[asia-apec 874] IN FOCUS: APEC

[Interhemispheric Resource Center]

Dear Friends-

I hope that this report, released today, will be useful. Please feel free
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Erik Leaver
Communications Director
Foreign Policy In Focus
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Foreign Policy In Focus: Asia Pacific Economic Cooperation  

November 1998
Vol. 3, No. 35

Written by John Gershman, Institute for Development Research
Edited by Tom Barry (IRC) and Martha Honey (IPS)

Key Points
o	APEC is the largest, most diverse trans-Pacific forum of its kind. 
o	APEC has adopted a declaration that envisions elimination of all trade
and investment barriers by 2010 for the wealthiest countries and 2020 for
the poorer ones. 
o	APEC is in crisis due to the region's social and economic crisis and the
growing opposition to the U.S.-dominated trade and investment
liberalization agenda.

Asia Pacific Economic Cooperation (APEC), founded by a dozen countries in
1989, has become a forum of twenty-one countries that addresses economic
issues in the Asia-Pacific region. This diverse group includes the U.S.,
Canada, China, Taiwan (officially Chinese Taipei), Hong Kong, Japan,
Australia, New Zealand, the Philippines, Thailand, Singapore, Indonesia,
Malaysia, Brunei, South Korea, Mexico, Papua New Guinea, and Chile. At the
November 1998 meeting, three additional countries-Peru, Russia, and Vietnam
-will join as full members.

Together, the APEC countries account for over 50% of the world's
merchandise trade, half the global GNP, and two-fifths of the world
population. Operating from a modest secretariat in Singapore, APEC sponsors
regular meetings and annual summits of senior government officials and
heads of state. APEC operates by consensus rather than through binding
agreements and the type of legalism evident in the North American Free
Trade Agreement. In this process of "concerted unilateralism," APEC members
define broad regional goals but leave the specific aspects of
implementation to each nation. 

APEC consists of three occasionally overlapping processes. The first is
economic and technical cooperation promoting economic and human resource
development, or "Eco-Tech." Second is trade and investment liberalization,
an agenda that emerged at its 1993 meeting when President Clinton invited
the 18 APEC leaders to Blake Island, Washington, for the first-ever APEC
Economic Leaders Meeting. The Bogor Declaration, adopted in 1994,
proclaimed the elimination of all trade and investment barriers by 2010 for
APEC's wealthiest countries and 2020 for its poorer ones. Subsequent
meetings led to a refinement of these goals in terms of Individual and
Collective Action Plans that were to provide the actual liberalization
commitments.

At the 1997 Vancouver meeting, APEC leaders agreed to liberalize trade in
nine sectors on a fast track basis covering $1.5 trillion in trade (known
as Early Voluntary Sectoral Liberalization). Those sectors include:
chemicals, fisheries, forestry, energy goods and services, environmental
goods and services, gems and jewelry, medical equipment, toys, and a
telecommunications mutual recognition agreement. Of these, the last was
approved in June 1998, while liberalization in fisheries and forestry
remain actively resisted by Japan. 

The third-and weakest-process is the sustainable development agenda, which
also emerged within APEC in 1993. To date, this process has been
characterized by a flurry of small-scale, capacity-building projects and
little else beyond statements of principles and a meeting on marine
resources earlier this year.

The weakness of the sustainable development agenda has five major causes:
poor leadership by the wealthier countries, most prominently the United
States; popular opposition to APEC's free trade agenda; the failure to
connect the trade, investment, and environmental tracks; the weakness of
prosustainable development forces within negotiating governments (most of
which are dominated by commercial interests); and the inability of
pro-sustainable development forces from civil society to penetrate the
national and regional processes of policy formulation. 

The challenge of working with diverse economies and varying perspectives on
trade and investment regulation gives APEC a certain informality and lack
of cohesiveness. Although the APEC forum has declared its support for free
trade, many members oppose mandatory implementation schedules for
comprehensive tariff and quota reduction. Indeed, some
countries-principally Malaysia and Japan-have insisted that the
liberalization goals be nonbinding and have opposed the U.S. demand that
all economic sectors be opened to foreign trade and investment. Countries
that oppose the U.S. in its drive to convert APEC into another free trade
area would prefer that APEC remain a consultative organization that
facilitates technical cooperation on economic matters. 

