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D. WTO Expansion and Its Impact on APEC
(Taiwan Institute of Economic Research) By 唐瑋麟
October 8, 2001
Introduction
At the dawn of a new century, geo-economics has emerged to become a critical aspect of strategic thinking in international relations. The end of cold war has ushered in a new international economic order. Economic entities rather than the sovereign nation states are the key players in the new international economic order. The centerpiece of the new international economic order is a dynamic process of global integration driven by economic players.[1] Because global integration produces winners and losers, it is imperative that the economic players come together to devise a viable system of global economic governance to mitigate the negative externality of global integration. Embodying an open, rules-based multilateral trading system, the WTO is at the forefront of global economic governance. The WTO agreements essentially provide the legal ground-rules for international commerce. APEC is an informal regional economic forum. Since its creation in 1989, APEC has repeatedly pledged to support the establishment of an open multilateral trade regime in a WTO-consistent manner (Table 1). Both the WTO and APEC accept "customs territory" as the basic unit of membership. The WTO and APEC share the common vision of non-discrimination, MFN, free trade, and fair competition in international commerce.
As the WTO expands in membership, the intensity and scope of its influence increases-commercially, politically, and geographically. More important, the WTO rules have become the embedded institutions of the new international economic order. At the same time, however, the WTO expansion proves to be a daunting challenge, and the way by which APEC handles the WTO expansion is problematic. The challenge is threefold. First, the WTO is undergoing a legitimacy crisis as a result of internal strife between the developing and the developed camps.[2] Inadequate representation and participation from the developing camp results in poor accountability, which in turn, leads to legitimacy crisis (i.e. representation & participation → accountability → legitimacy). In particular, the WTO's "legislative" function has been a subject of criticism. The developing members charge that the major industrial powers have hijacked the decision-making process in the WTO. Second, the WTO is a public good. The WTO's relatively large membership (142 as of July 26, 2001) gives rise to an array of collective-action, opportunism, and free-rider problems. The collection-action problem leads to institutional sclerosis, which in turn spawns opportunism and the free-rider tendency. These problems provide a fertile stimulus for the surge of regional trade agreements (RTAs) and free trade areas (FTAs) in Asia-Pacific as in other regions of the world. All in all, the credibility of WTO rules hinges on the effectiveness of enforceability (i.e. executive function → credibility → enforceability). However, the WTO lacks cohesive power to enforce the rules. Unlike the state, the WTO does not possess a police. Third, the WTO must learn to adjudicate dispute cases impartially and expertly (i.e. judiciary function → reliability → dispute settlement mechanism). Yet, the WTO's dispute settlement mechanism is still under test and experimentation. Moreover, the WTO lacks a viable penal system to effect legal sanctions.
The WTO is experiencing institutional crisis to the extent that its accountability, credibility, and reliability have been undermined. APEC has little to offer to help resolve the WTO's institutional dilemma. For one thing, APEC is experiencing internal strife within its own organization. Being a voluntary, consultative regional economic forum, APEC is particularly vulnerable to members' unilateral actions to renege on commitments. In the wake of the Asian Financial Crisis of 1997-98, for instance, some of APEC's developing members had chosen to renege on their earlier commitments. Countries like Malaysia openly defied APEC with active "non-participation" in the forum. Due to its institutional design, APEC has a relatively weak institutional capacity in terms of enforceability and dispute resolution. Rather than reinforcing the WTO's executive and judiciary functions, APEC is becoming growingly reliant on the WTO for enforcement and dispute settlement. In fact, APEC is using the WTO as a "dumping ground" to "bury" the irreconcilable controversies (e.g. EVSL).
Although the WTO and APEC share a common aim to foster an open multilateral trade regime, they differ in institutional structure. The institutional incongruence prevents the two international organizations from developing a closer tie that would yield substantive economic gains between them. The institutional link between the WTO and APEC remains tenuous. Neither organization has the capability to influence the institutional design of the other. Nor do they possess the capacity to provide institutional support for each other.
Ironically, notwithstanding the institutional divergence, APEC and the WTO are both experiencing institutional crisis. Both organizations are beset by an internal strife between the developing and the developed camps, with the NICs wavering between the two groups. The advanced industrial economies strive to develop a global level-playing field on the basis of transparent legal rules and a predictable international business environment, while the developing economies are keen to promote substantive two-way flows of skill, capital, and technology between the North and the South. In other words, the developed economies focus on rules-based competition, whereas the developing economies emphasize practical economic and technical cooperation. APEC and the WTO provide an open arena whereupon the disparate interests and conflicting views of the two camps clash. The NICs will have a less-than-critical role to play in influencing the outcome of internal struggle, as they tend to align with the developed camp when the ultimate choice calls.
The WTO and APEC are encumbered with institutional overload. Enlarged membership, together with an increasingly complex and dynamic global economic system, have surpassed the WTO's and APEC's original institutional design. Institutional overload spawns internal strife, which in turn, leads to institutional deadlock. In particular, the WTO is faced with serious political logjam in its negotiating process. The protracted negotiation process stimulates the rise of RTAs and FTAs. Without sweeping institutional reform, the WTO and APEC will continue to face institutional crisis and internal strife in the near future.
In this paper we plan to assess the impact of WTO expansion on APEC from a comparative institutional perspective. We will examine how the WTO and APEC endeavor to foster an open multilateral trading system? How the two different institutional structures affect the outcome of global trade regime? What are some of the institutional challenges the WTO and APEC face in their endeavor to promote a rules-based multilateral regime? And finally, what are the implications of these institutional challenges?
1.The Institutional Divergence Between APEC and the WTO: A Comparative Macro-Structural Analysis
Although APEC and the WTO share the common goal of creating an open, rules-based multilateral trading system, they differ fundamentally in their institutional deign (Table 2). Whereas APEC seeks to promote regional economic and technical cooperation based on the principles of "open regionalism" and voluntarism, the WTO sets the general rules and conditions for international trade through an ongoing process of multilateral negotiation. While APEC sets targets, the WTO focuses on rule-making. The institutional divergence, consequent upon disparate organizational principles and goals, results in different attitudes toward globalization, regionalism, private business, political commitment, and policy agenda (see Table 2).
1.1 The Institutional Structure of APEC
Legitimacy. The legitimacy of APEC rests upon members' voluntary commitment to conduct their activities on the basis of "open dialogue with equal respect for the views of all participants" (APEC Secretariat 2001). APEC acknowledges the diversity in the level and pace of development of member economies and maintains its legitimacy through confidence-building and trust-building.
