APEC: Still nothing after two decades

With all the crisis situations in the world today, there is always a summit meeting of heads of governments going on somewhere. There was still another gathering of world leaders last weekend, this time in Honolulu. President Obama chose his birth place as the venue for this year’s summit meeting of the Asia-Pacific Economic Cooperation (APEC). The US is hosting this year’s meeting, 18 years after President Clinton invited fellow APEC leaders to meet on Blake Island near Seattle, elevating APEC from ministerial to head-of-government level for the first time. I had the privilege of covering that one, with FVR leading the Philippine delegation.

APEC claims to be the premier economic forum in the Asia-Pacific region, established in 1989 and comprising 21 member economies from around the Pacific Rim. APEC supposedly fosters growth and prosperity by facilitating economic cooperation and expanding trade and investment throughout the region. But the record would show APEC had accomplished nothing significant and that it had been all talk from the start.

Yet, there are reasons to hope big about APEC’s potentials for good. APEC economies account for 54 percent of global GDP, 44 percent of world trade. For the United States, the region accounts for 61 percent of its goods exports. Now that the world economy is teetering on the brink of disaster, there should be reason to hope that APEC leaders would break usual barriers to cooperation and finally get some of APEC’s big plans rolling. If for nothing else, the world and the region must mitigate the debilitating effects of the world economic crisis and there is much APEC can do.

Nothing of the sort will likely happen. APEC’s one big project, the Trans-Pacific Partnership, a plan for a free trade agreement between nine countries, will likely be dead on arrival, if it even arrives at all. Negotiations have been underway since March last year but as in the case of the Doha round, the same contentious issues are making a deal difficult to achieve. The Partnership is being negotiated between the US, Australia and New Zealand, as well as Chile, Peru, Vietnam, Brunei, Malaysia and Singapore, with the possibility Japan joining too if it could get over their farm lobby.

According to the Financial Times, the long run aim is to create a bloc of sufficient mass to put pressure on China to join and thus subject its economy to market disciplines. Former US trade representative Karan Bathia told the FT the idea was to use an initial core group of enthusiastic free traders “to create a gravitational force that would bring others in.”

But in Beijing, a Xinhua story pictures a China eagerly defending free trade and it is the United States that it accuses of being protectionist. Chinese Assistant Commerce Minister Yu Jianhua, Xinhua reports, hopes “the meeting will further promote the liberalization and facilitation of trade and investment in the Asia-Pacific region, push forward economic and technology cooperation, oppose trade protectionism... so as to inject vitality into world economic recovery and growth.”

The Chinese official told a briefing APEC should send a strong signal that its members will do everything possible to stave off a global recession and restore confidence. Frequently complaining about the lack of a fair playing field, China accused some developed members of manipulating the rules to their advantage.

“Why ask others to lower tariffs when they themselves seek punitive tariffs on others for no sensible reasons? While accusing rival producers of underpricing to gain advantages, they smugly deny their own discriminatory trade restrictions, especially the export of high-tech products, are the main cause of their trade deficit.” On the other hand, China sidetracks the issue of its undervalued currency.

Strange things are really happening in this world these days. Communists are telling free trade capitalists to safeguard the multilateral trade system, and “drop short-sighted acts and make a strong voice against various trade and investment protectionism at the upcoming summit.” China also correctly lectures the West, or maybe its politicians, that “as the World Trade Organization has repeatedly stressed, free trade was not the cause for either the Great Depression or the present global economic crisis. The fantasy of using trade protectionism policies to get through a crisis can only exacerbate the crisis and hamper the global recovery.”

The United States, on the other hand, as APEC host in 2011, says it will prioritize concrete initiatives that build a “seamless regional economy” by achieving outcomes in specific priority areas, including: (1) strengthening regional economic integration and expanding trade; (2) promoting green growth; and (3) expanding regulatory cooperation and advancing regulatory convergence.”

Nice words and lofty objectives we have heard for two decades. Interestingly, US Trade Representative Ron Kirk said APEC has “been a really good laboratory for trade liberalization.” Since no trade liberalization has really happened, he must be talking about all the talking going on in APEC about trade liberalization. He also said the emphasis now, is real economic integration and “putting meat on the bones behind that.”

Economic integration is a very lofty objective… just ask the Europeans. In fact, the less ambitious effort of APEC itself to accomplish a smaller Trans Pacific Partnership is having a tough time getting beyond the talking stage. Even if Mr. Kirk says Washington believes the Trans-Pacific Partnership “could become a valuable tool toward anchoring us in the region and building the next generation trade model, from the ground up,” it would seem the US may have torpedoed it already. US demands for greater patent and intellectual property rights (at the urging of US pharma companies) have deadlocked early talks.

Michael Janda, an Australian TV reporter interviewed Iwan Azis, the head of the Asian Development Bank’s office of Regional Economic Integration, and he found him less optimistic about a deal being struck. “It is the non-threat issues that will be the major stumbling block. I’m not worried about the trade issues like tariff reduction, some non-tariff barriers removal and so forth. I think that can be done rather easily. But the non-threat issue, that is the most difficult part. This is really grade-A type of agreement. So it’s the gold standard, which is very nice on paper but when it comes to the practice it’s very difficult.”

Dr. Patricia Ranald, from the Australian Fair Trade and Investment Network, told the same reporter that negotiations have stalled after the US introduced some new demands. “Negotiations have been going since March last year. They were meant to be completed at the APEC meeting but they’ve essentially been delayed because of US demands which are far more extreme in the areas of medicines particularly and intellectual property.”

According to Dr. Ranald, some of the main sticking points are clauses that would effectively undermine Australia’s Pharmaceutical Benefits Scheme, and similar programs in New Zealand and elsewhere. Currently a panel of experts sets the wholesale price of new drugs included in Australia’s PBS based on the cost of comparable existing treatments. Dr. Ranald says leaked documents show the US wants provisions that would allow drug companies to appeal that wholesale price determination. Dr. Ranald warns Australia’s economy would also lose out from stronger intellectual property protection.

Iwan Azis of the ADB says the same effect may occur in developing countries less able to afford it. That may affect the price of some medicines for some emerging markets because the price will go up if this is imposed in a strict way. Mr. Azis also told Mr. Janda that the Trans-Pacific Partnership may need to set its sights lower on intellectual property and government enterprise issues if it wants to attract members.

“At this early stage do not impose too strict conditions to give some room for other countries who are not members, who are outside those nine, be interested to join, you know. But if at this early stage they are already imposing too strict rule then that panel for environment whereby new members are interested to join will be gone basically.”

So there it is… the first real significant initiative of APEC killed by this year’s host government. Not surprising. Even Mar Roxas will recognize those arguments by the US pharma industry and the tremendous pressure they can exert. As we have learned from Wikileaks, the US Embassy exerted unspeakable pressure when our Congress was discussing the Cheaper Medicines Law.

As for last weekend in Honolulu… it is no business as usual for APEC 2011… just a bunch of world leaders acting like tourists in postcard pretty Hawaii and posing for one more APEC class photo of leaders wearing the usual colorful costume a tourist in the host city would probably wear.

Trust her

My friend Romy B texted me this one.

History lessons

GMA circa 2000… “I am not running…”

GMA circa 2011… “I am not running away.”

Boo Chanco’s e-mail address is [email protected]. He is also on Twitter @boochanco