Jane Kelsey - Critical Overview Of APEC’s Agenda

AFTINET MEETING Sydney, 1 September 2007

It is difficult for APEC veterans to take the whole circus very seriously. It has always been a poor relation (in liberalization terms) to the regional initiatives in Europe and North America that its instigators (led by Australia) intended to match. It continues to limp along with old targets that are rarely met, new initiatives that are likely to go the same way. Member ‘economies’ will urge each other to breath life into the moribund Doha round and to ensure that bilaterals don’t undermine the multilateral system, and continue behaving the same.

APEC’s official free trade agenda has been problematic from the start. The 1994 Bogor goal of free trade and investment among the richer economies of the region by 2010 and the rest by 2020 was always ‘voluntary and non-binding’. The pillars of trade and investment liberalization and facilitation, and that of economic and technical cooperation reflected an intrinsic tension between the Anglo-American members (Australia, NZ, US, Canada, later Chile) who wanted access into the Asian economies and markets, and the Asian members, especially Japan and ASEAN, that were interested in strengthening their existing integration.

Each ‘economy’ was required to submit an Individual Action Plan (IAPs) setting out its steps towards this goal. Look for yourselves – the pro-liberalization countries like Australia and New Zealand assiduously did so. Others made promises they might or might not achieve.

The idea of IAPS soon lost its gloss and the free traders developed a new initiative. Early voluntary sectoral liberalization would kick start liberalization in specified areas – from forestry to fisheries to toys and jewelry. This was launched at the Vancouver meeting in 1997 as the Asian financial crisis lowered the boom on the globalization nirvana of the early 1990s. By 1998 EVSL has failed too. Clinton stayed away from the Malaysia meeting in 1998 hosted by the ‘recalcitrant’ Mahathir, whose ‘unorthodox’ currency controls had limited the impact of the crisis on Malaysia’s economy. By 1999 New Zealand needed to find a new to pull rabbit out of the hat. Two developments happened. The East Timor crisis saw foreign policy and security become the major purpose of the leaders’ meeting of APEC ‘economies’. And the pro-liberalization camp began pushing bilaterals free trade agreements (FTAs) to rebuild momentum for liberalization from below. The architects dubbed it a Trojan Horse strategy. That was the month before Seattle. APEC’s attempts to catalyse WTO negotiations speak for themselves.

The FTA strategy encountered the same internal divisions. Australia has led the push for ‘high quality’ liberalization and consistency through FTAs. Since 2003, policy dialogues at Senior Official level on FTAs have encouraged ‘sharing of experiences’ – New Zealand, Singapore and Chile have promoted the Trans-Pacific Strategic Economic Partnership Agreement (the P-4) as a model for integrating bilateral FTAs. Best Practice guidelines for FTAs were developed in 2004 and endorsed by the Ministers and Leaders meetings. The Australian government produced a handbook on FTAs for a workshop on FTA negotiations in late 2004, including a section on how to sell the agreements at home. This was part of the Australian government’s ‘capacity-building’ activities in APEC funded by AUSAID. Australia’s DFAT also published a negotiating guide to FTAs in 2005, which included the best practice principles and a stylized FTA. Training programmes have been organised to build micro-networks of officials, with several of the APEC Study Centres playing a key ideological role. Model chapters have been developed to encourage ‘high ambitions’. But governments continue to tailor their own approaches, driven by their own offensive and defensive interests and, increasingly, by their domestic opposition to these deals.

The objective of the neoliberal camp is to link together the tangle of FTAs that is emerging in the region into a grand Asia Pacific FTA. While the principle has been broadly endorsed it is euphemistically described as a very long term goal. Just like the Doha round, unrealistic ambitions followed by excuses failure that fail to address the real causes are deeply discrediting the globalization agenda and reflect a growing desperation of those who champion and increasingly unstable free trade agenda.

In one sense, APEC has lived up to its nickname of Aging Politicians Enjoying Cocktails. But it has also provided a place for officials to gather and for liberalization proselytizers in the APEC studies centres, Pacific Economic Cooperation Council, ABAC and government trade ministries to peddle ideas and promote guidelines and principles that do become incorporated into FTA texts. More importantly, the meetings provide diplomatic impetus for the brokering of deals as ministers and leaders need something to announce to justify the silly shirts and extravagant junkets.

But APEC is also being overtaken by activities between its Asian and Latin American members, respectively. Sometimes the former is visible, such as the ASEAN plus three and the post-ASEAN dialogue with other governments, including Australia and New Zealand. But there are also more subtle and driven by new geopolitical dynamics that have changed dramatically in the past few years.

