New Protectionism May Derail Asian-Pacific Forum's Liberalization Agenda : Recession Makes Trade Plan Doubtful
International Herald Tribune
October 27, 1998
Michael Richardson 

Just three weeks before leaders of the Asia-Pacific Economic Cooperation forum hold their annual meeting, trade liberalization, a centerpiece of previous summits, risks being derailed by rising protectionist sentiment, officials and analysts say.

"The Asian economic crisis poses a huge challenge to APEC," Singapore's information minister and second minister for trade and industry, George Yeo, told a recent preparatory meeting of the group in Mexico.

"The process of rebuilding the affected Asian economies is going to be slow and painful. Measures providing short-term relief are often at the expense of long-term growth."

The Indonesian foreign minister, Ali Alatas, said in a recent interview that the group must "adjust" to the reality of the region's economic troubles by shifting the focus of the heads of governments meeting in Kuala Lumpur from trade reform to finding ways of overcoming the recession and the damaging side-effects of huge and sudden swings in the flows of capital in and out of markets.

Mr. Alatas's comments reflect the anxiety among a number of Asian members of APEC that rapid opening of their economies will only aggravate the crisis.

He said that the region remained committed to APEC's program of long-term trade and investment reform.

"But we hope and believe that APEC cannot close its eyes to the problems that we are facing," Mr. Alatas added. "How can we talk about liberalization without also realizing that the economies are in severe crisis?"

Malaysia, the host for the meeting, last month imposed controls to prevent "speculation" against its currency. On a recent visit to Tokyo, Prime Minister Mahathir bin Mohamad said that powerful proponents of unfettered free markets had "destroyed countries and regions, thrown millions out of jobs and precipitated starvation, riots, political unrest and the overthrow of governments."

Some U.S. officials and legislators are concerned that Malaysia will use its influence over the agenda at the Kuala Lumpur meeting to postpone trade liberalization, at least until economic recovery takes hold in the region.

Officials said that Malaysia was among an influential group of East Asian APEC members, including also Japan, China and Indonesia, that wanted the focus of the summit shifted from contentious short-term trade liberalization to other measures that would help economies recover and protect them from future currency shocks.

Australia is proposing a compromise plan under which at least partial short-term trade-opening measures would be agreed upon in Kuala Lumpur.

Prime Minister John Howard said Thursday that such measures should be accompanied by APEC support for reform of the international financial architecture, another global round of trade-liberalization negotiations under the World Trade Organization and "decisive action to improve the transparency and accountability of government and corporate decision-making."

But the United States is insisting that a plan adopted by the APEC summit meeting in Vancouver, British Columbia, a year ago to accelerate free trade in the Asia-Pacific region in nine major industrial sectors from 1999 should proceed as scheduled because it would help restore investor confidence and stimulate growth.

APEC earlier set a target of free trade in the region by 2010 for developed economies and 2020 for the rest.

The fast-track plan, agreed upon before the recession really started to bite in many East Asian economies, would cut tariffs and harmonize regulations in sectors ranging from fishery and forest products to chemicals, energy, telecommunications and toys, opening up trade with an estimated value of $1.5 trillion

APEC, formed in 1989, comprises 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.

Russia, Peru and Vietnam will join next month, bringing the total membership to 21.

The United States deputy trade representative, Richard Fischer, said last week that "the major initiative" of the Nov. 17-18 summit meeting had to be the "commitment made by all the APEC nations at the last summit to voluntarily liberalize the tariff regime affecting nine major sectors of the economy."

He said, "We have some work to do to secure that early voluntary sector liberalization exercise. But we expect to be successful."

Mr. Fischer added that the most contentious areas were likely to be fisheries and forestry, where Japan had taken "a difficult position."

Asian officials said that with the Japanese economy in a prolonged slump, the governing Liberal Democratic Party was under increasing pressure from interest groups in farming, forestry and fisheries not to agree to any early opening of these areas to foreign competition.

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