terms of
corporate planning, relations among governments and perceptions. We asked three of the world's leading


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experts on the delta and the Chinese economy to tell us how to keep the momentum going as Hong Kong
and the delta move into competition with the mainland's other fast-growing regions.
Richard Wong Yue-chim, dean of the business and economics faculty at the University of Hong
Kong: The Pearl River Delta is vast, but most of it is closely tied to Hong Kong, at least in the areas of
manufacturing. A recent study I conducted indicated that Hong Kong-based companies employ up to 10
million workers in the manufacturing sector across the border, but is this a sign that we have a partnership?
Is this partnership between Hong Kong and Guangdong province a myth or a reality?
William Overholt, the Asia-Pacific chair at the Centre for Asia-Pacific Policy at Rand, a think-tank
based in Santa Monica, California: There has always been a partnership. The delta taking off is largely
because of Hong Kong. Hong Kong's example has inspired the delta to modernise and move forward. Hong
Kong's logistics have moved the cargo from the delta's manufacturing. To a much lesser extent, tourism
has been mutual. At the same time, there has been inertia from the days of British-Chinese mutual
suspicion of western versus eastern ideological competition. Although the realities of the situation have long
since changed, the inertia has lasted until very recently.
What is happening is like the lifting of a huge trade barrier, as mentalities change on both sides. This
incomplete, but very rapid, transformation of mentality is the emergence of a completely new level of
partnership. Hong Kong and the delta are going to be like Siamese twins who cannot be separated. In
dealing with the new challenges, the delta is only going to be able to move forward with Hong Kong
marketing, and Hong Kong is only going to maintain its status through the delta story. Otherwise, both will
stagnate.
Michael Enright, Sun Hung Kai professor of business at the University of Hong Kong: Obviously,
tens of thousands of companies and individuals have formed their own partnerships, and they have done
so with the knowledge of, and the facilitation of, government support structures on both sides, but until
recently, there has not been a realisation of what partnership could mean.
Since 1997, it is almost as if we have put two children together. When you watch them get together for the
first time, they engage in what is called "parallel play". They go about their own business, and it takes them
a while to understand that they can play together, that they can co-operate and that they can do better
together than they can separately.
I think we are at the stage now where people are recognising that there are partnerships to be had, that in
the past, while we could do it on a company-by-company or individual-by-individual basis, many of the
issues we face today require a more encompassing sense of partnership. They encompass infrastructure
and environmental planning, and a recognition that actions taken in one part of the delta have
repercussions in other parts.
One reason I think we will see substantially greater partnership is because it is not being driven by some
sense of altruism. It is being driven by very bald, blatant self-interest.
Professor Wong: I think partnerships are best when it is between people who have something different to
bring to the table. What are the likely changes in the division of labour between Guangdong and Hong
Kong, so this partnership will take shape?
Professor Enright: We will see an increase, in the manufacturing sector, of the number of activities that
are shifting across into the delta; first the manufacturing itself, then the associated quality control ... then
some of the associated logistics and associated sourcing, while many of the highest value-added activities
remain in Hong Kong. I think this trend will continue.
Hong Kong's economy, on the other hand, will narrow; we will tend to see fewer activities performed here,
but potentially it will perform the high-value-added activities for more and more companies.
Dr Overholt: We are going to see a great refinement of the existing division of labour. The main division is
already there, but it has been fragmented and inefficient. There will be enormous efficiencies as it is
refined.
Second, there are going to be fundamental changes, such as Hong Kong moving into all kinds of services
in the delta that it has largely been excluded from in the past. Hong Kong distribution is as efficient as any
in the world and that will spread very rapidly.

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Professor Wong: How can Hong Kong help Guangdong become more competitive? It is an important
issue in a partnership, especially if Hong Kong is Guangdong's best card. What do we have to offer beyond
just saying: "Well, we are different just because we know the world better"?
Dr Overholt: I think it starts with marketing. Hong Kong has the global network. It has the international
marketing skills and this is going to be life or death for the delta going forward. I do not think it is really on
the radar screen yet. But the controversies over the yuan reflect a protectionist thrust, which could cause
companies to consider drastically reducing how much they source from China.
In areas that are crucial to the ongoing success of the delta - law, international property and the basic rules
of the game - Hong Kong is going to play the role it has always played, as an example, as a teacher, and
every year this is going to become more important because as the scale of activities increases, so the
demands for the international rules to be followed are going to increase exponentially.
Professor Enright: I think there are a lot of people in Hong Kong who still view it as the leader of
Guangdong development. While that might have been accurate 10 years ago, it is not so today.
Guangdong is too strong, it has enough linkages of its own to attract major economic activity. I think we in
Hong Kong have to be a little more humble when dealing with the delta and Guangdong; we have to think
more of a merger of equals.
What does Hong Kong provide? Hong Kong provides superior knowledge of global markets. How did
China, how did the delta, become one of the world's leading exporters after being cut off from the global
economy for 20 or 30 years? It has done so through Hong Kong. There is a very strong tendency today in
Guangdong province to dismiss the importance of Hong Kong. The rationale is that Hong Kong companies
are no longer the source of the largest investments, when there are companies like Shell, BP and IBM
putting in large investments. There is a tendency to overlook all the other things that go into turning a
factory into an economically viable entity; all the development, design, marketing, sales, promotion and
logistics. That is dramatically undervalued in Guangdong. We have to do an education job there.
Professor Wong: Is a closer partnership with Hong Kong truly beneficial for Guangzhou? The most
important thing for the Closer Economic Partnership Arrangement is that it goes beyond manufacturing; it is
really about services. Because of the rapid change in the last 20 years, Hong Kong is very much a service -
provider economy and that suggests that although we may not have the entire skill set that the delta
requires, we are certainly ahead of most, if not all, Asian cities. And given our interaction over the last 20 -
plus years, we have more knowledge about what is going on in the delta than anybody else. Therefore,
Hong Kong has a lot to offer Guangdong.
The next question is whether the city can rise to the challenge of mainland competition. The confidence of
people in Hong Kong has been shaken, particularly as they have gone through six years of zero or negative
growth. The basic point is that the mainland cost structure is so much lower than Hong Kong's and
mainlanders are probably as smart as, if not smarter than, us. So how can we rise to the challenge?
Dr Overholt: I think the delta, and the dialogue over Hong Kong's relationship with it, are what is going to
move Hong Kong forward. Historically, Hong Kong has been through a lot of major transitions, from being
just an entrepot to being a manufacturing centre, a manager of manufacturing across the border, and a
great service centre - but now it faces another major transition, and it has been having trouble evolving.
Coming back after a couple of years, I find myself inspired by the way these decisions on a closer
partnership have been reached. The business community and other groups have got together - they have
done strategic planning, they have thought where we want to be 10 years from now. And they have
concluded that maybe getting where we want to be 10 years from now involves a certain amount of short -
term pain, and that is okay because we are going to get to a great place.
Professor Enright: Six, seven years ago, everyone was saying Hong Kong would lose out to Singapore.
No one is even dreaming that today. Then, two or three years ago, everybody was saying Hong Kong
would lose out to Shanghai. We are hearing less about this these days, particularly from people who have
business operations in both cities.
Now we hear that Hong Kong is going to lose out to Shenzhen, Guangzhou and Dongguan. But today, the
challenge is somewhat different, because it is much closer to home. We have been able to get away with a



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lot, in terms of inefficiencies. I am not sure we are going to get away with these forever, given the mounting
competition from the delta region.
Let me tell you exactly what I mean. We have interviewed hundreds of companies with operations in Hong
Kong and the delta. We asked them what they would have to pay someone to do a particular job in Hong
Kong, compared to a person in the delta.
The really alarming area is in the middle and lower-middle managerial and professional ranks, because
they said they would have to pay Hong Kong people four, five or six times the amount they could pay
somebody in the delta, in order for the people to be able to afford to live in Hong Kong.
I wonder if that through policies, oligopolies, or whatever, we are pricing out the middle level. We are pricing
out the young professionals who will become tomorrow's high-fliers. We are potentially pricing out
entrepreneurs who will have a difficult time, given cost structures and productivity in Hong Kong compared
to those across the border. Markets will adjust, but we cannot artificially add to our costs in Hong Kong.
Also, looking at the improved skills and capabilities in the delta, if we are going to stay ahead in terms of
being able to provide the highest value-added services for the world's best companies, we need the people
to do it. And when we see that a lower percentage of Hong Kong students go on to university than their
counterparts in Thailand, and that roughly half the percentage of students go on to tertiary education in
Hong Kong, compared with in Shanghai, that gives me cause for concern.
(This conversation is adapted from a panel discussion at the Second South China Morning Post-Hong Kong
General Chamber of Commerce Pearl River Delta Conference on October 17. This is the first in a three-
part series.) (South China Morning Post/China, 29/10/03)


EU PRESSES CHINA ON MARKET ACCESS
Pascal Lamy, the European Union trade commissioner, pressed China for greater market access for
European car, construction and banking companies on Friday, warning that if Beijing did not live up to its
World Trade Organisations commitments the EU trade deficit could become a prickly political issue.
Mr Lamy also expressed qualified concern over a Chinese plan to ease trade tensions with the US by going
on a shopping spree for big-ticket American items such as Boeing planes. “Personally, I am not a great
believer in managed trade,” he told the Financial Times in an interview.
This week Don Evans, the US commerce secretary, won assurances from top Chinese officials that Beijing
would work to moderate a trade deficit with the US that was predicted to reach $130bn this year. Mr Evans
threatened action against China under US laws if it failed to move faster in opening its markets.
Mr Lamy echoed some of these concerns but also tried to strike a less strident tone. "We don‟t have the
same political and economic problems that the United States has, but we should be careful that it doesn‟t
develop into the same abrasiveness," he said.
He called for a loosening of the peg with which the value of the Chinese renminbi is kept virtually fixed to
that of the US dollar, urging Beijing to allow its currency to fluctuate against a basket of currencies,
including the euro, the dollar and the Japanese yen.
US administration officials, facing fierce pressure from manufacturers that insist an undervalued renminbi
confers unfair competitive advantages for Chinese exporters, have called for Beijing to permit market forces
to have a greater influence over its currency's value.
Mr Lamy, in contrast, said that Chinese competitiveness derived from factors other than its currency.
Putting further distance between the EU and US approach to trade relations with China, he said; “It isn‟t our
style to wave a big stick."
The EU was pursuing a softer line than that of US as a strategy to befriend China into accepting its
demands for greater access for car, insurance, construction, telecoms, cosmetics and other EU industry to
the world's fastest growing market, foreign diplomats in Beijing said.




