Will APEC momentum last until Osaka?<\/p>\n
By Frank Flatters<\/p>\n
BANGKOK: Asia-Pacific Economic Cooperation, or APEC, has come
\na long way in less than a decade, and the process appears to be
\naccelerating. The Blake Island meeting in 1993 brought most of
\nthe APEC leaders together for the first time. Last year's meeting
\nin Bogor increased the momentum. In particular, the declaration
\nof APEC's goal of creating free and open trade in the Asia-
\nPacific by 2020 (2010 for developed countries) is referred to as
\nthe \"Bogor Miracle.\"<\/p>\n
The next APEC summit will be held in Osaka in November. Can
\nthe momentum established at Blake Island and in Bogor be
\nsustained? If so, how? If not, would it matter?<\/p>\n
What is APEC really about?<\/p>\n
* APEC is not and will never be a free trade area. The
\ndiversity of its membership, and the complexity of the issues
\nthat would have to be resolved, together with the GATT\/WTO
\nrequirements that would have to be met, make this an
\nimpossibility.<\/p>\n
* One reason for the recent burst of APEC activities is the
\nweakening of multilateralism. This is argued to be due to the
\nincreasingly arbitrary and non-multilateral behavior of the
\nUnited States. If so, is it wise to attack this problem through
\na regional forum in which, by simple arithmetic, the U.S. plays a
\nproportionately greater role than in the GATT\/WTO? Is this what
\nMalaysia's Prime Minister Mahathir Mohamed has been asking? Is he
\nnot correct?<\/p>\n
For it to be justified on these grounds, APEC must protect its
\nmembers from American arbitrariness. This has yet to be
\ndemonstrated. The inclusion of a dispute settlement mechanism was
\nfelt by Canadians to be one of the major accomplishments of the
\nNorth American Free Trade Area (NAFTA) accord. Whether it is
\nproviding the hoped-for additional protection against U.S.
\nactions is the subject of lively debates in Canada.<\/p>\n
* Another important reason for APEC is the rapid growth and
\nincreased integration of the Asia-Pacific, and especially East
\nand Southeast Asia. This market-driven integration has brought
\nwith it a perceived need for improved government-private sector-
\nregional cooperation. There can be no doubt that the spontaneous
\ndevelopment of such initiatives and mechanisms is important. But
\nwhat institutional arrangements are really required?<\/p>\n
* A purpose of APEC that has been advocated by former prime
\nminister Anand Panyarachun, for instance, is to spearhead and
\nrevitalize the GATT\/WTO multilateral liberalization agenda.
\nAccording to this view, the importance of APEC does not lie in
\nany static effects of particular agreements to open up trade and
\ninvestment. Rather, its role in encouraging the process of global
\nliberalization is the one that merits attention.<\/p>\n
Some go so far as to claim that Blake Island, by presenting
\nthe EU with the threat of a credible coalition that could \"go-it-
\nalone,\" was responsible for the conclusion of the Uruguay Round.
\nThis simple explanation does not do justice to the complexity of
\nthe forces and issues involved.<\/p>\n
Another popular view is that the \"Bogor Miracle\" --
\nIndonesia's conversion to free trade as part its commitment to
\nAPEC -- illustrates APEC's liberalizing influence. The fact is
\nthat Indonesia embarked on a program to deregulate its economy in
\nthe early 1980s as part of a successful strategy to sustain
\ngrowth and reduce dependence on oil and other natural resources.
\nThis was not due to any regional or international commitments;
\nit was done because it is in Indonesia's self interest. Despite
\ngrowing domestic support for liberalization, however, some
\nopposition remains.<\/p>\n
The Bogor summit permitted President Soeharto to gain
\ninternational prestige by reaffirming his support for the
\nprinciples of free and open trade and investment. APEC was not
\nthe issue. Rather, APEC provided a set for a scene in an ongoing
\nIndonesian puppet drama.<\/p>\n
As the Indonesian example illustrates, unilateral MFN (i.e.
