It's making progress but always slowly

ROD ORAM measures the performance so far of the ten-year-old Apec trade project.

Apec is based on voluntary actions toward consensus goals. It is not prescriptive or rules-based like the World Trade Organisation. Each economy has more scope to shape and time its actions to suit its own conditions.

That is helpful politics but bad public relations. It makes it look as though Apec has achieved little compared with, say, a legally binding schedule of tariff cuts negotiated under Gatt or its successor, the WTO.

So how do you measure Apec's usefulness? Its goals are trade liberalisation, trade facilitation and economic and technical cooperation, or "ecotech" in Apec-speak. Its achievements to date, I believe, are fivefold:

(1) Its 21 economies are committed to creating an open, regional economy. Crucially, this is not a trading block discriminating against outsiders.

Of course, there are marked differences between economies in their depth of commitment, speed of action and consistency of purpose. But Apec should not be judged by short-term detours. After 10 years Apec is only half way through its timetable to free trade among developed countries by 2010 and one third the way towards free trade among developing countries by 2020.

(2) Tariff reductions: Apec members have already achieved a lot. Over the past 10 years average tariff levels have declined, in South Korea from 19 per cent to 7.9, in China from 39 per cent to 17, and in Chile from 19.9 to 11 per cent.

The United States has lowered its average tariff only slightly and Japan's have edged up, but their base levels are still low. And some economies, such as Hong Kong and Singapore, were already tariff free.

Admittedly, the averages mask some nasty barriers, such as on foodstuffs going into Japan and the United States, which only improves the case for more tariff reductions. There was a Gatt trade round in that decade and it is impossible to be specific about Apec's role in those reductions.

But Apec is a forum in which tariff reduction is pursued and peer pressure applied. There is reason to be optimistic that the action plans each country has committed to for further liberalisation will be implemented in large part.

Crucially, Apec played a role in preventing a resurgence of trade protectionism during the worst of the Asian economic crisis.

(3) Apec has some concrete achievements which its critics choose to ignore. Next time you make an international telephone call, or send a fax or e-mail, take a moment to consider how cheap is the connection. One factor in that is the telecommunications agreement the WTO completed in November 1996.

That agreement came out of an Apec meeting in Manila earlier that year. Officials from Apec countries did the groundwork to establish the mechanisms and principles used in the binding WTO agreement.

(4) Trade facilitation: Progress is being made on, for example, simpler customs procedures. The cost of documentation and processing for imports and exports is estimated at roughly 9 or 10 per cent of the value of goods. If the processes could be simplified, the savings could be even greater than from tariff reductions.

Take one of the issues on the Apec agenda at the weekend: e-commerce. This technology is even better at demolishing distances than was the freezing of meat or drying of milk at the turn of the century - technologies that then made us rich.

Other items on the agenda this week include more liberalisation of air traffic and better consumer protection. Ponder the value of that work next time you jet off abroad or you get ripped off.

It is a complete distortion to say that free trade means a free for all. In fact, the fairness of trade and its enforceability has been improved by the laborious processes of the WTO and other organisations.

(5) Economic and technical cooperation. Ecotech is a clumsy word for a useful practice. People across the region are sharing knowledge and skills at a grassroots level in, say, a meeting of water treatment engineers, to the big picture such as improving markets.

Abundant lessons were learned during the Asian crisis, for example, on the need for more transparent financial markets and much better corporate governance, such as credit practices by banks.

Apec has identified hundreds of areas in which to pursue ecotech work. But the output so far is meagre. The efforts are very unfocused and there is a lack of funding. One way to overcome that handicap would be to channel aid through ecotech projects but donor nations, even rich Apec members, have yet to do so.

Let's not suggest that Apec is too wonderful. It isn't. Here's some things wrong with it: Finance ministers are peripheral and will not be fully integrated into Apec until 2001. This is seriously hampering the work on strengthening financial markets. Apec's heterogeneity, embracing vast differences between economies and societies, leads to conflict over goals.

All decisions have to be by consensus, a process bedevilled by the heterogeneity. All decisions are voluntary and non-binding so there's a lot of slippage. The chair rotates annually with each host having a steep learning curve. Moreover, the capabilities and style of hosts varies hugely.

Institutional structures are weak. For example, leadership of the secretariat rotates with the chair. Forums, working and expert groups have proliferated rapidly and their work is very poorly integrated and prioritised. Bureaucrats are exerting ever-growing influence.

Last but most profound is the public distrust of Apec within member countries. Apec needs to demonstrate its benefits more effectively to the public.

It also needs to: strengthen its decision-making process, ensure that members put more backbone into their commitment, better integrate private sector inputs, sharply prioritise its work, streamline its activities, get other issues on its agenda (gender, labour practices, corruption) and make ecotech of equal priority to trade liberalisation.

Back in April, Christchurch hosted an Apec meeting of ministers responsible for small and medium-sized enterprises. There was a session which brought together business people, bureaucrats and politicians to discuss the problems confronting, and opportunities awaiting, small businesses.

It was a highly constructive dialogue, even if it will take years to work through many of the issues raised.

But the most exciting thing was to watch those hundreds of people from small businesses around Apec network with each other, share their experiences and engage with the governments.

One could see so clearly how those people could - if international trade was freer, fairer and safer - trade useful goods and services, create employment, challenge themselves, learn new skills, be fulfilled and improve their lives and the lives of others.

* Rod Oram is editor of the Business Herald. This is an edited extract from his speech yesterday to the Reclaiming Apec conference.