"When the center of the global economy shifts, logically, the world intellectual center must shift as well. This institute will be a new think tank for the new Asian Century."

Thus spoke HSBC CEO Stuart Gulliver last night at Hong Kong's Conrad Hotel, where the inauguration of the new Fung Global Institute was celebrated by 200 global movers and shakers, including former Federal Reserve Chairman Paul Volcker, former Hong Kong Chief Executive Tung Chee Hwa, and Institute founders and Li and Fung Corporation Chairman and CEO respectively Victor and William Fung.

As the dinner speaker, Volcker backed Gulliver's sentiment and called on Hong Kong and China to lead the way in overcoming U.S. resistance to adoption of the Volcker Rule (banks with implicit or explicit government guarantees because they hold insured accounts or are too big to fail would be prohibited from doing proprietary trading) by setting the example with immediate adoption in their own markets. He emphasized that the global financial system is sitting on a knife edge without a coherent and consistent set of international or intersecting national regulations on dealing with what is now a $700 trillion global market in derivative instruments that no one understands. In the face of dithering and caviling in the West, maybe, suggested Volcker, the East could start talking sense.

Of course, as Chairman Victor Fung emphasized in his own opening remarks, Asia is a vast, diverse space and no single institute can be its sole voice. But he voiced the intent for the institute to provide Asian perspectives on the key issues facing not only Asian but all global leaders. For that purpose, he presented an all star cast of fellows, advisers, and staffers. These include Nobel prize winning economist Michael Spence, institute President and Peoples' Bank of China adviser Andrew Sheng, former Chairman of the China Bank Regulatory Commission Liu Mingkang, and former World Bank chief economist for China Louis Kuijs.

In that spirit of presenting Asian perspectives to the world, the current crisis in Europe was the focus of much of the inaugural discussion. Commenting on the major challenges facing Asia, Gulliver placed the euro/EU problem first on his list saying that "the key now is the eurozone and calling on the Europeans to establish a Europe wide bank deposit insurance guarantee in euros along with a euro-bond and a fiscal concordance. However, as evidence of the differences in Asian perspectives, former Singapore Foreign Minister George Yeo took a much more relaxed position, arguing that more integration cannot be the answer for Europe and that it should perhaps not strive too hard to sustain what may well be unsustainable. Attractively out of the box in concept, this idea was quickly countered by Spence and others who emphasized that a collapse of the EU would have dire consequences for Asia and America because it is the biggest export market for both regions.

There was, however, unanimity of perspectives in one very important and perhaps defining respect. At a moment when the former head of a private equity firm (Mitt Romney) -- a firm dedicated to maximizing relatively short term profits for shareholders as its sole business objective -- is running to become president of the United States, Victor Fung emphasized that "any individual business has no right to exist if its objectives do not coincide with those of the society it serves." He further called for business to promote full global employment, social justice, and the interests of stakeholders.

That is certainly a different perspective -- a strongly Asian perspective -- from the dominant shareholder value/fiduciary obligation philosophy of U.S. business leaders and thinkers. The importance of that difference was suggested by Fung at the end of his remarks when he warned of a clash of civilizations if dialogue and debate cannot reconcile strongly differing perspectives.

Avoiding such a clash and promoting a truly equitable, sustainable, and prosperous global economy is the gargantuan task the Fung Global Institute has set itself. I sincerely wish it luck.

If you want to understand the truly upside-down nature of the thinking of Washington's foreign policy elite on Asia, take a look at the just released report and press commentary by the U.S.-ASEAN Strategy Commission of the Center for Strategic and International Studies (CSIS).

Like all of these think tank commissions, this one is studded with former high ranking officials now consulting for a variety of global corporations both American  and foreign. Particularly prominent in their remarks were former U.S. Trade Representative Carla Hills and former Defense Secretary William Cohen. Hills urged negotiation of that philosopher's stone of modern international relations, a free trade agreement, in this case between the United States and ASEAN. Breaking down barriers to trade and capital flows would encourage further investment in the region by U.S. corporations, she said.

In light of the fact that the ASEAN region is drowning in investment while the United States is starving for it, it's not clear why Washington should want to encourage further investment in ASEAN, but maybe Hills thinks the deal would encourage a two way flow of investment that would also be beneficial to the United States.

If that is the case, however, the commission's proposals do not include any recommendations on exchange rate manipulation, reciprocity on investment incentives, or other tax and regulatory tools often employed by the ASEAN countries in ways that tend to promote their trade surpluses and the U.S. trade deficit with its consequent impact on U.S. unemployment.

Read on

An old mentor of mine once remarked that "the only sure thing in life is the unexpected." How true I thought after arriving in Tokyo last night.

One minute, Japan and the world were happily anticipating a quiet weekend amid continued recovery from the world economic crisis. The next, Japan was plunged into what Prime Minister Naoto Kan has called its worst crisis since the end of World War II. The global economy, already roiled by the Arab revolution, is now again in uncharted waters.

It is a measure of the damage done here in Japan that even now, four days after the quake, only about half the trains and metros in Tokyo are operating and some areas remain without service. In fact, the outlook dimmed further today as a third nuclear reactor at the Fukushima power site lost cooling. The Tokyo Electric Power Company has announced that power outages are likely and that this situation will continue until at least the end of April. Given the accuracy of the company's forecasts so far, this could well mean until the end of the year.