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On construction, Mr Lamy said he had won a postponement of proposed Chinese regulation that would
ignore the track record of companies with a history of “building bridges and buildings” in China when
tendering for projects. The postponement was for six months but he hoped it would be extended.
He said he had made strong representations to his Chinese counterparts that Beijing's plans to subject
foreign and domestic car companies to different distribution regulations was an “obvious discrimination”
under the WTO.
Although China had moved to reduce “excessive” capital requirements on the opening of insurance
company branches, Mr Lamy said he had raised the issue of onerous capital requirements that remained
for banks.
The EU trade deficit with China totalled €47bn in 2002. (Financial Times/Reino Unido, 03/11/03)


CHINA, EU WORKING TO JUSTIFY CLOSER TIES
China and the European Union, each rapidly growing in its own way, are poised to develop a closer
relationship that encompasses virtually all spheres, including global politics and economic cooperation.
This is a natural development since both parties share a common desire to allow multilateral institutions, in
particular the United Nations, to play a more prominent role in world affairs.
The U.S.-led war on Iraq last spring showed that major European countries -- with the obvious exception of
Britain and Spain -- plus China and Russia wanted to prevent unilateral action by the United States.
Earlier this month, China took the unprecedented step of issuing a policy paper on the EU, the first time it
has issued such a strategy paper on any part of the world. In it, China highlighted the objectives of its EU
policy and outlined areas of cooperation in the coming five years.
While acknowledging differences between the two sides, the paper insisted that "there is no fundamental
conflict of interest between China and the EU, and neither side poses a threat to the other."
Moreover, both China and the EU stand for democracy in international relations and an enhanced role for
the U.N." (The term "democracy in international relations" is used to signify opposition to unilateral action by
the U.S.)
"To strengthen China-EU relations is an important component of China's foreign policy," the paper said.
"China is committed to a long-term, stable and full partnership with the EU." It went on to state China's
desire to "promote sound and steady development of China-EU political relations," to "deepen China-EU
economic cooperation and trade" and "to expand China-EU cultural and people-to-people exchanges."
The paper pointed out that the two countries' economies are to a large extent complementary: "The EU has
a developed economy, advanced technologies and strong financial resources while China boasts steady
economic growth, a huge market and an abundant labor force. There are broad prospects for bilateral trade
and economic and technological cooperation."
China is now the third-largest trading partner of the EU. The Chinese position was warmly welcomed by the
EU. Romano Prodi, president of the European Commission, called it "a significant contribution toward
further deepening dialogue and cooperation" and promised to undertake "a thorough examination of the
Chinese proposals."
The two sides will hold their sixth summit meeting in Beijing on Thursday, during which the Chinese
proposals will be discussed. This will be the first summit since the new Chinese leadership was inaugurated
earlier this year. The Chinese policy document follows a European Commission policy paper on China, "A
Maturing Partnership: Shared Interests and Challenges in EU-China Relations."
In its paper on China, the EU said: "Both sides must adapt to a fast-moving international scene. . . . The EU
and China have an ever-greater interest to work together as strategic partners to safeguard and promote
sustainable development, peace and stability. Interests converge on many international governance issues,
notably the importance both attach to the role of the U.N. in physical and environmental security."




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Both sides acknowledge disagreements in the relationship. A major issue is human rights. According to the
Europeans, the EU "remained concerned about the significant gap still existing between the current human
rights situation in China and internationally accepted standards." The EU wishes to raise the level of its
human rights dialogue to vice ministerial level, hoping that this would result in faster progress.
Illegal immigration from China is also a problem, and the EU hopes to reach an agreement with China on
the repatriation of illegal immigrants. The EU, though, wants to see more tourists from mainland China and,
to this end, hopes to sign with China an "Authorized Destination Status" agreement to facilitate Chinese
tourism in Europe.
On China's side, the main concerns are the observance of the one-China principle by the EU. The Chinese
paper called on the EU to "prohibit any visit by any Taiwan political figures to the EU or its member
countries under whatever name or pretext" and not to support "Taiwan's accession to or participation in any
international organization whose membership requires statehood."
China also asked the EU "not to have any contact with the 'Tibetan government in exile' or provide facilities
to the separatist activities of the Dalai clique." China also wants the EU to lift its ban on arms sales to
China, imposed after the Tiananmen Square massacre in 1989. (Frank Ching is a Hong Kong-based
journalist and commentator.) (The Japan Times/Japão, 03/11/03)


BAOSTEEL AIMS TO BE IN GLOBAL TOP THREE
China's No 1 steelmaker, Baosteel Corp, has vowed to squeeze into the ranks of the world's top three steel
companies by 2010, aiming to boost output by 50 per cent to about 30 million tonnes, official media says.
Baosteel, which owns listed unit Baoshan Iron and Steel - the world's fourth most valuable steel company
with a market capitalisation of US$9.06 billion - is now ranked fifth in terms of production, according to state
newspapers.
Last week, the parent kick-started a plant in Shenyang, Liaoning province, boasting an annual capacity of
100,000 tonnes, with output of steel products valued at 600 million yuan (HK$557.4 million) this year and
1.2 billion yuan next year.
"We want to meet soaring steel demand from car and electronics manufacturers in the region," a
spokesman said.
Baosteel wanted to lift annual revenue to 150 billion yuan by 2010 from a forecast 42.4 billion yuan this
year, chairman Xie Qihua was quoted by newspapers as saying.
The Shanghai-based company should be able to produce 22 million to 23 million tonnes of steel next year,
against 20 million last year, vaulting into the elite Fortune 500 circle, newspapers said.
Baosteel has also strengthened its grip on the market by sealing long-term ties with Belgian steel wire and
cord-maker Bekaert. Baosteel, which vies with Japan's Nippon Steel Corp and South Korea's Posco to
supply an economy that grew 9.1 per cent in the year to September, has enjoyed strong steel prices and a
heavier focus on high-end steel plates for cars.
But analysts warn that ballooning inventories in the country's car sector and government steps to cool an
overheated steel industry could weigh on earnings in the year beyond.
Baosteel's listed arm now ranks fourth in capitalisation behind Nippon Steel, JFE Holdings and Posco. Its
yuan-denominated A shares have rallied more than 50 per cent since this year. (South China Morning
Post/China, 05/11/03)


TEXTILE DEMAND TRIGGERS IMPORT QUOTA RISE
China, the world's top cotton consumer, plans to issue another 500,000 tonnes of import quotas to meet
increased demand from the country's textile industry, sources said last week.
"The government is planning to increase quotas by half a million tonnes for this year because the textile
industry needs more," an industry source said.

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The source said the quotas of 856,250 tonnes issued earlier for this year were insufficient to satisfy
demand.
Another industry official said the government had been discussing increasing quotas by that amount in
answer to calls from textile manufacturers.
For the first nine months this year, China's cotton imports soared 577.1 per cent to 644,303 tonnes,
customs figures showed. (South China Morning Post/China, 03/11/03)


REFORM MAY EASE SOES' WELFARE LOAD
Labour market reforms may help remove the welfare burdens that have been crushing the business of
many state-owned enterprises (SOEs) in China but ordinary workers could suffer as a result.
In a recently announced pilot project that so far covers seven provinces and large cities in the mainland, the
level of care that SOEs must provide to redundant staff will be radically reduced, with seemingly little
compensation offered for the labour force.
"The reform is certainly intended to lower the burden on SOEs and help SOEs' restructuring," said Martin
Fournier, an expert on China's labour market at the Hong Kong-based French Centre for Research on
Contemporary China.
"But it will have strong implications for the well-being of the laid-off workers in the absence of an effective
social security system."
With the launch of the pilot scheme, laid-off labour has stopped existing as a category in mainland areas -
accounting for 250 million people.
This means hard-pressed SOEs will probably no longer be forced to formally keep idle labourers as
members of their workforce. (South China Morning Post/China, 03/11/03)


PREMIER WEN JOINS THE CALL FOR REGIONAL UNITY
Senior Asian leaders yesterday banded together in a call for the unity and joint economic development of
the Asia-Pacific region.
Among them was Premier Wen Jiabao, who called on the region to come up with a "win-win" strategy by
increasing regional co-operation. His appeal came as the leaders met at the opening of the Boao Forum in
Hainan.
Pakistani President Pervez Musharraf echoed Mr Wen's position, calling for faster Asian financial co-
operation and the formation of a regional currency bond market. He also called for a unified effort to narrow
the gap between Asia's rich and poor and between the region's developed economies and their poorer
neighbours.
Meanwhile, Mr Wen continued his charm offensive towards neighbouring nations by offering to share the
nation's economic growth and benefits with the region.
"It is the consistent policy of the Chinese government to work for an Asia that enjoys development,
rejuvenation, peace and stability," Mr Wen told about 1,000 Asian delegates. "China's Asia policy is aimed
at achieving peace, security, co-operation and prosperity and to promote co-operation, development and a
win-win situation in Asia."
The premier made several promises that outlined China's Asia policy in the years to come. "We will engage
our fellow Asian countries in a spirit of mutual respect and equality, in cultivating a regional political
environment where all countries, big or small, can live with one another in peace and tranquility," he said.
The statement clearly was in response to growing regional nervousness of a rising China that may
dominate its neighbours both economically and militarily.




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General Musharraf, a firm US ally in the war on terrorism, said China was well placed to help develop both
North and South Asia. "China and East Asia, with the strength of their capital reserves, can lead regional
integration in the years ahead," he said.
Although many regional leaders heaped praise on China, Mr Wen promised them that an economically
powerful China would never threaten its neighbours. "One has every reason to believe that a dynamic,
strong and prosperous China, . . . will make fresh contributions to Asia's rejuvenation and renewal," he said.
(South China Morning Post/China, 03/11/03)


A TURN FOR THE WORSE?
To hear diplomats in Washington tell it these days, relations between the United States and China seem
about as good as they can get. James Kelly, the US State Department's senior Asia hand, said they were
"on some fronts, the best [they] have been in years ... marked by complementary - and sometimes common
- policies on a broad range of issues".
His boss, Secretary of State Colin Powell, has called them the best since Richard Nixon's Beijing visit
opened the China door back in 1972.
In fact, President George W. Bush frequently met former president Jiang Zemin, and has continued the
tradition with President Hu Jintao - meeting him more often than leaders from some countries considered
close allies.
Yet, as always, the Sino-US relationship remains tentative, fragile and subject to breakage. That may be
inevitable between two proud nations governed by contrasting systems and much mutual incomprehension;
a society where the people choose their leaders and one where the leaders pick themselves will naturally
have contrasting, even clashing, goals and policies.
But another complication is re-emerging, as the US moves into its presidential election year - disputes
about just how America should deal with China have again become a campaign issue.
Thus, Mr Bush faces growing pressure to get tough with China on crucial economic issues that have vote r
appeal. The topics range from the yuan to soybeans, but have two underlying themes: China is reneging on
its legal obligation to let in more American products, and it manipulates the yuan to let exports flood cheaply
into the US. These transgressions, it is claimed, destroy American jobs by driving factories out of business,
and explain the huge US trade deficit with China.
One man doing a lot of complaining is Congressman Richard Gephardt, a leading candidate for the
Democratic presidential nomination. "The Chinese have a currency that is undervalued by between 15 and
40 per cent [which makes] our products cost up to 40 per cent more in their market, and their products cost
as much as 40 per cent less in ours," he said. "That is not free trade. That is a free ride for China. It is time
we took action and held China accountable."
Most other potential Democratic candidates say the same as they seek workers' votes. But Mr Bush also
hears it from some of his best friends, such as the conservative National Association of Manufacturers,
which represents 14,000 companies. China poses "the largest single challenge to the global trading
system", said Frank Vargo, a NAM vice-president, who finds it "remarkable" how quickly its trade has
become a political issue. To ward off serious protectionism, he said, the Chinese government must open its
markets more fully and revalue the yuan upwards - and "the time to act is now".
Normally, the US-China Business Council would rebut this kind of talk; its 220 members are mostly
multinationals with large mainland investments which enthusiastically ride the export boom. But most are
keeping quiet. Over the past year, they note with regret that China has erected trade barriers that violate
the World Trade Organisation rules it has promised to obey.
According to Robert Kapp, the group's president, these include "new and daunting obstacles [that council
members] consider ... a clear indication of out-and-out protectionism on the part of government
bureaucracies". For example, there is a deliberate "verbal fog" around new technical and financial rules that
befuddle foreign businessmen.



