APEC grapples for leadership role, but problems remain

APEC grapples for leadership role, but problems remain

Elisia Yeo, Agence France-Presse/Busan, South Korea

APEC has staked a claim for a global leadership role providing a
counterweight to the European Union, but analysts warn its
efforts are doomed to failure without radical reform.

Atop the list of problems facing the 21-member Asia-Pacific
Economic Cooperation (APEC) forum after last week's summit in
South Korea is the plethora of sometimes competing free trade
agreements (FTAs) among members.

APEC has long insisted that FTAs boost the cause of global
free trade, and the two-day meeting in the South Korean port of
Busan saw a raft of new announcements.

China and Chile signed a free trade deal, while Canada and
Japan, Chile and Japan and the United States and Southeast Asian
nations all made preliminary moves which could result in
agreements.

But analysts and business leaders say the "spaghetti bowl" of
agreements with widely differing rules and standards are causing
confusion.

"Politicians like to sign agreements, it makes them look good
at home," said Richard Drobnick from the Marshall School of
Business at the University of Southern California.

"They won't have a tremendous economic effect but they will
have a confusing effect, because when you try to figure out what
the rules are ... it's hard for the business people to think
exactly 'what's my net advantage in going here or going there?'"
he said.

Business leaders have blamed the abundance of FTAs on the
virtual standstill in multilateral talks and say progress at next
month's World Trade Organization (WTO) meeting in Hong Kong is
vital.

While business executives recognize economies will not stop
signing bilateral or regional trade accords, they say APEC must
try to standardize agreements or risk irrelevance.

"If they don't get us all together, and we don't come up with
a common take or template for FTAs, then it will always be like
this. And that is distressing," said Roberto Romulo, a Philippine
businessman who advises APEC.

Analysts also say APEC's goal of open trade and investment in
the Asia-Pacific region for developed economies by 2010 and for
developing economies by 2020 is behind schedule.

Privately, officials and business executives grumble at the
organization's sleepy pace and express doubts about its ability
to act effectively, given its consensus structure and non-binding
agreements.

Romulo said APEC had been unable to adequately respond to
problems such as the Asian economic crisis of the late 1990s.

"That's one issue that needs to be addressed. Are we really
responsive? The fact that we're non-binding -- should we be
binding? That's the other question. And security, is there a role
for security in APEC?" said Romulo.

Despite the complaints, many agree APEC can wield useful
political clout by bringing together such heavyweights as the
United States, Japan, Russia and China under one roof.

The chief executive officer of steel and iron maker CAP SA in
Chile, Jaime Charles, said APEC could still carve out a role as a
counterweight to Europe and the tendency for regional trading
blocs.

He pointed to the political pressure APEC put on Europe last
week to make concessions on farm subsidies ahead of next month's
WTO ministerial meeting.

"You need someone like APEC to work and to make these strong
statements, to work towards multilateral trade for progress to be
made," he said.

"The European Union doesn't move on its own. You need to move
them, and to move them you need to have this big counterpart."

APEC also provides a forum for friendly member countries to
politely nudge each other in ways they would not in the larger
WTO arena.

"It all goes to peer pressure," said the chief economist with
the General Motors Corporation, G Mustafa Mohatarem.

"The U.S. doesn't necessarily want to pressure Japan -- that's
in the WTO context -- to change its agricultural policy," he
said.

"But through the APEC process you indirectly do that."