[VIEWPOINT]Support Asia-Pacific free trade

About one month ago, I advocated an Asia-Pacific free trade area in an article in this newspaper. I have since received a number of requests from Korean readers for more on this subject. So, to recap: The main reasons why an APFTA is desirable are (1) there is now a willingness to negotiate free trade areas in the region, a willingness that was missing at the time of the APEC Bogor Declaration ten years ago; (2) an APFTA would likely be deeper and more encompassing and create more benefits than a series of bilateral FTAs or investment agreements within the region; and (3) the negatives of bilateral agreements, e.g., the difficulties and costs of administering these consistently and the threat of welfare-reducing trade diversion, would largely be avoided.
Moreover, an APFTA avoids the now-possible risk that a network of bilateral and sub-regional agreements might create a “line in the center of the Pacific” separating the Asian and American halves of the Pacific into two preferential blocs that would impede commerce between the two. Thus, at the 2004 APEC Ministerial and Leaders meetings in Santiago, Chile, the idea of an APFTA was raised by the APEC Business Advisory Committee. But no action was taken. Consequently, if there is to be action, Korea can play the leadership role as host of the 2005 APEC meetings.
But, if this idea is to have traction, preparation must begin now. To this end, I earlier suggested the formation of a high-level international advisory group whose role would be to create a plan detailing what needs to be done to make a meaningful APFTA a reality. Such a group played a useful role at the Bogor meetings that endorsed in principle free trade in the region in 1994, but produced no concrete plan as to how to proceed at that time. Now, such a plan is needed.
What would the advisory group specifically do? Rather than simply advocating a lofty but possibly unattainable goal, the group should focus on what the major “stumbling blocks” are that might inhibit achievement of free trade and, in addition, should advise as to what new ground an APFTA might reasonably cover.
On the latter, to be meaningful, an APFTA of course must achieve tangible goals that are “WTO+”, that is, go beyond the trade (and investment) liberalizing provisions of the extant WTO agreements.
One possibility would be to see if in an APFTA the “Singapore” issues that were squelched at the WTO Cancun meeting could be usefully resurrected; these include investment, competition, trade facilitation, and transparency in government procurement.
Another would be to see if APFTA might be able to go beyond the WTO in liberalizing the services sector. On this, the WTO “GATS” (services agreement) set a framework for services liberalization, but did not create much actual liberalization. Perhaps APFTA could create freer trade in services on a faster schedule than WTO.
On the matter of “stumbling blocks,” most of these will take the form of sector-specific exceptions that APEC member countries might seek. The advisory group thus should catalogue these blocks in advance of the next APEC meeting in order to advise how to minimize their welfare-reducing effects. But quite likely the most serious potential stumbling block will be the trading relationship between China and the United States. An important task thus will be to advise on how to deal with the complexities of this relationship, focusing on what is realistically possible and what is not.
But, again, if Korea’s role as host to the APEC meetings is to bear fruit, preparation for these meetings must begin very soon. Moreover, it would be far better for the Korean government to be optimistic and to assume that a significant opportunity for a major result is possible. Unfortunately, some Korean officials take a pessimistic view that any effort to move towards an APFTA will likely flounder or fail and thus that little can be accomplished on this matter. But this latter view does nothing but ensure failure.
Taking the risk that a big goal might succeed would be better than writing off such a goal altogether, only later to realize that the goal might have been possible but the opportunity lost.

* The writer is a senior fellow at the Institute for International Economics.

by Edward M. Graham