APEC faces risk from WTO failure<\/p>\n
By Tony Hartono<\/p>\n
JAKARTA (JP): Integrating liberalization and economic and
\ntechnical cooperation objectives into a balanced agenda would
\nsustain the momentum of the Asia Pacific Economic Cooperation
\nforum in Brunei, because it would meet the needs of both its
\ndeveloped and developing member countries.<\/p>\n
The 21 APEC leaders will meet in Brunei from Nov. 15 to Nov.
\n16, only this time it will be different. This time the forum
\ngathers in the shadow of the failed attempt to launch a new
\nglobal trade round at last year's World Trade Organization
\nmeeting in Seattle.<\/p>\n
Amid this inauspicious atmosphere there are grave doubts about
\nthe APEC summit's ability to achieve anything.<\/p>\n
Before the 1996 Manila Declaration, APEC had achieved
\nsignificant progress. It set a timetable for liberalization by
\n2010 and 2020, and developed an action plan to meet the target
\ndates.<\/p>\n
The progress continued until APEC had trouble implementing the
\naction plan involving tariff reductions on 15 products.<\/p>\n
New Zealand Prime Minister Helen Clark has described APEC as
\nout of steam and unlikely to make much progress at the Brunei
\nmeeting. She has good reason to say this, particularly because of
\ndisillusionment with the U.S. and the internal conflict within
\nAPEC.<\/p>\n
These two issues must therefore be carefully addressed if
\nAPEC's momentum in Brunei is to be sustained.<\/p>\n
Disillusionment with the U.S. stems from the indirect impact
\nof the 1985 Plaza Accord on the Asian economic crisis from 1997
\nto 1999. Under the accord, the U.S. appealed to Japan to allow
\nthe yen to appreciate with a view toward eliminating its trade
\ndeficit with Japan.<\/p>\n
However, the accord did not reduce the U.S. trade deficit, but
\nrather had a hand in the depreciation of other Asian currencies.<\/p>\n
The strength of the yen caused a rise in Japan's production
\ncosts in terms of U.S. dollars, thus making Japanese exports less
\ncompetitive. This, in turn, forced Japan to relocate its
\nindustries, particularly labor-intensive ones, to other Asian
\ncountries such as Indonesia, Thailand, Malaysia and the
\nPhilippine, where labor costs were cheaper.<\/p>\n
This relocation greatly stimulated economic growth in these
\ncountries, leading to the so-called \"Asian miracle\". But the host
\ncountries became addicted to the high rates of growth and sought
\nmore overseas funds, until their currencies fell as overseas
\ninvestors withdrew.<\/p>\n
In the aftermath of the crisis, the feeling has emerged that
\nthe U.S. has been less supportive than it might have been.
\nInstead of establishing an Exchange Stabilization Fund as it did
\nfor Mexico in 1995, the U.S. left the International Monetary Fund
\n(IMF) to deal with the crisis, perhaps seeing it as an
\nopportunity to liberalize the Asian economies.<\/p>\n
As it has done to debtor countries elsewhere, the IMF has
\ntaken dramatic steps by adopting tight fiscal and monetary
\npolicies, combined with a freeing up of Asian economies. Although
\nthe IMF has succeeded in stabilizing Asian currencies, the
\ndeflationary nature of its remedies has added to massive
\nunemployment, rising global poverty and other social costs.<\/p>\n
If this current trend continues, says UN Secretary-General
\nKofi Annan, global poverty will not decline until 2015.
\nProtesters campaigning against poverty and globalization during
\nthe IMF\/World Bank meetings in Prague last month strongly
\ncriticized the IMF, accusing it of increasing global poverty.
\nThey want IMF reform and separate roles for the IMF and the World
\nBank.<\/p>\n
In Bangkok in July, a meeting between the member states of
\nASEAN and Japan, China and South Korea established a Currency
\nSwap Agreement (CSA). Many international commentators mistakenly
\nsaw the CSA as a latent trade or currency threat to the rest of
\nthe Asia Pacific. Like the ESF, the CSA is not a trade or
\ncurrency bloc.<\/p>\n
It was created partly to prevent another Asian crisis as a
\nresult of external disturbances and partly to alleviate the
\nimpacts of the IMF's deflationary measures on worldwide social
\ncosts. The APEC senior officials and ministers' meetings should
\ntake into account this issue when shaping the agenda for the
\neighth leaders' meeting in Brunei.<\/p>\n
The conflict within APEC has arisen because of the failure of
\nJapan, the U.S. and other APEC members to agree on various trade
\nissues at the WTO meeting in Seattle last year.<\/p>\n
Japan and Korea, for the sake of their food security, were
\nreluctant to reduce their subsidies on farm products, while
\nAustralia, New Zealand and Thailand demanded just the opposite,
\narguing export subsidies created unfair competition.<\/p>\n
Except for Singapore and Brunei, other developing APEC
\neconomies, including China, have felt that liberalization has
\ngone too fast, resulting in a widening income gap.<\/p>\n
They say environmental and labor standards have been used as
\ndisguised barriers to block their exports to rich markets.<\/p>\n
The U.S., meanwhile, protected its steel industry by refusing
\nto change its antidumping policy and imposed tariffs on New
\nZealand and Australian lamb to reduce its large trade deficits
\nwith the countries.<\/p>\n
The APEC trade ministers' meeting in Darwin earlier this year
\nconsidered eliminating the internal conflict as a precondition
\nfor relaunching the next round of WTO trade talks. This could be
\ndone by treating APEC's pillars of the Trade Investment
\nLiberalization Facilitation, known as \"liberalization\", and the
\nEconomic and Technical Cooperation, known as \"ecotech\", in an
\nintegrated manner rather than as separate processes.<\/p>\n
However, a perception has emerged that developed APEC members
\nhave focused heavily on the \"liberalization\", accusing ecotech
\nchampions of blurring the free trade goal. Some ecotech projects
\nin developing APEC economies, such as human resources
\ndevelopment, poverty reduction and development of small and
\nmedium enterprises were put on hold, while liberalization
\nprojects such as standard and customs procedures have gained a
\nhigh priority.<\/p>\n
Integrating liberalization and ecotech objectives into a
\nbalanced agenda will sustain APEC's momentum in Brunei, because
\nit meets the needs of both developed and developing APEC member
\ncountries.<\/p>\n
However, floating the balanced agenda idea is challenging for
\nsmall APEC member countries like Brunei, the chairman of APEC
\nthis year. Yet it is essential, not only to realize trade
\nliberalization in the Asia-Pacific region, but also to reduce
\npoverty, unemployment and other social evils.<\/p>\n
Dr. Tony Hartono is a former senior economic researcher with
\nthe ASEAN Secretariat in Jakarta and is currently employed by The
\nOpen University, Department of Economics, Wellington, New
\nZealand.<\/p>",
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