Free trade slips down summit list

By Greg Ansley

CANBERRA - New doubts have been cast on the ability of the Auckland Asia Pacific Economic Cooperation forum summit to set trade liberalisation in the region back on track.

With the forum's trade ministers preparing to meet at the end of the month ahead of the leaders' summit in September, business focus is switching instead to the World Trade Organisation and prospects for a millennial round of trade negotiations.

"It doesn't look like free trade in the region by 2010 or 2020 is likely," Professor Lawrence Krause, coordinator of the Pacific Economic Cooperation Council's (PECC) annual economic forecast, said yesterday. "I think a new approach, a more traditional approach, is going to be required."

The 2010-2020 deadlines for the elimination of Asia-Pacific trade barriers, agreed at Bogor, Indonesia, in 1994 have come under increasing pressure in the wake of the Asian economic crisis.

A bid to accelerate the process collapsed on Japanese opposition at last November's summit in Malaysia, when Apec passed its proposals for the early voluntary lowering of trade barriers in nine key sectors to the WTO.

Forecasts released yesterday by the PECC show a region still struggling to emerge from crisis, with major domestic and political problems adding to the drag of international economic malaise.

Economic growth across the region is expected to increase from last year's 1 per cent to 3 per cent in 1999 - well below pre-crisis double-digit expansion - with continuing difficulties in Japan and the likelihood of at least one hike in US short-term interest rates before the end of the year.

A second consecutive year of negative growth is forecast for Hong Kong - whose position as both a financal centre and a transhipment centre for China is under threat - the political will for further reform of debt-heavy chaebols may wilt with recovery in Korea, and the foreign capital vital for Indonesian recovery will not return until political stability re-emerges and Indonesian-Chinese businessmen feel safe enough to go home.

Professor Krause, director of the Korea-Pacific programme at the University of California at San Diego, told a satellite seminar yesterday Apec had not only failed to predict the crisis but had missed its opportunity to prevent its onset.

"Apec can well be criticised for not having headed it off," he said.

"After all, they have ministerial meetings among finance ministers that might have done some good if they had really taken it to heart."

Professor Krause said that while the region could take some comfort from the fact that the crisis had not pushed it back towards protectionism, the Apec concept of open regionalism was under serious challenge.

He said the US in particular was likely to look instead at more traditional forms of negotiation through the WTO, although Apec remained a confidence-building institution and continued to have a role in global trade liberalisation.

Apec had the mechanism of its regular meetings at which finance ministers spoke honestly to one another, gave each other good information and recommended policies to one another.

"Having that institution within Apec is better than the totality of the IMF, which brings in so many other parts of the world which don't have such an interest in what is going on in Asia-Pacific," Professor Krause said.

"Having a regional organisation that has the capability of getting governments to cooperate is a very useful institution - and, in addition, any institution that includes China, Japan and the US in a cooperative framework has got to be worthwhile."