TNAG-1880-FCO40-2671-Student-demonstrations-and-internal-political-situation-in-C-1989 — Page 47

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has been improved and disincentives for direct investment have been slashed. The service sector has been opened to foreign competition.

Hong Kong and Singapore, are already more open market economies than most of the Western industrialized coun- tries.

To sum up, market barriers can hardly explain very low market

shares of the Europeans. As traditional, preferential trade linkages between some of these countries with Japan or the

U.S. have been clearly reduced over the 1970s and 80s, and as

these countries have repeatedly expressed their intention to

diversify highly concentrated imports (away from Japan) and exports (away from the U.S.), it is up to European producers to step in and gain bigger market shares.

cc. The NIES external trade and internal saving surplus

The import behavior of the NIEs has developed quite diffe-

rently from that of Japan. The NIES' growth strategy resembles

more the German than the Japanese model. They rely more on im-

port liberalization and foreign manufacturing inputs, while

Japan never really opened up in manufacturing. Hence the in-

come elasticity of their import demand is significantly higher than that of Japan,

3) and the "coverage ratio"4) is ap- proaching balanced exchanges, with the notable exception of

the U.S.

For the first time in 1983, the NIEs as a group recorded a current account surplus which has grown ever since ($ 22.9 Bn in 1986, $ 32 in 1988)5). Three global economic developments

have helped to improve their current account in the 1980s:

3)

4)

5)

The ex-post value for the 1973-85 period is 0.40 for Japan, 0.96 for the industrial countries, 1.83 for Hong Kong, 1.25 for Singapore, 1.37 for Korea and 0.86 for Taiwan.

Percentage of their exports divided by their imports.

Taiwan has reached a surplus since 1980, Korea only in 1986, while Hong Kong and Singapore have trade deficits.