Less euphoric about APEC's Osaka summit

Less euphoric about APEC's Osaka summit

The distracting domestic political agendas of the United States
and Australia have brought a new sober reality to the notion of
economic cooperation in the Asia-Pacific. Stephen Leong analyses
the issue.

Japan is in a quandary over APEC. As host to the November
Osaka meetings, pressure on Tokyo to lead in crafting a bold
Action Agenda for APEC to achieve the target dates of 2010 and
2020 for trade liberalization in the Asia-Pacific region began
almost immediately after last year's Bogor summit. The U.S., in
particular, has frequently reminded Tokyo that, as chairman, it
must demonstrate leadership to move the wide regional grouping
further along and in step with the earlier two milestone events
at Seattle and Bogor which, respectively, announced the vision of
a Pacific Community and the creation of free trade in the region
by the year 2020.

The advanced Western countries, keen to open markets in East
Asia, are taking advantage of the euphoria arising out of the
APEC jamborees at Seattle and Bogor to strike while the iron is
still hot.

For the United States and Australia, domestic agendas weigh
heavily in their approach to APEC. The Clinton Administration,
clearly aware of 1996 as an election year, must score in the APEC
negotiations in Osaka. Having lost so badly in the mid-term
elections in 1994, thus ushering in a Republican majority in
Congress, Democrats are keen to reverse the situation in 1996.
President Clinton himself, against strong odds not to follow
his predecessor as a one-term president, wants his negotiators to
achieve substantially in trade and investment liberalization
within APEC for the benefit of the American economy and the
Democratic Party.

While the earlier car-parts dispute, and current Kodak-Fuji
film and air freight services problems with Japan, are bilateral
issues in which the U.S. has resorted to unilateral action
(including threatening the use of the Super 301), APEC provides
an excellent opportunity for the U.S. to use multilateral
pressure on Japan. Washington is going all out to ensure that it
succeeds in achieving "comprehensiveness" in the Osaka Action
Agenda for free trade in the region for all sectors by the years
2010 and 2020.

The pressure by the U.S. within APEC on Asian economies (such
as China, South Korea, Taiwan and especially Japan as APEC chair)
to open up their sensitive agricultural sectors is strongly
supported by Australia. Canberra's stand on "comprehensiveness"
and achieving APEC's objectives by the target dates are also
indicated by the domestic need to shore up the Keating government
for elections, widely expected early next year.

With an increasingly confident conservative opposition
determined to replace the present ruling Labor Party and a recent
stinging comment by Australia's global media tycoon Robert
Murdoch that the nation's economy is a "disgrace", Mr. Keating's
government is striving hard to bolster its domestic image.
Australian Trade Minister Bob McMullen has commented that it
would be "inconceivable" that "an Australian Prime Minister would
agree to an action agenda excluding agriculture". Australia is,
therefore, only too pleased to join hands with the U.S. to stand
firm on "comprehensiveness" in the APEC Action Plan.

While China, South Korea and Taiwan, together with Japan, are
keen to exclude the sensitive agriculture sector from the APEC
Action Agenda, Japan, as the world's second economy and APEC
host, feels the brunt of criticism for not wanting to open its
farm market wider. Although Tokyo realizes that pressure has been
building up throughout the year, it still hopes that it will be
able to protect its politically sensitive sectors. Some
concessions had already been made at the Uruguay Round of GATT
negotiations on the importation of foreign rice. However, Japan's
ruling coalition is also anxious about elections which, as in the
case of Australia and the U.S., will take place next year.

Having strong ties with farm lobbies, Japan's Liberal
Democratic Party wants to ensure that the opposition coalition
will not have a cause celebre enabling it to return to
power. The fact that even the U.S. has sensitive sectors such as
maritime services and textile (having refused to liberalize them
in the Uruguay Round) is no consolation to Tokyo because it knows
only too well that Washington and Canberra desperately want a
"down payment" for liberalization of trade and investment at the
Osaka meetings. If the issue remains deadlocked, Tokyo can expect
a last-ditch onslaught at the ministers' meeting so that Clinton
and Keating will indeed have something to look forward to when
they arrive in Japan for the unofficial summit.

For ASEAN countries such as Thailand and Malaysia, since Bogor
last November, the road to Osaka has almost been a case of deja
vu. In attaching "observations" and "reservations" to the Bogor
Declaration, Thailand and Malaysia urged a gradualist
approach for APEC. They were the only two countries which were
willing to attach their frank views to the Bogor Declaration.
Although Japan and South Korea very likely had some reservations,
they did not express them as forthrightly.

Like Japan, Seoul is now balking at the notion of
"comprehensiveness" in terms of including its agricultural sector
in the Action Agenda. Although it is understandable that both
Japan and Korea (and for that matter even China and Taiwan) have
strong reservations about the inclusion of the sensitive
agriculture sectors for "comprehensive" liberalization, as called
for in the Bogor Statement, they should have indicated their
desire for exclusion or for flexibility from the very beginning,
perhaps even at Bogor. Western countries would not have placed
high hopes on Osaka in this case.

The dose of realism and diversity injected by Malaysia could
have been enhanced by countries like Korea and Japan. Instead,
these two chose to go along with the U.S. and Australia, the
prime movers of APEC, only now to be regarded as not-so-keen
promoters of free trade.

What then could be expected at the Osaka meeting? As the
Clinton and Keating administrations are keen to achieve concrete
results within APEC this year for greater market access for their
businesses and to strengthen their domestic positions for
elections in 1996, their representatives will not let up on
"comprehensiveness" in the APEC blueprint for liberalization. For
Japan and the others, while having to concede to this demand,
they will strongly argue for flexibility so that "differential
treatment" for specified sensitive sectors with varying time-
frames will be accepted. This is a reasonable compromise. It is
the only way to break the impasse in the Action Agenda.

Osaka will indeed be different from both Seattle and Bogor. It
will be far less euphoric. Pressing domestic agendas and failure
to heed APEC's great diversity are reasons for the change in
sentiment towards the regional grouping. It is not surprising
that it took only a short while after Seattle and Bogor for this
to happen. For APEC to progress more smoothly, it is important to
remember the lessons which Osaka will undoubtedly yield.

Dr. Stephen Leong is Director of the Center for Japan Studies at
the Institute of Strategic and International Studies (ISIS) in
Kuala Lumpur, Malaysia.