Both APEC's inability to develop a positive response to the ongoing Asian
crisis and U.S. criticism of recent interventions by Hong Kong, Malaysia,
and China in currency and portfolio capital markets set the stage for a
clash at the 1998 APEC meeting over the scope of appropriate responses to
the economic crisis and the utility of APEC itself.

Attention by nongovernmental organizations (NGOs) to APEC has been growing
since the first Heads of State Summit in 1993. The Indonesian government
blocked a planned NGO forum in 1994, but NGOs success-fully organized
parallel summits in 1995 (Osaka), 1996 (Manila), and 1997 (Vancouver) and
plan to do so in Kuala Lumpur (1998) and Auckland (1999).


Problems With Current U.S. Policy

Key Problems 
o	Washington's free trade model for the Asia-Pacific region has met with
resistance from countries less enamored by the ideology of economic
liberalization and determined to maintain their own development strategies. 
o	U.S. policy in APEC promotes an economic model that downplays human
rights and sustainable development. 
o	U.S. policy has focused on enhancing U.S. corporate interests rather than
addressing the social and ecological costs of the current economic crisis.

Between 1989 and 1992, APEC had a relatively low profile within U.S.
foreign economic policy. During that period, NAFTA and the Uruguay Round of
the General Agreement on Tariffs and Trade (GATT) were Washington's top
free trade priorities. The 1993 Seattle APEC meeting, hosted by President
Clinton, marked both a higher priority U.S. role in the Asia-Pacific region
in general and a more coherently articulated free trade and investment
agenda for APEC. Clinton's free trade vision received strong backing from
Australia and New Zealand, but other countries-notably Malaysia-were less
than enthusiastic. 

For the U.S. government and business community, APEC offers an opportunity
to exercise economic leadership in an important world region. U.S. economic
objectives, however, have been at variance with those of a number of the
Asian members and with the goals of NGOs that are trying to get a voice at
the table in order to raise issues about human rights, labor, and
democratization. Washington regards APEC as an instrument to assert its
economic liberalization agenda, reduce its merchandise trade deficit with
the region, and build a regional free trade bloc with strong U.S.
participation, while serving to discourage Asian nations from organizing
into an exclusive trading bloc. 

The Asia-Pacific region has surpassed Western Europe to become America's
largest regional trading partner-both as a supplier of U.S. imports and as
a customer for its exports. Like NAFTA, APEC is regarded by the U.S. both
as a regional bulwark against advances of the European Union and as a lever
to strengthen Washington's economic liberalization agenda at the World
Trade Organization (WTO). By developing initiatives supported by a
significant group of APEC members, the U.S. uses APEC to build a "critical
mass" for incorporating its global liberalization agenda into the WTO. 

Washington has not been entirely successful in promoting its economic goals
in the Asia-Pacific region. In the context of the economic crisis, the U.S.
trade deficit with the region has been rising, but the U.S. has been able
to boost its share of foreign direct investment (FDI) in those countries
hardest hit by the crisis.

The primary resistance to expanding NAFTA into a hemispheric Free Trade
Area of the Americas (FTAA) comes from opponents within the U.S. who either
oppose the free trade agenda or oppose attaching labor and environmental
agreements to new trade accords. In the Asia-Pacific region, however,
opposition to the U.S. free trade juggernaut comes from both governments
and citizens of the region. Although the Clinton administration has
succeeded in winning rhetorical commitments to free trade, its proposals
for the establishment of a mandatory timetable for the implementation of a
free trade area have been consistently rejected. 

The Clinton administration's continued insistence on
liberalization-especially in the face of a massive economic crisis-is
widely reviled in the region as a vulture strategy. Rather than trying to
address the social costs of the crisis, Washington has focused on pursuing
policy reforms that would enable U.S. corporations to pick at the choice
carcasses of Asia's economic crisis. The U.S. had harsh words in particular
for the 1998 host, Malaysia's Prime Minister Mohamad Mahathir, for his use
of capital controls. 

Washington's narrow economic approach to APEC is problematic. The U.S.
argues that economic liberalization, democracy, and security in the region
are all mutually reinforcing (forming "three pillars" of foreign policy in
Asia). But with the scramble for market share dominating the U.S. agenda,
other issues get short shrift. U.S. policy demonstrates no abiding concern
for the patterns or effects of either economic growth or crisis in the
region, and Washington is a recalcitrant supporter, at best, of the calls
for demo-cratic reform from the region's citizens. 

