Monday, May 7, 2007

Asian Countries Seeking Greater Currency Cooperation

From the WSJ:

Asian finance ministers' agreed-upon framework for pooling foreign-exchange reserves could allow governments to respond more quickly and with greater firepower to a brewing balance-of-payments problem.

Main aspects of the plan -- including the size of each nation's commitment and the circumstances under which a country can tap the pool -- haven't been set.

Implementation could take a couple of years.

Finance ministers from the 10-nation Association of Southeast Asian Nations, plus Japan, China, and South Korea agreed Saturday to set up a regional reserve pool that each country could access in a currency crisis.

This is a great idea. For those who remember the Asian currency crisis of the late 1990s, it is definitely a good idea.

However, it points to something deeper that is going on. The world is starting to fall into three different trading blocks -- the Americas, Europe and Asia. Each of these regions has its own strengths and weaknesses. However, the US in particular is way behind in its dealings with Asia and needs to develop a better policy toward the region.