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Moreover, Mr Hu and other top leaders seem so preoccupied with other issues that the entire WTO
compliance effort has "lost momentum", letting local officials get away with vigorous turf protection against
outsiders.
Thus, the Bush administration feels forced to at least take rhetorical action, even if it does not expect much
immediate benefit. When Robert Zoellick, the US Trade Representative, visited Beijing, he warned that
China's market access could suffer unless trade became more of a "two-way street".
He also told China to begin strengthening its currency, even if the banking system is still too weak to let the
yuan float freely. Mr Bush and Mr Hu agreed in Bangkok to form a joint committee to study the problem.
Many of these political demands ignore basic economics; America's job losses are not really due to "unfair"
Chinese competition, and revaluing the yuan will not bring them back.
For example, Nicolas Lardy, of the Institute for International Economics, a Washington think-tank, says that
upgrading the yuan 20 per cent would cut only US$10 billion off the trade deficit. Laurence Meyer, a former
member of the US Federal Reserve Board said: "China is not responsible for our problems."
Even so, the demands for action are sure to grow as the political season heats up. And non-economic
issues may add to the din. Human rights groups say China's performance has deteriorated over the past
year and they, too, want action, such as a United Nations resolution of criticism.
Moreover, the Taiwan question never really goes away. After stalling for two years, leaders in Taipei are
expected to order modern US weapons soon, almost certainly leading to harsh words between officials in
Washington and Beijing.
History suggests that campaign rhetoric seldom has a lasting impact. Similar complaints are heard every
four years, yet American policy towards China has been reasonably consistent for decades. But if US
economic troubles persist, this time, making China a scapegoat might continue well past next year's
election and lead to punitive measures - even if they do not make much economic sense. (Robert Keatley,
now based in Washington, was the Post's editor from 1999 to 2001.) (South China Morning Post/China,
29/10/03)


CHINA'S VANISHING JOBS SHOW BUSH IS ON WRONG TRACK
Last month, US President George W. Bush announced the appointment of a new manufacturing czar. He
could have saved himself the ridicule.
The United States government does not create jobs; the private sector does. A domestic manufacturing
czar is not going to bring back the 2.6 million factory jobs lost on Mr Bush's watch, or staunch the losses,
when the problem is global.
While a figurehead czar will do far less damage than any of the protectionist measures wafting through
Washington, it will not fix the problem. Manufacturing jobs are disappearing around the world, according to
a recent study by Alliance Capital Management. No one is stealing jobs, but something - productivity - is.
Nowhere are manufacturing jobs vanishing more rapidly than in China, the presumed villain in this tale. The
study by Alliance's global economic research department, headed up by Joe Carson, created a flurry of
interest last week because the results were contrary to what was commonly believed.
Prompted by intense interest in what is quickly becoming the No 1 myth (China is stealing America's
manufacturing jobs) and what could become the No 1 problem (protectionist trade sanctions), Mr Carson's
group mined international industry data on manufacturing production workers. The economists found that
China is even less of a thief than previously thought.
The initial study found a decline of 16 million manufacturing jobs in China from 1995 to last year. Further
digging unearthed a total loss of 25 million. The initial finding of a two-million increase in manufacturing jobs
in China since 1999 morphed into a loss in every year since 1995.
"All of China's 28 industry categories showed losses between 1995 and 2002," Mr Carson said. "Only two
industries - garments and electrical and telecoms equipment - experienced positive job growth since 1999."



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The mainland's huge contraction in manufacturing jobs is largely the result of shuttering inefficient state-
owned enterprises. Employment at SOEs, both manufacturing and non-manufacturing, fell by two-thirds
since 1995, Mr Carson said.
Employment in private enterprises has risen sharply as many workers from the defunct SOEs are
absorbed. However, neither China's rapid economic growth - 9.1 per cent in the past year - nor the growing
"number of private sector enterprises has been large enough to offset the drop in factory jobs at state-
owned enterprises", Mr Carson said. "Productivity is killing inefficient industries in China in the same way it
is here."
The Alliance study found that more than 31 million manufacturing jobs vanished worldwide from 1995 to
last year, versus an initial estimate of 22 million. Factory employment declined in every year in the biggest
20 economies in the world and in almost every year in the three major regions (North America, non -Japan
Asia and Europe).
Europe ranked No 1 - in terms of the fewest number of manufacturing job losses (2 per cent) in the seven-
year period of the study. No surprise there: the continent's rigid labour laws deny businesses the flexibility
to fire workers during lean economic times.
When it comes to things that really matter, such as the standard of living (an outgrowth of productivit y
growth), Europe loses its star ranking, based on international comparisons of manufacturing productivity in
14 economies by the US Bureau of Labour Statistics.
While the bureau did not aggregate country data, Germany saw output per manufacturing hour in crease an
average 2.4 per cent from 1995 to 2000 and less than 2 per cent in the following two years. That compares
with average rises of 4.5 per cent (1995 to 2000) and 3.4 per cent (2001 to 2002) in the US.
Only Sweden topped the United States in manufacturing productivity growth, but its weighting is not big
enough to raise the European average by much. Italy recorded average annual manufacturing productivity
growth of less than 1 per cent in the past seven years.
Britain and the Netherlands took the booby prize last year in the bureau's comparison, with growth rates of
0.4 per cent and 0.5 per cent respectively. Both countries had average annual manufacturing productivity
growth of 2.5 per cent in 1995-2000.
Europe has not benefited from the innovations in information technology to the same extent as the US in
the past decade. Since the technology itself is available everywhere, the assumption is Europe's structural
rigidities are to blame.
Europe will have to liberalise its economy in order to reap the full benefits of productivity-enhancing
equipment.
If companies had more leeway to fire workers, shorten the workweek and cut generous benefits, maybe it
would have been the bureaucrats in Brussels who dreamed up the idea of a manufacturing czar instead of
Mr Bush. (South China Morning Post/China, 03/11/03)


IN SEARCH OF A READY SCAPEGOAT
For months now it's been popular in the United States to whack China for its trade and currency policies.
But India could soon become the next political whipping boy because it has been snaring U.S. hi-tech jobs.
Recently unemployed computer professionals, labour unions and politicians have become alarmed that
U.S. companies are moving growing numbers of information-technology jobs to India.
In mid-September, technology workers staged a protest at a San Francisco conference promoting offshore
outsourcing of service jobs to countries like India. The protesters were backed by a unit of one of America's
most powerful unions, the Communications Workers of America. The unit, called the Washington Alliance
of Technology Workers, or WashTech, was set up to fight the exodus of jobs overseas. The protesters
carried such signs as "Chip in, don't chip out." A new group of unemployed computer specialists calling
itself The Organization for the Rights of American Workers, or Toraw, protested at a similar job outsourcing
conference in New York in July.


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These sentiments were bolstered in mid-October when Intel Chairman Andy Grove warned at a software
conference that a huge number of IT jobs could move from America to countries like India and China in the
next decade. The hi-tech pioneer added that his California-based semiconductor manufacturing firm had
"no choice" but to continue sending work offshore because of rising costs and the pressure to increase
productivity.
It would be one thing if the protests and dire warnings stayed confined to angst-ridden words, but now
American legislators are getting involved. Faced with an election next year, many smell a populist,
potentially vote-attracting issue. On October 20, the House of Representatives' small-business committee
held a hearing on the exodus of white-collar jobs. "At what point will we send so many jobs overseas that
we won't have any jobs here to buy the products, regardless of where they're made?" asked the
committee's chairman, Donald Manzullo of Illinois.
One of those who testified was California engineer Natasha Humphries, who was laid off in August by
hand-held computing-device provider Palm Inc. several months after she was sent to India to train Indian
engineers to perform her job. Humphries, who joined TechsUnited.org, a group created to protest against
the departure of U.S. hi-tech jobs, believes that "offshoring has created a devastating economic climate."
There is an irony in Humphries' words that goes beyond her travelling to India to train the people who may
have taken her job. Only a few years ago, American technology companies were accused of stealing some
of the best and brightest engineering and scientific minds from India to meet a severe talent shortage. But
now that the global economy has struggled for many months, technology unemployment in the U.S. is high
and the jobs are moving to India.
Some industry insiders blame at least part of the unemployment problem on the U.S. programme of
granting temporary work visas to hi-tech workers from India. Ron Hira of the Institute of Electrical and
Electronics Engineers told the October 20 hearing that many of those who come to the U.S. under this visa
scheme go home to set up or work for companies that compete with American companies. He called the
visas for these workers "a subsidy promoting the movement of American jobs overseas."
This concern has prompted legislators in at least nine states to join the fight to slow job migration. New
Jersey took the lead in drafting legislation after lawmakers learned that a company hired to help welfare
recipients had moved its help-centre jobs to Mumbai. Legislation requiring state government contractors to
use U.S.-based employees is still stuck in various committees. But the threat of the new law was enough to
persuade the welfare-help contractor, eFunds Corp., to move the jobs back to New Jersey.
A flurry of comparable bills in several states has prompted India's National Association of Software and
Service Companies, an umbrella grouping of some 850 companies, to hire high-powered lobbying firm Hill
& Knowlton. "India is being made to look like the enemy in some parts of the media," says Nasscom's
president, Kiran Karnik. "The popular mood is reinforced by politicians, and those statements make
customers wary. They're concerned, as are we."
So far, none of the state-level bills have become law. If they did, however, "purely on a business plane, it
wouldn't matter at all," says Karnik, since the bulk of India's outsourcing comes from private-sector
customers, not from government contracts.
Cheap, tech-savvy workers
Seeking to cut costs, U.S. multinationals such as General Electric, Honeywell and Citigroup have for years
moved jobs to India, seeking to capitalize on the country's inexpensive but technology-savvy, English-
speaking workforce. Nasscom estimates that job outsourcing to India saved U.S. companies $10 billion-11
billion in 2001 and was accompanied by a $3 billion increase in American exports to India that year.
The migration of these jobs wasn't a big issue when the U.S. economy was roaring and companies had a
hard time filling job openings. But that attitude changed abruptly with the dotcom bust in 2000 and
subsequent recession in the industry. Today, despite a tentative recovery, U.S. technology jobs remain
scarce.
The exact number of jobs that have moved to India isn't known. The Communications Workers of America
estimates that 400,000 white-collar jobs have already been lost, particularly to India, and projects that a
good proportion of 3 million more expected to migrate offshore by 2012 will go to India as well. "This is not


