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Open Regionalism and APEC: Rhetoric and Reality

Author(s): Saman Kelegama
Source: Economic and Political Weekly, Vol. 35, No. 51 (Dec. 16-22, 2000), pp. 4525-4533
Published by: Economic and Political Weekly
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Open In a global environment characterised by creating a 'spaghetti bowl' of overlapping regionalism was devised as a WTO con- these features. It is argued in negotiations under the Uruguay Round on a most favoured nation (MFN) basis the paper that APEC's attempts to put open also gave momentum to the formationunilaterally of without asking for reciprocity regionalism into practice have exposed the regional arrangements in the 1980s. Bergsten 1997. the simplest defini. open regionalism.and others] an important aspect that has mense geographical spread around the Economic and Political Weekly December 16. free trade areas. SAMAN KELEGAMA lems of contemporary trade policy: how not received attention is the operational Introduction to achieve compatibility between multipli. a vast body of literature and also gave birth protectionist bloc. sistent framework to further strengthen came into the picture in the late 1980s/ distorting global investment decisions. in the modem II lead to trade diversion. trading arrangements in the form of a free flexible arrangement that is more member. Although there is a growing body of for mutual gains.3 the limitations and the problems of open impede multilateral trade reform efforts ofCompliance to any commitment is volun. be turned into an opera- of regional arrangements.regionalism used by the author are APEC of proliferation of regional arrangements tion would suffice for the moment.. increasingly the world and the global trading system the concept have argued that in the current as embodied in the WTO. friendly than neo-liberal regionalist ar.88 on Sun. and so on. For Asia-Pacific economic integration phe- concern was that the regional bloc might open regionalism this is not a problem as nomenon from 1960s to the 1980s led to raise barriers to non-members creating a there are no rules of origin governing trade.196.jstor. weak foundations of the concept and its of these arrangements were preferentialIt is argued that open regionalism is a limitations. This claim of Bergsten is not firms to exploit economies of scale and forms and applied to cover a broad range based on comprehensive evidence of open specialisation.. determining a producer within the trading bloc. Eleke 1995.side of the concept. the concern that preferential trade will structure and bureaucratic set-up to specify cause trade to flow in inefficient ways orobligations. i e. However. Simply specific and the APEC's framework seems alongside efforts at multilateral trade put. rangements such as preferential trading and practice of open regionalism. The definitions of open the 'domino effect' [a la. common mar. customs union. economic integration in the Asia and Pacific early 1990s called 'open regionalism'. i e. Most from non-members. Section V provides some the WTO. a favoured argument against theseThere are no laws and binding contracts alism in the APEC. It is argued that market According to the key proponents of the literature on open regionalism [Ariff 1994a. liberalisation [Bergsten 1997]. The paper is organised as follows.191. what is open regionalism? Although egy for the early 21st century" [Bergsten national markets are usually too small for the concept could be defined in various 1997:546]. will be in practice 'building blocs' rather tional and highly significant policy than 'stumbling blocs' for further global programme. the ". .regionalism. open regionalism is trade liberalisation to have been generalised for emulation by liberalisation.. III discusses implementing open region- Round.. Th article argues that the operational aspects of APEC have clearly highlighted the limitations of APEC's governing framework.. driven integration is a powerful force of idea of open regionalism it represents an Garnaut 1994. Baldwin 1995] (Sections II and IV). sourcing of aday world where 'slicing of the value added Open Regionalism: Evolution good switching from an efficient producerchain' [a la Krugman 1995] characterise and Practice in the rest of the world to an inefficient most production processes.tion II provides a synopsis of the evolution ket or an economic union. The paper shows tha APEC's trade liberalisation strategy is a frail initiative and argues that APEC might be bet off focusing on deep economic integration issues. 08 Oct 2017 07:47:49 UTC All use subject to http://about. economic cohesion and despite the im- effort to resolve one of the central prob.It may turn out to be the tion for this proliferation is the widely held view that regional integration is a pre. Open Regionalism and APEC Rhetoric and Reality APEC has now functioned for more than one decade but its record is not very impressive. another reasonofisissues relevant to trade and investment regionalism. Section After the completion of the Uruguayarrangements. a new form of regionalism rules of origins under preferential trade. The concept global context. Another product's origin has become difficult. 2000 4525 This content downloaded from 112. This is a serious cation of regional arrangements around omission because the main proponents of he globalised economy. is witnessing an increasing number seeks to ensure that regional arrangements regionalism' can.concept of 'open characterised by trade liberalisation. At the heart of the argument wastary and there is no rigid institutional concluding remarks. For example. most promising international trade strat- condition for long run growth.2 This will not complicate global rules by to the concept of open regionalism.l One explana. because So. Section IV highlights regional arrangements was that they wouldand decisions are made by consensus.. The protracted nature among of the member countries in the region other regional . Sec- trade area.

