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Apec: The Challenges of Asia Pacific Economic Cooperation

  • Martin Rudner (a1)

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International trade figures prominently in the economic growth strategies of East and Southeast Asian countries. Despite the economic recession experienced across much of the world since the early 1990s, the pace of economic growth was sustained virtually unabated in the countries of East and Southeast Asia.During the entire decade of the 1980s the East and Southeast Asian economies grew more than twice as rapidly as the rest of the world economy. Along with this growth performance, international trade in the East and Southeast Asian region increased at about twice the rate of Europe and North America. Merchandise exports in East and Southeast Asia increased at an annual average rate of 10% per annum between 1965 and 1989. In 1990 and 1991 aggregate merchandise exports from Asia's Newly Industrializing Economies (South Korea, Singapore, Taiwan and Hong Kong) grew by 9.0% and 11.4%, while the four ASEAN (Association of Southeast Asian Nations) developing countries (Indonesia, Malaysia, the Philippines, Singapore and Thailand) recorded average increases of 12.9% and 14.3%, respectively.Expanding merchandise exports were accompanied by surging capital inflows and rising investment rates, culminating in accelerated growth of Gross Domestic Product (GDP) along with a significant reduction in the incidence of poverty.

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1 The countries of the East and Southeast Asia, for purposes of this paper, include Japan, the Republic of (South) Korea, China, Taiwan (Republic of China), Hong Kong and the six members of the Association of Southeast Asian Nations (ASEAN): Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

2 World Bank, The Challenge of Development, World Development Report 1991, published for the World Bank by Oxford University Press, 1991, Table 14; Asian Development Outlook 1991, Table A13. ASEAN consists of the four developing countries, Indonesia, alaysia, the Philippines and Thailand, together with oil-rich Brunei and Singapore, classed among the Asian NIEs. The grouping of data is this study sometimes addresses ASEAN as a whole, or it may differentiate between ASEAN countries at various levels of development, as is relevant and appropriate.

3 Cf. Lamb, Geoffrey and Weaving, Rachel (eds) Managing Policy Reform in the Real World: Asian Experiences, EDI Seminar Series, Washington: World Bank, 1992; and Chintayarangsan, Rachain, Thongpakdee, Nattapong and Nakornchai, Pruttipohn, ‘ASEAN Economies. Macro-Economic Perspective,’ ASEAN Economic Bulletin, Vol. 8, no. 3 (1992). For case studies of Southeast Asian development performance, see, eg., Abonyi, George and Ninsananda, Bunyaraks, Thailand: Development Planning in Turbulent Times, Asia Paper no. 3, University of Toronto—York University Joint Centre for Asia Pacific Studies, 1989;Ariff, Mohamed, The Malaysian Economy: Pacific Connections, Singapore: Oxford University Press, 1991;Lacson, Daniel, The Philippines Yesterday, Today and Tomorrow: Political and Socio-Economic Developments, Singapore: Times Academic Press for the Institute of Policy Studies, 1991;Lee, K.H. and Nagaraj, Shyamala (eds), The Malaysian Economy Beyond 1990: International and Domestic Perspectives, Kuala Lumpur: Persatuan Ekonomi Malaysia, 1991;Rudner, Martin, ‘Repelita-V and the Indonesian Economy,’ Review of Indonesian and Malaysian Affairs Vol. 25, no. 2 (1991);Thillainathan, R., ‘Malaysian Economy in the 1990s: The Issues, Lessons, Challenges and Outlook,’ Malaysian Journal of Economic Studies, Vol. 27 (1990).

4 Though they are part of this same geographic region, the Indochina states of Vietnam, Cambodia and Laos pursued ideologically and politically-determined policies that effectively isolated themselves from the emergent Asian trading system, so that they remained among the poorest, most deprived countries in all Asia. Following the Vietnamese withdrawal from Cambodia and the collapse of the Soviet Communism, consideration is currently being given to ways and means of re-integrating the Indochina countries into the regional economic framework for East and Southeast Asia. Vide Mya Than, ‘ASEAN, Indo-China and Myanmar: Towards Economic Co-operation?’ ASEAN Economic Bulletin (January 1991).

5 Asia Development Outlook 1991, Manila: Asian Development Bank, 1991, p. 43.

6 Alburo, F. A., Bautista, C. C. and Gochoco, M. S. H., ‘Pacific Direct Investment Flows into ASEAN,’ ASEAN Economic Bulletin, Vol. 8, no. 3 (1992).

