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The future of the Asia-Pacific Economic Cooperation forum (APEC) : joint hearing before the Subcommittees on International Economic Policy and Trade and Asia and the Pacific of the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, first session, July 18, 19 online

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Online LibraryUnited States. Congress. House. Committee on InterThe future of the Asia-Pacific Economic Cooperation forum (APEC) : joint hearing before the Subcommittees on International Economic Policy and Trade and Asia and the Pacific of the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, first session, July 18, 19 → online text (page 1 of 11)
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y

THE FUTURE OF THE ASIA-PACIHC ECONOMIC
COOPERATION FORUM [APEC]

Y 4. IN 8/16: AS 4/5 =^=— — —

The Future of the Asia-Pacific Econ. . .

^^..,. HEARING

BEFORE THE

SUBCOMMITTEES ON
INTERNATIONAL ECONOMIC POLICY AND TRADE

AND

ASIA AND THE PACIFIC

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
FIRST SESSION



JULY 18, 1995



Printed for the use of the Committee on International Relations



^1^







U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1995



For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-052159-9



y

A \THE FUTURE OF THE ASIA-PACinC ECONOMIC
r COOPERATION FORUM [APEC]

4, IN 8/16: AS 4/5 — _— =^=

e Future of the Asia-Pacific Econ. . .

„^..,. HEAKING

BEFORE THE

SUBCOMMITTEES ON
INTERNATIONAL ECONOMIC POLICY AND TRADE

A^fD

ASIA AND THE PACIFIC

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
FIRST SESSION



JULY 18, 1995



Printed for the use of the Committee on International Relations



^/•,;^/: .- . ■'r J ^r-:







^%^^



^^ / f



U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1995



For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-052159-9



COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman



WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

TOBY ROTH, Wisconsin

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

JAN MEYERS, Kansas

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

JAY KIM, California

SAM BROWNBACK, Kansas

DAVID FUNDERBURK, North Carolina

STEVEN J. CHABOT, Ohio

MARSHALL "MARK" SANFORD, South

Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York



LEE H. HAMILTON, Indiana

SAM GEJDENSON, Connecticut

TOM LANTOS, California

ROBERT G. TORRICELLI, New Jersey

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

HARRY JOHNSTON, Florida

ELIOT L. ENGEL, New York

ENI F.H. FALEOMAVAEGA, American

Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT E. ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. MCKINNEY, Georgia
ALCEE L. HASTINGS, Florida
ALBERT RUSSELL WYNN, Maryland
MICHAEL R. McNULTY, New York
JAMES P. MORAN, Virginia
VICTOR O. FRAZER, Virgin Islands (Ind.)



Richard J. Garon, Chief of Staff
Michael H. Van DUSEN, Democratic Chief of Staff



Subcommittee on International Economic Poucy and Trade

TOBY ROTH, Wisconsin, Chairman



JAN MEYERS, Kansas
DONALD A. MANZULLO, Illinois
SAM BROWNBACK, Kansas
STEVEN J. CHABOT, Ohio
DANA ROHRABACHER, California
DOUG BEREUTER, Nebraska
CASS BALLENGER, North Carolina



SAM GEJDENSON, Connecticut
MATTHEW G. MARTINEZ, California
MICHAEL R. MCNTJLTY, New York
ROBERT G. TORRICELLI, New Jersey
HARRY JOHNSTON, Florida
ELIOT L. ENGEL, New York



Edmund B. Rice, Subcommittee Staff Director

John Scheibel, Democratic Professional Staff Member

Christopher HanKIN, Professional Staff Member

Alexander Q. SCHMJTZ, Staff Associate



SuBCOMMirrEE on Asia and the Pacific

DOUG BEREUTER, Nebraska, Chairman



EDWARD R. ROYCE, California

DANA ROHRABACHER, California

JAMES A. LEACH, Iowa

JAY KIM, California

MARSHALL "MARK" SANFORD, South

Carolina
DAN BURTON, Indiana
DONALD A. MANZULLO, Illinois



HOWARD L. BERMAN, California
ENI F.H. FALEOMAVAEGA, American

Samoa
SHERROD BROWN, Ohio
ROBERT E. ANDREWS, New Jersey
SAM GEJDENSON, Connecticut
GARY L. ACKERMAN, New York



Michael P. Ennis, Subcommittee Staff Director

Richard KessleR, Democratic Professional Staff Member

Dan Marty, Professional Staff Member

Jon J. Peterson, Staff Associate



(II)



CONTENTS



WITNESSES

Page

Hon. Joan E. Spero, Under Secretary of State for Economic, Business and
Agricultural Affairs, U.S. Department of State 4