With Tokyo and much of the rest of the country operating at half speed, the hit on the Japanese economy is going to be enormous and the knock-on effect on the rest of the world economy will be large and very significant in some critical areas. For example, about 40 percent of the world supply of the Nand semiconductors -- critical to devices like cell phones and the iPad -- are made precisely in the part of Japan most affected by the quake and tsunami. Those plants are down now, and it is not clear when they will be coming back on line. Nor are they something that can quickly be ordered up from another source. A large part of the world supply of silicon and specialty chemicals for the semiconductor industry -- the building blocks for all semiconductor chips -- is also made in Japan. So even companies like Intel, Samsung, and Taiwan Semiconductor Manufacturing Company could be significantly impacted.

The overall impact is expected to be at least several months of slower GDP growth. But those estimates could change substantially. For instance, most comparisons are being made to the Kobe earthquake of 1995, which caused only a relatively short term downturn in the Japanese economy. But that disaster had no impact on the energy situation. This quake will result in large increases in Japan's oil imports which, combined with events in the Middle East, will undoubtedly lead to higher oil prices that will add to the economic drag both on Japan and on the rest of the world.

Also extremely important will be the effect on Japan's public debt, already double its $5 trillion GDP. Mitsubishi UFJ Securities is estimating that the debt costs of recovery will add anywhere from 2 to 10 percent of GDP to the already massive public debt.

Now, here's where the unexpected impact of the unexpected gets really interesting. There is speculation in Japan, that if the public debt should grow by 5 percent of GDP or more, the Japanese government would be reluctant to cover it simply through more borrowing. Rather, an attractive option might be for Japan to sell off a portion of its huge holdings of U.S. Treasuries to cover the cost instead.

That, of course, could result in a dramatically weaker dollar that would that would stimulate inflation and force the Fed to raise interest rates just at the moment when the U.S. economy appears to be gaining a little momentum.

It was Pericles who said that: "The important thing is not to predict the future but to be prepared for it." Globalization has made the economy more fragile. It's time that the world's major economies and global institutions prepare for that reality.

In
yesterday's (Nov. 25) Financial Times,
my friend Claremont College professor Minxin Pei commented
that "China may choose to do nothing (with regard to trying to rein in North
Korea) just to prove that the west cannot bash it and beg at the same time."

It wasn't
the question of China possibly cutting off its nose to spite its face that
caught my attention. After all, China may really not consider North Korea to be
or any danger to it at all. Rather it was the use of the term "bash" and its
ascription of bashing to the "West." Let me hasten to say that my comments here
are not at all meant as a criticism of Minxin who I am sure used the term
simply as a repetition of current usage and without giving it much thought. But
that in itself is significant as a manifestation of how extant this powerfully
loaded term has become.

Ask yourself
what bash means or what people would be trying to say if they called you a
basher. The word suggests a vicious, even irrational and probably gratuitous or
perhaps racist, attack on someone or some group or some country. And let me say
up front that I know this and am sensitive to it, because in the 1980s and 1990s
when I was first a U.S. trade negotiator with Japan and then an analyst of
globalization at the Economic Strategy Institute, I was routinely referred to
in the press as a "Japan basher."

In the case
of yesterday's article, the comment was in relation to the fact that China has
been criticized over the past few years on a wide range of issues including its
claims of sovereignty over disputed isles in the South China Sea, the ramming
of a Japanese ship by a Chinese fishing vessel, refusal to relax its
intervention in global currency markets and to allow its currency to revalue
significantly, reluctance to accept some degree of responsibility for
rebalancing the current, massive global trade imbalances, as well as its
refusal or inability to do anything about its North Korean allies' nuclear
proliferation actions.

Now, no
doubt, there are two sides to all these stories and China has a right to voice
its claims and to act or not to act as it sees fit. But surely other countries
may have grounds for their criticisms. China no more than any other country
should be immune from legitimate criticism. But this is, in effect, what
happens when we use start using the terms bash, bashing, and basher. Because
they suggest irrationality, hatred, and racism, they inhibit and obviate
serious and necessary discussion of important differences and issues. Are there
no legitimate grounds for concern about China's territorial claims in the
Pacific or about its currency and trade policies? Certainly the Federal
Reserve's monetary policies and U.S. currency policies were subjected to
withering criticism at the last G-20 meeting.

But this
only underlines another interesting element of phenomenon. "Bashing" is
something that apparently can only be done by the West, and really only by the
United States. No one calls China a U.S. basher when it criticizes Ben Bernanke
or the U.S. banking system. No one calls Germany a U.S. basher when it levels
criticism at U.S. economic policies.

The term
basher was first popularized by Washington
Post columnist Hobart Rowen in the 1980s when, in his passionate advocacy
of free trade, he used it to undermine the legitimacy of any U.S. response to
or even criticism of Japan's mercantilist, export led growth strategy of the
time. His tactic proved so effective that it was quickly adopted by the
officialdom and media of Japan and other countries wishing to deflect and halt
U.S. pressure on them for change.

It's
time to stop using this term in reference to debate with or about our
international partners. We should be speaking of "criticizing" rather than of
"bashing."

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.