View from the 19th floor: Reflections of the first APEC Executive Director 9789814379274

Citation preview

VKEWJFROM THE ]_9th

JFLOOR Reflections of the first

APEC

The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the many-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-today operations; it is chaired by the Director, the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit (AERU) is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairperson of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. A Regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

/SEAS Series on APEC

VliEWFROM THE JL9th

FLOOR Reflections of the firrs t

APEC Executive Director by William Bodde Jr

II!!!!!!!! II~ ASEAN Economic Research Unit lill;ll;l INSTITUTE OF SOUTHEAST ASIAN STUDIES

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Road Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies.

© 1994 Institute of Southeast Asian Studies The responsibility for facts and opinions in this publication rests exclusively with the author and his interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

Cataloguing in Publication Data

Bodde, William. View from the 19th floor: reflections of the first APEC Executive Director. (!SEAS series on APEC, 0217-7264; I) 1. Asia-Pacific Economic Co-operation. 2. Pacific Area Co-operation. I. Title. II. Series. DS501 15991 no. I 1994 sis 94-106745 ISBN 981-3016-93-0 ISSN 0217-7264 Typeset by The Fototype Business Printed in Singapore by Prime Packaging Industries Pte Ltd

Contents

Introduction

Vll

chapter I

How Would You Like to Go to Singapore?

3

chapter 2

Gearing Up: Ethics and Accountability

3

chapter 3

The Senior Officials' Meetings

9

chapter 4

Secretariat Relations with the Working Groups

28

chapter 5

Starting Down the Information Highway

32

chapter 6

Different Members, Different Visions

35

chapter 7

Sleepless in Seattle

39

chapter 8

Wrapping Up in Singapore

50

chapter 9

Recommendations

53

chapter 10

APEC's Future

61

Contents

vi appendix I

What Is APEC?

65

appendix II

Organization Chart of the Asia-Pacific Economic Co-operation (Forum), 1993

69

Joint Statement at the First APEC Ministerial Meeting in Canberra, 6-7 November 1989

72

Joint Statement at the Second APEC Ministerial Meeting in Singapore, 29-31 July 1990

85

APEC Declaration at the Third Ministerial Meeting in Seoul, 12-14 November 1991

95

appendix III

•

appendix IV

appendix V

appendix VI

APEC Declaration at the Fourth Ministerial Meeting in Bangkok, 10-11 September 1992

About the Author

100 103

Introduction

In 1993, I served as the first Executive Director of the Asia-Pacific Economic Co-operation (APEC) Secretariat. From my office on the nineteenth floor at Alexandra Point, I looked out over the thriving port of Singapore. Day and night, the harbour was busy with ships loading and unloading goods from all over the world. The view from my window was a constant reminder of the role that trade and commerce play in the dynamic economies of the Asia-Pacific region. The nineteenth floor was also my vantage point on APEC. This monograph is the result of my year in Singapore. It is meant to be partly narrative history, partly a case study, and partly my own thoughts regarding where APEC should be headed. The idea for this monograph come out of a talk I gave at a June 1994 Workshop on APEC organized by the Institute of Southeast Asian Studies, and owes much to the suggestions and encouragement of the Institute's Director, Professor Chan Heng Chee. The views expressed are my own and do not reflect the views of the United States Government nor any non-governmental organization. I received no instructions from the United States Government during my tenure as Executive Director and was solely answerable to the APEC Senior Officials as a group. I had an arms-length relationship with the vii

viii

Introduction

United States Government from the beginning, which I concluded meant that the Executive Director was to be treated as if he had been seconded to an international organization. This relationship gave me considerable freedom of action. Of course, instructed or not, my perspective was coloured by my background and culture. As the Germans say, "You can't jump over your own shadow." That said, I tried to be objective in running the Secretariat and to keep the interests of all the member economies in mind. I have also tried to be as honest as I can be in describing my experience as the first APEC Executive Qirector. In my many return trips to Singapore since then, I have been pleased to see that the guiding principles we had put in place seem to be working well. My successor, Ambassador Rusli Noor, has adjusted and improved the operation of the Secretariat. Some of the support staff have left, but job-hopping is a way of life in Singapore and that was to be expected. Additional professional staff have come on board and the morale and enthusiasm remain high. The Secretariat will change as it evolves and the tone of the organization will change depending on the Executive Director. But however it evolves, I will remember that year with affection and pride. In addition to Professor Chan, I would like to express my appreciation to Professor Tommy Koh, Dr Lee Tsao Yuan and Dr Sharon Siddique for teaching me about ASEAN in general, and Singapore in particular. Scott Thomson, Ainslie Smith, and Terri Lannigan were of invaluable help with the manuscript and, as always, my wife Ingrid gave me love, support and good advice throughout the whole experience.

chapter 1

How Would You Like to Go to Singapore?

In the fall of 1992, my wife, Ingrid, and I had returned from an ambassadorial stint in the Marshall Islands, and I was working as a Senior Advisor in the Bureau of Oceans, International Environmental and Scientific Affairs (OES). One day, Lynn Pascoe, an old friend and the Principal Deputy of the Bureau of East Asian and Pacific Affairs, called up and asked, "How would you like to go to Singapore for a year?" Lynn explained that the Asia-Pacific Economic Co-operation (APEC) forum was going to establish a permanent Secretariat in Singapore, and that an American would be the first Executive Director. Lynn and his boss, Bill Clark, wanted to ensure that the Executive Director built a strong, small and efficient staff. My experience as an Ambassador and as Consul General of the largest consulate in the world (Frankfurt, with 600 employees) convinced them that I had the qualifications they wanted. Although the prospect of leaving again just six months after my return to the United States was daunting, I could not help but be intrigued (and flattered) by Lynn's offer. After a sleepless night and a long, soul-searching conversation with Ingrid, I told Lynn I was interested. Lynn then suggested that I speak with Bill Clark and Deputy Assistant Secretary Sandy Kristoff.

2

View fro m the 19th Floor

I did not know Sandy, but she had been involved in APEC from the beginning, serving in the office of the U.S. Trade Representative (USTR) before coming to the State Department. She probably knew more about APEC than anyone else in the U.S. Government. Speaking to Bill, it was clear that he was very keen for me to go to Singapore to set up the Secretariat and would give me full support. I also interviewed with Deputy Under-Secretary for Economic Affairs Bob Fauver, who was Sandy's mentor and who followed APEC closely. I think the interview went well, but everything was put on hold until after the U.S. presidential election, which was then only weeks away. There was a lot to learn if I were to take the job. I had only a vague knowledge of APEC 1 from some fisheries work I had done while at OES. In this, I was like many Americans, who, at least until the time of the Seattle Leaders' Meeting in late 1993, tended to confuse APEC with OPIC or OPEC. Luckily, I found a small group of people in the Federal Government, concentrated in the State Department and USTR, who were keepers of the APEC flame. On the policy level, Secretary of State James Baker and his deputy, Bob Zoellick, were very interested in having APEC play a central role in U.S. foreign policy towards Asia. However, by the time I got involved, Baker and Zoellick had moved to the White House to manage President Bush's election campaign. Of course, after Clinton's victory in November 1992, Baker and Zoellick were out of the picture. I later met Zoellick when we served together on C. Fred Bergsten's informal committee advising him in his capacity as Chairman of the APEC Eminent Persons Group. My official appointment did not occur until after the election, when I really had to get busy! I was never sure why the appointment had to wait until after the election. It is possible that Baker, Zoellick and Fauver had another candidate. Whatever the reason, it was good to have the uncertainty removed so that I could get on with the task at hand. Fortunately, the first Senior Officials' Meeting (SOM) was scheduled to take place in Washington in early December. This would provide an excellent opportunity to meet key APEC players right from the beginning. But it also meant that I had to get acquainted with APEC quickly, especially the working group projects and the agenda for the SOM.

I. See Appendix I: What is APEC?

chapter 2

Gearing Up: Ethics and Accountability

I would officially take up my duties as Executive Director in January 1993 and would leave for Singapore right after Christmas. Examining the draft organization plan for the Secretariat it was obvious that improvement was needed. The budget allocated for running the Secretariat appeared arbitrary and the structure too rigid. While cost control was very important, there was a mean-spirited tone to the document. This reflected the lack of management experience on the part of the authors, who wanted tight control from Washington. There was no time to negotiate significant changes before the December SOM . Instead, I concentrated on learning from Sandy all I could about APEC. I came to have great respect for Sandy's talent. We had many productive discussions and I left for my assignment confident that she accepted the need for flexibility and freedom on the part of the Executive Director if we wanted to set up a first-rate organization. Of course, all significant decisions would have to be approved by the Senior Officials. Informing the Senior Officials of all our plans and seeking their approval at every important decision point was essential to the Secretariat's success. Even before the first SOM, it was necessary to make a quick two-day trip to Singapore to clear up some questions about the diplomatic status 3

4

View from the 19th Floor

of the Secretariat under Singapore law. I came back more exited than ever about serving in Singapore, a clean and bustling city. My reaction was like most first-time visitors to Singapore. Europeans were most impressed. I remember especially the reaction of some good friends of ours, the former Lord Mayor of Frankfurt, Walter Wallmann, and his wife, Margarethe. The gleaming new skyscrapers, the well-ordered traffic, teeming with Mercedes, BMWs, and Volvos, and the throngs of well-dressed young Singaporeans participating in Singapore's "national sport" (shopping) made a great impression. But the most striking thing of all to them was the spotless subway system, free of graffiti and drugs, in sharp contrast to Frankfurt! Much of my time in preparing for the new job was spent with State Department experts on management, ethics, financial accountability, and fraud. Even though the Secretariat would not come under U.S. rules and regulations, we were committed to ensuring transparency and sound financial practices, not just for the United States, but for all fifteen APEC countries. It was very gratifying to be told by some of the Senior Officials in the course of my tenure how happy they were that we had set up tough but fair rules and procedures for handling money. The Clinton Administration was not in place yet and that was both a blessing and a curse. It made our job easier, as we were pretty much on our own. At the same time, we did not know how seriously our new masters would take APEC or even who the key personnel would be. We were relieved to learn that Winston Lord, a known factor, would be the new Assistant Secretary for East Asian and Pacific Affairs in the State Department and that a strong supporter of APEC, Bob Fauver, would move to the White House to work on economic and trade issues. The appointment of Sandy Kristoff to the National Security Council was a mixed blessing. On the one hand, we would have a good friend of APEC at the National Security Council; on the other, we would lose her leadership and firm hand on APEC matters in the State Department. But at the time, all we knew for certain was that we were in a state of transition. Just how the new Administration would look at APEC was unclear. Ingrid and I set off for Singapore just after Christmas, stopping in Hawaii en route. There I met with our good friend Brenda Lei Foster, who had headed the Pacific Affairs Council and was now in charge of the Governor's Office for International Affairs. Brenda arranged a session with the governor. I also met with Bob Lees, the International Director General of the Pacific Basin Economic Council (PBEC), headquartered in Honolulu, with whom I later was to work very closely in the post-APEC

2. Gearing Up.· Ethics and Accountability

5

period. Speeches at the East-West Center and the Hawaii branch of the Council on Foreign Relations helped spread the word about APEC. We arrived in Singapore on 7 January 1993, preceded by an administrative officer, Terry Daru. Terry, Graeme Pirie, the Co-ordinator for the Eminent Persons Group (EPG) from New Zealand, and I were the total professional staff in those early days. We had a lot of ground to cover. Terry had arranged for a small support staff from a "temp" employment agency. We chose the Development Bank of Singapore as our bank and Peat Marwick as our accountant. Both were to give good service in the months ahead. Funds were slow to arrive; Terry and I and even Agatha Choong, our Singaporean secretary, had to pay some expenses from our personal accounts. One problem was swiftly solved - the choice of our support staff. The temporary staff was first-rate, reflecting the highly-skilled Singapore work-force, and we ended up keeping most of them on a full-time basis, including Agatha. I quickly learned how valuable Agatha was to be to APEC. One day I mentioned to her that because we sent a lot of faxes, it might be more economical in some cases to use a courier service, such as DHL or UPS. A few days later when I came into my office, I found on my desk a chart she had developed that showed the break-even point, depending on weight and destination, when it was advantageous to switch from fax to courier. There was also a note that she had negotiated a 50 per cent reduction in cost if we used a particular courier company! I made my obligatory round of calls, visiting the Foreign Minister, Trade Minister, and the American Ambassador, Jon Huntsman. Jon was a Bush political appointee and had to leave about halfway through my tenure. I was sorry to see him go because he was an excellent representative of the United States and a staunch supporter of the Secretariat. More professional staff began arriving: Merry Wickes (Australia), Peter Richards (Canada), the Deputy Executive Director, Ambassador Hendra Esmara (Indonesia), Park Jin Ho (South Korea), Yang Yafei (China), and Tom Johnson (United States). Although the person in charge of finance, Max Li (Hong Kong), did not arrive until later, he kept in constant contact so that he could advise me. The last to join were Shuji Miyazaki (Japan) and our computer expert, Terry Lee (Taiwan). Terry Daru returned to Washington and was replaced by a more experienced administrative officer, Pat O'Brien, who spent a few months with us. On 5 February, the Singapore Government issued the Presidential decree officially establishing APEC. I gave a press conference to publicize the opening of the Secretariat on 11 February, which received wide regional