into the WTO by itself due to the fear that the WTO investment cooperation. At least this was ofthethe APEC as articulated by the Eminent mentarity within the group. open regionalism bined shallow integration with a strategic for several decades. for tice as well as in law be generally consis. to the divergences by competition policy. Policy induced member countries were to reduce their vidual countries in liberalising and. as quoted in Panagariya 1999]. The overall strategic objective was initially devised to focus only on deep because of inherent economic comple.5 Most projects agenda. Lawrence (1993). discriminatory multilateral rules for trade purpose the basic steps are sharing infor- tion issues.. peer pressure and demonstration effects to Trade and investment facilitation mea- ture. The objectives are to make There was a clear understanding among Why did APEC decide to embark on the trade and investment regimes more economists during the early 1990s (before shallow integration? As is well known.Pacific and great diversity among coun. etc. which are sures are undertaken to facilitate trade encourage them to follow suit [Garnaut results of a low level of development. some developed countries take a long time. the APEC group which traded involves identifying specific areas for policy-oriented deep integration issues such together intensively. The Bogor declaration tion" or impediments'to integration caused in 1994 set an agenda for APEC in the area tion rather than negotiations.4 But due to opposition and delays process of multilateral liberalisation will undertaken by Working Groups (in APEC) in the WTO. 08 Oct 2017 07:47:49 UTC All use subject to http://about. own action they could pressurise WTO to were of the view that until policy-oriented tries in terms of size. ". procurement integration'. there were attempts to visualise towards non-members. indus. The Economic Association' where the associa.. members. at more or less the same rate and on the (Ecotech). 2000 This content downloaded from 112. intra-regional case with APEC . natural resource en. visualised impediments to trade tent with the MFN principle" [WTOnent among the four ever since shallow from the perspective of economic integra. trade negotiations. procedures. 1994].the first forum to put Persons Group was to catalyse and domi- trade and investment have grown [Garnaut open regionalism into practice. shallow integration most important objective was to create . did not consider instrumental in shaping the growth of side the WTO umbrella. extent that it concerns itself at all with the tariffs to zero by 2010. viz.gradually overtaken deep incentives for a positive response to trade informal arrangement before APEC was liberalisation from the rest of the world integration in the current debates on open formed addressing key impediments to [EPG 1994]. are hardly amenable to behaviour of trading partners. 1996:11. With a degree of certainty coming into barriers to trade within a regional grouping (3) economic and technical cooperation the global trading environment after the . associated with shallow integration. rather than 1994]. integration dominated the APEC's agenda. etc. The debate was whether or not liberalisation in goods and services in a mation on trade finance. APEC however. it was the WTO. of trade liberalisation where all developed level of development. 1993. taken to harmonise standards. So strictly speaking both trade and investment in the region.191. But after nate future global negotiations. trade to 'shallow integration. investment to grant the GATT a monopoly in 'shallow dynamic framework of emerging issues regime. process. In other words. there were fears among developed tine requirements.196.. border impediments to non-discriminatory basis towards non- regionalism used by its initial proponents integration or what is called impediments such as Garnaut (1994) and Elke (1995).org/terms . In other words. the transparent and to harmonise them among the completion of the Uruguay Round) that primary objective of the WTO is to set non. How. trade liberalisation is well defined accord- other is impediments to "deeper integra. customs regulations. After the WTO was for liberalisation under WTO will be a long. there were attempts by dragged-out process like the Uruguay Economic and Technical Cooperation some developed countries to bring in Round. tion. shallow integration in isolation. and (4) trade and investment completion of the Uruguay Round in late same time table as lowering of barriers dialogue. So are poor infrastruc.dress impediments to trade liberalisation a view to building capacity for trade and curement procedures. and developing trial structure.the precursor to APEC And in the APEC. in market forces and the ways in which at. to non-participants.jstor. felt the need to ad. Barriers caused by divergences affecting international transactions. deep integration issues are incorporated expedite in the multilateral liberalisation dowment. This strategy by divergences in domestic policy and relies on economic self-interest of indi. liberalisation. relies on countries by the year 2020. This would mean low integration and the other three address impediments to trade from a WTO con.ever. they should be addressed out. Component (1) addresses shal- 1993.the gradual elimination of internal (2) trade and investment facilitation. integration issues. Director General components: of (1) trade liberalisation (non- integration. They also felt that by their will lead to recommendations on sectoral 4526 Economic and Political Weekly December 16. He categorised these impediments Trade liberalisation is undertaken on a This is the most faithful definition of open into two types. and compatible with the concept of 'Open mainly of tariff and non-tariff barriers. Open regionalism.Trade liberalisation is the key compo- instance.88 on Sun. regionalism. the concept was widened to cover to deny any of the benefits of its actions The Pacific Economic Cooperation shallow integration as well (Section III). It argued shallow and deep integration are coveredIt may be appropriate to examine how that rapid economic integration depends open regionalism has been put into prac- under this concept but in general parlance upon the free functioning of intra-regional the definition of open regionalism tice is in the past. low technical skills.economic and technical cooperation with as. the regional liberalisation would in prac-deep integration.. and different cultures. are designed and implemented the WTO defined open regionalism discriminatory as: against non-members). the Council (PECC) . Thus. practice.functioned for nearly a decade as an seems to have. and then preparing ment were not part of the multilateral countries that the multilateral framework compendia for the region before steps are agenda of the GATT. etc. sistent framework. etc. government pro. intellectual property. as adopted by APEC has four tempts made to stimulate the process of Renato Ruggerio. quaran- in domestic policy and the level of develop. For this the GATT should handle shallow integra. competition policy. formed in 1995. In the APEC. tion continuously relies on unilateral ac-ing to a timetable. which consist liberalisation is unilateral. [Shand and Kalirajan 1997]. but com- economic cooperation in the Asia-Pacific With this thinking. It is also argued that objective. member countries in the long run.

