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.