Absent liberalization, the U.S. has no serious proposals to offer at APEC
regarding the economic crisis beyond those already proposed by the G-7. A
former member of APEC's Eminent Person's Group, C. Fred Bergsten has
proposed that APEC formulate a neo-Keynesian program to spend the $30
billion Japan recently offered the troubled Asian economies. The Japanese,
stung after the U.S. denounced a similar plan just over a year ago, are
likely to gracefully decline if such a proposal is offered. 

While the U.S. concentrates on overcoming the objections to what regional
leaders see as Washington's agenda for a U.S.-dominated pattern of
globalization, other problems raised by U.S. citizen groups and regionally
based NGOs receive little attention. A central complaint is that APEC is
opaque and undemocratic. As a result, citizen organizations have difficulty
raising their concerns about the development process in the Asia-Pacific
region. 

Although the U.S. has raised concerns about human rights and environmental
degradation in the region, it still allows its commercial ambitions to
overshadow these issues. This is clear in the current U.S. drive for
liberalization in forestry and fisheries. Rapid liberalization, in the
midst of a massive economic crisis and without regulations insuring
sustainable harvests, will only accelerate the region's rates of
deforestation and overfishing, already among the world's highest.


Toward a New Foreign Policy

Key Recommendations 
o	Washington should drop its insistence on comprehensive trade and
investment liberalization and recognize the validity of a plurality of
development models and priorities. 
o	The U.S. should support initiatives to develop rules for regulating
short-term capital flows and to address the social and ecological costs of
the current crisis.
o	The U.S. should insist that APEC become more transparent, participatory,
and accountable.

As the liberalization locomotive within APEC is stalled and new,
large-scale free trade agreements are unpopular at home, Washington could
seize the opportunity to pursue a less narrowly focused policy agenda
toward APEC. Trying to force liberalization on APEC member states has
failed, and maintaining it as the centerpiece of U.S. policy in the region
is counterproductive to Washington's stated goals of promoting democracy,
equity, and environmentally sustainable development. At a time when even
mainstream economists endorse capital controls, U.S. policymakers should
rethink their commitment to comprehensive economic liberalization. 

The conflicts over appropriate responses to the crisis have challenged
APEC's raison d'etre. As the world's broadest regional economic
institution, APEC is worth preserving if it can do two things: 1) catalyze
constructive action on the important regional and global policy issues
raised by the current crisis (such as regulating short-term capital flows
and addressing the social and ecological costs of the crisis) and 2) move
toward a more balanced sustainable development agenda. As first steps, the
U.S. could gain support for such an agenda by abandoning its
liberalization-for-everyone approach, increasing its support for
capacity-building efforts at the national and regional levels, and leading
by example at home.

U.S. policy should focus simultaneously on improving the transparency of
APEC negotiations and on expanding the APEC agenda to include issues of
concern to civil organizations other than Chambers of Commerce. Any effort
to make the APEC process more transparent and participatory should
encourage more citizen involvement at the national level (particularly in
the U.S.) in discussions about APEC policy. Also important is the
participation of nonbusiness citizen groups at the committee and
working-group level. Although the Clinton administration has occasionally
included NGO representatives in some U.S. delegations, this sporadic
inclusion falls short of the steps needed to open up the U.S. policymaking
process. Within APEC, the U.S. should facilitate NGO access to meetings and
should make documents publicly available. 

Human rights issues, while not on the formal APEC agenda, are slowly
forcing their way onto the backdrop of the meetings. This is primarily
because of demands by citizens in the region for democratization and
respect for human rights, including demands by groups in the 1998 host
country, Malaysia. Human rights have also been highlighted when previous
host governments have harassed NGOs or citizens engaged in protest or
parallel activities. The Philippine government banned Nobel Peace Laureate
José Ramos Horta and other potential "troublemakers" from attending the
Manila People's Forum in 1996, and Canada is in the midst of an
investigation of police repression of protestors that may implicate the
Canadian prime minister. The Malaysian government has made it clear it will
tolerate no "unruliness." 