6

View from the 19th Floor

coverage. Our opening reception the next day was attended by Singapore's foreign and trade ministers, other key Singaporean officials, the Hong Kong APEC Senior Official, and most of the APEC ambassadors resident in Singapore. Foreign Minister Wong Kan Seng and I signed the headquarters agreement a few weeks later on 4 March. Meanwhile, we were labouring to create a complete set of rules and regulations that would ensure accountability and high ethical standards in the Secretariat. Bob Dickson, the chief of the State Department's contracting office, was a tremendous help. Bob works under some of the most complicated and cumbersome contracting regulations in the world, and he welcomed the chance to devise a more simple but effective system. He and his staff worked many hours to develop draft rules that would be flexible, yet still strict enough to ensure accountability. The task proved harder than I thought at first, for when you receive money from one source (the APEC donors) and give it to a third party (the working groups), and in addition, you mandate competitive bidding for all but the smallest contracts (as required by the Washington SOM), the accounting process quickly becomes complex. At the very least, you need receipts, evidence that there was competitive bidding (or a good reason why there was not), and assurances that the procurement process followed the procedures approved by the SOM. As a result, despite Bob's best efforts, our system was still cumbersome. The situation was further complicated by the fact that, in previous years, the working group projects had been self-financed and subjected to very little supervision. Many of the working groups resented being required by the Secretariat to document their expenses before they could be reimbursed. The establishment of a travel reimbursement system also had its pitfalls. We established a system based on the principles that 1) no employee should lose money on travel by being forced to pay expenses out of his/ her own pocket, but 2) no employee should profit from travel either. Each professional was given a credit card and told that all legitimate expenses would be reimbursed within the standard United Nations per diem schedule. However, only money that was actually spent would be reimbursed. Some employees were unhappy because they were accustomed to receiving full per diem, eating and lodging as cheaply as possible, and pocketing the difference. However, most of the professionals accepted the idea and the Senior Officials commended us for running a tight ship. I drew up a code of ethics and Pat O'Brien developed personnel procedures, a pay scale and job descriptions for the support staff. The pay scale reflected my conviction that if you want to keep an organization small

2. Gearing Up.· Eth ics and Accountability

7

and effective, you must hire top-notch people, pay them competitive wages and motivate them. A few working-level Singaporean officials objected to our pay scale as being too generous, but were overruled by their superiors. As stated earlier, our support staff requirements were larger than we originally intended. We retained most of the original temporary help and obtained more employees as needed from the same employment agency. Transportation was also a challenge. The Secretariat was not near a Mass Rapid Transit (MRT) line and many of the support staff had a long commute. We tried to alleviate the problem by providing van service to and from the MRT. This was important because in a highly mobile labour force like Singapore's, you would lose people if it is inconvenient to commute. I authorized the purchase of a van, and convinced Japan's Ministry of Trade and Industry (MITI) to donate an additional car. Our first few weeks saw many visitors and two important meetings: the APEC Task Force on Telecommunications and Database Management, and the Eminent Persons Group, chaired by Fred Bergsten. Both groups were important (and will be discussed below) and we wanted to demonstrate from the start that the Secretariat was on top of things. From the beginning, I envisioned APEC outreach, or public diplomacy, as one of my most important functions as Executive Director. This outreach had to operate on many levels. At our base, support staff and professionals had to be kept fully informed of events in and around APEC. After each Senior Officials' Meeting, we would hold briefings for the professional and support staff. On the next level were the embassies in Singapore, as well as the media and business organizations. I held press conferences when we opened, and periodically thereafter, until just before I left. In between, there were numerous visitors, including a number of APEC foreign ministers, trade ministers, and representatives of international organizations (including the Asian Development Bank, Economic and Social Committee for the Asia-Pacific, the Organization for Economic Co-operation and Development, and the International Energy Agency). Finally, there were some very high-level visits. Of the non-APEC visitors, Belgian Foreign Minister Willy Claes, then about to assume the presidency of the European Community (EC), caused the biggest stir. He suggested in our meeting, and later in a public speech, that there should be informal contacts or perhaps even mutual observer status between APEC and the EC. Some Senior Officials reacted very negatively to this idea. An ambassador from an EC country later told me that Claes had made this proposal entirely on his own, and it had not been cleared with the other EC members. EC interest in APEC remained high and later the EC mission

00 SEAsians_ASEM.indd 10

9/18/14 10:52:23 AM

chapter 3

The Senior Officials' Meetings

Senior Officials' Meetings - SOMs in the language of APEC - were and are the engine of APEC. It is at these meetings that operational decisions are made that provide momentum for the organization; it is here that Senior Officials make policy recommendations to their Ministers. The five SOMs leading up to the Seattle Ministerial Meeting were defining moments for the Secretariat. In speeches, I often described the Senior Officials as my Board of Directors, and it was at the SOMs that we received feedback on our current performance as well as instructions for the Secretariat's future course. The first SOM at Washington in December 1992 provided our original charter, but the second SOM, in February 1993, was our proving ground.

The First Senior Officials' Meeting, Washington, D.C., 2-4 December 1992

The first SOM took place at the Department of State before I left for Singapore. Its main tasks were to approve the proposed arrangements for setting up the Secretariat and the operational and administrative budgets (about US$1 million each), and to agree to a budget cycle. The SOM 9

10

View from the 19th Floor

approved the proposed organization plan with little debate; it was evident that the Senior Officials were pleased that the United States had assigned a senior diplomat to the Executive Director position. This set a pattern and my successors also held the title of Ambassador when they took over. In Asia, where protocol and rank are especially important, these designations helped give the new organization credibility. There were some pleasant surprises. When I met the co-leader of the Japanese delegation, Ambassador Nobutoshi Akao, at the U.S.-Japan bilateral session, we both had the feeling that we had met before. We finally remembered that we had been on a raft together as part of a crew of diplomats and business people on a 1989 whitewater rafting trip down the Salmon River in Idaho. This created a bond between us that proved to be very helpful in the coming year. In fact, the Washington SOM marked the beginning of a very collegial and productive relationship with many of the Senior Officials. · Sandy's performance at the SOM was very impressive. An experienced trade negotiator, she was a master at chairing SOMs, moving the agenda forward while making sure that everyone was comfortable and on board. There were a few administrative complications. It soon became clear that the Secretariat would be slightly larger than the one proposed by the APEC Ministers in the Bangkok declaration. Originally, eight APEC countries proposed seconding officials to the Secretariat. Together with New Zealand's nominee for the position of Co-ordinator for the Eminent Persons Group, plus the Executive Director and the Deputy Executive Director, the professionals totalled eleven rather than the eight planned for at Bangkok. We also needed more support staff to serve the expanded number of professionals and to make some adjustments in the original personnel plan, especially to ensure complete financial accountability. Singapore had agreed to make the few changes we suggested in the privileges and immunities agreement. This also required a few minor revisions in the draft Presidential Declaration establishing the Secretariat under Singapore law. The SOM approved both agreements without difficulty, and also gave me a large measure of flexibility to set up the organization. At one of the lunches with heads of delegation I asked them to send me workers, not diplomats! This brought a chuckle, but they got the message. At the SOM, Japan made a statement criticizing the over-use of consultants in the budget submissions of the Working Groups. Ironically, despite the agreement of the other APEC delegations with this statement, the Senior Officials, during the course of the year, put so many restrictions on the use of Working Group grants that consultants were one

3. The Senior Officials' Meetings

11

of the few things the Working Groups were authorized to spend central funds on. In his speech to the SOM, Acting Secretary of State Larry Eagleburger caught the attention of the Senior Officials by suggesting a very ambitious agenda for APEC. He called on the meeting "to make APEC a pre-eminent regional organization which can serve as the Pacific Community's (emphasis mine) common voice in helping to shape the international economy of the 21st century". 1 He then went on to suggest a number of possible APEC initiatives, including: an investment agreement; a code of conduct for administrative procedures; an intellectual property agreement; a customs co-operation treaty; a dispute settlement mechanism; an open-skies agreement in civil aviation; and a trade agreement. Eagleburger concluded by saying that although none of these ideas were ripe for ministerial action, "we need to stretch our conceptual horizons and begin to think of APEC as an organization which can produce cooperative solutions to our common regional problems". 2 At the time, I did not realize just how bold these ideas would appear to some members of APEC. They were clearly drafted by Sandy Kristoff, and probably reflected the thinking of Baker and Zoellick. That these ideas would be anathema to some of the leaders of the APEC countries Prime Minister Mahathir of Malaysia, for example - would not have given pause to the Baker team. Of deeper political significance was the participation of Chinese Taipei - as Taiwan is designated within APEC - in meetings at the State Department. It had been more than a decade since the normalization of U.S. relations with China. At that time, all official diplomatic relations with Taiwan had ceased and no Taiwanese diplomat had entered the State Department since then. It was an indication of the importance of Chinese

I. Transcript of the welcome remarks by Acting Secretary of State Lawrence S.

Eagleburger at the APEC Senior Officials' Meeting, Wednesday, 2 December 1992.

2. Ibid.

12

View from th e 19th Floor

Taipei's economic role in Asia that the joint entry into APEC of China, Chinese Taipei, and Hong Kong was even possible. I was later pleased to observe at the Secretariat that the professionals from the three economies were able to work together in perfect harmony. In any event, the Chinese Taipei delegation was delighted to be present at the diplomatic reception in the Benjamin Franklin room at the State Department. We insisted on full participation by Chinese Taipei in all APEC activities, much to the chagrin of the "purest" among the China hands at the State Department. Of course, China was sensitive to any political ramifications and I would quickly hear from Beijing if we called Chinese Taipei by the wrong name or otherwise strayed beyond the Seoul agreement. It is not remarkable that there were occasional problems but, by and large, things went smoothly.

Highlights of Group Reports to the Senior Officials' Meeting

Ad Hoc Economic Trends and Issues Group

The Ad Hoc Economic Trends and Issues (ETI) Group pledged to prepare a mission paper to clarify the ETI's role and development within APEC. The focus was to be on ways that ETI would be able to reinforce the ministerial and APEC work projects and activities. The ETI took into consideration whether there should be regular circulation of economic indicators of the member countries and pledged to prepare discussion papers on the short and medium-term outlook for APEC countries and on foreign direct investment.

Informal Group on Regional Trade Liberalization

The Senior Officials agreed to the process for the establishment of an Eminent Persons Group and a timetable for nominations and funding . The Regional Trade Liberalization (RTL) Group also continued with the development of a survey to tap private sector thoughts and opinions on investment issues. The RTL considered further actions that might be taken in order to encourage private sector input in APEC. The group also discussed methods of approaching various issues, such as APEC's conceptual horizons, the GATT (General Agreement on Tariffs and Trade) Uruguay

3. The Senior Officials' Meetings

13

Round, customs co-operation, the electronics database proposal, administrative barriers to market access, and an investment regime survey.

Trade Promotion Working Group

The Trade Promotion Working Group announced agreement on the establishment of four programmes, including two seminars in Korea and China, a training course in the Philippines, a study tour of Chinese Taipei and an APEC fair to be held in Japan in 1994.

Trade and Investment Data Working Group

The Trade and Investment Data Working Group was responsible for defining issues related to services and investment data. It n()ted that progress had been made in developing a merchandise trade database. The SOM had approved a proposal to initiate work to establish a merchandise trade database in order to provide comparable data to countries.

Investment and Technology Transfer Working Group It was determined that participants from the three Working Groups related to trade issues would meet to discuss technical and economic factors to avoid duplication of inforrn,ation on the databases. The Group submitted a proposal on industri?; parks development, which was accepted at the meeting.

Human Resources Development Working Group

The Human Resources Development Working Group stated its progress in three network areas: business management, economic development management, and industrial technology. In addition, activities were being designed and implemented through APEC educational partnerships in individual member countries.

Regional Energy Co-operation Working Group

The Regional Energy Co-operation Working Group announced the development of an energy database, the publication of regional energy statistics, and a report on clean coal technologies in 1993. Several seminars had been

14

View from the 19th Floor

held or planned and new projects promoting the efficient use of energy were being implemented.

Telecommunications Working Group

The Telecommunications Working Group proposed that views and recommendations for infrastructure policy be prepared in report form for the fifth ministerial meeting on the collection and dissemination of electronic data, to facilitate communication between the APEC member countries. In addition, plans were made for a survey among the member countries on their interest in establishing global telecommunications standards.

Fisheries Working Group

The Group reported progress in achieving consensus on issues of mutual concern in relation to fisheries management and scientific support, harvesting technology and marketing. The Group also sought to identify and promote co-operation on fish species not covered by an international management regime or arrangement.

