Trilateral Forum III, Nov. 11-12, 1997, Alumni House, University of California, Berkeley

SESSION I. Domestic Financial Adjustments and Their Impacts on Open Trade and Investment

China’s financial reform – status and impacts; Trade and investment "diversion" problems

• Barry Naughton, China’s Financial Reform: Achievements and Challenges

• Shujiro Urata, Foreign Direct Investment Diversion

Discussion Points

1. Will the SE Asia currency crisis affect the timing and character of China’s financial reform? If so, how?
2. The debt of the state-owned enterprises: will the state take it off the banks’ shoulders?
3. Problems of current overcapacity and income distribution in China.
   

Japan’s "big bang" – status and impacts; The current monetary crisis in SE Asia

• Shinji Fukukawa, Development of the Big Bang and its Impact

• Edward Lincoln, Evaluating Japan’s "Big Bang" Financial Deregulation

• Teruhiko Mano, Roles played by the yen in the global and Asian financial and capital markets

Discussion Points

1. How seriously will Japanese financial institutions be affected by financial turmoil in other parts of Asia? And more broadly, how seriously will the Japanese economy be affected by these developments?

2. Japan has proposed its own fund to help other Asian nations facing international financial problems. The U.S. government and European nations have reacted negatively. How should we react? Is this proposal a helpful step in the region, or more specifically in the trilateral context?

3. Lincoln's paper on Japan's "big bang" financial reforms presents a somewhat skeptical picture. What do other participants think of the prospects for reform? Are expectations of reform affected by the latest round of financial turmoil (including the falling Tokyo Stock Exchange prices)?

SESSION III. Systems Frictions and Their Impacts on Open Trade and Investment

National perspectives on system-friction issues; Systems friction and China’s WTO accession

• Li Zhongzhou, China Plays a Constructive Role in the Dynamic Growth of the Asian and Pacific Economics

• Heizo Takenaka, System Frictions: Japan’s Standpoint

• Richard Steinberg, Institutional Implications of WTO Accession for China

Discussion Points

1. Are the concerns Steinberg raises likely to be salient to governments other than that of the United States? Does the EU care about these issues? Japan? In so far as other governments may not

be likely to raise these concerns, is that attributable to an expectation that they can free-ride off U.S. diplomacy or to a real lack of concern?

2. Of the problems raised in Steinberg’s paper (particularly the substantive shortcomings of the WTO as applied to China), which are the most important? Prioritize them, please.

3. To what degree is the systems friction and institutional friction described in the paper (and suggested in Steve Cohen's paper from the first meeting) truly attributable to different forms of national political-economic organization versus attributable to differences in factor prices (i.e., the cost of labor) that will

persist no matter what form China's political-economy takes?

4. What about that suggestion in Steinberg’s last paragraph—of import targets, citing the Polish and Romanian accessions precedents?

5. How big a problem is caused by the eight issues (state enterprises, etc.) raised in the paper? Won't a model/typical process of accession solve all the problems that really matter and that now cause 99% of the systems friction, leaving the problems identified in the paper as relatively minor irritants, but not of real importance? If the problems identified in the paper are going to cause such a big problem, then why hasn't the US government pressed them-- or at least not pressed them to the degree it has pressed the normal/typical accession issues?

SESSION IV. Systems Friction and Financial Adjustments

A. Discussion: systems friction and financial adjustments

B. Meeting review; discussion of agenda and dates for next meeting, Tokyo, June/July