What Apec can achieve at Shanghai

C. Fred Bergsten believes that a focused leaders' meeting can prepare the leaders on some key points for the WTO meeting in Doha.

THERE ARE THREE achievements I would like to see Apec make at its leaders' meeting in Shanghai: advance the process of world trade liberalisation; contribute to regional financial stability; and set directions for its member economies to benefit from the "new economy". These issues are all on the agenda for Shanghai, but the question is what the leaders will actually do about them.

The objective on trade should be to repeat the achievement in Manila in 1996. Apec had been exploring an agreement on trade in information-technology goods and services, but its ministers were unable to find sufficient common ground. The leaders' meeting overcame the countries' differences. Three weeks later, they took their IT agreement to the first World Trade Organisation (WTO) ministerial conference in Singapore. This was sufficient to pull Europe into a multilateral agreement that eventually accounted for 94 per cent of world trade in information-technology goods, worth $US500 billion a year.

The sequence and timing now is almost identical to 1996, with Apec meeting just before the WTO ministerial meeting in Doha. The task this time is to launch a negotiation, not to reach a substantive agreement, as with the IT agreement. This is simpler, but it does require nations to resolve important differences over the agenda for the new round of talks. Within Apec, for example, there are differences between the United States and Japan, as there are between the rich nations and the poorer nations. Japan wants the US to accept that anti-dumping and investment be on the agenda. The US, in turn, wants Japan to make meaningful movement on agriculture and some services areas.

The poorer countries want to re-open some Uruguay Round agreements. They want to slow down their obligations on trade-related investment and intellectual property rights. They also want the developed countries to speed up some of their commitments, such as phasing out textile quotas. Some of the poorer countries are reluctant to support a new round because they doubt their ability to participate meaningfully.

There is scope for agreement on some of these issues within Apec. The Bush administration has given every indication that it is serious about a new round and is prepared to put some previously sacred cows, such as anti-dumping, on the table. The rich countries could allow more time for the lesser developed countries on some of their Uruguay Round commitments, and they could set aside a pot of money to raise the capacity of poorer nations to have a substantial involvement in the round. It is harder for the developed nations to re-open their own commitments under Uruguay Round agreements, because they have been legislated by parliaments in most cases.

At the Auckland Apec leaders' meeting, which took place on the eve of the WTO meeting in Seattle in 1999, there were some wonderful words about commitment to launching a new round. But, when the leaders got to Seattle, Apec was nowhere to be seen. Indeed, the major Apec nations were part of the problem. In Shanghai, Apec needs to work out the key differences, and deliver more than rhetoric.

On finance, Apec can never replicate the work of the G8 or the International Monetary Fund in designing financial architecture. But, Apec could establish a permanent training institution for bankers, finance regulators, lawyers, auditors and accountants in the region. Weakness in these areas was a common element in the financial crisis of 1996 and although progress has been made, reform is still incomplete.

The suggestion for the establishment of an Apec Finance Institute plays to a lot of Apec themes, including capacity building, human-resources development, technology transfer, and the need to resolve the financial crisis.

A study for Apec on the "new economy" by the Institute for International Economics points out that gaining access to the productivity benefits of technology requires several policy reforms covering areas such as telecommunications and financial services. The report sets out specific recommendations, and the opportunity is there for leaders to direct their ministers to act upon them.

Apec's leaders are gathering at a time of great challenge. There should be a willingness to overcome the petty quibbles that too often hold us apart. Apec should act decisively to restore confidence in the ability of the world's officials to get the world back on track in both security and economic terms.

C. Fred Bergsten is director of the Institute for International Economics in Washington, DC.