Rising inflation in Asia stings in the West

BAT TRANG, Vietnam: The free ride is ending. For decades, Westerners have imported goods produced ever more inexpensively from a succession of low-wage countries – first Japan and Korea, then China, and now increasingly places like Vietnam and India.

But mounting inflation in the developing world, especially Asia, is threatening that arrangement. Not just in China, where rising energy and labor costs have already made exports to the United States and Europe more expensive, but in the lower-cost alternatives to China, too.

“Inflation is the major threat to Asian countries,” said Jong-Wha Lee, the head of the Asian Development Bank’s office of regional economic integration.

It is also a threat to Western consumers because Asian exporters, even in very poor countries, are passing their rising costs on to their customers.

Developing countries have had bouts of inflation before – indeed, some are famous for them, like Brazil, which saw triple-digit inflation in the late 1980s and early 1990s.

But two things make this time different, especially in the United States, where the possibility of recession looms.

First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar.

That puts American consumers in a double bind, paying at least some of producers’ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries.

IHT