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"APEC and Free Trade"
Seminar to Development Studies, Massey University, Palmerston North, Aotearoa/New Zealand:

by Aziz Choudry, Corso National Officer and spokesperson for the fair trade coalition "GATT Watchdog".

GATT Watchdog, PO Box 1905, Christchurch, Aotearoa/New Zealand
Fax 64 3 3668035

APEC and Free Trade

Aziz Choudry, 2 May 1997

It occurred to me that a good place to start to talk about APEC would be with two popular TV shows - Shortland Street and The X-Files. What do these have to do with APEC? Well The X-Files is mostly shot in Vancouver, Canada, which in November will host this year's APEC Leaders Summit, and in 1999, APEC will come to Auckland, the home of Nick, Rachel, Rangi, Kirsty and the Shortland St Clinic. And like both TV shows, the official hype about APEC and the drive to what is called "open regionalism" in APEC-speak which we will hear more and more of in the next couple of years is a nice story, full of intrigue and sub- plots, but very definitely far removed from reality. And APEC is full of commercial breaks for the big business interests that have long been the engine of its growth and evolution.

For many who challenge the wave of corporate colonialism that is sweeping the world whether in the form of Rogernomics, World-Bank imposed structural adjustment policies, and free trade agreements, APEC is yet another vehicle to shape the world for the interests of the powerful corporations that control much of the world's economy. Having outgrown their domestic markets, they have aggressively lobbied governments, and directed the world's free trade arrangements like GATT, APEC and NAFTA to do away with government regulations which limited their access to some markets and economies. With more and more of the world's economic activity involving the service sector - broadcasting, tourism, and financial services, these companies demand even greater rights to invest however and wherever they wish. Corporate lobby groups like the Coalition for Service Industries and the Intellectual Property Alliance have played a large role in driving the engine of trade and investment liberalisation with their strong influence on US trade and foreign policy. With the creation of the World Trade Organisation (WTO) in 1995, now the deregulated national regimes of countries around the world are being protected by a legally binding international treaty, the GATT, enforced by the threat of trade sanctions and managed by an organisation which is unanswerable to ordinary people.

There is nothing inevitable about globalisation. It is a programme that is being pushed through by identifiable actors on the global and national stages. Trade and investment liberalisation is not being adopted because of demonstrated success in reinvigorating national economies. For many, it is an IMF/World Bank requirement for obtaining credit. These institutions' leverage over countries with little choice in the matter creates a mistaken impression that deregulation and liberalisation is the only possible path of development. Filipino academic and writer Walden Bello says: "Whether in the form of Thatcherism in Britain, Reaganism in the US or structural adjustment in Africa and Latin America, the free-market model has resulted in weak growth or stagnation accompanied by greater income inequality, a greater percentage of the people living under the poverty line and serious environmental damage." I might add New Zealand fits into this trend - during the first eight years of restructuring, the economy faced stagnation or recession. After 3 years strong economic growth between the end of 1992 to the end of 1995, economic indicators started to slump. And ironically, although some of the agencies promoting globalisation try to hold up the East Asian "tiger" economies as free trade success stories, economic growth in the region has actually been created in large part by activist governments with high levels of state intervention and support for local producers.

Joan Spero, US Undersecretary for Economic, Business, and Agricultural Affairs spelt out the Washington agenda for APEC in quite unambiguous language to a US Congress subcommittee in July 1995: "APEC is not for governments; it is for business. Through APEC, we aim to get governments out of the way, opening the way for business to do business". In 1996 the Ministry of Foreign Affairs and Trade openly stated that :"through APEC we are able to encourage regional colleagues to follow the type of reforms undertaken in New Zealand." That is cold comfort if you are the 1 in 5 of New Zealanders estimated to live below the poverty line, or you appreciate the finer points of the New Zealand "economic miracle" - enjoying the fastest growing income gap among 18 comparable industrialised countries over the 15 years between 1979 and 1994.

APEC is not an international treaty or a formal agreement, nor is it a trading bloc along the lines of the EU. It operates through a series of leaders and ministerial meetings, scripted by officials, coordinated by a small secretariat in Singapore. Each year, the forum is chaired by a different member economy. In 1995, it was Japan, last year the Philippines chaired APEC, this year, it is Canada's turn, and in 1999, New Zealand will chair.

With the conclusion of the GATT Uruguay Round in April 1994, APEC sees its role as regional economic integration - to "ratchet up" the GATT process and "deepen and broaden" its outcomes by tearing down remaining protections, forcing other countries to move further and faster. It seeks to export its advances in trade liberalisation to the rest of the world, and to fill perceived gaps in the Uruguay Round resolution.