Established in 1989 in response to growing interdependence among Asia-Pacific economies, APEC provides an open regional forum through which leaders and senior officials of the region meet regularly to discuss vital issues relating to trade and economic and technical cooperation. With a combined gross domestic product of over US$18 trillion, the 21 members of APEC are responsible for about 44% of global trade by value. APEC's declared goal is to advance Asia-Pacific economic dynamism and sense of community. The three pillars of APEC are: trade and investment liberalization, business facilitation, and economic and technical cooperation.
APEC encourages active participation from the private business sector. The APEC Business Advisory Council (ABAC), a permanent council composed of up to three business leaders from each member economy, provides advice on implementation of APEC action plans and on other business-related agenda. ABAC makes recommendations about the regional business conditions.
Enforceability. APEC operates by consensus. In observing the spirit of open regionalism and voluntarism, APEC relies on consensus-building and consultation to secure individual members' commitment to regional economic cooperation. APEC is not a free trade agreement like NAFTA or Mercosur, nor is it a EU-style common market. APEC's decisions are non-binding. APEC relies on peer pressure to monitor the progress of individual commitments.
APEC is action-oriented rather than rules-based. APEC sets targets for its member economies. In its 1994 Bogor Declaration, APEC adopted an ambitious goal to achieve "free and open trade in investment in the Asia-Pacific by 2010 for developed member economies and 2020 for developing ones" (APEC Secretariat 2001). The 1996 Manila Action Plan (MAPA) requires each member economy to submit an updated annual report called Individual Action Plan (IAP) to record and explain its progress towards the Bogor goal. The Committee on Trade and Investment (CTI) reviews the IAP process and coordinates the implementation of trade and investment liberalization programs through the Collection Action Plan (CAP).
The annual Ministerial Meeting defines and funds a wide range of work programs through a number of designated agencies, including three committees on trade and investment, economic outlook, and budget and management; one sub-committee on economic and technical cooperation (Ecotech); and eleven working groups on small and medium enterprises, energy, fishery, human resources development, industrial science and technology, marine resource conservation, telecommunication and information, tourism, trade promotion, transportation, and agriculture.
Dispute mediation. APEC is developing an informal voluntary, consultative dispute mediation service to supplement the WTO's dispute settlement mechanism. APEC encourages members to settle disputes through consultation. The WTO's Dispute Settlement Mechanism remains the primary channel for resolving trade disputes.
1.2 The Institutional Structure of the WTO
Legitimacy. The legitimacy of the WTO is derived from its universal membership (equal representation) and equal rights and obligations for all members. The WTO embodies a rules-based multilateral trading system. The principles of the multilateral trading system are:
A.Non-Discrimination
l MFN
1 National treatment
B.Free Trade
l Progressive trade liberalization and market access
l Reduction of trade barriers
C. Fair Competition
l Binding rules to foster a stable and predictable business environment
l Transparency and disclosure
l Trade Policy Review Mechanism
At the heart of the multilateral trading system are the WTO agreements, which were developed through a series of negotiation rounds over the past five decades. These agreements are essentially binding contracts which govern the general conducts and norms of international business. The goal is to enable producers, consumers, exporters, importers, and service providers alike to perform their business functions in a transparent and predictable business environment.
One of the WTO's most important functions is to serve as a forum for trade negotiations. The member economies can avoid complicated and tortuous bilateral negotiations by using the single forum of the WTO to negotiate with all or most of their trading partners. This can help reduce transaction costs and increase the efficiency of negotiation procedure.
In principle, the WTO members have equal rights and obligations. A single set of trade rules applies to all members. The WTO's rule-making process is all-inclusive. Decisions are made by the entire membership, typically by consensus. A majority vote has never been used in the WTO. The WTO agreements are agreed upon by the entire membership and ratified by members' parliaments. Through this process, a commitment, once made, cannot be changed or reversed without going through the formal negotiation process again. In theory, the WTO rules ensure non-discrimination and fair competition for all. Rich and poor countries alike have an equal right to challenge others in the WTO's dispute settlement procedure. However, the members are also obliged not to act unilaterally, should disputes arise.
Enforceability. Without effective enforcement, the WTO rules would be meaningless. The WTO has established an institutional mechanism to enforce the international trade rules at two levels: the multilateral trade level and the national trade policy level.
l Enforcement through the Multilateral Trade Regime. The WTO agreements are legally binding and enforceable. Within the WTO's legal framework, international trade in goods, services, and intellectual property are governed separately under GATT, GATS, and TRIPs, respectively. Each set of agreement contains specific measures on market access, transparency, non-discrimination, and MFN.
According to GATT, the individual members must make commitments to "bind" their tariff rates. Over the past decade, developed countries have increased their bindings from 78% of product lines to 99% (WTO 1999). Developing countries have increased their bindings from 21% to 73%. The duty rates for information technology products had been completely eliminated by 2000. Tariffs on all agricultural products have all been subject to bound commitments. The bound commitments are difficult to change or reverse.
l Enforcement at the National Trade Policy Level. The WTO reviews national trade policies through an institutionalized peer review system, namely the Trade Policy Review Mechanism (TPRM). The TPRM ensures the transparency and full compliance of national trade policies. Under the TPRM, the world's largest four trading economies (namely the EU, the US, Japan, and Canada) are subject to reviews each two years, while the rest are reviewed each six years.
Dispute settlement. The premise on which the WTO is rendered reliable rests on its ability to resolve disputes justly and deliver the results promptly. The member economies have an equal right to challenge others in the WTO, should trade frictions arise. However, by accepting the WTO membership, the member economies have agreed to abide by the legal procedure and accept the judgment of the WTO.
The WTO's Dispute Settlement Mechanism (DSM) is consisted of a set of clearly defined rules and procedures. The DSM not only includes a timetable for completing a case, it also contains a judiciary body named the Dispute Settlement Body (DSB), which has the sole responsibility to establish tribunal panels, to monitor and implement rulings, and to authorize trade sanctions. A settlement procedure typically lasts between twelve to fifteen months, depending whether there is appeal. At the completion of the panel procedure, the DSB would draft a final report, which becomes the ruling. Both litigants can appeal the ruling. By rules, appeals may not last beyond 90 days. Under the DSM, any final ruling is automatically adopted unless the entire membership reaches a consensus to reject it. Since January 1, 1995, countries have brought more than 230 dispute cases before the WTO DSB.
2. The Interactive Relationship Between APEC and the WTO: Comparing the Alternative Analytical Perspectives
There are two different points of view in the existing literature which concern the interaction between the WTO and APEC. We propose an alternative perspective.