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about protectionism," says Marcus Courtney of WashTech, the union affiliate that organized the San
Francisco protest. "We have to find a way to engage in globalization so that it doesn't come at the expense
of our best workers."
More of Courtney's anger is directed at U.S. companies than at India. "This is an issue about how
companies want to increase profits at the expense of highly-skilled American employees," he says.
Others believe the figures cited by labour unions are exaggerated. Economist Rafiq Dossani of Stanford
University cites Nasscom statistics estimating that India had 171,500 "business processes" jobs by March
2003, up from 106,000 a year earlier. And that number is expected to grow annually by about 45% over the
next five years to be nearly 1 million by 2008. But even that heady growth is substantially less alarmist than
what labour unions warn will be India's job-grab from America.
"Am I concerned that the U.S. information-technology industry will end up in India over the next year?" asks
Harris Miller, who heads the Information Technology Association of America that includes America's leading
multinationals. "That's rubbish. Only about 6%-8% of the all information-technology outsourcing will move
offshore. Now it's only 2%."
Miller argues that the best way to protect U.S. jobs is to promote free trade. He believes that there are
steps the U.S. government could take to bolster job growth, including such measures as establishing a tax
credit for companies that engage in research and development. Miller also says that the current surplus of
hi-tech workers in the U.S. will dissipate as the baby-boomer generation retires.
Others add that sending work offshore leads to important benefits to the U.S. John Chen, who heads
Sybase, the software giant, argues that "when we spend $1 in India and China, 65 cents comes back" in
the form of orders for hi-tech equipment.
Still, the new breed of hi-tech activists can boast of at least one recent success. They helped persuade a
majority in the U.S. Congress to let lapse on September 30 a measure that had temporarily tripled the
number of foreign professional workers, many from India, admitted to work in the U.S.--to 195,000 a year
up from the usual 65,000.
But this victory may be short-lived. Utah Senator Orrin Hatch, the influential chairman of the Senate
Judiciary Committee, is in the early stages of floating a proposal that would introduce a variety of
exemptions that would effectively circumvent the 65,000-visa limit. If the proposal succeeds--and that's not
assured--the number of hi-tech workers admitted into the U.S., many from India, could again top 100,000 a
year.
Any moves to expand the number of visas for foreign hi-tech workers will likely be opposed by groups such
as Toraw, the one founded last December by recently unemployed information-technology workers. These
are people like John Bauman, a computer expert who lost his job in Connecticut a year ago. Toraw is
lobbying Connecticut and other state governments to pass legislation making it illegal for a company in the
U.S. to bring in a foreign worker and lay off an American employee within six months. "We'd like to see tax
incentives for companies that don't offshore work and tax penalties for every job offshored," says Bauman.
"I'm going to tell my kids to go into [car] repair so they can't be offshored," he adds.
If tech jobs in the U.S. remain scarce, the biggest uncertainty as to whether the U.S. ultimately takes action
on the issue of outsourced jobs is the U.S. election coming up in November 2004. "It's anyone's guess as to
which way the political roulette wheel will spin," says Vivek Paul, vice-chairman of Wipro, one of India's
largest software firms. "We will definitely see more posturing, but the question is: Will we see regulatory
action?"
Still, even if outsourcing opponents are big election winners, analysts doubt that India will face the strident
critiques that China is likely to experience in the months ahead.
"There's no constituency for bashing India," says James Steinberg, a foreign-policy analyst in the Brookings
Institution think-tank. Steinberg, who served as No. 2 in the Clinton administration's National Security
Council, points out that it's politically easier in the U.S. to attack Beijing's communist government than the
world's largest democracy. On top of that, American politicians raise a lot of money from Indian Americans.
Says Steinberg: "There are only two countries that get an applause line when they're bashed [in the U.S.]:
China and France." (Far Eastern Economic Review/China, 13/11/03)


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ECONOMIC MONITOR: INDIA
Analysts expect consumer spending in India to increase this year thanks to the rain. India experienced its
best monsoon in a decade and will see agricultural growth surge, which in turn gives farmers money to
spend and spurs the overall economy. Agricultural production is expected to expand 10.7% in the current
financial year ending on March 31, 2004, according to the Centre for Monitoring Indian Economy, a think-
tank. That's compared to a contraction of 3.2% last year due to the country's worst drought in over 10
years.
Farm output weighs significantly on India's economy since it contributes a quarter of GDP. But the
economic revival under way in India at the moment isn't limited to the rural sector. Other key components of
the economy--namely services and industry--are also performing well. As a result, HSBC is forecasting
GDP growth as high as 7.5% this financial year.
The consensus among various research institutions and economists is that India's GDP growth will reach
somewhere between 6.5% and 7%. The upbeat mood is very much visible in the country today.
Stockmarkets are roaring. Overpasses are sprouting across roads nationwide, part of an ambitious
government road-building programme. Consumers are thronging modern malls. Bicycle-riding villagers are
graduating to motorcycles and motorbike owners to cars. Low interest rates are creating a boom in
consumer lending, especially mortgages.
"The feel-good factor is particularly strong at present," says Jyoti Jaipuria, head of research at DSP Merrill
Lynch in Mumbai. The Bombay Stock Exchange's benchmark index soared to touch a 42-month high of
5,000 points in early November, primarily due to heavy buying by foreign institutional investors drawn by
strong corporate-earnings reports. So far this year, foreign portfolio investors have pumped in excess of $5
billion into Indian stocks, more than the previous three years put together.
Signs that the economy is moving into higher gear were already visible in the first quarter of the financial
year from April to June. Powered by higher output in the services-and-manufacturing sectors, GDP
increased by 5.7% compared to the same quarter last year. The really good news, however, is expected for
the following quarters as bumper farm output translates into higher spending among India's 600-million-plus
rural consumers. "There will be a resurgence in consumer spending that will boost the manufacturing
sector," says Rajeev Malik, an economist at JP Morgan Chase in Singapore.
The housing sector has been another bright spot as mortgages grew by a whopping 76% to 516.7 billion
rupees ($11.4 billion) in the last financial year, according to the Federation of Indian Chambers of
Commerce and Industry. With a housing boom under way, bankers say mortgages are growing at a rate of
35%-40% annually.
One potential snag, however, is the strengthening rupee. Since January, the rupee has appreciated 5.5%
against the United States dollar, which has made India's oil imports, the country's biggest import item,
cheaper. However, an appreciating rupee is also a drag on exports. The government is targeting a 12%
increase in exports but economists think that may not be achievable, given the strengthening rupee. (Far
Eastern Economic Review/China, 13/11/03)


REDDY OPTIMISTIC OF EXPORTS DRIVING GDP GROWTH OVER 7%
India could achieve a gross domestic product (GDP) growth rate of over 7 per cent in the current fiscal year
ending March 2004, provided the current tempo of export growth continued with signs of economic recovery
in major world markets, according to Reserve Bank of India (RBI) governor Y Venugopal Reddy.
In an interview with news agencies here, Dr Reddy on Tuesday said, “the growth would largely be driven by
the double digit export growth, over 7 per cent growth in agriculture, 6 per cent growth in industrial
production and over 7 per cent growth in services sector.
“If there is no downslide in exports, we could exceed the growth rate over 7 per cent,” he observed.




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However, Dr Reddy put a cautionary word by saying that the growth projection could be restricted to the
lower end of 6.5 per cent if there was a setback in global recovery due to any sudden development which in
turn might impact our exports.
India‟s exports during the first half of the current fiscal year increased by 10 per cent in US dollar terms as
compared to 18 per cent in the same period of the previous year.
During the same period, imports rose faster by 21.4 per cent as against an increase of 9.2 per cent in the
same period of last year.
Elaborating on the “comfortable factors” of the economy such as good monsoon, low inflationary pressure
and reasonable interest rate levels, Dr Reddy said, “there was a need to make periodic assessment to bring
certain balancing factors between the return to the investors and savers and determining the cost of funds.
“Though the credit pick-up by the industrial sector has been sluggish for most of the year, there were signs
of increasing credit demand from August, signalling a resurgence of manufacturing activities”, he said.
There was a discernible increase in credit to tea, jute, textiles, gems and jewellery, computer software and
infrastructure.
On the other hand, decline in credit was observed in coal, petroleum, iron and steel, mining, rubber and
rubber products, automobiles and food processing.
In this context, Dr Reddy said that the banks needed to sharpen their risk assessment techniques so as to
guard against any adverse impact on credit quality keeping in view the intense competition in the sector.
(The Financial Express/Índia, 05/11/03)


INDIA INC GOES SHOPPING
In mid-October, when India's Reliant Industries acquired the UK-based communications company Flag
Telecom for US$207 million, its vice chairman, Anil Ambani, wasn't just ecstatic because he got Flag, once
valued at $6 billion, at such a great price. Flag, which owns, develops and operates advanced fibre-optic
cable systems, is the only network that covers the entire globe.
"Soon Reliance will be the only telecom service provider [of Indian origin] on a global scale," Ambani said.
He has an acolyte. For Venugopal Dhoot, chairman of the white-goods company Videocon International
Ltd, which is hoping to acquire Thai CRT, one of the world's largest television picture-tube makers, it isn't
enough to be the backbone suppliers of components for consumer durables worldwide. "Just as you find
'Intel Inside' badges on computers, you could soon be seeing 'Videocon Inside' badges on most durables,"
Dhoot says.
Ambani and Dhoot aren‟t the only aggressive Indian industrialists trying out their act for a world stage.
Many Indian companies are deciding India isn‟t big enough for them. The drug makers Ranbaxy Lab,
Wockhardt, and Dr Reddy's Lab, automakers Tata Motors and Mahindra and Mahindra, the consumer
goods maker Dabur India, and at least two-dozen other homegrown companies are dreaming of global
competitiveness, capacity, revenue, and global market shares.
This is a classic path that has been followed by many other countries as their economies create investors
eager to play on a world stage, with more money than the local economy can bear. The most spectacular
was Japan in the late 1990s, whose industrialists in rapid succession bought Rockefeller Center in New
York, the Pebble Beach Golf Course in Monterey, Columbia Pictures in Hollywood and a multitude of other
American assets. At first, super patriots in the United States steamed and screamed, accusing the
Japanese of buying up America. Then they discovered that the Japanese had paid outrageous prices for
virtually every purchase, making the sellers enormously rich. As the Japanese economy cooled, their
investors, pockets shorn, retreated ignominiously.
Nor are the Japanese alone. Several Australian companies including Bond Corp, driven by hubris and full
pockets, far overreached in the mid 1980s and went bankrupt. Bond's flamboyant leader ultimately went to
jail. Singapore Inc, as it is known, has for years made investment decisions that ended up with lackluster
returns. What they have all learned, as have a long list of other multinational purchasers with more money
than experience, is that it is difficult for overseas investors not only to price their acquisitions correctly but to

