, say, simpler – or does it reflect the greater difficulty of regulating across sovereign borders? it seems to me to be the latter, and we should address this deficiency. the need for “ rules of the game ” seems, if anything, to be greater in a globalised world than in a less integrated world. one of the defining characteristics of globalisation is the importance of scale, as technology drives the optimal business units larger and larger in a number of important areas. the other defining characteristic is “ winner takes all ”, and its related concept of “ first mover advantage ”. these characteristics combine together to produce areas where monopoly or quasi - monopoly will be important. the old response to monopoly – to break it up and force competition – will be precluded or restricted because of the inefficiencies that would result from this action. so the alternative channel will be to achieve a network of rules which addresses the issues raised by these imperfectly competitive firms. given the increasingly international nature of enterprise, what is needed to complement this development are international rules, not specific to any one country, but developed in a uniform way and acceptable to all. these would address issues such as monopoly, intellectual property rights, and legal issues. prudential supervision, capital flows, taxes and “ industry policy ” may also be suitable cases for treatment. in short, as closer relations impose greater need for uniformity ( e. g. in tax or investment regimes ), the need is to develop these in a collective international environment. tom friedman ( 1999 ) has called such rules the “ golden straitjacket ”, which captures two important characteristics of the process – the degree of uniformity which globalisation will impose ; and the generally beneficial nature of these rules. rules to govern global relationships will generally need to be on a uniform multinational basis, but this does not preclude the need for important regional input, in order to ensure the applicability of the universal rules to all countries. a good set of rules requires recognition of the great diversity of circumstances and institutions between countries. one specific example here is the rules on prudential supervision. it seems quite likely that the rules relevant to banks in this region would be somewhat it would be easy to exaggerate just how universal and all - encompassing the golden straitjacket may be. it does not seem true, for example, that tax rates will have to become uniform across countries. different ( reflecting the different degree of complexity and make - up of

approach of the new arrangements to borrow ). rather than anticipate the later debate on this issue here, let me quote, with approval, yung chul park ( 2000 ) : “ one development that has encouraged the regional cooperation in east asia has been the slow progress of the reform of the international financial system. the urgency of reform in the g - 7 countries has receded considerably with the rapid recovery of east asia. … as long as the structural problems on the supply side of capital are not addressed, the east asian countries will remain as vulnerable to future crises as they were before. instead of waiting until the g - 7 creates a new architecture, whose effectiveness is at best questionable, it would be in the interest of east asia to work together to create their own system of defence. ”. globalisation as i foreshadowed, my feeling is that the issues of globalisation are even more important to regional co - operation than is policy co - ordination. let me record briefly some of the characteristics of globalisation, to try to establish why policy must be attuned to the needs of this new globalised world, in order to foster globalisation and – at the same time – ensure that we all get maximum benefit from it. first, a point which is close to tautology, but full of policy implication nevertheless : globalisation means that an increasing part of our economic relations are with external parties ( for many of the east asian economies, foreign trade ( exports and imports taken together ) far exceeds gdp. as dobson ( 2001, p. 26 ) observes : “ peers must be willing to supply constructive criticism and those in potential or actual difficulty must be willing to accept objective analysis. unless governments are willing to enter into this kind of give and take, the regional mechanism will simply become another overlay of officialdom. ” foreign trade ( per cent to gdp ) australia china hong kong indonesia japan korea malaysia new zealand philippines singapore thailand united states domestic trade and investment is subject to myriad controls and regulations, even in the most “ free market ” economies. in contrast, international relations are lightly regulated. “ the dilemma we face as we enter the 21st century is that markets are striving to become global while the institutions needed to support them remain by and large national. ” ( rodrik - quoted in the economist, 29 september 2001, page 19 of'a survey of globalisation'). is this disparity in regulatory density reflecting some innate characteristic – that these relationships are