Time for APEC to shake its lethargy

Time for APEC to shake its lethargy

Lee Kim Chew, The Straits Times, Asia News Network, Singapore

Leaders of the Asia-Pacific Economic Cooperation (APEC) forum meeting in Shanghai on Sunday will grapple with economic revival and global action against terrorism, and the signs are that they will deliver.

In promises, at least.

But where action is concerned, it can be a different story. The unique thing about APEC is that the commitments of this 21- member economic fraternity are voluntary and non-binding, despite endless discussions on critical issues.

This is why APEC economies tend to tarry and have moved at their own pace to remove barriers after agreeing in 1994 to make the Pacific Rim a free-trade area -- by 2010 for developed economies and 2020 for developing economies.

But now, faced with the growing threat of a world recession amid America's war in Afghanistan, APEC leaders have some hard decisions to make.

The ASEAN countries, in particular, are under strong pressure to rev up the pace of reforms and liberalization to woo back capital and compete with a fast-growing, fast-learning China.

Although APEC has set dates for its free-trade goals, it still needs a collective action plan to move resolutely towards them. China is working on a Shanghai Accord to achieve this.

Real resolution at last? Maybe.

It will not be easy. Take the travails of the ASEAN Free Trade Area (AFTA), for example. Differences among ASEAN members remain unresolved since Malaysia extended protection for its automotive industry after the 1997 Asian financial crisis.

Because APEC had moved at snail's pace, its lethargy, plus fears of backsliding in AFTA, drove Singapore to look for partners in bilateral free-trade pacts to speed up the pace of liberalization.

APEC business leaders want measures to boost trade and investments. But liberalization has been patchy and painfully slow, especially in regulated industries such as civil aviation, telecommunications and banking.

New Zealand's move to re-nationalize its ailing flag carrier instead of allowing Singapore Airlines to raise its equity stake shows that national interests, however perceived, take precedence over commercial sense.

Liberalization? Yes, but up to a point. Thus, some areas, like open skies for commercial airlines, will take considerable hard bargaining and time to implement.

But trade facilitation, like harmonizing Customs procedures and setting common industrial standards in APEC economies, may be easier to implement.

Still, there are problems, such as the lack of Internet access for small and medium-sized enterprises which want to get online to do e-commerce.

Vietnam, for example, has to liberalize its regulatory framework and improve its telecommunications infrastructure to do this.

But as critics point out, many ideas have failed to get off the ground for want of funds or political will, if not conflicting national priorities.

The APEC Business Advisory Council wants APEC leaders to "instill a sense of urgency and commitment" to transform the Pacific Rim into a free-trade area.

It said: "APEC's credibility is at stake, unless it can demonstrate political will and decisively translate commitments into concrete actions to achieve the Bogor Goals of trade and investment liberalization and facilitation."

Will the Shanghai summit get things moving to make a difference?

Much depends on APEC host China. Driven by its desire to open up and integrate with the global economy, China can play a critical role on the eve of its entry into the World Trade Organization (WTO) by prodding APEC to move in the right direction.

But it is American leadership, above all, which is vital, particularly in pushing for new trade negotiations in the WTO. APEC's commitment to free trade by supporting a new WTO round will keep the liberalization process going.

In APEC, only the United States has the leverage to get the European Union (EU) to decouple agriculture from the environment, a linkage that could torpedo the new WTO round.

Decoupling them will help to overcome the resistance from Malaysia and Indonesia, which fear that rich countries will use the new round to create rules on competition, labour and environmental standards to block cheap imports from developing countries.

The WTO has prepared a blueprint for a new global round to rebuild confidence after the Sept. 11 terrorist attacks.

It entails the United States, EU and Japan making concessions and opening up their markets for textile, steel and agriculture.

This is a tough call, but it is in America's interest to keep the global trading system open.

Adrift since the conclusion of the Uruguay Round in 1994, the WTO is badly in need of another boost to keep free trade from stalling.

Notwithstanding the reservations of some APEC members, it is better to get a new WTO round started, as this will make it harder for protectionism to creep into the world trading system.

The danger should not be underestimated at a time when the United States has a ballooning annual trade deficit approaching US$400 billion (S$731.6 billion).

The delay since 1999 in launching a new WTO round has already slowed regional economic cooperation, like the stalling in AFTA. All this should snap APEC out of its complacency.

APEC's emerging economies will be better off riding on the new mood in the U.S. Congress, which is now amenable to giving President George W. Bush fast-track authority to negotiate trade pacts as he builds an international coalition against terrorism.

They are highly dependent on exports to the United States for their growth. It is not enough just to wait for massive pump priming and the return of consumer confidence to revive the American economy.

A new global round that liberalizes trade and investment, and APEC's open regionalism, are safe long-term bets to promote economic growth.

Bush's presence in Shanghai will be crucial to the summit's success. To be sure, he will use the summit to garner support for America's war against terrorism.

He wants cooperation to track and freeze assets linked to the Al-Qaeda network of Osama bin Laden, the Saudi-born dissident behind the terrorist attacks.

He needs international support to break up terrorist networks. His meetings with other APEC leaders, notably China's President Jiang Zemin, on the sidelines of the summit will be crucial.

With the anti-terrorist front, Russia's President Vladimir Putin forged a new relationship with NATO and the United States. Similarly, the Jiang-Bush meeting could put Sino-U.S. relations on a better footing.

APEC leaders will be taking a common stand against terrorism. This, plus the Shanghai Accord on economic liberalization, will be the summit's highlights.

So will APEC pick up speed again?

One can only hope.