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ASIA-PACIFIC: Trade Concerns Loom In Yet Another APEC Summit

Analysis by Suvendrini Kakuchi

TOKYO, Nov 4 2010 (IPS) - Yet another Asia-Pacific Economic Cooperation (APEC) summit is around the corner, but questions remain about its impact on trade liberalisation more than 20 years after the forum was born amid grand visions of a world free of trade barriers.

While there has been a lot of movement toward freer trade over the years since its creation in 1989, much of this momentum has been driven by bilateral free trade accords and influenced by developments like China’s export muscle in global trade.

Likewise, an assessment of the free trade goals of the 21 APEC member economies from the Pacific Rim – as well as a look at delays these face – will be high on the agenda when its ministers meet starting Nov. 10 and its leaders hold their annual summit on Nov. 13-14 in the Japanese city of Yokohama.

There are however optimists like Prof Koichi Ishiyama, international finance expert at Toiin University. He points out that APEC’s value may not be in formal trade negotiations but in creating an environment that encourages member economies to keep dialogue going between developed and developing economies, and doing what they can to reduce trade barriers despite the political obstacles to this.

“The saving grace in Yokohama will be the role of APEC as a facilitator for balanced growth bringing in greater inclusiveness and building a resilient social environment given the varying economic capacities between the large grouping,” Isihiyama said.

The APEC meetings will be going on at around the same time the G-20 group of major economies will hold its Nov. 11-12 summit in South Korea. Many of the G-20 countries are also part of APEC.

At recent briefings here, officials said APEC will look at how far its industrialised economies – including Japan, the United States, Australia and Canada – have come to achieve the zero tariffs envisioned by the forum.

Under APEC’s vision, developing economies are expected to follow suit with the same reductions within the next decade.

But what the years since 1993, when the first APEC economic leaders’ summit was held, have seen is a string of free trade agreements and economic partnership agreements (EPAs) that focus more on bilateral or intra-regional ties, rather than the original goal of a tariff-free, globalised trading market set in the 1994 APEC summit in Indonesia.

APEC’s share of global Gross Domestic Product is 31 trillion dollars, or 52.7 percent of the world total. Intra- regional trade has climbed to 44 percent of global trade.

Also expected to be discussed at the Yokohama meetings, as they will be at the G-20 summit, is the issue of China’s exports that have led to international pressure on the country to let the yuan appreciate more rapidly. Some estimates have said the Chinese currency is undervalued by some 20 percent.

China’s exports were up by almost 50 percent in May 2010 compared to a year earlier. In recent weeks, China has let the yuan climb a bit more quickly, appreciating more than 2 percent against the dollar since June to about 6.673 yuan to a dollar.

The prospects for the Yokohama meeting making a big difference in trade liberalisation are also shaped by the interests and challenges of the host, Japan.

“With the focus on dynamic globalisation through an open regional economy, the pressure is on Japan to lead the way. But the going will be slow,” explained economist Yuri Sato, at the Institute of Developing Economies.

Far from being a leader in cutting trade barriers, Japan has found this a political minefield when it comes to the opening the local market to foreign agricultural products.

Still, the fact that Japan is this year’s APEC host is pushing it to show more results at this meeting.

Japanese officials say the country is ready to boost its leadership in APEC by joining the Trans-Pacific Partnership (TPP) regional economic initiative that Singapore, New Zealand, Brunei and Chile launched in 2006.

With five more nations keen to go ahead, including the United States and Australia that are major agricultural exporters, Prime Minister Naoto Kan has said he intends to discuss Japan’s participation in the TPP in Yokohama.

In one of the clearest statements of support for this, the Cabinet Office announced in October that inclusion in the TPP would boost Japan’s GDP by 13 billion dollars.

But even then, the Agriculture, Fisheries and Farm Ministry has already come out with its traditional opposition to trade liberalisation. It released estimates that Japan would lose almost 12 billion dollars if the government eliminates tariffs on major agricultural items like rice. Currently, rice imports into Japan face more than 700 percent tariffs. Tariffs on beef imports are at almost 40 percent.

The average tariff for trade in agricultural products is 23.6 percent for Japan, and 5.3 percent for the United States, according to World Bank figures. For emerging economies like Thailand, this stands at around 7 percent.

“The controversial TPP is an apt demonstration of the pitfalls facing Japan and APEC in Yokohama,” Sato says, referring to the tussle between Tokyo’s wanting to take a high profile at the APEC summit and its being held back by its domestic lobby.

She points to similar conflicts playing out on the bilateral level. Japan’s EPA with Indonesia, signed in 2007, also ran into complications around the number of Indonesian health workers accepted in Japan, due to worries about opening the country’s labour market.

“The verdict today is that the EPA has really not brought significant breakthroughs in increasing bilateral trade,” Sato explained. (ENDS/IPS/AP/IP/WD/IF/DV/SK-JS/JS/10)