What next after Osaka summit?

Sat, 20 Apr 1996, 00:00 WIB | Source: JP

By Hadi Soesastro

The following is the second of two articles on the progress of
the Asia Pacific Economic Cooperation.

JAKARTA (JP): The action agenda for the trade and investment
liberalization and facilitation (TILF) as contained in the Osaka
Action Agenda is a set of collective trade and investment
facilitation measures and the implementation of individual trade
and investment liberalization actions. Some collective actions
may also become appropriate in APEC's trade and investment
liberalization.

Osaka agreed on an "action process," which describes how
"concerted unilateralism" is supposed to work. The first step is
the development of individual action plans (IAPs) by each APEC
member. In the process there will be ongoing consultation to
facilitate exchange of information on progress, to ensure
transparency, and to contribute towards attaining the
comparability of respective IAPs.

The IAPs will be submitted to the Ministerial Meeting in the
Philippines in November 1996, and the overall implementation will
begin in January 1997. A review process will be conducted by the
Senior Officials Meeting (SOM) on the basis of reports from the
Committee on Trade and Investment (CTI). The review, as part of
the "peer-pressure mechanism", should result in the continuing
voluntary improvement of the IAPs. In addition, efforts will be
made towards the expansion and improvement of the guidelines.
These also apply to the collective action plans (CAPs).

It has been widely suggested that the collection of IAPs could
form the APEC trade liberalization package on the basis of which
APEC could take the lead in strengthening the open multilateral
trading system and enhancing the momentum for global
liberalization. APEC could take its trade liberalization package
to the WTO Ministerial Meeting in Singapore in December 1996, as
a way to induce others, the European Union (EU) in particular, to
broaden, deepen and accelerate their Uruguay Round commitments.
To be able to do so, the IAPs must be credible.

The package could consist of two parts. First, specific and
concrete details of tariff reductions and efforts to eliminate trade
and investment impediments which will be a significant
improvement of the initial actions (the so-called down payments)
made at Osaka, for instance, for the period between January 1997
to January 2002. Second, an outline of the basic direction
towards achieving free and open trade and investment in 2010 in
the case of developed economies, and 2020 in the case of
developing economies.

To be able to produce such a trade liberalization package,
and for the concerted unilateral approach to work, APEC needs
champions (or heroes) to undertake unilateral liberalization. The
U.S. is unlikely to be in the driver's seat here. Washington has
been pushing hard for liberalization but its ability to deliver
is far from certain, especially in an election year. It has been
suggested that the adoption of concerted unilateralism by APEC
has permanently weakened U.S. leadership in APEC. An important
question to ask is whether the U.S. will be less interested in or
committed to APEC if it is not in the driver's seat.

This need not be the case. Indeed, the adoption of concerted
unilateralism has shifted the leadership of APEC liberalization
to East Asia. What this means is that East Asia should continue
with its own liberalization without worrying about the
application of the principle of comparability to U.S.
liberalization efforts. It was the U.S., and not East Asia, that
insisted on comparability.

East Asia should allow the U.S. an essentially free ride, that
is, to do almost nothing for a number of years to come. This can
be justified by the fact that the U.S. economy is already much
more open than many East Asian economies. Japan must continue the
leadership it displayed in Osaka. It can do so by continually
undertaking significant unilateral liberalization and
deregulation. The Philippines, the chair of APEC in 1996, is
fully aware of the burden of undertaking a similar task, and is
preparing itself to do so.

The leadership in APEC essentially rests with the economy that
assumes the chairmanship of APEC. This is the beauty of APEC.
With the involvement of the leaders since Seattle, the APEC chair
can assert even greater leadership. This is an important
development which will also help assure that the concerted
unilateral approach towards APEC trade liberalization will work.
Leadership, however, is also required in other areas of APEC
cooperation, such as the ETC.

The Philippines is equally interested in playing a
leadership role in the area of ETC or development cooperation.
ETC is seen as imperative because of the diversity of APEC.
Development cooperation, in terms of developing safety nets for
the people, is also seen as necessary to support APEC's move
towards a region of free and open trade and investment. Hence,
the Philippine government hopes to see the APEC meetings in
Manila and Subic in November 1996, develop a set of principles
and a coherent plan for development cooperation.

Development cooperation was brought to the APEC agenda when
Indonesia chaired APEC in 1994. However, the process leading to
Bogor was overwhelmed by the trade liberalization agenda. In the
APEC Ministerial Meeting in Jakarta in November 1994, Japan, then
the next chair, proposed to strengthen APEC's development
cooperation agenda through an initiative called Partnership for
Progress (PFP). It was hoped that the PFP would be fleshed out in
Osaka. This also did not materialize.

