Sabtu, 21 November 2009

Apec angst as it turns 20

Apec has 21 members, including rich nations like the US, China and Japan. A preview of the meeting last week in the Financial Times was scathing. It described the group as one that speaks for half of the world's economy, but decides nothing.

It is a reference to the fact that Apec leaders make decisions by consensus, but they are not binding. It means that a country can agree on one thing today, but do exactly the opposite tomorrow.

An example is how the US can slap import taxes on Chinese tyres in September and yet reject protectionism in the Apec leaders' joint statement. Others say it is losing its relevance as more new groups emerge, often with an economic objective.

Apec now has to contend with the G-20, a group of 20 countries that is trying to fix the global financial system, and an emerging East Asian Community (EAC), a trade group that will be similar to the European Union.

By the way, there are two versions of the EAC: one with the US and the other without.
Throw in a global recession and, in short, it was not a birthday to remember for Apec this year.

One of Malaysia's main aims at Apec 2009 was to find out the trade policy of the new US administration. Free trade agreement (FTA) talks with the US have stalled and International Trade and Industry Minister Datuk Mustapa Mohamed admitted that he had heard of the US favouring an existing regional FTA.

In fact, US President Barack Obama has yet to get a final stamp of approval on an FTA with South Korea although the deal was done in 2007.

Indeed, Obama faces unprecedented problems at home. The global recession started in the US and, among other things, the jobless rate has hit a record high. He has to nurse the economy back to health, much to the anger of voters who did not like the bailouts of big financial institutions.

An FTA with South Korea, for example, could send the wrong message to Americans as domestic carmakers lose out due to what they say are trade barriers in South Korea. This could mean that prices of US cars will not be good enough to compete against other brands.

It also means that if South Korean carmakers do well in the US but its US rivals cannot perform in South Korea, more jobs could be lost in the US.

It is exactly this domestic opposition that is stopping Obama from doing more on trade.Prime Minister Datuk Seri Najib Razak initially pressured Obama to be more like George W. Bush on trade policies, but later conceded that the President had problems at home.

Personally, there were two things that disappointed me at Apec. One was that Obama cut short his trip to Singapore. It was understandable that he needed to attend the memorial service for victims of a mass shooting in Fort Hood in the US, but if Asia was really important to the US, he would spend more time with us. That was not the impression I got.

Secondly, there was no major push on the Doha Round of trade talks from the major economies. The Doha deal is essentially this: Europe and the US would open up their markets to agricultural trade and, in return, get better access for manufacturers and service providers in booming markets such as China and India.

Obviously, it has been stymied by differences among these major countries. It is now and more than ever that the world needs this round to be concluded. A successful deal could give the global economic recovery the push that it needs beyond 2010.
But the US talked about another regional FTA rather than dealing with a global solution under the World Trade Organisation (WTO).

The idea of free trade is certainly appealing. Basically, I can sell my products or services at the price I want and anywhere that I want. But you and I know that this is easier said than done.

Governments sometimes want to protect their local producers, so they slap high duties and make imports more expensive. The WTO was set up to make sure its 153 members could sit down and work out a trade deal for everyone.

This arrangement meant that some would not receive a better deal than others just because they were friends. Rather, a poor country could receive better trade terms if it needed to protect farmers to prevent them from being worse off.

When the Doha talks got stuck, the exact opposite happened. Everyone went to talk to someone (normally big trading partners) and created their own FTAs or their own private club. The downside of this is that poor countries will find it hard to progress because they cannot join these private clubs.

This means the divide between the haves and the have nots will be bigger and the world will not be a better place.

I am not confident that the Doha Round will be concluded next year because the recession has produced a lot of problems for governments around the world. And problems at home are certainly more pressing ma tters than talking about lofty ideas about making theworld a better place.

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