Asia: Trade Hopes for Next Century

JAKARTA, Indonesia -- Imagine: The world's largest free-trade zone, encompassing the United States and East Asia's dynamic economies.


The nations of North America, East Asia and Australia appear set to take an important step toward that goal at a summit meeting in the city of Bogor, near this Indonesian capital, Nov. 15.


U.S. President Bill Clinton and the heads of 17 other nations belonging to the Asia-Pacific Economic Co-operation forum, or APEC, will set a broad aim of achieving free trade and investment in the region by sometime between 2002 and 2020, according to diplomats involved in the advance negotiations.


Such a declaration would mark a significant milestone in the Clinton administration's tilt toward Asia, a shift driven by its strategy of putting economics at the top of its foreign-policy agenda.


The administration believes closer links with the Asian-Pacific region's burgeoning economies would open enormous opportunities for the most competitive American industries.


"From a U.S. standpoint, moving to free trade in the region would be an exceedingly good deal," said Washington economist C. Fred Bergsten, the chairman of a panel of trade experts from APEC countries that has submitted a report advancing the proposal for consideration at the leaders' meeting.


The U.S. already exports more across the Pacific than it does across the Atlantic and could export substantially more, because most of the countries in the region still have very high trade barriers, according to Bergsten.


"We by contrast have removed most of our barriers, so a deal would give us a very substantial improvement in relative access in the fastest-growing markets in the world," he said. The leaders' statement at Bogor is bound to be so vague as to leave substantial doubt about what regional free trade means -- and member governments are sure to spend plenty of time in coming years squabbling over issues such as what constitutes a barrier or a legitimate regulation.


The difficulties are compounded by the fact that APEC runs on consensus rather than majority rule and is made up of countries with enormously diverse economic and legal systems, including some of the world's richer nations -- the United States and Japan -- and poorer ones -- China and Papua New Guinea.


But proponents contend that as long as the deadline for eliminating barriers is not set too far into the 21st century, benefits should start to flow well before then. Past experience with other free-trade zones shows that corporations begin stepping up their efforts to export and invest once barriers are headed downward.


"The main thing is to get the political commitment to make a start" on a free-trade regime, Australian Prime Minister Paul Keating said in a speech last week. "Then, with business factoring further liberalization into its decisions, the momentum builds up and becomes unstoppable. That is the process we want to start at Bogor."


The vision is getting an unexpected and important push from Indonesia's President Suharto, who as host of this year's meeting serves as the organization's chairman.


Indonesia has some of the higher trade barriers in Asia. But the president, 73, who is expected to retire in 1998 after ruling for three decades, "wants this meeting to be of some historical importance," said a Jakarta-based diplomat. "It's his main preoccupation."


Officials involved in the discussions caution that the plan could still be derailed at the last minute by objections from some leaders.


Malaysia's anti-Western prime minister, Mahathir Mohamad, favors the creation of an exclusively Asian trade bloc. China is also hinting it may torpedo the plan, unless it gets pledges from Washington to refrain from imposing trade sanctions because of human-rights issues.


But Indonesian officials confirm that Suharto has used his considerable influence to extract support from his fellow Asians for at least a general commitment that would include a deadline for regional free trade.


Malaysia's Mahathir, who boycotted the first-ever APEC summit last year in Seattle, "has announced he's coming, and if he's coming, it must be with good intentions to make this meeting successful," an Indonesian official said.


Indeed, officials said that the leaders may decide to accelerate the timetable spelled out in the trade experts' report, which called for the richer APEC members to eliminate barriers by 2010 and the poorer by 2020.


An APEC free-trade zone would be governed by rules much looser and more voluntary than those of the European Union or even the North American Free Trade Agreement. But the creation of yet another trade bloc worries some experts, who fear it will undermine the global trading system and efforts to implement the international market-opening expansion of the General Agreement on Tariffs and Trade.