Which direction will APEC take from Bogor?

Which direction will APEC take from Bogor?

The Nov. 15 Bogor accord underlined the Asia Pacific Economic
Cooperation forum leaders' commitment to achieving trade and
investment liberalization by 2020. Furthermore, there is
agreement on bringing new protection moves to a standstill. Noted
economist Mari Pangestu argues that exposition of the various
options toward achieving the goal is imperative for the next APEC
meeting.

JAKARTA (JP): The Bogor commitment cannot be considered a
binding one since there is no legal document accompanying the
declaration. The statement is one of political intent and will,
and, since it comes from a group of economies which account for
40 percent of world trade, it sends a very important message
regarding this region's seriousness about liberalizing.

What does all this mean? To the optimist, the fact that the
leaders met and talked about the issues and came up with such
political intent is already a remarkable achievement.

At the other extreme, there are those who feel that the non-
binding commitments made under APEC are ineffective and, at best,
that the APEC meetings are a talk shop.

The truth probably lies somewhere in between.

Of course the basic difficulty of the trade and investment
liberalization process still lies in the divided opinions about
what liberalization means. At the heart of the debate, which
emerged due to the recommendations of the Eminent Persons Group,
is whether liberalization should be done on a basis which is
non-discriminatory/unconditional, or on a reciprocal/conditional
basis for non-APEC members. The East Asian economies have
undertaken unilateral liberalization in their own interest to
adjust and reform their economies so that they can become more
competitive. They would like to continue on that basis and are
against the conditional basis of liberalization, and especially
against the idea of creation of a free trade area.

Whereas some of the developed countries are in favor of
conditional liberalization because they do not want Europeans to
have "free trade". Reciprocity is a way to ensure that Europe
will also liberalize. Japan is in a particularly difficult
situation because it does not as yet support full liberalization
domestically, yet it will be the chair of APEC next year. One can
only hope that emphasis on regional economic cooperation, which
is not inward looking and is consistent with GATT/WTO in a manner
that will encourage and strengthen trade and investment
liberalization in the world as a whole, will be translated into
non-discriminatory liberalization. Otherwise the wrong message
will be sent to Europe and we could see the feared division of
the world into regional blocs.

President Clinton has called for a blueprint to realize trade
and investment liberalization by the next APEC meeting. This is
an ambitious goal given that the basic issue of how the
liberalization should occur vis-a-vis non APEC members is still a
contentious issue. Other more difficult issues in coming up with
a blueprint relate to resolving very difficult issues. What is
the scope of trade and investment liberalization? Is the target
zero tariffs? Are non-tariff barriers included? What are the
exceptions if any to be made on the promise to undertake a
standstill on new protection? Which sectors are to be included in
liberalization? Goods sectors alone? Are agriculture and services
included? Will liberalization take place sector by sector, or
simultaneously? What are the acceptable exceptions to the
liberalization?

It would be too much pressure on the APEC process to accept
final answers to these very difficult questions. At best, what we
could hope for by the next APEC meeting would be a clear
exposition of the various options in undertaking liberalization,
so that the leaders are in a better position to decide.

Here are two possible options:

* First is the pragmatic suggestion that countries take their
existing commitments in the Uruguay Round. In the first instance
APEC countries should ratify GATT 1994/WTO, implement the
commitments and then undertake a unilateral or regional effort to
accelerate the existing commitments. For instance APEC economies
can offer to add another additional percentage, say 10 percent,
to their offered tariff reductions under the Uruguay Round market
access commitments. The advantage of this approach is that it
will minimize the need to negotiate and can clearly be seen as
supporting the multilateral track to liberalization.

* Second is to clearly define the scope of the liberalization
in stages, either by instruments of protection (tariffs and then
non-tariff barriers) or by sectors. After all, integration in
Europe started by sector. As an example, one area that developing
countries in APEC will see great advantage in, will be if the
U.S. commits itself to an accelerated phasing out of textile
quotas under the Textile Agreement. At the bare minimum, if the
U.S. commits itself to implementing the textile agreement itself
-- that is not resorting to increased use of safeguard measures,
anti-dumping and unduly onerous circumvention rules, and also not
phasing out the important items in the last stage of the 10-year
phase out period -- this will be an important signal for all the
developing Asian exporters of textiles and garments in APEC.

In order to proceed from here in the APEC liberalization
process, much thought needs to be put into the various options
and modalities, weighing the different economic, political and
other conditions of the various countries -- as well as what has
been decided in GATT 1994.

An important element to bear in mind, and in line with the
view that APEC is an evolutionary process, is the principle of
pragmatism in which the primary focus is result rather than form.

The writer is Head of the Economics Department of the Centre
For Strategic and International Studies and a lecturer at the
University of Indonesia.