[asia-apec 301] FOCUS-on-APEC#9 Part 2

[gonzalo]

APEC and WTO: The Washington Connection

by Walden Bello

The Asia Pacific Economic Cooperation (APEC) and the World 
Trade Organization (WTO) are said to be complementary 
mechanisms to achieve a liberal world trade regime that will benefit 
most of  the world's population.

After the November APEC Summit in Manila and the first WTO 
Ministerial Conference in Singapore held early in December, people 
are becoming impatient with such "ideological" statements.  Indeed, 
the lesson that many observers have drawn from the two meetings 
is how the two trade organizations can be manipulated to serve as 
complementary mechanisms to advance the interests mainly of 
their more powerful members.   

For them, the recent Information Technology Agreement (ITA) 
forged in Singapore is a powerful example of how the main link 
between APEC and WTO at this point is not the achievement of 
universal prosperity via free trade but hardline US trade 
diplomacy.

For some years now, the US has been trying to gain an agreement 
to liberalize trade in information technology and 
telecommunications.  The reason is not hard to find:  with superior 
technology in both product areas, US corporations are confident 
that with the elimination of trade barriers, they can extend their 
control of the international market beyond the 50 per cent they 
now have.  

Washington has been candid about its goals.  As US Trade 
Representative Charlene Barshefsky has stated, "Today, the 
United States accounts for nearly 50 per cent of all telecom revenue 
worldwide.  We cannot , and we will not, settle for a situation 
where we are unable to operate in the other half of the world's 
markets."    

In Washington's view, the main stumbling block has been the 
European Union, which has been extremely hesitant to lower its 
tariffs on US information products for fear this could drive 
European IT producers out of business.  Before Singapore, 
negotiations with Europe were getting nowhere.  This led to 
tremendous exasperation among Washington's trade diplomats, 
among them APEC Ambassador John Wolf, who warned in public 
that "Either the Europeans liberalize or they die."

As part of their strategy of breaking the deadlock with Europe, 
Wolf and the Washington trade team, around the middle of 1996, 
placed the achievement of an information technology agreement on 
the agenda of the forthcoming APEC Summit in Manila, to the 
surprise and consternation of many of Washington's Asian trading 
partners.  As in the case with Europe, there were a lot of 
hesitations among the APEC governments and business groups, 
many of whom feared that Washington's zero tariff proposal would 
wipe out their plans of building up information technology 
industries through tariff protection.  There was also resentment at 
being manipulated as bargaining chips in a high-stakes trade duel 
with Europe.  

These feelings ensured that by the conclusion of the APEC Senior 
Ministers' Meeting on November 23, the most Washington could 
get was a draft declaration that supported the liberalization of the 
IT sector but in very general terms.

What happened next is well described by Martin Walker of ÔThe 
GuardianÕ:
"At breakfast with President Ramos of the Philippines, [US 
President] Clinton reviewed the tentative agreement...and said: 
'This unacceptable--we have to do better.'  Ramos then rewrote the 
communique, and Clinton and his staff spent the rest of the day 
lobbying the other Asian leaders to achieve the far more ambition 
Information Technology Agreement."

After 16 hours straight engaging in what APEC guru C. Fred 
Bergsten described as "the most intensive diplomacy I have ever 
seen,"  Clinton, with the assistance of Ramos, got what he wanted:  
an APEC Manila Declaration that called for "the conclusion of an 
information technology agreement by the WTO Ministerial 
Conference that would substantially eliminate tariffs by the year 
2000..."

Thus, Washington had "momentum" coming into Singapore two 
weeks later.  Charlene Barshefsy declared in her speech at the 
WTO's opening plenary on Dec. 9 that, as far as Washington was 
concerned, achieving an ITA was at the top of the ministerial 
meeting's agenda.  Many delegates, especially those from the 
developing countries, reacted apprehensively since they had 
expected the meeting to focus on discussing and proposing 
solutions to problems encountered in implementing the ambitious 
27,000-page GATT Uruguay Round Accord ratified two years ago.