A. The idealist perspective
The idealists, including the official APEC view, paint an optimistic picture about "cross-fertilization" between APEC and the WTO (Garnaut 1999; Hannah 1999; Yamazawa 1999; 1998). The idealists emphasize concrete cooperative measures and policies. For instance, the APEC Strategic Plan on Capacity Building provides technical assistance to prepare the developing members for the WTO. The concrete cooperative programs and policies, the idealists believe, are conducive to region-wide confidence-building and trust-building. Regional cooperation and mutual trust, in turn, can bring about collective support for the WTO. For example, APEC collectively endorsed the WTO Information Technology Agreement. In short, the idealists tend to view the WTO and APEC as functionally complementary to each other and hence advocate a strong synergy between the two based on practical programs.
B. The radical realist perspective
The radical realists emphasize structural inequality and power asymmetry at the systemic (global) level (Lin 2000; Mokhiber and Weissman 1999; Talvi 1999).[3] The radical realists denounce "globalization as the highest stage of imperialism." They see an intimate ideological synergy between the WTO and APEC, because both serve as the vehicle for promoting globalization. The WTO and APEC are essentially the instruments of the advanced industrialized countries, which seek to dominate the world through globalization. Anti-globalization activist groups such as International Forum on Globalization, World Socialist Web Site, and APEC Alert, as well as left-leaning publications like Mother Jones and The Nation, believe open trade and free competition would exacerbate unequal distribution and power asymmetry in the global system. They accuse the WTO and APEC for advancing trade and commercial values at the expense of human rights, environmental protection, workers' welfare, cultural diversity, and social democracy, etc. Moreover, the WTO and APEC force the developing economies to open up their markets to the multinational corporations.
C. The institutional perspective
Both strands of thought miss the institutional reality of the multilateral trade regime. They fail to examine the institutional underpinning of APEC and the WTO. Nor do they take into account the dynamic nature of institutional conflict and institutional change within the two international organizations. First, although both the WTO and APEC aim to foster an open, rules-based multilateral trade regime, the fundamental difference in their institutional structure makes a broad-based "cross-fertilization" more an ideal than a reality. The cross-fertilization between the WTO and APEC is confined to a limited scope of concrete, non-controversial issues such as tariff reduction and technical assistance. Since the WTO and APEC are institutionally differentiated, they do not possess the capacity to provide institutional support for each other. For example, APEC has no way to ascertain that any bilateral agreement between two APEC members is WTO-consistent. Ultimately, if falls on the WTO to do the policing.
Second, power asymmetry is not a static phenomenon. True, the advanced industrialized economies play a powerful role in shaping the rules of the game in the WTO. However, the institutional design of the WTO also allows the developing economies to challenge the status quo. In APEC, due to its consultative nature, the industrialized economies do not dictate agenda setting. In both organizations, the decision-making process, though far from open and fair, is by no means a secretive process. Furthermore, there is a built-in safeguard which ensures that all final agreements are subjected to consensus. Therefore, one can argue that the conflict of interests between the developed and the developing camps is of institutional rather than ideological nature.
The exponent of institutional perspective is little concerned whether there exist functional complementarities between the WTO and APEC, or whether there exist ideological conflicts between the advanced developed countries and the underdeveloped countries. Instead, it seeks to analyze the nature of institutional conflict and institutional change in the WTO and APEC. It compares and contrasts the institutional structures of the two international organizations. It also attempts to understand the institutional linkage between the WTO and APEC.
Proponents of the institutional perspective find that the WTO and APEC are undergoing serious institutional crisis to the extent that their accountability, credibility, and reliability have been undermined. The causes of institutional crisis are:
l Legitimacy crisis: The WTO and APEC have weak accountability. Power asymmetry, unequal representation/participation, and inequity of rules together leads to legitimacy crisis. The way by which the G7 powers dominate and manipulate the decision-making process is subject to harsh criticism from the developing members. The WTO's poor accountability and allegedly undemocratic decision-making process spawns internal strife. Likewise, APEC suffers from weak political commitment and conflicting views on regional economic cooperation.
l Weak institutional capacity in enforceability and dispute resolution. The WTO and APEC have weak credibility and reliability. The WTO is a public good. The WTO lacks an effective enforcement mechanism to implement the rules. Nor does it have a penal system to effect legal sanctions. APEC is a consultative regional forum which lacks binding power.
3. Institutional Crisis and Internal Strife in the WTO
3.1 Legitimacy Crisis
Power asymmetry and unequal representation. Despite the principle of equal rights and obligations for all, there exists serious power asymmetry within the WTO. The power asymmetry is reflected in the different degree of participation in the decision-making process between the developed and the developing camps. The power asymmetry is also reflected in the individual economies' negotiating power. As Chadha et al. note: "[A]symmetries in negotiating power and capacity remain a fundamental characteristic of the [world trading] system" (2000: 433).
One major source of power asymmetry stems from the structural inequality of representation and participation. In 1999, the developing economies accounted for 74% of WTO membership, compared with 66% in 1982 (Michalopoulos 1999). However, the G7 powers together accounted fro 47.9% of world merchandise trade, and 49.8% of world trade in commercial services (WTO International Trade Statistics 2000). Comparing with their developing counterparts, the advanced industrialized economies have more financial, technical, and human resources to support their Missions in Geneva. In the late 1990s, only around 66% of developing country members actually had a Mission in Geneva. By contrast, all developed country members, with the exception of Liechtenstein, had a Mission in Geneva. The average size of Mission for developed economies was 6.8 persons, compared with 3.5 persons for developing countries. For the least developed countries, the average size was only 1.2 persons (Michalopoulos 1999). In terms of participation, the representatives from the developed economies occupied about 54.8% of all chief executive offices (chairmen and vice chairmen) in the General Council, Working Parties and Committees, Dispute Settlement Body, and Trade Policy Review Body. Due to resource constraints, the developing members have weaker negotiating power vis-a-vis their developed counterparts. Moreover, the relatively large size creates serious collective-action and free-rider problems for the developing camp as a whole. The 100-plus developing country members often lack a common position on major issues in the WTO.
Another source of power asymmetry comes from the ongoing controversy regarding the nature of decision-making process in the WTO. Critics argue that the WTO's decision-making system is both "untransparent" and "undemocratic" (Hormeku 2001). In the WTO, while the final agreement is subject to consensus, the decision-making process is not. Many developing members argue that during the past rounds of GATT/WTO talks, nearly all major issues relating to rule-making or procedural amendments had been dominated by the Quad (namely the EU, the US, Japan, and Canada). A major source of contention during the 1999 Seattle Ministerial Conference came from the developing members' criticism that the Quad had dominated the making of the rules of the game in the WTO. The outcome of WTO negotiations, the critics believed, was essentially the result of compromise and interests swap between a few powerful industrial nations. The Quad have usurped what Finger and Schuler (2000) called the "ownership of the rules" in the WTO.
