APEC: Between optimism and pessimism<\/p>\n
By Bob S. Hadiwinata<\/p>\n
BANDUNG (JP): The meeting of 18 world leaders in Bogor on Nov.
\n15 is pivotal in that it serves as a test case on how far the
\nAsia-Pacific countries are willing to go in setting up order
\nunder increasingly cut-throat global economic conditions.<\/p>\n
Great hopes are pinned on the success of the APEC summit in
\ncreating investment liberalization and free trade area for the
\nentire Asia-Pacific region. The Pacific Business Forum (PBF), a
\nbusiness advisory group of APEC, suggests that the forum should
\naccelerate trade and investment liberalization. More
\nspecifically, the PBF raises an optimistic view by maintaining
\nthat trade and investment liberalization in the region can be
\ncompleted by the year 2002 for developed economies, and no later
\nthan 2010 for developing countries.<\/p>\n
From a single country's point of view, investment
\nliberalization and free trade are also important. Australian
\nPrime Minister Paul Keating insists that the APEC forum must
\nachieve free trade in a way that is consistent with the General
\nAgreement on Tariffs and Trade and World Trade Organization (WTO)
\nprinciples and that it contributes to further global trade
\nliberalization.<\/p>\n
What is the benefit of trade liberalization for a particular
\ncountry? It is obvious that developed countries will gain more
\nthrough the adoption of free trade since their economic power and
\ntechnological excellence will enable them to shift their
\nactivities to more profitable sectors with no serious casualties.
\nIn this case, developed countries can compete in the world market
\nbased on comparative advantage.<\/p>\n
What is the option for the developing countries in a free
\ntrade arrangement? Shortly before the Bogor summit commenced,
\nIndonesia's House of Representatives (DPR) ratified the
\nestablishment of WTO, the body that will administer the GATT by
\nJanuary 1995. The WTO ratification will allow more Indonesian
\nexports to enter the global market, while at the same time
\nopening the country's domestic market. An estimation made by
\nIndonesian Ministry of Trade projects that the adoption of the
\nWTO principle will raise the market share of Indonesian exports
\nto developed countries to the range of four and seven percent.
\nMore importantly, another estimation predicts that Indonesia's
\nper capita income will be quadrupled to around US$2,660 by the
\nyear 2019.<\/p>\n
With this in mind, it is not surprising that the Bogor summit
\nhas generated optimism among state and business leaders in the
\nAsia-Pacific region.<\/p>\n
Apart from this optimistic view, one should be aware of the
\nfact that current global economic competition is much more
\ncomplicated than ever.<\/p>\n
In many cases, the complexity of international economic
\nrelations involves non-economic factors. Indeed, there are some
\nreasons not to be too optimistic when considering the possible
\noutcomes of APEC. First, given the fact that the Asia-Pacific
\nregion consists of a large number of diverse countries in terms
\nof culture, political systems, economic policy orientation, and
\nlevel of industrialization, one can easily anticipate the
\npossibility of a \"tug-of-war\" between different national
\ninterests.<\/p>\n
There are three prevailing opinions with regards to economic
\npolicy orientation and level of industrialization. For the United
\nStates and Australia, both proponents of economic liberalism,
\nthe creation of investment liberalization and a free trade area
\nin the Asia-Pacific region is a kind of sine-qua-non. Both the
\nUnited States and Australia have long been annoyed by the
\nexcessive trade barriers imposed by Japan and other
\nindustrializing Asian countries. As their economic power enables
\nthem to compete according to the principle of comparative
\nadvantage, one cannot deny their preference for free trade.<\/p>\n
On the other hand, countries such as Japan, Canada, New
\nZealand, South Korea, Hong Kong, Singapore, Taiwan and China
\nexpect the Asia-Pacific economic forum to reduce transaction
\ncosts and to coordinate policies. In other words, these countries
\nexpect APEC to provide a more favorable atmosphere for their
\nexport strategies.<\/p>\n
The third category is represented by the less-powerful APEC
\nmembers such as Mexico, Indonesia, Malaysia, Philippine,
\nThailand, Brunei, and Papua New Guinea. These countries expect
\nAPEC to serve as a development cooperation forum, to provide them
\nwith foreign investments and to open new markets for their
\nproducts.<\/p>\n
Another point worth considering has to do with the growing
\nlinkage of trade practices with non-economic factors such as
\nhuman rights issues and democracy. With regard to human rights
\nand democracy, the Asia-Pacific region is rife with potential
\nconflicts. Some countries in the region champion liberal
\ndemocracy while others refuse to identify their political systems
\nwith what they call \"Western\" liberal democracy. Tensions between
\nthe United States and China and Indonesia, from early this year,
\nreflect the direct threat posed by human rights linkage to trade
\nrelations between APEC members.<\/p>\n
The main reason for those tensions seems to be a conflict
\nbetween universalism and particularism. The defenders of liberal
\ndemocracy feel obliged to protect individual human rights all
\nover the world as a part of their duty to maintain universal
\nvalues. On the other hand, some other countries feel that it is
\ntheir particular right to develop their own version of democracy
\nand their own definition of human rights.<\/p>\n
Indeed, short term business interests have prevented APEC
\nmembers from coming into too much conflict with each other. Yet,
\nhow far they will sacrifice their universal or particular claims
\nfor the sake of business activities remains unclear. Therefore,
\nthere is no guarantee that trade-human rights linkage can be
\ncompletely solved in the near future.<\/p>\n
Finally, many countries in the Asia-Pacific region tend to
\nadopt free trade principles more in rhetoric than in their actual
\neconomic policies. Most countries agree to commit to the
\nprinciple of free trade only in the sectors they already control
\nin the international market, but not in the more competitive
\nsectors. Those who can easily shift their production activities
\nto different sectors think that free trade is fair because it
\ngrants them opportunities to specialize in sectors that where
\nproduction is cheaper. On the contrary, those countries that are
\nunable to shift production activities due to the lack of
\ntechnology and human resources think that free trade is not fair
\ntrade because their industries cannot compete on the basis of
\ncomparative advantage.<\/p>\n
Under these circumstances, the establishment of a free trade
\narea in the Asia-Pacific region appears to be an enigma. Just a
\nfew weeks prior to the Bogor summit, China and Malaysia cautioned
\nagainst the adoption of free trade in the Asia-Pacific region and
\nwarned APEC against developing too fast.<\/p>\n
On the Indonesian side, despite the ratification of WTO
\nprinciples, there are signals made by Indonesian economists for
\nthe need to protect local medium and small scale industries as
\nwell as service sectors. All in all, many Asian members worry
\nabout any APEC trade deal that would allow developed economies to
\nexploit free trade principles for their own benefits.<\/p>\n
These problems should not necessarily curtail the positive
\nmood established by APEC members in the preceding summits. Yet,
\ngiven the complexities of economic relations in the region,
\nleaders of the Asia-Pacific countries should be aware of the
\nbroad dimension of trade-related issues.<\/p>\n
Just as they realize that current trade problems are more
\npolitical, moral and ethical rather than simply technical, they
\nshould also anticipate the extension of the scope of consultation
\nto include more non-economic factors for a long term solution.<\/p>\n
The writer is a graduate of Monash University, Australia, and
\nlecturer for the Department of International Relations,
\nUniversity of Parahyangan, Bandung.<\/p>",
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