Friday, November 25, 2005

With free trade all talk, APEC risks becoming irrelevant

by Wenran Jiang
(Nov 25, 2005)
The Global and Mail

Prime Minister Paul Martin must have heaved a sigh of relief to leave domestic headaches behind for a few days when he flew to South Korea for the annual APEC summit last week.

The Asia Pacific Economic Co-operation forum seems an ideal international stage for Mr. Martin and many of his 20 counterparts to boost their image. Representing more than 40 per cent of the world's population, the APEC group is the largest regional trading bloc, commanding nearly 50 per cent of global trade volume and 60 per cent of GDP. It has generated nearly 70 per cent of global economic growth in the past decade. In a joint declaration, members expressed support for the World Trade Organization talks in Hong Kong next month, combatting the spread of avian flu, and fighting terrorism.

But image-polishing is not quite the same as tangible achievement. Contrary to the carefully chosen theme of this year's forum -- "Toward One Community: Meet the Challenge, Make the Change" -- beneath the surface, APEC is disintegrating into regional and bilateral blocs and lacks the leadership to meet many of its challenges.

Free-trade rhetoric has never been as strongly propagated by governments as the dominant ideology and unmistakable path to prosperity, yet every major global free-trade mechanism has trouble reaching a consensus. The implementation of the WTO's 2001 Doha commitment to global open trade is stalled; the coming talks are at risk because rich countries won't end domestic agricultural subsidies. Similar issues caused the dismal failure of the recently held Summit of the Americas, where the Free Trade Area of the Americas, being negotiated for more than a decade, faced fierce resistance from Southern Latin American states.

The APEC club, hailed as a major free-trade advocate, has done little beyond issue statements. Nor is there any clear road map on how to realize the goals of an Asia Pacific open market by all advanced economies in 2010, followed by all others in 2020.

The APEC community is gradually becoming an empty shell, shrinking into isolated resort gatherings of government elites, while mass protests gain momentum, intensifying global discontent.

While most countries belong to some form of global, regional and bilateral trade regimes, they tend to employ protectionist measures whenever self-perceived interests are at stake. The U.S. refusal to abide by NAFTA rulings over the softwood lumber dispute with Canada is a frustrating example. China complains bitterly that its textile exports, which comply with the WTO-mandated schedule that all barriers be lifted this year, are being blocked by the United States and European Union.

APEC countries are committed to mutual tariff reduction but a mechanism is missing to move beyond paperwork.

Threatened by the growing and perceived protectionist movements, many countries are seeking bilateral and intraregional trade deals, making WTO and larger regional organizations such as APEC more and more a theatre for talk rather than serious action. China has moved to establish a free-trade zone with the Association of Southeast Asian Nations (ASEAN); its free-market status has been recognized by New Zealand and South Korea; Australia and the EU are negotiating with Beijing for the same arrangement; Japan is chasing China, in fear of lagging behind.

Next month, there will be several summits centred on ASEAN and China: The ASEAN plus Three

(China, Japan, South Korea) conference, the ASEAN-India conference, and the ASEAN plus Russia conference.

However, the most visible challenge and alternative to the U.S.-centred Asia Pacific order will come when the first East Asian Summit is held in Malaysia next month. While ASEAN, China, Japan, South Korea, Australia, New Zealand and India will all be at the table, neither the U.S. nor Canada is invited. This is a serious development, if not a setback for Ottawa's Asian diplomacy. Mr. Martin has threatened Washington with closer ties to Asia as a counterbalance to U.S. protectionism. But everyone knows he has no action plan to back up his rhetoric. The only way to get back in the game is to take aggressive measures that reconnect Canada with other Asia Pacific countries. The newly established free-trade negotiation with Japan is a step in the right direction but it is not bold enough. For Canada not to be left out of the world's emerging and most dynamic trading bloc, similar actions must be taken with China and ASEAN.

Unfortunately, rather than asserting much-needed leadership and projecting a distinct Canadian mark on the other side of the Pacific, Mr. Martin is busy marking his calendar for a federal election.