7 Data from Jardine, Flemming, cited in The Economist (8 May 1993), pp. 70–1.

8 Ariff, Mohammed and Chye, Tan Eu, ‘ASEAN-Pacific Trade Relations,’ ASEAN Economic Bulletin, Vol. 8, no. 3 (1992),

9 Yamazawa, Ippei et al. , ‘Trade and Industrial Adjustment in the Pacific Asian Countries’, The Developing Economies (1983); Lee, Young Sun, ‘Intra-industry Trade in the Pacific Basin,International Economic Journal (Spring 1987);Intra-Asian Trade,’ and ‘Intra-Asian InvestmentAsian Development Outlook 1991, pp. 43–9.

10 Cf. Lim, Linda Y. C., ‘The US, Japan and Other East Asian Economies: The Emergence of a Pacific Economic Triangle’, Journal of Southeast Asian Business (Fall 1991), pp. 27 et passim.

11 Ibid., p. 28.

12 Vide Fujisaki, S. et al. , ‘Three Decades of Development in the Pacific Basin: An Overview,’and Arndt, Heinz, ‘The Gatt System, Free Trade Areas and Regional Cooperation,’ both in Fukuchi, Takao and Kagami, Mitsuhiro (eds), Perspectives on the Pacific Basin Economy: A Comparison of Asia and Latin America, Tokyo: Institute of Developing Economies, 1990;English, H. E. and Smith, Murray, ‘The Role of Multilateralism and Regionalism: A Pacific Perspective’ in Ariff, Mohamed (ed), The Pacific Economy: Growth and External Stability, Sydney: Allen and Unwin, 1991.

13 Drysdale, Peter, ‘Japan in the Asia-Pacific and the World Economy,’ in Japan and the World, Vol. 1, Canberra: Japanese Studies Association of Australia, 1991. See also Drysdale, Peter and Garnaut, Ross, ‘The Pacific: An Application of a General Theory of Economic Integration,’ in Bergsten, C. Fred and Noland, Marcus (eds), Pacific Dynamism and the International Economic System, Washington, DC: Institute for International Economics, in association with the Pacific Trade and Development Conference Secretariat, The Australian National University, 1993.

14 Rudner, Martin, ‘ASEAN, Asia Pacific Economic Cooperation, and Hemispheric Free Trade for the Americas,’ World Competition (December 1992);Hughes, Helen, ‘Does APEC Make Sense?ASEAN Economic Bulletin (11 1991).

15 On the East Asian Economic Group (EAEG) and East Asian Economic Caucus (EAEC) proposals, see Yam, Tan Kong, Heng, Toh Mun and Low, Linda, ‘ASEAN and Pacific Economic Co-operation,’ ASEAN Economic Bulletin, Vol. 8, no. 3 (1992), pp. 325–8.

16 Yue, Chia Siow and Yuan, Lee Tsao, ‘Subregional Economic Zones: A New Motive Force in Asia-Pacific Development,’ in Bergsten, and Noland, (eds), Pacific Dynamism and the International Economic System, pp. 225–69.

17 Vide ‘Japan, Australia Pioneer Regional Forum,’ North South Institute Briefing (B35, 1993);see also Drysdale, Peter, ‘The Pacific Trade and Development Conference: A Brief History,’ Pacific Economic Papers (1984),and English, H. Edward & Okada, Yoshitaka, ‘Japan — Rising Sun or Western Star,’ in Hampson, Fen Osier and Maule, Christopher J. (eds), Canada Among Nations 1990–91. After the Cold War, Ottawa: Carleton University Press, 1991.

18 Hughes, , ‘Does APEC Make Sense?’, p. 126.

19 For a broad overview of the Clinton administration's approach to APEC and regional institution-building in the Asia Pacific area, see the statement of Assistant Secretary of State for East Asian and Pacific Affairs Winston Lord to his confirmation hearings before the United States Senate Foreign Affairs Committee, as reported in Group Therapy’, Far Eastern Economic Review (15 04 1993), pp. 1011. As well, the Clinton administration furthermore indicated its intention to pursue the creation of an Asia Pacific regional security architecture. During his July, 1993 visit to Korea, President Clinton enunciated four priorities for an Asia Pacific security framework, including a continued American military commitment to the region, stronger efforts aimed at curbing the proliferation of weapons of mass destruction, new regional dialogues on ‘common security challenges,’ and support for democracy and ‘more open societies’ throughout the region (vide New York Times, 11 July 1993).

20 Tan, , Toh, and Low, , ‘ASEAN and Pacific Economic Co-operation,’ p. 324el passim.

21 The APEC Formula for Assessed Contributions is provided as Attachment 1 to the ‘Future Steps of APEC, Consolidated Report of the APEC Senior Officials in the 4 th APEC Ministerial Meeting,’ in Record of the Fourth Ministerial Meeting of Asia- Pacific Economic Cooperation (APEC), p. 160.

