9:19 AM Oct 11, 1995


Penang Oct 10 (TWN/Martin Khor) -- The battle to shape the future direction and structure of APEC (the Asia Pacific Economic Cooperation forum) is hotting up as members prepare for the November Summit in Osaka.

This week, senior officials of APEC countries will meet in Tokyo for the last time before the Summit, to try and complete an Action Agenda that is a provide a plan for implementing the "Bogor Declaration" signed by political leaders at the last APEC Summit of November 1994.

Major disagreements between member countries include the nature and pace of trade liberalisation; whether APEC should be a loose grouping or become a formal agreement; whether it should become a free-trade area or simply "promote free trade"; and whether Apec initiatives should discriminate against non-members.

When APEC was mooted by Australia in 1989, it was agreed that this would be only an informal and loose consultative forum to discuss and promote trade liberalisation in the region.

Since then, some countries, notably the United States and Australia, have piled on the pressure to upgrade the forum into a structured entity with more and more institutions and formalised agreements, and to widen its scope to include a wide range of economic issues.

A big boost to APEC's prestige and institutionalising was given by US President Bill Clinton when he unilaterally converted the 1993 APEC meeting in Seattle into a Summit by inviting heads of government. The precedent was continued last year when APEC's meeting in Indonesia also included a Summit component.

Unhappy with the way APEC was being pushed ahead, Malaysian Prime Minister Dr Mahathir Mohamad stayed away from Seattle, but went to Bogor. At Bogor, Malaysia opposed moves led by the US to further institutionalise APEC (including through a free trade area) and to commit all members to a rapid pace of liberalisation dictated by the APEC process.

As a result of the opposition, members only agreed to "the goal of free and open trade and investment" in the region by 2010 for industrialised countries and 2020 for developing countries, thus averting reference on establishing a "free trade area",

Malaysia also attached an annex to the Declaration stating that implementation would be flexible and that the time frame was non-committal and non-binding.

Since Bogor, the moves to get developing countries to commit themselves to trade and investment liberalisation have intensified. Some quarters have also not given up the idea of a free trade area. The APEC leaders are being pressured to come up with specific commitments, which now carry the term "down payment", on how each country intends to liberalise.

The US and Australia are leading the push for liberalisation commitment. A recent report in the Australian Financial Review revealed that during talks in Washington in July, the two countries had quietly agreed to work together to remove Asian trade barriers.

The specific goals in this joint strategy include getting intellectual property rights protection for US and Australian products in some East Asian countries, reduced beef import barriers and shelf life restrictions for food products in South Korea, removing curbs on foreign access to legal services industry in Singapore and economic deregulation in Japan.

The report also quotes an official of the Australian Department of Foreign Affairs and Trade as saying the two countries were working "quietly" so as not to create sensitivities in other APEC nations.

The rapid-liberalisation push is also coming from two unofficial but influential groups, the Pacific Business Forum (comprising businessmen from APEC countries) and the Eminent Persons Group (a 17-member committee that has prepared three reports to guide the APEC process).

In September, the Pacific Business Forum produced a report with 15 recommendations to accelerate liberalisation, including clear deadlines and time schedules for each action.

Key proposals include reducing the time for APEC members to implement Uruguay Round commitments and expand the liberalisation process to areas inadequately covered by the Round; strengthening APEC's non-binding investment principles and incorporating them in domestic law; and introducing visa-free business travel.

In August, the EPG (which is chaired by Fred Bergsten, a former senior US trade official) also published their third report. The EPG's 1994 report was heavily relied on by the US as a rationale for its moves towards free trade commitments at the Bogor Summit meetings.

In the 1995 report, the EPG has proposed that APEC countries accelerate the implementation of their Uruguay Round applied tariff rates. The developed countries are asked to cut by half the period to reduce their tariff schedules; reduce agricultural subsidies in three years rather than six; and increase by 50 percent the volume of imports when phasing out their import quotas on textiles and apparel.

The EPG also wants APEC's non-binding investment principles to be strengthened and applied in practice: they principles should be converted first into a voluntary code and ultimately into a binding agreement. It also suggests that APEC take on new trade issues, such as preventing abuse of anti-dumping policies, harmonising competition policies, and developing a common programme for product standards and testing.

The EPG is urging that APEC leaders adopt these measures as a "down-payment" at Osaka to show their commitment to implementing the Bogor Declaration.

