APEC ignores Gore's warning

Our Asia correspondent has already reported on the political controversy that swirled around the Asia Pacific Economic Cooperation (APEC) summit in Kuala Lumpur. Now Harvey Stockwin analyses the most critical issue which that summit failed to remedy.

HONG KONG (JP): Al Gore spoke ten short words of strategic wisdom in Kuala Lumpur last week. Asia is once again ignoring the advice. It may rue the day that it did so.

The strategic advice was not contained in the words of Gore criticizing authoritarianism, which quickly bounced around the world, purporting to be the most important thing he said.

That wasn't the most important thing that Gore said, although you would never have known this from most of the press and television reporting.

Naturally the tightly controlled Malaysian media did not dwell on what Gore actually said, but is nevertheless still attacking him for saying it. The uncontrolled foreign media, on the other hand, has also been at fault as it fastened on to this single Gore quote out of a 4,640 word speech which was a reasoned critique of the current Asian crisis and what needs to be done to meet it.

Amidst the furor brought about by excessive media concentration on the Malaysia story, Gore inadvertently failed to put the focus where he intended -- on a crucial issue for all 21 APEC members, when he said "We must take great care to ensure that what began as a global financial crisis does not become a global trade crisis. I urge you to consider what has happened to Asian exports to America: they have gone up dramatically. And other major industrial economies have not absorbed nearly as much."

Gore emphasized, "I want to make one point crystal clear: The United States cannot be the importer of only resort."

Those were the ten words, the strategic thrust of which APEC is ignoring.

Gore's choice of words further underlined the looming danger. The United States does not merely consider itself too much the importer of last resort -- but rather the only country which is being expected to absorb the rapidly increasing flow of price- competitive Asian exports.

Yet by the time Gore spoke, APEC officials and ministers had already acted on the implicit assumption that there was nothing to worry about.

Led by a recalcitrant Japan, the summit had been unable to reach consensus on a further package of trade liberalization measures to encompass all 21 members.

Japan refused to even consider further measures to open up its forestry and fishery sectors to imports.

Conversely, the APEC majority failed to persuade Japan and the APEC minority to place the collective interest in expanded free trade ahead of any selfish protectionism, born of parochial political imperatives.

At least one source suggested that the Americans themselves were not fully prepared to advance the proposed liberalization package. The proposals will now be referred to the World Trade Organization, which means they will not be backed with the urgency that an APEC consensus would have provided.

Leaving such technical matters aside, the selfishness of the Japanese position is mind-boggling: the nation which has helped to ravage the tropical forests of Southeast Asia, the nation which has gravely deplete the fish stocks in the world's oceans, insists upon protecting its own forestry and fishery sectors.

The question arises -- do the Japanese have no sense of shame? Of course there's a simple explanation for this shameless behavior. Once again, the "Defend Japan At All Costs" syndrome, under which Japan tenaciously pursues its narrow self-interest with scant regard for the interests of others, was on display in relation to a key trade issue.

Regarding the markets of other countries, Japan still too often takes the attitude of what is yours is mine, and what is mine I keep. Hence the extraordinary fact that while Japan is suffering an extended recession, at the same time Japan is accruing huge trade surpluses and accumulating by far the largest foreign exchange reserves in the world.

The sheer undiluted folly of sustaining the "Defend Japan At All Costs" syndrome was perfectly illustrated as the United States released its latest trade statistics on Nov. 19. In a nutshell,the U.S. trade deficits continue to head towards the stratosphere, as a result of fast increasing imports from Asia. Japan's imports from Asia are declining, but Japan's exports to the U.S. are soaring.

The overall U.S. trade deficit was $191 billion in 1996, $198 billion in 1997, and in the first nine months of 1998 it had already reached $184 billion. It is therefore certain to soar well past $200 billion in the whole of 1998.

The figures do not look much better even when the hefty U.S. surplus in the trade of services is added in.

The total U.S. deficit in trade of both goods and services was $109 billion in 1996, $110 billion in 1997 and has already surpassed those levels to $123 billion in the first nine months of 1998.

In September alone Japan accrued a $5.1 billion surplus with the U.S., second only to China with $5.9 billion. Hong Kong, Singapore, Taiwan and South Korea racked up a surplus of $2.5 billion -- with only Hong Kong in deficit to America to the tune of $135 million. Other Southeast Asian and Pacific nations accrued a surplus of $2.6 billion at America's expense.

Indonesia still managed to gain a September surplus in trade with the U.S. of $724 million.

These highly political statistics are plainly and simply unsustainable.

Already the flood of cheap Japanese steel is raising a hornet's nest in the U.S. If Japan must protect its relatively small fishery and forestry sectors from cheaper American and Asian imports, the argument is bound to resonate -- why shouldn't the Americans defend their relatively large steel industry in the same way?

Japan's political and economic interest lies in heading off any such American tendency to make such protectionist calculations. The "Defend Japan At All Costs" syndrome prevents Tokyo from seeing this self-evident truth.

So far, the United States has found it in its interest to be the importer of only resort -- but it will not do so if Asian imports of what America has to offer continue to decline. American charges that Asia practices unfair trade are buttressed by the fact that Hong Kong -- where there are fewer trade restrictions than anywhere else -- keeps trade with the U.S. in rough balance. The contrast is with the huge and continuous U.S. trade deficits with China and Japan.

So the APEC leaders would appear most unwise to dismiss Gore's speech as "disgusting" (Malaysian Trade Minister Rafidah Aziz) or as "hectoring" (Australian Prime Minister John Howard) or as mere "megaphone diplomacy" (next year's APEC host New Zealand Prime Minister Jenny Shipley).

Asia and Oceania can only ignore at its peril the strategic wisdom contained in Vice President Gore's speech. Paraphrasing the sentiments of John F. Kennedy, the strategic wisdom is this: Think not what America can do for you, but what you can do for America.

Regarding trade, Asia's self interest demands nothing less.