Marine Resources Conservation Working Group

The Marine Resources Conservation Working Group resolved to focus on a broad agenda with regard to marine environment issues. The Group agreed to work with the Secretariat to co-ordinate environmental activities that cut across the Working Groups.

Transportation Working Group

The Transportation Working Group was involved in reviewing transportation bottlenecks within the Asia-Pacific region, conducting surveys of existing data-gathering methods and the national transportation systems of the member countries, and reporting on transportation issues being considered by other international organizations.

Tourism Working Group

Because tourism in the Asia-Pacific was one of the fastest growing industries, the Working Group identified four issues as top priority: tourism

3. The Senior Officials' Meetings

15

and the environment; human resources development; exchange of tourism statistical information; and development of a regional tourism policy.

The Second Senior Officials' Meeting, Williamsburg, Virginia, 28 March-1 April 1993 My strategy was simply to get as much done as possible before the Williamsburg meeting in order to convince the Senior Officials that, at the Secretariat, we were doing a serious job worthy of their support. Pat O'Brien and I put in all our effort and it was worth it. In Williamsburg, we were able to present a budget analysis, a functioning audit system set up by Peat Marwick, a support staff handbook, draft salary scale and job descriptions, an organizational chart, a code of ethics, and a calendar of APEC events for the next three months, as well as an activities report. In addition, we gave them our proposal for administering APEC grants, including our financial principles, disbursement procedures and sample forms and instructions. We had created everything from scratch in just three months. The Senior Officials were very impressed and approved the whole package with minor changes. Williamsburg is a charming reconstruction of an eighteenth century colonial village. I had brought along all the professionals so that they could be exposed to the Senior Officials and experience the ebb and flow of an SOM. This productive meeting was marred only by one minor incident that was unfortunately characteristic of the sometimes awkward relationship between the Secretariat and the Department of State. The incident occurred when we arrived and were told that all the Secretariat staff, including myself, had been classified as "observers". This gave us the same status as non-APEC organizations - ASEAN, the South Pacific Forum and the Pacific Economic Co-ordinating Council (PECC) - rather than being an intrinsic part of the organization. This absurd decision was changed at future SOMs. The Williamsburg SOM was important from a policy standpoint because it was the first such meeting in the new Clinton Administration. Secretary of State Warren Christopher sent greetings and Winston Lord, Assistant Secretary of State for East Asian and Pacific Affairs, opened the meeting. Any doubts we had about the Administration's commitment to APEC were dispelled. Of course, at that time, we did not know that President Clinton would call for a Leaders' Meeting in connection with the planned ministerial meeting in Seattle, thus greatly enhancing APEC's domestic and international profile.

16

View from the 19th Floor

Although it was not made clear at Williamsburg, Sandy Kristoff was to remain the U.S. Senior Official. In February, when I was in Washington, I took the opportunity to recommend to Winston Lord that he retain Sandy as Senior Official even though she was no longer with the State Department, but had been assigned to the National Security Council. The State Department was understandably reluctant to give up the position, but in the end agreed to her appointment. Sandy's appointment did not end bureaucratic infighting between the State Department and the White House, however.

Highlights of the Second Senior Officials' Meeting

Economic Trends and Issues (ETI) Ad Hoc Group

The ETI Ad Hoc Group presented a draft mission statement that included the following objectives: to contribute to broader economic dialogue, promote transparency, and serve the ministerial dialogue in APEC; and to develop and enhance contacts among economic policy advisors in the region. The paper also described the methods to achieve its objectives, how it would contribute to the APEC ministerial and work plan, and outlined the ETI structure and output.

Informal Group on Regional Trade Liberalization (RTL)

In addition to a "trade policy dialogue" that covered the Uruguay Round, the North American Free Trade Agreement (NAFTA) and the ASEAN Free Trade Area (AFTA), globalization and the progress of deliberations in the Eminent Persons Group, the RTL discussed four short-term measures for regional trade liberalization: establishment of an electronic tariff database; customs procedures; investment in the region; and administrative aspects of market access. The RTL group also discussed possible business sector participation in its deliberations but came to no conclusions. The question of how APEC

3. The Senior Officials' Meetings

17

could best interface with the business sector troubled the organization throughout 1993 and is likely to continue to do so in the future. (See chapter 9, "Recommendations".) The Eminent Persons Group began to establish their agenda, proposing that they develop a series of papers on APEC's conceptual and institutional framework, and looking into APEC's future.

Trade Promotion Working Group

The Trade Promotion Working Group reported on the success of a training course and study tour for small and medium enterprises held in Manila and Taipei, co-sponsored by the Philippines and Chinese Taipei. The programme attracted a large number of public and private sector representatives from most of the APEC countries.

Working Group on Trade and Investment Data Review

The Trade and Investment Working Group had not met since the last meeting because of scheduling difficulties and worked to set the date and location for the next meeting.

Investment and Technology Transfer Working Group

Further progress was made towards the establishment of an information network for technology transfer. The next meeting of this group was to present a "Pilot Study Proposal" and discuss its appropriateness. The Working Group declared its intention to expand into four other areas: investment information availability of each APEC member; improvement of investment infrastructure; investment dialogues between government and private sectors; and promotion of technology transfer through research co-operation. The group considered holding investment seminars and a round-table on industrial technology and scientific co-operation with private-sector and APEC-member participation.

Human Resource Development Working Group

One of the most vigorous, this Working Group organized activities which

18

View from the 19th Floor

included networks in business management, economic development, education, and university mobility. The first APEC Education Forum had been held in Tokyo in January 1993, where a work plan had been adopted.

Regional Energy Co-operation Working Group

Although it had not met since September 1992, this group proposed eleven projects for central funding, including those on clean coal technology, an energy database, renewable energy sources, and so forth. The Working Group reported success in a trial run of its energy database, the publication of a clean coal technologies report, and the organization of seminars on energy demand management. Additional reports on energy efficiency and policies were to be published for all APEC member countries.

Working Group on Telecommunications

In its last meeting before the Williamsburg meeting, the Group agreed to focus on three areas in preparation for the November Ministerial Meeting: electronic data exchange (EDI); development of telecommunications infrastructure (teleports); and telecommunications standards.

Fisheries Working Group

The Working Group endorsed three new project proposals on the development of small and medium-sized business in the fish processing sector, a study of health and quality rules, and a study on the feasibility of improving information accessibility.

Marine Resources Conservation Working Group

The Marine Resources Conservation Working Group reported that it had gathered further information on two projects: the red tide/ toxic algae project, and an integrated coastal zone management project.

Transportation Working Group

The Group announced that a project was under way to identify transportation bottlenecks in the APEC member countries and the report would be completed by the end of the year. In addition, the Group was working

3. Th e Senior Officials' Meetings

19

on policy recommendations for a regional transportation system. They intended to solicit active private sector participation in these projects.

Tourism Working Group

The Tourism Working Group reported that it had finished its Vision Statement, a draft Policy Objectives paper and refined its work programme. It hoped to co-ordinate the work with other Working Groups.

Leaving Williamsburg, the staff and I took back to Singapore a better sense of how the Senior Officials saw the role of the Secretariat. I travelled for several weeks after the Williamsburg meeting, and discovered on my return to Singapore that it was not a good idea to be absent from my post for too long. We were still in the process of defining our jobs and learning to work together as a team.

The Third Senior Officials' Meeting, Seattle, Washington, 28 June-2 July 1993 This meeting gave the Senior Officials a preview of the city and facilities where the November Ministerial Meeting would be held. We were disappointed to discover at the last minute that Sandy Kristoff would not be able to attend the meeting as the U.S. Senior Official. However, Winston Lord sent his principal deputy, Peter Tomsen, and the SOM proved to be productive. The local committee organizing the November meeting demonstrated great warmth and hospitality to the Senior Officials, most of whom were in Seattle for the first time. They found it very attractive and could so advise their Ministers in preparation for the November meeting.

Highlights of the Third Senior Officials' Meeting

Ad Hoc Group on Economic Trends and Issues

The Group reported that it was waiting for comments on a draft Mission Statement, and a Vision Statement. An Economic Trend and Issues paper was also being prepared. An expansion of ETI functions was discussed in light of the growing economic dialogue among APEC member countries. The group decided to move slowly until it had gained more experience.

20

View from the 19th Floor

Informal Group on Regional Trade Liberalization It was becoming evident that the electronic tariff database would prove

difficult to compile. Not all the fifteen APEC countries kept comparable customs data, and making the data compatible would be very expensive. By the Seattle SOM, we had already spent more than US$100,000 and had not scratched the surface of the problem. However, Australia and New Zealand continued to press forward, and an additional US$135,000, including the US$37 ,000 left unspent from previous allocations, was authorized for an Australian feasibility study. Eventually, the study was converted to a more modest CD-ROM-based project. In my view, a consolidated database, though obviously desirable, is still many years away. Trade Promotion Working Group Japan announced the first APEC Trade Fair in Osaka in October 1994. Consulting work on telecommunications and database management was being carried out. Trade and Investment Data Review Working Group The Group presented the results of its last meeting, showing that inconsistencies in economic data might lead to misunderstanding and inaccuracies with regard to economic relationships between the APEC member countries. A study on the inconsistencies in service trade data, and investment flows was also in progress. Investment and Technology Transfer Working Group In addition to reporting on ongoing projects, it was decided to rename the Investment and Technology Transfer Working Group. It would now be known as the Investment and Industrial Science and Technology Working Group in order to incorporate science and technology activities into its work plan. The term "industrial science" was to be considered broadly, and the option was left open to establish a Working Group on Science and Technology if considered appropriate at a later date. Human Resources Development Working Group Vision and policy statements of the Human Resources Development Working Group were endorsed at the SOM. Network activities and educational fora were progressing according to the work plan.

3. The Senior Officials' Meetings

21

Regional Energy Co-operation Working Group

The SOM approved the Regional Energy Co-operation Working Group's vision statement, as well as a statement on strategic issues. Future co-operative projects and programmes were to be centred around these strategic issues. The group prepared proposals for new projects in the coming year.

Telecommunications Working Group

The second edition of "The State of Telecommunications Infrastructure and Regulatory Environments of APEC Economies" was under preparation. The Working Group planned to distribute the final document at the November Ministerial Meeting. A film on Electronic Data Interchange and Business Transactions in Customs was to be presented at the November meeting to demonstrate its efficiency in facilitating the processing of trade documentation.

Fisheries Working Group

New activities were proposed and accepted for the coming year in relation to already set priorities for the Working Group. An inventory of facilities and opportunities for technology transfer was to be conducted, and workshops to encourage small and medium-sized businesses were planned. New projects were proposed in health and quality rules and to disseminate market information.

Marine Resources Conservation Working Group

The Working Group briefed the Senior Officials on ongoing projects and submitted a draft statement to the Senior Officials for consideration for issuing at the November Ministerial Meeting.

Transportation Working Group

The Transportation Working Group reported the completion of its survey of transportation systems and services in the APEC member countries. The survey on transportation bottlenecks had been initiated, and the scope of work for a consultant was under consideration. A statement defining regional transportation objectives to formulate policy approaches to regional transportation development was also in progress.

22

View from the 19th Floor

Tourism Working Group

The Working Group began work on an ecotourism project, and was in the process of recruiting a consultant. An update on the following year's proposed projects was provided.

Assessing the Working Groups

Korea presented a chart showing the respective Working Groups' accomplishments. The Secretariat was instructed to refine the chart and collect the data in time for the Working Group Shepherds' Meeting in Singapore in August for further discussion before presenting to the SOM later the same month.

In my own report, I expressed concern about how slowly requests for funds were coming in from the Working Groups. At the current rate, we would only disburse a small fraction of the money allocated for projects by the end of the year. It was suggested that the Secretariat be more "flexible" about requiring receipts and other documentation. I did not take this suggestion very seriously, since the Senior Officials would have been rightly upset if at the time of the audit we could not provide a thorough accounting. Although the SOM had gone well overall, I was disappointed that we had not made more progress towards the November meeting. I was to learn that the Ministerial Meeting is an action-forcing event. The Senior Officials often put off tough decisions until the last possible moment (that is, at the last SOM before the Ministerial Meeting). In the early years of APEC, some delegations questioned the need for annual ministerial meetings. However, given the role the meetings play in keeping up APEC's forward momentum, it would be very unwise to cease having ministerial meetings every year.