22 The original Japanese appointee to the EPG, Dr Saburo Okita, one of the early architects of Asia Pacific economic cooperation, passed away in February 1993, and so did not participate in work leading up to the landmark report.

23 A Vision for APEC. Towards an Asia Pacific Economic Community, Report of the Eminent Persons Group to APEC Ministers (C. Fred Bergsten, Chairman), APEC # 93-EP-o1, October 1993, p. 21.

24 Prime Minister Mahathir's refusal was symptomatic of the posturing and frictions afflicting bilateral relations between Malaysia and the United States over recent years. These irritants in the relationship reflect political contentions more than economic or trade disputes. Certain of these may be attributed to Dr Mahathir's vaunted ‘Look East’ policy, others stem from mutual antagonism over Middle Eastern and Islamic issues. These political irritants were exacerbated by trade-related environmental and health controversies over palm oil, tropical timbers and latex gloves, regarded by many Malaysians as a conspiracy on the part of the West, led by the United States, to undermine their export markets: Vide ‘Another Slight. Malaysians Angered by US Move on Latex Imports,’ Far Eastern Economic Review (1 July 1993). Goaded by these grievances, the Malaysian government became obsessed with confounding and provoking the United States in an Asian regional context. This was expressed in the idiom of Malaysia's antipathy towards American assertiveness in Asian economic affairs, notably its championing an EAEG and EAEC that would exclude the US, and refusing to participate in the US-sponsored APEC summit. Another expression of this pique may be seen in Malaysia's first-ever purchase of Russian-made MIG-29 fighters for its air force, along with a far smaller number of American-made aircraft, marking a politically daring — albeit militarily iconoclastic — departure in arms procurement (Aviation Week and Space Technology, 5 July 1993). Sometimes these provocations became grotesque, as when Malaysia refused to allow the New York Philharmonic to perform the work Schelomo (‘Solomon’) by the late Jewish composer, Ernest Bloch, causing cancellation of that orchestra's scheduled visit. American exasperation peaked into anger over Malaysia's sympathetic tilt towards Iraq during the 1990 Kuwait crisis and Gulf War. Latterly Malaysiadecided to embark on joint economic ventures with virulently anti-Western Iran. Sally Morphet of the British Foreign and Commonwealth Office has written that Malaysia ‘seems to have taken over the role of the non-aligned gadfly …’: The Non-Aligned in “The New World Order”: The Jakarta Summit, September, 1992,’ International Relations, Vol. 11, no. 4 (04 1993) pp. 361, 368.

25 China subsequently claimed that the agreement on Hong Kong and Chinese Taipei (Taiwan) participation in APEC excluded them from actually hosting APEC or APEC Working Group activities. This claim, first put forward at the Honolulu meeting of the Education Forum, which took place in May 1993 under the auspices of the APEC Human Resource Development Working Group, was deferred to the senior officials or ministerial levels.

26 See Rudner, Martin, ‘European Community Development Assistance to Asia: Policies, Programs and Performance,’ Modern Asian Studies (02 1992), p. 29.

27 Rudner, Martin, ‘ASEAN, Asia Pacific Economic Cooperation, and Hemispheric Free Trade for the Americas,’ esp. pp. 136–40, 144.

28 APEC Economies: Recent Developments and Outlook, Appendix II to the Ad Hoc Economic Group Report to Ministers, Record of the Fourth Ministerial Meeting of Asia- Pacific Economic Cooperation (APEC), pp. 50–7.

29 Vision for the Economy of the Asia-Pacific Region in the Year 2000 and the Tasks Ahead, APEC Ad Hoc Economic Group Meeting,10–11 August 1992,Tokyo, Japan.

30 Vision for the Economy of the Asia-Pacific Region in the Year 2000 and the Tasks Ahead, PP. 34–7

31 In January 1994, Canada took over from Japan as coordinator of the Business Management Network. This seems likely to engender a greater number of project proposals from Canadian sources.

32 Consolidated Report on APEC Work Programme, Record of the Fourth Ministerial Meeting of Asia-Pacific Economic Cooperation (APEC),10–11 September 1992,Bangkok, Thailand.

33 In addition to the activities it itself sponsors, the APEC HRD Working Group also provides liaison with other cooperative initiatives at the regional level in education and training. Examples include the so-called ‘partnership’ projects between Japan and the United States, an Australian initiated study of University Mobility in Asia-Pacific, and the Pacific Economic Cooperation Council (PECC) Asia-Pacific HRD Outlook presented to the APEC Working Group.

34 APEC Statement on the Uruguay Round, reprinted in Record of the Fourth Ministerial Meeting of Asia-Pacific Economic Cooperation (APEC), p. 17.

