9
Interest rates declined from their peaks of 1982-83, and hence debt service fell sharply (improving the balance in the case of Korea),
Real oil and commodity prices declined, giving the re- source-importing NIEs a competitive advantage,
The decline of the dollar, to which their currencies are loosely tied, improved their international competitiven- ess at the expense of Japan.
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On the other hand there is a clear trend of falling investment rates probably a reaction to lagging growth rates in the world economy and an increased politicization of international trade flows. As domestic saving keeps rising, this pattern is
reflected in a growing trade surplus from 1983 on (see Charts
4 and 5).
It seems that the NIEs are actually at a crossroads. On the input side, rising wage levels and acute labor shortages bring more and more intermediate production and assembling activi- ties into the neighboring ASEAN countries; thus, there is in fact some of the looked for "trickling down" effect of the NIES development in the region. On the output side, a further increase in the politicization of the international economy would push the NIEs towards pursuing the route of direct in-
vestments in the industrial countries instead of an increase
in exports. Both these channels will guarantee the absorption
of the saving surplus in the NIES.
Whatever future scenarios can be conceived of, there are some
clouds hanging over the future of the Asian economies (prospective U.S. budget deficit adjustment, internal labor unrest and wage pressure, limits of technological advancement by way of reverse engineering) that will worsen the group's trade balance in the future. In addition, protectionist measures divert trade flows without reducing the overall balance. This experience is increasingly acknowledged and should be borne in mind when conceiving political demands
towards the NIES (see next chapter).