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.