[asia-apec 35] APEC: The Unauthorized History, by Walden Bello

[daga]

Special to BUSINESS WORLD

                           	APEC: The Unauthorized History

(This is the first of a series of articles on the Asia-Pacific Economic
Cooperation [APEC].)

                                      by Walden Bello*


	The Asia-Pacific Economic Cooperation (APEC) is an economic forum composed
of 18 countries that border on the Pacific which account for 46 per cent of
the world's merchandise trade and over half of the world's gross national
product.

                         "Four Adjectives in Search of a Noun"

	Beyond this description, there is no consensus among APEC members on what
APEC is or should be.  To borrow the classic definition of the forum by
former Australian Foreign Minister Gareth Evans, APEC is still "four
adjectives in search of a noun."

	To the Malaysians, backed covertly by the Japanese, APEC is and should
remain a consultative group where technical cooperation on economic matters
among governments could be facilitated.

	To the US and Australians, in particular, APEC is a formation that is
consolidating into a formal free trade area, where tariffs will eventually
be brought down to zero or thereabouts and all other barriers to trade
eliminated. To Washington and Canberra, the essence of APEC is contained in
the Bogor Declaration of November 1994, which in their interpretation
committed the member governments to establishing borderless trade by the
year 2020.  But even as they signed the Bogor Declaration, the Malaysian and
Thai governments were quick to append their understanding that the
declaration was aspirational in nature and "non-binding."  Beijing also
issued a formal statement supporting the Malaysian and Thai interpretation.  

	There is, in fact, an ongoing, though for the most part, silent battle to
define the direction of APEC, and the Summit in Subic in November 1996 will
be critical in determining whether APEC will remain a consultative group or
solidify into a formal free trade area.

                              From Canberra to Blake Island

	APEC started as a suggestion in the late 1980's from the Japanese,
specifically from then Ministry of Trade and Industry (MITI) chief Hajime
Tamura.  MITI's idea was a forum for technical cooperation on economic
issues, along the lines of the Organization for Economic Cooperation and
Development (OECD).  Japan's objective in making the proposal was to draw
the attention of Washington back to Asia, at a time that the US was
preoccupied with global developments focused on Europe--mainly the winding
down of the Cold War, the renegotiation of the General Agreement on Tariffs
and Trade (GATT), and Europe's becoming a single unified market by 1992.

	Washington did not evince much interest at first.  But Canberra did.
Having come to the conclusion that the survival and future of Australia lay
in integrating it economically into Asia, the Labor government of Prime
Minister Bob Hawke took up the idea of an economic forum enthusiastically.
In the process, however, Canberra gave it a new twist:  that the grouping
would serve as the basis for a future free-trade area.

	In the first three years since APEC's founding in Canberra in 1989,
Washington's energies were focused on successfully concluding the Uruguay
Round of GATT and on creating the North America Free Trade Area (NAFTA) as a
response to the European Union.  In 1993, however, the Clinton
administration replaced Australia as the leader of the free trade lobby in
APEC.  There was a reason for the Americans' sudden interest:  GATT was
experiencing rough sailing at that point, and the US wanted a fallback in
the form of an Asia-Pacific regional free trade area that would supplement
NAFTA in the event GATT fell through.

	In the months leading up to the first APEC Summit in November 1993, an
"Eminent Persons' Group" (EPG) of free trade enthusiasts from throughout the
region was formed, headed by economist C. Fred Bergsten, an influential
Washington insider and head of the Institute of International Economics.  At
the Summit in Blake Island, Seattle, the EPG unveiled a vision of a
"community of free-trading nations"--a euphemism for a free trade bloc--to
enthusiastic cheers from President Clinton and then Australian Prime
Minister Paul Keating.  But, drawn together by great uncertainty and urged
to caution by  Malaysia's Prime Minister Mohamad Mahathir's boycotting of
the meeting to protest what he regarded as Canberra and Washington's effort
to railroad the event,  the Asian governments were able to prevent the
formal declaration of a free trade area as APEC's end goal.
                    
                         Bogor: The Triumph of the Free Trade Vision?

 	Washington, Canberra, and the EPG were, however, unfazed.  Intense
lobbying on their part to get President Suharto on board the free trade
bandwagon resulted in the Indonesian strongman's endorsing the EPG's now
famous 2020 Plan during the second APEC summit in Bogor, Indonesia, in
November 1994--inspite of strong opposition from some sectors of the
Indonesian economic bureaucracy.  