Such concerns were brushed aside, as Barshefsky focused the 
energies of the WTO's biggest powers, the US and the European 
Union, on the achievement of an IT pact.  In  the end, Washington 
got what it wanted:  an agreement among 28 countries accounting 
for over 85 per cent of world trade in IT products to reduce tariffs 
to zero by the year 2000.   In these negotiations, the US employed 
the "APEC mandate" to good effect.  As Barshefsky noted in her 
final press conference, "Without the support of APEC for such an 
agreement, there was no way this agreement would have come out 
of Singapore."  

What the US trade representative failed to mention was that only 
nine of the 18 APEC countries that signed the Manila Declaration 
also signed on to the Singapore ITA Accord, the most significant 
exceptions being the Philippines, Thailand, Malaysia, and Chile.  
This fact was, however, drowned by the impressive show of trade 
diplomacy, whereby armed with the APEC Summit declaration on 
zero tariffs on IT, Washington could bring Europe to the table and 
focus the first WTO ministerial meeting on achieving something 
that would push principally US interests.  

Many of Washington's APEC partners are still shaking their heads 
at the display of economic might and consummate trade diplomacy 
that enabled the Americans, in the space of three weeks, to use the 
"APEC consensus" to achieve an IT agreement at the WTO that 
Barshefsky admitted, quite openly, "would bring substantial 
benefits to the United States."  Let them be warned:  it is not likely 
to be the last time that Washington will use the APEC-WTO nexus 
with such devastating effectiveness.

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Ceasefire in Singapore

by Walden Bello

What a difference two weeks and two locales make!

Two weeks earlier, in Manila, spokespeople of the Philippine 
government and representatives of the Manila People's Forum on 
APEC like myself had been slugging it out on television shows.

Now, here we were in Singapore in mid-December, in the midst of 
the World Trade Organization (WTO), sharing notes, ideas, and, 
yes laughter.  Unusual perhaps but understandable, for common 
interest had pushed Philippine NGO's and the Philippine 
government to positions close to one another's.  Indeed, in 
Singapore we were working on the same side: the side of the South. 

During APEC,  the Philippine government behaved as the 
champion of indiscriminate trade liberalization.  In contrast, in 
Singapore, from Dec. 9-13, the Philippines took the position of 
ASEAN and of the South more generally, which was to oppose 
new liberalization initiatives in the WTO.

Away from the close embrace of Washington at APEC, Philippine 
government representatives in Singapore expressed a more critical 
view of the US and the North's trade policies.  In fact, in his speech 
before the plenary on Dec. 10, Secretary of Trade and Industry 
Cesar Bautista sounded very much like an aggrieved Third World 
spokesperson:
o Some northern countries (read United States), Bautista claimed, 
were not living up to the GATT Agricultural Accord because they 
were turning export subsidies outlawed by the agreement into 
domestic support subsidies.   
o They were not living up to the Textiles Accord because they 
were deliberately postponing lifting quotas on items of commercial 
relevance to Third World countries until the latter stages of the 10-
year phaseout period.
o Echoing widespread Southern sentiment that a clause on 
observing "core labor standards" could become a mechanism of 
disguised protectionism by the North, the secretary warned that 
labor issues should remain the province of the International Labor 
Organization (ILO) rather than the World Trade Organization.

Perhaps the most notable divergence from its behavior at APEC 
was the Philippines' joining APEC members Malaysia, Thailand, 
and Chile in not signing on to the Information Technology 
Agreement (ITA) negotiated in the corridors of the Singapore 
International Convention Center by the US, European Union, and 
26 other countries.  This was surprising since President Fidel 
Ramos had only two weeks' earlier served in Manila as Bill 
Clinton's willing little helper in pressuring other APEC member-
countries to sign on to a Declaration explicitly targetting zero 
tariffs in information technology by the year 2000.