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understand income streams and the cultural mores that govern them - especially when they are in the
sights of sellers who know the territory and how to conceal the weaknesses of the assets they are seeking
to dump.
Nonetheless, the Indian multinationals are on a so-far modest but increasing global acquisition spree, aided
by a strong rupee, easy access to credit and a newfound confidence in their abilities. The Mergers &
Acquisitions Service of the Center for Monitoring Indian Economy reports that until September this year,
Indian companies acquired 35 foreign firms for a total of $600 million. On Tuesday, Tata Motors announced
today that it will buy South Korea's Daewoo Commercial Vehicle Corp for $118 million, plus pay $40 million
of unpaid bills.
That pales, of course, against Bank of America‟s single purchase of FleetBoston for an estimated US$47
billion in the US at the end of October.
Nonetheless, "the figure is set to go up considerably, with many Indian companies eyeing overseas
acquisitions or expansion," said Vijay Kothari, and analyst at LKP Corporate Services. "An equal number of
deals have either been dumped or lie stalled, even lost to the opposition."
According to Premal Parekh, partner and head of Mergers & Acquisitions (M&A), Ernst & Young, anyone
worth his business school degree is working on some acquisition deal or the other. In fact, M&A experts say
that acquisitions for Indian companies have evolved into a trend where every player has started seeking a
value proposition, “instead of acquiring just as a fashion,” as says Hemendra Kothari, chairman of DSP
Merrill Lynch Limited, one of India's premier investment banking and brokerage companies.
Indeed, in the past 13 years since the Indian government freed up the country‟s economy to global forces,
Indian companies have been dreaming of going global. But thanks to a suddenly liberalizing economy that
was fiercely protected for over five decades, the first 10 years following the opening up process that started
in 1990 were spent fighting competition, restructuring and shedding flab, and, "simply overcoming the
process of creative destruction," says Munesh Khanna, the managing director of the NM Rothschild, India
investment banking organization. "But now, Indian companies have emerged competitive after having learnt
the virtues of efficiency both in operations as also resources allocation."
Even the state-owned companies are stretching out. Oil and Natural Gas Corporation (ONGC) recently
targeted stakes in Russian oilfields. According to Subir Raha, chairman of ONGC, not only is this a move to
gain energy security, but it also signals ONGC's ambitions of becoming global oil major. And, after
marketing lubricants in Nepal, the Indian Oil Corporation, another state-owned oil giant, is planning to set
up retail outlets in Sri Lanka, while Mahanagar Telephone Nigam Ltd, the state-owned telecom company is
tapping Nepal and Mauritius aggressively.
"The progressive liberalization of the government's policies that have given rise to many financing options
for more overseas opportunities are also helping Indian companies to spread wings offshore," says Amit
Mukherjee, partner at Ambit Corporate Finance. Burgeoning foreign exchange reserves, exceeding $92
billion, and a rising rupee are the other positive factors. "With the rising rupee, Indian companies are
required to spend less to acquire an overseas outfit," adds Mukherjee.
The Center for Monitoring Indian Economy feels that since a lot of local companies are sitting on piles of
liquidity, which too is a fruit of an open economy, India Inc is going on the global prowl because with few
opportunities to invest, the cash reserves have started to raise questions with investors who feel that
excess cash destroys value. According to the center, the top 24 privately-owned listed companies had more
than $10 billion in cash and equivalents at the end of the current fiscal (March 2003) year. That has grown
from $7.6 billion in 2001-02.
However, it is also true that most Indian companies are far smaller in size compared to many global
counterparts. Moreover, with limited capital at their disposal compared to global standards and even less
experience of international markets, many find it absurd that these companies are trying to go global with a
vengeance. Some even argue that the acquisitions so far are low-cost and puny on a global scale and can
never fulfill Indian companies' dreams of achieving global status.
Still, "Indian industry is coming out of an extended adolescence where firms are being forced to earn their
living on their own," says Tata Sons executive director R Gopalakrishnan. "But most importantly, a small
band of Indian companies has figured out a way to compete. For many of them now, the next logical step is

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to search out opportunities not just in the Indian market - but in the rest of the world as well. And this is a
significant development."
Consequently, such analysts as Harvard professors Krishna Palepu and Tarun Khanna wagering that these
Indian companies have fundamental strengths that will help them dominate not just their domestic markets,
but parts of the global market as well. Dominic Wilson, a Goldman Sachs economist, in a recent report
predicts that explosive growth in Brazil, Russia, India and China (collectively referred to as the 'BRIC'
countries) will see these countries overshadow the economic might of the seven leading industrialized
nations of today.
Already, the Global Competitiveness Report 2003-04 of the World Economic Forum has ranked India
several notches above China. In the Business Competitiveness Index, India ranks 37 of 102 countries as
against China's 46.
Therefore, according to optimists, India‟s corporate sector is experiencing the start of a movement. And, the
pioneers, with their spirit of global competitiveness, could soon pave the way for the rest - thus, altering the
way home-grown Indian companies have been run. But it is wise to heed the Latin words caveat emptor.
Not for nothing have they been in fashion for thousands of years. (Asia Times/China, 06/11/03)


JAPAN INC. - A RUDE AWAKENING
When executives at Kawasaki Steel Corp. and NKK Corp. began talks about a prospective merger three
years ago, they agreed early on to throw away their old names to symbolize just how dramatic a break from
the past they contemplated.
Steel makers have always been at the heart of what was once regarded as Japan Inc. and the Japanese
economic miracle. But the newly combined enterprise, now known as JFE Holdings, is no longer
yesterday's story. The company has torn up much more than the names that were so evocative of past
Japanese industrial might. It has closed blast furnaces, taken out capacity and reduced headcount. Post-
merger, it is the largest Japanese steel-maker and the fourth largest in the world.
In reshaping itself, JFE has become emblematic of the awakening of much of corporate Japan after more
than a decade of drift. Today, Japanese firms are flexing still awesome technological and marketing muscle
and are finally getting serious about restructuring.
True, there have been signs of recovery in the past. But those signs were largely due to massive fiscal and
monetary stimuli and proved fleeting. This time, the revival is driven primarily by the private sector and is
thus likely to prove more lasting. "We have the freedom to rationalize," declares Eiji Hayashida, a vice-
president and head of finance at JFE.
At least part of the catalyst for the reawakening is the message of opportunity and threat from Japan's
neighbours in Asia. Orders from China are a big part of the resurgence in demand for the materials, capital
equipment and consumer electronics that Japan still produces better than anyone else does. "China and
Asia represent a huge tailwind for us," adds Hayashida. "Every day our production is up." At the same time,
competition from South Korean companies is contributing to a new sense of urgency.
Statistics bear out the story. In the quarter to the end of September, exports were up 10% over the previous
quarter, while in September, they surged 3.4% month on month. While Europe and the United States saw
exports up less than 2% in the past 18 months, in Japan they have risen 13%.
"Exports are only 11% of Japan's GDP," says Masaaki Kanno, a managing director at JPMorgan Securities
in Tokyo. "But they drive Japan's industrial production and the business cycle." As a result of these orders,
business capital investment, which dropped almost 5% in calendar 2002, is expected to swell 11.6 % this
year and over 10% next year, Kanno says.
That in turn is good for the rest of the region. China may be the mantra of the day for the rest of Asia, but
Japan's $4 trillion economy is still nearly four times the size of China's and recovery in Japan can swiftly
translate into growth elsewhere in the region. For example, in September, export orders from Japan to
Taiwan were up 37.4%, according to data from Goldman Sachs. Japan already imports more from China
than it does from the U.S.


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JFE reflects the circumstances of corporate Japan writ large: decline at home, hope abroad. Domestic
demand for steel is shrinking 2%-4% per year, according to Hayashida. The number of cars produced
domestically is also dropping, from 10.5 million last year to under 10 million in two years, he adds.
Not surprising then that sales at JFE were down 8% in the year to March or that the company's medium -
term business plan is full of references to downsizing at home. Yet, thanks to a combination of cost cutting,
improved productivity and higher prices from abroad, particularly China, operating profit was up 80% for the
fiscal year ended in March.
JFE's strategic plan calls for over $3 billion in investment over the next three years at home--not to expand
facilities but to modernize its ageing plant. But because JFE has about ¥2 trillion ($18.4 billion) in debt and
a debt-to-equity ratio of nearly 350%, investment is subject to discipline that was unknown in the past.
"From a financial point of view, we benchmark ourselves against Posco," says Hayashida, referring to his
mighty Korean competitor, the world's fifth-largest steel-maker. "We have to improve our credit rating and
reduce our debts to make our balance sheet stronger."
At the same time, JFE is investing in China, most recently beginning construction on a plant in southern
China that will provide steel for cars rolling off the assembly line at Honda's Guangzhou factory and other
car plants. China's total vehicle production is currently less than 4 million a year but is growing rapidly while
Japan's shrinks. In addition, JFE supplies materials to China's hungry construction and appliance
industries.
China's own steel industry is huge--indeed, the capacity it's currently adding is equivalent to India's entire
output. Moreover, Chinese facilities are now world class. But the gap between the quality of the two
countries is still large, because China lacks the soft infrastructure, the processes and the engineering skills
of its richer neighbour, Hayashida notes. Still, the knowledge that China, along with Posco, is striving to
close that gap has forced JFE to become, finally, more lean and mean.
"We believe JFE is stronger than the sum of its parts due to rationalization and amalgamation of
overlapping facilities, a focus on new business opportunities and headcount reductions," note analysts at
Morgan Stanley in a recent report, which names JFE as one of three possible winners from global
consolidation. "The management has shown a commitment to profitability by making pricing a top priority. It
is best positioned to benefit from expected growth in Asia."
JFE is just part of a growing corporate universe that is showing signs of increasing vigour. Konica-Minolta
Holdings, which was born in August from the merger of two companies which specialize in optical and
imaging technologies and cameras, is another example of a firm where the whole is finally more impressive
than the sum of its parts.
Stagnant markets
Both companies--much like Eastman Kodak in the U.S.--faced stagnant markets and an increasingly
competitive environment, with balance sheets burdened by heavy debts when they decided to combine.
"We are much stronger together," says Fumio Iwai, president and chief executive officer of the combined
firm. "Our technology in both processes and products is very complementary." Konica, for example, is
stronger in plastic-based lens technology while Minolta's strongpoint is glass-based lenses.
"They had always played second fiddle to Fuji or Canon," says Simon Davis, who manages Japan funds for
Putnam Investments in Boston. "Now they are serious." Serious especially about cutting costs and
combining resources to boost spending on research and development, Iwai adds. "We need to seek higher
technology," he says.
The mood has also changed at other traditional giants, such as Matsushita Electric Industrial, albeit without
the fanfare or drama involved in mergers or importing foreign management. Matsushita, which flourished in
the immediate post-war years, once represented Japanese resilience. But then, for many years it seemed
instead to symbolize the inability to keep up with changing times, and was hobbled by overstaffing,
overcapacity and dowdy products.
Today, though, Matsushita is far leaner after a voluntary layoff programme that reduced headcount by
10,000. And it has regained momentum by once more making things people want. Alongside the bicycle
lights (designed by Konosuke Matsushita himself) at the company museum in its Osaka headquarters are


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next-generation products for which demand is soaring, including digital televisions and DVD recorders,
made under its Panasonic label.
Matsushita was one of the earliest and most successful companies to operate in China. Today, its orders,
both domestically and from abroad, are booming. But gone is the complacent mindset that looked only on
Japanese rivals as relevant. "In the past, we used to benchmark ourselves only against Sony," says
Matsushita Executive Vice-President Yukio Shohtoku. "Now we benchmark ourselves against Samsung
Electronics as well."
Even Japan's long-ailing banks are finally showing signs that the worst may actually be over. At Bank of
Tokyo-Mitsubishi, nonperforming loans have dropped from 9% of the total to 4%, after massive write-
downs. Loans that had already been consigned to the dustbin are suddenly starting to pay interest again,
executives say. Moreover, the biggest banks have formed units that help troubled borrowers restructure.
For example, Ichida, which was once a successful if modest kimono-maker during the bubble years
expanded into everything from Western-style apparel to real estate. Debt soared and cash flows
disappeared. But now, with help from Phoenix Capital, a private-equity fund associated with Tokyo-
Mitsubishi, the company has returned to its core business. After 11 straight years of losses, it is once again
operating profitably and its share price has doubled from its lows.
Moreover, today, the possibility that entrenched managements can actually lose control of companies if
they fail to revitalize them is finally becoming real. So far, most of the so-called vultures looking for takeover
opportunities in Japan have been foreign, and hence anathema to many local firms. But now, for the first
time, there is a growing pool of domestic risk capital looking for companies to acquire and turn around.
At the same time, a greater number of shares are available as cross-holdings are unwound and the keiretsu
system, or conglomerates built around banks or financial institutions, dissolves. Institutional investors are
also under pressure to become more involved in the governance of the companies in which they hold
shares.
To be sure, it would be a mistake to overstate the strength of the recovery at this point. Problem loans may
be dwindling but none of the banks see demand for new loans yet and bank credit is still shrinking, albeit at
a slower rate. Many corporate executives say they can live with a yen-dollar rate of 100 but wonder if their
customers can do so. They also worry about the government's repeated history of doing the wrong thing,
whether it was raising the consumption tax and spooking Japanese households or prematurely abandoning
the zero-interest-rate policy, actions that snuffed out previous signs of revitalization. Moreover, the signs of
recovery are largely confined to the area around Tokyo; the gap between the health of the capital and the
hinterland continues to grow.
Still, the mood in Japan is a far cry from that of a year ago, when some analysts warned that only a war
(preferably someone else's) could rescue Japan from its downward spiral. In early October, during a week
in which bank shares rallied strongly, there were even rumors that UFJ, one of the largest Japanese banks,
would buy Shinsei, the bank rescued by a group of mainly foreign investors led by Ripplewood Holding s.
The rumour was noteworthy not because it was true (Shinsei executives swiftly denied it) but because it
had been years since shares of a Japanese bank could even remotely be considered a takeover target.
(Far Eastern Economic Review/China, 13/11/03)


CHINA CLOSES THE GAP
If there is one pervasive question Corporate Japan is currently pondering, it is how soon it will be before
China closes the gap with its Japanese rivals. When China meant just cheap labour, the question seemed
less urgent. But that's not so today. China has capital and can afford to buy the most sophisticated
equipment anywhere in the world. Also, China is no longer just about vast pools of cheap labour, it is
increasingly about the combination of that with skilled human capital.
"The facilities gap with China is narrowing," says Eiji Hayashida, a vice-president at JFE Holdings. "But that
is not my concern. If they have new facilities and the soft infrastructure of Japan's engineering talent, then
they can close the gap quickly." That fear translates into a reluctance to lay off engineers, lest they go to
China and take with them the skills that have given Japanese steel the highest quality in the world,
Hayashida adds.

