What next after the Osaka summit?

What next after the Osaka summit?

By Hadi Soesastro

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

JAKARTA (JP): APEC after Osaka is about implementing a set of
action plans as outlined in the Osaka Action Agenda. Japan's
prime minister, Murayama, proudly proclaimed that Osaka marked
the transition from concept to action. This is a big challenge
for APEC.

Member governments must seek ways to ensure that collectively
their "individual action plans" produce significant results and
that their "collective action plans" are both feasible and
acceptable. It is this combination of individual and collective
action plans that is unique to APEC and from now on will
characterize the APEC process.

Skeptics question how a process that rests on the
implementation of individual action plans could make progress in
establishing free trade. Some have described the Osaka Action
Agenda as "no action, no agenda."

Osaka was a close call. There was concern that Japan could not
provide the necessary leadership to create the road map for APEC
to implement the much heralded Bogor Declaration. Yet Japan was
successful. The leadership may have come not so much from the top
but largely through the careful planning and efforts of the
bureaucrats. Their success was in their ability to form a
consensus, which definitely involved compromises by all members.

Those that have been involved in APEC cannot deny that Osaka
was a success. Leaders and ministers made an important agreement
on the principles for trade and investment liberalization. The
modality of APEC trade liberalization, which hitherto remained
vague -- perhaps unavoidable at the initial stage -- is now
clear.

Osaka is regarded a success not only because it produced an
Action Agenda but because it has brought the APEC process back on
track. A number of APEC members, Malaysia in particular, were
concerned that since the Seattle meeting APEC had embarked on the
wrong road: a road which may have ended with the creation of a
free trade area.

Nowhere in APEC documents is it stated that forming a free
trade area is the objective of cooperation. In fact, the Bogor
Declaration expressed the leaders opposition to the forming of an
inward-looking trading bloc. However, there was the worry that
APEC trade liberalization would be pursued along the same process
that would lead to the creation of a free trade area, namely
through negotiated schedules of tariff reductions and the
application of discrimination against nonmembers. Some APEC
members thought that this was the way to go.

Osaka put an end to the uncertainty by adopting a set of nine
principles: (1) comprehensiveness, (2) World Trade Organization-
consistency, (3) comparability, (4) nondiscrimination, (5)
transparency, (6) standstill, (7) simultaneous start, continued
process and differentiated timetables, (8) flexibility, and (9)
cooperation. To be sure, these principles are a result of
compromises and some of the wordings allow for differing
interpretations.

Of importance is that the APEC process, which is acceptable to
all, is now clearly recognized as being based on open
regionalism, voluntary and nonbinding commitments, unilateral
actions, decision by consensus, and the role of peer pressure and
enlightened self-interest.

The modality of APEC trade liberalization is now popularly
known as "concerted unilateralism". This approach is grounded in
voluntarism and collective initiative. In essence, under
concerted unilateralism, APEC liberalization will be driven by
the collective peer pressure of action plans implemented by each
economy at its own pace. APEC post-Osaka will have to be able to
demonstrate that this process works. However, APEC cannot fail
because there is no alternative approach.

In addition to this issue of modality, there is also the
concern that the APEC process has been too focused on trade
liberalization. It has been clear from the outset that America's
support of APEC is largely driven by its interest in opening up
markets in the region. The U.S. has effectively used bilateral
means to do and it is hoped that with the strengthening of the
World Trade Organization the U.S. will make greater use of this
multilateral forum.

Should the U.S. also use APEC? It is widely believed that U.S.
negotiators would like to see APEC as a multilateral crowbar for
prying open East Asian markets. Such an attitude is likely to
backfire because APEC would then be seen as the superpower's
trade policy instrument, while many East Asians on their part
would perceive the playing field as being essentially tilted
against them.

Trade is a contentious issue. It is not that APEC should not
deal with it, but it is a matter of how to approach it. It has
been argued that trade liberalization should not be the test of
APEC's success or failure. By using trade as a measuring stick
APEC would become hostage to economic interest groups, and APEC
is not so firmly established that governments would sacrifice
important issues for APEC's sake.

On paper APEC believes in the importance of having a balanced
agenda and that APEC should rest on three legs, namely trade and
investment liberalization; trade and investment facilitation; and
economic and technical (or development) cooperation. However,
there is a strong tendency to view facilitation and development
cooperation as subordinate to trade and investment
liberalization. This should not be the case. APEC is not
fundamentally about liberalizing trade and investment. APEC is
much more; it is first and foremost about community building.

There has always been this discrepancy between the broad view
and the narrow view of APEC. The broad view sees the importance
of APEC as a vehicle for community building in the Pacific,
including the structuring of a healthy and strong trans-Pacific
relationship. The strategic value of APEC is that it could
intensify U.S. economic engagement in the Asia-Pacific region as
a way to strengthen the basis for its presence in the region.

However, APEC also serves as a forum for engaging China
constructively in the regional and international arenas. This is
of strategic importance to the region in view of China's history
of isolation and revolutionary adventures. Both the U.S. and
China are two big nations for whom multilateralism does not come
naturally.

The implementation of the Osaka Action Agenda should always be
viewed in the broadest context of APEC's development. The broad
view of APEC also suggest that besides emphasis of cooperation
among regional countries, emphasis should equally be given to
areas of population, food, resources, energy and the environment.
APEC's task ahead is to translate these challenges into a
balanced agenda. This is indeed a tall order. In due course
further development of APEC's institutional structure may be
necessary. If the rationale is clear and derived from the broad
view, members should be less hesitant in supporting the
institutional development of APEC.

Since Osaka, in line with the structure of the Osaka Action
Agenda, perhaps it is now more appropriate to talk about APEC's
two pillars rather than its three legs. The two pillars are: (1)
trade and investment liberalization and facilitation; and (2)
economic and technical cooperation, also described as development
cooperation.

Window: Those that have been involved in APEC cannot deny that Osaka
was a success. Leaders and ministers made an important agreement
on the principles for trade and investment liberalization.