APEC’s Summit Ends Under Cloud of Harsh Realities

It is at the level of trout, eel and crustaceans that the hard work of trade negotiations is done. It is quarrels over fiberboard and Barbie dolls. And never has it been so difficult as this year.

Not just because there are more than 220 types of tariffs that had to be negotiated on fish alone, more than 1,000 on chemicals.

It was difficult and, ultimately, impossible at this annual Asia-Pacific trade summit to broadly agree on lower tariffs because that would mean tougher competition. And in Asia these days, competition is not what people are looking for.

In a statement delivered Wednesday at the close of this year’s Asia-Pacific Economic Cooperation forum, Vice President Al Gore and 20 other leaders vowed to keep opening borders, to find new ways to recapitalize banks and bolster cash-strapped companies and to extend more aid to the millions impoverished by the dramatic reversal of fortunes in this once-thriving region.

However, APEC’s failure to seal a highly touted market-opening package reflected the trouble that lies ahead as the fiscal instability that began in Thailand in 1997 continues to exert a worrisome drag on the world economy.

While Gore generated most of the news from this week’s APEC meetings with his criticisms of the policies of Malaysian Prime Minister Mahathir Mohamad, that wasn’t the only source of discord.

Plenty of the friction that seeped out from beneath the closed doors of the sessions was spurred by protectionist sentiment--a phenomenon that is intensifying as unemployment mounts in Asia’s hardest-hit economies and trade deficits climb in the United States and Europe.

But rather than offering new solutions, the APEC leaders generally supported calls for a new financial architecture previously endorsed by the International Monetary Fund and World Bank.

They offered their prescriptions after emerging in brightly colored silk batik shirts from Wednesday’s final meetings at the Cyber Lodge in the heart of Malaysia’s “multimedia super corridor,” a pet project of Mahathir.

They suggested the Group of 22 industrialized and developing nations establish a forum to oversee this restructuring effort, with particular emphasis on tougher regulation of financial institutions and stronger disclosure standards for private institutions such as hedge funds.

While APEC leaders rejected Mahathir’s plea to support global controls on the movement of capital, they did support his call for a review of international credit-rating agencies. The Malaysian prime minister has objected to the downgrading of Asian economies by firms such as Standard & Poor’s and Moody’s, which makes it harder for them to get capital.

A senior U.S. official, speaking on condition he not be named, described the APEC declaration as a “sober” assessment of a regional crisis that he said “took a long time to develop and will take a long time to work through.”

In response to concerns that the APEC leaders’ statement was long on commitment and short on action, Mahathir, host of this year’s meeting, said APEC was limited by its geography.

“I think [APEC] is relevant, but it is not an organization that can make decisions for the rest of the world,” he said after the meeting.

Struggling to put the best spin on this year’s APEC meeting, officials said it was significant that the group had not retreated from its mission to keep opening borders, even if it did not move forward as far as many had hoped.

“The leaders were graceful under pressure,” said Thai Foreign Minister Surin Pitsuwan. “They were very fair, very sober, and they remain very committed to the APEC process. Sure there are some sharp edges here and there. But this is to be expected.”

However, prominent business leaders serving on an APEC business advisory group judged APEC’s response to the financial crisis as “inadequate” and said “the human cost of this crisis has been too high for too long.”

“We have to act now if APEC is to stand for anything,” they warned the APEC leaders in a meeting Tuesday.

The stakes are huge, which is why officials here--sitting at ground zero of the world’s worst economic crisis in five decades--found themselves exchanging insults over lumber and Atlantic salmon.

Of particular concern to export-dependent countries in Asia is the threat that the United States--whose politically explosive trade deficit appears headed toward the stratosphere, despite Wednesday’s report of a small decline in October--will begin closing its doors as its economy begins to slow.

In his address to APEC business leaders, Vice President Gore said “protectionism will only protect us from prosperity itself,” but he added a warning that the U.S. “cannot be the importer of only resort.”

In recent weeks, the Clinton administration has upheld dumping complaints against steel producers from Japan, Brazil and Russia after U.S. producers cried foul. U.S. farmers have thrown up barricades at the border to prevent Canadian farm and forestry goods from coming south. And the U.S. is locked in a nasty battle with the European Union over its restrictions on banana imports.

“People are feeling the hot breath of protectionism on their backs,” said Ernest Bower, head of the Washington-based U.S.-ASEAN Business Council, a trade group.

APEC meetings were far happier affairs in the group’s formative years, when the region’s economies were growing at double-digit rates and foreign banks were scouring the region for places to loan their money.

Three years ago, APEC officials, representing a region that produced more than $16 trillion in goods and services, agreed to create an open trading region by 2010 for industrialized countries and 2020 for developing countries.

But today’s dismal climate has changed all that.

For the APEC trade initiative to successfully speed up tariff reductions in nine industries, including medical equipment, toys and chemicals, would have required Japan’s weak government to take on its politically powerful forestry and fisheries industries. Japan refused, arguing that its tariffs are already low and its producers too weak to sustain further foreign competition.

“APEC was never meant to be a trade negotiating forum,” insisted Mikie Kikoi, a Japanese Foreign Ministry spokesman.

Unable to agree among themselves, APEC leaders simply kicked the trade package over to the World Trade Organization and urged that it be negotiated on a global basis in 1999.

Southeast Asia’s hard-hit economies would benefit handsomely from lowered tariffs on fish and forest products in Japan, already a major customer. Currently, Japan buys about $18 billion worth of fish. If the APEC deal had gone through, Thailand could have upped its exports of fish to Japan by an estimated $70 million, according to U.S. figures.

Similarly, Southern California-based toy giant Mattel would be a big beneficiary of a deal in toys, since the U.S. tariffs on incoming toys are already at zero but many other countries levy charges as high as 30% on Barbie dolls, games and stuffed animals.

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* GONE BUT NOT FORGOTTEN: Vice President Al Gore stirred a furor at the summit. A18