APEC's trade vision

APEC's trade vision

The most visionary among the policy recommendations contained in the second report of the Eminent Persons Group delivered on Wednesday to President Soeharto, in his capacity as the Chairman of APEC, is the call for the development of free and open trade and investment in the Asia- Pacific region by 2020 at the latest.

We think the free trade proposal is one of the most important agenda items for the Asia-Pacific Economic Cooperation forum if this organization is serious about moving forward from the process of dialogs over the past five years to concrete programs of action to generate tangible economic benefits for the region.

We don't see the proposal as a bold one. Nor is the idea of free and open trade and investment new to the APEC process. In fact, a free trading system is the primary objective and the common interest of the 12 countries which founded APEC in Canberra in November, 1989. No wonder, up to last year, APEC's annual ministerial meetings always put the then protracted Uruguay Round multilateral trade negotiations on top of their agendas.

Obviously, the first question is whether the least developed members of APEC, notably Indonesia, Thailand, Malaysia and the Philippines, all ASEAN members, and Papua New Guinea will accept the proposed free and open trade system within the target period as prescribed by the expert task force.

However, given the economic developments in Asia's developing countries over the last decade, that question may now be irrelevant. In fact, free and open international trade has become the engine of economic growth in almost all developing countries in Asia. This is due in great part to the adoption of an outward-looking economic policy since the latter part of the 1980s. In fact, many of them have even pursued an export-led growth strategy.

For example, Indonesia, which has been known as the most reserved about free trade arrangements among the ASEAN countries, has become increasingly enthusiastic about that concept, especially because export trade has been designed as the locomotive of its economic expansion.

The time schedules proposed by the eminent persons for the trade liberalization make the proposal even more palatable to the least developed members of APEC in view of the wide economic diversity of APEC members. We think the 2020 deadline -- about 25 years from now -- for the completion of trade liberalization is quite pragmatic as there will be broad leeway for the least developed members to make the necessary adjustments in a gradual way.

The goal of free and open trade may even be achieved ahead of the target year because the ASEAN Free Trade Area, whereby tariffs will be cut down to a range of 0-15 percent, is scheduled to be fully realized in the year 2009. In fact, the ASEAN economic ministers meeting in Chiang Mai in the middle of this month will look into the possibility of accelerating the AFTA process and expanding its coverage to include unprocessed agricultural commodities and services to bring it fully into conformity with the new GATT agreements.

We think, therefore, that the coming APEC Economic Leaders Meeting in Bogor, West Java, in the middle of November should endorse the proposed free and open trade and investment for implementation according to the time schedules prescribed by the expert task force. Delaying a decision on such an important agenda, may weaken the momentum of the APEC process and make the forum less meaningful for the economic development of its members.