The Quad has been able to dominate the WTO's decision-making system through an informal consultative process in which only a small handful of advanced industrialized countries that supposedly possess sufficient human and institutional resources to deal with the complex trade and legal agenda are invited to participate. During the Seattle Conference, representatives from the major industrial powers met behind the closed door. The secrecy attached to the so-called "greenroom process" aroused furor among the participants from the developing world. Many developing countries felt they have been unfairly and systematically excluded from the rule-making process. As a result, the WTO rules tend to favor the rule-makers, namely the advanced industrial powers. For example, during the Uruguay Round negotiations, less than three percent of written proposals were submitted by the sub-Saharan countries; however, all of the African members of the GATT must accept the new obligations of the WTO (Finger and Schuler 2000). In this regard, the WTO is not accountable to all members. The principle of equal representation and equal rights and obligations is under doubt.
However, the developing world as a whole lacks the capability to challenge the Quad's dominance. First, the relatively small size of the Quad means that it can circumvent the collective-action problem more effectively than the developing camp. Second, the developing countries face serious resource constraints. As Sampson observes: "In the increasingly frequent, complex, and resource-intensive negotiations at the WTO, most small delegations do not have the appropriate resources either in Geneva or in their capitals to service the negotiating process and thereby participate meaningfully in what could be meetings of primary importance for their national interests" (2000: 1100).
Inequity of rules. Many developing economies feel discontented with the fact that the industrialized economies try to push their way through to adopt WTO rules and agreements that favor their transnational corporations. The advanced industrial economies try hard to impose their standard of investment, competition, and government procurement on the developing economies. This "one-size-fits-all" approach arouses much resentment in the developing world. Since most of the key decisions in the WTO are worked out by a small handful of industrial powers through informal consultations, the vast majority of developing economies barely have any influence in the WTO system. At the 1996 WTO Ministerial Conference in Singapore, for instance, the industrialized economies lobbied hard for the issues of investment, competition, and government procurement to be included in the agenda of trade negotiation. Despite the explicit opposition of the majority of the developing economies, these issues were included in the final declaration (Hormeku 2001).
The same situation almost occurred again during the 1999 WTO Ministerial Conference in Seattle in which the advanced industrial economies sought to impose their view of labor and environmental standards on the developing economies. The Conference was a fiasco. Critics argued that imposing a minimum international labor or environmental standard would incur higher implementation cost for the developing economies. More important, minimum labor and environmental standards would work to the disadvantage of indigenous producers and favor the transnational corporations. The labor-intensive, textile, and agriculture-related producers in the developing world often lack the financial wherewithal or technical capability to meet the international labor and environmental standards.
Many developing economies simply feel that the WTO is unfair to them. As Stiglitz points out: "The Uruguay and previous Rounds focused heavily on liberalizing tariffs on manufacturing. They did little to reduce protection in agriculture, a sector in which many developing countries have a comparative advantage" (2000: 441). It appears to the developing economies that the advanced economies are only interested in introducing new issues-such as services, investment, and intellectual property rights-that appeal to the interests of the most advanced, competitive, and politically influential industries in their economy (VanGrasstek 2000: 678). In case where agricultural liberalization that did occur, it was driven primarily by developed exporters such as the US and Australia (Stiglitz 2000).
3.2 Weak Institutional Capacity in Enforceability and Dispute Resolution
Lack of effective mechanisms to enforce the rules. The WTO is a public good. The WTO's relatively large membership gives rise to serious collective-action problems. The formal trade negotiation rounds are long and resource-intensive, and it is time-consuming for the entire membership to reach consensus on any agreement or rule. The large size of membership also means that it is difficult, if not impossible, to effect organizational restructuring or institutional change. The collective-action problem results in institutional sclerosis. Free-rider and opportunistic behaviors prevail in the WTO, thanks to the principle of non-discrimination and the MFN treatment. Some member economies in the WTO feel growingly frustrated with the protracted trade negotiations process. The WTO's poor enforceability stimulates the surge of RTAs and FTAs.
Lack of a penal system to effect legal sanctions. The WTO has a poor record in dispute settlement. Between early 1995 and mid-2000, a total of 234 dispute cases had been brought before the WTO's DSB. Of the 234 cases, only 39 cases had been successfully settled or withdrawn. This dismal success rate shows the WTO's weak ability in settling disputes.
Unlike the state, the WTO DSM lacks a penal system to punish the transgressors. The WTO lacks an appropriate legal capacity to pass a sentence on the violator of international trade laws. Nor does it own a police force to exact compliance of law from its constituency. Although in theory the WTO DSB has the authority to issue trade sanction against any economy that fails to comply with the ruling, in reality this has rarely been practiced. For one thing, trade retaliation often involves raising trade barriers against the target nations. Sometimes, trade sanction also includes the use of embargo. These retaliatory measure are simply against the basic tenet of the WTO.
Critics from the developing world point out that the WTO DSM is prejudiced against the developing economies. The WTO DSM, dogged by power asymmetry, tends to work to the advantage of the powerful industrialized economies. Between April 1994 and March 1999, the WTO DSB had received 173 requests for legal settlements. Of the 173 cases, 110 were filed by the Quad (Hoekman and Mavroidis 2000).[4] Small trading nations cannot credibly retaliate against the large trading nations because raising import barriers will have little impact on the target nations (Ibid.). The recent banana trade dispute between Ecuador and the EU exposed the fundamental weakness of the WTO dispute settlement system. Ecuador must rely on the US (more specifically the large US transnational corporations Del Monte, Dole, and Chiquita) to file the case against the EU. The relatively small size and vulnerability of the Ecuadorian economy makes it difficult to bring retaliatory pressure on the EU (Oxfam 2000).
Small developing countries lack the legal expertise, institutional capacity, or financial resources to take a complaint against a major industrial power to the WTO DSM. The legal issues underlying the WTO agreements involve very complex international legal matters that require specialist legal expertise. Hiring international law firms would cost from $250-$1,000 an hour (Michalopoulos 1999: 136). As of 1999, the WTO Technical Cooperation and Training Division employed only two full-time legal officers and two part-time external consultants to provide legal advice to developing members (Oxfam 2000).
4. Institutional Crisis and Internal Strife in APEC
4.1 Legitimacy Crisis
Lack of political solidarity and weak political commitment. Unlike the EU or NAFTA, APEC is not a formal trade agreement or custom union. APEC is not founded on political consensus. Rather, APEC is a result of political comprise between the developed and the developing economies. The principles of open regionalism and voluntarism, to a great extent, reflect the outcome of weak political commitment. From the very beginning, the political solidarity of APEC has been marred by a deep political divide between the developed English-speaking members and the developing Asian members. On the one side is an American-led group of English-speaking member economies which pushed for comprehensive liberalization with an aim to achieve a full-fledged regional trade agreement. On the other side is a Malaysian-led (with the backing of Japan) group of developing Asian economies that favored the creation of an Asia-only club to promote technical cooperation and to strengthen political and economic influence for the region (Bullard 1998).
