Asia Pacific Economic Cooperation (APEC).

Key Points

* APEC is the largest, most diverse trans-Pacific forum of its kind.

* APEC envisions elimination of all trade and investment barriers by 2010 for the wealthiest countries and by 2020 for the poorest ones.

* APEC is in a quandary due to the region's social and economic crises and the growing opposition to the U.S.-dominated liberalization agenda.

Asia Pacific Economic Cooperation (APEC), founded by a dozen countries in 1989, has matured into a forum of twenty-one countries that addresses economic issues in the Asia-Pacific region. This diverse group includes the U.S., Canada, China, Taiwan (officially Chinese Taipei), Hong Kong, Japan, Australia, New Zealand, the Philippines, Thailand, Singapore, Indonesia, Malaysia, Brunei, South Korea, Papua New Guinea, Mexico, Chile, Peru, Russia, and Vietnam.

Together, the APEC countries account for nearly half of the world's merchandise trade, half the global GNP, and approximately half of the world's population. Operating from a modest secretariat in Singapore, APEC sponsors regular meetings and annual summits of senior government officials and heads of state. APEC operates by consensus rather than through binding agreements and the type of legalism evident in the North American Free Trade Agreement (NAFTA) or the European Union (EU). Through a process of "concerted unilateralism," APEC members define broad regional goals but leave the specific aspects of implementation to each nation.

APEC consists of three occasionally overlapping processes. The first is economic and technical cooperation promoting economic and human resource development, or "eco-tech."

The second is trade and investment liberalization, an agenda that emerged at its 1993 meeting when President Clinton invited the (then) 18 APEC leaders to Blake Island, Washington, for the first-ever APEC Economic Leaders Meeting. The Bogor Declaration, adopted in 1994, proclaimed the elimination of all trade and investment barriers by 2010 for APEC's wealthiest countries and by 2020 for its poorest ones. Subsequent meetings led to a refinement of these goals in terms of individual and collective action plans with the actual liberalization commitments.

At the 1997 meeting, APEC leaders agreed to negotiate mandatory liberalization targets in nine sectors on a fast-track basis covering $1.5 trillion in trade (known as Early Voluntary Sectoral Liberalization). Those sectors included: chemicals, fisheries, forestry, energy goods and services, environmental goods and services, gems and jewelry, medical equipment, toys, and a telecommunications mutual recognition agreement. Although the latter was approved in June 1998, Japan's opposition to liberalization in fisheries and forestry effectively torpe-doed the broader initiative. Since then, liberalization has been on a back burner. The 1999 meeting in Auckland was dominated by discussions of East Timor and G-7 proposals to reform the international financial architecture. This year's meeting in Brunei will focus on technical issues associated with facilitating e-commerce. The heads of state will focus on bilateral meetings among themselves, with little attention to an APEC-wide agenda.

The third--and weakest--process is the sustainable development agenda. To date, this process has been characterized by a flurry of small-scale capacity building projects and little else beyond statements of principle. The weakness of the sustainable development agenda stems from five major causes: poor leadership by the wealthier countries, most prominently the U.S.; popular opposition to APEC's free trade agenda; failure to connect the trade, investment, and environmental tracks; the weakness of pro-sustainable development forces within negotiating governments (most of which are dominated by commercial interests); and the inability of pro-sustainable development forces from civil society to penetrate the national and regional processes of policy formulation.

The challenge of working with diverse economies and varying perspectives on trade and investment regulation gives APEC a certain informality and lack of cohesiveness. Although the APEC forum has declared its support for free trade, many members oppose mandatory implementation schedules for comprehensive reduction of tariff and nontariff barriers. Indeed, some countries--principally Malaysia and Japan--have insisted that the liberalization goals be nonbinding and have opposed the U.S. demand that all economic sectors be opened to foreign trade and investment. Countries that oppose the U.S. in its drive to convert APEC into another free trade area would prefer that APEC remain a consultative organization that facilitates technical cooperation on economic matters.

APEC failed to respond effectively to the Asian financial crisis. In the face of APEC's paralysis and a stalemate in trade negotiations at the global level, countries in the region are pursuing a range of bilateral and regional initiatives outside the APEC framework, including bilateral free trade agreements and a mechanism to protect countries during currency crises.

John Gershman ([e-mail]) is the Asia/Pacific editor for Foreign Policy in Focus.