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.