[PEN-L:7701] Re: Re: China, WTO & Excess Capacity

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Bill Rosenberg wrote:

> "Henry C.K. Liu" wrote:
>
> > False expectations.
>
> A. What are their expectations?
>

China sees (unrealistically, I may add) WTO members as a way to get more
global capital for foreign direct investment, more guaranteed access to
froeign markets, healthy pressure on weak and inefficent domestic
industries to reform out of a need to survive world competition, remove US
imposition of non-trade demands (human rights) on trade policies, access to
global new techonolgy currently denied by the US, and generally drag the
Chinese economy kicking and screaming into the 21st century.

> B. I don't believe those governments aren't smart enough to be able
> to work out the real consequences.

It is not a question of smarts.  Every government, even communist ones, is
subject to complex domestic politics and internal ideological struggles.
The issue of the correct path of development has been central in the debate
and a political footbal for internecine politics since the founding of the
PRC 50 years ago and will go on forever, albeit in changing and increasing
more complex forms.  The WTO issue has become a lightning rod in the
struggle beteen two fundamentally opposing alternatives: socialist road and
capitalist road.  The political debate has gone on for so long that the
economic and political meaning of the coded rhetoric (which some on this
list have ridiculed out of malice) are well understood by the combattants.

> To put it another way: I was recently asked by a Member of Parliament at
> a New Zealand parliamentary inquiry into APEC, why I thought Vietnam
> wanted to get into APEC if APEC's policies were as bad as I had made out.
> What would you answer - for Vietnam or for China?

APEC is very different from WTO.  With US dominated APEC, the U.S. has the
ideas, but the Japanese have the money. The Japanese are a little upset
that their money is being used by the US to form the basis of a policy that
favors the US.  Both China and Vietnam are as apprehensive about Japan as
the are about the US.  That is one reason they like APEC.  The other reason
is that ASEAN, a competitve organization dominated by Japan were orginially
formed as an economic  counter weight against China and Vietnam.
On the trade front, the US will push other APEC nations to agree to a
plan to speed APEC members to cut tariffs in nine sectors: environmental
goods and services; fish; wood and paper; medical equipment; energy
products and services; telecommunications; toys; jewelry; and chemicals.
The US estimates that these sectors account for $1.5 trillion in world
trade.  The US would take an APEC agreement and try to
enlist nations in Europe and elsewhere to agree to the tariff cuts as well.
The agreement would not take effect unless the world's biggest trading
nations agree to it.  The US accuses Japan of trying to protect its local
industries by lobbying against tariff cuts in the wood, paper and fishing
industries.
Without the full package of tariff reductions the deal effectively falls
apart at APEC, although pledges of continuing efforts are made.
Japan is quietly going around the region promising overseas development
assistance to countries that do not participate.

APEC came into being in late 1980 when Japan proposed the formation of a
regionwide consultative group that would provide technical cooperation on
trade and investment matters, along the line of OECD.  Early in the 1990s,
Australia, long a European outpost in Asia, joined APEC, prompted by fear
of economic isolation and dissatisfaction with outmoded trade and economic
treatment from her home country.
The United States, following Australia's heel, change Japan's idea of a
loose consultative body towards a formal free trade area, a vision
enshrined in the 1994 APEC declaration in Bogor, Indonesia.
In the subsequent 1995 summit in Osaka, Japan used the tradition of host
country influence to redeclare that any trade liberalization would be
voluntary, flexible and non-binding.
The 1996 summit in Subic Bay, the Philippines, was a non-event that
officially anointed thehost country as the latest "tiger".
By then, Asia was a shrinking economic forest, where there are more tigers
than food supply.
The 1997 Vancouver summit produced an agreement on "early voluntary sector
liberalization" (EVSL) in 15 "priority" sectors that no one really intended
to follow through.  The 15 have since been narrowed to 9: chemicals,
energy, environment, fish, forestry, gem and jewelry, medical equipment,
telecom MRA (mutual recognition agreement), toys, of which fish and
forestry are political suicide issues in Japanese domestic politics.
Vancouver was mainly an one act play where the US/IMF lectured Asian
economies on the deterministic results of Asian values.

APEC is an interesting window on the politics of international trade.
ASEAN sees it as a rival to the Asean Free Trade Area.
Japan wants APEC to provide respectability to voluntarism.
The US wants a collective vehicle where her threats of unilateral trade
action, coupled with trade/investment preconditions demanded by IMF
programs on battered individual Asian countries, can have a regional
impact.
The main American message, as stated by US Ambassador to APEC, John Wolf on
October 19 1997 to PBEC (Pacific Basin Economic Council) Conference in Los
Angeles: "the whole system is threatened when individual countries try the
path of financial autarchy".  Translation, capital flow control is a no-no.

The second American point: "Before financial reform ..... further (Asian)
market opening and liberalization are important".
Back to the WTO where the US holds a veto vote.

The real target is Japan: clean up bank mess, deregulate economy and open
markets.  It all fell on deaf ears.
Above all, pay for US proposals for solving the Asian crises with Japanese
money.
To which the Japanese, who culturally have more difficulty expressing
disagreement than maintaining disagreement, answer: "Yes, we will do what
we will do."

What will America do for Asia?
The answer as provided by Wolf: "We are continuing to grow and take
monetary and fiscal steps the ensure that growth path is sustained".  In
other word, no new deal, the same trickling down policy on an international
scale.  What is good for America is good for Asia.
We all remember what John Galbreath said about trickling down: When you
feed the horse enough oats, the sparrows will eventually benefit from the
droppings.

Gore deliver a anti "bad" government speech at the meeting in Malaysia in
1998.  It was not even his speech. He was reading the speech written for
Clinton who was preoccupied with impeachment.  But Gore was hoping to make
it a kick-off speech for the next election, like Nixon's kitchen debate in
Moscow.
The speech got uniformly bad reception all over Asia, even among America's
traditional allies, like Australia, whose diplomats, while not openly
critical, embarrassingly looked down at their shoes.

China and Vietnam eye WTO and APEC as potential freebies.  The calculation
is that membership will buy some time for the stalled economies and if it
fails, the leadership would have foreigners to blame.  Besides, its the
only game in town.  There is no socialist trading regime around.


Henry C.K. Liu


> >
> > Bill Rosenberg wrote:
> >
> > > Maybe a naive question but...
> > >
> > > Can someone explain to me why countries like China and Vietnam want
> > > to be in organisations like the WTO and APEC?
> > >
> > > Bill Rosenberg
> >