But agreeing to these proposals, in fact, would mean taking a mighty leap on liberalisation even far beyond the already onerous obligations that developing countries have taken on at the World Trade Organisation.

These countries are already stretching themselves trying to cope with the wide ramifications of the Uruguay Round on various sectors of the national economy. As a saving grace, the Uruguay Round agreements provide a few years for countries to adjust themselves to absorb the shocks of liberalisation.

Many countries realise that these few years are already going to be insufficient, and that many of the Uruguay Round's obligations on them may lead to serious problems, such as loss of competitiveness of local farmers and firms, with accompanying retrenchments and unemployment.

If the time frame for meeting the Round's obligations is to be cut by half, then developing countries will have next to no time at all to prepare themselves to counter ill effects, or to build up their local enterprises and farmers to withstand the onslaught of competition from bigger foreign firms.

Thus, the suggestion by the Pacific Business Forum and the EPG to speed up the implementation of the Round commitments and to give up a large chunk of their grace period could cause serious economic and social problems for many of APEC's developing countries.

But observers say Asian trade policy makers and diplomats have to take care that reports of the Forum and the EPG are not made use of (even against the intention of their authors) by some powerful countries to push their own narrow agenda. There is a danger that broad political statements or reports of non-official groups, are used and cited as "authorities" to push for increasingly formal rules and eventually legally binding agreements.

Thus, what begins as a summary report or declaration of a meeting (or as proposals in an unofficial report) can be taken up by a country with negotiating skills as the basis for preparing a set of non-binding principles, which are then pushed to become a "voluntary code of conduct", and then further advocated to be made a legal agreement, to comply with which signatory countries are obliged to enact or change national laws and policies.

Dr Noordin Sopiee, director of ISIS (the Institute for Strategic and International Studies) Malaysia, and a member of the EPG, has punctured a few myths surrounding APEC in a recent article.

According to him: "The Bogor Declaration is being touted by some quarters as the greatest trade agreement in history. If so it must surely be one of the miracles of the 20th century. The truth is that the Apec economic leaders met for only a couple of hours, during which they read prepared texts. They did not debate the issues substantively. Indeed some of the points, for example the continuation of the EPG, must have been a surprise to quite a few leaders who thought they had buried the EPG as a result of their deliberate efforts."

Dr. Noordin reveals that there were "quite a few surprises" when some of the leaders saw the declaration text, which was not a negotiated document. "It is a travesty of the truth now to cite the Declaration to say that the Economic Leaders decided on this detail and that detail. It is a travesty to now use what is a political declaration to imply that it is a legal 'agreement', legally binding the members to specific actions in specific areas, when the leaders did not even know they were addressing these specific issues, still less agreeing to them."

Dr Noordin adds that the view that Apec should be turned into a free trade area is "a big nonsense". "The Apec economic leaders did not agree to this, even politically, in Bogor. Many have explicitly stated their opposition."

The EPG, the first "culprit" to propose free trade in the region, Dr. Noordin notes, made clear in its report that it was not proposing an Asia Pacific free trade area. The EPG's position is that free trade in the region should be reached through multilateral liberalisation in the GATT.

Apec's "open regionalism" concept implies that the 'region' in which free trade and investment result from Apec initiatives could extend well beyond the geographical boundaries of Apec members.

This clarification is important. It means that Apec is not intended to be a trading bloc that gives special preferences to its members, thus shutting out others. Instead, Apec initiatives would be consistent with GATT or World Trade Organisation principles of non-discrimination.

But this view is not shared by all countries within Apec. Asean countries and Japan are reported to be in favour of non-discrimination, with the US against.

US assistant trade representative Nancy Adams said in Bangkok last week that the US remains convinced that trade liberalisation in APEC should not allow non-members a free ride.

The US position would take Apec another step further to institutionalising Apec through an agreement of its members to certain trade and investment measures that would apply only to themselves, and thus cutting out the European Union, India and other non-members.

Another move to create more formal structures is the proposal from the Pacific Business Forum, which is a loose body, that the Apec leaders now set up a formal Apec Business Council of business representatives from each Apec country to directly advise the forum's leaders.

Many Apec members are wary of the speed with which a few countries are attempting to drive the liberalization process in the region. Decisions on what and when to liberalise should be taken by each country according to its needs, weaknesses and strengths. They should not be foisted onto countries through a top-down regionalisation process that in the end may well serve the strong at the expense of the weak.

Those countries that want a different process have to get together to make their views clearly heard, at next week's Tokyo meeting and at the Osaka Summit.