Hon. Charlene Barshefsky, Deputy U.S. Trade Representative, Office of the

U.S. Trade Representative 6

Dr. Paula Stem, president. Stem Group, Inc 23

Mr. Richard O. Lehmann, chairman. National Association of Manufacturers —

Asia Working Group 28

Dr. Mark Borthwick, chairman, International Coordinating Group of the Pa-
cific Economic Cooperation Council 29

APPENDIX

Prepared statements and biographical sketches:

Hon. Toby Roth, chairman. Subcommittee on International Economic Pol-
icy and Trade 37

Hon. Joan E. Spero 39

Hon. Charlene Barshefsky 47

Dr. Paula Stem 55

Mr. Richard O. Lehmann 70

Dr. Mark Borthwick 76

Additional Material Submitted for the Record:

Statement from the Government of Australia 95



(III)



THE FUTURE OF THE ASIA-PACIFIC
ECONOMIC COOPERATION FORUM [APEC]



TUESDAY, JULY 18, 1995

House of Representatives,
Committee on International Relations, Subcommit-
tee ON International Economic Policy and Trade,
AND Subcommittee on Asia and the Pacific,

Washington, DC.

The subcommittees met, pursuant to call, at 2:10 p.m. in room
2200, Raybum House Office Building, Hon. Doug Bereuter (chair-
man of the Subcommittee on Asia and the Pacific) presiding.

Mr. Bereuter. The subcommittees will come to order. I am Con-
gressman Doug Bereuter, chairman of the Asia-Pacific Subcommit-
tee.

First of all, I want to apologize for not having more room for our
hearing today. Unfortunately the major hearing room for the com-
mittee is occupied by a hearing rignt now on the women's con-
ference in Beijing, which also drew standing-room-only crowds.

We do have a vote just being completed on the House floor, but
I think it is important to begin to expedite our proceedings here so
we can give a full amount of time to the witnesses for their presen-
tations.

I will make my opening remarks. We may recess briefly until a
couple of the other members arrive and then move to our wit-
nesses.

Today's hearing is a joint hearing; the Subcommittees on Asia
and the Pacific and International Economic Policy and Trade.

On February 2, 1995, our two subcommittees held a joint hearing
on trade and economic prospects in the Asia-Pacific region.

During that hearing, Chairman Roth and this member and our
subcommittee members learned that while U.S. merchandise ex-
ports to the region have tripled in the last decade, U.S. merchan-
dise imports have grown even faster.

The 1994 estimated U.S. trade deficit with the Asia-Pacific re-
gion is expected to surpass an astounding $125 billion. This figure
represents a full 80 percent of the total projected worldwide U.S.
trade deficit of $154 billion.

While United State trade deficits with the Asia-Pacific region are
the result of many factors, including great discrepancies and sav-
ings rates between the United States and our Asian competitors
and trading partners, the burgeoning trade deficits with nearly
every Asian country have led many people to conclude that the
United States has an Asian problem with respect to trade.

(1)



One of the Administration's most ambitious strategies to deal
with the United States' chronic trade deficits is trade liberaliza-
tions through APEC.

Last year, at the APEC leaders meeting in Bogor, Indonesia, 18
APEC leaders committed to free trade in the region by 2010 for de-
veloped countries and 2020 for developing ones.

In this member's view, that goal is laudable, and it is also ambi-
tious. As one of the most open economies in the world, the United
States must continuously and aggressively attempt to open foreign
markets to U.S. goods and services.

In the context of APEC, that means the elimination of tariff and
non-tariff barriers for all APEC countries by the year 2020.

Unfortunately, non-tariff trade barriers in both developed and
developing countries within APEC loom ominously as indicators of
APEC's enormous challenge to create real trade liberalization in
the most dynamic economic region in the world.

Intransigence in this area on the part of some important Asian
economies has produced many APEC skeptics who argue that
APEC is not an important step in addressing America's trade woes.

Nevertheless, countries such as Australia and Canada with simi-
lar trade deficit problems are, like the United States, investing a
great deal of effort in making APEC work.

Today's hearing is an attempt to discern whether the United
States' investment in APEC is worthwhile and to determine what
role Congress serves in helping U.S. goods and service producers
to compete in the Asia-Pacific region.

Today we are extremely fortunate to have two key APEC policy-
makers on our first panel; the Honorable Joan Spero, Under Sec-
retary of State for Economic, Business and Agricultural Affairs and
the Honorable Charlene Barshefsky, Deputy U.S. Trade Represent-
ative.