the paper 1994 could be considered as the turning their agriculture sector much to the dis- will first examine the controversial ele.However.1995. trade liberalisation associated with ' should be allowed to move at its gional arrangements have the tendency It was originally envisaged as a non-ne-preferred pace to reach the final destina- to oscillate between short-lived euphoria gotiating body with the objective of focus-tion. not go beyond standing commitments. and academia are encouraged. Japan. New Zealand. The Phil. by design. in the first summit in Canberra in 1989. meetings of government officials. Singapore. after a brief introduction to APEC. It is more of a process and less of APEC argued for flexible unilateral ap. academic. in 1994 shows the practical difficulties of Vietnam. to liberalise before they are fully ready to to avoid this and to keep the enthusiasm "When APEC was first established. the 'concerted unilateral' ap- nent of operationalising open regionalism now evolved beyond what was envisioned proach of the Asian members not only and it could be considered as the contro. In the next section. for EVSL was also difficult. Korea. Developing member countries were and agonisingly protracted stalemates ing on 'deep integration' issues to of the view that they should not be forced [Schneider and Cederman 1994]. US. Malaysia. It and most sensitive areas were avoided world trade and intra-regional trade was first advocated in this summit that [Oxley 1996]. Taiwan. and the US) to 15 declaration 'shallow integration' domi. the EVSL did not solve the funda- summits in Singapore (1990). liberalisation to achieve the goals of the Taiwan). APEC has sequently.usually those made in the Uruguay Round APEC region controlled 37. 'deep integration'. APEC chose its modality as operational side of open regionalism. obtaining consensus on the sectors Vancouver (1997). More- (1994). fact. Its membership has trade liberalisation with 2010 as the dead- On the basis of EVSL decision in Osaka. gained acceptance but its definition ex- versial element. Japan. By the time of the Osaka Summit in nessmen. the US. Kuala Lumpur (1998). However. This provided ample eration on various issues (see Figure).7 and the recommendation of the EPG for and Auckland (1999). Since that time liberalisation and facilita. and the Eminent Persons Group Report of and China wanted special treatment for open regionalism.for the pear and medium term because the Stubbs 1997:211]. 1994 Bogor Summit. (a) concurrent East Asian countries in general and ASEAN Experience with Open in particular. do . developed member countries of the APEC proof of the fact that the EVSL process APEC. Seoul (1991). Osaka (1995).6 Ever since the Bogor Subic Bay Summit in 1996 detailing out Canada. In most cases. protection. to 18 in 1994 (with eral liberalisation after the Bogor Summitmodest.cial crisis dominated the formal discus- Economic and Political Weekly December 16. South Korea.196.rider' problem [Gallant and Stubs In the APEC atnnual summit in sions are non-binding on individual mem. Community and an agenda for APEC to liberalisation compared to CUVTL. and to 21 in 1999 (with Peru. is a loosely structured were particularly worried about the 'free was not very effective. tended to include selected sectors for cally focus on the deep integration side ofwhich president Clinton personally chaired. Eventually.. The term used to describe the going in regard to follow-up action. point of APEC in handling issues beyond pleasure of western countries.1997:209]. and nated the APEC's discussions. regular Ecotech was identified as the main com- approach was 'concerted unilateralism'.line for developed countries and 2020 forAPEC members were to come up with nesia. busi. i e. Indo. APEC has a Secre. In order strengthen market integration in the region.cooperation and specify economic and an institution and the former Australian proach to voluntary trade liberalisation technical issues (see Figure). (1) above is the key compo.jstor. APEC's liberalisation strategy be- This component is a new addition to the tion programmes have emerged as equalcame clearer. Hong Kong. "The failure of many IAPs amounted to 65 per cent in 1990 [Drysdale member countries should act in a unilateral to be little more than vague declaration of and Garaut 1993]. and (b) that certain Regionalism Economic Community to foster free politically trade sensitive sectors could be set Since its birth in 1989 in Canberra. were wary of the EPG liberalisation plan by all countries may not be to transform APEC into Asia Pacific practically possible. grown from the initial 12 (Brunei. as 'four adjectives in search of a noun'.. APEC's fifth summit at Seattle. Other components basi.191. grouping without a charter whose deci. The results were very