Difficult Meeting Forces a 'Reality Check' on Goals : Economic Turmoil Means Lower Expectations for APEC 
International Herald Tribune
November 20, 1998
Michael Richardson 

As the Asia-Pacific Economic Cooperation forum enters its 10th year after a sometimes stormy meeting here of national leaders and other high-ranking officials, the group seems to be grappling with political, trade and financial problems that are either too big or too hot for it to handle.

But as the heat and dust started to settle Thursday, some officials and analysts said that the buffeting the group had received might turn out to be a useful reality check, for the organization and its critics alike.

"People had unrealistically high expectations," said Prime Minister John Howard of Australia. "They have undergone a reality check, but that doesn't mean to say there isn't still enormous benefit and a great deal to be derived from the organization."

In the heyday of supercharged growth and booming trade in the region, it was relatively easy for APEC governments to cut tariffs and open markets, analysts said. But now that many countries and industries are being hurt by the current economic slowdown and unemployment is rising, it is more difficult to ignore demands for protection of national interests.

"It's not surprising that trade liberalization has not only become less important for APEC but more thorny," said Andrew Fung, an economist at Standard Chartered Bank in Singapore.

While the leaders of the 21 APEC member economies failed to produce a concrete plan of their own to deal with the region's financial crisis, they issued a broadly worded pledge at the end of their meeting Wednesday to pursue a "cooperative growth strategy" to hasten economic recovery.

They also "renewed" their commitment to a 1994 plan agreed to in Bogor, Indonesia, to achieve free and open trade and investment within APEC by 2010 for developed nations and 2020 for the rest.

"It's notable that despite the pressure of this crisis, the momentum for liberalization in this region is very much intact," a senior U.S. official said. "It may look as if it's slowed in some sense, but what's significant is that it's still moving forward."

Nonetheless, the continued trade opening now being sought by President Bill Clinton of the United States as he visits Japan will be difficult to achieve, other officials and analysts warned.

Among the "too-hot-to-handle" issues passed on to other organizations by APEC this week was a fast-track liberalization plan to eliminate tariffs on trade valued at $1.5 trillion in nine sectors.

The plan was agreed in principle by all APEC members a year ago, before the full force of the financial crisis hit the region. But in Kuala Lumpur, Japan adamantly refused to include two of the agreed sectors — fish and wood products — in the tariff-elimination plan. Both of those sectors are represented by politically powerful constituencies in Japan.

Under a compromise deal worked out by APEC ministers, the issue was pushed to the World Trade Organization, with U.S. officials saying there was a good chance a global accord covering all nine sectors could be reached in 1999.

But Japanese officials said privately that as far as Tokyo was concerned, the nine sectors must be part of another comprehensive round of global trade negotiations, one that will only start in 2000 and probably will last for several years.

The APEC summit meeting also passed along two other issues of importance to governments and the private sector to other organizations.

A study of currency traders was referred to an ill-defined international task force, and a blueprint for global financial change was shuffled to an expanded version of the Group of 22 nations, which links finance ministers and central bankers from developed and emerging countries, some in the APEC region and some in other parts of the world.

APEC's unity and clout — its 21 members account for more than half of the world's economic output and trade — took a hit when Mr. Clinton last weekend canceled his trip to the Kuala Lumpur meeting to handle the U.S. confrontation with Iraq.

When Vice President Al Gore — at a business conference on the sidelines of the meeting — praised the reformasi, the movement that is campaigning to bring down the government of Prime Minister Mahathir bin Mohamad of Malaysia, the chairman of the summit, Malaysian officials were outraged.

Many other APEC nations, even those normally in step with Washington, criticized Washington for bringing politics to a forum set up to promote economic cooperation.

But Prime Minister Jenny Shipley of New Zealand, whose country will host year's APEC meetings, said that she did not believe the issues of human rights and democracy raised by Mr. Gore had disrupted the work of the summit.

"We were not distracted," she told Reuters Television, even though "the public rhetoric may have led you to believe that."

Still, many business executives remain disillusioned by APEC's priorities and performance.

Jeffrey L.S. Koo, chairman and chief executive of the Taiwan company China Trust Commercial Bank, said APEC was not organized to deal with major financial problems because trade and foreign ministry officials dominated its councils. This should be changed by integrating finance ministers more closely into the work of the group, he added.

"This region has a massive need for injections of long-term capital and equity investment," said Victor Fung, chairman of the Hong Kong Trade Development Council. "We have pushed very hard for APEC governments to implement a nonbinding code they approved in 1994 to encourage investment. Yet the code has not yet been implemented."

Gareth Evans, the former Australian foreign minister who was chairman of the first APEC ministerial meeting, in Canberra in 1989, said the group had "dropped the ball" in another area vital to the business community — reducing trade and investment costs by mutual recognition of technical standards and harmonizing customs and investment rules.

"It seems to have got endlessly bogged down," he said, "so we are only getting small results."

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