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At the same time, government officials worry that in addition to luring Japanese talent, Chinese companies
may be tempted to buy Japanese companies to acquire technology. Executives at the big electronics
conglomerates, now embarked on a course of perpetual restructuring, say they would be criticized if they
were to sell divisions directly to the Chinese. But if, for example, "we were to sell to an American investment
fund, and that fund in turn sold to a Chinese strategic buyer, we could hardly be criticized," says a top
staffer at one of Japan's major conglomerates.
The concern with China is a world away from the disdain with which Japanese companies contemplated
their Korean rivals just a few years ago. But with Samsung Electronics' market capitalization now larger
than that of Japan's leading consumer-electronics companies combined, that complacency has vanished.
(Far Eastern Economic Review/China, 13/11/03)


JOB MARKET DATA POINT TO GROWING RECOVERY
New job offers in Japan jumped by more than 10 per cent in September, a sign that a cyclical economic
recovery is giving some companies the confidence to expand.
The increased labour demand, shown by data released on Friday, raised the prospect of an end to the
restructuring that has helped lift corporate profitability and confidence, and the beginning of business
growth.
A 10.4 per cent rise in job offers from the previous month did not, however, affect Japan's unemployment
rate, which remained at a two-year low of 5.1 per cent. Economists said this was because of the lag
between establishing new positions and filling them, and a mismatch between skills needed and workers
available.
Richard Jerram, economist at ING said in a report: "Labour demand indicators are reliable cyclical
indicators and their improvement in recent months is consistent with an acceleration of underlying
economic growth."
Together with exports, corporate spending on upgrading and replacing equipment, notably those of
information technology, has driven the rise in economic growth.
Kiichi Murashima, economist at Nikko Citigroup, said a continued recovery in exports was cementing the
slightly more positive outlook in Japan's manufacturing sector, but warned in a report: "The yen is stronger
than manufacturers assumed when they made their business plans (including employment plans)."
A stronger yen makes it more difficult for exporters to maintain their competitiveness and profitability.
Mr Murashima also said that many non-manufacturers were still cautious about new recruitment. "Hence,
the medium-term gains in employment, and therefore worker income and consumption, will likely remain
capped at low levels."
Separately, finance ministry data on Friday showed the Japanese authorities conducted Y2,723bn of
currency intervention in October to limit a strengthening in the yen, which was trading at Y109 to the dollar
on Friday having risen from Y111.5 at the start of the month.
October intervention was down from a record Y4,457bn in September but took the yearly total to about
Y16,200bn.
The Bank of Japan's policy board, in its biannual economic outlook, revised its annual gross domestic
product forecast to between 2.3 per cent and 2.6 per cent from an earlier forecast of around 1 per cent
made in April. Official data on July-to-September GDP will be released on November 14.
The policy board also decided to leave its ultra-loose monetary policy unchanged after a one-day meeting.
Other data showed consumer prices fell by 0.1 per cent in September, the smallest fall in three years, but
economists said the apparent slowdown in deflation was due to a rise in rice prices caused by a poor
harvest. (Financial Times/Reino Unido, 03/11/03)


AUSTRALIAN FARMERS TARGET JAPANESE PALATES

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A growing number of Australian agricultural producers are developing farm products targeted solely at the
Japanese market in an aim to secure stable export revenues.
With conventional Australian farm exports to Japan such as beef subject to a large degree of market
volatility, farmers hope to gain a more reliable income source from products such as strawberries.
Since Australia is in the Southern Hemisphere, it is possible for Australian growers to harvest products such
as strawberries at a time when the product is scarce in Japan. Apart from strawberries, a growing number
of farmers are planning to produce wasabi and other products common to Japanese diets.
In Hobart, the capital of Australia's southeastern island state of Tasmania, farmers are producing
strawberries especially for the Japanese market. Three years ago, Nagasaki Prefecture-based New Agri
Network Co. started growing Toyonoka strawberries--a species originally from western Japan--in
greenhouses on the island, targeting Japanese confectioners who demand strawberries with good flavor
and taste even during winter.
New Agri Network has established a subsidiary based in Tasmania, Ichigo Australia Pty. Ltd., and has
contracted with three agricultural producers to grow the strawberries. Combined production of strawberries
by the subsidiary and the three growers reached 80 tons last year, a 1.6-fold rise compared with a year
earlier.
Although the Australian-grown Toyonoka strawberries are priced more than 50 percent higher than their
Japanese counterparts, there is high demand for the product from many high-quality confectionaries in the
Kanto region.
As Tasmania is free of fruit fly--a natural enemy for fruit growers-- it is highly suitable for growing farm
products for the demanding Japanese market. Apart from strawberries, buckwheat flour, Fuji apples and
carrots have been exported from Tasmania to Japan.
Targeting the Japanese market, the Tasmanian state government has been studying ways to cultivate
daikon, wasabi and broad beans. As a result, several farmers in the state are now able to grow wasabi, and
some samples of daikon already have been shipped to Japan.
Meanwhile on the other side of the country, last year the Western Australian state government launched the
"Made by Japanese in WA" project, under which farm produce and processed foods for the Japanese
market are produced under the initiative of the state government. The project is designed to encourage
Japanese growers and food manufacturers to tie up with Western Australian farmers and businesses.
Western Australian Agriculture Minister Kim Chance promoted the cost efficiency of the state's farm
products, saying the Japanese agricultural industry faces high costs and other problems.
Chance also said the state government is considering processing pork to suit Japanese tastes, noting the
importance of making Australian farm products exported to Japan taste like domestic products.
Japan seen as gateway to North Asia
Japan is the largest importer of Australian agricultural products. In the Australian 2001 fiscal year between
July 2001 and June 2002, Australia exported 4.76 billion Australian dollars (about 360 billion yen) worth of
such products to Japan. However, most of the exports were of such products as beef and barley that are
subject to a great deal of price volatility.
In addition, as was pointed out by a Tasmanian state government official, Tasmanian farmers probably
would find it difficult to compete if they grew the same products made by growers in the United States and
elsewhere.
However, by expanding the production of farm products designed for the Japanese market, Australian
farmers would be able to compete, according to the official.
The Australian authorities also hope that their deepened relationship with Japanese companies through
joint production of various farm produce will help them enter other North Asian markets, including South
Korea and Taiwan, Chance said.
Thorns in farmers' path


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However, some problems have been encountered concerning farm produce aimed at the Japanese market,
which needs to satisfy the needs of the nation's demanding consumers. For instance, the green color of
wasabi grown by a Tasmanian farm was not dark enough and some black spots were found on the surface.
As a result, they decided not to export the products to Japan, instead selling them to Japanese restaurants
in Australia.
The Australian farmers also have had problems finding Japanese business partners.
The Western Australian government's "Made by Japanese in WA" project invited Japanese farmers to the
state in October last year and February this year to familiarize them with the local industry. However, the
government has yet to reach the phase of even conducting a feasibility study for any project.
An official of the state's Agricultural Ministry said it would take at least two to three years until a project
could be realized under the program.
Competition with Japanese products is yet another problem.
Ball Noodles, a firm jointly set up by Toho Corp., an Osaka-based trading house that specializes in marine
products, and Australia's Ball Group, which is based in the Western Australian state capital of Perth, have
started producing the first frozen Japanese udon noodles in Australia.
Charlie Ball, the firm's managing director, said the company's rivals are Japanese producers, and he
pointed out the difficulty of penetrating the Japanese market without an established brand name. (Yomiuri
Shimbun/Japão, 03/11/03)


SOUTH KOREA - SCANDAL GROWS
South Korea's political fund-raising scandal is widening by the day, threatening to expose and unravel cosy
financial ties that have long bound politicians to the country's family-controlled business empires, known as
chaebols.
Prosecutors are investigating allegations that top aides to President Roh Moo Hyun as well as key
legislators from all three major political parties accepted billions of won in illegal donations from chaebols
before and after last year's presidential election.
Roh says he wants prosecutors to expose the entire web of covert transactions that provides money for
politics. "The probe should be conducted in such a way as to reveal the whole truth about the political funds
to bring about the drastic reform of the political funding system," he told a news conference on November 2.
The next day, prosecutors said they would expand their probe from political donations made by SK Group,
the country's third-largest chaebol, to include donations made by four other chaebols--Samsung, LG,
Hyundai and Lotte. The president has raised the possibility of a pardon for corporate wrongdoers as an
incentive for them to cooperate in the probe.
It's too early to tell whether the investigation will result in big changes in South Korea's campaign-finance
system. But prosecutors seem to have the green light to aggressively pursue the investigation. If they're
allowed to pursue it to the bitter end, many observers think the results will help sever the deep-rooted links
between politicians and big business. "The [continuing] probe may act as a catalyst to clean up scandal-
ridden politics," says Park Jai Chang, a professor of public administration at Sookmyung Women's
University in Seoul.
The political-finance scandal began to gain momentum last month when Choi Do Sul, a long-time adviser to
Roh, was arrested on charges of accepting 1.1 billion won ($950,000) from SK Group after Roh's election
victory last December. In the run-up to the election, Roh's campaign team also received a total of 7.2 billion
won from the five conglomerates, Lee Sang Soo, former secretary-general of the Millennium Democratic
Party and Roh's campaign manager, told reporters on November 3. These sums are far in excess of the
legal limit of 250 million won for corporate donations to political parties.
Following Choi's arrest, the country's main opposition Grand National Party also admitted to accepting 10
billion won in illegal campaign funds from SK Group. The prosecution in late October arrested Lee Jae