In December 1990, the Malaysian Prime Minister Mahathir proposed the formation of an East Asian Economic Group (EAEG). The EAEG would exclude the US. The idea was to reduce the region's heavy dependence on US markets by replacing trans-Pacific trade with intra-Asian trade (Atkinson 1995). While Mahathir's proposal received warm welcome from ASEAN, South Korea, and China, it failed to gain the support of Japan. The US was strongly opposed to the idea of an all-Asian club. This partially explained Japan's refusal to endorse the EAEG. The US did not wish to see a "dividing line down the Pacific."[5] Under American and Australian pressure, the EAEG was downgraded to the East Asian Economic Caucus (EAEC) in 1995. The EAEC-composed of ASEAN, China, Japan, and South Korea (known as ASEAN Plus Three)-was subsumed under APEC. In response, Malaysia's Minister for International Trade and Industry Rafidah Aziz declared that "anything that happens in APEC is non binding, period."[6] The Philippines Under-Secretary for Trade and Industry Edsel Custodio also responded: "APEC…should be a loose consultative machinery, it should be non-binding, it should not be a negotiating forum and it should not be institutionalized."[7]
Conflicting views on regional economic cooperation. The political tension between the developed English-speaking members and the developing Asian members was also reflected in their conflicting views on regional economic cooperation. Within APEC, there exists a sharp dichotomy between TILF (trade and investment liberalization and facilitation) and Ecotech (economic and technical cooperation). Enshrined in the Osaka Action Agenda of 1995, the three pillars of APEC is a clear deed of political compromise which seeks to maintain a balance between TILF and Ecotech. However, this delicate balance is under tension. As some APEC specialists observe: "If Ecotech and TILF continue to be seen a separate, competing strands of the APEC process, it will be hard to build a sense of share economic interests and mutual respect" (Elek and Soesastro 1999: 19).
The developed members in APEC are not enthusiastic about Ecotech or business facilitation. However, they realize the success of Ecotech is crucial to maintaining ASEAN and Chinese participation in APEC. Insofar as APEC is moving toward the direction of trade liberalization, the developed economies are willing to provide technical assistance and to fund the capacity-building programs. Generally speaking, the US is largely indifferent to technical cooperation and business facilitation and is strongly opposed to any slightest hint of an all-Asian regional trade bloc. The US, eager to reduce trade deficits with its Asian trading partners and to promote American exports, sees APEC primarily as a vehicle for reducing trade barriers. To the Americans, the focus of APEC should be TILF not Ecotech. In the midst of Asian Financial Crisis, Japan proposed to set up an Asian Monetary Fund with an initial capitalization of $100 billion to provide a quick line of credit relief to economies buffeted by the crisis. The US and IMF worked in tandem to block the proposal. The US feared that an Asian Monetary Fund would spill over into an inward-looking Asian trading arrangement.
Japan supports liberalization in the industrial sector, but opposes liberalization in the agricultural sector. Japan has demanded that its agricultural sector be exempted from the Bogor goal. This was strongly resisted by the US and Australia. Notwithstanding the concern for agriculture, Japan is overall not enthusiastic about Ecotech.
By contrast, the developing members believe the focus of APEC should be on Ecotech and business facilitation, with particular emphasis on human resource development and institutional capacity building. Led by China, many developing economies in APEC strongly believe that "APEC had put too much effort on liberalization and not enough in Ecotech" (Chiang 2001: 4). Speaking at the APEC Economic Leaders' Meeting in Subic in 1996, Chinese President Jiang Zemin proposed a unique "APEC approach" to foster reciprocal economic and technical cooperation based on "equality, mutual benefit and complementarity." Jiang implicitly resisted the US's liberalization agenda by asserting that economic and technical cooperation and trade and investment liberalization are of equal importance. Specifically, Jiang called for the establishment of a science and technology industrial parks network within APEC in order to promote mutual assistance in scientific and technological development.
The developing members of APEC are wary of the US demand for free competition. In their eyes, free competition is tantamount to open invasion by the powerful American transnational corporations. The developing economies believe the primary purpose of economic cooperation is to help them improve their national competitiveness rather than to subject them to fierce foreign competition.
4.2 Weak Institutional Capacity in Enforceability and Dispute Resolution
Lack of cohesive power to implement targets. APEC's weak enforceability is illustrated in its failed attempt to implement the Early Voluntary Sector Liberalization (EVSL) program. Championed by the US, the EVSL was a fast track package to expedite the realization of the Bogor objectives.[8] The EVSL was essentially a sectoral-based liberalization program, covering a total of fifteen sectors. The selected sectors were divided into two tiers. The first tier, designated for fast track implementation, included nine sectors.[9] The second tier, which covered six sectors, would require further development and action.[10] The EVSL initiative included quantitative measures to reduce tariff and non-tariff barriers ahead of the Bogor 2010/2020 timetable.
The EVSL was met with resistance from the very outset. In the first place, Mexico and Chile decided voluntarily not to partake a role in the program, and the credibility of the EVSL initiative was undermined instantly. China, Indonesia, Thailand, and Malaysia also refused to endorse the program. The fatal blow came from Japan's decision at the Kuala Lumpur meeting in 1998 to renege on its earlier commitment to liberalize the "forest products" and the "fish and fish products" sectors. Japan reminded the fellow APEC members that Japan is the world's largest net importer of both forest and fisheries products.[11] Japan also contended that the trade-weighted tariff rate of forestry products in Japan, at 1.7%, was lower than those of most APEC members and certainly lower than that of the US (Mezzera 1998).
APEC eventually decided to transfer the EVSL program to the WTO. However, the WTO is unlikely to discuss the EVSL in its formal negotiation round. First, the WTO does not accept sectoral-based approach or product-based approach to liberalization. Second, the WTO can only consider the proposal as part of a round (Lloyd 1999: 6). There is no assuring that there will be enough support from the WTO membership to include the EVSL in the agenda. Third, the WTO cannot consider the EVSL as a package because the program contains a mixture of industrial, agricultural, and services sectors.
The political commitment to sectoral-based liberalization among APEC economies has diminished as a result of the failure of the EVSL initiative. APEC's credibility in terms of enforceability is open to doubt.
