Leaders at Summit OK Plan to Bolster Asian Economies

The leaders of 18 Pacific Rim nations strained to calm jittery investors Tuesday by endorsing a strategy to shore up Asia’s shaky economies and a plan to accelerate the removal of trade barriers in the region.

President Clinton said the achievements of the Asia-Pacific Economic Cooperation, or APEC, summit were striking, given that the nations involved included those under the most severe financial strain: Thailand, Indonesia, South Korea and Japan.

The Pacific Rim leaders clearly wanted to send a message to global investors that, despite the current fiscal turmoil, they are committed to keeping their markets open and willing to make the painful adjustments necessary to turn around their ailing economies.

“Asia’s financial difficulties would have made it tempting for some of our partners to turn inward,” Clinton told U.S. consular staff here at a gathering that preceded Tuesday’s leaders summit. “Instead, we agreed to open trade in nine new areas covering $1.5 trillion in goods and services, everything from chemicals to environmental technology to medical equipment. This is a strong vote of confidence in our common future.”

But even as the APEC meeting closed in this picturesque British Columbia port, public calls for the Japanese government to bail out its country’s fourth-largest brokerage firm pointed to the serious obstacles that lie ahead when Asian leaders return home to tackle their floundering banks, skittish markets and demoralized citizens.

Following the meeting, Japanese Prime Minister Ryutaro Hashimoto warned the world that his ailing country cannot act as a “locomotive” for the revival of Asia’s sick economies. The previous day, Clinton had urged the prime minister to move more aggressively to stimulate the Japanese economy, arguing that its financial well-being was vital to the region’s recovery.

Charles Morrison, an Asia expert and chair of the U.S. Consortium of APEC Centers, expressed skepticism that the APEC leaders’ pronouncement would be sufficient to counteract the contagious crisis of confidence that has toppled stock and currency markets from Bangkok, Thailand, to Seoul.

In response to the ongoing crisis, the APEC leaders agreed to support a plan drafted last week in Manila to provide “backup financing” to the International Monetary Fund’s fiscal rescue programs and set up an early warning system that would help governments in Asia head off future problems.

“I think it’s enough to avoid a real negative reaction, but there are negative things going on in the domestic economies that push things down even as the leaders meeting pushes things up,” Morrison said of the APEC summit. “Two days from now, the APEC meeting will be forgotten and there will be some other failure somewhere that will get investors’ attention.”

Still, White House officials were upbeat about the positive outcome, given earlier concerns that the financial problems back home would press Asian leaders toward protectionism and make it impossible to move them in the direction of APEC’s goal of a free-trade region by 2020.

The past four APEC summits were convened under much more favorable circumstances, when the economic news in Asia was dominated by double-digit growth rates and expanding incomes. “You can’t judge it [the APEC summit] by whether all the equity markets are now going up in Asia instead of going down in Asia,” said Dan Tarullo, assistant to the president. “You have to ask what signal this is sending, and I believe the signal this is sending should be reassuring to the markets.”

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At a leaders-only lunch, Clinton made a pitch for all nations, including developing ones, to pledge to control greenhouse gas emissions, believed to contribute to the problem of global warming. The leaders agreed this problem requires “cooperative efforts” by the international community.

The majority of the leaders have not yet committed themselves to reducing or controlling their nations’ greenhouse gas emissions, as advocates will press them to do at an upcoming Kyoto, Japan, conference on climate change.

But Hashimoto called on the United States and Europe to be more “flexible” in their stance toward requirements for developing countries, fearful that their insistence on tough standards will “doom” next week’s Kyoto conference, said Hiroshi Hashimoto, the prime minister’s spokesman.

Responding to a proposal by Canada, APEC also agreed to develop a regional emergency program to predict, prevent and coordinate responses to future natural disasters with transnational consequences, such as the forest fires that plagued Indonesia.

Throughout the conference, the leaders stressed the interdependence of their economies. Clinton emphasized that Asia’s fiscal difficulties are America’s problems because almost one-third of U.S. exports go to Asia. Japan, which is struggling with a recession, was urged to clean up its banking system and take the lead in revitalizing the region.

The APEC-endorsed monetary stabilization plan, drawn up last week in Manila, designates the International Monetary Fund as the key organization to bolster countries in financial distress. This strategy was supported by the United States because the IMF places strict fiscal reform requirements on the countries it sponsors in exchange for the support.

By signing on to the Manila plan, the leaders agreed to clean up their nations’ internal financial systems as needed and to supplement IMF funds if they fall short in an emergency.

The most recent victim of the spreading financial crisis in Asia is South Korea, which has asked the IMF for at least $20 billion in aid. Indonesia, Thailand and the Philippines have also accepted IMF aid.

The leaders’ accord on trade calls for a voluntary push to quickly ease trade barriers in nine areas, including forest and fish products; chemicals; energy; environmental technology; and toys. They hope it is the start of a broader deregulation of trade.

Clinton administration officials hope the APEC measures will help them advance trade initiatives in the United States.

They include passage by Congress next year of the “fast-track” negotiating authority that the president was forced to give up on this fall after he ran into stiff opposition from labor and environmental groups.

Overcoming objections that the organization was on the verge of becoming unwieldy, the APEC leaders agreed to allow Vietnam, Peru and Russia to join next year. Current members are: the United States, Japan, Canada, Australia, Brunei, Chile, China, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, South Korea, Thailand and Hong Kong.

APEC leaders also repeated their commitment to improving labor conditions and educational standards in the region, endorsing the Philippine government’s offer to hold a ministerial meeting on women’s issues next year.

But human rights activists, largely focused on human rights abuses committed by the governments of China and Indonesia, voiced their unhappiness via a noisy protest outside the leaders summit. Police used snarling dogs and pepper spray to hold back crowds.

In meetings on the sidelines of the APEC gathering, Chinese officials apparently offered to make further trade concessions as part of their bid to join the World Trade Organization, the global trade treaty. But a Chinese spokesman said he could not elaborate on what the offer contained.

* LESSONS FROM BRAZIL

Analysts say South Korea could have learned from Brazil’s austerity moves. D1