APEC sends disputed trade pact to WTO for resolution

APEC sends disputed trade pact to WTO for resolution

KUALA LUMPUR (Agencies): Pacific Rim nations failed on Sunday to reach an agreement on the terms a massive trade pact to cut tariffs in nine key industries.

The 21 members of the Asia-Pacific Economic Cooperation (APEC) forum said they would now submit the trade proposal to the World Trade Organization for resolution. The pact would lift tariffs on US$1.5 trillion in global trade.

Trade and foreign ministers from the APEC meeting over the weekend in the Malaysia capital had hoped to conclude the pact for APEC leaders to sign during their summit meeting on Tuesday and Wednesday.

But the leaders will now be requested to approve a ministers' statement asking the WTO to try to do that instead.

"I think the financial crisis has had a chilling effect on the package that we put together last year," said Canadian Trade Minister Sergio Marchi.

"There's not enough of a critical mass here. So the package essentially goes to the WTO, and ultimately to New Zealand," where APEC leaders will meet next year, Marchi said.

APEC leaders in Vancouver, Canada, last year agreed to reduce tariffs in nine Early Voluntary Sectoral Liberalization (EVSL) sectors by 2002, as a start toward APEC's ultimate goal of free trade in the Pacific by 2020.

The nine sectors are environmental goods and services, fish and fish products, forest products, medical equipment, energy, telecommunications, toys, gems and jewelry, and chemicals.

But that was before Japan and the United States, the world's two largest economies, began arguing over some provisions.

Japan has refused to cut border taxes in two sensitive areas - forestry products and fish - at a time when its economy is in its worst recession since World War II.

The United States believed that Japan had to be on board in all nine sectors to give the pact weight. Washington had argued that it would send a strong signal that Asia was not turning protectionist, despite its worst economic crisis in 50 years.

"If Japan does not participate in those two sectors, then the ministerial and heads-of-state meeting would be viewed as a failure and Japan would be responsible for that failure," Deputy U.S. Trade Representative Richard Fisher had said in Washington two weeks ago.

Nevertheless, the Philippines foreign minister, Domingo Siazon, said it was unfair to characterize the lack of an agreement as a failure. "What you cannot finalize here, you pass onto the WTO," Siazon said.

Thai Foreign Minister Surin Pitsuwan also refused to call the trade pact a setback because Japan was not fully on board.

"In the spirit of realism, APEC has reached a decision that everybody can live with," he said. "We will have to count on it as another success that we can build on at the next APEC meeting."

It was Thai Deputy Prime Minister Supachai Panitchpakdi who disclosed on Saturday that the trade liberalization row between Japan and other APEC economies would be passed to the WTO.

Supachai, who is a candidate to lead the WTO from early next year, said having the whole package transferred to the WTO for wider participation by other members of the organization.

APEC comprises Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.

Supachai also suggested that there could be an "associate" or transitional class of members, which would allow countries like China to join the WTO more quickly.

But Canada's candidate to head the WTO, Roy Maclaren, rejected such a suggestion and said there should be no relaxation of rules to speed up the entry of new countries into the group.

He said it would be unfair and mistaken to relax the requirements of members to have a free enterprise and relatively open economy before joining.

Maclaren, in the Malaysian capital to lobby for the job of WTO director-general, which will be decided before the end of the year, said the 132-member free trade body could not be truly global without the countries waiting to join.

China and Russia head a list of around 30 aspirant WTO members.