Lack of formal dispute settlement mechanism. APEC provides a venue for members to engage in dialogue; however, APEC does not possess a formal dispute settlement mechanism to adjudicate trade disputes. In principle, irreconcilable trade friction ought to be formally channeled into the WTO's dispute settlement procedure. However, the WTO has a poor track record in its judiciary practice. As such, the ultimate responsibility falls on the individual economies to resolve the dispute through bilateral negotiation.
In early June 2001, Japan and China were engaged in a bilateral trade dispute over some low-value Chinese agricultural imports. In April, Tokyo announced a decision to impose import duties of 266% on shitake mushrooms and 106% on rushes used to make tatami mats. Two months later, Beijing threatened to retaliate with 100% tariffs on imports of Japanese cars, mobile phones, and air conditioners. The dispute actually goes beyond the cheap Chinese agricultural imports. Competition form the cheap Chinese imports has serious impact on Japanese industry and agriculture. Japan feels uneasy about the influx of cheap Chinese imports, ranging from bicycle to eel. In 2000, Japan registered a $22-billion trade deficit with China. Since China is not yet a WTO member, Japanese Prime Minister Koizumi and Chinese President Jiang Zemin have agreed to discuss the issue at the APEC summit meeting held in Shanghai in October 2001. However, few international observers believe Japan and China would be able to resolve the dispute in APEC. It is also unlikely that the two countries would bring the case before the WTO Dispute Settlement Body immediately after China's accession to the world trade organization. Both APEC and the WTO have limited capability to resolve the bilateral trade dispute between Tokyo and Beijing. Ultimately, it depends on the political will of both Tokyo and Beijing to resolve the difference through bilateral negotiations.
5. The Implications of Institutional Crisis in the WTO and APEC
Faced with serious institutional crisis in the multilateral trade regime, the economic stakeholders have two options: (1) strengthen the multilateral trading system, or (2) pursue RTAs among themselves (Chiang 2001: 2). The WTO suffers from institutional crisis as a result of legitimacy crisis and weak institutional capacity in enforceability and dispute resolution. A sweeping institutional reform in the multilateral trade regime is not likely to occur in the near future. Frustrated by the painstakingly slow process of the multilateral trade negotiations, many trading nations have decided to opt for strategic trade agreements as a remedy to the institutional inertia of the multilateral trade regime.
5.1 The Multilateral Trade Regime under Crisis
National interests prevail over multilateralism. One critical lesson one learns from the institutional crisis of the WTO and APEC is that interests politics has prevailed over the principle of multilateralism. A vast proportion of initiatives presented in the world trade organization is based on raw national self-interests. The WTO and APEC's common aim to promote an open, rules-based multilateral trade regime is shadowed by the traditional power politics in international relations, in which the practice of "beggar-thy-neighbor" policy has been pervasive in international trade.
Although the advanced industrialized economies as a groups appears ostensibly as a solid force behind the advancement of multilateralism, there actually exists serious conflict of interests among the industrial powers. For example, the EU continues to protect its agricultural sector with tariff barriers and government subsidies. The US and the EU, the two most powerful economies in the world, have been engaged in perennial struggle over protectionism to agriculture. However, in the area of industrial trade where they possess competitive advantage, the US and the EU collude to champion the cause of multilateralism.
To be sure, there is similar conflict of interests within the developing camp as well. For example, between 1992 and 1996, Argentina lodged 33 anti-dumping complaints against Brazil (APEC Economic Committee 2000: 38).
Global competition vs. regional cooperation. The developed and the developing camps have conflicting views over the purpose of multilateral trade regime. Whereas the advanced industrialized economies push for the creation of global level-playing field in order to foster open competition on a global scale, the developing economies wish to promote regional economic and technical cooperation through reciprocal capacity-building programs. This divergent view has often been politicized. Many developing economies fear that the industrial powers are using the idea of multilateralism as a disguise to promote the interests of transnational corporations. On the other hand, the developed economies charge that some developing economies selfishly vie for technical assistance and technology transfer, but at the same time refuse to abide by the international rules of the game. A fruitful political compromise between the developed and the developing camps is simply not forthcoming in the WTO or APEC.
Internal strife remains unmitigated. The problem of power asymmetry, unequal representation, and inequity of rules in the WTO remains unsettled, causing the legitimacy of the multilateral trade regime to deteriorate. Being a public good, the WTO does not possess effective institutional mechanisms or legal instruments to pre-empt opportunism or the tendency toward free-ride. The WTO not only lacks a police to enforce the rules, it also lacks sufficient legal capacity to mete out penalties to any violator of international trade laws. Similarly in APEC, weak political commitment and conflicting views on the nature of regional economic cooperation continue to undermine the political solidarity of the regional organization. The developing Asian economies' quest to build an all-Asian club is likely to remain a source of intense contention between the English-speaking developed members and the Asian developing members.
Institutional purpose or vision is blurred. The WTO expands rapidly, with its membership swelling from 88 in 1992 to 142 in 2001. The proportion of developing representation has increased from about 66% in the early 1980s to more than 74% in the late 1990s (Michalopoulos 1999). Notwithstanding the rapid expansion, the WTO has not been able to upgrade its institutional structure to meet the diverse interests and demands because it lacks a built-in institutional capacity for self-adjustment. Enlarged membership, compounded by an aggressive process of globalization, has surpassed the WTO's original institutional capacity to meet the challenge of an increasingly complex and diverse global economic environment. Large membership naturally gives rise to serious collective-action problems. The pace of multilateral trade negotiations is marred by political logjam. The problem of institutional deadlock ensues and will likely to stay for the years to come. Like the WTO, APEC is beset by internal political infighting. Dogged by internal struggles, both the WTO and APEC lack a clear institutional purpose or vision (Aggarwal and Morrison 1999). The ideal of multilateralism becomes blurred.
5.2 The Race for Strategic Trade Agreements in Asia-Pacific
A. The Motives Behind the Formation of RTAs and FTAs in Asia-Pacific
Dismayed at the institutional crisis which underlies the protracted process of multilateral trade negotiations, developed and developing members of APEC alike rush to form RTAs and FTAs as a way to supplement, or indeed supplant, the multilateral trading system. The surge of new regionalism is attributed to an interlocking web of institutional, economic, and political motives:
Institutional motive. The trading nations have strong institutional incentives to establish RTAs and FTAs among themselves:
Provide an insurance against the WTO
By establishing RTAs and FTAs with their most important trading partners, economies can circumscribe the crisis of legitimacy, enforceability, and dispute settlement in the WTO. The trading nations need an "insurance policy" to guard against the potential failure of the multilateral trading system (Findlay and Pangestu 2001).
