From Latin America And Southeast Asia Financial Crisis, Developing Countries' Trade Strategy And The Financial Crisis

The trade-development strategy of developing countries has always been a focus in the researching fields of international economics and development economics. In about I 980s. there was a great contrast between Latin American economies trapped in the debt crisis and East Asian economics obtaining the continually fast increase. It was the contrast that made the opinion widely accepted that East Asian抯 export-oriented trade strategy was superior to the import-substitution strategy pursued by the Latin Americans. However, the financial crisis firstly broke out in Southeast Asia in 1997. which revealed some defects in the application of the export-oriented strategy. Starting from the analysis of the trade strategies, the author intends to make a comparison among the debt crisis of 1 980s, monetary crisis of 1994 occurred in Latin America and the well-known financial crisis attacking Southeast Asian economies in 1997. The relations between the trade strategy and financial crisis are consequently found out: The lack of capital accumulation caused by the import-substitution policy finally incurs the insolvency in debt crisis, while the export-oriented one may well make up for the various defects of the former and be the main reason of the East Asian miracle as well as avoiding the debt crisis. Nevertheless, some Asian countries like Korea and Thailand didn抰 take shelter from the financial stonn. It is all because they uplifted their industrial and trade structures too fast, neglecting the basis of their comparative advantages. And the result was the inevitability to carry out disordered financial policy, persist in fixed exchange rate and open up the capital account without full preparation, which led to the disaster in 1997. On the contrary, some small economies pursuing the same export-oriented policy like Singapore and Taiwan stayed safe in that storm. The difference was they went step by step in the modifying the industrial structure and liberalizing the monetary sector. There is much we should learn for reference from the case. Under the circumstance of economic globalization, we should stick to the opening-up policy. In the course of that, the best choice is to elevate our industrial as well as the trade structure gradually based on the comparative advantage. The same is in the monetary sector. Only if the conditions become mature, can we release the regulations on capital account.