SUNS  4329 Monday 23 November 1998



ASIA-PACIFIC: AFTER NINE YEARS, APEC LIMPS ALONG

Kuala Lumpur, Nov 19 (IPS/Johanna Son) -- The Asia-Pacific Economic Cooperation (APEC) forum has just survived its ninth year brimming with brave words, but bruised by tussles over free trade and hobbled by members' rival interests.

Once seen as a bridge linking an Asia-Pacific "community" across the ocean, APEC today finds its free trade agenda stalled by domestic national interests and the Asian recession.
Under pressure to act amid inaction on Asia's meltdown, the most the leaders of 12 Asia-Pacific economies could do was to say they would work to gather wider support for reform of a financial system whose volatile swings had undercut weaker economies.

Even as APEC members spoke of the need to pursue trade liberalisation despite Asia's crisis, trade flows were declining across the region - given import cutbacks. Trade friction was growing within the grouping as the U.S. trade deficit swelled due to a rise in exports from Asia.

APEC's staunchest critics now believe it is time for the forum, launched in Australia in 1989, to close its brief history, saying it has become little more than an annual talking shop for leaders garbed in exotic costumes.

Perhaps at no time than now is one of the earliest criticisms of APEC -- that it is four adjectives in search of a noun -- more true.

"APEC is being kept alive on a respirator: maybe someone should just pull the plug so that it can die peacefully and everyone can get on with more important matters," Nicola Bullard of the Bangkok-based Focus on the Global South said in an interview.

This is not the APEC its founders wished it to be. It was formed as a loose consultative "forum", not a bureaucratic organisation. It has member "economies" instead of countries, to stress its non-political bent.

Its flexible nature was supposed to be its strength, but that also allowed the United States to come in the early nineties and push a "vision" to turn Asia-Pacific into a free trade area.

In 1994, APEC economies agreed to form a zone of free trade and investment by 2020. As host of the 1995 meetings, Japan secured an accord saying any trade liberalisation would be flexible, voluntary and non-binding.

Last year, APEC officials meeting in Canada set out 15 "priority sectors" where tariffs could be cut quickly. Nine of these were to be agreed upon this year, but the accord lost steam due to objections by Japan to opening its troubled fishery and forestry sectors. The compromise reached was to bring those tariff reduction offers to the World Trade Organisation -- but it is now clear that the voluntary
manner of tariff cuts is not producing the peer pressure expected to keep the momentum toward trade liberalisation within APEC.

This played no small part in a proposal by the three Latin American members of APEC (Chile, Mexico and Peru) to bring future trade negotiations to the WTO, whose outcome they argued are binding and there would no fear of "free riders" who would benefit from unilateral tariff cuts but not offer the same privileges in turn.

"The problem with APEC at the moment is that it is too big and too diverse, and the trade liberalisation agenda is too narrow to accommodate all those interests," Bullard said.

Still, APEC leaders said in Malaysia they remain committed to the ideals of free trade. That was viewed as a passable achievement by APEC proponents, but lamented by activist critics.

For Timothy Ong, head of the National Insurance Company of Brunei and a member of the APEC Business Council, the fact that moves toward rapid lifting of tariffs continue amid doubts about the free market approach, is in itself progress. Many businessman want to see tariff cuts swiftly, but Ong says Asia's problems must be recognised. "While more free trade, foreign investment is needed to help the region, on the other hand there is great doubt or increasingly profound ambivalence to what is globalisation", he said.

"So progress (so far on tariff reduction proposals) is remarkable," Ong explained.

But for Premesh Chandra of the Malaysia Trades Union Congress, it is evident despite the call of APEC leaders for reforming the financial system, the forum remains hooked on free trade, if at a slower pace. "For us the push toward free trade is not welcome, because it causes tremendous restructuring at the local level and hardship for workers," he said. "The free trade agenda is still very much on the table," Elizabeth Wong of the human rights group Suaram added.

Even APEC supporters have warned that the forum risks becoming irrelevant if it does not help in solutions to Asia's crisis.

"As the only organisation embracing all economies affected, APEC could and should have been more than a bystander as the financial and economic crisis of the last year unfolded," Gareth Evans, former Australian foreign minister, said last week. Failure by APEC to assert itself would leave it "totally marginalised as an institution and its achievements of the last nine years squandered", he added.

Asked why APEC did not have a more action-oriented response to Asia's recession, Malaysian Prime Minister Mahathir Mohamad said APEC economies cannot act alone to address the volatility of financial markets and needs to "seek a forum" like the Group of 22 to convince more nations.

Bullard says APEC's call for reform of the financial system is not a major re-thinking of the international economic situation. But she concedes that the recognition of the risks of market volatility and speculation is a "significant shift compared to last year's APEC meeting in Vancouver, where the focus was very much on the deficiencies of the Asian economies rather than the global system".

Yet so far, no one is asking questions like where does speculation come from and who benefits from it, Bullard says. Until these are discussed "we are stuck with the status quo, where the needs of capital and the market override the need for a more balanced and sustainable approach to development".

Increasingly, Asia's recession has also stoked tensions within the group, notably between the U.S. and Japan which have been sparring over trade issues and Tokyo's efforts to spur its domestic economy to jumpstart the regional one.

Japan chafed at being made the culprit in the stalled deal for tariff cuts in nine sectors discussed here. The U.S. was pushing for the nine-sector deal, but was itself actually hampered because it cannot implement any such accord without legislation.

Japan and US were also competing on aid for ailing Asian economies, presaging more friction in the future.

Japan also believes that the US pledges of help are belied by its trade officials' efforts to pry open Tokyo's markets to help US firms sell there -- when they knew very well that Japanese firms were going bankrupt.

The future of an economically weak APEC riven by diversity of interests is far from predictable. "It's a successful meeting," Mahathir said of the summit, "but whether it will be successful later on is another matter".

Has APEC lost its way? Bullard said: "It's hard to lose your way when you don't know where you're going."