What remains to be done after APEC?

What remains to be done after APEC?

Leaders of 18 nations grouped in the Asia Pacific Economic
Cooperation (APEC) forum have just concluded their meeting in
Manila. Economist Mari Pangestu presents her views.

JAKARTA (JP): Given the media reporting, it would appear that
the success or failure of APEC depended on all APEC economies
supporting the Information Technology Agreement (ITA), which
would reduce tariffs on information technology products (from
hardware to software products) to zero by the year 2000.

The rather vague conclusion "that would substantially
eliminate tariffs by the year 2000, recognizing the need for
flexibility as negotiations in Geneva proceed" was the compromise
reached. While the benefits of an open information technology
market are clear, one could perhaps question the approach. What
should have been a collective action plan, brought about through
consensus resulting from discussions through the year, became
what looks like a belated U.S. agenda in post-election mode.

More importantly, using the rather vaguely worded statement
about substantial reductions in tariffs by the year 2000 while
recognizing the principle of flexibility as a barometer to
measure the achievement of the Manila Action Plan for APEC (MAPA)
is shortchanging APEC.

There is more to the results of the APEC meetings this year
than the ITA. We are now entering the first act of the APEC drama
of a true Asia-Pacific community. MAPA provides the first glimpse
of how economies will collectively or individually reach the
long-term goals of the Bogor meeting.

This is where APEC as a process takes over from the vision and
political will of leaders, and is the true test of the APEC
approach of voluntary initiatives to liberalize and facilitate
trade through individual action plans (IAPs) and collective
action plans, as well as undertaking joint activities to promote
economic and technical cooperation.

This idea of peer pressure, review and revision as an ongoing
proceeding is at the crux of this unique APEC process. Therefore,
the assessment of MAPA needs to be completed in this light: that
we are only seeing the first step and we should assess whether it
has been a significant one and, more importantly, determine what
remains to be done.

Will there be free trade and investment? It is useful to
remind ourselves why the answer is important. For governments, it
implies needed policy changes and the necessary anticipation and
institutional strengthening that comes with them. For
businesspeople, it means both having to compete in their own
markets as well as taking advantage of the opportunity to enter
other markets. For housewives and consumers, it will mean more
choice in terms of price, quality and type. For workers and
professionals, it will mean the continuous need to upgrade
productivity and keeping up.

The progress on reduction of tariffs offered in their IAPs, as
well as a result of the unilateral program of liberalization,
indicate that individual APEC economies are all well on track
towards the Bogor goal, and the tariff reductions are mostly
faster and deeper than under their Uruguay Round commitment.
Furthermore, there are a number of "champions" -- Chile, China,
Indonesia and the Philippines -- who are committed to extensive
tariff reductions, so that they are set to move ahead of the
Bogor track. If the reduction trajectory is followed and the
standstill is adhered to, then all members will reach low average
tariffs of 0-5 percent by 2010/2020.

The progress on non-tariff barriers is less evident, with no
specific commitments, but only general commitments to review and
reduce such barriers. Likewise, in investment liberalization,
there were no specific commitments for further liberalization,
although some economies, such as Korea and the Philippines,
announced removal of restrictions by a certain time frame. Of
course, it should be noted that some APEC economies already have
open investment regimes to begin with.

However, there has also been progress in reducing costs of
doing business, or what is known as the second APEC pillar of
"facilitation". A number of important results in this regard is
the move towards a paperless customs system by the year 2000,
with some results already expected to be felt in 1997; developing
mutual recognition of standards for products; simplifying
business visas for business travelers; greater transparency in
government procurement and developing best practices and
deepening public-private partnerships in infrastructure.

What else needs to be done to have free trade and investment?
The first thing is to continue on track towards progressive
tariff reductions, and ensuring that standstill on new protection
is adhered to.

Second, defining and refining the goals of free trade and
investment, which would in turn create the policy certainty
needed for businesses to operate and to lock in policy from
vested interests. Such goals could be average tariffs at 0-5
percent, with minimum exceptions; identifying for removal core
non-tariff barriers by 2010/2020 and fulfilling the national
treatment principle in its respective investment regime by
2010/2020.

Third, reducing true impediments to trade will necessitate
reducing peak tariffs in certain sectors, such as the automotive
and textiles and garments sectors, and removing prevalent non-
tariff barriers. Fourth, monitoring progress in facilitation and
identifying areas where there are bottlenecks. Fifth, reducing
the danger of trade diversion and further discriminatory actions
under the guise of the World Trade Organization's consistent
rules instruments, such as rules of origin and antidumping
investigations.

APEC has also achieved an important beginning towards the
third pillar in APEC by coming to an agreement on a set of goals,
guiding principles, and priorities for strengthening economic and
technical cooperation, resulting in mutually beneficial and joint
activities aimed at focused outcomes. The challenge ahead is in
the actual implementation of these principles, and in ensuring
that there is adequate resources for the joint activities of
policymakers: process, soft negotiations.

The writer is head of the Economic Department at the Centre
for Strategic and International Studies and a lecturer at the
University of Indonesia.