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APEC Members Differ Over Route to Free Trade

Asia-Pacific leaders will face challenges posed by a wave of bilateral free trade agreements when they meet for their summit in Chile Saturday. The issue could threaten broader trade liberalization goals agreed to 10 years ago by the bloc of nations in the Asia-Pacific Economic Cooperation forum.

The Asia Pacific Economic Cooperation forum, or APEC, set a goal 10 years ago in Bogor, Indonesia, to fully open trade by 2020.

Now a decade later, APEC's 21 member economies are a long way from that goal - following a global trend, which has stalled the World Trade Organization's efforts to open up trade.

Shujiro Urata, an economics professor at Waseda University in Japan, says slow progress has frustrated some countries into taking bilateral action.

"So many countries under APEC thought the way to liberalize was to go for a bilateral free trade agreement and other regional agreements," said Shujiro Urata.

The result is a proliferation of trade deals.

About half of APEC's members have signed at least one bilateral free trade agreement. Of 184 regional and bilateral agreements completed or negotiated worldwide in recent years, 79 involve APEC members. Proponents of the deals argue that they are building blocks toward wider free trade areas.

But some regional experts warn the deals undermine APEC's very foundation.

Professor Mark Beeson studies multilateral cooperation among Asia-Pacific nations at Queensland University in Australia.

"The fundamental premise that APEC was organized on, was some form of multilateral organization where various countries cooperated to achieve collective goals and the whole principle was based on non-discrimination," said Professor Beeson. "Bilateralism is the complete antithesis of that. It provides special benefits to two members of one deal and by implication excludes other people."

The challenge, experts say, is to ensure that bilateral and regional trade deals do not discriminate against other APEC members.

Chile, host of the annual APEC summit this year, is proposing a formal free trade agreement or a trade bloc among APEC members. This could create the world's largest trade zone, involving three of the biggest economies - Japan, China and the United States.

Economist Fernando Gonzales-Vigil in Peru heads a task force studying regional trading for the independent policy group, Pacific Economic Cooperation Council. He says it is time for APEC to make bold decisions on freeing trade.

Trade liberalization under APEC is currently voluntary. Mr. Gonzales-Vigil says this limits what the group can achieve.

"When the agenda is so huge, when the agenda has very sensitive sectors, you are not able to go further up to a certain limit, voluntarily. If you want to go beyond a limit, you have to do it necessarily through binding negotiations done under the basis of reciprocity," he said.

Thus, some economists say, the bigger and more powerful WTO remains the primary platform for free trade because it enforces compliance.

Some are optimistic that the Bogor goals can be achieved, especially by developing economies. Developed nations may face more difficulties because of politically sensitive protected sectors such as agriculture.

So, how should APEC position itself in the debate over global versus bilateral deals? Professor Beeson at Queensland University says APEC's strength perhaps lies not in its trade role.

"I think APEC's great advantage is that it provides a forum in which all of the major players in the region can get together in one setting and can have important discussions," added Professor Beeson. "If APEC takes this role more seriously and perhaps doesn't worry about the trade agenda quite as much, then it could still be a potentially important organization."

APEC was formed in 1989 to advance cooperation among Asia-Pacific economies as fears grew that protectionism would increase as the old General Agreement on Tariffs and Trade was being phased out in favor of the WTO.

Leaders meet in Santiago, Chile, on November 20.

APEC comprises Australia, Brunei, Canada, Chile, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, South Korea, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.