The challenges ahead

The leaders of 18 nations who gathered this week at the Asia- Pacific Economic Cooperation summit meeting in Indonesia arrived with lofty talk of achieving a sweeping agreement to stimulate economic growth on the Pacific Rim, already among the most vibrant economic regions in the world. Their final communique enshrines a noble objective: free trade and investment by the year 2020.

Unfortunately, the APEC pledge fails to include a single substantive measure. The easy task is to commit to a vague goal a quarter-century away. The hard task -- apparently too hard -- is to take concrete measures that would challenge entrenched interests in each country.

The APEC countries call for free trade, but do not say if that includes services as well as manufactured goods. The participants call on APEC's industrialized members to achieve free trade 10 years earlier than the 2020 target for everyone, but does not say which countries would be included in the fast lane. Does that leave South Korea or China, for example, in or out?

Underlying the failure to produce a detailed agreement are fundamental differences among the group's members. The United States and Australia are both enthusiastic proponents of free trade, in part because both feared that the East Asian members might move without them. But Malaysia and others opposed free trade to varying degrees.

Their problem arises in part from the fact that international trade rules, with one exception, prevent countries from extending preferential trade to each other unless they also extend it to every other trading partner.

The exception applies only to countries that move all the way toward forming a free trade bloc -- like the North American Free Trade Agreement between Mexico, the U.S. and Canada.

The Asia-Pacific countries know that Congress is not about to approve another NAFTA, especially if it includes low-wage bastions like Malaysia and Indonesia, without insisting upon rules about environmental protection and working conditions.

That prospect scares many APEC countries out of tying themselves closely to the U.S. in a free-trade zone. The conference postponed dealing with fundamental difficulties like these for at least a year.

Even though it could not create a free-trade zone overnight, the APEC gathering could have made progress in specific areas. For example, the countries considered, but failed to adopt, a code to open up borders to foreign investors.

The trick for APEC is to turn the virtuous pledge into real progress. That will require aggressive action on small measures that would knock down tariff and non-tariff barriers. Free trade among Pacific Rim countries could then become something more than rhetoric.

-- The New York Times