APEC should go back to basic vision and goals<\/p>\n
Mari E. Pangestu, Centre for Strategic and International Studies,
\nJakarta<\/p>\n
The recently concluded Asia-Pacific Economic Cooperation
\n(APEC) meeting in Bangkok sent out mixed signals regarding the
\nworld trading system.<\/p>\n
On the one hand there was strong endorsement of, and
\ncommitment to, the multilateral trading system under the auspices
\nof the World Trade Organization (WTO). There was recognition that
\nunless talks on the Doha Development Agenda (DDA) resume, there
\nwill be great uncertainty and the emergence of protection amid
\nthe economic recessions faced by a number of major members.<\/p>\n
APEC ministers and leaders committed to restart the stalled
\nDoha Development Round by the mid-December deadline and to this
\nend agreed on accepting the draft text of Cancun as the starting
\npoint, rather than going back to ground zero. Furthermore they
\nalso agreed to \"work toward abolishing export subsidies\", an area
\nof major contention in the negotiations.<\/p>\n
APEC has often been credited with providing the breakthrough
\nin the logjam on agriculture between EU and U.S. in 1993 and
\ndelivering the Information Technology Agreement (ITA) for
\nreducing tariffs on IT goods to zero in 1996. However, one should
\nbe under no illusion of the \"power\" of APEC to provide similar
\nbreakthroughs. In fact APEC has made similar calls for successful
\nnegotiations without yielding results, and it has even made a
\ncall to eliminate export subsidies before, in 2001. Ultimately
\npolitical will by the major players, especially on agriculture,
\nand various groups of developing countries will be the decisive
\nfactor.<\/p>\n
On the other hand, as has been increasingly the case, various
\nAPEC members used once again the occasion of the APEC meeting to
\nannounce various bilateral Free Trade Agreements. The
\nannouncement of these agreements also came on the heels of the
\nASEAN Summit in Bali earlier this month, with progress being made
\non intra ASEAN economic integration and various ASEAN wide
\nagreements.<\/p>\n
What is a layman and business person supposed to make out of
\nthis alphabet soup of agreements? There is WTO, APEC, ASEAN,
\nASEAN+3(China, Japan, South Korea), Asia European Meeting (ASEM),
\nASEAN Free Trade (AFTA) and many more to come. What will all
\nthese agreements do to the world and the regional trading system
\nfacing Indonesia? What is the role of APEC, if any, amid all
\nthese agreements?<\/p>\n
The world trading system is indeed in a state of flux. The
\nmultilateral trading system has been in trouble since Seattle.
\nThere are still sharp differences between developed and
\ndeveloping members, as well as within developed and developing
\nmember groupings. All this is happening amid slow growth in many
\nmajor economies and regions. Despite Director General Supachai's
\noptimism -- that he shared at the APEC CEO Summit -- that
\nnegotiations would be completed by the deadline of January 2005,
\nrealistically speaking the negotiations are likely to go on for
\nlonger. One view is that the real deadline is 2007, the end of
\nthe fast-track negotiations in the U.S.<\/p>\n
Therefore, negotiations in the WTO are likely to continue for
\nanother four years or even longer and it is crucial to ensure
\nthat there is progress. The world, and developing countries like
\nIndonesia, cannot afford the multilateral trading system to fail
\nbecause the alternative is worse. A world divided by
\ndiscriminatory trading blocs and protectionist barriers will hurt
\ndeveloping countries.<\/p>\n
To understand what is meant, take the worrying and
\ninconsistent trend of the proliferation of bilateral and regional
\nagreements by a number of APEC members. While all profess that
\nthese agreements are consistent with the WTO and the APEC
\nframework, the truth of the matter is that articulating this in
\noperational terms is no easy task. Consistency with the WTO
\nessentially means complying to Article XXIV of the GATT (General
\nAgreement on Tariffs and Trade) and Article V of the GATS
\n(General Agreement on Trade and Services) which essentially talks
\nabout substantial coverage of the agreement and not raising
\nbarriers to non members.<\/p>\n
The WTO Regional Trading Agreements Committee has in fact only
\nbeen able to rule on one out of the close to two hundred RTAs
\nthat they are reviewing. There are numerous problems of
\ninterpretation and the fact that no committee member wishes to
\nrule against an RTA as being inconsistent, for fear of reprisal
\nwhen it is their turn to be reviewed.<\/p>\n
As for complying to the APEC architecture, implicitly this
\nmeans that the preferences given to members under the RTA or
\nbilateral agreement, will be given to all countries on a most
\nfavored nation (MFN) basis by the 2010 or 2020 Bogor Goal
\ndeadlines of free and open trade and investment for developed and
\ndeveloping countries. Therefore all agreements need to explicitly
\ninclude these deadlines for the Bogor goals. This aspect is yet
\nto be seen.<\/p>\n
It is of great concern that there has been little discussion
\non these issues, and little open dialogue on the potential
\ndownside risks and costs of these bilateral and RTAs. Instead
\nthere appears to be too much of a follower or \"me too\" strategy
\nand being driven by political needs. For politicians and
\nbureaucrats negotiating these agreements, it is concrete and
\ndeliverable and \"money in the bank\" (these last words were used
\nby Prime Minister Howard at a Press briefing on the Australia-
\nThailand Free Trade Area). What are some of the risks and costs
\nthat are often glossed over?<\/p>\n
They include, among others, the following. First, is that the
\nproliferation of agreements will increase the complexity of the
\nnumber of regulations and agreements that a business person must
\nface to sell the same product in different markets. This will
\nhurt smaller and medium sized firms more. Enforcement and
\nadministration costs will also impose a heavier burden on
\ndeveloping country's governments. Second, is that it is likely
\nthat a hub and spokes pattern will emerge with major markets such
\nas the US as a hub.<\/p>\n
Third, it could lead to increased tensions between neighboring
\ncountries which are already part of regional agreements, and
\naffect regional stability.<\/p>\n
What then is the role of APEC? There is a great deal of scope
\nfor APEC to contribute to the process through what it does best,
\ndialogs to reach a common understanding, without negotiating to
\nbridge differences between developed and developing members, and
\nthe diversity of members' interests.<\/p>\n
For instance the so called Singapore issues, which are still
\ntrying to make it on the WTO agenda, are already on the APEC
\nagenda. So discussions can certainly start on the feasibility of
\nincluding them on the WTO agenda for instance. APEC should also
\nimprove on what it is capable of, that is on capacity building.
\nMost of the negotiating groups in the WTO are represented in the
\nAPEC working groups such as market access, services, intellectual
\nproperty rights, trade facilitation, competition, and investment.<\/p>\n
The current agenda and work program of APEC should be
\nrefocused on multilateral trading issues, as well as building
\nconfidence and peer pressure for members to continue their
\nconcerted unilateral liberalization and facilitation efforts.<\/p>\n
For APEC to be relevant -- and to prevent the collapse of the
\nworld trading system into a confused alphabet soup -- APEC needs
\nto reform itself. APEC has become an unwielding series of
\nmeetings, proliferation of committees and sub committees, and an
\nexercise of reporting rather than holding true dialog.<\/p>\n
If it does not restructure itself, refocus, streamline and go
\nback to the basic vision and goals of APEC, the members are
\nlikely to treat APEC just as an annual party -- and render the
\nprocess in between meetings as irrelevant.<\/p>",
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