Papua New Guinea). has gone a fairly long way with annual in the region [Ariff 1994b]. Bogor declaration. ment of open regionalism in some detail.developing countries was accepted in theIndividual Action Plans (IAPs) for the ippines.a diluted form of trade open regionalism. that they are flexible guidelines.88 on Sun.national programmes of unilateral trade in 1991 (with China.felt that this Ill achieve free trade in the region by 2020. In works. to 17 in 1993 (with Mexico and The APEC's attempt to enforce unilat. Con- As stated. Bogor nations were able to convince APEC of . and voluntary way to reduce tariff barriers intent led APEC officials to rationalise tariat in Singapore (established on a concurrently .4 per cent of low integration' in open regionalism. for liberalisation which can be a tripartite basis (government. APEC outside and to forge close trade and investment ties the trade liberalisation agenda. Foreign Ministerjovially referred to APEC because they were of the view that each Trade and Investment Dialogue: Re.concurrent unilateral vol. Seattle (1993). commitment did Chile). and the Russian Federation). Australia. Australia and the US wanted to revisited and revised on a continuing basis and business) and has 10 Working Groups establish comprehensive binding targetsby each member economy" [Gallant and and two ad hoc groups on regional coop. [ESCAP 1998:115]. method would at least accommodate two APEC: Background and political realities. The Asian members of the Vancouver in 1997. the east Asian finan bers. 08 Oct 2017 07:47:49 UTC All use subject to http://about. partners in the overall APEC agenda"non-confrontational and cooperative. Subic Bay (1996). Australia and some other powerfulmental problem of unilateral liberalisation Bangkok (1992). As stated. 2000 4527 This content downloaded from 112.that is the 'free rider' problem. or frame- decision taken in 1992) and functions on untary trade liberalisation (CUVTL). Per- dominate global trade liberalisationhaps andall the member countries. ponent of the APEC work programme. the trade liberalisation strategy of APEC and thereafter highlight some general The EPG Report gave a vision to APEC was named early voluntary sectoral liberal- observations on the functioning style of in terms of an Asia Pacific Economic isation (EVSL) . Thailand. the need for a trade liberalisation agenda over.

... The Summit showed that EVSL .... summit by stating "leaders may well wishless talking shop' [as quoted in Asiaweek..... 1997:20]... 1997:17]with the east Asian financial crisis....which to take a moment to consider preciselyJanuary 22.* ? Sustainable Development ? Telecommunications Trade * Transport Senior Officials APEC Secretariat Meeting ? ... 2000 This content downloaded from 112.. Mahathir's observa- was referred to by the president of the what the organisation can do".... .....Tourism Transportation Data Trade Promotion ications Soumrce.. Meetings of other Ministers f | Energy ? Finance APEC Business * Human Resources DevelopmentBusiness Ministerial Advisory Council * Industrial Science and Technology M tinsA * Information Technology M * Small and Medium Enterprises .. that prime minister....' Working Committee on Trade Economic Budget and Groups and Investment Committee !:iiii I^Aii&ife^............ sions of most members.191.1 1 IR4VI I 191 1 Marine Resource Energy 1g Fisheries | Human Resources 1 Industrial Science 1 Con Development and Technology I 11 1 1 1111^ Trade and Investment |TTrade Promotion elecommun.jstor...... so much that the trade liberalisation agendas in the recession. Customs g Standards III 1....... Policy as a 'face saving device' designed 1998...... APEC's December 5.... Figure: APEC Structure Leaders Summit .... December 4... The core chairman Korea Institute of International Economic In the Kuala Lumpur APEC Summit in of the APEC Business Advisory ... 1999:6].88 on Sun......could not hold up in the face of regionalambitious agenda was in disarray.. 08 Oct 2017 07:47:49 UTC All use subject to http://about..196..... Economic Review................ tions cannot be pushed aside as empty 4528 Economic and Political Weekly December 16......... The Asiaweek correspondentso..... ......... Mahathir Mohamed IAPs were nothing more than what was concluded his survey on the Vancouverof Malaysia referred to APEC as a 'tooth- already pledged in the Uruguay Round... Australia APEC Study Centre. the debate over trade liberalisation Roberto Romula stated: "You can't very to avoid the harder task of crafting APEConly increased dismay about the absence well talk about trade without the financial into a duty free zone by 2020 [Far Easternof a detailed and proactive strategy to deal survival of your economy" [Asiaweek... teei^ .^ Administration C ommiE^at^^^s... The Council noted .^^^^ .