Under Secretary Spero came to the government with extensive
private sector and academic experience. Before assuming her cur-
rent position on April 2, 1993, Mrs. Spero was executive vice-presi-
dent of corporate affairs in communications at American Express.

She taught for 6 years at Columbia University and has written
and lectured widely on international economic issues. Mrs. Spero
graduated as Phi Beta Kappa from the University of Wisconsin and
holds a doctorate from Columbia University.

Ambassador Barshefsky, who has testified several times before
these subcommittees, was appointed as Deputy U.S. Trade Rep-
resentative in May 1993.

Her responsibilities include the Asia-Pacific region, Latin Amer-
ica, intellectual property, investment and sectoral areas.

Through Asia, Ambassador Barshefsky has pursued bilateral and
multilateral trade agreements and negotiations to increase our
market access. She was, for example, the lead negotiator at the re-
cent United States-Sino IPR agreement in March.

After our first panel, we will look forward to hearing from three
distinguished private witnesses. I think I will introduce them at
this time to expedite our proceedings.

The Honorable Paula Stern, former chairwoman of the Inter-
national Trade Commission and president of the Stem Group, an
economic analysis and trade advisory firm.



Dr. Mark Borthwick, chairman of the International Coordinating
Group of the Pacific Economic Cooperation Council.

Mr. Richard Lehmann, director of Public Affairs at IBM and
chairman of the Asia Trade Group of the National Association of
Manufacturers.

I am going to recess about 2 minutes, 3 minutes maximum at
this point to see if, in fact, the chairman and the ranking members
of the two subcommittees arrive, in addition to myself.

Just rest at ease for about a minute or two. I would like to have
them hear your full testimony.

[Recess.]

Mr. Bereuter. I would recognize the distinguished gentleman
from California, Mr. Dana Rohrabacher,

Mr. Rohrabacher. I guess while we are waiting for the rest of
the members to come back, I will say just a couple of words.

I believe that there has been too much focus not only in this ad-
ministration, but also the administration prior to this administra-
tion, on what has been going on and what was going on in Europe.

There is a Eurocentricisim to American foreign policy. I think it
has worked against the United States of America in this century.

Where the history of the world is being made is in the Pacific.
History is being made where new wealth is being created. That is
the way it always has been in world history.

Today, Europe and to that degree Europe and Eurasia, where the
former Soviet Union is now trying to figure out what is going on
with their peoples, that area of the world is going to be less impor-
tant to the future of our planet, in terms of peace and prosperity,
for the American people, than is what is happening in Asia.

I am very pleased with the chairman and the other members of
this committee who have recognized that fact. Mr. Chairman, I
have spent a lot of time in that part of the world and look forward
to working with you to make sure that the United States becomes
what it should be.

An Asian power and an Asian focused country, because that is
where our people's lives will be improved. That is where the secu-
rity of our country will be attained.

Thank you very much.

Mr. Bereuter. Thank you very much, Mr. Rohrabacher.

Mrs. Meyers, we are waiting for Chairman Roth. If you have any
opening statement.

Mrs. Meyers. No statement.

Mr. Bereuter. All right. In light of that, I would like to proceed.
Under Secretary Spero and Ambassador Barshefsky, your written
testimony will be made a part of the record.

You may summarize your statements or proceed in any manner
you wish. To facilitate a mutually beneficial dialog between us, the
Chair would ask if you can summarize and limit your statements
to about 10 minutes each. Somewhere in that area.

We very much appreciate your attendance and your testimony
here today. We look forward to your comments and then an oppor-
tunity to raise some questions or points with you.

Under Secretary, if you would like to proceed, we would welcome
your testimony.



STATEMENT OF HON. JOAN E. SPERO, UNDER SECRETARY OF
STATE FOR ECONOMIC, BUSINESS AND AGRICULTURAL AF-
FAIRS, U.S. DEPARTMENT OF STATE

Mrs. Spero. Thank you. Thank you, Mr. Chairman and members
of the committee. I am glad to have this opportunity to talk about
U.S. policy toward APEC, the Asia-Pacific Economic Cooperation.

As you suggest, Mr. Chairman, I will summarize my remarks in
I hope less than 10 minutes.

The Asia-Pacific is one of the most economically dynamic regions
of the world. It accounts for 41 percent of world trade and half of
world output.

It is also the fastest growing region in the world. By the end of
this century, one half of world trade will take place in the Asia-
Pacific.

U.S. business needs to be part of this explosive economic develop-
ment. Already one-third of U.S. exports supporting nearly $2.7 mil-
lion American jobs are destined for East Asian markets.

