Security is the Asian carrot
Sunday 30 October 1994
The main venue will be the Jakarta summit of APEC, the Asia Pacific Economic Co-operation group, on 14 and 15 November. Members include the US, Australia, Brunei, Canada, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand, Mexico and Papua New Guinea. Chile is expected to gain membership at the meeting.
Europe's complete absence from this and other important Asian forums is glaringly apparent. APEC has been anointed by the US as the organisation through which it intends to play the balance-of-power politics that it hopes will result in big commercial gains. Unlike other Asian groupings, it includes both China and Japan. Also, it is relatively new - born of Asia's fear that it would be left behind as a result of regionalising trends in both Europe and the Americas.
Asia is the region and APEC is the kind of organisation President Clinton had in mind when he articulated the US policy goal of 'economic security'.
Thus, the stakes are high at the Indonesian summit. The Clinton administration, having botched earlier dealings with key Asian countries, now finds itself in a better position to negotiate. Differences with Japan have been papered over with a watered down 'framework agreement'; the human rights saga with China is over; and the US has turned down the volume on labour rights violations in Malaysia. Using its continued security presence as a lever, the US is now intent on business gains.
This, of itself, is unusual in US policy terms. Unlike other industrial countries, the US almost never mixes business with politics. But this has changed dramatically under the Clinton team: the President lobbied Saudia Arabia personally on a successful airplane deal; Ron Brown, the commerce secretary, has led several business groups on missions to China and Russia, and the US administration has targeted 12 big emerging markets for high- level commercial attention.
The bulk of these are in Asia where US companies have been slow to take advantage of growth ranging up to 14 per cent a year. With the exception of Japan, high performers in Asia are expected to achieve growth of some 6 to 8 per cent a year through the decade. This is the reason a surprised group of 30 chief executives were invited to the State Department last month for briefings from Cabinet officials on economic and trade prospects in Asia.
According to Robert Rubin, head of the White House Economic Council, the 'mostly Republican' executives were startled but pleased by the attention.
For its part, the administration was spurred not only by the prospect of gain but also by fears over the near-record US trade deficit that was running at an annual rate of dollars 147bn for the first eight months of the year. The record was dollars 152bn set in 1987. By far, the biggest losses were caused by exploding imports from China and Japan, accounting for two-thirds of the deficit. In sharp contrast to big trade gains made in western Europe, the US is running a trade deficit with most of the APEC members.
This explains the US emphasis on specific market-opening measures and overall trade liberalisation in the region. Although the US will not support date- specific proposals that APEC achieve regional free trade by 2010 or 2020, it will work on a sectoral basis to reach the goal even earlier.
Specifically, it will seek bilaterally to lift barriers to investment and telecommunications while working through APEC to streamline standards, customs procedures and the rules governing government procurement and the movement of professional people.
Particularly in the areas of investment, where the US believes it has comparative advantage, officials will work for liberalised codes similar to those negotiated in the North American Free Trade Agreement - the first fruits of which were realised when the Mexican government granted charters to 18 foreign banks, ending a ban that had been in effect for almost 60 years. The list included 10 US banks which are expected to provide the bulk of dollars 3.25bn in new loans projected for foreign banks next year.
Asia, however, may be a much tougher market to crack. Many countries, emulating Japan's 'export-first' policies, have adopted strict industrial policies that limit access to their markets and emphasise domestic content provisions.
In addition, the US is not universally loved in Asia. However, it is generally conceded that the US has a comparative advantage by virtue of its security presence in the region - because of the distrust Asian countries have of each other. That is President Clinton's trump card.
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