The Fourth Senior Officials' Meeting, Honolulu, Hawaii, 22-24 September 1993

For me, the Honolulu SOM was the mostfrustrating of all of the meetings we had that year. Part of the problem was caused by President Clinton's announcement at the G-7 (Group of Seven industrialized countries) meeting in Tokyo in August that he was going to invite the leaders of the

3. The Senior Officials' Meetings

23

fifteen APEC countries to an informal meeting following the Seattle Ministerial Meeting in November. This certainly raised APEC's profile in the United States. Of course, in Washington, once the President is interested in something, high-level people throughout the government quickly become interested. As a result, the Honolulu SOM was graced with a number of high-ranking officials, including Winston Lord, who chaired the meeting, Deputy U.S. Trade Representative Charlene Barshefsky, and Special Assistant to the President and G-7 Sherpa Bob Fauver. Fred Bergsten, the Eminent Persons Group chairman, also came and gave the Senior Officials a preview of the Eminent Persons Group report. There was the inevitable clash of egos and a great deal of U.S. delegation staff time was devoted to taking care of the YIPs rather than participating in substantive work. Another reason for my frustration was that I ran into unexpected opposition to my plans to establish an APEC Communications and Database System (ACDS). Some Senior Officials thought the programme was too expensive (our estimates ranged from US$450,000 to US$780,000, which, even at the high end, was a bargain for a telecommunications system). Other Senior Officials feared that money might be taken away from their pet projects to pay for the ACDS, and still others were afraid of embracing new technology. The SOM decided to put off a decision until the last meeting before the November Ministerial Meeting. Eventually, we did get the funding, and the project turned out to be much less expensive than we had estimated. Despite the hassles, the Senior Officials did make a number of significant decisions. The SOM approved the Proposed Declaration on an APEC Trade and Investment Framework and the APEC Trade and Investment Committee Work Programme. This was a major milestone in APEC's development, for it began the process of making the organization into a decision-making institution and could pave the way for eventually addressing some of Eagleburger's bold suggestions outlined earlier. Achieving consensus on the Trade and Investment Framework was not easy and was accomplished largely through the tireless and skilful efforts of Nancy Adams of the office of the U.S. Trade Representative. She commuted between Washington and the region numerous times during the year, meeting again and again with her APEC colleagues and, in the end, convinced them of the need to move APEC forward. The SOM also reversed its original decision made in Washington and agreed to establish a Budget and Administration Committee. The new committee would scrutinize the budget and make recommendations to the SOM. During the first year, all members were entitled to appoint

24

View fro m the 19th Floor

representatives to the committee. However, I hope that with experience the SOM will agree to limit the group, even if to do so requires a rotation system: This will make the group more effective. The Committee was to meet twice a year and should be able to relieve the SOM of some of its more mundane duties. The Honolulu SOM also agreed to "clustering" the Working Groups as a first step towards more rational organization of work. Presently, a new Working Group cannot be established without abolishing an old group. Although there are some new areas that APEC should address, the lack of willingness to abolish any group has stymied the process of change. Clustering could lead to abolishing or otherwise consolidating some of the Working Groups. Fred Bergsten's preview of the Eminent Persons Group report to the Ministers did not get a very strong reaction from the Senior Officials, who seemed to accept the main thrust of the report. However, in Seattle, some of the Ministers were to prove less enthusiastic.

Highlights of the Senior Officials' Meeting

Ad Hoc Economic Trends and Issues Group

Many delegates praised the Thai outlook paper and the Japanese vision paper. Chinese Taipei agreed to prepare a study on the regional economic outlook for 1994. The Philippines proposed preparing a paper on trade liberalization and privatization in the APEC countries. Japan proposed two projects: a paper on sustainable economic growth, energy issues and the environment, and an input-output table on international industrial relations.

The Informal Group on Regional Trade Liberalization

The trade policy dialogue focused on the importance of the successful completion of the Uruguay Round, developments in NAFTA (North American Free Trade Area) and AFTA, as well as a Canadian paper on globalization. The Group reviewed progress in customs-related projects, including the Electronic Tariff Database, customs procedures and the Customs Trade Symposium. The SOM agreed that the Regional Trade Liberalization (RTL) recommendations to the Ministers should be complementary or crossreferenced with the new Trade and Investment Committee Work Programme, as the Trade and Investment Committee would replace the Regional Trade Liberalization group.

3. The Senior Officials' Meetings

25

Trade and Investment Data Review Working Group The Group noted the importance of its project to establish comparable databases among the APEC countries and raised concerns about the insufficient allocation of central funds for the project. The Senior Officials approved the Group's vision statement and policy objectives.

Trade Promotion Working Group The Group met in Vancouver, Canada, in June 1993. The ongoing activities included the exchange of trade and industrial information through the APECNET database, trade promotion seminars to be held in Korea and China, and the first APEC International Trade Promotion Fair scheduled for 24-27 October 1994 in Osaka, Japan. In addition, the Group reported that it was pleased to see efforts to involve the private sector in its activities.

Working Group on Investment and Industrial Science and Technology The Working Group took on new issues in industrial science and technology, outlining an initiative aimed at upgrading the region's capabilities in science and technology. The Group also drafted a set of principles for APEC member co-operation in industrial science and technology issues.

Human Resources Development The chairman of the SOM praised the Human Resources Development Working Group for its solid achievements, good internal management and process of evaluating and prioritizing proposals. The Group presented a progress report on all its network and educational projects.

Working Group on Regional Energy Co-operation The Group completed work on its Policy Issues Paper and briefed the Senior Officials on the outcome of two informational visit programmes on photovoltaic technology and on clean coal technology.

Marine Resources Conservation Working Group The Working Group completed its survey of international organizations

26

View from the 19th Floor

concerned with marine conservation projects in the region and submitted proposals for its 1994 projects.

Working Group on Telecommunications

The SOM approved the Working Group on Telecommunication's statement for presentation at the November Ministerial Meeting. There was continued discussion for co-ordination of EDI activities among the APEC member countries. The SOM requested the Working Group to prepare an overview of activities and issues within APEC for the Seattle meeting in November.

Fisheries Working Group

The Fisheries Working Group held a workshop on small and medium businesses in the industry and was advised by the Senior Officials to follow up on issues of regional and technical support, the need for management training, and limited market opportunities.

Transportation Working Group

At the Group's meeting in Seattle in July 1993, one hundred and five delegates had attended, nearly half of them from the business/ private sector. The meeting approved the vision statement and policy objectives. Work was continuing on the Transportation Bottleneck Study and the Group had initiated an electronic data interchange project after consultation with the RTL Group and the Telecommunications Working Group.

Tourism Working Group

The Tourism Working Group had continued its projects in its three areas of priority: tourism and the environment, human resource development, and the role played by tourism in the region. The Working Group had coordinated some activities with tourism organizations to promote efficiency and to avoid duplication.

On balance, the SOMs, during the year that the United States held the chair, accomplished quite a bit, especially as all important decisions were made by consensus. Sandy Kristoff's leadership played a major role. The general atmosphere in APEC was also congenial and harmonious. Another

3. The Senior Officials' Meetings

27

contributing factor was that a core group of Senior Officials had been active in APEC for some time, some even going back to the inaugural meeting in Canberra in 1989! They like each other and work very well together. A number of Senior Officials and their colleagues were extremely helpful to me during the year. At the risk of leaving someone out, I would mention Tony Miller (Hong Kong), Wisher Loeis and Mrs Saodah Syahruddin (Indonesia), Wade Armstrong (New Zealand), Frederico Macaranas (the Philippines), Lai Seck Khui and Ms Ng Kim Neo (Singapore), and Ms Laxanachantorn Laohaphan (Thailand). Skip Boyce and Larry Greenwood at the U.S. Embassy in Singapore were also very supportive. David Parsons, the International Director General of the PECC was specially helpful, and we became good friends. Clearly, the SOMs are too large and cumbersome. There is a constantly changing cast of characters, which means that a certain amount of time is taken up at each meeting to bring the newcomers up to date. It is not that they have not read their briefs, but that they must learn the APEC corporate culture. It is not uncommon to see a SOM get bogged down by some minor, albeit symbolic, procedural issue that takes up a great deal of time. The result is that more important issues are sometimes given less attention than they deserve. This problem is, of course, not unique to APEC, but plagues most multilateral meetings.

chapter 4

Secretariat Relations with the Working Groups

Not surprisingly, the most difficult relationship for the Secretariat to work out .was that with the Working Groups. Some of the groups had been established in Canberra at the founding meeting, and all were self-financed until a central budget was established in 1992. They were used to operating quasi-independently, and some of them did not want to accept the authority of the Secretariat acting on behalf of the Senior Officials. It should be kept in mind that the Working Groups were, in effect, international committees with an ever-changing membership. This made the whole issue of accountability very difficult. It was a challenge to set up a system that assured: 1) competitive bidding; 2) disbursements in conformity with the regulations set up by the Secretariat and approved by the Senior Officials; and 3) final reports that the work had been completed. To complicate matters, many of the projects approved under the 1993 budget had been drawn up hastily to take advantage of available central funding and were not very well thought through. There was also some confusion as to exactly what the funds could be used for. We began by using as a guideline the paper prepared by the United States in connection with the 1993 budget. However, each succeeding SOM mandated ever tighter restrictions on the use of funds. By the Seattle Ministerial Meeting, 28

4. Secretariat Relations with the Working Groups

29

respective SOMs had narrowed the authorized use of funds to publications and consultants. Some of the member economies became very protective of particular Working Groups and would recommend exceptions for certain projects in direct contradiction to the restrictions they had originally insisted upon. Most of the professionals working at the Secretariat were assigned as liaison officers to particular Working Groups. 1 Some of the Working Groups quickly adjusted to the new situation and made good use of the Secretariat liaison officers. The hard work and keen analytical skills of Park Jin-Ho, Merry Wickes and Peter Richards were appreciated and utilized by their Working Groups. Other groups treated the liaison officers as interlopers and blamed them for their frustrations with the Secretariat. The Working Group on Regional Energy Co-operation was particularly difficult. They would put in claims for money without receipts or for expenses that were not authorized by the Senior Officials. I was determined to be strict when it came to disbursement rules. We had set up tough accountability regulations, and we had a highly respected international accounting firm auditing our books. I was the only one authorized to sign cheques and was therefore personally accountable. I would not sign a cheque for any claim that did not conform to the rules. From the day that we received member contributions and set up a bank account, we were very strict in disbursing money, as shown in the audits covering the first year. I always felt bad to send Yang Yafei, a first-rate liaison officer from China, to the Energy Working Group meetings, for he had to take a great deal of abuse because of our strict rules. There were two Shepherds' Meetings in 1993. The first was in Washington, on 18-19 February. For the most part, these Shepherds' Meetings were really meetings of the government officials who followed the Working Groups rather than the actual shepherds managing the Working Groups. We called these officials the shepherds of the shepherds. Merry Wickes, Max Li and I attended the Washington meeting, and Merry provided the group with our first production, a draft Calendar of APEC and Related Events. Max presented the Secretariat's draft disbursement procedures and APEC central funding application procedures. The Shepherds' response was positive, but again, they were not the people who were to create the real problems. In addition to hearing reports from the Working Groups, the delegates

I. See organization chart in Appendix II.

30

View from the 19th Floor

also discussed policy issues such as "rationalization", telecommunications and database issues, and non-official participation in Working Group activities. The second Shepherds' Meeting was held in Singapore, on 26-27 August. This was a very important meeting because it was here that we were to propose the funding for the APEC Communications and Database System (ACDS). We needed the Shepherds' agreement to the plan if we were to get approval from the Senior Officials. The Shepherds accepted the ACDS proposal and the general outlines for a US$2 million budget in 1994, of which US$1 million would be for work programmes (the same as for 1993), US$440,000 for the ACDS, and US$560,000 for administration of the Secretariat. Everyone knew there would be a large amount of unspent funding from the 1993 operational budget. The Shepherds wanted it to be carried over into 1994 and added to the US$1 million requested for the 1994 budget. The Shepherds also requested that the Working Groups be given flexibility (within the general guidelines) to re-programme unspent 1993 funds. Even so, the group had to cut almost US$300,000 from the proposed budget to keep the requests from extending beyond the US$1 million limit. The meeting also discussed refining the budget guidelines, agreeing on a format for project proposals, relations with the Secretariat in general, publications policy, and business/private sector participation in the Working Groups. In general, I had serious doubts about whether the Working Groups could spend such large sums of money in a rational and prudent manner. The 1993 proposals had been drawn up in great haste and it is doubtful if some of them would ever be carried out. Working Groups are made i.lp of government officials who have other duties as well. They meet only occasionally, and to spend all of the money that had been authorized would have required the officials to devote a great deal of time to overseeing projects. Some of the Working Groups simply took their list of 1993 proposals and repeated them for 1994. Because of time constraints, if for no other reason, there will be a large carry-over each year. An even more fundamental problem is that there was no mechanism or political will to prioritize proposals among competing Working Groups. Within a Working Group there might be an effort to prioritize goals; however, neither the Shepherds' Meeting as a whole nor the Senior Officials were willing to decide among the various Working Group proposals. When they had to cut back the requests in order to keep the total at US$1 million, they simply made a percentage cut across the board.

