between nafta's 46 percent and the eu's 62 percent. asia's export - led growth has increased its absorption, thereby stimulating its imports from abroad. this is particularly true of china where huge domestic demand has yet to be saturated. because of its large population, china presents itself as both an international production hub and a big consumer market. for instance, china accounted for 7 percent of global trade in 2004. combined with hong kong and taiwan, it captures 11 percent, only slightly below the us. against this background, china is exerting a strong influence on the global economy. also note india, which is becoming the major off - shoring destination for foreign multinationals, particularly in the service sector. this strong performance of asian economies might possibly be affected by the recent spike in oil prices. in fact, some asian currencies, like the indonesian rupiah, came under pressure when oil prices reached a record high this august. however, the economic fundamentals of most asian countries are much stronger than in the 1970s when they were hit by the worst oil market turmoil ever. in addition, asian countries responded swiftly this time by raising interest rates or slashing public fuel subsidies. these prompt actions have helped them minimize potential disruptions to their economies. furthermore, asian countries have large volumes of foreign reserves and only a small amount of external debt in comparison to both their own past and developing countries in other parts of the globe. for mutual liquidity assistance in times of external stress, countries in this region are working toward an expanded network of bilateral swap arrangements, to which i will come back in a few minutes. in short, asian economies are better equipped with both the will and capability to fend off sources of disturbance to their sound economic growth. 1 / 4 iii. rising regional cooperation under these circumstances, we have seen increasing drive for regional cooperation in asia, especially among the " asean + 3 nations " consisting of the ten asean countries plus japan, china, and korea. as i said earlier, these countries are strengthening their trade links. but similar attempts are being made in other fields as well where progress has been less impressive, such as finance, environment, energy, and scientific technology. collaboration in these areas is proceeding in a functional and pragmatic manner. closer trade links in asia, as symbolized by the web of free trade agreements ( fta ), are likely to promote trade liberalization and catalyze fdi flows in and out of the region

issue debt to finance a loan or an asset purchase, there is an immediate impact on government debt in the official statistics. but no impact on the deficit will be recorded unless or until there is clear evidence that the interest on the loan or the price paid for the asset does not reflect market conditions. in cases where a privately owned special entity is established to provide loans or purchase assets, there may be no immediate impact on the government accounts, even if the debt issued by this entity is backed by a government guarantee. only if and when this guarantee is called will the corresponding amount be recorded as government spending. at the current juncture, it is impossible to assess the amount of the guarantees that will be called or what the final scale of the losses will be. as eurostat put it, the cost of the public support to banks is a large cloud on the horizon, but at the moment we do not know how much it is going to rain! the fiscal exit strategy faced with the prospect of large deficits in the coming years and uncertainty regarding the final costs of bank rescue packages, the priority for fiscal policy must be to set out a clear and credible plan for restoring order to the public finances over the medium term. just as central banks are mulling their exit strategy from non - standard monetary policy measures, governments need to develop their exit strategy too. * * * in this respect, the first hurdle to overcome is to be honest and transparent about the scale of the problem. as i already mentioned, much of the support given by governments to the banking sector will not be reflected, for the time being, in the government accounts. but this does not mean it can be overlooked. eurostat has announced that it intends to establish a supplementary reporting table to collect data on guarantees, liquidity support measures, and the operations of special purpose entities relating to the financial crisis. this reporting must be taken seriously. public authorities cannot call on banks to be more transparent about the scale of their liabilities, if they exploit statistical conventions themselves to keep debt off of their balance sheets. beyond this, there is a risk that the increase in government borrowing during the crisis is viewed as being purely the consequence of the operation of the automatic stabilisers and fiscal stimulus packages. cyclical effects should cancel out over time. stimulus measures are supposed to be largely temporary. so once the crisis is over and the stimulus measures unwind, we should be more or less back where we started. this is wishful thinking. the sharp