The other achievements ism.gains from trade creation exceeds the are noteworthy in reduction of non-tariff criminatory against non-members.taking come from reduction of barriers to trade delays in implementation are common to a free ride is considered as beneficial to the economy undertaking unilateral and investment.diversion will not result. EPG report . the priorities of the APEC's 1994) also needs to be further investigated.general conclusion would be that would be multilateral and not regional. larations were very general. the 'beauty is in the political impracticability of allowing ex- trade barriers involve international commit.which do not be won from. Thus. This has happened despite the heads Welfare gains are expected from trade of state of APEC member countries comparative advantage and this area is creation when a formation of a Free Trade deep integration. Key dec. noted: have access to the markets of the members developing ones were at odds. Whether this is due to the APEC initiate it on a regional basis in the first Non-Binding Investment Principles (which and there was a departure from discussing place?" trade issues . The Osaka Action Agenda of 1995 iden. . not in the product. Concrete achievements out of the were influenced by MAPA. This obligations and establish formal obliga-but given the difficulty of the a novice at trade liberalisation".as was envisaged before the from high-cost source to a low-cost source. From a neo-liberal theoretical perspec- Moreover.three most significant develop-reciprocating in terms of trade liberal- to be more histories of past accomplish. when imports switch from low- WTO agenda. however. 08 Oct 2017 07:47:49 UTC All use subject to http://about. In the Auckland Summit in 1999. Also. 33]. 2000 4529 This content downloaded from 112. the remains a hypothesis yet to be tested in tions as part of a broad multilateral deal..compatible with APEC [Elek 1995]. But barriers and in some areas of 'deep inte- gration'.non-members can developed member countries andESCAP its (1998:63). ESCAP Let us take the most faithful definition diversions. offers MFN for non-members) a trade commitments and to what extent the WTO- principle of Article 1 of the GATT. free trade areas. remains to principle be is incompatible with regional- Kuala Lumpur summit were hard to come studied further. trade tified 15 areas as a framework for diversion occurs. and economic unions. Action planss success to date have been mainlyof the open regional grouping without "APEC' for achieving Bogor objectives continued diplomatic. and Rodrik (agreed upon during the Subic Bay Sum. the problems that crop up and reciprocate to such liberalisation .jstor. EVSL effective for future perceived bene- should work on deliverables within their fits. Of and thus all countries . In other welfare losses from trade diversion. but in the case goals of APEC do not seem to have con-of APEC there are no indications so far liberalisation. why would any group East Timor issue dominated discussions flows. As Srinivasan (1997) notes "if by. a preferential FTA can (1998) notes that the results of the MAPA of open regionalism into consideration. By working on deep Area (FTA) leads to switching of imports providing leadership to APEC summits. There its ability to pay off in the long run by to an economy taking a unilateral initia- are often strategic and political benefits to implementing the Bogor Declaration. open regionalism of the ments than blue prints for new activities.9 The IAPs IV to the nation in the regional agreement. The strategic and political all regional arrangements. 1999:22.process'. De Melo. Athukorala and to non-member countries on an MFN basis. the 'free rider' problem can be existing cases of regional or bilateral trade to be paying large dividends in the short ignored. There was no agreement to early are mainly in the area of harmonisation ofregional liberalisation is to be extended on voluntary trade liberalisation as was en. ments that can be specifically attributed toisation. September 24. and the Bogor Declaration. improve welfare only when the welfare i e. Some argue that APECbooks.191. to what extent thesewords.APEC can complement the However. the APEC process does not seem tive. It is on this basis that the WTO operates. resulting in welfare loss liberalisation and facilitation.10 The limitations of open regionalism have of these. APEC to be: the inclusion of China. It is argued that the greatest share liberalisation are undertaken to achieve run and there is considerable question over of benefits of trade liberalisation accrues more than just economic benefits. However.which were sidelined. trade'facilitation measures. Honggrouping cannot be reconciled with closed The chairman of the Pacific Basin Council Kong China and Taiwan Province of Chinaregionalism of other regional blocs based is reported to have said "let's admit it hasin one international forum.rhetoric. Panagaria. APEC's achievements up to date integration are . The .196. economic integration that course. [Asiaweek. standards and customs procedures and other the same time table 'in practice and in law' thusiastically expressed in Bogor. the endorse-on conventional preferential trading agree- been a failure and consider other options"ment of Non-binding Investment Prin-ments. In each that non-members will soon realise the successful international efforts to reduce of these three cases.'free rider' problem . it must also be noted that most Clearly. together with the collective actionLimitations plans and Problems of In fact. ciples. (1992) have shown that a preferential FTA Open Regionalism: APEC mit in 1996) made up the so-called Manila is not necessarily welfare improving be- Action Plan for APEC (MAPA) to address Experience cause of efficiency losses due to large trade the 15 areas identified in 1995. trade liberalisation should be non-dis. cost source to a high-cost source.88 on Sun. Even the APEC cessive 'free riding' and thus follow suit ments which are legally binding and re-dissenters would like to see the successful by liberalising unilaterally so as to be quire trading partners to accept similarimplementation of the Bogor Declaration.. the tive may have had a marginal effect on F]I If that is the case. Hill (1998) observe that the APEC initia. all WTO members will be offered if the FTA is based on open regionalism reductions are due to Uruguay Round non-discriminatory treatment under MFN (i e. mainly in the areas not related to EVSL. This is consistent with the vinced all member countries to make lessons of international economics text- that the pitfalls and delays are undercontrol of the APEC forum. can claim to have Those whohave faith in the 'unconditional been exposed by APEC. The global historygenerated substantial progress on economic MFN' definition of open regionalism argue of trade liberalisation clearly shows thatindicators or in terms of output. was endorsed by APEC trade ministers in It also exposes a member country to the Further. None common markets. and the members problem here is that adherence to the MFN of the FTA will not suffer welfare losses plus actions of some APEC member nations Economic and Political Weekly December 16. tive. customs unions.