4. Secretariat Relations with the Working Groups

31

There is no substantive analysis of the Working Group proposals by the Senior Officials or the Secretariat. This is partly because the Senior Officials lack the technical knowledge to judge the projects and partly because no one wants to attack the other Groups' proposals, lest their own be attacked in turn. The experience gained over time will help to smooth out some of the difficulties between the Secretariat and the Working Groups. However, some of the problems run deeper, and will require tough decisions on the part of the Senior Officials. 2

chapter 5

Starting Down the Information Highway

APEC had the rare good fortune of being a child of the information age. I was convinced that we should take advantage of the situation by creating the APEC Communications and Database System (ACDS). A user-friendly APEC communications system would tie the APEC countries together and help to give the organization a sense of identity. To do this, the ACDS would need to be flexible, upgradable, cost-effective, and capable of expanding with APEC. I felt strongly that it was time for APEC to start down the information superhighway! A Swedish friend once said, "You always pay the most for your best ideas." This was certainly the case in my efforts to bring the Secretariat into the information age. To begin with, I was unaware of how stiff the competition was in the telecommunications industry. Clark Norton, a colleague in the State Department and a member of the Telecommunications Working Group, suggested that it would be a good idea to have some of the representatives of U.S. telecommunications and computer companies in Singapore provide free advice on a communications and database system for APEC. When the word of this got to the telecommunications companies and officials in the other member countries, many additional volunteers came 32

5. Starting Down the Information Highway

33

forward. The result was that what had been envisioned as a "small, ad hoc group" became a 22-person APEC Telecommunications and Database Management Task Force with representatives from Australia, Canada, China, Japan, Singapore, Thailand and the United States. The Task Force met in Singapore in February and produced a very useful concept paper on an appropriate communications and database system for APEC. The paper addressed two major tasks: 1) to identify procedures for facilitating electronic messaging capability for use by the APEC Secretariat, member countries, Working Groups and the general public; and 2) to develop procedures for facilitating electronic access to existing and future databases as well as other commercial, international and national databases. Following up on the Committee paper, the Telecommunications Working Group (TWG) proposed that the Secretariat engage a consultant to assist in making recommendations on a system to the Senior Officials. It was recognized that the decision would be difficult. The proposal was approved by the SOM, and the Secretariat, together with the Telecommunications Working Group, drew up the terms of reference for engaging a consultant. It is said that an objective telecommunications consultant is an oxymoron. This is because most consultants, by virtue of their experience and old loyalties, are biased towards a particular company and/or a national system. To guard against this, we sought to set up a process that we hoped would ensure the best technical and most cost-effective choice for APEC and do so in a way that was perceived by the member countries, especially those competing in telecommunications, as fair and unbiased. A tall order indeed! The process we set up was cumbersome and time-consuming, but it worked. At each crucial decision point, we convened a committee at the Secretariat to make recommendations. All member countries were welcome to send representatives at their own cost. This meant that only member countries that had a serious interest would participate but also that their representatives were likely to have good technical backgrounds. The first committee met in June to review and to recommend three consultants in priority order from the sixteen who had applied in response to our request for proposals. The committee chose an Australian firm, Consultel Australia, as the lead agency, and the SOM approved the choice. Relations with Consultel were difficult from the beginning. At first, they sent a young man who was technically competent but very inexperienced in working within an international context. When he learned that one of the requirements of the ACDS would be to link up with INTERNET,

34

View from the 19th Floor

he commented that INTERNET was "North America-centric". After we expressed our doubts to his home office, Consultel sent two more senior people to help him prepare the Request for Proposal (RFP) for bids on a contract to install and operate the ACDS. After Consultel had prepared the draft RFP, the committee was reconvened in Singapore to make comments and suggestions before the RFP was sent out for bids. Even here there were differences, for some members of the committee felt that the Consultel RFP would attract only firms interested in setting up a unique APEC system and would discourage international telecommunications service providers from applying. The committee made changes to ensure the broadest range of options. As mentioned above, the Seattle SOM did not approve my financial plan for paying for the ACDS, which was based on an estimate of costs in 1994 of US$680,000 to US$780,000. Of this, US$340,000 would have been carryover funds from 1993, and US$440,000 would have come from 1994 funds. We received eleven formal bids by the deadline of 23 September 1993. Consultel did an analysis and the final committee meeting was held on 27-29 October. After a full analysis of the proposals, the committee recommended accepting the AT&T proposal. The committee members felt that AT&T, as a global telecommunications service provider, could handle the diverse technical needs of all the member countries. We were able to bring costs down to US$530,000 for 1994. The Senior Officials approved the project and funding in Seattle at the SOM preceding the Ministerial Meeting. To pay for the ACDS, US$361,000 came from carry-over funds from 1993 and US$169,000 from the 1994 budget. The first steps in implementing the ACDS would be to establish an e-mail system, compile an electronic library, and set up the first APEC Secretariat electronic bulletin board. With the help of a Singapore attorney, we negotiated a contract with AT&T in December, and installation of the system began in early 1994. Throughout the process, the Secretariat's computer systems expert, Terry Tsong-Guey Lee, was a source of excellent advice and support. As a very nice gesture from my successor, Ambassador Rusli Noor, I received the first test ACDS message from Singapore at my home in Bethesda, Maryland. As is usually the case, the ACDS is taking longer to install than had been anticipated and there are hiccups; however, the ACDS will pay significant dividends in the future. I remain convinced that it will bind the APEC countries together. APEC has just driven on to the information highway, but once on, there is no turning back and APEC will be positioned to take advantage of technological change in the twenty-first century.

chapter 6

Different Members, Different Visions

Travel throughout the Asia-Pacific was an important part of the job of the Executive Director of APEC. During the year, I spoke at the Pacific Basin Economic Council (PBEC) annual meeting in Seoul, the Pacific Economic Co-operation Council (PECC) meeting in Hawaii, the AsiaPacific Council of American Chambers of Commerce (APCAC) in Chinese Taipei, as well as various Chambers of Commerce (such as in Jakarta, Kuala Lumpur, Singapore, and Hong Kong). I also attended and spoke at academic and think-tank conferences (Awashima Conference, Japan; Centre for Strategic and International Studies, Jakarta; Institute of Southeast Asian Studies, Singapore; East-West Center, Hawaii; and so forth). The purpose was to tell the APEC story far and wide throughout the region. There was a great deal of interest in APEC, but it was not always matched by in-depth knowledge, which was quite understandable given the fact that APEC was less than five years old. APEC was always better known in Asia than in America. The Asian media were much more interested than the American or European media. This changed somewhat during the Seattle Leaders' Meeting when there was considerable U.S. and European interest (over 2,000 media representatives from the United States, Asia and Europe were in Seattle). This was an exception, however, 35

36

View from the 19th Floor

and after the Seattle meeting, the U.S. media reverted to its European focus. In addition to meeting with hundreds of APEC and non-APEC officials and journalists in Singapore, I made a special effort to reach the business/ private sector. While business people by and large knew less about APEC than the journalists or officials, they were ready to listen and eager to learn more about APEC, especially if the focus was on what APEC could mean to the bottom-line. While in Japan, we visited Osaka, Japan's gateway to Southeast Asia. There, interest in APEC was very high among officials and business people. Osaka is scheduled to host the first Asia-Pacific International Trade Fair in October 1994 and reportedly will be the venue of the APEC Leaders' Meeting in 1995. The Ministerial Meeting will be in Tokyo. Another purpose of travel in the region was to gauge the political views concerning APEC's development among the member economies. During my twelve months as Executive Director, I visited all the APEC members, except Canada, Australia and New Zealand. However, frequent contact with representatives from the latter three economies at APEC meetings and at the Secretariat in Singapore kept me informed as to their views on APEC matters. During my visits to the member countries, I would most often meet with the Foreign Minister, the Senior Official and other officials concerned with APEC. It was helpful to meet with people away from formal APEC sessions; often they would speak more frankly at home. The trips were invaluable in finding out how key people in the various member countries felt about the future direction of APEC, although the views expressed did not necessarily reflect the views of the top leadership, as we would learn in Seattle. During these visits, I would also try to hold a press conference or give a talk to make the case for APEC. The warm reception throughout Asia was in part normal Asian hospitality and part a reflection of the general approval for how the Secretariat was doing. From the visits, conversations with visitors to the Secretariat and APEC meetings, I developed a scale to show how member countries felt about the further institutionalization of APEC. This was one indication of how enthusiastic the member countries were about supporting the organization. The Seoul Ministerial Meeting in 1991 had begun the process of institution building in APEC. The establishment of the Secretariat in 1992 was the next step and the Ministers' approval in 1993 of the Trade and Investment Framework and Work Programme carried the process of institutionalization a step farther. The following "spectrum of enthusiasm" is an attempt to show how different members fit on my scale.

6. Different Members, Different Visions

37

Enthusiasm for Institution Building in APEC (1993)

Most enthusiastic about institution building in APEC are: Australia Canada Korea

United States New Zealand Singapore

In the middle, from hedged to reluctant support are: China Indonesia Philippines Chinese Taipei

Thailand Hong Kong Brunei

Resisting all efforts towards APEC institution building is: Malaysia

Differences among the member countries were apparent at both the SOM and the Ministerial Meeting in Seattle. In the course of 1993, China appeared to lose some of its enthusiasm for further institutionalization for reasons that were unclear. It was very difficult to tell in the case of Japan, but on balance, the Ministry of Trade and Industry (MITI) seemed somewhat more positive about APEC and the Foreign Ministry more cautious. It is very difficult to predict what Japan will do when it chairs APEC in 1995, except that bold initiatives are unlikely. An interesting case of a member country becoming .more, rather than less, enthusiastic over time was Indonesia, especially since the Leaders' Meeting in 1993. As the 1994 APEC Chairman, and host to the Leaders' Meeting in November, Indonesia took a more pro-active, more enthusiastic attitude towards APEC. In fact, the momentum from Seattle could not have been sustained without Indonesia's strong efforts. Nowhere were the differences in vision about where APEC should be headed better demonstrated than by the Ministers' reactions to the Report of the Eminent Persons Group (EPG) in Seattle. The Eminent Persons Group had been formed in response to the 1992 Bangkok ministerial agreement that a small group of "high calibre individuals from the region be established with a mandate to report back initially to APEC Ministers meeting in the United States in 1993 identifying, with recommendations, issues in the trade field which should be considered by APEC countries

38

View from the 19th Floor

over the medium term". The idea was that a group of eminent persons who were not government officials could be more bold and creative in developing a vision for APEC. The original group consisted of Neville Wran (Australia), John MacDonald (Canada), Huang Wenjun (China}, Victor Fung (Hong Kong), Suhadi Mangkusuwondo (Indonesia), Hank Lim Giok Hay (Singapore),Mahn Je Kim (Korea}, Narongchai Akrasanee (Thailand), Rong-I Wu (Chinese Taipei}, and Fred C. Bergsten (United States). The distinguished statesman Saburo Okita was to be the member from Japan, but he died of a heart attack and was replaced by Ippei Yamazawa just before the first meeting. At the first meeting of the Eminent Persons Group, which took place at the Secretariat in Singapore on 7 March 1993, Fred Bergsten was elected Chairman. The EPG met a number of times and completed its report just before the Seattle Ministerial Meeting. The report set the goal of free trade in the Asia-Pacific region that would lead to a "true Asia-Pacific Economic Community". Anyone who knows Fred Bergsten, whose persuasive powers are accompanied by seemingly inexhaustible energy, would not be surprised by the thrust or boldness of the EPG Report. As coordinator for the EPG, Graeme Pirie had his hands full handling Fred and the other eminent persons, but Graeme managed to keep the process on track and everyone happy, a remarkable feat. Moreover, the reason that non-government people were chosen in the first place was because they had more freedom to be bold. The task of the EPG was to point out the stars that APEC could use to navigate into the twenty-first century. This was what they did but it was a little too daring for some of the Ministers. It was no surprise that the Malaysian Trade Minister would reject a bold vision for APEC. Other member countries also expressed reservations (for example, China, Indonesia, Japan, Brunei, the Philippines), while others (such as Singapore, Korea, Australia and the United States) expressed support for the ideas in it. The term "Pacific Community" bothered some because it conjured up visions of the European Community, which is anathema to many of the APEC members. China finally agreed to join the consensus when a Chinese character meaning "big family" was used for community. As it turned out, the Leaders were bolder than the Ministers, and their vision statement contains the expression "Asia-Pacific Community". The differing reactions among the APEC countries at the Ministerial Meeting reveals underlying differences that will have to be worked out if APEC is to become a true Asia-Pacific economic community.

chapter 7

Sleepless in Seattle

The general atmosphere at the Seattle meetings was very positive. Even the weather, unpredictable in that part of the country at best, co-operated and there was sunshine almost all of the time. Seattle is a mid-sized city in the American northwest. It is famous for its salmon, intellectual life and a damp and rainy climate. It is also a major U.S. gateway for trade with Asia. Its importance to Pacific trade, and the fact that Seattle is home to such international giants as Boeing, Microsoft, and Weyerhauser, made it an appropriate U.S. city to host the 1993 APEC Ministerial Meeting. When President Clinton decided to host the APEC Leaders' Meeting there as well, the logistics became a little sticky. But the people of Seattle rose to the occasion, and their hospitality and warm welcome reflected the very best American qualities. Fortunately, two friends from the state Department, Chris Runkel and Pat O'Brien (who had helped me set up the secretariat in the early days) were in charge of a major part of the logistics and they did an incredible job. They also ensured that the secretariat was set up so that it could function efficiently. Everywhere you looked, including the Space Needle, there were posters and "WELCOME APEC" signs. Even the local adult movie house joined in the act with a risque marquee welcoming the delegates. The local citizens 39

40

View from the 19th Floor

endured the intrusive security measures, the VIP motorcades that tied up traffic and the overtaxed facilities with good cheer and humour. It seemed perfectly appropriate that the theatres in the city were showing "Sleepless in Seattle". In addition to the official APEC meetings, there was a customs fair, an international business forum, meetings of PBEC and PECC, and numerous bilateral diplomatic meetings, including the first high-level meeting between China and the United States since 1989. The three official APEC meetings were the SOM, the Ministerial Meeting, and the Informal Leaders' Meeting on Blake Island in Puget Sound, with President Clinton as host. President Clinton arrived in the city fresh from his important North American Free Trade Agreement victory in the U.S. Congress. The President had invited the Asia-Pacific leaders to Seattle to demonstrate to the American people and to the world that he believed the economic future of the United States was tied to the Asia-Pacific region. Earlier in the day, he told a welcoming committee at Boeing Field that his economic strategy was simple and direct. He said that he wanted to: put our own economic house in order, enable our people to compete and win in a global economy and find more markets for our products and services .... APEC can complement our nation's other efforts to open world trade. It can provide a counterbalance to our bilateral and our global efforts . . .. If our efforts to secure global trade agreements falter, then APEC still offers us a way to expand markets within this, the fastest growing region of the globe. 1

The Fifth Senior Officials' Meetings, 14-16 November 1993 The last SOM under the United States' chairmanship made a number of recommendations to the Ministers. Below are highlights of these recommendations.