APEC has always been market-driven and is heavily influenced by big business and private sector free marketeers. It mainly relies for research and input on a thinktank of business representatives, academics and officials "acting in their own capacity" outside the framework of national governments known as the PECC (Pacific Economic Cooperation Council). APEC works in a very secretive and unaccountable manner. You only have to look at who has access to the APEC meetings besides the handful of official representatives from each member economy. Official observers are limited to three groups - PECC, the newly-formed APEC Business Advisory Council, and the South Pacific Forum. There is absolutely no opportunity for citizens' input.

NZ Listener journalist Bruce Ansley commented on the high level of secrecy surrounding last July's Christchurch APEC Trade Ministers Meeting: "Little of it was reported. It met in secret, except for a few handouts, and the odd press conference where the idea was to say as little as possible and to stall questions and urbanities". APEC has created a number of ideologically-driven bodies like the standing committee on trade and investment (CTI), and an ad hoc committee on economic trends and issues (ETI). Various working groups and fora within PECC develop ideas on a range of areas like "human resource development" and trade policy. These invisible unaccountable processes raise serious questions as to the very legitimacy of APEC. Robert Scollay, New Zealand co-ordinator of the PECC Trade Policy Forum (TPF) and lecturer in economics at Auckland University describes it as "a self-selected group...populated by people committed to the multilateral system based around the GATT. There's little discussion of that...because it's taken as common ground by most of the people working in the TPF".

During 1993 an eminent persons group was formed of free trade enthusiasts from around the region, including New Zealand's very own Sir Dryden Spring, and headed by US economist Fred Bergsten. It set to work on a long-term vision for APEC. Although it no longer exists, while it did it played an important role in shaping APEC into a vehicle for trade and investment liberalisation. The EPG wanted clear linkages between APEC, the IMF, the World Bank and the ADB, and for APEC to be a launching pad for future rounds of GATT negotiations. Many saw the EPG as over the top, ideological and US-driven. Its role has been largely taken over by the ABAC. The New Zealand government hype and superlatives that ooze forth about APEC tends to gloss over the fact that, among the 18 APEC member economies, there is no real consensus about what APEC is. Walden Bello describes APEC as "four adjectives in search of a noun". APEC first saw the light of day in 1989 as a relatively loose forum for discussing regional economic issues, tolerant of different levels of development and economic models. Canberra was already interested back then in the grouping forming the basis for a future free trade agreement. But soon after NAFTA had been approved, during a rocky patch in the GATT negotiations, the Clinton administration began pushing APEC to set an agenda for a free trade and investment area as a sort of fallback position should the GATT talks dissolve in disarray.

Since it hosted the Leaders Summit in Seattle in 1993, the US has been forcing APEC's development to make it a more effective instrument for advancing its economic interests in the region and for its competition with the EU. Broadly speaking, the USA, Australia, New Zealand and Canada have taken up the goal of creating a free trade and investment area, seeking more formal binding commitments from APEC members while Japan and the ASEAN countries have all resisted such attempts to a greater or lesser degree.

Deep divisions within APEC are glossed over with characteristically ambiguous language at the Leaders Summits. The 1994 APEC Leaders meeting in Jakarta adopted a timetable for achieving free and open investment in the region by the year 2020, with staggered targets to reflect the different levels of economic development of each member. But Malaysia and Thailand both attached appendices to the Bogor declaration saying that they understood liberalisation to be voluntary flexible and non- binding. Even the meaning of "free" remained unclear - did this mean zero or low tariffs?

In 1995 there was marked tension over the issue of inclusion of agriculture in the APEC agenda. Both blocs within APEC claimed victory for their perspective, based on the wording of the final documents that emerged. The US accused Japan of trying to divert attention away from trade liberalisation by its insistence that APEC was equally about trade facilitation and economic co-operation.

APEC promotes: minimal controls on big business; unrestricted foreign investment;unlimited export of profits; privatisation of state assets, utilities and services; full exposure of domestic producers to cheap imports; privately-funded and owned infrastructure operating through deregulated markets; market-driven service sectors, including social services like education; competitive (i.e. low cost, deunionised) and flexible (temporary, part-time and contract-based) labour markets; free movement for business immigrants (while retaining strict controls on foreign workers and refugees). In short APEC, like other free trade regimes promotes a race to the bottom in environmental, health and safety standards, wages and human rights to attract foreign investment. We're being asked to believe that what's good for the economically powerful is good for everyone, that the benefits will trickle down to us all, and that economic growth should be pursued for its own sake, regardless of the social or environmental costs.

