Asia - Pacific Cooperation : An Alliance for Progress

 

Paper presented at the Thirteenth International Conference of the Korean Institute of International Studies on Regional Cooperation among the Asia-Pacific Nations : Joint Prosperity for the Year 2000, held at Seoul, July 5-9, 1983.

 

               The idea of Pacific cooperation has been around for over two decades now. In the last few years, it has been gaining considerable momentum as representatives of business, government, and academia from all the Pacific Basin countries have been meeting and discussing the idea of Pacific cooperation and how it might affect their own special areas of interest. However, I would like to suggest that unless we begin to take more concrete steps toward establishment of a real mechanism for Pacific cooperation, the momentum that has been built up recently will fade away, and we will have lost this excellent opportunity for mutually beneficial cooperation.

Three factors in particular make it important for the Pacific cooperation idea to begin now to shift into a higher gear.

Rising Protectionism

The first and perhaps most pressing reason for Pacific cooperation is the problem of rising protectionism. As we are all well aware, the rapid economic growth and development that nearly all of the countries in the Pacific Basin have experienced over the last 20 years or so is largely a result of the expansion of international trade and the outward or trade-oriented economic strategies most countries in the region have followed. And as our economies have grown, our countries have become increasingly interdependent, to the point where trade within the Pacific Basin accounts for a majority share of the total trade of almost all the countries in the region.

In light of the outward orientation and interdependency of the nations in the Pacific region, the prospect of rising protectionism poses a serious threat to the overall prosperity of the region in both the short and long run. In the short run, by reducing the ability of growth in one country to stimulate growth in others through the free expansion of trade, protectionism threatens to stifle the economic recovery that now appears to be beginning. In today's interdependent world economy, no one country can expect to achieve a sustained recovery by itself-and for the current recovery to last, there must be a concerted effort to allow trade to expand by stopping the rise in protectionism.

From a long-term perspective, also, there is an urgent need for the Pacific Basin countries to work together to reverse the current trend toward protectionism. As we have seen in the past and are seeing increasingly today, in times of economic hardship there is a tendency for countries to turn inward, to concentrate on solving internal problems by forestalling economic adjustment and adopting measures that interfere with the natural workings of the free market. Such measures-all of which are forms of protectionism-not only reduce the efficiency and growth potential of the domestic economy, but have a negative impact upon growth and efficiency in the country's trading partners. Particularly in the highly interdependent Pacific region, the adoption of inward-looking protectionist policies will seriously undermine further expansion of free international trade and thus reduce the overall prosperity of the region.

Economic Dynamism

The second major factor contributing to the urgent need for cooperation among the countries in the Pacific Basin relates to the very economic dynamism that has made possible the tremendous growth and expansion of the Pacific region. We should all be aware of the fact that unless the dynamism of the region is channeled properly, it may lead to increasingly disruptive trade frictions within the region.

To a certain extent, we are already seeing some signs of the kind of problems that can arise from uncoordinated growth and competition. Perhaps the most serious of these is the increasingly nationalistic outlook that is being adopted by some Pacific Basin countries. In their drive toward development, many countries are pursuing industrial and agricultural policies such as investment controls and domestic content legislation that-from the point of view of the region as a whole-will be extremely costly in time. In the short run, nationalistic policies can lead to overinvestment, excess capacity, and needless duplication of investment in certain industries. In the long run, because they often work counter to the principles of comparative advantage, nationalistic policies will reduce the efficiency and long-term growth prospects of the region's economies. Pacific cooperation, if only by increasing each country's awareness of the policy goals and objectives of other countries in the region, can help to significantly reduce the frictions that will inevitably arise among countries competing in the international marketplace. In particular, Pacific cooperation can help to channel growth in the region in a way that will benefit both the individual countries and the region as a whole by encouraging the development of intra-industry rather than interindustry specialization among Pacific Basin countries.

