Asian economies will find in China an alternative trading partner to the United States, and possibly with more symbiotic trading terms, providing more room to structure trade to enhance domestic development along the path of converging regional interest and solidarity. The rise in living standards in all of Asia will change the path of history, restoring Asia as a center of advanced civilization, putting an end to two centuries of Western economic and cultural imperialism.
The foreign-trade strategies of all trading nations in the decade of neoliberal globalization have contributed to the destabilizing of the global trading system. It is not possible or rational for all countries to export themselves out of domestic recessions or poverty. The contradictions between national strategic industrial policies and neoliberal open-market systems will generate friction between the United States and all its trading partners, as well as among regional trade blocs and inter-region competitors. The US engages in global trade to enhance its superpower status, not to undermine it. Thus the US does not seek equal partners. With economic sanctions as a tool of foreign policy, the US government is preventing, or trying to prevent, an increasing number of US companies, and foreign companies trading with the US, from doing business in an increasing number of countries. Trade flows not where it is needed most, but to where it best serves the US national interest.
Neoliberal globalization has promoted the illusion that trade is a win-win transaction for all, based on the Ricardian model of comparative advantage. Yet economists recognize that without global full employment, comparative advantage is merely Say's Law internationalized (Say's Law states that supply creates its own demand, but only under full employment, a condition supply-siders conveniently ignore). After a decade, this illusion has been shattered by concrete data: 30 percent of the world's population live on less than $1 a day, and global wages, already low to begin with, have declined since the Asian financial crisis of 1997, and by 45 percent in Indonesia.
Yet export to the United States under dollar hegemony is merely an arrangement in which the exporting nations, in order to earn dollars to buy needed commodities denominated in dollars and to service dollar loans, are forced to finance the consumption of US consumers by the need to invest their trade surpluses in US assets (as foreign-exchange reserves), giving the US a capital account surplus to finance its current account deficit.
Furthermore, the trade surpluses are achieved not by an advantage in the terms of trade, but by sheer self-denial of basic domestic needs and critical imports. Not only are the exporting nations debasing the value of their labor, degrading their environment and depleting their natural resources for the privilege of running on the poverty treadmill, they are enriching the US economy and strengthening dollar hegemony in the process. Thus the exporting nations allow themselves to be robbed of needed capital for critical domestic development in such vital areas as education, health and other social infrastructure, by assuming heavy foreign debt to finance export, while they beg for even more foreign investment in the export sector by offering still more exorbitant returns and tax exemptions. Yet many small economies around the world have no option but to continue to serve dollar hegemony like a drug addiction.
Japan provides the perfect proof that even a dynamic, successful export machine does not by itself produce a healthy economy. Japan is aware that it needs to restructure its domestic economy, away from its export fixation and upgrade the living standard of its overworked population and to reorder its domestic consumption patterns. But Japan is trapped into helplessness by dollar hegemony.