by countries that account for half the world logic of the case of the economic benefits nitions of opep regionalism from the economy. order to avoid being discriminated against because it is not a political option. to be given annually. Bergsten argues that if the bulk to be won by unilateral liberalisation is not APEC's perspective.nic. The award. Email: natraj@mids. "No regional arrangement in countries. tion where APEC becomes a preferential the benefits of unilateral liberalisation in Even Bergsten says that APEC cannot trading arrangement but offers to generalise the present-day world. Scholars in the field may make nominations with a short resume of the nominee's work incl a list of important publications. in practice this argument hardly Sectors where this is not the case will not Second. The Madras Institute of Development Studies will administer the award.jstor. A three-member jury of eminent scholars will select the awardee. protected. countries are free to secure be considered for unilateral liberalisation. Chennai 600020. Indian and foreign working in India and Indian scholars at present engaged in development studies outside In eligible to be considered. It is argued process of multilateral liberalisation with that APEC will have to work on specifics that outsiders would accept the offer in the WTO. The name of the will be announced in April 2001 and the presentation will take place in September 20 awardee will be invited to deliver the Malcolm Adiseshiah Memorial Lecture. liberalisation. (2) conditional MFN. Usually this is justified to sup. essentially represent a multilateral liberal- ment in trade barrier reduction in many The first definition is based on 'open .88 on Sun. certain sectors need to be plus' idea of the 1970s and 1980s which [Bergsten 1997:554]. or (b) where theover WTO to influence faster global alism than under preferential FTA. Thus higher welfare expanded membership has a competitive tors will be: (a) where domestic production gains will be obtained under open region. and not This has not occurred in practice and additionals to make it operational. Gandhinagar Adyar. I lakh. urged the OECD countries to adapt new Third. unilateral liberalisation obligation. The scholar should have made significant contributions published work to the understanding of India's development problems. and then tries to reconcile the alternatives. and (4) trade facilitation. 2000 This content downloaded from 4530 Economic and Political Weekly December 1. is the global liberalisation defi- port development of a strategic industry. will be made to a ordinarily not over 50 years of age. Madras Institute of Development Studies. presumably take place in the WTO and Reciprocity has been an in-built instru. 2000 4530 Economic and Political Weekly December 16. It is basically 'going global' follow APEC's agenda so that simulta- will have practical appeal only for sectors. the powerful.from trade diversion. liberalisation measures far beyond thosenition where APEC continues with unilat- This in fact has been the case among agreed in the Kennedy Round and the eral liberalisation but at the same time industrialised economies for several Tokyo Round and then offer accession to continues multilateral negotiations with the club for anyone prepared to accept the the WTO in order to influence WTO to decades.1i membership' which is based on the 'GATT history has ever made such an offer" Politically. domestic industry is globally competitive.191. trade liberalisation. Second Main Road. (3) globalextension of APEC liberalisation would reduce trade barriers comprehensively. viz. Therefore. is the conditional MFN defini- holds.196. However. edge capacity is not significant. 79. 08 Oct 2017 07:47:49 UTC All use subject to http://about. It would have been count on the clear-cut definition (uncon. and thosewith sec-unilateral liberalisation so that APEC' s neously free trade is achieved in the region Announcing THE MALCOLM ADISESHIAH AWARD The Malcolm and Elizabeth Adiseshiah Trust has instituted the-Malcolm Adiseshiah Award for contributions to Development Studies. including the US. (1) open mem-of the non-members accept the offer. The award will consist of a citation and a cash prize of Rs. The Bergsten comes up with alternative defi. They should be sent before 3 st January 2001 to: The Director.its reduction in tariffs to all non-members quicker than the inevitably prolonged ditional MFN) of open regionalism and that agree to take similar steps. There is always a reluctance to bership. In fact. . Let us take a 'snap shot' view of thenon-binding investment principles is also first. Thus this option of APEC of the 'spaghetti bowl' phenomenon are is not currently put into practice in the will remain a challenge as it will be dif. PECC.191. it cannot afford to sac. In fact. legislation. of market orientation decisions as opposed preferential trading arrangement. 08 Oct 2017 07:47:49 UTC All use subject to http://about. It is argued the membership criteria is still being stud-APEC is able to advance multilateral that legally binding agreement is the only ied in the APEC. they do not provide evi- with Article XXIV of the GATT. In short. goes ments take the first steps. Second is the issue of the institutional Asian-Pacific governments would offerfull to head-to-head GATT style negotiations framework governing open regionalism. It is argued that APEC's success report and it has no controversial elements slow trade liberalisation. APEC will leave the border This strategy is influenced by the view Decisions are made by building consen- barriers to the WTO and focus on non. decision-making more time consuming and If the APEC leadership can influencehas led to debate on the style of implemen- cumbersome". And APEC's agreement on What about the other two options? i e.and the world. the main point here is that whatever achieve- definition cannot be associated with open sitions put forward remain hypotheses yetments there are from non-binding volun- regionalism as it is more akin to a neo. definition is basically the original aimaccessof to a wider range of influences and argues for voluntary unilateral liberal- APEC before the Eminent Persons Group forces to support the political cases for isation.. the first definition has proved process. and global liberalisation. Although the. with liberalisation of comparable scope.jstor. The thinking is thatThe problem with this approach however. They are statements of intent and integration issues and leaves shallow and to 'find' them at the lower levels in are expected to guide the formulation of integration under the WTO umbrella. APEC concentrates only on deep to respond with comparable liberalisation binding. But the international mecha. 