[asia-apec 511] Article: APEC takes stock of Asian economic turmoil

[Gatt Watchdog]

>From Export News, 6 July 1998, Christchurch, New Zealand (NZ Trade
Development Board)

APEC takes stock of Asian economic turmoil

Financial turmoil in the East Asian member nations of APEC has
impacted on a spectrum of economic sectors and is curtailing the
region's capacity to generate economic growth.

The social ramifications will continue to be far-reaching,
according to APEC trade ministers who met in Kuching, Malaysia to
review progress on implementation of trade and investment
liberalisation measures.

It is also evident that there is varying pace with which East
Asian members are facing up to the regional economic crisis.

Whilst some APEC economies affected by the financial turmoil must
undertake domestic policy initiatives to effect economic recovery,
other members could assist that process.

Individual Action Plans were reaffirmed as the primary means of
implementing APEC's trade and investment liberalisation agenda.
The trade ministers want member economies to submit revised IAPs
by 15 October and to consider the views of the business sector in
formulating such plans.  Malaysia submitted its IAP for peer
review in Kuching and Korea will do the same in Septmeber.

But there are doubts over the pace with which Japan might commit
to the process.  "We've given them more time but they've an
election coming and the country's adrift," says New Zealand's
Minister for International Trade Dr Lockwood Smith.  "We've given
them until September to tidy up their act.  They didn't expect
APEC to be united (on this)."

"But if Japan won't come in, we'll go without them," he told
Export News on his return from Malaysia, Japan and Taiwan.

The Japanese problems are appreciated.  In Japan it is
"extraordinarily difficult to do anything," says Smith, because of
the layers of politicians, officials and lobby groups.

"The Prime Minister and key ministers know what has got to happen
but, unlike New Zealand where ministers have the ultimate say, the
bureaucracy in Japan is very powerful."

This was evident, he says, from the presence of senior Japanese
officials at crucial sessions of APEC ministers.  The inertia of
the Japanese system could be overcome but a limiting factor is
lack of awareness by the Japanese public that the country is in
crisis.

"The ordinary people don't feel the crisis.  Their levels of
individual wealth are two-and-a-half times higher than New
Zealand incomes and they have high levels of savings," says Dr
Smith. "There's no pressure on the government to undertake
reforms.  In the mid-1980s many New Zealanders felt the country
was in a crisis; in Japan I doubt you'd find that feeling."

How this attitude is reflected in the forthcoming Japanese
election remains to be seen but regional concern and that of
countries like New Zealand and the USA is clear.  "I was in Tokyo
when the USA spent several billion dollars (supporting the JPY)
without Prime Minister Hashimoto's agreement to reforms".

Dr Smith says there is talk in the region that the Chinese
wouldn't be able to hold the renminbi but views on its resilience
vary.  "China's got a lot of head room to remain competitive," he
adds.  Productivity is rising enormously but the difficulty is how
quickly China can improve its position relative to a falling yen.

APEC trade ministers agreed that flexibility would be needed in
dealing with product-specific concerns raised by individual
economies in each of the nine sectors set down by national leaders
at Vancouver for early voluntary liberalisation.  This will mean
longer implementation periods in some cases and it was agreed
"developing economies" (such as China) should be allowed greater
flexibility.

Work is under way on more than 80 activities under Collective
Action Plans aimed at reducing transaction costs and speeding up
the movement of goods, capital, services and business people.
These trade facilitation activities are seen as bolstering the
confidence of members to make liberalisation efforts.

The Kuching meeting reaffirms the importnace of promoting a
broad-based understanding of the impact of liberalisation.  Just
before the next trade ministerial meeting in New Zealand in June
1999, New Zealand will host a seminar on case studies conducted as
part of the implementation plan.