Need for Coordinating Mechanism

This brings us to the third major factor underlying the need for concrete steps toward the establishment of a mechanism for Pacific ooperation. If we look at recent developments in trade policy in the region, it is apparent that many so-called realists among today's economic policy makers still think that the problems relating to trade within the region can be solved through the traditional bilateral approach. In fact, these problems are not bilateral in nature, and the tendency to solve trade problems bilaterally only worsens the situation-for two major reasons. First, most bilateral trade arrangements, though voluntary in appearance, represent attempts by the countries with greater bargaining power to impose their will on countries in a less advantageous position. An example of this is the Multi-Fiber Arrangement, which-although multilateral on paper-allows the large importing countries to dictate to weaker exporting countries-usually developing countries-through bilateral agreements in restraint of trade. Second, proliferation of bilateral arrangements, as has been seen recently in the spread of countertrade and reciprocity agreements, will ultimately lead to breakdown of the free trade system by undermining the general principles of the GATT and negating to a considerable degree the beneficial workings of the market. Especially in the Pacific Basin, this threat to free trade-the cornerstone of the region's prosperity-must be countered by increasing multilateral cooperation for the promotion of free trade.

Certainly, the ongoing general discussion on Pacific cooperation has shed light upon the gravity of these three major problems, and it is heartening to see that there is now widespread recognition of a need for some kind of institutional mechanism for cooperation among the Pacific Basin countries. However, while this recognition is necessary-and in fact vitally important-it is clearly not sufficient, as it has had little real impact on the policies of the regional countries. Thus, in view of the need to gain a more significant impact on trade policy and to sustain the momentum that has been built up, I would like to make three suggestions regarding the future course of Pacific cooperation.

First, there should be a move to coordinate and consolidate the many ideas and opinions relating to Pacific cooperation that have emerged over the last few years. In particular, efforts should be made to establish concrete links between such groups as the Pacific Basin Economic Council (PBEC), representing the business community, the Pacific Trade and Development Conference (PAFTAD), representing the academic community, and the many international professional groups that have been formed in the Pacific region. Increasing ties among the groups concerned with Pacific cooperation will have two effects. It will begin to focus overall efforts on the solution to specific issues or obstacles, and it will broaden the popular support for more concrete forms of Pacific cooperation.

In this regard-and this brings me to my second suggestion-I think the Pacific Economic Cooperation Conference (PECC), a tripartite body with representatives from business, academic and government circles, provides an excellent example of how the various interest groups can work together to establish an effective mechanism for Pacific cooperation. I would like to suggest that the regional countries should take advantage of the opportunity offered by the PECC, and use it as a model for future institutionalized forms of cooperation. In particular, the PECC can be extremely beneficial as a kind of information clearinghouse from which the countries in the Pacific Basin can obtain information on the policies, economies, and strategies of their neighbors. This in itself will go a long way toward improving cooperation, especially in terms of economic and industrial policies, in the Pacific.

My third suggestion relates to the need to take concrete action now to move toward the solution of the problems associated with protectionism, trade friction, and bilateralism that I outlined earlier. As always, because solving these kinds of problems requires changes in economic policy, it is essential that the regional countries' governments become involved in a multilateral effort toward Pacific cooperation. In addition, the urgency of these problems requires that governments be willing to meet and talk even without prior commitments regarding the specific measures to be discussed or the need for a formal statement on policy. Moreover, such a meeting between government officials should occur at a high enough level that it will have some impact on policy, although not necessarily an immediate impact. Therefore I would like to propose that high-ranking government officials and political leaders of the Pacific Basin countries begin to meet more frequently in groups-not bilaterally-in order to discuss issues relating to Pacific cooperation, particularly issues relating to national industrial and trade policies. To be realistic, I don't expect that this kind of meeting will often result in any specific changes in policies, but even if no formal agreement is reached, the simple ability to discuss regional economic issues at such a high level will be a considerable step toward ironing out some of the problems facing all the Pacific Basin countries.

Concluding Remark

In closing, I would just like to say that in the next few days you are going to hear a lot about both the benefits that can be obtained through Pacific cooperation and the obstacles that must be overcome before we can realize those benefits. In my mind, it is important for us to concentrate on two things: First, what must be done to keep up the momentum of Pacific cooperation; and second, what steps we can begin to make now to set up an effective institutional mechanism for cooperation. I have tried to outline three basic steps I feel should be taken, and I hope that in the next few days you will come up with further suggestions on the future development of cooperation among the Pacific Basin countries.