"Economic issues cannot be divorced from the complex realities of people's daily lives. Yet APEC is described as a community of economies which bears no responsibility for the social political or cultural consequences of the decisions its members make. This artificial distinction allows the APEC process to operate in a totally anti-democratic, unaccountable and untransparent way". Statement from NGO forum on APEC, Kyoto.

APEC's narrow focus on trade and economic issues insulates it from its social, environmental, political and anti-democratic impact. Since APEC is not rules-based, but rather a "non-binding" process involving a grouping of "economies"(Jim Bolger goes to APEC meetings not as the PM of New Zealand, but the leader of the NZ economy) - political accountability to the public via parliaments is expediently sidestepped. APEC and GATT commitments bypass Parliamentary ratification and can be signed without debate or formal vote. Effectively these two free trade regimes lock in future governments to the current free market free trade economic model without any debate.

Clerk of the House of Representatives, David McGee raised concerns about the "fundamentally undemocratic" way in which New Zealand entered into international agreements. "There is little or no opportunity for public input while such a treaty is under consideration", he notes. An October 1996 Justice Department briefing paper to the incoming Minister of Justice concurred: "where treaties are likely to change our domestic law, presenting the House with a concluded draft treaty for acceptance or rejection may not be sufficient. Where a treaty has the potential to affect the rights of New Zealand persons, parliamentary, and hence public, participation would be more effective if the House provided guidance during the formative drafting stages". Democracy has been redefined as "government of big business by big business for big business". APEC promotes a Clayton's version of prosperity and stability based on the exclusion of increasing numbers of people from having a say over their destinies.

In 1995, Ministry of Foreign Affairs and Trade officials said that the New Zealand delegation were going to Osaka on a mission to eliminate the wriggle factor - referring specifically to attempts by some governments, especially South Korea and Japan - to exclude agriculture from APEC's liberalisation agenda. APEC, MFAT said was a voluntary agreement insofar as it was voluntary to enter into, but once a member, an economy is bound by its commitments. This view was consistent with the push by the US and Australia to make APEC a more rules-based entity, rather than a "voluntary, non-binding process". They wanted APEC to embrace a schedule for trade and investment liberalisation that was binding, could be monitored and would allow the comparison of performance between members.

But last year MFAT told a different story, conveniently designed to stave off questions raised by GATT Watchdog and others about the mandate of those representing New Zealand at APEC (from a caretaker government) to make any commitments and the secrecy surrounding the contents of the New Zealand Individual Action Plan, outlining the commitments to further liberalisation that would be made at the Manila APEC Summit. Draft copies of all 18 APEC member economies' Action Plans had been leaked to non-governmental organisations prior to the APEC Summit. Now MFAT said that commitments at APEC were not binding, and that a future government could alter its offer to liberalise. But the goal of attaining free trade by 2010/2020 remained, and the change seemed merely to indicate that, within that, perhaps there could be some flexibility in the pace and the means by which that goal is pursued. I think it was also a tacit acknowledgement, that, having met with significant resistance to moves to turn up the heat on agricultural liberalisation, and having failed to further institutionalise APEC in Osaka, continued pressure in these directions might actually backfire in what is already a rather tense and sometimes decidedly fragile looking forum.

Some pro-market commentators, doubtless swept up in the official APEC hype bemoan the far from spectacular outcomes of APEC. The Economist described the Osaka Action Agenda as a "no action, no agenda" document which "committed nobody to nothing". Meanwhile the National Business Review complained bitterly that the anti-APEC activities in the Philippines, when tens of thousands of people mobilised to denounce APEC had got better coverage than the APEC meetings themselves.

Recently, there have been noises from within and outside of the APEC process to "address" environmental issues. Last year, President Ramos made a number of statements along the lines of how through APEC, business would stand "shoulder-to-shoulder" with people and governments in the pursuit of the "vision we all share in the Asia Pacific community". He claimed to stand for a "kinder, gentler APEC" APEC with a human face, and so on. The sustainable development buzzword has been picked up by the Canadians too as a theme for this year's APEC work. What does this mean? In a worldview where human needs and the environment are subordinated to narrow economic goals what kind of sustainable development can we expect from APEC, with its vision of rampant transnational investment and trade flows? And how can we expect environmental protection from a vehicle which seeks to remove all regulations whether they relate to trade, investment, or worker rights and the environment? On the same day that Ramos told a conservative grouping of NGOs how clean and green APEC was he was telling the APEC Business Forum, a two day summit where hundreds of CEOs from major corporations met to put their own proposals to the APEC meeting: "Let's go for it. Go. Go. Go. Go. Go". He wasn't talking about sustainable or socially just development, that's for sure.

