However, the risks of a further bout of financial contagion precipitated by this possibility are receding. Foreign exchange reserves of the crisis-affected Asian countries have now strengthened considerably and, in general, exposure to credit and exchange rate risks is less than previously. Nevertheless, a devaluation of the renminbi could create pressure for a mild depreciation of regional currencies. Trade tensions in the world economy are mounting. The incidence of bilateral trade disputes and of anti-dumping actions brought before the World Trade Organization is rising at a worrying rate.
Protectionist interests are at work both within the region and outside.
The administration is under strong pressure to protect domestic steel producers who are feeling fierce competition from lower-cost producers. In Japan, there is strong political resistance to liberalization of trade in agricultural goods. Moving trade liberalization forward in this environment poses an immense challenge. More inward-looking trade policy in developing countries would impair their collective ability to persuade developed countries to relax remaining restrictions on market access, and would impede their capacity for structural change. Finally, by most indicators, developing Asian economies remain ill prepared for the Y2K computer problem.