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Mon, Nov 15, 2004 - Page 12 News List

Regional pacts trade deals wrecking APEC: analysts

LACK OF INTIATIVES The group's free-trade tools appear moribund, while Japanese intransigence has blocked efforts to open up trade and investment in several areas


APEC, set up 15 years ago to bring the Asian and US economies together, now threatens to split the Pacific axis apart, some analysts say.

The APEC forum, whose leaders gather in Santiago for annual talks this week, also is evolving into a tripolar global trading system that some warn could wreck the multilateral trading system pursued by the WTO.

Key reasons for the concern are the proliferation of preferential trading arrangements with the Asia-Pacific region and APEC's inability to formulate an efficient trade-liberalization program.

APEC made some dramatic trade policy moves after its establishment in 1989 but over the last six years, its trade liberalization initiatives "have faltered badly," said American economist Fred Bergsten.

Bergsten, among the "eminent persons" who helped set up APEC in 1989 to serve as an effective bridge between the two sides of the Pacific Ocean, said the APEC free-trade tools now appeared "moribund."

The Early Voluntary Sectoral Liberalization, a US-led initiative to open up trade and investment in specific sectors within the region, failed to make headway due to Japanese intransigence.

The Individual Action Plans were supposed to be blueprints for member economies to spur free trade but they have largely ended up as just national reports of trade actions.

When APEC's tariff-busting plans went awry amid the extremely slow pace of WTO achieve-ments, economies within the forum began to forge their on bilateral or subregional preferential trading agreements.

APEC, whose primary goal is to achieve free trade and investments in the region by 2020, comprises developed nations such as the US, Japan, South Korea and Canada, Australia and New Zealand and developing economies such as China, Chile and those in Southeast Asia.

APEC economies have rapidly forged 40 free-trade agreements (FTAs) and regional trading arrangements so far, with about 40 others still under negotiations.

In Asia, the 10 Southeast Asian nations, China, Japan, South Korea and India are setting up "building blocks" for a giant free-trade area covering nearly 3 billion people.

Meanwhile, negotiations to formulate the Free Trade Area of the Americas, an expansion of the North American Free Trade Agree-ment to every country in Central America, South America and the Caribbean, except Cuba, are to be completed by 2005.

These arrangements are rapidly creating a "noodle bowl" of overlapping inconsistent and often low-quality agreements, Bergsten said.

South Korean economist Kim Kih-wan also cautioned that the arrangements were "discrimina-tory" and "diverting" trade within the region.

"It causes the 'chop suey' effect," Kim said, referring to the Chinese-American dish which is mostly a bland stir-fry vegetable dish, with bits of beef or pork, in a lightly-thickened sauce.

"The chop suey effect may not be good to those who have too much fat in their body," Kim said, citing massive "conflicting trading rules" in the trading arrangements in the region.

As East Asia and America continue having their own region-specific trading arrangements, there could emerge a bipolar Asia Pacific and a tripolar global trading system that would breed "hos-tility," said Kim, the chairman of Pacific Economic Cooperation Council, the influential think tank.

"This reminds me of the situation before World War II when there was basically a tripolar world," Kim said.

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