Initially, the PFP program appeared to be just an extension
of Japan's conventional development cooperation in building
infrastructure through official development assistance. This was
objected to by a number of APEC members. It has been proposed
that the PFP initiative should incorporate all three types of
development cooperation, which involve technical cooperation
(such as training), development cooperation in the narrow sense
(public infrastructure development), and sectorial cooperation
(securing energy supplies, the efficient use of resources, and
protecting the environment).

Further development of the PFP has highlighted a number of its
essential (new) elements:

(a) that it should help enhance the process for new donors (for
example Korea and Chinese Taipei) to emerge;

(b) that it should replace the traditional donor-recipient
relationship;

(d) that more actors should be involved; these would include the
business sector, NGOs and local governments. Nonetheless, the PFP
initiative continues to be ill-defined.

The Third Report of the APEC Eminent Persons Group (EPG) did
propose an ETC action plan for Osaka, and suggested that a set of
guiding principles be adopted to embark on an APEC Initiative.
The report sees the importance of development cooperation:

(a) as a way to create the enabling environment for, and as a
vital building block in, APEC's agenda for complete trade and
investment liberalization; and

(b) to fill the gaps in technology, management, planning and
administration among APEC's diverse members.

The Osaka Action Agenda states that development cooperation
will be pursued in order to attain sustainable growth and
equitable development in the Asia-Pacific region, while reducing
economic disparities among APEC economies and improving economic
and social well-being. It further states that such efforts will
also facilitate the growth of trade and investment in the region.
The basic principles for development cooperation contained in the
Osaka Action Agenda are:

(a) mutual respect and equality;

(b) mutual benefit and assistance;

(d) consensus building;

(e) voluntary contributions;

(f) development of an environment favorable to the effective
operation of market mechanisms;

(g) integration of the business/private sector and other
pertinent institutions in the cooperation process;

(h) integration of environmental consideration in all
relevant cooperation activities.

The Osaka Action Agenda has begun to formulate common policy
concepts, joint activities and policy dialogs, defined as the
three essential elements of ETC, in 13 activities which are
undertaken through the various APEC working groups.

After Osaka, the main task is to make development
cooperation in APEC more coherent and more prominent. There is
the danger that development cooperation might become lost in the
APEC process. In fact there are a number of reasons why this is
so.

First, within APEC there is no full support for development
cooperation because:

(a) development cooperation has no place in APEC, which is
essentially a forum for trade liberalization, and its inclusion
will only dilute APEC's trade liberalization agenda;

(b) it provides a vehicle for Japan to dominate APEC; and

Other reasons have also been identified. These include:

(a) development cooperation does not attract the attention of
politicians and the media and tends to be overshadowed by the
trade liberalization agenda;

(b) the new, non-traditional development cooperation programs are
difficult to formulate; and

(c) there is a lack of bureaucratic or institutional structures
in member economies to manage APEC development cooperation
programs. Most notably, however, is the fact that APEC's
structure itself does not provide a place for a coherent
development cooperation program to evolve.

The adoption of the Osaka Action Agenda has implications on
how APEC should structure its activities. This may or may not
involve further institutional development.

The modality for implementing trade and investment
liberalization as based on concerted unilateralism requires
continuous and systematic monitoring and review of the progress.
This responsibility will now rest with the SOM, assisted by the
CTI. Is there a need for a more permanent kind of a "blue-ribbon
panel" of eminent persons to provide independent review and
assessment of the liberalization process? Or will it be
sufficient for the SOM and the CTI to undertake this task with
the aid of a systematic survey conducted on their behalf by an
independent (and tripartite) body such as the Pacific Economic
Cooperation Council?

Trade and investment facilitation programs appear to be
adequately handled by the CTI, which reports and can bring the
matter up to the SOM and in turn to the Ministerial Meetings.

The various ETC or development cooperation programs,
currently undertaken by the working groups, lack a coherent
"institutional home" and therefore are devoid of a mechanism to
bring the matter up to higher levels of decision making in APEC.
Does this not suggest the need for such a mechanism?

The discussion of APEC development cooperation suggests that
there are two main groups of activities. One relates to cooperation
in areas that have direct bearing on trade and investment
facilitation.

The other encompasses issues of managing sustainable growth
and ensuring equitable development in the region. This area of
cooperation would address the emerging important issues for APEC,
namely population, food, resources, energy and the environment.
The first group of activities can be channeled through the CTI.

But what about the second group of activities? Should they be
entrusted upon and channeled through a separate committee. If so,
APEC may want to establish a new committee, or, with some minor
restructuring, it can make use of the existing Economic
Committee.

The writer is the executive director of the Centre for
Strategic and International Studies, Jakarta.

Window A: There is the danger that development cooperation
might become lost in the APEC process.

Window B: The adoption of the Osaka Action Agenda has
implications on how APEC should structure its activities.

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