In meetings with Philippine NGOs at the Oriental Hotel, Bautista 
told us the reason for the Philippines' interesting turnaound:  only 
the Philippine Congress had the authority to declare zero tariffs for 
any category of imports.  This was a very pleasant revelation, 
indeed, for during the APEC debate, we in the Manila People's 
Forum had lambasted the government's "Individual Action Plan" 
for committing liberalization initiatives, like the repeal of the Retail 
Trade Nationalization Act, that had not yet received congressional 
approval.

During these consultations--which included old adversaries like 
Ambassador J. Antonio ("Ton")  Buencamino and Assistant 
Secretary of Trade and Industry Edsel Custodio, one the one side, 
and old allies like UP Professor Oscar Zamora and MODE's 
Jocelyn Cajuiat and Aurora Regalado on the other--disaffection 
over other US and North-led initiatives bubbled up:

The European-led push to have a WTO-sponsored agreement on 
investment was a dangerous one that had to be stopped.  Here the 
Philippine officials said that, like the other ASEAN countries, their 
position was to specify in the Ministerial Declaration that any 
studies of investment had to be carried out by UNCTAD (United 
Nations Conference on Trade and Development)  and not the 
WTO, and that such studies should not be interpreted as giving the 
green light to negotiations for a investment treaty.
o Similarly, the North's--and particularly, the United States'--
insistence that government procurement policies should be 
liberalized and brought more fully under WTO surveillance was 
resented by the Philippine officials, whose position was to 
welcome transparency in procurement processes but to insist that 
any agreement must respect "national policy" (read preferential 
treatment for local firms).

>From all indications, the Philippine delegation contributed its share 
to expressing Southern concerns during the informal meetings 
where the key decisions were made during the WTO meeting, 
though it fell to Malaysia's colorful Trade Minister Rafidah Asiz to 
serve as the standard bearer of the South.

Why the difference in the Philippine government's  behavior in 
APEC and the WTO ministerial meeting?  

There were several reasons, in my view.

First, unlike in APEC, the Philippines came to Singapore with its 
positions synchronized with ASEAN, which continues to be 
dominated by trade officials skeptical of doctrinal liberalization and 
suspicious that global free trade arrangements mainly benefit the 
North.

Second, the stakes in the North-South struggle were clearly much 
greater at the more institutionalized GATT-WTO than in APEC, 
the direction of whose evolution is still uncertain.  The WTO, 
Philippine negotiators have realized, is a real organization with 
teeth, where agreements have really grave consequences.  During a 
bilateral meeting with the US in Singapore, for instance, the 
Philippine delegation had first hand experience in how the big 
powers can use the WTO process to turn the screws on smaller 
countries:  US Department of Agriculture officials demanded that 
the Philippines import the originally submitted minimum access 
volume of 49,000 metric tons for frozen pork despite Secretary of 
Agriculture Salvador Escudero's best efforts to explain that this 
figure had been erroneously calculated and should have been only 
15,000 metric tons..

Finally, few of the free trade ideologues (read economists) that 
dominate the discussion of trade policy in Manila were present in 
Singapore.  The members of the Philippine delegation were the 
nuts-and-bolts negotiators who have experienced the realpolitik 
rather than speculated on the theory of world trade.  As Secretary 
Bautista revealingly noted during his plenary speech, his 
assessment of global trade developments was influenced by his not 
being an economist but being a chemical engineer by training.   

Singapore will probably be remembered as one of those rare 
instances when Philippine NGOs and the Philippine goverment 
came to a meeting with non-antagonistic positions.  Unfortunately, 
this broad congruence of views is not likely to be maintained in 
Manila, where trade discussions in policy circles tends to be 
dominated by the hardline free trade ideologues and economists 
who drown out the more cautioous views of the negotiators and 
technicians.  

It was thus with some regret that I greeted the end of the Singapore 
meetings.  As I told Edsel Custodio, "It's interesting how we can 
communicate and share positions outside the Philippines.  Once we 
get back home, banatan na naman." (ItÕs back to slogging it out). 
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