Widening rifts in APEC

By Eva Cheng Preparatory meetings in the lead-up to the Asia-Pacifc Economic Cooperation (APEC) conference scheduled for Osaka, Japan later this month, indicate that the 18 member nations will be unlikely to agree on the timing of the removal of trade barriers, in particular, on agricultural goods. A year ago, at Bogor, Indonesia, APEC's member nations agreed in principle to remove all barriers to "liberalise" trade over the next 25 years. The Osaka meeting is supposed to reach specific agreements on policies. The developed economies in APEC — the US, Canada, Australia, New Zealand and Japan — were to free their trade by 2010. The other APEC members — South Korea, China, Taiwan, Hong Kong, Papua New Guinea, the ASEAN six (Thailand, Malaysia, Singapore, Philippines, Indonesia and Brunei), Mexico and Chile — have till 2020. But negotiations on specific policy proposals to implement this goal have not had much success. As late as November 1, Japan was adamant that it would not agree to meeting the tariff removal timetable for its agricultural products, despite Australia's recent threat to pull out of APEC if such exceptions are accepted. For its ultimatum to be ignored, especially by a major member, is a slap in the face for the Keating Labor government which has sought to portray APEC as its creation. Apart from Japan, over the past few months, China, South Korea and Taiwan have also said that they want similar exemptions. The idea has been rejected by the remaining members, most energetically by the US and Australia. While rejecting north Asian countries' demands for more time to open their agricultural markets, in September the US extended subsidies to its agricultural exporters to help them sell their products in Asia. The concerns of dissenting members are not confined to agricultural products. The sweeping free trade proposals will endanger many sectors of the less developed member nations' economies; smaller producers, service providers and entire industries will be at risk of being wiped out if they have to compete directly with multinationals without tariffs and other protective measures. Last year Malaysia also declared that it would not commit itself to the timetable, while Singapore had asked for a 10-year extension on top of the 25-year timetable for developing member nations to remove their "trade barriers". According to the free trade agenda pushed most enthusiastically by the US, these barriers are unjustified and any country which refuses to dismantle them, should be shut out of its markets. As the key buyer of many Asian exports, the US is in a strong position and has been active in exploiting this leverage. Tokyo's bid for exemption reflects pressure from Japan's farming sectors which are traditionally well organised and have considerable electoral clout. But not all affected sectors in the APEC member countries have this kind of influence on their governments. The massive number of workers who are likely to be displaced if the trade "reforms" move ahead have an even weaker voice. The free trade proposals cover services as well as goods. They have the potential to affect practically all sectors of an economy, including the strategic sectors of banking, insurance, telecommunications and mass media which have traditionally been considered too sensitive to allow to slip out of state control. Under APEC's proposal to extend free trade from physical goods to services and investments, these critical sectors would be left at the mercy of big capital, which has minimal concern, if any, for social priorities. Considering the sweeping impact these measures would have on most developing economies, it is unlikely that any of these countries can sensibly commit themselves to the timetables set out at Bogor. There is also no clear agreement on crucial questions such as whether new market openings are exclusive to APEC members. Over the last few months, the US has been pushing to make APEC's trade benefits exclusive to its member states while Australia has been arguing for a "non-discriminatory" system. The US wants the APEC standards to be formally institutionalised but many Asian countries prefer an informal arrangement. Both the US and Australia have opposed all requests for exemptions with the argument that the market opening has to be "comprehensive". The Osaka meeting will test whether the Bogor agreement was more than rhetoric.