SUNS  4321 Wednesday 11 November 1998



ASIA-PACIFIC: FREE-TRADE AGENDA ADRIFT AS SUMMIT NEARS

Bangkok, Nov 9 (IPS/Johanna Son) -- Asia's recession has set adrift the free-trade agenda of the Asia-Pacific Economic Cooperation (APEC) forum, which is being pulled in different directions ahead of this week's annual meetings in Malaysia.

While the United States and Australia want this year's meetings to get on with plans to cut trade and investment barriers across the Pacific, Asian countries want APEC to tackle the region's economic
emergency first.

This difference is fuelling new tensions between eastern and western economies, threatening to undercut a forum supposed to be the main body for economic dialogue from North and Latin America down to South-east Asia and Australia.

American and Australian officials have been saying there is no room for countries to turn to what U.S. Secretary of State Madeleine Albright last week called "the false gods of protectionism",
despite the painful effects brought by the volatility of currency and financial markets and speculation.

But Asian countries say they find questionable the mouthing of the usual slogans about tearing down trade and investment walls when the very foundations of once-booming economies are in peril, and social tensions rising because of the recession.

Indonesian Foreign Minister Ali Alatas says the recession requires APEC -- whose membership expands from 18 to 21 this month -- to transfer attention from trade reform to dealing with footloose
capital.

"What needs to be done is that we should together study it, whether some regulation is necessary, whether there should be some form of regulation on monetary and financial markets," he said.

As APEC host this year, Malaysia is in the driving seat in setting the agenda and direction of the forum. The APEC ministerial meeting is being held in Kuala Lumpur on Nov 14-15, and the leaders' summit on Nov 17 and 18.

This week Thailand unveiled, reportedly with the support of Malaysia, a proposal for the creation of a "World Financial Organisation" to help regulate financial flows whose volatility has been blamed for exacerbating Asian economies' woes.

Thai officials also said they want added to the agenda a proposal for funds in addition to the 30 billion U.S. dollar fund that Japan offered last month to stimulate crippled economies.

Malaysia is keen to push the economic and technical cooperation part of APEC's original aims, saying this is what the region badly needs at this time.

Asia-based experts say these moves are a sign that the region has decided to speak up more strongly given the failure so far by the developed countries and the Bretton Woods institutions to get a concrete handle on regulating financial flows.

"Asia has finally tired of waiting for the U.S., the IMF and the market to solve problems," said Nicola Bullard of the Bangkok-based group Focus on the Global South.

Already, she says Japan's 1997 proposal for an Asian regional fund -rejected at the time by the Fund and the U.S.- has in fact been revived through the 30 billion fund it announced in October.

"The next opportunity for Asian governments to do something about the deepening recession will be the November APEC summit in Kuala Lumpur, unlike last year's whitewash when everyone agreed that things would be fine provided they kept taking the IMF medicine," Bullard added.
"It's pretty pointless to wander around the region and tell people who do not have enough to eat that everything is going to be all right because by 2020 we are going to have free trade," said Darby
Higgs of Australia's National APEC Study Centre.

The year 2020 marks the deadline by which APEC's member economies are to have achieved free trade across the Pacific Rim.

Higgs added that Asian economies were harking back to APEC's basic goal of reducing poverty -- and clearly the way to do that is to reverse the economic contractions of up to 15 percent that
countries like Indonesia expect this year.

APEC should do more by "repairing economies in trouble on a social level instead of waiting for an economic recovery which might not happen in the short term", Higgs said in a briefer on APEC prepared by Focus on the Global South.

But American officials say that with the crisis APEC should all the more go for liberalising trade, even though ailing economies are seeing domestic sectors suffering from the effects of the slowdown.

"It is very important at a time of economic distress to send a very clear signal that market opening is going to continue and the commitments we made to each other are going to be kept," Alan Larson, assistant U.S. secretary of state for economic and business affairs, said last week.

Some Asian diplomats say that they are willing to agree to a "reaffirmation" of commitment to liberalisation of trade and investment over the long run -- but that they cannot sit by and talk about a free trade area as if the crisis did not exist.

Talk of opening markets to foreign competition is sensitive at a time when Asian economies are going through a weak period of exports and low commodity prices, and domestic producers are unable to sell well at home.

The poor performance of Japan's forestry and fisheries sectors, for instance, is the reason Tokyo invokes in its refusal to slash import duties there despite efforts toward that by APEC economies.

APEC economies have been meeting to identify nine sectors to include in an Early Voluntary Sector Liberalisation accord by next year, and plan for a list to be announced in Malaysia.

But American and Australian officials fear that without Japan on board, it would be harder to get other Asian countries aboard efforts to rapidly and voluntarily cut tariffs.

Japan's Chief Cabinet Secretary Hiromu Nonaka put it bluntly: "We will continue a liberalisation drive, but our country also has to look at the reality squarely. The most important issues at APEC
this time must be finance and economic recovery."

Thai Foreign Ministry Surin Pitsuwan says there needs to be a balance in the concerns of developed and developing countries instead of single-mindedly pushing trade liberalisation. "It should be a matter of cooperation," Surin said here.