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