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Hyun, a former GNP finance official who allegedly helped transport cash from SK Group to party
headquarters during the election campaign.
In an attempt to defuse the scandal, Lee Hoi Chang, the GNP's presidential candidate who lost to Roh,
apologized on behalf of his party for accepting the money from SK Group. Lee said he would take full
responsibility for his party's misconduct. He didn't say whether he was aware of the illegal donations at the
time, but GNP officials who carried the cash told investigators that they reported it to the party leadership,
according to local newspapers.
After Choi's arrest, Roh proposed holding a national referendum on his government, even though he took
office only eight months ago and still has four years to go. But the widening investigation appears to have
put the referendum plan on hold.
The president, a relative outsider who promised to reform Korea's scandal-tainted politics, seems
determined to seize this opportunity to push for sweeping change in the political funding system. But even
as Roh urges prosecutors to leave no stone unturned, the opposition is threatening to pass laws appointing
independent counsel to investigate the president's inner circle. The GNP has also promised to overhaul its
own fund-raising operations and proposed changes in the law governing political funding.
Many political analysts say changing the funding law is key to cleaning up politics. They say the crux of the
problem is that the law doesn't require transparency in political fund-raising--it protects the identity of
donors and doesn't compel political parties to release details of their income or spending.
The maximum amount of money that a presidential candidate is legally permitted to spend was set at 36.8
billion won for last December's election. Political campaigners say that ceiling is unreasonably low and
forced them to break the law. So some people are arguing that the legal limit on campaign funding should
be raised. "We need to accept the reality of elections and revise the system to contain such violations,"
says Kim Suk Joon, a professor of politics at Ewha Womans University in Seoul. The law is "far from what's
really happening in the political arena." (Far Eastern Economic Review/China, 13/11/03)


KOREAN EXECUTIVES AMONG LOWEST PAID
Korean executives are among the lowest paid in the world, with only China and India trailing behind in basic
compensation among the competitive markets, according to a prominent consultancy.
Towers Perrin, a global human resources and management consulting firm, also showed in its 2003-2004
Worldwide Total Remuneration Report that Korea has a very weak performance-based reward system,
which is common in the more advanced countries.
"Certainly people cannot accuse Korea of excessive executive compensation like they do in the United
States," Donald Lowman, managing director of the firm said in a press conference yesterday. With a basic
compensation of about $200,000, a Korean executive's salary is only nine times more than an average
worker's, compared to the 23-fold gap in the United States.
But what is more noteworthy is the low level of variable bonuses and long-term incentives offered in Korea,
Lowman said, as it shows Korea has yet to adopt a performance-based system that can improve workers'
satisfaction. Variable bonuses refer to perks like profit-sharing bonuses offered regularly, and long-term
incentives and rewards like stock options.
Yet another strategy that could improve the working environment at Korean companies is a greater level of
employee engagement, a relatively new area of study that has nevertheless been proven effective in
boosting employee performance at the workplace, he said.
"There are many things senior managers can do to encourage employee engagement. They include
sharing with the workers the company's vision and giving them their specific role in it, and offering a good
reward-system based on their performance," the expert explained. It is also important that the employees'
relationships with their supervisors are based on trust, openness and transparency, in order to engage their
best work efforts, Lowman added.
"Employee engagement correlates to employee satisfaction, which leads to consumer satisfaction,
improved financial performance and greater profits for the shareholders," according to Lowman.

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Meanwhile, the manager said that Korea is a very attractive market for human resource consulting, given all
the changes that are going on in the corporate world, such as restructuring. Towers Perrin's business in
Korea grew 50 percent from last year. (The Korea Herald/Coréia do Sul, 05/11/030)


MACHINERY MANUFACTURERS FLEEING TO CHINA
Local heavy machinery makers are moving their production facilities to China, raising concerns that
hollowing-out of the key sector may deal a serious blow to the nation's industry.
Korea's major heavy equipment manufacturers, including Hyundai Heavy Industries Co., accelerated their
China operations recently in order to meet growing demand and to capitalize on cheap labor and stable
labor-management relations there.
Hyundai, the world's largest shipbuilder, signed a contract late last month to set up an electronics joint
venture in China's Jiangsu Province.
Beginning next April, the new enterprise, dubbed Jiangsu Hyundai Nanji Electrical Company Ltd., will
produce various electronic and electric devices such as switchboards, medium- and low-voltage circuit
breakers, power transformers and locomotive equipment.
Hyundai plans to develop the venture as its electro-electric division's second production base and a
stronghold for sales in China as well as for export to the rest of Asia and the Middle East.
Daewoo Heavy Industries & Machinery Co. completed a Chinese plant in the first half to produce mini
excavators weighing 1 ton to 4 tons per unit for supply in China and Europe.
The production volume will begin with 500 units this year to reach over 1,000 units next year. The company
established its Chinese sales unit, Daewoo Heavy Industries Yantai Co., in Yantai, Shandong Province in
June 1996.
In addition, Daewoo held a signing ceremony in April to build a large-scale machine-tool plant in the same
city to churn out over 1,000 units of tuning and machining assemblies annually starting early next year.
Samsung Techwin Co. also concluded a license contract with a Chinese company Wuxi Compressor for
technology transfer and on-the-spot production of turbo compressors. (The Korea Herald/Coréia do Sul,
05/11/03)


SMALL FIRMS SUFFER LABOR SHORTAGE
Korea's small and medium-sized companies are facing a labor shortage as illegal immigrant workers are
being forced to leave the country by Nov. 15.
Hiring of foreign workers is also becoming increasingly difficult as the government's ban on employment
broker agencies, who specialize in bringing them in, took effect Nov. 1.
"We used to benefit from 30 to 40 foreign workers employed on daily contracts. We are not ready to
implement the new work-permit system, which subjects us to pay more for the use of foreign labor force,"
said a company manager in Ansan, south of Seoul.
"If companies hire foreign workers on a regular basis under the new work-permit system, their labor costs
will grow by more than 20 percent," he said.
Many small and medium-sized companies in factory areas such as Ansan and Seongnam in Gyeonggi
Province had procured needed labor through broker firms, which provided workplaces in the region with up
to 15,000 daily foreign workers.
Preparing for the full adoption of the foreign work-permit system, at the end of October the Ministry of Labor
ended the registration of foreign workers with shorter than four years of stay in the nation. A massive
crackdown on illegal foreign workers is scheduled to begin Nov. 16.




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Under the foreign work-permit system, which will take effect next August, foreign laborers in Korea will be
entitled to receive workers' protections and rights, including labor union membership, minimum wage
benefits and industrial accident insurance.
Meanwhile, Korea's hourly labor costs are higher than those of its major competitors in the global market,
hobbling the nation's export competitiveness.
Korean companies spent an average of $9.16 per hour per employee, while Singapore spent $7.27, Hong
Kong $5.83, Taiwan $5.41 and Mexico $2.38 in 2002, the Korea International Trade Association said
yesterday.
Hourly labor costs rose 17.3 percent in Korea last year from a year earlier, in contrast to decreases of 5.1
percent in Taiwan, 4 percent in Japan, 3.8 percent in Singapore and 2.2 percent in Hong Kong.
The report is a comparative analysis of data on hourly labor costs in the world's manufacturing sector that
was issued by the U.S. Department of Labor.
"Korea's hourly labor cost was the highest among developing countries, though it was lower than advanced
countries," a KITA official said. "Rising labor costs are likely to put further strains on export
competitiveness." (The Korea Herald/Coréia do Sul, 05/11/03)


FDI LEADS TO TRADE SURPLUS WITH VIETNAM
About 40 percent of Korea's trade surplus with Vietnam stems from its foreign direct investments in the
Southeast Asian country, according to a report by the Korean International Trade Association.
The report, based on a survey of 121 companies, said that South Korean companies operating in Vietnam
posted $900 million in exports and $200 million in imports last year, generating a trade surplus of $700
million with the country, or 40 percent of South Korea's overall trade surplus with Vietnam.
South Korean companies operating in Vietnam employ 200,000 Vietnamese, or 0.5 percent of the country's
population, according to the report.
South Korea's trade with Vietnam rose more than five-fold, to $2.71 billion last year from $490 million in
1992, when the two countries opened diplomatic relations, with its exports to the country increasing to
$2.24 billion from $430 million.
A KITA official said the businesses' presences in Vietnam give a boost to South Korea's trade surplus with
Vietnam, contributing to increasing exports, and creating jobs there. (The Korea Herald/Coréia do Sul,
04/11/03)


N.E. ASIA DEVELOPMENT BANK PROPOSED
Nam Duck-Woo, former prime minister of Korea, has reportedly called for the creation of a Northeast Asian
Development Bank to finance economic development in Northeast Asia.
Addressing the ongoing Annual Conference 2003 of the Boao Forum for Asia on Sunday, Nam said the
area covered by Japan, South Korea and the eastern part of China has become one of the three centers of
the world economy together with North America and the European Union, the Xinhua News Agency
reported.
However, he said the western part of China, Mongolia, the Democratic People's Republic of Korea, and
Russian Siberia still remain as a development frontier, and these less developed areas are known to be
treasure troves of mineral resources of every variety, not to mention their natural gas, fresh water reserves,
marine products, forests, agriculture, land, and people.
"Siberia has about 32 percent of the total deposits of natural gas in the world," he was quoted as saying by
the report.
For those areas, he argued, the immediate problem is how to finance regional infrastructure projects -
including highways, railways, pipelines and air transportation, ports and harbor facilities,


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telecommunications systems and dependable energy generation and distribution, water and sewage
facilities.
Financial resources made available by the World Bank and Asian Development Bank in recent years fell far
short of the requirements, and "it is necessary therefore to install an institutional mechanism by which to
attract additional resources to the region from the international money market," Nam noted.
The ADB's paid-in capital is only $3.3 billion, on the basis of which, the bank has been able to mobilize as
much as $87 billion for Asian developing countries, demonstrating the important role the multilateral
development bank has played in regional economic development, said Nam.
He said the proposed bank will not duplicate the business of the existing development banks, but would
coordinate closely with existing international financial institutions in the selection, allocation and funding of
national and regional infrastructure projects. (The Korea Herald/Coréia do Sul, 04/11/03)


WTO IS STILL ALIVE & WELL, SAYS SUPACHAI
The widely perceived failure of the World Trade Organisation‟s ministerial meeting on global trade
liberalisation in Cancun, Mexico in September did not “sound the death-knell” for the Doha round of trade
talks, WTO chief Supachai Panitchpakdi said on Tuesday.
“The multilateral trading system is at a crucial juncture,” the director general said.
But he added: “the system is still alive and well and gaining in significance after the so-called setback in
Cancun.”
The Doha agenda was the most ambitious round of trade talks yet, with more issues on the negotiating
table than ever before, making it a complex process, Mr Supachai said.
“When we take two steps forwards sometimes we take one step back,” he told a conference organised by
London‟s city university.
WTO ministers gathered in Cancun in early September in a bid to breathe life into moribund trade-
liberalisation talks that were launched in the Qatari capital of Doha on November 2001 and are due to
conclude by January 1, 2005.
But the meeting collapsed after bickering over cross-border investment and competition added to a more
fundamental dispute about farm subsidies in richer states and the high tariffs on agriculture imports from
developing nations.
Delegates to Cancun nonetheless agreed on a December 15 target for a consensus on how to go about
galvanising the Doha Round. (The Financial Express/Índia, 05/11/03)


EXPERTS PREDICT DOHA DEADLINE STRETCHING UP TO 2007
The jury is still out on the total collapse of Cancun meeting of trade ministers of 146-member World Trade
Organization (WTO). Is the Doha Development round of trade negotiations dead and buried? Or can it be
revived in December, when the WTO general council holds its meeting?
So far only official voices have been heard over here in the post mortem on Cancun. But what of informed
European public opinion - the independent think tanks, academics and interested citizens? How do they
see the key issue exercising official minds and development NGOs like Oxfam?
The issue is agriculture, of course. A public debate organized here by the Brussels-based Trans-European
Policy Studies Association revealed a generation gap on this issue. Older Europeans clearly have a
sentimental attachment to agriculture which their younger contemporaries do not share. European farmers
were strongly defended by an Italian journalist and editorial writer who has followed the progress of
European integration from Brussels for the last 40 years.
For Ferdinando Riccardi the countryside needs farmers. Without them, rural Europe would become a
wasteland, while the exodus from the countryside would transform European cities into megalopolitan