Ameliorate the collective-action problem
RTAs and FTAs, based on bilateral or regional trade arrangements, involve a relatively small number of players. The smaller the number of players, the easier is to control the problem of collective-action.
Pre-empt opportunism and free-rider tendency
RTAs and FTAs are legally binding, allowing the participants to reap substantive economic gains. Foreseeable economic gains provide a strong incentive for players to stay in the game and not to renege on the commitments. Due to the "smallness" of the game, the participants can easily monitor the behaviors of other players.
Economic motives. The trading nations are motivated to form RTAs and FTAs by a number of clear economic incentives:
Reduce transaction costs.
Forming RTAs and FTAs can help reduce bargaining, negotiation, communication, information, and administrative costs. Moreover, they help reduce the undesirable costs associated with bureaucratic red tape.
Enhance market access and economies of scale and scope.
By allowing free market access to each other, the signatories can improve the size of their markets and thus benefit from economies of scale and scope.
Sunk costs
Investing in foreign markets often involves a large sum of sunk cost. Therefore, firms which choose to invest overseas are concerned with the transparency and predictability of the business environment there. Foreign firms are especially sensitive to the credibility of government policies. RTAs and FTAs serve as a legal warranty against unilateral defaults by the foreign authorities.
Managed competition
By engaging in RTAs and FTAs, the participating economies can avoid cut-throat competition in international trade. Through managed competition, firms can compete in an "orderly market."
Political motives. In addition to institutional and economic motives, members of APEC are also motivated by political incentives:
APEC lacks political and economic counterweight vis-a-vis NAFTA and the EU
Unlike NAFTA and the EU, APEC is not a free trade area or a custom union. APEC simply lacks the same political influence as NAFTA and the EU in international commerce. APEC cannot engage in trade negotiation on behalf of its members. Nor can it authorize retaliatory sanctions against transgressors or free-riders. Hence, APEC members feel strongly impelled to form RTAs or FTAs to enhance their political bargaining position in the international arena.
Growing disillusionment with the US
Many Asian members in APEC feel growingly disillusioned with the US. While advocating multilateralism and free trade, the US is itself involved in more than seven free trade agreements, including NAFTA and FTAA. In fact, the US is pursuing a strategic dual-track approach to international trade (APEC Economic Committee 2000). The Asian members feel compelled to emulate the American approach.
Moreover, the Asian members feel they cannot rely on the US to resolve regional crisis. In the aftermath of the Asian Financial Crisis, the US left to the IMF to deal with the crisis. The IMF vetoed Japan's proposal to establish an Asian Monetary Fund. At the same time, the IMF imposed a stringent conditional loan package on the recipients, which, many criticized, is incompatible with the real situation of the crisis. In July 2000, ASEAN, Japan, South Korea, and China decided to establish a Currency Swap Agreement (CSA) as a preemptive safeguard against another regional financial crisis.
Jockeying for the hub position
A hub and spokes structure has emerged within the dense regional trade agreement network. A "hub" country occupies a strategic position to provide equal access to all participants. The "spoke" countries do not necessarily have free access to all other spokes' markets. They only have free access to the hub. The hub gains preferential treatment from all spokes because of its strategic position. The hub could divert investment from each of the spokes, because only those firms based in the hub are able to source from any of the spokes (Findlay and Pangestu 2001). This explains why countries like Singapore and Mexico are jockeying to occupy a hub position.
B. The Emergence of a Dense Network of Strategic RTAs and FTAs in Asia-Pacific
A dense network of strategic regional trade arrangement is emerging in Asia-Pacific. Except for Taiwan, Hong Kong, Russia, and China, virtually all other APEC members belong to one or more sub-regional blocs (Table 3). China, Japan, and South Korea are either contemplating, or in the process of establishing strategic trade agreements with major trading partners or the existing agreements. A dense network of RTAs and FTAs is rapidly rising to supplement-or perhaps supplant-the multilateral trade regime. In Asia-Pacific, the crisscrossing strategic trade agreements are cutting across five major regional blocs, namely Southeast Asia, Northeast Asia, the English-speaking APEC economies, Chinese Mainland, and Singapore. Countries or economies that fail to take part in this dynamic process are increasingly being marginalized in international trade.
APEC's members not only sign bilateral or free trade area agreements with strategic trade partner(s), they also actively find ways to formulate inter-regional trade agreements. The rationale behind the establishment of a dense network of strategic RTAs and FTAs is that by participating in as many strategic trade agreements as possible an economy can benefit from the essential attributes of multilateral trade regime without having to go through the painstakingly slow and conflict-ridden process of multilateral trade negotiations.
Rich Men's FTA Network. The rich men's network include: Canada-Singapore FTA, CER, Japan-Korea FTA, Japan-Singapore FTA, NAFTA, NAFTA-Australia FTA, Republic of Korea-New Zealand FTA, Singapore-New Zealand FTA, and US-Singapore FTA.
The advanced developed economies are the chief protagonists of new regionalism. The advanced economies have different strategic interests in signing RTAs and FTAs. Economically speaking, by engaging in RTAs and FTAs with other industrialized economies, an advanced economies can reap substantive gains from economic integration and enhanced trade relationships. For example, Australia and New Zealand signed the "Closer Economic Relations" (CER) agreement on January 1, 1983 to bring about a closer partnership between the two countries. The CER removed tariffs and quantitative restrictions on 80% of trans-Tasman trade (Martyn 2001). Since 1983, the value of trade between Australia and New Zealand has increased more than 400%. Japan and South Korea have recently released a feasibility study on creating a joint free trade area across the Japan Sea. The feasibility study estimates that a Japan-Korea FTA would create a joint market worth of US$5 trillion. It would also boost Japan's real national income growth by 10.45% a year, and Korea's by 9.11% a year (Martyn 2001).
The US has both geo-political and geo-economic interests in RTAs and FTAs. The US seeks to maintain its influence in Asia-Pacific by singing FTAs with Singapore, Australia, Canada, and Mexico. Washington needs its allies' support to maintain a stable political and business environment in East Asia. By offering access to US aircraft carriers, Singapore and Australia play a crucial role in keeping the American military presence in the Asia-Pacific region.
Singapore is making vigorous effort to secure a strategic hub position in Southeast Asia. Singapore signed a FTA with New Zealand (ANZSCEP) on November 14, 2000. Singapore is currently negotiating FTAs with Australia, Canada, Japan, Mexico, and the US. Singapore and Japan is contemplating to develop a "new age FTA," which would provide the both signatories with national treatment in investment and financial services, mutual recognition of patents on IT and telecommunication products, mutual recognition of medical standards, mutual recognition of academic degrees and vocational licenses, and harmonization of e-trade.
