Japan Brief

APEC Summit in Hanoi Focuses on North Korea and Global Trade

[Economy]　November 21 , 2006

The summit meeting of the Asia Pacific Economic Cooperation (APEC) held in Hanoi focused on the North Korean nuclear issue and ways to facilitate free trade on a regional and global level. After the two-day meeting on November 18-19, it came up with an oral statement demanding North Korea stop its nuclear weapons development and a declaration proclaiming firm support for the stalled WTO Doha round of trade negotiations.

A loose, non-binding organization consisting of 19 countries and two territories, the APEC nonetheless offers an important venue for bilateral and multilateral diplomacy and discussions on major political and economic issues of the world as it includes such major powers as the U.S., China, Russia and Japan, and economies, some of them growing very fast, that account for more than half of the world economy. Its importance for Japan is seen increasing even more as the country’s economic future is considered dependent on closer integration with the rest of the Asia-Pacific region in trade, investment and other activities. As evident from the North Korean nuclear issue that dominated the security discussions in this year’s summit, the APEC is now also of crucial importance for Japan’s security issues.

For Prime Minister Shinzo Abe, who took office less than two months ago, the APEC summit in Hanoi turned out to be an important debut on the world stage. He met with U.S President George W. Bush in their first summit, agreeing on a further buildup of the bilateral security alliance and working closely together in pressuring North Korea; with China’s President Hu Jintao, he agreed on the establishment of a ministerial level economic meeting between the two countries. He also took advantage of Vietnam’s hosting of this year’s APEC meeting to push for Japan’s deeper economic ties with the country, as more than 130 Japanese business leaders visited the country at the same time as his visit.

A major subject among the economic issues was promotion of freer international trade as represented by the World Trade Organization’s Doha round, which has been deadlocked since summer. The APEC summit gave top priority to support for the resumption of the trade negotiations. Another important issue included in the declaration was a free trade agreement scheme embracing all the APEC members proposed by the U.S., an idea generally regarded as unrealistic at this moment but worth studying as a long-term possibility.

In addition to growing layers of bilateral free trade agreements, Asia is witnessing moves for a region-wide free trade agreement—a 13-nation East Asian free trade area, consisting of the 10 ASEAN members plus China, Japan and South Korea, proposed by China, as opposed to a 16-nation version (which would also include Australia, New Zealand and India) pushed by Japan. These moves are regarded as a sign of rivalry between China and Japan over regional influence, but one thing in common is that both exclude the U.S., of whose stake in the region is high both in security and economic terms. The U.S. proposal for a Free Trade Area of the Asia-Pacific is considered to reflect America’s displeasure at being left out of the Asian initiatives for a regional free trade arrangement.

Japanese Media Show Interest in the U.S. proposal
These overlapping moves toward free trade arrangements prompted Japanese newspapers to comment on the APEC summit’s economic discussions: The Nihon Keizai Shimbun in its editorial on November 14 called on Asian countries to push for economic liberalization seizing on the U.S. proposal for an APEC-wide free trade agreement. “When we recall the difficulties each country is facing even in negotiations for bilateral free trade agreements, it is obvious that the U.S. proposal is not easy to realize. But what’s remarkable is the U.S.’s switch to proactive economic diplomacy to engage in economic liberalization in East Asia. For Japan, which is aiming to live together with Asia through greater economic liberalization in the region, the American activism in the APEC is a welcome development and strong help. Any Asian economic community concept will fail when its relationship with the U.S. is ignored since it is the largest end consumer market for Asian products. Japan ought to push for a free economic area in Asia open to the rest of the world, drawing on the American clout when necessary.”

Also in reference to the U.S.’s move, the Mainichi Shimbun called for attention to the viewpoint of economic security in its November 18 editorial. “It has been a long time since the U.S. showed an attitude of positive engagement in regional economic diplomacy in Asia, as the Asian financial crisis in 1997-98 and its preoccupation with the war on terrorism have left the country’s diplomatic involvement in the region’s economy in a vacuum. China and Southeast Asian countries, however, are wary of America’s hurried demand for liberalization, adding to the complexities in bargaining over the framework of international trade surrounding Asia. In Japan, the trade liberalization issue tends to be focused on domestic agricultural products like rice. In addition to the race for energy and other natural resources, there is growing interest in securing a stable supply of agricultural imports against the backdrop of soaring grain prices. The Abe government is also proposing greater use of biomass fuels, which will require a supply of sugarcane from abroad. Protection of domestic agriculture is important, but from the viewpoint of economic security, working with a broader scope is necessary.”

The Asahi Shimbun argued in its November 20 editorial that Japan should stick to the idea of an East Asian economic community, while, as a sign to show that the U.S. is not excluded, responding with a forward-looking outlook to the U.S. proposal for an APEC free trade agreement. “It shouldn’t be forgotten that the APEC, under its 1994 Bogor declaration, has already been working toward the goal of achieving trade and investment liberalization by 2010 for industrialized members and 2020 for developing members. If an APEC-wide free trade agreement is proposed abruptly, some members could be shaken. Also, if a free trade zone that will include major exporters of farm products such as the U.S. and Australia is to be created, agricultural liberalization will be inevitable, especially for Japan which is an entrenched protector of some domestic farm products, such as rice.”

The Yomiuri Shimbun in its November 20 editorial also noted the significance of probing the possibility of the U.S. proposal in order “to advance open regional cooperation, since the APEC is a huge market accounting for 60% of the world’s GDP and 40% of the world’s population.” The newspaper argued that Japan needs to weigh how to relate its own idea of a 16-nation free trade zone to the U.S. version. In the meantime, the newspaper said, Japan should work hard on pending bilateral free trade agreements with some countries before moving to a larger design. Domestic reform is inescapable, it noted, and also argued that Japan should play a leading role in an early resumption of the WTO round of trade talks that broke down in summer.