The Message From Asia: Trade Locally, Think Globallyby
President Clinton, the first President of the Vietnam War generation, has become the first President ever to set foot in a unified Vietnam. His visit to Vietnam was part of a trip to Asia to attend his valedictory meeting of the heads of state of APEC, the Asia-Pacific Economic Cooperation forum, a regional group promoting economic integration. Back in 1993, when the American press was replete with dire predictions about the protectionist tendencies of the new Democratic Administration, President Clinton convened the inaugural meeting of APEC. Each year since, the leaders have met to set plans to achieve their long-run vision of free trade within the region.
President Clinton's leadership in developing APEC and his successful effort to secure passage of NAFTA during his first year in office signaled his Administration's commitment to trade liberalization. But despite these remarkable first steps, the naysayers continued to fret. They said Clinton may not have been a traditional protectionist, but wasn't his pursuit of regional trade agreements jeopardizing multilateralism? Wouldn't NAFTA and APEC encourage the formation of competitive trade blocs rather than expand global welfare by fostering more open trade?
In fact, APEC and NAFTA revitalized global efforts to secure final agreement on the Uruguay Round of multilateral trade negotiations that had dragged on for more than 15 years. Contrary to conventional wisdom, regional trade agreements proved to be a prod, not an impediment, to multilateralism. The Uruguay Round agreement finally took force at the end of 1994, slashing tariff and nontariff trade barriers and ushering in the World Trade Organization.
Just two years later the WTO adopted the Information Technology Agreement, an initiative that had first been launched by the United States within APEC. Once again, American leadership showed how enlightened regionalism could foster multilateral progress. When fully implemented, the ITA, which has more than 70 signatory nations, will eliminate all tariffs on computers, semiconductors, and related equipment.
During their last two meetings, in 1998 and 1999, APEC leaders reaffirmed their commitment to economic reforms and greater integration into the world economy, despite the fact that many APEC nations were still reeling from the effects of the 1997-98 Asian financial crisis. Indeed, the APEC countries agreed to additional tariff cuts in priority sectors and called for the launch of a new round of multilateral trade talks. And China used the APEC forum to announce a number of important reductions in protection that were ultimately reflected in the historic U.S.-China agreement on the terms of China's accession to the WTO. This was one of President Clinton's major foreign policy goals.
This year the APEC meetings focused on New Economy issues, including a moratorium on custom duties over the Internet, safeguards against software piracy, and measures to close the digital divide both within and between APEC members. The New Economy focus confirms that the Asian economies are the next major frontier for the information-technology revolution. In this APEC meeting, as in earlier ones, the U.S. approach was to build support for regional agreements on particular issues that could serve as models for broader agreements within the multilateral system. Progress in APEC is especially important right now because of the temporary setback to a new round of multilateral talks dealt by the collapse of the WTO meetings in Seattle.
Nor is APEC the only regional forum for economic cooperation in Asia. Regional leaders, including Japan and China, are trying to build currency-swap arrangements and trade deals that exclude the U.S. These efforts reflect understandable frustrations over the 1997-98 financial crisis and the Seattle debacle.
MOMENTUM. American policymakers should avoid a knee-jerk reaction to such regional initiatives. Asia has a disproportionate share of the world's foreign exchange reserves and an effective currency-swap arrangement backed by them could deter another round of debilitating currency contagion. And trade agreements such as those under discussion between Japan and South Korea or Japan and Singapore could act as a catalyst to a new round of global trade talks. In addition, regional agreements defining an "Asian approach" to globalization might defuse some of the anti-American sentiment behind antiglobalization forces in Asia and elsewhere.
Thirty-five years ago, when the U.S. looked to Asia, its primary interest was containing communism. Today, its primary interest in the region is sustaining globalization. During the last several years, APEC has served this interest well, demonstrating that with the right leadership, regional economic agreements can build consensus and capacity for global action.
Based on its APEC experience, the U.S. should respect rather than reject recent initiatives by the Asian nations to foster stronger economic cooperation among themselves.