Divided and Distracted, APEC Prepares to Meet
International Herald Tribune
November 14, 1998
Michael Richardson

As the Asia-Pacific Economic Cooperation forum prepares to admit three new members on Saturday, before heading into its annual summit meeting next week, the group appears more divided and distracted than at any time since it was formed in 1989.

Such disarray and unimpressive leadership, analysts say, could hardly come at a worse time for the group, which was established to knit together politically and economically diverse countries on both sides of the Pacific. Many of the previously turbocharged economies of East Asia are reeling under the impact of deepening recession, rising unemployment, shrinking investment and drastically weakened companies and banks.

These regional problems, and their potential for worsening the fragile global financial system, challenge APEC to "adopt a vigorous set of timely, concrete actions to address the crisis," Jane Skanderup, assistant director for programs and development at the Pacific Forum CSIS think tank in Honolulu, said Friday. "If not, APEC is in serious danger of becoming irrelevant."

With the addition of Russia, Peru and Vietnam on Saturday, the organization's 21 members will have, according to 1997 figures, a total combined gross domestic product of $14 trillion, accounting for about 58 percent of world income and 47 percent of world trade, officials say.

Yet as APEC has become larger, it has also become more unwieldy and fractious. It is now deeply divided over whether open markets are a help or a hindrance in the current crisis, with the world's two largest economic powers — the United States and Japan — lining up on opposite sides of an increasingly bitter and damaging debate.

The U.S. trade representative, Charlene Barshefsky, said Friday that Washington was growing increasingly impatient with Japan on a number of issues, including its resistance to full participation in an APEC fast-track trade liberalization package.

"We had an exceptionally blunt set of interchanges," she said after a meeting with the Japanese trade minister, Kaoru Yosano.

Later, Ms. Barshefsky accused Japan of using aid money to try to buy support for its protectionist position.

"Japan has gone round the region offering assistance in the form of money to countries willing to back away from the initiative," she said. "Japan is actively discouraging countries from liberalizing. That is terribly disturbing and destructive."

APEC senior officials ended a three-day meeting on Friday without an agreement on the fast-track initiative and said it was now up to their ministers and leaders to work out a deal.

The organization is also distracted by political differences, including the treatment of Anwar Ibrahim, the former deputy prime minister of Malaysia.

Mr. Anwar complained that he was beaten by the police after his arrest under the draconian detention-without-trial provisions of the country's Internal Security Act.

The U.S. secretary of state, Madeleine Albright, hopes to meet Mr. Anwar's wife during her visit to Malaysia for the organization's annual ministerial talks, which start Saturday, the U.S. Embassy here said Friday.

The move is seen in Kuala Lumpur as a significant new gesture of U.S. disapproval of the Malaysian government's treatment of Mr. Anwar, who cultivated close ties with many countries and international financial institutions as deputy prime minister and finance minister.

Mr. Anwar's trial on corruption and sodomy charges began earlier this month amid extensive foreign interest. To avoid further controversy, it was adjourned Friday and will only resume after APEC leaders finish their two-day summit meeting in Malaysia on Wednesday.

In a move that analysts say will hardly contribute to good working relations on trade and other contentious issues at the meetings, U.S. officials said that Mrs. Albright would not hold any bilateral meetings with Malaysian officials while she is in Kuala Lumpur.

To add weight to their governments' official expressions of displeasure, President Bill Clinton of the United States and Prime Minister Jean Chretien of Canada have declined traditional bilateral meetings with Prime Minister Mahathir bin Mohamad, who will be chairman of the summit.

This contentious approach worries some other APEC countries, among them Australia, which lines up on the side of the United States and Canada in the open markets debate.

Prime Minister John Howard of Australia said he planned to meet Mr. Mahathir. "I think it's very important in circumstances such as this — given the character of our relationship and given the importance of the bilateral relationship and the fact we are part of this region — that we don't just automatically follow the stances of countries that are not part of this region," he said.

"If you have concerns about what may be happening inside a country, your obligation is to meet face to face with the head of government of that country and to express those concerns."

Ostensibly, the U.S. disagreement with Japan is over Tokyo's refusal to carry through on an accord reached by APEC leaders a year ago to lower tariffs "voluntarily," starting next year in nine key trade sectors, including fishery and forest products — which are politically sensitive for the Japanese government.

But analysts said that now that the full force of the economic crisis has broken over East Asia, many other governments in the region are either supporting Japan's protectionist position or using it as a pretext to delay painful market-opening measures. These include Malaysia, which has imposed currency controls to shield its economy from what Mr. Mahathir says is the failure of the international community to regulate damaging currency speculation.

At issue is whether APEC should be pushing ahead with trade and investment liberalization or concentrating on other measures to help its worst-affected members recover from the economic crisis.

"The worst possible response to the crisis would be to put up the shutters," Mr. Howard said. "That would result in competition to raise tariffs and barriers within the region and outside."

Not including Russia, Peru and Vietnam, APEC 's members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States.

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