2000 4531 This content downloaded from 112. If the menting the Bogor declaration.WTO method.The APEC model is based on voluntary integration via trade liberalisation for all action. The fourth nism of the WTO provides all nations untary action. It raises the issue ofTechnology in 1997. not in the product. it is argued that the threat of APECjoint statements of intent are made. Even be seen in practice.12 played a central role in achieving a majorthe complex issue of how compliance to The first definition has problems in the WTO global agreement on Informationany formal undertaking could be edforced. notes: "It was felt that too many new to do something. The does not raise the 'free rider' problem at members liberalising on a preferential basisapproach has the advantage of avoiding least in the traditional manner. many of the propo. which no other regional Implementation of the Bogor declara- members might make the consensus-driven arrangement has tried so far. Without these formal discussions in the WTO makingwithoutit question that any attempt by APEC in place. also used as an argument against binding APEC. liberalisation via the WTO it would be an incentive-compatible mechanism for trade rifice deepening of the forum to follow idealthis situation. ficult to sell to a domestic constituency. a case for binding obligations to enter into negotiated agreements will clear that they expect others to reciprocate cannot be totally ruled out. ESCAP( 1998:61) argues: ". Time border barriers. Strictly speaking this operational. tion. In this scenario APEC will bind (that is.debate goes on. this is not the inherently complicates the process of deep. That is one rea. operational side. and it does not call for formal negotiations in the WTO in order to achieve political commitment to' liberalise. but initiateopen regionalism stands heavily oneffective: (a) there has to be high level of voluntarism. Here there is no guarantee thattions so far. From APEC's opera. trading arrangement. in which case APEC becomes a arrangements such as a 'threat' of a pref.. Economic and Political Weekly December 16. to liberalise only on a preferentialpractical side of these concepts from thequoted to justify this position by its pro- basis but offer it to non-members if they APEC's perspective. Further-fication binding treaties are avoided and themselves to preferential treatment and more. This erential trading arrangement (specifics) and to deliberate policy and argue against the would obviously prevent 'free riding' but aiming at a strategic goal of influencing pursuit of forced action since there is a risk it is a departure from open regionalism and fast global liberalisation (additionals). it is clear that without bor. ponents. it of unraveling the current dynamism in the seems to be a diluted form of neo-liberal is not possible to make open regionalism Asia Pacific. The problems to be impractical and the fourth definition very effective. create more problems than it will resolve.13 Although discrimination against non-members. broadening vs deepening. Bergsten argues that many key element in bringing GATT talks toconsuming formal negotiations and rati- of these non-border barriers do not lend success in the Uruguay Round. Broadening of this strategy of trade liberalisation mayis that there is heavy reliance on voluntary the membership of any regional group have a comparative advantage over theimplementation.88 on Sun. other words. APEC realised this and WTO to achieve global free trade as of thetation. put it: "As soon as Asia-Pacific govern.. Politically. held by some observers that APEC was thesus rather than formal negotiations. on the other hand.196. Declarations are not formally Fourth. For the voluntary process to be liberalisation on an MFN basis. Fane (1995) and Oxley (1996) have imposed a moratorium in expanding same date as APEC this would avoid APEC argued for legally binding rules for imple- membership as early as 1998. As Elek (1995:14) (b) strategic interests in further economic regional structures that are legally binding.. never to reverse) their are re-neither feasible nor desirable".Bora and Findlay (1996) argue that the the non-members will reciprocate APEC'srowed ingredients from neo-liberal trading level of integration in the region is a result offer. which is binding and for-easiest of options when considering effec- ening its integration. It is a play a global leadership in influencing the duced rates of protection at the new lower model based on persuasion rather than WTO trade liberalisation agenda. as stated. provided others were also prepared coercion. the overall open regionalism functioningdence to the fact that the 'process' is The second option is to commence mechanism. has been mainly achieved via a diplomatic son why the EVSL process has not been in it. the idea of effective." future policies of APEC governments. they can initiate members should be clear.'4 reciprocate. tary action since 1994 in the area of trade liberal trade arrangement that is consistent There are two general shortcomings ofliberalisation.liberalisation given the problems of vol- option of open regionalism. which is based on voluntary action. ESCAP (1998:137) mal. In the WTO. in this case too APEC is tryingtive implementation.

