APEC Finds Pact on Opening Asian Markets Elusive

After days of table pounding and hallway lobbying, Asia’s premier trade club Sunday failed to find common ground on an ambitious market-opening package championed by the U.S. as a confidence-building measure for the hard-hit region.

Instead, the senior ministers representing the Asia-Pacific Economic Cooperation forum agreed to disagree and passed off the trade-liberalization package to the World Trade Organization for consideration next year. The package covered nine sectors representing $1.5 trillion in goods.

The mood at the Palace of the Golden Horses, the ornate hotel that is the home of this year’s APEC meeting, was dampened further by Sunday’s news that President Bill Clinton would not be attending the APEC leaders’ summit on Tuesday and Wednesday because of the standoff with Iraq.

Vice President Al Gore, who is standing in for the president, arrives here today and will give the closing speech at an APEC business conference. He and the other APEC presidents and prime ministers will begin their informal meeting Tuesday, at which they are expected to endorse the compromise trade pact and other issues addressed by the finance ministers in today’s final declaration.

Those included developing programs to alleviate the social effects of the crisis and supporting the APEC finance ministers’ efforts to develop mechanisms to modernize the global financial system, liberalize capital accounts and strengthen corporate governance.

Some fear that the absence of Clinton, who hosted the first leaders’ summit in Seattle, will undermine APEC’s efforts to demonstrate to the rest of the world that the region’s leaders remain committed to opening their markets faster.

“This organization counts on the U.S. to come up with the fresh ideas, to come up with the fresh initiatives,” said Michael Mullen, head of the National Center for APEC in Seattle. “When the U.S. president isn’t here, that whole process tends to slow down or stop altogether.”

U.S. business owners attending APEC meetings had hoped Clinton would offer the region a helping hand, particularly in financial restructuring and debt reduction.

“American businesspeople are extremely disappointed” that Clinton isn’t coming,” said Sandra Kristoff, a former top U.S. trade official now working at New York Life International Inc. “At a point in the Asian economic situation when American leadership is being looked for, people in the region and the leaders here might view this as a lessening of American interest.”

Prime Minister Mahathir Mohamad, the host of this year’s APEC summit, expressed regret that Clinton would not be able to visit Malaysia to “verify for himself” that the country is not going up in flames. Mahathir blames the foreign media for painting a distorted picture of his country’s political and economic woes.

But Mahathir has also locked horns with the Clinton administration over the firing of his deputy prime minister, Anwar Ibrahim, and the decision to impose currency and market controls to stabilize his economy.

Clinton and Canadian Prime Minister Jean Chretien had said they would not hold bilateral meetings with Mahathir because of their concerns about deteriorating human rights conditions in his country. He said other governments should quit worrying about his problems and take care of their own.

“Other people think interfering in other people’s affairs is legitimate,” he said.

The U.S., Canada, Australia and New Zealand pushed hard to have the trade package adopted by APEC’s senior ministers before it was referred to the WTO. However, they were unable to persuade Japan to cut tariffs in its politically sensitive fisheries and forestry sectors.

“The bite of the financial crisis was certainly more apparent around the APEC table this year than it was last year,” said Canadian International Trade Minister Sergio Marchi. “As a result, it was a rather difficult meeting.”

U.S. Trade Representative Charlene Barshefsky expressed disappointment with Japan’s “intransigence” but insisted that APEC’s proposal to the WTO still represented a remarkable “step forward” for a group whose members have lost a decade of growth in just a year. Until a few days ago, Japan had refused to even consider including forestry and fisheries in any trade package.

Barshefsky accused Japan of using its $30-billion regional recovery fund as a vehicle for bribing other Asian countries into opposing the market-opening effort. She praised Thailand, Indonesia and the Philippines for not only resisting that pressure but offering to accelerate their measures.

“This meeting occurred at a critical moment,” she said. “The question was whether APEC would move forward or whether it would retreat. These countries could have used Japan’s intransigence in fisheries and forestry to retreat, particularly the ASEAN [Assn. of Southeast Asian Nations] countries. But exactly the opposite happened.”

The Japanese government, which vehemently denies those motives, called today’s agreement a good compromise based on the APEC principle of “volunteerism.”

The APEC market-opening package would accelerate the removal of tariffs and other barriers to trade in nine sectors including toys, gems and jewelry, chemicals and medical equipment. U.S. companies have a great deal at stake since they are aggressively building new markets in the developing world.

In the area of fisheries, for example, the U.S. ranks among the world’s top producers. However, U.S. fish exporters are at a competitive disadvantage because the average tariffs in other countries run as high as 27%, while U.S. tariffs are generally less than 2%.

Richard Holwill, director of international affairs for the Amway Corp., said APEC will continue to be an important force in the region despite this year’s setbacks.

“One less-than-stellar conference doesn’t make APEC a failure,” said the co-chair of the Asian committee of the U.S. Chamber of Commerce. “This is a forum that will go two steps forward, three steps forward and one step back.”