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Some bumps in a flat world

Apec countries have kept in sight the goal of moving towards a free-trade zone. But as within the WTO, there are differences of opinion, writes Dmitri Kosyrev.

india Updated: Nov 23, 2006 02:22 IST

The main intrigue at the Asia-Pacific Economic Cooperation (Apec) forum, which ended in Hanoi on Sunday, found expression in its final documents. One of them, the Hanoi Action Plan, refers to the Apec’s initial objective, the goals of free and open trade and investment in the region, formulated in Bogor, Indonesia, in 1994. ‘The Hanoi Plan of Action on the Pusan Roadmap toward the Bogor Goals’ is a literary gem. The action plan was adopted in Hanoi without much serious discussions. It shows that the Apec has kept in sight the goal of moving towards a free-trade zone, which had been discussed at last year’s forum in Pusan, South Korea.

However, ahead of this year’s meet, Russian President Vladimir Putin wrote that when the Bogor Goals were formulated, many countries viewed the situation differently. These included the United States, which leads the pro-liberalisation camp in Apec. Several important events took place between 1994 and 2006. Initially, it was believed that the world could be turned into a free trade zone within the World Trade Organisation (WTO). The Apec decided to act on behalf of the WTO and prepare Pacific countries for cooperation in a free trade regime, where national economies are not protected from foreign rivals. However, by 2006, it became clear that the WTO dream was most likely a soap bubble. WTO President Pascal Lamy spent the past week with Apec leaders, rallying their support for de-blocking the Doha round of WTO talks.

The WTO has stumbled because many countries are not prepared to open up their agricultural markets to foreign rivals. However, the only thing the Apec can do is to appeal to the WTO, because the societies and economies of many Pacific countries are suffering from the consequences of full liberalisation. The main achievement of the Hanoi summit has been that participants expressed this idea clearly.

Lamy’s predecessor, Supachai Panitchpakdi, the current secretary-general of the UN Conference on Trade and Development, stated that foreign investment had not created the expected number of jobs in the region. The imbalances provoked by the rapid development of Asian countries have become intolerable, he said, referring to the growing property gap between Apec countries and within each of them. This included China, the regional growth leader, and Vietnam, the host of the Apec forum.

In the past few years, over half of all investment was made in the Pacific region, spurring its unprecedented growth (by 66 per cent since the establishment of the Apec). However, it turned out that economic liberalism, which lies at the root of this brilliant result, must be complemented with auxiliary measures. Otherwise, achievements will create problems for those who have not yet benefited from this prosperity.

Auxiliary measures are exactly what the Apec has been trying to formulate and implement. The final documents of the Hanoi forum name many programmes in the region’s 21 countries. Many of these initiatives have nothing to do with the economy. The new programmes discussed in Hanoi include Russia’s initiative on protecting energy communications and Apec’s initiatives on fighting counterfeit products, and on dealing with the consequences of epidemics.

Importantly, the goal of strengthening societies was formulated in a separate chapter of the Hanoi Declaration. But not all Apec leaders welcomed the idea. Since six countries — China, Japan, South Korea, the US, Canada and Mexico — accounted for the bulk of trade and investment (90 per cent), it may become an irritant for Asean States, Russia, Australia, Peru, Chile and New Zealand among others. Each of the 21 Apec States has an equal say. Finally, there was agreement that regional countries face common threats, including that of excessive and unbalanced development. Even wealthy members, like the US, are facing this threat.

US Secretary of State Condoleezza Rice stated that the Pacific region accounts for two-thirds of US trade. This is a global sensation — the US has ceased to be a trans-Atlantic State. Europe should think hard about this. At the same time, it also means that the US faces the same imbalances that trouble Pacific countries. On the other hand, millions of people in Apec countries on the fringes of ‘progress’ constitute a future growth reserve — tens of millions of potential buyers and producers.

In Hanoi, the Apec has confirmed its awareness of this possibility and its readiness to move towards it.

Dmitri Kosyrev is a political analyst with the Russian news agency, RIA Novosti.

First Published: Nov 23, 2006 00:42 IST