The Eminent Persons Group

The EPG Report recommended the following items: 1. that a strategy and action plan be developed to promote trade in the post-Uruguay Round period;

I. "Clinton Emphasizes Domestic Opportunities Provided by APEC", Transcript

of Arrival Remarks in Seattle, 18 November 1913.

7 Sleepless in Seattle

41

2. that APEC's trade and investment facilitation programme be extended to reducing barriers to trade and investment in such areas as standards and certification, rules of origin, and administrative practices; 3. that new issues such as trade and environmental policy concerns and competition policy be incorporated into APEC activities; and 4. that Ministers should seek the views of the EPG whether the pace of regional trade liberalization is advanced or retarded by a structured approach instead of autonomous actions and how regional trade liberalization within existing GATT rules might be implemented. The EPG Report also brought up the issue of whether, in light of a successful Uruguay Round, there is a need for an Asia-Pacific dispute settlement process and whether existing international models of competition policy take sufficient account of globalization and what, if any, modifications are needed.

Trade and Investment

Beginning in January 1994, the Committee on Trade and Investment (CTI) agreed to review the results of the Uruguay Round to consider steps for trade liberalization.

Participation Issues

Individual member countries should solicit the advice and input of the business/private sector and enhance outreach to that sector. Consideration should be given to providing opportunities for the business/ private sector to present its views to the Committee on Trade and Investment. One method would be to consider holding business/ private sector meetings coincident with APEC SOM and Ministerial Meetings.

Organizational Issues

From the approved 1994 budget of US$2 million, US$169,000 was .allocated to the ACDS, US$668,000 for administrative expenses and reserve, and the balance to Working Group projects. Permission was granted for unspent 1993 funds to be carried over to 1994 expenditures approved by the SOM. A permanent Budget and Administrative Committee was established to meet twice a year (but Working Groups continued to report directly to the SOM).

42

View from the 19th Floor

Other Matters

Japan informed the SOM that Ambassador Shojiro lmanishi had been appointed Deputy Executive Director. The SOM welcomed Canada's offer to host the APEC Environment Ministers' Meeting in March 1994. Highlights of the Fifth Senior Officials' Meeting Ad Hoc Group on Economic Trends and Issues

During the year, the Group completed a paper on the outlook for the region, a vision of the region in the year 2000, and adopted a mission statement. The Senior Officials approved the mission statement at this meeting. The work plan for the next year included further regional economic outlook, a study on privatization and liberalization, and work on foreign investment issues. Informal Group on Regional Trade Liberalization

The SOM affirmed that the successful completion of the GATT Uruguay Round was a top priority for APEC member countries. The Group was working to advance liberalization in regional trade policy, including trade facilitation, standards, and tariff and policy approaches. The Senior Officials prepared a "Declaration of an APEC Trade and Investment Framework" for consideration by the Ministerial Meeting. Trade and Investment Data Working Group

During the year, the Working Group completed an inventory of practices among the APEC member countries in compiling statistics on merchandise trade, service trade and foreign investment; established a Technical Advisory Panel to oversee the development of a trade database for all members; and developed a budget proposal for the establishment of the database. Trade Promotion Working Group

The Working Group increased commercial exchanges through two seminars and the first APEC Trade Promotion Seminar was being planned. The Group was also developing an electronic information network to exchange information about firms, business opportunities and governmental regulation in all member countries.

7 Sleepless in Seattle

43

Investment and Industrial Science and Technology Working Group

The Working Group began exploring ways to expand industrial science and technology co-operation in the Asia-Pacific region and to develop principles for co-operation.

Human Resources Development Working Group

The Working Group initiated and conducted workshops, training centres and research projects. It planned to complete the medium term work plan, work for co-ordination with other APEC Working Groups, and implement programmes and projects consistent with its vision and policy statements.

Regional Energy Co-operation Working Group

The Working Group held workshops on energy demand management and on clean coal technology. The activities and studies focused on problems and issues faced by member countries in energy conservation and environmental protection. The Group also published reports on energy supply and demand statistics, clean coal technology, and a survey of energy efficiency programmes in the member countries. Private sector participation was highly encouraged in the Working Group.

Marine Resource Conservation Working Group

The Working Group completed a survey of international organizations dealing with marine resource conservation in the APEC region. The Group began to gather data for two projects. Plans were being made to co-ordinate with other organizations to prevent duplication of research, studies and projects.

Telecommunications Working Group

The Working Group on Telecommunications issued a statement endorsing balanced growth of telecommunications and encouraging standardization of networks and services within the member countries. Other activities included implementing the Education and Awareness EDI pilot programme and creating a framework for customs EDI initiatives.

44

View from the 19th Floor

Fisheries Working Group

The Group determined which fishery species required international cooperation for resource management and surveyed existing systems in the Asia-Pacific region. They continued to develop programmes towards these ends.

Transportation Working Group

The Working Group completed a survey of transportation systems and services data. The Group held seminars on privatization and infrastructure financing methods. They also conducted a study of regional transportation bottlenecks.

Tourism Working Group

The Working Group focused on the role of tourism in the region, environmental issues, and the collection of statistics for project development. The Group planned to initiate a regional database and to develop its role in promoting tourism in the region.

The Ministerial Meeting, 17-19 November 1994 The mood was less relaxed compared to the typical APEC meeting, in part because of Secretary of State Warren Christopher's formal style. However, the meeting was very productive. Historically, each Ministerial Meeting has been a milestone in APEC's evolution. APEC was born at the Canberra meeting. The Singapore Ministerial Meeting ensured that the young organization would survive and kept the APEC process going when there were those who hoped to kill it, and the Seoul Ministerial Meeting defined the organization's purpose and brokered the admission of China, Hong Kong and Chinese Taipei into the organization. The Bangkok Ministerial Meeting established a permanent Secretariat, a significant step in the institutionalization of APEC. The Seattle Ministerial Meeting will rank with its predecessors in importance. Decisions taken in Seattle included:

Approval of the Trade and Investment Framework, the creation of the Committee on Trade and Investment and agreement on its far-reaching work programme; Approval of membership for Mexico and Papua New Guinea in 1993

7 Sleepless in Seattle

45

and Chile in 1994, together with a decision not to accept any more new members for three years; Approval of the US$2 million 1994 budget, including funds for the ACDS; and The APEC Trade Package Offer and the Ministers' Response to the EPG Report, which are discussed in more detail below.

The APEC Trade Package Offer

The Ministers once again issued a strong statement calling for a successful conclusion to the Uruguay Round as they had done at every Ministerial Meeting, beginning with the one in Canberra. However, for the first time, in Seattle they went beyond simply making a laudatory statement and offered an APEC package of trade concessions, more liberal than what had been agreed to at the Tokyo G-7 meeting, to jump-start the negotiations that had been stalled until then. This gesture of APEC solidarity, together with the meeting of the fourteen APEC Leaders with President Clinton, sent a very powerful message to the European Union. Some experts believe that the APEC Seattle Meeting was critical to the ultimate success of the Uruguay Round. One European trade negotiator told Fred Bergsten that Seattle galvanized the Europeans because it made clear that the United States had an alternative should the Uruguay Round fail, which Europe did not.

The Ministers' Response to the Eminent Persons Group Report

The Ministers were somewhat restrained in their response to the EPG Report. Diplomatically, the Ministers warmly welcomed the Report's broad thrust and direction, pointing out the report's bold vision of open trade, investment, and economic development in the region [which] provides an important foundation and catalyst for future regional cooperation.

While they did not immediately endorse the bolder elements of the EPG's vision, they did extend the life of the EPG for a year and asked the Group to present more specific proposals on how those recommendations might be realized for consideration at the Indonesian Ministerial Meeting in 1994. I was neither surprised nor disappointed by their reaction. The reason the panel was made up of non-governmental people in the first place

46

View from the 19th Floor

was that such people would have greater freedom to propose imaginative policies. In my view, if the proposals of the EPG were so bland that they could have been accepted by the Ministers without debate, the EPG would not have done its job. Thus, even if there had not been an APEC Leaders' Meeting, Seattle would have been considered a success by those of us who wanted to see APEC evolve into a policy-making organization. However, the Leaders' Meeting was to take the Seattle results to an even higher level in the development of APEC.

The APEC Leaders' Meeting, 20 November 1993 Until 1993, the Ministerial Meeting was the highest-level policy-making meeting of APEC. President Clinton changed all this when he invited the other APEC Leaders to meet with him in Seattle. When he announced at the Tokyo G-7 meeting that he was inviting his APEC colleagues to join him for an informal meeting following the Ministerial Meeting, there was considerable media speculation about who would accept the invitation and who would not. The meeting had to be depicted as an informal gettogether to handle the question of Taiwan's representation. Clinton also wanted to have an informal meeting that allowed for a real exchange of ideas and not a sterile, scripted meeting like that of the G-7. Some journalists speculated that the meeting might not coine about. They wrote that the issue of Chinese representation would scuttle the whole idea. In the end, only Prime Minister Mahathir of Malaysia declined to attend, and China, Hong Kong and Chinese Taipei worked out a solution that permitted all three to attend. What was surprising was that not only did the fourteen Asia-Pacific Leaders get together in Seattle, but they were also very enthusiastic about the future of APEC. Many observers, including the Indonesians, were especially caught by surprise at President Soeharto's enthusiasm in Seattle for APEC and Indonesia's willingness to hold a Leaders' Meeting in 1995. The Leaders' Meeting on Blake Island in Puget Sound, just outside Seattle, met for only a few hours but agreed to a "Vision for the Region", summarized below.

