Will next century be Asia-Pacific era?

Will next century be Asia-Pacific era?

By Yasuhiko Shibata

TOKYO: The Asia Pacific Economic Cooperation (APEC) forum,
which groups some of the world's fastest growing economies, is to
hold a summit in Indonesia next week.

A key issue will be whether APEC members decide to make a
stronger commitment to the Asia-Pacific free-trade zone advocated
by the United States, or whether to stick to local cooperation.

Also at issue will be Japan's policy toward APEC, which still
remains unclear.

Looking back at world history, we see that the pattern of
emergence of advanced civilizations has followed a westward
course. Thus the great civilizations of China, India and
Mesopotamia in the Middle East were followed by the Greek and
then Roman civilizations, which later spread throughout Europe
and eventually reached the United States. Now the center of world
civilization seems to be moving back to Asia.

Considering the combined share of the world market accounted
for by the 18 APEC nations, including Chile, which is scheduled
to join the forum shortly, it is evident that the 21st century
will be the era of Asia-Pacific nations.

The combined population of APEC nations tops 2.2 billion,
equal to 40 percent of the world's population. APEC nations'
combined gross domestic product amounts to $12 trillion, or more
than 50 percent of the world's total, while its combined trade
volume accounts for 40 percent of global trade.

According to the International Monetary Fund, the average
economic growth rate of the Asian nations surpassed seven percent
in 1992, against a world average of minus 0.1 percent. Some
experts predict that if Asia-Pacific economies continue to grow
at their current rate, their combined share of the global economy
will exceed 60 percent in the early 21st century.

Given the sustained growth of Asian economies and the rapid
expansion of their markets, it is understandable that the United
States has started to shift emphasis in its external trade policy
to links with China and other Asian countries.

Economic relations between the United States, Japan and other
Asian nations have cast Japan as supplier of both capital and
technology, Asian nations as manufacturers and the United States
as consumer.

Now, the United States, with massive trade deficits and
foreign debts, wants to transform itself from a consumer to an
exporting country. Washington appears to believe that a
commitment to the fast-growing Asian market is the key to U.S.
economic recovery. Asian nations have achieved an economic
"takeoff" and acquired considerable purchasing power.

Last autumn, the Clinton administration announced that it
would henceforth attach great importance to APEC. The idea behind
the new policy was to create a free trade zone in the Pacific
Basin at the initiative of the United States and to convert Asian
countries into production-consumption-investment bases for U.S.
businesses.

One of the major steps the United States has taken in this
direction is President Bill Clinton's successful drive to have
the APEC conference upgraded from a ministerial meeting to a
summit meeting. Another step was the report compiled by the APEC
Eminent Persons Group that urged member nations to achieve
regional trade liberalization by the year 2020. The group is
chaired by Fred Bergsten, head of the Institute of International
Economies of the United States, which is a major adviser to the
U.S. administration on external economic policy.

According to some, the United States has another goal, namely
expanding the North Atlantic Free Trade Area (NAFTA) to Asia as
part of a long-term, grand scheme to create a Pacific Basin Free
Trade Area that includes Central and South American countries.
The United States is now sounding out South Korea and Taiwan
about their willingness to join NAFTA.

Asian nations have shown mixed responses to the U.S. scheme.
Malaysia, Thailand and four other members of the Association of
Southeast Asian Nations are concerned about what they consider
hasty moves toward market liberalization and creation of a free
trade zone under U.S. leadership.

These countries are instead moving to create an Asian economic
bloc in which the East Asian Economic Caucus will play the
central role. Their attitude toward APEC is, therefore, that the
forum should remain a loose consultation organization.

The Philippines and Indonesia, on the other hand, are leaning
toward the U.S.-led plan for an Asia-Pacific economic zone, their
response to the threat posed by China's rapid economic expansion
and aggressive exporting strategy.

South Korea and Taiwan have expressed a willingness to join
NAFTA. These diverse approaches indicate that Asia's newly
industrialized economies are not united in their policy toward
APEC.

The fate of APEC lies chiefly with China, a likely 21st-
century superpower, and Japan, a 20th-century economic power.

China, which is now changing over to a market economy, will
need funds, technology and markets for its products from both
Japan and the United States.

Thus China wants to step up trade and economic cooperation
with the two countries, but will seek a delicate balance in
Japan-U.S. relations. It would not help China if trade disputes
between Japan and the United States intensify, but neither would
China be pleased if Japan and the United States joined hands in
economic policy toward the Asian giant.

China is also keen to join the General Agreement on Tariffs
and Trade. China is thus likely to consider it unwise to take the
leadership in APEC meetings or seek a showdown with the United
States.

The last question concerns how Japan will act at the APEC
meeting. There are two options: Japan could give strong backing
for the move to form an Asian economic bloc that includes ASEAN
and China, or it could play a mediator role between the United
States and Asia and call for gradual formation of a Pacific Basin
economic zone.

The external economic policy of the current Murayama Cabinet
remains totally unclear, as is the case with its domestic
economic policy. If Japan continues to take an ambiguous attitude
at the upcoming APEC meeting, Japan may see its reputation
nosedive and invite contempt from Asian nations.

Next autumn, Japan will host the APEC ministerial meeting in
Osaka. In view of the forthcoming APEC meetings in Indonesia and
Osaka, both the Japanese government and bureaucracy should become
fully aware of the urgent need to establish a basic policy toward
Asia.

Yasuhiko Shibata is a senior fellow with the Yomiuri Research
Institute.

-- The Daily Yomiuri