	With APEC moving along a trajectory quite different from their original
vision for it, the Japanese quietly lobbied to delete from the official
summit statement the clause committing the APEC leaders to the goal of
establishing a free-trade area.  Japan banked on its being Indonesia's
biggest foreign investor, trading partner, and donor of aid.  But the
American-Australian pressure on Suharto proved stronger, and his position as
host served to increase the pressure on his guests, including Mahathir, to
sign on to the Bogor Declaration.

	The scene of the next act in the APEC drama was Osaka in November
1995--enemy territory in the view of Washington.  While Mahathir kept up the
fire on the free trade area idea in the open, the Japanese tried, in their
usual indirect and subtle way, to sabotage the 2020 vision.  First, then
Foreign Minister Yohei Kono argued that APEC had three equally important
"pillars"--trade liberalization, trade facilitation, and economic
cooperation.  There was too much emphasis on trade liberalization, he said,
and it was time to place the stress on trade facilitation measures, like
harmonizing customs procedures throughout the region, and on economic
cooperation in the form of aid to the less developed APEC member countries.
Accelerated aid to the less developed APEC countries was necessary, Kono
asserted, because trade liberalization in an uneven playing field would
merely accentuate inequalities within the region.  

	The Americans were not pleased, and they accused the Japanese of trying to
convert APEC into an economic aid agency.

	Next, the Japanese tried to exempt agriculture from any liberalization
plan, and here they were backed openly by South Korea, China, Taiwan, and
informally by Malaysia and Indonesia.  Washington, which has targetted the
Asia-Pacific countries as a dumping ground for its huge grain surpluses, was
enraged.  Sandra Kristoff, coordinator for APEC affairs at the US State
Department warned Tokyo:  "The Bogor commitment to free trade was
unambiguous and unqualified.  It did not speak about 'some trade in some
some products some of the time,' with some free trade by 2010 and 2020 and
other products being delayed until 2050."

	But it was not only the Japanese who were subverting the Bogor vision.
Washington itself was eroding the spiriit of Pacific cooperation by
launching punitiive unilateral trade actions against some of its key APEC
trade partners even as it mouthed noble sentiments about resolving trade
disputes via multilateral fora like GATT and APEC.  In the months leading up
to the Osaka Summit, the US threatened action against China on intellectual
piracy grounds and against Korea and Japan on grounds of restrictive
practices in autos and auto parts under the 301 provisions of the US Trade
Act of 1988, which mandate the US executive to take retaliatory action
against those countries deemed as unfair traders or abetters of violations
of the intellectual property rights of US corporations.

                              Free Trade Derailed at Osaka

	At the actual summit itself, the Japanese and Asian view prevailed.  A
close reading of the "Osaka Action Agenda" reveals that while it broadly
reaffirmed the Bogor goal of regional trade liberalization and declared that
all economic sectors would be included in liberalization plans, it nevertheless:

	o explicitly supported the Japanese position that economic cooperation
(aid) and trade facilitation were equally important "pillars" of APEC as
trade liberalization;

	o affirmed the Asian position that liberalization would be carried out
voluntarily, flexibly, and in a non-binding fashion--precisely what Malaysia
and Thailand had argued for in their respective appendices to the Bogor
Declaration;

	o disbanded the Eminent Persons' Group, which Asian governments had
increasingly attacked as a tool of the American-Australian free trade axis.

	Not surprisingly, the pro-free trade magazine The Economist ridiculed the
Osaka Action Agenda as a "No action, no agenda" document that "committed
nobody to anything."

	In the view of the US and the free trade lobby, then, Osaka was a retreat
from Bogor.  But Osaka, they also knew, was not the last word in APEC's
evolution.  At Osaka, the 18 member countries agreed to submit their
individual liberalization plans for collective review and adoption in 1996.
Washington hoped to get the free trade agenda back on track by insisting on
the submission of detailed liberalization plans at the meetings of APEC's
senior ministers and trade ministers in Cebu in May, Christchurch, New
Zealand in July, and finally in Manila in November.  The individual country
programs could then be subjected to assessment along the Osaka guidelines of
"comprehensiveness," "comparability," and "transparency," so that they could
be "harmonized" in accordance with the principle of "concerted collective
liberalization" referred to in the Osaka document.  