Key Elements of the APEC Leaders' Vision Statement "Recognizing our economic interdependence as well as our economic diversity, we envision a community of Asia-Pacific economies (my emphasis)

7 Sleepless in Seattle

47

in which the spirit of openness and partnership deepens, enabling us to find co-operative solutions to the challenges of our rapidly changing regional and global economy"; "We are a vast Asia-Pacific market of two billion people where dynamic economic growth continues, contributing to an expanding world economy and supporting an open international trading system"; "We continue to reduce trade and investment barriers so that our trade expands within the region and with the world and goods, services, capital and investment flow freely among our economies"; "Our people share the benefits of economic growth through higher incomes, high skilled and high paying jobs and increased mobility"; "Improved education and training produce rising literacy rates, provide skills for maintaining economic growth and encourage the sharing of ideas that contribute to the arts and sciences"; "Advances in telecommunications and transportation shrink time and distance barriers in our region and link our economies so that goods and people move quickly and efficiently"; "Our environment is improved as we protect the quality of our air and green spaces and manage our energy sources and renewable resources to ensure sustainable growth and provide a more secure future for our people". 2 The APEC Leaders took a number of initiatives at the meeting. They: Pledged to try to bring the Uruguay Round to a successful conclusion by the 15 December 1993 deadline; Welcomed the challenge of the EPG to achieve free trade in the Asia-Pacific region, advance global trade liberalization and launch concrete programmes to move towards these long-term goals; Asked APEC to deepen and broaden the outcome of the Uruguay Round, strengthening trade and investment liberalization in the region, and facilitating regional co-operation, including standards; Agreed to an APEC Finance Ministers meeting to consult on broad

2. U.S. Department of State Dispatch, Vol. 4, No. 48 (29 November 1993): 833-34.

48

View from the 19th Floor

economic issues, including macro-economic developments and capital flows; Asked business leaders to establish a Pacific Business Forum to identify ways in which APEC could facilitate regional trade and investment; Asked APEC to strengthen its policy dialogue on small- and mediumsized business enterprises; Agreed to establish an extensive APEC Education Programme; Agreed to establish an APEC Business Volunteers Programme; and Resolved to deepen the spirit of community based on a shared vision of achieving stability, security and prosperity for their people. The social whirl of the Seattle meeting was exhilarating for the Secretariat staff. They enjoyed rubbing shoulders with the Asian-Pacific leaders. Our personable and very competent professional staff member, Shuji Miyazaki, even had his picture taken with President Clinton. As I had attended summit meetings with former Presidents Ronald Reagan and George Bush before, the high point for me was to have a brief chat with Microsoft's Bill Gates. Talking with delegates and the media from Asia after the Leaders' Meeting, I found their assessment of the meeting, although a little less euphoric than the Americans, to be very positive. There clearly was a feeling among the delegates that the Seattle meeting had contributed significantly to the growth of APEC as an institution. One delegate from ASEAN told me at the airport that he thought we had made history in Seattle. Young Razali Kassim, the Regional Analysis Editor of Singapore's Business Times summed up the general feeling when he wrote: The skeptics appear to have been proved wrong: Seattle saw as much substance as symbolism ... And those who see their future tied to the benevolent protection of the U.S., whether in terms of markets or of security, can thank the Apec summiteers for helping to secure this.

Even some of the more strident newspapers and magazines in the region that had been critical of APEC before were now more supportive. Unfortunately, the message was blurred by a controversy that arose between Australia and Malaysia immediately after the meeting. When Clinton was asked after the Leaders' Meeting how he felt about Prime Minister Mahathir's absence, he responded that he was sorry the Malaysian Prime Minister had not been there and looked forward to meeting him in the future. Australian Prime Minister Paul Keating was not so diplomatic when responding to a similar question and called the Malaysian Prime

7. Sleepless in Seattle

49

Minister a "recalcitrant". The Malaysians responded, and the result was that a good amount of Asian press coverage in the weeks following Seattle centred around the Australia-Malaysia brouhaha and not the accomplishments of Seattle. That said, APEC received a tremendous amount of media coverage in Seattle. More than 2,000 media people were there and a huge convention centre was needed as a press centre. I took the opportunity to give speeches in Chicago and Seattle before the meetings. The Secretariat's Public Affairs Officer, Tom Johnson, did a superb job in Seattle of arranging interviews with a cross-section of the media to get the APEC message across. Thanks to Tom's efforts, I gave more than thirty interviews to local, national and international press, radio and television journalists during the week of the meetings. It is impossible to overestimate the role of Seattle in giving APEC a global profile. The Seattle meeting even had an impact on the Eurocentric capital of the United States, Washington. Since then, every government agency seems to want a piece of the APEC action. In fact, the proliferation of U.S.-sponsored APEC events has sometimes built up unrealistic expectations and fed suspicions in Asia that the United States has some huge hidden agenda. This new profile means that APEC, to be taken seriously, must achieve some concrete results in the near future. If not, there will be disappointment, especially in the private sector, and political support for the organization will be undermined. In fact, the new popularity of APEC carries some risks. There is hardly a meeting concerned with the regions that does not attempt a tie-in to APEC. U.S. government agencies are very prone to attaching the APEC label to any meetings remotely connected to the region. This not only creates false expectations as to what APEC will deliver, at least in the short run, but it also gives the impression, especially to the Asians, that the United States has a grand design or agenda for APEC. While there may be people in the U.S. Government with grand plans for APEC, it is not, to my knowledge, official policy: Moreover, it is unrealistic.

chapter 8

Wrapping Up in Singapore

Our group from the APEC Secretariat returned to Singapore tired but delighted with the outcome of the Seattle meeting. I held a series of briefings, first with the APEC ambassadors and then with other interested diplomatic missions in Singapore. A delegation from the European Union embassies, led by the German Ambassador, who was clearly there under instructions, called at the Secretariat. He evidently found the whole situation beneath his dignity and looked upon us with disdain through his monocle. Most of his ambassadorial colleagues were delighted to be brought into the picture so that they could report home with some new insights about APEC. Not surprisingly, there was a great deal of interest around the region as to what happened in Seattle. In my closing weeks, I went to Kuala Lumpur to meet with government officials, and spoke to the first ever joint meeting of the Malaysia-Canada Business Council, the American-Malaysian Chamber of Commerce and the Malaysia-Australia Business Council. I waited until after the Seattle meeting to make my first visit to Malaysia, as I saw no reason to provoke the Malaysian Government. In fact, in Seattle after the Ministerial Meeting, the Malaysian Trade and Industry Minister Seri Rafidah Aziz was most gracious in conveying her compliments for what we had accomplished at 50

8. Wrapping Up in Singapore

51

the Secretariat. I also spoke at the American Chamber of Commerce meeting in Singapore, and the Hong Kong Chamber of Commerce, and made a quick trip to Hawaii to speak at a CSIS-East-West Center conference. My last task at the Secretariat was to oversee the negotiations with AT&T for the ACDS. This was achieved in time and I signed the agreement just a few days before leaving to return to the United States. Ingrid and I went through a round of farewell events, which was not easy, as we had developed strong ties to Singapore in the short time we were there. I learned shortly after we left Singapore that, because the APEC meetings in Indonesia had taken on a whole new dimension with the commitment to hold a second Leaders' Meeting, the Government of Indonesia replaced Professor Hendra Esmara with a very distinguished diplomat, Ambassador Rusli Noor. Ambassador Noor had headed the ASEAN Secretariat and brought very relevant experience to his new position. Not surprisingly, reports out of Singapore are universally favourable about his leadership. Looking back at 1993 as I wrote a report to each of the Senior Officials, I felt very good about what we were able to accomplish in less than a year. The Ministers' concluding speeches had been lavish in their praise for what we had accomplished, and they cited the Secretariat staff and me for "outstanding efforts during the last year of operation" in the 1993 Ministerial Joint Statement. We had set up a lean and efficient organization which should s.erve APEC for years to come. We established accountability to a degree unknown in most international organizations and we laid a foundation for an APEC information network. When we arrived in Singapore, I had been worried that there might be serious-cross-cultural communication problems in the Secretariat. Although I had a background in multilateral diplomacy, I had not worked in Asia. Long experience as a diplomat taught me never to underestimate the complexity of forging a close-knit team from diverse cultures. Anyone who thinks that the smooth functioning of a multi-cultural staff is automatic need only look at some other international organizations, rife with dissension and infighting, to see what could have happened in APEC. Even after forty years of a wonderful cross-cultural marriage, Ingrid and I have communication misunderstandings based on our different cultural backgrounds. Setting up the Secretariat was a very positive experience, in large part because my colleagues were of a very high calibre and showed extraordinary goodwill and enthusiasm. The member countries seconded very good people

52

View from the 19th Floor

and, in some cases, outstanding people to the Secretariat. For example, we would never have been able to set up a finance system stressing ethics and strict accountability had it not been for the remarkable job done by Max Li from Hong Kong. The support staff was excellent across the board, reflecting the high calibre of the Singapore work-force. Our Office Manager, Agatha Choong, was invaluable to the smooth functioning and high morale of the Secretariat. Her assistant, Marlinda Sitam, was not only very competent, but her sweet smile could light up a room. As it turned out, the biggest communication problems I had as Executive Director were with some of my own people in Washington, who seemed to feel threatened by the Secretariat. Later, I spoke to our old friend, Ira Wolf, who had served in Papua New Guinea and Japan. Ira told me that he had found the experience in the Pacific Islands very relevant to working with Asians. Such factors as consensus decision-making, reverence for age, and the importance of family were all very familiar to me from the islands when I came to APEC. The other critical factor in our success was the generous support we received from the Government of Singapore. Singapore had agreed to provide the office facilities and underwrite the cost of the support staff for three years, after which they would construct a permanent building to house the Secretariat. For the three years, they rented the nineteenth floor of a new office building at Alexandra Road. It is very nice and makes a good impression on visitors. As the Secretariat was larger than originally conceived, we required many more computers and a reconfiguration of office space. I am sure that on many occasions the Singapore authorities wished for a somewhat less demanding Executive Director. But in the end, they always came through and the Secretariat was the better for it. The last few days were very hectic. I gave my last press conference, called on the Singapore Foreign and Trade Ministers, had a private meeting with Senior Minister Lee Kuan Yew, and held a farewell/ Christmas party at the Secretariat for all the staff and their families. The children of the staff certainly had no cross-cultural communication problems, and they had a great time together. On Christmas Eve, the night before we left, Ingrid and I had a wonderful formal dinner at Raffles; food for the mind, and food for the palate - a rather good metaphor for Singapore and the first year of the Secretariat.

chapter 9

Recommendations

The following recommendations are based on my experience at the Secretariat as well as my experience as a ·manager and multilateral diplomat. They are my personal recommendations and do not represent the views of the United States Government or any non-governmental organization. They are divided into two types: policy recommendations and managerial or administrative recommendations.

Policy Recommendations Additional Roles for APEC

From the beginning there has been a rash of proposals to expand APEC's mission, including such areas as security, global environment, population and even combating international trade in narcotics. While these proposals may be well-intentioned, they could spell disaster for APEC! Member countries should resist these efforts to expand APEC's role in non-economic areas. Adding security issues to APEC would overload this new organization and distort its focus. APEC's focus should remain on trade and investment liberalization, trade facilitation, and human resource 53

54

View from the 19th Floor

development. There should be a balance in dealing with these issues. Together with the efforts to liberalize trade and investment, emphasis should also be given to programmes that will help the less developed members (for example, in human resource development, technology transfer and assistance to small- and medium-sized enterprises). As APEC matures, there will be more and more pressure to broaden its mission and this should be strongly resisted until the organization has proven itself in trade and economics. RECOMMENDATION:

Member countries should resist pressure for APEC to take on additional roles beyond trade and economics.

Membership

APEC should concentrate on developing the institution and resist taking in new members until the end of the present three-year moratorium. The only exception that should be made would be for new members of ASEAN and NAFTA. This could mean the entry of Vietnam and perhaps Cambodia, but countries outside these two trade groupings would have to wait until APEC becomes more established. If there is a steady stream of new members, it will be very difficult to consolidate gains and to continue the process of institutionalization. The latter is one of the reasons that Malaysia is such a strong supporter of a rapid increase in membership. Eventually, Russia should become a member as well as other Pacific littoral economies. Down the road, there probably is a good case for accepting India's membership as well. But timing is very important and APEC should be permitted to establish itself and to produce concrete results (for example, an investment code, a dispute mechanism, agreement on standards, and so forth) before expanding too much. RECOMMENDATION :

The present three-year membership moratorium should be extended to five years to give APEC an opportunity to consolidate. Exceptions should only be made in the case of new ASEAN or NAFTA members.

Relations with ASEAN

Despite a rocky start, relations between ASEAN and APEC have developed fairly smoothly. The ASEAN caucus at the SOMs is very productive and enables the others to float ideas and proposals with the ASEAN members

9. Recommendations

55

before proposing them formally in the plenum. In fact, one of the most common statements heard around the margins of the SOM when a new idea or proposal is discussed is, "What does ASEAN think of it?" Thus, ASEAN provides a multiplier effect for the smaller economies in APEC. Of course, the ASEAN Secretariat has observer status at the SOM and the Secretary General of ASEAN, Dato Ajit Singh is an observer at the Ministerial Meeting. When I was Executive Director of APEC, we exchanged visits and had a very cordial relationship, but I think more can be done to cement this relationship. One way to do this would be to have a few well selected joint projects which could contribute to confidence-building. RECOMMENDATION:

Efforts should be made to bring ASEAN and APEC closer together through joint projects and other confidence-building measures.

A Role for the East Asian Economic Caucus?

The East Asian Economic Caucus (EAEC) has made some of the APEC members nervous, especially the non-East Asian members, ever since Malaysia proposed the idea. The decision by APEC in 1993 to make the EAEC a caucus in APEC has yet to be accepted by the United States. It is also likely that some of the other APEC countries are happy to have the United States take the heat for holding back on EAEC, but I do not think this position can be sustained indefinitely. Therefore, I think it would be prudent to permit the EAEC caucus in APEC after obtaining some quiet assurances from Malaysia and other members of ASEAN that it would not become a "we" against "them" situation that could split APEC. The risk would be worth it if we could put the APEC versus EAEC dispute behind us. RECOMMENDATION:

The non-EAEC members should accept the EAEC as a caucus in APEC provided there is a discreet understanding beforehand that the EAEC will not act as a bloc within APEC.

