Breaking down the region's brick wall

By Rod Oram

Between the lines

Two weeks from today, Apec's trade ministers will meet in Auckland for the most important deliberations so far in New Zealand's year in the chair.

Representing the 21 economies making up Apec, the ministers will try to revitalise the trade liberalisation process which ran into a Japanese brick wall at last year's Apec leaders' summit in Kuala Lumpur.

They will have to find some common ground to work on over the coming months. If they don't, their political leaders will have little of substance to discuss at the Apec summit in Auckland in September, the crowning event of our chairmanship.

With a fortnight to go to the trade ministers' meeting, the signs are inauspicious. The agenda will likely have three main topics: Early Voluntary Sector Liberalisation; Apec's relationship with the World Trade Organisation; and measures for strengthening market mechanisms in Apec economics.

The first topic is the most forlorn. Voluntary liberalisation was Apec's brilliantly simple innovation in the Byzantine world of international trade talks. Each Apec economy would voluntarily and unilaterally agree to liberalise trade. Even better, some sectors were singled out for early liberalisation. This mechanism neatly side-stepped the traditional process of trade liberalisation pursued doggedly through rounds of multilateral negotiations where one country's tariff cuts were traded off against another's.

Voluntary liberalisation broke down at the Kuala Lumpur summit when Japan refused to budge on fisheries and forests. The compromise was to refer nine sectors to the WTO where they were to be negotiated under the old process within a year while six sectors remained for Apec to work on.

Precious little has happened since on the six sectors in Apec. Meanwhile, in the WTO arena, New Zealand diplomats have been touring some non-Apec capitals trying to line them up behind the EVSL sectors but the list of interested countries is short and lightweight.

On the second topic, there is much, rather formless, debate. In theory, Apec could work on issues to present in a relatively united way to the WTO. But there is not a lot of passion or unanimity in Apec these days on trade liberalisation, Apec's original reason for being. Moreover, the European Union is as wary as ever of Apec because it is denied a role in it.

The third topic - strengthening markets - is probably Apec's best long-term goal now that trade liberalisation has gone cold. But any progress will be slow and difficult. Expect no more than a handful of initiatives to surface at the trade ministers' meeting.

Two hopeful innovations for the meeting are the inclusion of business leaders from Apec economies in some of the discussions and side events such as a symposium on the benefits of liberalisation. But these hardly constitute the bold revival of Apec the region needs.