Pacific Economic Co‐operation:

The rapid growth of East Asian exports in the 1980s led to rising trade tensions. Trading partners, especially in the USA and Europe, tended to overlook the substantial growth of East Asia's imports (especially raw materials and capital equipment), focusing only on its capture of market shares in products for which US and EC manufacturers no longer held a comparative advantage. There is considerable interest in economic regionalism, raising concern about the division of the world economy into discriminatory trade blocs. In most economies around the Pacific, there is wide appreciation of the region's overwhelming interest in the maintenance of an open world trading system based on the non‐discrimination principle of the GATT. Among initiatives for bilateral and regional trade liberalization in recent years, the Asia Pacific Economic Co‐operation (APEC) forum offers perhaps the best prospect of co‐operative promotion of these objectives. APEC, established in 1989, already includes fifteen economies from both sides of the Pacific accounting for over half of world production. APEC's guiding principles stipulate that co‐operation should be outward‐looking, building consensus on a gradually broader range of economic issues. This paper proposes four pragmatic options in areas for useful co‐operation: • Improving market access by reducing barriers to trade, such as the heavy protection of some parts of Northeast Asian agriculture, and of textiles and some other manufactures in major OECD countries. • Reducing uncertainty about future market access: for example, agreement to streamline dispute settlement procedures could reduce resort to arbitrary or discriminatory measures to deal with trade tensions. • Reducing physical bottlenecks, such as shortfalls in infrastructure, ranging from harbours to telecommunications, which impede trade in goods and also in services such as tourism. • Harmonizing domestic legislation and rules, such as those relating to safety, quality and environmental standards. It will not be easy to realize the economic gains from nondiscriminatory trade liberalization. But progress should be possible in some sectors where complementarity among APEC economies is obvious, as in mineral processing, where original reasons for protection have been weakened by changing circumstances, and where natural resource endowments and transport costs limit effective competition from outside the region. Regional initiatives will need to be non‐discriminatory in order to avoid creating needless divisions in the world trading system. Preferential or discriminatory trading arrangements that fragment the multilateral world trading system constitute a threat to the Pacific region's economic prosperity. In contrast, this paper recommends an evolutionary approach: seeks early consensus on less contentious issues in order to build the sense of trust required for more effective future co‐operation among economies on both sides of the Pacific, without discrimination against economies outside the region.