35 On trade restrictions and impediments among the ASEAN countries see Australia's Business Challenge. Southeast Asia in the 1990s, pp. 70–8.

36 Vide Pangestu, Mari, Soesastro, Hadi and Ahmad, Mubariq, ‘A New Look at Intra-ASEAN Economic Cooperation,’ ASEAN Economic Bulletin, Vol. 8, no. 3 (1992);Rudner, Martin, ‘ASEAN, Asia Pacific Economic Cooperation and Hemispheric Free Trade for the Americas,’ pp. 141–3.

37 Other sub-regional economic zones being planned or mooted include a Northern Growth Triangle covering (Northeast) Malaysia, (Southern) Thailand and possibly Indonesia (Sumatra); a Borneo growth triangle covering Indonesian Kalimantan, Malaysian Sarawak and Sabah, and Brunei; a Bhat Economic Zone embracing Thailand, Cambodia, Laos, and possibly Burma; and a wider Southern China Economic Zone encompassing South China, Hong Kong, and Taiwan. Even more tenuous perhaps are suggestions of a Pan Japan Sea Economic Zone involving China, Pacific Russia and Japan, and a Pan Yellow Sea Economic Zone involving Japan, China, and North and South Korea. On sub-regional economic zones in Southeast and Eastern Asia, see Yuan, Lee Tsao, Growth Triangle: The Johor—Singapore—Riau Experience, Singapore: Institute of Southeast Asian Studies, 1991;Rudner, Martin, ‘The Dimensions of Asia Pacific Economic Cooperation,’ Transnational Law & Contemporary Problems, Vol. 4, no. 2 (1994);Yue, Chia Siow and Yuan, Lee Tsao, ‘Subregional Economic Zones: A New Motive Force in Asia-Pacific Development, in Bergsten, and Noland, (eds), Pacific Dynamism and the International Economic System, pp. 225–69.

38 For a study of the implications of NAFTA for East and Southeast Asian developing countries, see Kim, Han Soo and Weston, Ann, ‘A North American Free Trade Agreement and East Asian Developing Countries,’ ASEAN Economic Bulletin, Vol. 9, no. 3 (1993).

39 Vide speech by the Hon. Dato Seri Rafidah Aziz, Minister of International Trade and Industry of Malaysia, in Record of the Fourth Ministerial Meeting of Asia-Pacific Economic Cooperation (APEC), p. 97.

40 At the same ASEAN Post Ministerial Conference, the ASEAN and Canadian foreign ministers signed a revised Canada-ASEAN Economic Cooperation Agreement, aimed at expanding governmental and private sector linkages.

41 Tan, , Toh, and Low, , ‘ASEAN and Pacific Economic Co-operation,’ pp. 325–8.

42 China Seeks Close Ties with ASEAN Nations’, Beijing Review (20–26 01 1992), PP. 78.

43 ‘Block Politics,’ Far Eastern Economic Review (28 November 1991) P. 26.

44 Advocates of North American free trade deny that NAFTA need become a protectionist bloc, and some indeed see it as potentially becoming a regional pillar of multilateralism, as a counterpart to APEC for the Americas: English, H. Edward and Smith, Murray G., ‘NAFTA and Pacific Partnership: Advancing Multilateralism?’ in Bergsten, and Noland, (eds), Pacific Dynamism and the International Economic System.

45 On the evolution of ASEAN economic cooperation, see Martin Rudner, ‘ASEAN, Asia Pacific Economic Co-operation, and Hemispheric Free Trade for the Americas,’ pp. 141–3; Palmer, Ronald and Reckford, Thomas, Building ASEAN. 20 Years of Southeast Asian Cooperation, New York, Praeger, 1987;Wong, John, ASEAN Economies in Perspective, London, Macmillan, 1979;Suriyamongkol, Marjorie, The Politics of ASEAN Economic Cooperation, Oxford University Press, 1988.

46 The ‘special’ fast track list includes cement, ceramic and glass products, chemicals, copper cathodes, electronics, fertilizers, furniture (wooden and rattan), jewellery and gems, pharmaceuticals, plastics, pulp, rubber products, and textiles; Australia's Business Challenge, p. 69.

47 On the gap between rhetoric and policy practice as regards AFTA, see ‘Market or Mirage,’ Far Eastern Economic Review (15 04 1993), pp. 4850.

48 On the role of academic research in East and Southeast Asian policy reform and trade development, see Ostry, Sylvia (ed.), Authority and Academic Scribblers. The Role of Research in East Asian Policy Reform, San Francisco: ICS Press for the International Center for Economic Growth, National Centre for Development Studies of Australian National University and the Economic Development Institute of the World Bank, 1991.

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Apec: The Challenges of Asia Pacific Economic Cooperation

  • Martin Rudner (a1)

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