O'Sullivan: Apec leaders put chief issue in 'too hard' basket

BRUNEI - A $US4 billion white elephant built by Prince Jeffrey, brother of the Sultan of Brunei, is the surreal site for a business summit devoted to getting Apec back to basics.

The Empire Hotel will never make a serious buck. In a land where many of the flashest hotels experience average occupancy rates of under 30 per cent, what constitutes a sensible return on investment has never been the subject of everyday debate. Oil riches have seen to that.

But there are limits. Prince Jeffrey's investing prowess is now under scrutiny.

Also under scrutiny is the level of investment which business players from the Asia-Pacific Rim have put into Apec.

At this summit, held in an Islamic country which is both Apec's smallest country (population 300,000) and one of its wealthiest per head, the prevailing concern - how to get the Apec free trade agenda motoring along in the face of a backlash against globalisation - seems at times a forlorn hope.

Speaker after speaker has mounted the case to put some spine back into Apec's ambitious goals for free trade and investment within its developed economies by 2010 and within other member economies by 2020.

But the political leaders at whom business is really directing its criticism have pre-written their scripts. The leaders' communiqué is all but ready for release.

Most leaders will take the softer option of shifting their focus to Apec's other agenda and coping with the digital divide rather than expose their leaderships to risk by pushing the free trade agenda.

The financial realities are such that respected commentators such as Ken Courtis, of Goldman Sachs, are pointing to further risks within Asia of another serious downturn.

Southeast Asia's marginalisation - in particular, the slump in real earning power by the Asean bloc, with which New Zealand has been seeking to form a free trade pact - has been noted.

This is raising for New Zealanders at this summit the question of why their country is pursuing free trade agreements with this bloc rather than seeking to join Nafta, the North American free trade agreement.

Coming through strongly is the perception that the region still depends hugely on the United States to carry on its role as the economy of first resort.

But the US also needs to take a leadership stance.

The litmus test from this business summit will be the message that the US participants take home to their new President.

Bill Clinton, hobbled by Congress, was unable or unwilling to push against internal protectionist interests and further the Apec agenda.

Some US participants at this summit predict the next incumbent, whether George W. Bush or Al Gore, will also be unwilling to grapple with the hard issues involved in dealing with the globalisation backlash.

But as Fred Bergstein, director of the Institute for International Economics, noted, every President gets a window of opportunity in his first year to take hard decisions.

Taking advantage of that window of opportunity will be New Zealand's challenge.

Under former National Prime Minister Jim Bolger, steps were taken for New Zealand to cement a free trade agreement with the United States.

But the plan came unstuck when Congress told Mr Clinton that it would not agree to fast-tracking free trade arrangements.

As Apec's bold agenda for open free trade goals slides further backwards, the World Trade Organisation's multilateral programme is also slipping back as regional ministers baulk at putting a deadline on their push to start a new negotiation round.

New Zealand is faced with a pragmatic choice.

Either sign up to every bilateral free trade arrangement going, or see a slow slide into obscurity.

* Fran O'Sullivan is in Brunei for the Apec summit.

Herald Online feature: Apec