\nnon-discriminatory) liberalization is seen as the best strategy
\nfor many APEC countries.<\/p>\n
Are there any disadvantages to liberalizing in a concerted or
\ncooperative manner through APEC? A lesson of the Uruguay Round is
\nthat concerted liberalization might force participants to the
\npace of the \"lowest common denominator\" and delay achievement of
\nthe ultimate goal. A reason for this is that the process promotes
\nthe view of trade liberalization, not as providing benefits for
\nthe liberalizing country, but as \"granting concessions\" to one's
\ntrading partners.<\/p>\n
The principal beneficiary of trade liberalization by any small
\ncountry is the country itself. Misunderstandings of this simple
\npoint lead to needless concern about the \"free-rider\" problem,
\nwhereby non-liberalizing countries allegedly \"free-ride\" on the
\n\"concessions\" granted by others.<\/p>\n
The free-rider issue and the tendency to be governed by the
\nlowest common denominator often slow the pace of liberalization.
\nSuch thinking led Thailand in the Uruguay Round negotiations, for
\ninstance, to commit itself to tariff levels in excess of those
\nalready unilaterally declared by the time the agreement took
\neffect. The Thai team was apparently very proud that it had not
\nmade any unnecessary concessions during the negotiations.<\/p>\n
There is no consensus on whether or under what conditions
\nconcerted liberalization is more successful than go-it-alone
\nliberalization. And there is even less agreement on whether
\nconcerted liberalization is best achieved at a regional level,
\nglobally or through some combination of the two.<\/p>\n
What is clear, however, is that rapid liberalization of trade
\nand investment in Southeast Asia will continue, regardless of
\nwhat happens in Osaka. This process is well under way, especially
\nin ASEAN. In the sphere of trade policy, many of the early
\nreforms were aimed at freeing exporters from the high costs of
\nimport substitution policies. While initially successful, these
\n\"export-oriented protectionist\" regimes have begun to meet their
\nnatural limits. This has led Malaysia, Thailand and Indonesia to
\nmore fully embrace the principles of genuine openness. As these
\nthree countries race to get ahead of each other, others will not
\nbe far behind.<\/p>\n
APEC will not interfere with this process. Maybe it can help
\nto push laggard members more rapidly in the direction of the
\n\"leaders.\" And it might also be simply irrelevant.<\/p>\n
What will happen in Osaka?<\/p>\n
Blake Island and Bogor provided statements of \"vision\". Beyond
\nthat, there is precious little agreement, on even some of the
\nbroadest principles, let alone the many details that will have to
\nbe worked out if the vision is to be realized. Issues to be
\nresolved include the following:<\/p>\n
* Will trade and investment \"concessions\" be discriminatory,
\nand if so on what basis?<\/p>\n
* Will trade liberalization be broadly-based or sectoral? Will
\ncertain sectors (e.g. agriculture) be excluded?<\/p>\n
* Will there be a dispute resolution mechanism? If so, what
\nsorts of multilateral (WTO) and\/or bilateral issues will be
\nexcluded?<\/p>\n
* What will be the criteria and conditions for new membership?<\/p>\n
* Will there be any attempt to harmonize competition and\/or
\nenvironmental polices within APEC?<\/p>\n
* What issues will be dealt with by APEC rather than being
\nleft to WTO, and why?<\/p>\n
This list illustrates the magnitude of the issues that could
\nbe faced, and stimulates a few general observations about the
\nOsaka agenda.<\/p>\n
First, the agenda could be as broad as the WTO's. APEC's
\ndiversity ensures that it will have no greater success than the
\nWTO in dealing with these issues in the short run. Second, the
\nadministrative and coordinating costs of trying to do so are
\nconsiderable.<\/p>\n
The momentum of APEC will not be sustained in Osaka by working
\nthrough the details of any grand agenda. If a \"grand gesture\" is
\nneeded, then, in the tradition of Bogor, it should come from the
\nhost. One could imagine a public commitment to the principles of
\na free rice market and increased competition in Japan's non-
\ntradable distribution sector. But in light of Japan's recent
\nhistory and her current political situation, one would need a
\nvivid imagination.<\/p>\n
Dr. Frank Flatters is Professor of Economics at Queen's
\nUniversity in Canada, and is a CIDA-funded research advisor at
\nthe Thailand Development Research Institute.<\/p>\n
-- The Nation<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/will-apec-momentum-last-until-osaka-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }