APEC ADVISERS CALL FOR ACCELERATED TARIFF REDUCTIONS MEMBER NATIONS MIGHT BALK

APEC ADVISERS CALL FOR ACCELERATED TARIFF REDUCTIONS MEMBER NATIONS MIGHT BALK

An elite group of advisers has set an ambitious goal for Pacific Rim nations - to hasten the phase-in of tariff reductions.

The so-called Eminent Persons Group of the Asia Pacific Economic Cooperation forum suggests that Pacific Rim nations offer a major "down payment" on free trade, cutting in half the phase-in period for tariff cuts and other trade-liberalizing measures under last year's Uruguay Round trade pact.The suggestion comes one year after the advisory group persuaded leaders of the 18-member APEC to create a massive free-trade and investment zone by 2010.

Speeding up the phase-in process would represent a huge step forward toward the goal of free trade.

While the group's advice has been closely followed up to now, this year might be different. The United States and Japan appear reluctant to tackle the sensitive issue of trade liberalization.

The 1995 report, prepared in advance of the Nov. 19 annual meeting of APEC heads of state, also calls for an informal mediation process to defuse conflicts like the U.S.-Japan auto fight, and outlines changes to a proposed APEC investment code that was panned by the United States a year ago. (See story, Page 12A.)

Fred Bergsten, chairman of the Eminent Persons Group, was to deliver the report today in Tokyo to Japanese Prime Minister Tomiichi Murayama, who will chair the 1995 APEC meeting in Osaka.

Last year, this same group of advisers jump-started a vaguely defined APEC process with a recommendation that most member countries embrace the goal of free trade and investment in the region by 2010. Inspired by this vision, Indonesian President Suharto rallied other members of the group, and the goal was unanimously endorsed by heads of state last November in Bogor, Indonesia.

The Bogor declaration helped convince Latin American and Caribbean leaders a month later, at the Summit of the Americas in Miami, to endorse 2005 as the deadline for free trade throughout the Western Hemisphere.

This year's Eminent Persons' report comes at another turning point for APEC. Unlike last year, when Mr. Suharto enthusiastically took up the invitation to set a bold goal for the organization, Mr. Murayama has given few signs that he will bring decisive leadership to bear this fall. Most recently, the Japanese government has sought to exclude agriculture from the APEC agenda, a reminder of its single-minded opposition to easing barriers to rice imports under the Uruguay Round pact.

The APEC meeting could also be a test of leadership for President Clinton. Last year, Mr. Clinton eagerly took up the mantle of free-trade visionary. This year, his administration is badly split over the issue.

First, Mexico's financial crisis in early 1995 shattered the optimistic predictions for the North American Free Trade Agreement. Whether or not the crisis was related to the Nafta, its effect has been to make free trade a much harder sell to the public and to Congress.

Meanwhile, a fight over the role of labor and the environment in new trade negotiations continues to block a congressional vote on giving Mr. Clinton the power to make tariff cuts. Republican leaders insist that the special power to implement trade agreements not include labor and environmental negotiations.

Stripping these two components from the bill would likely lead most Democrats to vote against granting the authority, and Mr. Clinton has so far been unwilling to abandon his goal of adding labor and environment to trade agreements.

This stalemate over negotiating authority prevents Mr. Clinton from joining in any acceleration of tariff cuts under the Uruguay Round pact, as called for in the new report.

Beyond this, however, is the sense among congressional leaders and officials with the APEC governments that the administration is generally unwilling to consider major tariff-cutting before Election Day, 1996. Battered by the loss of Congress to the Republicans and Mr. Clintons's many other travails in office, some of the president's closest advisers are unwilling to consider tariff cuts that would be politically unpopular.

U.S. officials involved in APEC downplay the importance of tariff cuts this fall. They say that more vital but less dramatic work this year has gone well, including more than 100 meetings of the APEC countries on matters such as labeling, product standards and the promotion of private investment.

One U.S. official said that, despite the ardent lobbying of Mr. Bergsten and his group, few of the APEC countries would be prepared to move forward with accelerating Uruguay Round commitments this fall.

But two officials of APEC governments contacted this week said that was incorrect, and blamed the division in the Clinton administration for the misreading.

"That has to be the official line, because there is a struggle going on in the administration," said one. "There are many opponents to this who think it is bad politically for Clinton, but some people in the White House are starting to get the message."

Skeptical U.S. officials and bullish APEC supporters agree on one thing, however - President Clinton is the most avid supporter of the APEC process in his administration, and he will be sensitive to the suggestion that he has lost his leadership role.

"When it comes to his attention, that will be the test," said one foreign official.

MAJOR RECOMMENDATIONS OF REPORT

URUGUAY ROUND SPEED-UP

As a "down payment" toward free trade, APEC countries would halve the phase- in period for commitments under the Uruguay Round world-trade pact.

For industrialized countries, tariffs on manufactured goods - set to come down 40 percent over four years - would be reduced that much in two years; agricultural subsidies would come down in three years instead of six; and a 10-year phase-out of restrictions on textile imports would be substantially accelerated.

Developing countries, over five years, would cut in half the difference between their actual tariff rates and the levels to which they have committed themselves in the Uruguay Round. They would cut the phase-in of patent rules

from nine years to 4 1/2 years, and of copyright rules from four years to two years, and would cut the phase-in of rules protecting foreign investment related to trade from five years to 2 1/2 years.

DISPUTE MEDIATION

An informal, nonbinding process covering all types of economic disputes would emphasize conciliation rather than arbitration. It would aim at avoiding confrontations, like the U.S.-Japan auto dispute, and the winner-take all approach of the World Trade Organization.

INVESTMENT RULES

The report calls for major changes to the APEC investment code proposed last year. The United States and other developing countries said that code would actually lower foreign investors' protection from discrimination, expropriation and other hazards of investing abroad.

Since last November, the United States has voted with its feet and thrown its support behind investment talks in the Organization for Economic Cooperation and Development.

The Eminent Persons Group would overhaul five of the APEC code's 10 provisions, including rules on the movement of funds and a requirement that foreign investors export a percentage of their production.

ANTI-DUMPING REFORM

In a proposal generally aimed at the United States and European Union, complainants would post a forfeitable bond to discourage frivolous lawsuits; dumping decisions would take the interests of consumers into consideration; and antitrust officials would challenge dumping orders discouraging competition.

COMPETITION POLICY

"Positive comity" would take concerns of foreign competition officials into account; there would be more joint enforcement by national authorities, and harmonizing competition rules would be a long-term goal.

MONETARY COOPERATION

The proposal would help implement the International Monetary Fund's new Emergency Financing Mechanism to head off Mexico-like crises; it calls for richer nations to contribute to the EFM and possibly the General Arrangements to Borrow, a fund now maintained by rich countries.