We must meet both the immense challenges and the immense op-
portunities in the region's dynamism. U.S. business is doing its
part by becoming more competitive, but government also has a role
to play.

The Clinton Administration is committed to ensuring that U.S.
economic interests are fully integrated in the development and im-
plementation of our foreign policy.

We are trying to carry out that mission in 3 principal ways.
First, we are committed to global economic engagement and to
building and modernizing the economic architecture for the post
cold war world.

We are aiming for an international system that is more open or
market oriented and that promotes world prosperity and world
peace.

The new world trade organization is a central pillar of the ad-
ministration's policy of international economic engagements.

The world's monetary and development institutions are also criti-
cal parts of our global architecture. At the June Gr-7 summit in
Halifax, we took important steps toward modernizing these finan-
cial institutions.

On the bilateral front, we continue to level the playing field and
to provide new opportunities for our companies and our workers
through efforts in the United States-Japan framework talks, mar-
ket access discussions with China and formal economic dialogs with
key Asian economies like Korea, Taiwan, Thailand and India.

Mr. Chairman, we also need regional approaches to expand busi-
ness opportunities, promote economic growth and secure benefits
for the American people.

Regional policies help to ensure that U.S. business is firmly root-
ed in those dynamic parts of the world that are so important to our
economic future.

In Asia, our efforts to build a new architecture have centered on
the Asia-Pacific Economic Cooperation forum. APEC first met in
Australia in 1989 as an informal economic dialog among 12 mem-
ber economies.

Beyond a general economic focus, the group had no stated mis-
sion or goal. But, we have come a long way since then.



APEC has expanded from 12- to 18-member economies. Collec-
tively, APEC's members represented one-half of the world's people
and one-half of its annual economic output.

APEC now has a structure; a small secretariat in Singapore; a
policymaking process capped by annual leaders meetings and most
importantly in terms of day-to-day business needs, 3 committees
and 10 active working groups.

Mr, Chairman, the U.S. contribution to APEC's annual budget is
only $580,000. I think it is one of the best deals we have for the
American taxpayer.

APEC also has a customer. APEC is not for governments. It is
for business. Through APEC, we aim to get governments out of the
way, opening the way for business to do business.

It is our goal to make APEC the most user-friendly forum in the
world. That is why business participates in APEC's working
groups.

That is why APEC established a business advisory group, the Pa-
cific Business Forum, to advise APEC leaders on business priorities
and to provide a vision for APEC's future. That is why increasing
the role for the private sector in APEC is a key objective for this
year's meeting in Japan.

Much of APEC's most important work, in terms of solving prac-
tical daily business needs, takes place in the activities of its 10
working groups.

For example, APEC's working groups have published customs,
investment, telecommunications and transportation guides. The
guides provide information, which make regional regimes and regu-
latory environments more transparent, especially for small- and
medium-sized companies.

APEC will use these guides to analyze best practices, identify
bottlenecks and work toward harmonization of standards and re-
gimes.

APEC reached a turning point with President Clinton's hosting
of the first-ever APEC economic leaders meeting at Blake Island off
Seattle in 1993.

With that meeting, APEC developed a guiding vision; a commit-
ment to more open trade and investment and trie concept of open
regionalism.

At their meeting last year in Indonesia, leaders gave life to the
vision by calling for the achievement of free and open trade in the
Asia-Pacific by the year, as you have mentioned, Mr. Chairman,
2020.

Now, APEC members are working on an action agenda for the
leaders to review at their meeting in Osaka this November. We ex-
pect the agenda to include some initial liberalization steps,
progress in lowering some business transaction costs.

For example, we expect announcements on streamlining customs
procedures and we expect a blueprint for free and open trade and
investment.

This blueprint would go beyond tariff reductions to address
broader non-tariff and structural barriers in the region.

We also hope that APEC leaders in November will endorse estab-
lishment of a new, permanent business sector advisory body for



APEC. We want business to provide the expertise and views nec-
essary for APEC to define its objectives and focus its work.

In conclusion, Mr. Chairman, APEC is a work in progress, one
which provides a platform for achieving genuine economic integra-
tion in the region, based on market-driven forces.

We look forward to working with American business and the
Congress in developing APEC as a key building block of that com-
munity.

Thank you.

[The prepared statement of Mrs. Spero appears in the appendix.]

Mr. Bereuter. Thank you very much for your testimony.

I would like to interrupt our testimony at this point to recognize
my colleague, the Chairman of the International Economic Policy
and Trade Subcommittee.

