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Free trade goal under pressure

Mark Hollands for CNN

Bilateral free trade pacts may threaten APEC's trade goal, analysts fear.
Bilateral free trade pacts may threaten APEC's trade goal, analysts fear.

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• Special report: APEC 2003 
GDP growth forecast 2003
Australia 3.0 percent
Brunei 3.0
Canada 2.2
Chile 3.5
China 8.0
Hong Kong 2.1
Indonesia 3.4
Japan 0.8
Malaysia 4.1
Mexico 2.5
New Zealand 2.2
Papua New Guinea 1.5
Peru 4.0
Philippines 4.0
Russia 6.0
Singapore 0.5
South Korea 3.1
Taiwan 3.1
Thailand 6.0
United States 3.0
Vietnam 6.9
Sources: ADB, HSBC

(CNN) -- The breakdown in World Trade Organization (WTO) talks in Mexico last month is adding to pressure on the Asia-Pacific Economic Co-Operation forum to create free trade between its 21 members by 2020, analysts say.

Government officials and academics are now expressing fears the recent rash of bilateral free trade agreements (FTAs) could also undermine APEC's trade goal.

Australian National University academic Christopher Findlay, of the Asia Pacific School of Economics and Government, said he was worried about FTAs, claiming they "create a new set of interests, which is not good."

New Zealand's senior official to APEC, George Troup, said FTAs that ignored difficult trade areas, such as access to protected markets, were not desirable.

"Every government has lost its virginity in this area (and) I am sure that it will come up in conversation between the leaders," Mr Troup said.

"We want FTA provisions to be similar in detail," he said. "If one simply negotiates around the easy sectors, ignoring points of contention, then these FTAs will certainly be a stumbling block to free trade.

"We believe the CER (Common Economic Region) established between New Zealand, Australia and Singapore is a good example of what can be achieved. We have been critical of the deal signed between Singapore and Japan because it excludes the difficult area of agriculture."

Dr Findlay described some FTAs as "no more than political trophies for domestic consumption".

"There are always high expectations when they are agreed and signed," he said. "These FTAs create fragmentation if they establish new interests. They can make trade liberalization harder to achieve.

"It is not clear to me how they will bolt together. Each one could agree to different tariff rates. The best way to deal with this is to push for WTO liberalization."

Dr Findlay said while APEC was working on desirable preferential arrangements between its members, it "needs to get more specific".

The US has complained some FTAs were not high quality, such as the deal between Japan and South Korea, which is little more than a statement of mutual understanding rather than a substantive agreement on opening up domestic markets.

The president of the Hawaii-based East-West Center, Charles Morrison, said the United States was deliberately promoting FTAs.

"Because it is the largest economy, countries are clamoring to have an FTA with the U.S.," he said. "In theory, all these FTAs should promote competition and liberalization, but some are political statements.

"Others have a significant impact, such as the agreement between China and Hong Kong, or the FTA between the US and Mexico and Australia's agreements with Singapore and Thailand.

"I don't think anyone can make a blanket statement that FTAs are either pro or anti the goals of APEC, or the Doha Round (of talks being conducted by the WTO)."

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