Unsurprisingly, the sorts of social and environmental concerns which Ramos and other Filipino ministers promised to try to advance at APEC did not surface in anything more than token form. In fact the Philippines government is prepared to liberalise further and faster than its more pragmatic and cautious neighbours in Asia and sees itself as a "trailblazer" for this economic path regardless of the human and environmental costs.

Several other countries, including India, Peru, Russia and Vietnam have expressed interest in joining APEC. Why? Because membership is seen by some hopeful of being accepted as a way of gaining favour with lending institutions like the World Bank whose loans are conditional on countries pursuing liberalisation and deregulation policies and opening themselves up for foreign investment. Certainly in order to join, a country must voluntarily open up its economy and implement the same sort of programmes as contained in the individual action plans of APEC members - a "shadow" IAP as it were. This resembles the way in which countries seeking World Bank loans must first implement shadow structural adjustment programmes to prove that they can follow the dictates of the World Bank conditions. Regardless of whether APEC is able to achieve its goals in 5, 10 or 20 years it will; be a powerful force in shutting off possibilities for alternative forms of social and economic development. We've all heard the "There Is No Alternative" message trumpeted during the decade of Rogernomics and Ruthanasia. That same message is now being blasted throughout the region, regardless of the diversity of the region and the aspirations of the peoples that make up the Asia-Pacific.

APEC and GATT proponents subscribe to a narrow economic reductionist outlook. Economics is defined so as to exclude vast areas of human activity - those which don't contribute to GNP growth and all the other supposed 'vital signs' of a 'healthy economy'. And within that, peoples, natural resources, lands, even the water we drink and the air that we breathe are redefined within this narrow definition as tradeable commodities. I am not being emotive or melodramatic here. Last year a WTO panel ruling found an important implementing regulation of the US Clean Air Act to be a barrier to free trade, after a challenge was filed by Venezuela and Brazil because the US had regulations setting standards for gasoline designed to reduce emissions that cause smog and airpollution. Refineries in Venezuela and Brazil objected to this - and an April 1996 appeal by the US government to the WTO was rejected. The US can choose - it can change its environmental law, face huge trade sanctions or pay compensation worth hundreds of millions of dollars to Brazil and Venezuela. US media commentator Norman Solomon wrote: "Too often debates over trade policy seem ideological or theoretical. But there's nothing abstract about the air we breathe".

Similarly the imposition of World Bank policy recommending privatisation of water rights has had a devastating impact on Somalia, coming with the assumption that there should be no ecological or social limits imposed on water. World Bank policy in India also recommends the creation of markets in tradeable water rights, which will alienate common rights of access to water and replace them with market-oriented notions of commodity property rights. And we don't have to look too far to see similar models being applied - Papakura District Council has already moved to privatise water, other local authorities will certainly follow.

As Indian environmentalist and scientist Vandana Shiva points out, all areas have become "trade related". Nothing is off-limits. You can put the term "trade-related" in front of anything and draw the "areas of domestic decision making into the global arena" and create areas where the 'darker', more visible, facets of free trade are transformed into reasons for its justification and expansion".

JK Galbraith wryly remarked on the pervasive influence of freemarket thinking a few years ago at Harvard University: "No-one can be without sin who does not at least daily affirm his belief in the profound benificence of free market forces." Challenging free trade and the free market is tantamount to heresy in New Zealand these days. Those of us that do, according to former Labour trade minister Mike Moore are "grumpy geriatric communists" who tuck their shirts into their underpants, and "primitives who, if they they had their way, would throw New Zealand and our region into chaos and depression". Some of us are threatened with sedition charges, or have SIS agents illegally breaking into our home followed by police raids supposedly looking for bomb- making equipment a few days later. When the facts about the free market model start to get in the way of the good story successive New Zealand Governments have tried to spin for the last decade or so it is most certainly prepared to go into bat for big business and switch from abuse and other attempts to debate to nastier forms of state intervention against those who don't believe the hype. Obviously the free market does not apply to competing ideas. Native American activist and poet John Trudell calls the New World Order an "Old World Lie" and he's absolutely right. If APEC and free trade are anti- democratic, how much more so than the impacts on indigenous peoples already struggling for self-determination against coloniser governments, as those governments which have no rights over their resources rush to sell them off to the highest bidder. In my mind free market economic orthodoxy is based on the same twisted anti-human values of colonisation. As Cree lawyer Sharon Venne says of NAFTA: "It is the same colonisation game - just with a new name". Free traders keep telling us that we have to look at "the big picture" to understand the benefits of liberalisation. So let's look at it briefly. Of the world's top 100 economic units 51 are companies - not countries. The Washington-based Institute for Policy Studies last year released a report called "The Top 200: The Rise of Global Corporate Power", which used 1995 statistics to compare a company's annual sales with a nation's GDP. 200 corporations recorded sales in 1995 that exceeded 28% of the world's total economic activity. Tobacco giant Philip Morris's sales are greater than NZ's GDP. IBM is bigger than Malaysia, Toshiba is bigger than Chile. The same study found that the top 200 corporations provide jobs for only 0.75% of the world's workforce.