Poor Men's FTA Network. Some of the most well-know free trade agreements in the developing world include AFTA, Mercosur, Andean Community, Andean Community-Mercosur, G3, Northern Triangle-Mexico, etc. The developing economies establish strategic trade agreements to provide reciprocal economic and technical support for each other and to leverage against the influence of advanced economies and transnational corporations.
AFTA is the most influential poor men's FTA in the Asia-Pacific region. The leaders of ASEAN decided to establish an ASEAN Free Trade Area in 1992 (AFTA). The AFTA grew out of a fear of regional dominance by the more developed English-speaking members of APEC. At Malaysia's behest, the AFTA intentionally excludes the US, Canada, Australia, and New Zealand. AFTA provides technical assistance to its members through reciprocal capacity-building programs. AFTA also serves as a "training ground" for competition in the wider global market (Findlay and Pangestu 2001: 6). The timetable for completion of the free trade area has been accelerated from 2008 to 2002. The original ASEAN Six (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Brunei) will complete the Common Effective Preferential Tariff (CEPT) by 2002. The four new members have up to 2006 (Vietnam), 2008 (Laos and Myanmar), and 2010 (Cambodia) to meet the deadline. As of yearend 2000, 83% of all tariff lines in ASEAN had been liberalized. The average tariff amongst ASEAN countries had been reduced from 12.75% in 1993 to 3.75% in 2000 (Martyn 2001).
Although China has not yet entered into any formal free trade agreement, it is contemplating to establish a strategic free trade area with ASEAN. At the ASEAN Plus Three Summit Meeting held in Singapore in September 2000, Chinese Premier Zhu Rongji called for the formation of an "ASEAN-China FTA" as a political and economic counterweight against the EU and NAFTA.
Rich-Poor FTA Network. Despite the fundamental conflict of interests between the developed and the developing camps, there is a sign of convergence between rich men's FTA networks and the poor men's FTA networks. Among the most prominent examples of the Rich-Poor FTA Network are FTAA, AFTA-CER, EU-Mercosur, CER-Mercosur, inter alia. While suspicious of each other, both the developed camp and the developing camp need market access and limited degree of economic integration from each other to pursue trade activities. For the developing economies, a multi-layered Rich-Poor FTA network provides double-protection against the onslaught of fierce global competition. Whereas in an open multilateral trade regime, the developing economies are forced to confront the formidable industrial powers tete-a-tete.
The bilateral trade agreement between a plurilateral AFTA and a bilateral CER is a classical example of Rich-Poor FTA Network. In October 1999, Ministers from ASEAN and CER agreed to study the feasibility of establishing a regional trade agreement. To this end, the AFTA-CER Free Trade Area Task Force was established in February 2000. The AFTA-CER FTA, representing a combined market of 524 million people and US$1.38 trillion, would cover all trade in goods, services, investment, and intellectual property rights (Martyn 2001). The preliminary scenario of an AFTA-CER free trade area would contain a timeline to achieve zero tariffs on goods and services by 2005. Opposition from Malaysia, Thailand, and the Philippines remains the principal obstacle to the formation of AFTA-CER FTA.
Conclusion
The multilateral trade regime is under crisis. The WTO and APEC are experiencing institutional crisis as a result of legitimacy crisis and weak capacity in enforceability and dispute resolution. Enlarged membership, compounded by an increasingly complex and diverse global economic system, has surpassed the capacity of the WTO and APEC's original institutional design. In the WTO, institutional overload spawns internal strife, which in turn leads to legitimacy crisis. Legitimacy crisis results in institutional deadlock. A protracted trade negotiation process ensues as a result of political logjam. Furthermore, the WTO is a public good. Since the WTO lacks cohesive power to enforce rules and lacks a viable legal system to effect legal sanctions, it cannot effectively pre-empt the occurrence of collective-action, opportunism, and free-rider problems within its membership. Like the WTO, APEC suffers from internal conflict of interests and political struggle. Lacking binding power, APEC has a weak political base. In short, the WTO and APEC are beset by institutional crisis to the extent that their accountability, credibility, and reliability have been undermined.
Dismayed at the institutional crisis which underlies the painstakingly slow process of multilateral trade negotiations, developed and developing members of APEC alike are rushing to form RTAs and FTAs as a means to supplement, or indeed supplant, the inept and conflict-ridden multilateral trade regime. As a consequence, a dense network of strategic regional trade agreements has emerged in the Asia-Pacific region as in other parts of the world. The new geo-economic strategy is to pursue a dual-track approach a la USA and to participate in as many strategic RTA and FTA networks as possible. Virtually all APEC members are establishing strategic regional trade agreements with their major trading partners. The rationale behind forming a dense network of strategic RTAs and FTAs is that by participating in as many strategic trade agreements as possible a trading nation can enjoy the essential attributes of the multilateral trade regime but bypass the painstakingly slow and conflict-ridden process of multilateral trade negotiations at the same time. As the WTO and APEC continue to experience international crisis, RTAs and FTAs will flourish as a result of strategic realignment in the major trading nations' international trade policy.
[1] Some of the key economic players include: national economies, custom unions, regional trade agreements, free trade agreements, international economic institutions (e.g. World Bank, IMF, Asian Development Bank, etc.), financial centers and institutions (e.g. Wall Street, London, NYSE, Nasdaq, etc.), economic and financial research institutes, MNCs, etc.
[2] It must be qualified, however, that neither group constitutes a harmonious whole. Within each camp, there exist conflicting interests and diverse views. Nonetheless, there is a fundamental conflict of interests between the two camps within the WTO and APEC.
[3] The radical realists are influenced by the radical thinking in development economics-particularly the dependency theory, Latin American neo-structuralism, and neo-Marxism-which gained prominence during the 1960s.
[4] In order of size: the US, 54; EU, 43; Canada, 13; India, 8; Mexico, 7; Japan, 7; Brazil, 6; Thailand, 4; New Zealand, 4.
[5] Quoted from US Assistant Secretary for East Asian and Pacific Affairs Winston Lord (Atkinson 1995: 39).
[6] Quoted in Atkinson (1995: 39).
[7] Ibid.
[8] The EVSL began at the Manila Meeting of Economic Leaders in 1996 and ended at the Kuala Lumpur Meeting of Economic Leaders in 1998.
[9] The nine sectors included: environmental goods and services, fish and fish products, forest products, medical equipment and instruments, telecommunications mutual recognition agreement, energy, toys, gems and jewelry, and chemicals.
[10] The six sectors included: oilseeds and oilseed products, food, rubber, fertilizers, automotive, and civil aircraft.
[11] Eighty percent of Japanese consumption in forestry products and forty percent of fisheries products is imported (Mezzera 1998).
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