APEC's goals must be linked with GATT

APEC's goals must be linked with GATT

By Mohammad Sadli

TAIPEI (JP): Take a glance at these terms: Level playing
field, extraterritoriality, national treatment, convergence,
harmonization, gray areas, voluntary export restraints, rule-of-
reason and gradualism versus activism.

If they sound strange, and you are uneasy about your
ignorance, you should attend the meetings of the Trade Policy
Forum of the Pacific Economic Cooperation Council (PECC), a
tripartite platform consisting of academics, government
officials, in their private capacities, and businessmen.

The PECC came into being in 1986, long before the Asia-Pacific
Economic Cooperation (APEC) forum. This non-governmental
organization launched the idea of Pacific economic cooperation
and its academic elements from Australia, Japan, the United
States and Canada, were early true believers. At one time they
despaired because they could not get governments to take over the
initiative, but in the end they succeeded in attracting Bob
Hawke's interest. At that time Hawke was Australian prime
minister.

The big breakthrough with APEC, however, came at Blake Island
in Seattle under U.S. President Bill Clinton. The Bogor meeting,
under the leadership of President Soeharto, pushed the APEC
process further, through the institution of annual summits.

This year the summit leadership is in Japanese hands. The
country is not known for strong political leadership, certainly
not in international affairs. Hence, although the summits will
continue (in 1996 in Manila), the pace and vigor of the APEC
process can be expected to vary.

Perhaps we should accept those uncertainties as facts of Asian
life. Implications of the APEC vision also remain shrouded in
ambiguity and ambivalence. Take the Seattle vision of APEC, as a
community of Asia-Pacific economies for free trade based on open
regionalism, and the Bogor declaration, aiming at a balanced
package of trade liberalization, facilitation, and development
cooperation. What does all that mean in operational terms?

The idea of "open regionalism" is still debated. Whether it
means that the liberalization drive launched by the member
countries is unilateral, voluntary and always on an unconditional
Most Favored Nation basis, or that non-APEC countries, or
regional blocs, should reciprocate.

Even within the Pacific region, the U.S. always demands a
quid-pro-quo for access to its markets, for instance, from Japan
and China. On the other hand, developing countries with smaller
economies, such as Indonesia, have undertaken unilateral
liberalization of their trade and investment regimes without
bothering reciprocity, convinced that the measure is good for
themselves, and never mind third country "fire riders".

There are two sentiments in the APEC process: the activists
("radicals" according to the other group) and the gradualists,
who prefer an evolutionary approach ("bureaucratic slow trackers"
according to the other school).

President Clinton, in the Seattle summit, and President
Soeharto, in the Bogor meeting, made good use of a new track or
channel, which is outside the conventional bureaucratic channel
controlled by foreign (and perhaps economic) ministries, and
relied on the "sherpas" (special officials directly reporting to
the leaders), and the APEC Eminent Persons Group. In the
preparation of the Osaka summit in November 1995, it is not
certain whether the Japanese leadership will be strong and
determined. At least, that is not the tradition in Japan.

The gradualists or bureaucrats do not like to see APEC
becoming a negotiation forum (in the process of forming a free
trade regime). They also believe that APEC should not be
institutionalized, although the leaders have started the annual
summits. APEC should not lead to a supra-national authority, as
in the case of the European framework. What the activists want is
not so clear, but they believe that "free and open trade" for the
region is to be pursued according the Bogor target of 2010 and
2020.

Reports from the Osaka Senior Officials Meeting and a similar
special meeting held more recently in Singapore are not
encouraging. The bureaucrats have not been able to come up with
concrete proposals for an action plan, apart from producing a
table of major agenda points.

The Eighth Trade Policy Forum of PECC, which gathered in
Taipei on April 21-April 22, tried to be helpful and came up with
a compromise. It suggests that APEC be a new model of regional
integration, quite different from the European Union and NAFTA.
It is viewed as being a more flexible regional forum, suited to
the realities of the Asia-Pacific, and will be called an Open
Economic Association. Open -- meaning that it does not lead to
discrimination against non-members. Voluntary, and association
like ASEAN -- meaning that its members do not cede sovereignty to
any supra-national regional institution.

Unilateral liberalization will be stressed, but executed in a
"concerted, coordinated or collective" way by the members. For
this, a monitoring mechanism is needed with "peer pressure", to
reinforce and encourage. Decision making is based on "flexible
consensus", meaning that decisions are arrived at by consensus,
but carried out by individual members flexibly, with respect to
time, order of sequence, sectors and others.

If that sounds pretty fuzzy, especially for western ears, it
is part of the Asian reality. Consensus was interpreted by
somebody as intermediate between unanimity and majority. One
guest speaker favors the 18-x formula, meaning that if some
member countries feel uncomfortable, they can opt out. But others
feel strongly that a decision should be supported by all members,
with the execution being flexible.

Well, if the compromise proposals do not sound convincing in
their inner logic or practicality, at least the forum did not
choose sides. The APEC process is still young and evolving, and
political resolutions are often fuzzy and ambiguous rather than
logically neat. Such resolutions are also way stations in an
ongoing and continuing evolution.

A Korean luncheon speaker appealed to Japan to assert stronger
leadership in these international undertakings, and a Canadian
speaker proposed that the "middle powers", such as Japan, Korea,
Australia, Canada and Indonesia should concertedly play a
stronger role and not leave things to the large members such as
the U.S. and China.

APEC should have as its main objective the effective
implementation of the GATT Uruguay Round, and then call for the
beginning of a new round because many "new issues" are not yet
part of the completed round.

Here the option for APEC is to just execute the Uruguay Round
faithfully in an accelerated way, or go beyond it by "deepening
and broadening" the aims, for instance, establishing a free trade
regime in or within the region. The difference between "in" and
"within" the region may be essential in the eyes of the beholder
(open-plus-Most Favored Nation status or not).

The Bogor declaration calls for a balanced package of three
objectives: trade liberalization, facilitation and development
cooperation. What "balance" means is also ambiguous. But if trade
liberalization is still deemed difficult, perhaps firmer actions
can be projected in the field of "facilitation" and "development
cooperation".

According to some academics trade liberalization in the form
of reduction of tariffs and Non Tariff Barriers is not very
important any more because some nations, especially the
Organization for Economic Cooperation and Development countries,
have made much progress in the past. The schedule of further
liberalization is also already fixed in the outcome of the
Uruguay Round.

Hence APEC could concentrate on facilitation measures to
promote economic integration. Much positive sum gains can be
reaped from improving infrastructure for transportation and
communication, reducing uncertainties, establishing more
effective dispute settlement procedures, creating mutual
recognition, or by harmonizing a gradually broader range of
products standards, regulations, procedures and qualifications.

Development cooperation is popular with Japan, but its
relation to bilateral aid, to the APEC multilateral and North-
South character, should be specified.

Dr. Mohammad Sadli is a prominent economist and has served as
cabinet minister several times.