The informal bilateral discussions that parallel the multilateral meetings
enable U.S. officials to raise issues not on the official APEC agenda.
These are prime opportunities to raise issues regarding the social and
environmental impact of the economic crisis and to emphasize respect for
human rights. While it is laudable that Clinton will not meet with Prime
Minister Mahathir to protest the detention of former deputy Prime Minister
Anwar Ibrahim, the inconsistency and hypocrisy that characterize U.S.
policy in the region reinforce regional sentiment that America's promotion
of democracy, worker rights, and environmental protection are self-serving
in nature. To overcome these criticisms and to chart a more responsible
foreign policy toward APEC and its member countries, Washington should
indicate that the U.S., too, needs to improve its own practice regarding
the environment and human rights. 

Specifically, we recommend that Washington take the following actions: 

o	Stop insisting on comprehensive trade and investment liberalization and
recognize the validity of Asian development models that allow for the
judicious intervention of government as a legitimate strategy in pursuing
industrialization and food security. 
o	Support regional mechanisms to scale-up successful strategies of
community-based natural resource management, encourage the transfer of
clean production technologies, and promote energy conservation.
o	Consistently implement existing labor rights provisions in U.S. trade
legislation, such as GSP provisions regarding the Export-Import Bank,
Overseas Private Investment Corporation (OPIC) operations, and the IMF. 
o	Create citizen advisory groups paralleling APEC working-groups to enable
NGOs and citizens to participate in the formulation of U.S. policy within
APEC. 

John Gershman (jgershman at igc.org) is a Research Associate at the Institute
for Development Research.


Sources for More Information

APEC Education Network 
Box 353690 
Seattle, WA 98195 
Voice: (206) 543-0663 
Fax: (206) 616-1978 
Email: Hellman at u.washington.edu 
Website: http://www.apec.org/ 
Contact: Donald Hellman 

APEC Secretariat 
438 Alexandra Rd. 
Alexandra Point 
Singapore 
Voice: (65) 276-1880 
Fax (65) 276-1775 
Website: http://www.apecsec.org.sg/ 

Asia Pacific Center for Justice and Peace 
110 Maryland Ave. NE, Box 70 
Washington, DC 20002 
Voice: (202) 543-1094 
Fax: (202) 546-1094 
Email: apcjp at igc.apc.org 
Website: http://www.apcjp.org
Contact: Andrew Wells

Asian Human Rights Commission 
Unit D, 7 Floor, 16 Argyle St. 
Mongkok Commercial Centre 
Kowloon, Hong Kong SAR
China
Voice: (8522) 698-6339
Fax:(8522) 698-6367
Email: ua at hk.super.net
Website: http://www.hk.super.net/~ahrchk

Focus on the Global South 
c/o CUSRI, Prachuabmoh Bldg. 
Chulalongkorn University 
Phyathai Road 
Bangkok 10330
Thailand 
Voice: (662) 218-7363 
Fax: (662) 255-9976 
Email: admin at focusweb.org 
Website: http://www.focusweb.org
Contact: Walden Bello

Nautilus Institute for Security and Sustainable Development 
1831 Second St. 
Berkeley, CA 94710 
Voice: (510) 204-9296 
Fax: (510) 204-9298 
Email: lzarsky at nautilus.org 
Website: http://www.nautilus.org 
Contact: Lyuba Zarsky 

Publications 

Vinod K. Aggarwal and Charles E. Morrison (eds), Asia-Pacific Crossroads:
Regime Creation and the Future of APEC (New York: St.Martin's, 1998).

Walden Bello and Jenina Joy-Chávez-Malaluan, APEC: Four Adjectives in
Search of a Noun (Philippines: Manila People's Forum on APEC, 1996). 

Focus on Trade, an electronic magazine produced by Focus on the Global South. 

Donald C. Hellman and Kenneth B. Pyle From APEC to Xanadu: Creating a
Viable Community in the Post-Cold War Pacific (New York: M.E. Sharpe, 1998).

Lyuba Zarsky, "APEC and the `Sustainable Development' Agenda," Asian
Perspectives, 1998.

World Wide Web 

APEC Education Foundation 
	http://www.apecef.org 

APEC Secretariat
	http://www.apecsec.org.sg

Good links on APEC
http://www.nautilus.org

Human Rights Watch
	http://www.hrwatch.org

U.S. State Department Bureau of East Asian and Pacific Affairs 
	http://www.state.gov/www/regions/eap/index.html

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