Since we are doing this hearing jointly, I recognize my colleague,
Toby Roth.

Mr. Roth. Thank you. Chairman Bereuter. I have an opening
statement, but let me ask to put that into the record so that we
can go and listen to the other testimony and go right to the ques-
tions.

[The prepared statement of Mr. Roth appears in the appendix.]

Mr. Bereuter. Thank you very much. We appreciate that.

Mr. Roth. I would like to add I appreciate having such a good
turnout from our subcommittee at this hearing today, too, because
this is some of the most important work we can be doing.

Mr. Bereuter. Thank you very much.

Ambassador Barshefsky, we look forward to your testimony.
Please proceed as you wish.

STATEMENT OF HON. CHARLENE BARSHEFSKY, DEPUTY U.S.
TRADE REPRESENTATIVE, OFFICE OF THE U.S. TRADE REP-
RESENTATIVE

Mrs. Barshefsky. Thank you, Mr. Chairman and Chairman
Roth.

It is a pleasure to be here today to talk about APEC. APEC is
a key initiative of this administration in furthering U.S. interests
in the Asia-Pacific region, which is the fastest growing region in
the world.

APEC itself, as Under Secretary Spero has said, is composed of
18 of the world's most dynamic and diverse economies. Our rela-
tionship with them represents an important part of our economic
future.

China's growth rate in 1994 was 12 percent; Malaysia's, 8V2 per-
cent; Korea's growth rate, 8 percent.

Several of the world's most populous countries, China, Indonesia,
Japan and Mexico, are also represented in APEC. All APEC na-
tions have growing middle classes and rapidly improving levels of
education.

The growth and dynamism of the APEC region has led to an ex-
plosion of trade with the United States. East Asia is the No. 1 ex-
port market for U.S. products. United States merchandise exports
to APEC countries totaled $304 billion in 1994, 60 percent of total
U.S. merchandise exports.



Last year, our exports to APEC nations grew by about 15 per-
cent. Export growth this year is expected to exceed 17 percent.

One recent projection shows that Asia, excluding Japan, will be
our largest export market by the year 2010, amounting to roughly
$250 billion in U.S. exports.

Despite these figures and they are promising and dramatic,
APEC economies also represent the countries with which we have
our most substantial trade deficits and our most significant trade
problems.

Over 85 percent of our global trade deficit in 1994 was with
APEC nations and most of that deficit is with Japan and China.

For this reason, while APEC does not replace bilateral or multi-
lateral initiatives, we believe it is an important complement to our
desire to open markets, expand trade and increase global growth
and U.S. standards of living.

In my testimony, I will focus today on APEC's current work on
trade and investment issues. Let me touch a moment on APEC's
history.

As Under Secretary Spero has said, APEC existed since 1989. In
1993, President Clinton provided extremely bold leadership and a
new direction for APEC by hosting the first-ever APEC Leaders'
Meeting.

This meeting was critical to evolving APEC's role as an institu-
tion committed to trade investment, facilitation and liberalization,
not just a talk shop.

In 1994, President Soeharto of Indonesia built upon the ground-
work laid by President Clinton by encouraging the leaders to agree
to the explicit goal of free and open trade and investment in the
region by the year 2010 for developed economies and 2020 for de-
veloping.

This November in Osaka, APEC will outline some of the sub-
stance of the processes for reaching this central free trade and in-
vestment goal.

Although the preparatory work has not yet been completed, we
believe several key steps will be taken at Osaka.

First, a mid- to long-term plan for achieving free and open trade
and investment in the region. That is the action agenda. Second,
concrete business facilitation steps in such areas as customs, stand-
ards, telecom and transportation.

Let me spend a moment on the action agenda, which is the focal
point. We think that the action agenda will likely include 3 ele-
ments.

First, key principals that will guide APEC's liberalization effort.
Second, specific liberalization steps that APEC members will take
over time to achieve the goal of free and open trade. Third, some
indication of the approaches and processes to be used by which all
of these steps will be implemented.

Let me take each of these in turn. The broad principals of impor-
tance to the United States that are likely to be included in the ac-
tion agenda include the following:

First, WTO and GATT consistency. That APEC arrangements
will be consistent with the WTO and will strengthen the multilat-
eral trading system.



8

Second, a common start date and continuous contribution. That


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Online LibraryUnited States. Congress. House. Committee on InterThe future of the Asia-Pacific Economic Cooperation forum (APEC) : joint hearing before the Subcommittees on International Economic Policy and Trade and Asia and the Pacific of the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, first session, July 18, 19 → online text (page 1 of 11)