Free trade is a euphemism for freedom from governmental restrictions for transnational corporations. A 1995 UN Conference on Trade and Development Report states that transnationals account for two-thirds of world trade in goods and services. That comprises one third of intra-firm transactions, and a third of inter-firm transactions. So that leaves only a third of world trade in goods and services which can operate according to free market/free trade theories of arm's length transactions.

While the US government were wanting to push agricultural liberalisation onto the APEC agenda in 1995, some 40% of its own grain production was subsidised in one form or another. While farmers from Mindanao to Manawatu are trying to scrape a living in agricultural sectors which have being oriented to a subsidy-free, export-focussed model, US farmers are being subsidised to the tune of US $16000 each - around 30 times the average Filipino income. The US is the main sourcee of cereals imports into the Philippines. Unsurprisingly, Filipino farmers are unable to compete with the cheap bulk imports and are forced off their land in droves. An April 1995 World Bank study "Agricultural Liberalisation and the Uruguay Round" concluded that member governments had greatly exaggerated the level of agricultural liberalisation that the GATT deal would produce. The study lowered the estimated income gains for Australia and New Zealand from 0.6% of each country's GDP to less than 0.1%, and suggested that farm protection might even increase under the deal. As English trade policy analyst Kevin Watkins says "in agriculture as in other areas of world trade the level playing field slopes all the way downhill from Washington and Europe".

The gap between US free trade rhetoric and reality were put into sharp relief just after the APEC Trade Ministers Meeting last July. Just a few days after both Philip Burdon and Charlene Barshefsky, acting US Trade Representative firmly called for further commitments to trade liberalisation the USA announced a round of dairy export subsidies into Asia. New Zealand officials saw this move as unfair and at odds with the US commitment to trade liberalisation and the Uruguay round. That same week, US agriculture secretary Dan Glickman demanded "the elimination, not just the reduction, of all trade distorting subsidies in agriculture" in the next round of global trade talks scheduled to start in 1999. It's very much a case of do as we say, not as we do. The track record of the governments of major economic powers with regard to their international trade commitments is poor.

One analysis of GATT disputes since 1980 shows that the US is a defendant more often than a plaintiff, and that while it normally prevails as a plaintiff, it usually loses as a defendant. The US insists on its sovereign right to use unilateral sanctions against any country it considers to be behaving unfairly towards it while simultaneously demanding that all other countries surrender their right to make decisions to the international trade rules. Prying open new markets is high on the US agenda. And there has been no let-up in this double standard as many APEC countries such as South Korea, Thailand, Japan and the Philippines have all found themselves on the receiving end of threatened or actual trade sanctions in the past couple of years.

There remains a sense that APEC as an international forum comprising a diverse range of economies could, if pushed too far too fast fly apart. But APEC must be seen in a context. As Jane Kelsey points out, whether it survives in some form or not, the global interests of capital, its agents and allies, the networks which feed into APEC will continue to operate. Currently there are advanced moves within the OECD to create an expansive bill of rights for international investors in the form of the Multilateral Agreement on Investment, which would initially apply to the 29 OECD countries, with the intention to extend it to the Third World. A January draft of the MAI was leaked, revealing the most comprehensive set of rules yet proposed to protect and expand the power of corporations and other large international investors, guaranteeing them open market access, freedom from any obligation to serve local economic needs, easy repatriation of profits, seriously undermining the power of local and national governments to regulate investment. Once again, the speed and the secrecy with which this agreement is being negotiated is typical of the way in which free market free trade programmes have been shaped to then be locked into place. It is vital that people continue to challenge and to expose such moves and force these issues to be debated in the open.