Introduction

After World War II ended in 1945, the General Agreement on Tariffs and Trade (GATT) was established to create an open and free trading system. Together with the system of fixed currency exchange established under the International Monetary Fund (IMF) agreement at Bretton Woods, a stable global trading and monetary system was instituted. These two key post-war institutions, sustained by the hegemonic power of the United States — based on its technological, economic, and military superiority — ushered in an unprecedented period of steady expansion in world output and trade as well as closer economic interdependence in the non-communist free world. World trade in volume terms expanded at an average annual rate of 5.6 per cent between 1953 and 1963 and 8.5 per cent between 1963 and 1973, much higher than the average rate of 3.5 per cent between 1873 and 1913 and the 0.9 per cent in the inter-war period of 1919-39.

This unprecedented expansion in world output and trade in the post-war era provided the Asia-Pacific economies like Japan and the four East Asian newly industrializing economies (NIEs) — South Korea, Taiwan, Hong Kong, and Singapore — with a conducive and stable environment for export-led growth. They were lucky to set sail on the tack of industrial catching-up when the gust of wind was strongest. Consequently, from the mid-1960s to the early 1990s the four NIEs were the most dynamic middle-income economies in the world. Their annual growth rates in gross national product (GNP) per capita between 1965 and 1990 have averaged 6 to 8 per cent, almost triple the average rate of 2.3 per cent for middleincome economies of the world and double the 3.6 per cent average for countries in the Association of Southeast Asian Nations (ASEAN), excluding Singapore.

The pattern of industrialization and exports of the NIEs has been rather similar. After a short period of protectionistic importsubstitution policy in the 1950s and early 1960s, they soon turned to an export-oriented strategy for growth. During the early stage of the outward-oriented development strategy in the 1960s, the emphasis was on the production and export of traditional labourintensive products such as textiles, clothing, footwear, toys, leather goods, and other light manufactured goods.