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Lowering the Rice Barrier to Free Trade in Asia

WASHINGTON'S budget showdown has grounded President Clinton, so this weekend Vice President Al Gore will be at the table in Osaka, Japan, talking trade with Asian leaders whose countries are members of the Asia-Pacific Economic Cooperation forum. APEC's goal is to liberalize trade by removing all tariff barriers, in order to have full market access by 2020.

For industrialized countries in this grouping, such as the United States and Japan, barriers would be eliminated by the year 2010. Developing countries like Indonesia and Thailand would have an added 10 years to remove any trade barriers.

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Despite the economic dynamism of the Asia-Pacific region, and APEC's effort to liberalize trade, internal political concerns in various APEC member countries threaten the credibility of the forum. For example, Japan, host to this third annual ministerial conference, has proposed that trade liberalization for agricultural products be exempt from any comprehensive trade liberalization plan.

Japanese rice farmers are heavily subsidized by their government and were furious when their leaders agreed to allow rice to be imported into Japan under the General Agreement on Tariffs and Trade. The South Korean government experienced a similar problem. China also heavily subsidizes its farmers.

A dilemma for the US

What complicates this issue even more is that it puts the US in the awkward position of pressing for more liberalized trade reforms when relations are strained with China, Japan, and South Korea. Good relations with these countries are vital to national security and integral to peace and economic prosperity in the region.

If agriculture is exempt from trade talks in Osaka, protectionist forces in the US would be strengthened. Moreover, Australia has threatened to withdraw its membership from APEC if agricultural goods are not included in the free-trade agreement. If the US does not lead, most Asian countries will be reluctant to pressure Japan to accept agricultural products into the deal. Consequently, the future of APEC may be in danger.

By not liberalizing their agricultural markets today, Japan, South Korea, and China could set a precedent for other Asian countries to ignore calls for liberalized trade in other areas. By the end of this century, the Asian Development Bank estimates that investment to bolster infrastructure (communications, highways, airports, etc.) in the Asia-Pacific area will reach $1 trillion.

One-fifth or more of this total will be in the area of telecommunications, where the US is the world's technological leader and Asia is its most important market. While rice and telecommunications are definitely ''apples and oranges,'' a rice-exclusion precedent could nonetheless intensify economic disputes among APEC members.

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At Osaka, Mr. Gore must demonstrate that the US is prepared to act decisively to implement the declarations made at the past two APEC meetings in Seattle and Bagor, Indonesia. Domestic concerns of America's Asian allies should, however, be taken into consideration.

Japan, South Korea, and China would like to sidestep any trade liberalization measures for agricultural products. But the US and other APEC members might encourage these countries to reduce farm subsidies at a slower rate initially, but to accelerate the process as it is shown that such a reduction benefits Chinese, Japanese, and Korean consumers and farmers.

Giving Japan, South Korea, and China six years to gradually reduce barriers to agricultural products should be enough time to allow their farmers to compete in a global economy. After six years, subsidies could be reduced at an accelerated rate so that these countries could adhere to the time schedule for all APEC countries to reduce their agricultural subsidies.

Farmers in these countries will probably not be pleased with such a compromise, but the governments should find ways of helping their farmers to accept the transition. While protectionist forces in the US will also not be enamored of such a compromise, the administration could argue that widely shared sacrifice, spread out over time, is the best way for all parties to speed growth and national prosperity.

American leadership

For the past few years, many Asians have questioned the leadership of the United States in a post-cold-war era. Asians want the US in Asia as a stabilizing force. While the US has 100,000 troops in Asia, economic development is the linchpin for stability in the region.

The US has an opportunity to exhibit strong leadership at the Osaka meeting while still acting on a consensual basis in order not to appear dominant. The US does not, in fact, dominate APEC, but needs to provide leadership in the forum when Japan's and China's political systems are in a state of flux. Such action would also help counter the idea of an East Asia Economic Caucus, as espoused by Malaysian Prime Minister Mahathir bin Mohamad, which would exclude the US, Australia, and New Zealand.

The ability of the US to provide leadership, while understanding the concerns of other APEC members, can only enhance stability and prosperity in the world's most dynamic economic region.

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