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Collapse of WTO Talks Hampers APEC Free Trade Goals

As the 21 members of the Asia-Pacific Economic Cooperation (APEC) meet in Vietnam next week, questions have been raised whether the grouping can meet its free trade goal four years from now. The collapse of the global trade negotiations under the World Trade Organization (WTO) is putting pressure on APEC to take the trade liberalization agenda forward.

APEC members agreed 12 years ago to create a free-trade zone that spans the Pacific beginning by 2010. But progress has been uneven. Some governments are clinging to trade barriers to protect certain sectors, such as agriculture, from foreign competition.

The slow progress has led some APEC members to negotiate preferential agreements with their major trading partners. Others - such as Southeast Asian nations, Japan, South Korea and China - have started forming their own free trade zones.

However, trade experts say these arrangements create exclusionary trade blocs, defeating APEC's goal of expanding trade among its 21 members.

And they say the collapse this year of negotiations on the World Trade Organization's Doha agenda of trade liberalization does not help APEC's goals of liberalizing trade.

In a report issued a month before the summit, the APEC Business Advisory Council (ABAC) called on APEC leaders to re-evaluate their WTO positions and push to advance negotiations. Talks have been stalled largely by disagreements over how much developed economies, such as the United States and the European Union, should cut farm subsidies, and how much developing economies should open their markets.

Tran Thien Cuong, the business council's executive director, based in Hanoi, says the WTO talks are critical to the economic development of many APEC members. Stalling liberalization, he says, will hurt economies that need foreign markets for their goods.

"Its effect to the whole economy in the region would be very bad,” he said. “We hope that with the political jolt from strong members in APEC we can revitalize the Doha negotiations."

But can APEC help push the global trade agenda?

APEC, which is holding its annual summit and ministerial meetings in Hanoi this month, groups most countries of the Pacific rim. It includes some of the world's biggest economies, such as the United States and China, and many of the region's developing economies, such as Mexico and Indonesia.

Most of its members are major trade powerhouses - particularly in Asia, where most economies are based on export industries.

As more and more APEC countries negotiate preferential trade deals, experts say it is putting pressure on the rest to follow. Singapore, for instance, has at least 10 free trade agreements, including deals with its major trading partners - the United States, Japan and European Union.

Tran says the proliferation of these agreements has made business costly and more complex, adding layers of paperwork for trade transactions.

Instead of having standardized rules under the WTO, bilateral agreements produce different sets of requirements for trade to different countries.

Mark Thirlwell, an international economy expert at the Lowy Institute, a private policy group in Australia, says APEC could play an important role in solving such problems.

"There is a need for some kind of regional organization to come in and oversee, sort of smooth out inconsistencies, try to make a more coherent policy,” he said. “The big advantage that APEC has of course is that it gets the United States in there. The United States is an overwhelmingly important trading partner for East Asia."

Some experts and business executives say it is time for APEC to adopt the proposed Free Trade Area of the Asia-Pacific that would encompass all APEC members and consolidate all existing bilateral and regional arrangements. It would create one of the world's largest trading blocs, representing about 60 percent of the world economy.

Thirlwell says those outside APEC would be marginalized, which could prompt them to revitalize the WTO negotiations.

"Because it would be such a big grouping it would encourage others outside APEC, particularly the Europeans, to be proactive within the Doha round," he added.

But experts warn that such a big entity could face the same obstacles that slowed the WTO talks - such as the reluctance of some members to open up politically sensitive markets.

With only four years to go before APEC's free trade deadline, experts and business executives say APEC leaders in Hanoi need to deliver on their promises to increase trade, or risk slowing all efforts to increase world commerce.