Private/Business Sector Input to APEC

No concept has proven more elusive than how to get appropriate private/business sector input into APEC. The APEC Leaders called for the establishment of the Pacific Business Forum (PBF), consisting of two representatives from the private/ business sector, one of which would

View from the 19th Floor

56

represent small- and medium-sized enterprises. The PBF has published a report that in many respects goes beyond the EPG Report. Many of the PBF recommendations should be implemented, but I am not convinced that a new permanent advisory group is necessary. For reasons I cannot understand, it was decided in Seattle not to use the two proven regional organizations, the Pacific Basin Economic Council (PBEC) and the Pacific Economic Co-ordinating Council (PECC) as the vehicle for private/ business liaison. PECC does have observer status at APEC but this does not seem to give it any special role in bringing the views of the business sector to APEC. When I was at the Secretariat, I had a very close working relationship with the PECC's International Secretary General, David Parsons, who is co-located with APEC in Singapore. I also kept in close touch with Bob Lees, the International Director General of PBEC, in Hawaii. It is clearly time for APEC to work more closely with these organizations which have a common interest in continued economic growth in and development of the Asia- Pacific region. The new regional organization, APB Net, sponsored by the Indonesian Kadin and the Australian Chambers of Commerce and Industry will concentrate on the small- and medium-sized enterprises in the region. Some worry that the proliferation of regional organizations will create duplication and sap resources. I think this is an over-reaction. There certainly will be some overlap, but there is value in having so many economic, cultural, political, and non-governmental organizations to tie the region together. I believe that we have been making the relationship between the private/ business sector and APEC too complicated. Business persons are concerned with the bottom-line and APEC should work towards removing impediments to trade that effect the bottom-line. I always use long overseas flights to learn from fellow businessmen and women what sort of problems they have in doing business in the Asia-Pacific region. The creative use of impediments to hinder trade is amazing and we must be equally creative in removing them. If APEC does this, it will earn the respect and support of the business community. The first step is to find ways to solicit the information from our business colleagues as to what and where these problems lie. Phil Obermeyer (AT&T), Dave Conners (Citibank) and their colleagues at the American Chamber of Commerce in Singapore were very helpful in educating me about the concerns and needs of the business community abroad. We should not make this whole problem more difficult than it need be. RECOMMENDATION:

The Pacific Business Forum (PBF) should go out of business after

9. Recommendations

57

presenting its report to the Leaders in Jakarta. APEC should use the existing, proven organizations such as PBEC and PECC, as well as the new APB Net, for obtaining private/ business sector input into APEC. If, however, the Leaders decide that a new permanent advisory panel is needed, it should represent a broad range of the business community, and the process should be open and transparent.

Administrative and Management Recommendations Turnover of the APEC Secretariat Leadership

The annual turnover of the APEC Secretariat Executive Director and the Deputy Executive Director makes management of the organization very difficult. This will become even worse as the Secretariat inevitably expands (see below). One solution would be to elevate the positions of Executive Director and Deputy Executive Director to Secretary General and Deputy Secretary General. They would then concentrate on policy-making and outreach activities, leading APEC Secretariat delegations to the SOM and Ministerial and other meetings. Directly under them and reporting to them would be a professional manager hired on a five-year, non-renewable contract. This would provide continuity without developing an entrenched, unresponsive bureaucracy. A few other key positions (such as finance officer, publications officer, and so forth) at the Secretariat could also be made direct-hire positions rather than filling them by secondments from the member countries. If the mix was kept in balance, the Secretariat would gain stability without becoming independent of the policy-makers in the SOM and Ministerial Meetings. RECOMMENDATIONS:

1. The positions of Executive Director and Deputy Director should be elevated to Director-General and Deputy Director-General. Their responsibilities would be limited to setting policy and outreach activities, and the supervision of the Executive Director. 2. A professional manager should be hired on a five-year, non-renewable contract to manage the staff and the day-to-day operations of the Secretariat, reporting to the Director-General and the Deputy DirectorGeneral. 3. A few other key positions (such as finance officer, publications officer) should be filled by contract specialists, also on five-year non-renewable contracts.

58

View from the 19th Floor

Senior Officials' Meetings

Senior Officials' Meetings are too large and cumbersome to be efficient. To get around these problems, the delegation leaders have met over lunch to discuss the more controversial or difficult subjects. I would also suggest that one afternoon or morning be devoted to a closed session of delegation leaders and the Executive Director to tackle some of the more complex problems. No observers would be allowed at these meetings. After the tough questions are dealt with, the SOM could reconvene in a plenary session. RECOMMENDATIONS:

Efforts should be made to reduce the size of member delegations attending the plenary sessions at any one time. One half-day at each SOM should be used for a closed session, with attendance limited to the heads of delegation. Preventing the Secretariat from Growing Too Fast

The Secretariat will grow as more member countries send representatives and as duties expand. The challenge will be to keep the growth under tight controls. This will require political will and a willingness to face up to pressure among the SOM members. If it is not done, APEC will evolve into another bloated international organization. RECOMMENDATION:

Limited growth in Secretariat staff should be permitted if new conditions require it. However, every effort should be made to limit the size of the Secretariat to the smallest number required to do the job. The Working Groups

The Working Groups have produced very mixed results and there is a crying need for rationalization. Some Working Groups should be consolidated and others abolished. New groups should be established in such areas as small- and medium-sized enterprises, environment and other timely issues. Consolidation will be very difficult because of the vested interests of some of the member countries in specific Working Groups. One way to handle this would be to set up a special committee assisted by some of the Secretariat staff. The committee would be instructed to do a complete assessment and evaluation of each Working Group with the goal of consolidating or eliminating enough Groups to provide at least three new slots

9. Recommendations

59

for new Working Groups. The burden would be for each Group to justify its existence by measuring the value of the Group's work project in its own right and comparing it to work being done by other regional and international organizations in the same field. RECOMMENDATION:

A special committee should be set up to review each of the ten Working Groups with the goal of providing for at least three new groups to be formed by consolidating or abolishing present Working Groups. Non-member Participation in the Working Groups

At the beginning of 1993, the Senior Officials were more magnanimous about permitting non-member participation in the Working Groups. During the year, they became more and more restrictive. Obviously, there must be controls on non-member participation or it could get out of hand. At the same time, participation by appropriate regional organizations (such as the Economic and Social Committee for the Asia-Pacific, the Asian Development Bank, the United Nations Development Programme, and so forth), depending on the subject or geography involved, can make significant contributions. This also holds true for potential future member countries, such as Vietnam or Russia. Participation in the Working Groups can help the pace of acculturation on both sides. They should adhere to the rules of participation as previously set by the SOM. RECOMMENDATION:

APEC should welcome limited participation by non-members in the Working Groups. Allowable Expenses for Working Groups

During the course of the year, the Senior Officials became more and more restrictive about what the grants to the Working Groups could be used for. By the end of the year, it was decided that the grants could only be used for consultants and publications. This policy is dysfunctional. It encourages dependence on outside consultants even when the job can be done just as well, or even better, in-house. At the same time, it places unreasonable restrictions on the Working Groups. The policy should be changed to permit other reasonable uses. RECOMMENDATION:

The Senior Officials should relax the restrictions on the use of central

View from the 19th Floor

60

funding by the Working Groups. They should be permitted to use these funds for renting space and equipment for meetings and even for appropriate social functions related to the meetings on a shared 50/ 50 per cent basis.

Publications

In my time, publications were done on an ad hoc basis and the quality varied. There is a need to professionalize the publications function of the Secretariat. The Secretariat should share in the editing of APEC publications and the design should be more professional and standardized. This may require adding an experienced publications professional to the Secretariat staff. It may also be necessary to add a professional editor to the staff to improve the quality of APEC publications. RECOMMENDATION:

To improve the quality of APEC publications, an experienced publications professional and perhaps an editor should be added to the Secretariat staff and given authority by the SOM to manage all APEC publications.

chapter 10

APEC's Future

Thirty-one years of experience as a diplomat has made me very skeptical about predicting the future. How many German experts (including myself) predicted German reunification in our lifetime? And it was only a few years ago that conventional wisdom was that 1992 would be the year of Europe - that is, the European Community would unite to become the most powerful and dynamic economy in the world. The problem is that unforeseen difficulties (for example, the astronomical costs of German reunification) create unpredicted consequences that change the pattern of events (such as the drain on German resources plunging Europe into recession). Most indicators suggest that the twenty-first century will be "The Pacific Century". One does not have to be of the doom and gloom school of Michael Dobbs-Higginson, who predicts a trade war between Europe, NAFTA and Asia, 1 to accept the possibility that things could go wrong.

1. Asia Pacific: Its Role in the New World Disorder (London: Mandarin Publishers, 1994).

61

62

View from the 19th Floor

A trade war between the United States and Japan, war on the Korean peninsula, and mass migration should China become unstable, are just a few of the possible disruptions that could check the economic growth and prosperity in Asia. The question is how likely these things (or equally disruptive events) will happen. It is impossible for any person or group to predict. However, assuming that we muddle through and maintain relative stability in the Asia-Pacific region, the prognosis looks good. If, as it appears now, a consensus may be developing among the APEC Leaders, who will meet in Indonesia, to accept the goal of achieving free trade in the region by 2020, then the prognosis is indeed bright. However, even if the Asia-Pacific economies do not reach the goal of free trade by 2020, but continue chipping away at barriers to trade and investment, they will continue to fuel economic growth and prosperity. It will be necessary, at the same time, to accelerate APEC programmes with a developmental thrust, such as human resource development and technology transfer, so that the less developed economies in APEC can catch up. What about competition from Europe and NAFTA? Europe has some very tough restructuring to do and I am not sure that the European leaders have the political will to take the tough measures necessary to make Europe globally competitive. The social/welfare state that has contributed to political stability in Europe, has also become too expensive. When a German flagship company such as Mercedes decides to build its new factory in Alabama and re-export 60 per cent of its production to Germany, it says something about comparative advantage. Moreover, the Europeans have let themselves fall behind in technology and innovation. The competition between Asia and NAFTA is likely to be alleviated, albeit not removed, by the common membership in APEC and the continued economic growth of China. But it is not Europe alone that will have to make tough decisions. The degree of existing trade liberalization in the Asia-Pacific region is greatly exaggerated. Almost all of the Asia-Pacific economies will have to open up much more than at present and numerous barriers to trade and investment will have to be dismantled if we are even to approach free trade in the region by 2020. For example, it may be politically expedient, in some quarters, to characterize the call for intellectual property rights as a north-south issue. However, if the protection of intellectual property rights is not taken seriously by an economy, that economy will lose out in the global competition for limited direct foreign investment available and will not gain the technology transfer desperately needed for development.

9. Recommendations

63

The United States, for its part, has some tough decisions to make as well. It will have to decide if it believes in multilateralism (for example, the World Trade Organization, a dispute settlement mechanism in APEC, and so forth), or if we want to depend on unilateral trade measures, such as Super 301 or anti-dumping measures. To select the former will require leadership and a willingness to do battle with very powerful interests in Congress. The United States has to continue the difficult job of getting its economic house in order by controlling spending and reducing the deficit. Both Asia and the United States will have to keep the debate about conflicting value systems within bounds. Different values do not necessarily mean better values. In fact, many of the values Asia or the United States claim as their own are often shared by both. For example, the Asian virtues of thrift, hard work and importance of family sound very much like the so-called Protestant work ethic shared by most Americans. Cultural differences are important and should be treasured. The very diversity of Asia bears this out. We can also learn much from each other. This is recognized in Asia, and hence, half of the almost 500,000 foreign students in the United States are from Asia. The other side of the coin is that the Asian demand for quality at a reasonable price has taught America ·to become globally competitive again. In this regard, it will be necessary for the United States to engage Asia, especially the emerging giant China, across the board. It must help China to become a full, dues-paying member of the international trading community. APEC offers one important vehicle for accomplishing this. To build the Asia-Pacific Community articulated in Seattle, we must press for the evolution of APEC into a decision-making organization. This can only be accomplished through the step-by-step approach favoured by the Asians. For this reason, discarding the consensus decision-making process in APEC should be carefully weighed. Achieving consensus is often frustrating and slow, but it works. Once decisions are made by consensus, they tend to stick and there is the political will to carry them out. In addition, the consensus process protects the smaller members of APEC and alleviates their fears that they will be pushed around by the big economies. The fantastic economic success of the Asia-Pacific region has been entrepreneurial-driven and we have to become more creative about forging a relationship between the officials in APEC and the businessmen and women who have brought about the Asian economic miracle. As I mentioned earlier, we already have the tools at hand to do the job in the form of existing and proven regional organizations, such as PBEC and PECC. We must find ways for APEC and the private/ business sector to have

64

View from the 19th Floor

a closer relationship and to be more mutually supportive. This will be necessary if APEC is to play a significant role in the Pacific Century. The Indonesian year has turned out to be, as I expected, a big boost for APEC. The Indonesians have built on the momentum of Seattle and have propelle