APEC: The Asian countries highway to free trade?<\/p>\n
By Mohammad Sadli<\/p>\n
JAKARTA (JP): At the APEC Summit in Osaka recently there was a
\nbattle of approaches or, if you want, \"philosophies\". The
\nAmericans want to take a \"western\" approach in moving towards a
\nfree trade area in the Pacific as was done in North America with
\nNAFTA.<\/p>\n
This approach relies basically on unambiguous understandings,
\nnegotiations, time tables and contractual obligations. The North
\nAmerica Free Trade Area framework consists of an agreement
\npainfully and minutely negotiated for two years and enshrined in
\na document of 2,000 pages.<\/p>\n
An APEC approach has to accommodate the majority of the Asia-
\nPacific Economic Cooperation members who live in Asia. To forge
\nan agreement among 18 countries of very different sizes, stages
\nof development and cultures is definitely much more difficult
\nthan hammering an economic agreement between three North American
\ncountries dominated by the United States.<\/p>\n
Before the Blake Island Summit two years ago, APEC also looked
\nlike a loose association without much institutionalizing. The six
\nASEAN countries were very prominent at the birth of APEC and were
\naccorded parity by the developed country members. Therefore, the
\nannual congregations alternate between a place in an ASEAN
\ncountry and in an industrial country. Hence we have Vancouver,
\nBogor, Osaka, Manila and after that a place in Canada.<\/p>\n
The six ASEAN countries are developing countries, and so is
\nthe biggest country in APEC, China. The Newly Industrialized
\nEconomies often like to see themselves as still developing
\ncountries. They are not members of OECD as yet.<\/p>\n
These developing countries have often mixed feelings about
\nintegrating their economies with industrial countries because
\ntheir economies are so much weaker. They fear that when free
\ntrade prevails their young industries, without a strong
\ntechnological basis, will be wiped out by the transnationals. And
\nsome industrial countries still want to protect their
\nagricultural sectors.<\/p>\n
In the end it is a matter of domestic politics. In some
\nadvanced countries the agricultural lobby is very strong. The
\nnascent industrial lobby is also strong in many developing
\ncountries. This is evident in ASEAN where for 20 years there were
\nefforts to set up a preferential trading arrangement, but the
\nschemes were shot down by the industrial lobbies and their
\nfriends in the bureaucracy. If ASEAN cannot make true its promise
\nof giving preferential trading privileges to neighbors, how can
\none expect that it will move more daringly in the Asia-Pacific
\nregion?<\/p>\n
Well, there is at least one difference. The developing
\ncountries in the Asia-Pacific region needs greater access to
\nmarkets in the U.S. and Japan and they are willing to pay a
\nprice. The advanced countries are eying the agriculture markets
\nof the developing countries and want to gain uninhibited access
\nto the great market for infrastructure hardware and related
\ncontracts, such as telecommunications and power plants.<\/p>\n
The Americans are skeptical about the openness of Asian
\nmarkets because in their eyes there has been too much protection
\nand government intervention, with domestic companies favoring
\neach other as in the Japanese keiretsu network.<\/p>\n
Hence the Americans want explicit and specific commitments and
\nare not embarrassed about using \"unilateral\" measures, or quid-
\npro-quo in order to secure access to Asian markets. For the
\nAmericans, this does not constitute unilateral action, but
\ninvolves negotiations and contractual commitments through
\nagreements. One can see this applied to Japan and to China. The
\nU.S. does not regard China as having an unqualified developing
\ncountry status, although their stated per capita income is lower
\nthan that of Indonesia. They see the coastal regions capable of
\nexporting over hundred billion dollar per annum and possessing
\nindustrial country's capabilities. The U.S. does not see
\nIndonesia (non-oil exports less than US$25 billion) in the same
\nlight.<\/p>\n
Although the Uruguay Round agreement does not exempt
\nagriculture, a number of Asian countries would feel more
\ncomfortable if this sensitive sector were excluded from the APEC
\naccord. That would be against the spirit of the Bogor declaration
\n(i.e., on comprehensiveness) and therefore the western countries
\nin APEC are strongly resisting it. Indonesia is of the same
\nopinion. The Indonesian argument is that once a \"sensitive\"
\nsector can be excluded, other countries could also have their own
\n\"sensitive sectors\", perhaps some service sectors and
\nintellectual property rights. It would be like opening Pandora's
\nbox.<\/p>\n
Fortunately, in Osaka the principle of \"comprehensiveness\" was
\nupheld, although the host country, Japan, feared some domestic
\npolitical backlash. That is why a new principle, that of
\nflexibility, gained prominence in Osaka. Although agriculture
\ncannot be excluded, Japan could undertake the liberalization of
\nthis sector \"in a flexible manner\", whatever that will mean. But
\nthe two deadlines of Bogor, 2010 for the advanced countries and
\n2020 for the developing countries, are still firmly enshrouded.
\nMalaysia under Prime Minister Mahathir keeps insisting that the
\ncountry does not feel bound by the Bogor and Osaka agreements.
\nThat is another face of APEC (Asian) flexibility. Nobody,
\nhowever, worries because Malaysia is not known as a protectionist
\ncountry.<\/p>\n
President Soeharto likes to stress that Indonesia has 25 years
\nto open up its markets completely and hence there should not be a
\nworry that tomorrow all sluice gates will be opened. But the
\nmental switching should start now.<\/p>\n
This flexibility is certainly more of an Asian approach than
\nan American one, but Washington has to live with it. The risk is
\nthat Washington will be turned off and loose interest in APEC. It
\nis said that even the NAFTA agreement has come under fire. But
\nthe Asia-Pacific proposition has its own and great attraction.
\nThe East Asian market is the fastest growing market in the world
\nand the Europeans are already discovering this. Witness the fact
\nthat flights from and to Europe are always fully booked.<\/p>\n
The relations with Europe depict another difference in
\napproach between East Asia and America. The U.S. does not like to
\ngive away market access, as in the principle of Most Favorite
\nNation. The Asians and Australia want to maintain the principle
\nof \"open regionalism\" in nurturing free trade in the Pacific. The
\nmeans that whatever trade and investment liberalization comes
\nabout, it applies also to non-regional countries. The Americans
\nfear free riders, or countries that will benefit without making
\nappropriate contributions. Japan and Asia still need European
\nmarkets and do not want a trade war with it. That is why they
\ninsist on openness.<\/p>\n
Before the Manila Summit, a lot of homework has to be done by
\nthe member countries of APEC to start delivering the promises
\nmade in Osaka. They have to observe comparability in down
\npayments, a tricky business without hard negotiations. They have
\nto rely on peer pressure. They have to move on three fronts:
\nliberalization, facilitation, and development cooperation. And in
\nthe process the Asian feelings and the American sentiments have
\nto be accommodated.<\/p>\n
The writer is a prominent economist and a member of the
\nIndonesian cabinet several times.<\/p>",
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