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nightmares. It would mean the end of European agriculture, were the European Union (EU) to give in to
pressure from the G-21, and more particularly from India, China and Brazil, and to open up its domestic
market to imports.
For Mr Riccardi, the real global problem is the imbalance between the world‟s rich and its poor. People in
poor countries, who do not have enough to eat, want to sell food to Europeans, who can feed themselves
and, in any case, account for only 5% of the world‟s population.
But the elderly Mr Riccardi‟s passionate defense of European farmers and farming was received with
scepticism by the younger members of the audience. One of them saw no reason why farmers should not
go the way of European miners or steel makers or factory workers, large numbers of whom have lost their
jobs without any public outcry.
Another of the three speakers, a university professor and contemporary of Mr Riccardi, came to his
defense. Prof Laurent Van Depoele noted that some 45% of the EU budget of over $100 billion is still
devoted to supporting European farmers in a number of ways, including price support and export subsidies.
He agreed that 80% of the EU‟s expenditure on agricultural support goes to just 20% of the farmers. In
other words, the farms which are receiving the bulk of the funds are not your small family farms but very
large farms, run on industrial lines. Even so, Prof Van Depoele favoured supporting all farmers, as th ey are
a key factor in rural development.
The conclusion - that Europe must continue to restrict imports of agricultural products - is hardly acceptable
to the governments of India, China and Brazil, for example. But both Mr Riccardi and Prof Van Depoele
were careful to safeguard the interests of those developing countries with whom the EU has commercial
and other links.
The fact is that since it was set up in 1958, the EU has maintained close ties with African countries. Today
more than 70 African, Caribbean and Pacific countries are associated with the EU through the Cotonu
convention, under which they enjoy preferential access to the EU market for virtually all their exports.
For MM Riccardi and Van Depoele, many of these countries still concentrate their efforts, as in colonial
times, on growing one or two crops (e.g. coffee, cocoa, cotton, palm oil) for the EU and other export
markets. The answer is to teach them to grow food for domestic consumption, and to provide them the
necessary technical and financial help.
However, perhaps the oddest and most surprising proposal for dealing with the deadlock in the WTO was
put forward by Prof Van Depoele. He thought the future of the WTO lay in its integration into the World
Health Organization (WHO) and the International Labour Office (ILO). Such a move, in his view, would
allow trade and development problems to be dealt with more effectively.
A very different approach was favoured by the last of the three speakers, Karl Falkenberg. One of the EU‟s
key trade negotiators in Cancun, he pointed out that developing countries need to export their agricultural
products to the EU - in order to be able to import manufactured products from Europe.
Mr Falkenberg also explained why the Cancun negotiations collapsed. Mexico‟s foreign minister, Luis
Ernesto Derbez, who was presiding over the negotiations, decided to stake everything on what he was told
was the most difficult item on the agenda - the so-called “Singapore” issues (competition, investment, trade
facilitation and greater transparency in government procurement). If these negotiations failed, then there
was little point in continuing the ministerial session.
Negotiations on the Singapore issues opened on the last day. But after five hours of very difficult
negotiations the Mexican foreign minister concluded that agreement was impossible. Rather than continue
the negotiations, he announced in a meeting of all the trade ministers that he was closing the Cancun
session.
However, before actually doing so, the minister looked carefully around the hall, to see whether one or
other trade minister would challenge his decision and propose that the negotiations be continued on some
other item on the agenda - say agriculture. In the event, none did, and the Mexican foreign minister then
formally closed the meeting.




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For Mr Falkenberg, no country wanted to continue the negotiations - certainly not the G-21 leaders, who
feared that the group would break up if it actually had to engage in negotiations over agriculture. The US
Trade representative remained silent because Washington favours bilateral or regional free trade
agreements anyways. The EU‟s chief trade negotiator, Pascal Lamy, was also silent, because he felt that in
the event that the negotiations on agriculture resumed, the EU would be asked to make further
concessions. All three speakers agreed that the Doha Development round will resume, probably when the
WTO general council meets in Geneva in December. But all three agreed that the deadline set at Doha for
the conclusion of the negotiations - end 2004 - will not be met. Indeed the negotiations will probably
continue until 2007. (The Fiancial Express/Índia, 05/11/03)


WORLD TRADE: BACK TO THE NORTH VS SOUTH SPLIT?
THE current deadlock over the Doha global trade round and the rift that was exposed in Cancun between
the industrialised nations and the group of 22 developing countries (G-22) - led by Brazil, India, Egypt and
South Africa - may reflect more than just temporary disagreements between trading partners and could take
the form of an ideological split.
Bruce Stokes, a trade expert and columnist for the National Journal, heard some echoes of the earlier clash
between the industrialised North and the developing South that had dominated the trade agenda in the late
1970s and early 1980s.
At that time, politicians and intellectuals in developing countries adopted a confrontational approach
towards the United States and the other industrialised capitalist nations (the Soviet Union and the
communist bloc were then not part of the capitalist system).
They blamed the rich economies for perpetuating an international trade system in which those economies
on the 'periphery' - that is, exporters of primary goods and poor countries - were finding themselves in
permanent disadvantage vis-a-vis the industrialised nations of the 'core' of the global economy, since the
economic welfare of, say, Brazil, Iraq or Egypt (measured by the level of their exports of coffee, oil,
minerals, etc) was supposedly 'dependent' on the choices made by companies and consumers in the
United States, France or Japan.
And many of the leaders of developing countries called for the establishment of a New International
Economic Order (NIEO), in which political and economic pressures (through international institutions and
the use of Opec-like commodity cartels) would force the rich economies to agree to changes in terms of
international trade in a way that would create more balanced relations, or 'interdependency' between the
'core' and the 'periphery', and strengthen the position of the entire poor South vis-a-vis the rich North.
Much of the intellectual foundations for the confrontational strategy adopted by the developing countries in
the 1970s and 1980s was provided by neo-Marxist intellectuals and activists in Brazil and Argentina.
Interestingly enough, these same intellectuals and activists have been inspiration for the members of the
left-leaning governments that rule those countries today. It is not surprising, therefore, that Brazil - and, to
some extent, Argentina - have become leading forces in the G-22 group in the World Trade Organization
(WTO), and are seen by Washington, Brussels and Tokyo as trying (together with India, Egypt and South
Africa) to challenge the status quo in the international trade system that, they argue, is being perpetuated
by the rich countries.
Indeed, US officials blamed Brazil for the collapse of the trade talks in Cancun, Mexico, saying it was too
aggressive in championing the demands of the developing countries for an end to farm subsidies in
developed countries.
In fact, United States Trade Representative Robert Zoellick called Brazil the leader of the 'won't do'
countries. Stokes warns that there is a danger that Brazil and other G-22 countries could transform the
WTO from a vehicle aimed at negotiating trade disputes into a forum in which a politically energised South
would be launching attacks against the North, and especially on the United States.
That would only ignite anti-WTO sentiment in Washington and could result in an American decision to drop
out of the Geneva-based organisation.


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And there is no doubt that President George W Bush and his trade advisers are angry at what Brazil and its
allies in the G-22 are doing. Reflecting this new confrontational approach towards the US, President Luiz
Inacio Lula de Silva of Brazil and President Nestor Kirchner of Argentina, who met last month in Buenos
Aires, made it clear that they were determined to maintain the G-22 alliance and to continue to press for
more equitable terms of trade for the South.
At the same time, they also indicated that they would also resist US efforts to form a free-trade zone in the
Western Hemisphere, preferring a regional economic bloc that would exclude North America.
In the 1970s and 1980s, the Northern countries, led by the US, responded to the challenge from the South
by adopting a 'divide and rule' strategy, by trying to co-opt some of the leading commodity exporting
countries, including the oil-producing countries of the Middle East.
Hence, the oil revenues of Saudi Arabia and Iran were deposited in American banks, and some of those
petro-dollars were, in turn, provided as loans to some developing economies, especially in Latin America.
As a result, the South lost some of its more economically powerful members, and its ability to apply an
economic leverage over the North was eroded. The main losers in that international drama were the poor
economies of the Third World, especially in sub-Saharan Africa, who were left behind while the more
prosperous commodity exporters were transformed into pro-status quo players.
There are some signs today that Washington is pursuing a similar 'divide and rule' strategy in its dealing
with the new challenge posed by the South, in the form of the G-22 countries, as it is trying to co-opt some
of the developing economies in Latin America, Asia and Africa, by offering them separate trade deals with
the US.
US trade officials say that in Latin America, American strategy has helped persuade not only Mexico and
Chile, but also Colombia, Costa Rica, Ecuador, Guatemala and Peru to reject Brazil's confrontational
approach in the WTO and to support the idea of a trade zone in the Western Hemisphere.
Similarly, the bilateral trade agreement with Singapore, and the plans to offer similar deals to Thailand and
other Asean economies, help contain pressures from Malaysia to create a pan-Asian trade bloc that would
exclude the US and Australia.
The message coming from Washington is that the trade agenda advanced by Brazil, India, Egypt and South
Africa is heavy on anti-American ideology, if not demagoguery, and that it could lead to the collapse of the
global trade negotiations.
Brazil and India could gain some international power and prestige by promoting the interests of the
developing nations and playing the role of the 'won't do' countries. But the main losers in this outcome
would be the poor countries of the Third World who would be devastated by the collapse of an open trade
system. That may explain why they are more inclined to adopt a 'can do' posture in the WTO.
But the main reason why the majority of the 148 members of the WTO should reject a new South -driven
confrontation is not because it is self-defeating, argues Brink Lindsey, director of trade studies at the Cato
Institute, a pro-free market think tank based in Washington.
He explains that the main force that helped undermine the aggressive NIEO-oriented Southern strategy in
the 1970s and 1980s were the newly industrialised economies (NIEs) of East Asia, like Singapore and
South Korea, that 'were able to take advantage of the access provided to them to the markets of the
industrialised nations so as to develop a successful policy that attracted international investment and
increased their exports, and helped them climb the global economic ladder'.
The Southern bloc collapsed when the economic 'tigers' of East Asia proved that you become a winner not
by blaming the North, but by taking all the necessary steps to join it. In many ways, the barriers into the
markets of North America, Western Europe and Japan were higher in the 1970s and 1980s than they are in
2004.
But the export-driven economies in Asia recognised that in order to be successful, 'you don't play the role of
the victim and demand special preferences', Lindsey contends. Like South Korea and the Asean
economies, 'you have to provide for basic protection of property and contract rights, and you open your
economy to investment and trade'.


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Hence, while Lindsey and other pro-free trade analysts have been very critical of the US, Europe and
Japan for their protectionist policies - and, in particular, their subsidies for their agricultural sectors - they
also believe that developing countries will be shooting themselves in the foot if they adopt the 'victim ology'
posture that blames all their economic problems on the policies of the rich industrialised countries and turns
the WTO into an America-bashing forum.
Indeed, the economic player that is not taking part in the 'blame game' and is following the winning strategy
advocated by Lindsey and others is China, as it is trying to do in 2004 what the East Asian 'tigers' did 20
years earlier.
This suggests that Beijing could emerge in the coming years as the most effective opponent in the WTO of
the belligerent approach promoted by Brazil and other G-22 members and as one of the leading allies of
the US in advancing an ambitious trade-liberalising agenda. (The Business Times/Cingapura, 05/11/03)


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