Power is shifting. The US capacity to negotiate free trade agreements is likely to remain crippled without fast track negotiating authority, and it now treats trade agreements as instruments of foreign policy and security. It is looking internally for now with the Security and Prosperity Partnership among NAFTA members promoting deep integration and a commons security boundary (albeit divided by a wall between the US and Mexico). Canada is treated internationally rather like the Tasmania of the US. Australia has already negotiated its treaty of economic surrender with the US, and other easier targets like Singapore and Thailand. It has the advantage of energy but is also too aggressive for many governments. New Zealand sits irrelevant and increasingly desperate on the geographical and economic periphery. The two gang together to use their bullying power on the Pacific Islands. While the CER ASEAN agreement and agreements with China are the grand plan the public and private versions of the state of play are very different.

The real dynamics in Asia are now coming from the new hegemons of China, India and Japan. Recent developments suggest they will find agreements much easier to achieve. Japan’s EPAs with Indonesia, Malaysia and Thailand have largely slipped under the radar, although the Philippines agreement is stuck in their Senate. Equivalent agreements with the US would have been politically unachievable. There is a risk that these agreements will be treated as preferably pro-Asian or in the case of India and China some form of South/South solidarity. But they are all the same model; all have to be WTO compatible and hence WTO plus. They all involve the surrender of policy space and sovereign authority to the interests of major corporations and international capital and locking in a neoliberal model that is failing the mass of the people in the region.

At the same time the combination of economic crises, declining legitimacy of neoliberalism and popular resistance is having a major impact. The political contradictions are already being played out in many communities. Sometimes the national government has been the target. In the Philippines the battle has centred largely around the attempt of the pro-US Arroyo administration to rewrite the nationalist constitution. In Thailand, resistance ranged from local communities opposing new bylaws on supermarkets demanded by the Wal-Mart and others to the removal of the corrupt Prime Minister Thaksin as he negotiated a US free trade deal. In South Korea, cultural activists, students, farmers and workers joined together to oppose the US assault on national culture and livelihoods. Even the Pacific islands are baulking at the unconscionable pressure from the EU to sign crippling EPA agreements, despite (or maybe because of) recent threats to cut their aid. They have also begun to stand up to Australia and New Zealand demands under PACER.

The alternatives this generates will be localized, although strategies, pressures and examples can be developed collaboratively. Increasingly opposition and alternatives will need to confront the merging of militarization, security and war, energy crises and the unsustainability of a global economy that relies on oil, and economic instability.

The led is, at present, provided by Latin America, led by Venezuela, Cuba and now Bolivia and driven by social movements. None of these are APEC members, but their regional activities are impacting on those who are members – Chile, Peru, Mexico, US and Canada. A belligerent Venezuela is now taking the challenge to the imperial powers in the WTO. Oil wealth provides a platform to build alternative alliances, reduce the risk of political isolation and challenge neoliberal globalization. As the host of OPEC in 2002, Chávez pushed for production limits that increased world oil prices and returns to oil-producing countries. He visited both Saddam Hussein and Gaddafi beforehand. Chávez took over from Brazilian President ‘Lula’ da Silva as the spearhead of the strategy to sink the US’s grand hemispheric plan for the FTAA. When the US succeeded in dividing the Andean Community of Nations through bilateral deals, Venezuela cut its ties with the community. Chavez sought to join Mercosur instead, but as of August 2007 Brazil and Paraguay had delayed Venezuela’s entry. Their domestic constituencies fear that Chavez will oppose the Mercosur FTA with the EU and turn Mercosur into a political vehicle to promote his counter-hegemonic Bolivarian Alternative for Latin America and the Caribbean (ALBA). Mercusor is a neoliberal regional pact; Alba has been described as a socially-oriented trade block [sic] rather than one strictly based on the logic of deregulated profit maximization [that] appeals to the egalitarian principles of justice and equality that are innate in human beings, the well-being of the most dispossessed sectors of society, and a reinvigorated sense of solidarity toward the underdeveloped countries of the western hemisphere.

Chávez also developed creative ways to circumvent the OPEC prohibition on sales at below market value. Venezuela provided oil to crisis-ridden Argentina in 2003-4, and delivered subsidized oil through Sandanista politicians during Nicaragua’s election campaign in 2006. Chávez eased the economic blockade of Cuba through a deal that allowed deferred and in-kind payments, notably by health and literacy programmes. In a move calculated to humiliate George W. Bush, he even offered heavily discounted heating oil to flood victims, low-income families and first nations in the US. There were moves to consolidate petroleum organizations in Latin American and Caribbean, and establish a strong diplomatic and oil relationship with China, fast emerging as the US’s main energy competitor. China became a major investor in Venezuela’s oil industry. In a further threat to US hegemony, the government used its oil wealth to repay Venezuela’s IMF loans. In May 2007 announced it would withdraw from the IMF and World Bank in favour of a socially democratic alternative regional institution.

In this context the US needs APEC as a forum to maintain visible presence and inject its agenda in the changing Asian region, with assistance from its allies in Australia, Japan and the Philippines, among others. Next year’s meeting in Peru; that government apparently intends to invite Brazil’s Lula to attend. APEC’s already incoherent political and economic agenda seems destined to become even more complicated and ultimately unsustainable.

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