what (EPG) of APEC has stated that the opera. the third of world trade. comings get even more exposed [see debate. Figure 1 shows liberalisation' (EVSL). South Korea. especially ones from practical problems as they are politi- Concluding Remarks cally not viable. 2000 This content downloaded from 112. results in bperational terms. since it controls nearly one- creation). monitoring steps open taken tariat may become essential to see regionalism in practice is how to treat towards harmorlisation of standards. the secretariat become an issue. At least in the welfare issues of trade (diversion developed and to avoid the possibility ofcase a of APEC. If the Keynesian trade dynamism organisations. of trade liberalisation.As stated. Thus open regionalismwhere in there are many developing coun- APEC is fundamentally a 'frailed' trade tries as members. the legalised contract-based organisation [Gal. the is stronger case for regionalismCUVTL working groups is limited and tied to there than or EVSL methods have no com- government that is hosting the summit argued by neo-liberals. implementing EVSL encoun. However. In this regard. theof checking that the voluntarism is not the agenda. Neo-liberals focuses on static The concept of open regionalism wasKelegama 1998 and 2000]. In this view regionalism isdiscriminatory only trading bloc.jstor. In other words. etc. there may in the regional grouping. agenda of trade liberalisation. the powers and functions clear-cut of and the most faithful definition dragged to its limit by member nations.196. open regionalism is not based non-discriminatory can be achieved only Keynesians. its limitations and short- Let us briefly revisit the regionalism initiative. The concept of openfrom deep integration than from shallow ters problems. secretariat's powers in terms of supervis- of implementing it.differences among APEC countries. Supervisionthe willconcept with various additionals and be still the option of making a departure at least check that voluntarism is not borrowed ideas from neo-liberal trading from the WTO agenda on non-tariff bar- dragged to the extreme by some memberarrangements. Even with these additions. countries may take time to respond). there are many definitionsthe need furtherstudy to expedite policy actions of area of shallow integration. try will obtain long term advantageand (due is augmented by the term 'concurrent mental. Thus for Keynesians the WTO smallor (b) unilateral liberalisation. 08 Oct 2017 07:47:49 UTC All use subject to http://about. APEC remains relatively argument of bargaining over technology formal obligation to liberalise. tuned to match that vision. Since this has not been results inthe area of deep integration. limitations of confining APEC into aThe other group sees it more as a counter. cally less effective. Regionalism(CUVTL) or 'early voluntary sectoral limited and it remains small. In deep commitment and does not accommodate perhaps this may be the reason why it is integration issues. that the APEC's secretariat does not seem lem with these ideas is that they do not ber countries to get established in particu- to have a link to the working groups or lar products before being exposed to in- help governments to manage the politics the technical committees. economic and technical cooperation. theoretical directions. This is precisely what has hap. firstly. country assumption is relaxed and a latter coun. Then the only items that siveness. As stated. cessful. the comprehen- called an 'oxymoron' by T N Sirinivasan political realities. effective in complementing the WTO are in favour of strengthening the institu-pened and why APEC has not been suc. The ship and meetings. Australia. cause parts of open regionalism suffer When it comes to applying open region- V alism to other groupings. In sorted out. and the role of the secretariat and its powers ponents to define it in different ways clearly indicates that the clear-cut definition is not (c) trade and investment dialogue. tional structure in APEC. of trade. The has been diluted due to practical problems in the absence of binding obligations. One group in APEC sees it sectors. Clearly. timing (developing keep an open regionalism group moving (as quoted in Panagariya. Given the low integration being very limited. non-members. It is argued that many Asian ofthe From these two theoretical emphases trade liberalisation especially when members of APEC view the forum more it be- potential for confusion in the APEC comes to trade liberalisation in poli- tically-sensitive as a process than an institution withcomes clear. they will unstructured because coordination of transfer and foreign investment is . it willis keep open regional arrangements tional efficiency of APEC should belikely to achieve the weaker campaign role moving in the future are deep integration upgraded [EPG 1994]. APEC's institu. But this requires a high level of countries to delay or take no action open on regionalism has not shown much political commitment to the open regional agreed policies. Newthan a stronger role of a regional counter-issues.88 on Sun. 1999). it is a (poor) second best to on how to make it work. the age old problem of monitoring (a) trade and investment facilitation. But for group- unilateral free emphasised in open regionalism tionalisation has been gradual and incre. parative advantage over the WTO methods meeting. Thus open regionalism will be most Zealand. press governments to omit certain sectors. it could have a vision concept useful if it is a step towards free trade. there is an emphasis on econo- mies of scale and bargaining over terms on institutional structures. It is being pulled in two different the question whether there are more gains As argued. In was not matched by practical and open regional framework can be fine considerations other words. At least becomes an issue. This is be- grouping.191. (b) open regionalism. there arewithin the WTO for trade liberalisation. Canada and the USweight. The major prob- is seen as advantageous in allowing mem-. By contrast forThethe idea that trade liberalisation should be ings that are weaker than APEC especially 4532 Economic and Political Weekly December 16.With achievements in the area of shal- process. The main problem of some degree of monitoring by the secre- ing sectoral projects.riers. At least for the purpose for the smooth progress of these items operational in in practice.simply as an organisation campaigning CUVTL and EVSL processes are politi- lant and Stubbs 1997]. When domestic ternational competition in the global constituents are aware that there is no When compared to other regional market. secondly. However. will have to be addressed. as they do not demand regionalism suffers from this problem and integration needs further study. Even the eminent persons group weight to EU and NAFTA. a secretariat functions unilateral voluntary trade liberalisation' to economies of scale) from specialisation in Singapore but its responsibilities are within the regional market. the attempt by its pro. Despite the rapid in two ways: (a) liberalising through the expansion of APEC in terms of member. and 'are the deep integration issues and items:When there is a clear-cut definition of thirdly. However.

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