SUNS4507 Tuesday 14 September 1999

Trade: Ten years on, APEC struggles to re-invent itself


Canberra, Sep 11 (IPS/Bob Burton) -- The credibility of the Asia- Pacific Economic Cooperation (APEC) is on the line as its members meet in New Zealand this week -- in the view of both groups who want its free-trade agenda to go faster and those who want it to shift direction.

APEC, in whose formation Australia had played a key role 10 years ago, is the region's largest economic forum and brings together presidents and prime ministers of 21 member economies in high- profile summits each year.

But now, "the combination of external pressure and internal paralysis means APEC is likely to wither away", says Jane Kelsey, professor of law at Auckland University, who sees a bleak future ahead for APEC.

The deputy director of the Melbourne-based Asia-Pacific Study Centre, Darby Higgs, concedes the main task of this year's APEC summit, scheduled for Sep 12-13, is "re-establishing APEC's credibility in the region". Its ministerial meeting ends Friday.

APEC aims for an area of free trade and investment linking North and Latin America with East Asia and Australasia. But there is not much to show for that, even as critics say APEC's original plans to benefit both developed and developing countries like have lost their way.

APEC's fall from grace is reflected in the change from its jovial description after its formation, of "four adjectives in search of a noun", to the more recent and disdainful definition of APEC as short for "Ageing Politicians Enjoying Cocktails".

At last year's APEC meetings in Malaysia, attempts by the US and Australia to gain commitments opening protected industry sectors to free trade foundered when Japan rejected the proposal that its troubled fishing and forest sectors be included.

This liberalisation was part of a package of voluntary measures APEC members were discussing to speed up their free-trade plan, which as agreed in 1994 aims for free trade and investment by 2010 in developed countries and 2020 for developing countries.

The stalemate on the liberalisation was referred to the World Trade Organisation (WTO) in 1998, a development that Kelsey argues "merely re-affirms APEC's impotence".

Underlying the tensions within APEC are differing emphasis given to the three of its policy pillars -- trade liberalisation, economic cooperation and trade facilitation.

Australia, Canada, New Zealand and the US have placed greatest emphasis on trade liberalisation, including reducing tariffs and easing investment restrictions.

Developing countries, led by Malaysia, place more emphasis on the goals of promoting economic cooperation and trade facilitation.

Malaysian Prime Minister Mahathir Mohamad will not join the APEC summit in Auckland this year. Earlier, Mahathir dismissed APEC as "just a place to meet each other, APEC has no clout".

As last year's APEC host, Malaysia tried to propose that the forum endorse measures to regulate flows of speculative capital, at a time when the effects of the Asian financial crisis hit hardest.

Malaysia's advocacy earned it support among Asian members, which include Thailand, the Philippines and Indonesia, but it was insufficient to gain general agreement.

Asian governments are not persuaded that the developed APEC members acknowledge the role of currency speculation in causing the Asian financial meltdown or its severe social consequences.

Only last month the US coordinator for APEC, Richard Boucher, said that further trade liberalisation is "the way to take care of the lingering effects of the crisis".

The tension within APEC reflects the forum's constantly evolving style and its lack of hard and fast rules, which members say allow peer pressure to push trade liberalisation. APEC decides by consensus, using non-binding commitments.

This is why Asian member economies have been insisting that commitments in trade are voluntary and non-binding. Australia, Canada, the US and New Zealand want specific targets and timetables and for commitments to be strictly honoured.

Even formerly enthusiastic supporters of APEC are despairing at the prospects that it can push further ahead with trade liberalisation.

The APEC Business Advisory Council (ABAC), the only non- government sector with a formal role in APEC, warned in a recent report to APEC leaders that unless action is accelerated the trade liberalisation goals adopted in 1994 would be missed.

"Individual action plans being taken by member economies are not ambitious enough, in content or timeframe, to meet the goals of free and open trade by 2010/2020," ABAC warned.

Analysts say APEC will not produce major decisions this year,
with major trade talks slated at the WTO ministerial meeting in
November in Seattle, United States. There are also calls for a
new round of world trade talks.

"This year APEC won't have a trade benchmark," the APEC Study Centre's Darby Higgs said, "mainly because of the impending WTO round which is where the trade stuff is going to go".

Jeff Atkinson, spokesman for the development group Community Aid Abroad, agrees: "APEC is probably not going to go anywhere ontrade liberalisation. The WTO is where the main game is."

Kelsey argues that opposition in many countries against forums like APEC and the WTO is also slowing their momentum. "The secrecy of such negotiations, and the corresponding lack of public debate, parliamentary scrutiny and indigenous voice, have fuelled complaints of a democratic deficit and loss of sovereignty," she says.

Higgs agrees that there may be a role for NGOs in future, noting "there has been mutual distrust between NGOs and APEC". APEC, he says, "has been run by trade people who tend not to like people who bring in what they see as extraneous issues like the environment".

The former minister for Trade in the APEC-founding Australian government, Senator Peter Cook, concedes that APEC has lost much of its early legitimacy.

"Bringing APEC into the 21st century means involving women in APEC forums. APEC needs to consider ways in which indigenous groups, unions, small enterprises and other non-governmental organisations can be accommodated within its structure," he says.

But Kelsey is sceptical: "Recent offers of dialogue with more compliant unions and NGOs are simply a public relations exercise."

"The challenge for critics of APEC is to promote debate on economic alternatives that can provide a basis for genuine economic cooperation among the people and countries of the Asia- Pacific region," Kelsey adds.