The challenges ahead

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