	In short, Osaka may well have enshrined the principle of non-binding,
voluntary, and flexible liberalization, but the US and the free trade lobby
was determined to keep the liberalization agenda on track via sustained
pressure, using other Osaka "principles" as well as non-APEC mechanisms,
like the implicit threat of continuing to employ unilateral trade action to
open up Asian markets if multilateral means failed..  In this enterprise,
Washington, Australia, and New Zealand--the main free traders-- set great
store on Manila being the host of the event.  Seattle, Bogor, and Osaka had
underlined the decisive role of the host government, and in the
administration of President Fidel Ramos, Washington saw a believer in trade
and investment liberalization.

                                   Subic: A Return to Bogor?

	However, the individual country submissions during the senior officials'
meeting in Cebu in May underlined how difficult a task faced anybody
confronted with harmonizing 18 plans submitted by governments with differing
commitments to the Bogor ideal.   According to a report of the Japan
Economic Institute in Washington, the proposals submitted in Cebu "vary
considerably in their scope and specificity...Although the plans remain
confidential, some generalized assessments became available.  Australia and
Japan, for example, reportedly submitted lengthy documents with fairly
detailed proposals in each of 15 economic areas.  Some APEC officials have
hinted, though, that even these proposals leave room for improvement.  The
American proposal, too, is considered among the most complete of those
submitted in Cebu, although it reportedly contains only sketchy coverage of
certain areas--such as competition policy and trade in services.  Plans
submitted by Indonesia and the Philippines also received high marks."

	The report, however, went on to descibe China'a action plan as "not every
detailed, providing only a general outline of Beijing's strategy for meeting
the forum's goals.  Thailand's proposal, too, addressed only a handful of 15
areas...Some APEC officials also described Malaysia's initail offers as
disappointing."

             The situation had apparently not improved by the time APEC's
trade ministers met in Christchurch two months later, in mid-July.  Putting
the best face to what was obviously a disappointing process, Department of
Trade and Industry Secretary Rizalino Navarro of the Philippines, the APEC
ministerial chairman, said that the action plans were of  "uneven quality."
A key Thai trade official predicted that, in fact, there would be little
chance to discuss, much less harmonize, action plans before the Subic summit
because "each APEC member would likely wait until the last meeting of senior
officials, immediately before the November summit, before submitting its
full action plan."  Which means that  the process of consultation on the
plans wll have to be deferred to 1997, with the burden of harmonizing the
plans falling on Ottawa, next year's host, rather than Manila.

	The stalling strategy adopted by some of Asia's APEC members has been
paralleled by other developments subversive of the regional free trade
ideal--which indicates that the "Bogor spirit" might be difficult to
resurrect this year.  For instance, in a virtual rerun of its behavior in
1995, the US has shown that it continues to prefer unilateral action to
multilateral resolution of trade disputes, threatening to again club China
with Special 301 on "intellectual piracy" and pressing Japan to give US and
other foreign firms a guaranteed 20 per cent share of its semiconductor
market.  South Korea and Japan have served firm notice that they will not
open their agricultural markets any more than they have already committed
themselves to under GATT.  Ironically, even the Suharto government, whose
pro-free trade instance was instrumental in the adoption of the Bogor
Declaration, has decreed a series of protectionist measures designed to
create a local car industry (connected to members of the Suharto family, of
course!) that the US has denounced as violations of both GATT and the spirit
of Bogor.

	In a speech delivered in Sydney in June, Malaysian International Trade
Minister Rafidah Aziz said that the idea that APEC will eventually become a
free trade area is turning more and more into a  "dream," and predicted that
the body will remain what it is now, that is, a "loose consultative forum of
economies of different levels of development."  As host of the coming
summit, the Philippines would do well to listen to what its neighbors are
saying--and doing--and distance itself from the US-led effort to convert
APEC into a free trade area.  The APEC free trade design may well be an idea
whose time has come...and gone, and the only thing that can result from
leading a charge towards a goal that few Asian countries share is a
diplomatic disaster.

*Dr. Walden Bello is co-director of Focus on the Global South, a program of
Chulalongkorn University in Bangkok, and a professor of sociology and public
administration at the University of the Philippines.  He is a co-author of
Challenging the Mainstream: The Asia-Pacific Development Debate (Hong Kong:
ARENA, AAYMCA, CCA-IA and DAGA, 1995) and several other books on the
political economy of East and Southeast Asia.