US turns to Asia

EUROPEAN fears that Asia is becoming the new centre of gravity in US policy are well founded. President Clinton's statement last week that he sees Latin America as the platform for a far wider free-trade zone for US goods and services contained a hidden message: Asia is next.

To carry out this strategy, the administration must 'win' this week's congressional vote on the North American Free Trade Agreement (Nafta). From the start, its plan has been to build on a successful Nafta, through Asian participation.

President Clinton is scheduled to fly to Seattle to host a ministerial meeting of the Asia-Pacific Economic Cooperation (Apec), to which the US belongs. According to Joan Spero, the US Under-Secretary of State for Economic Affairs, this meeting could be the start of something very big.

The Clinton Administration has stressed the importance of Asia to future US growth. These days in Washington, Europe is often dismissed as a place doomed to slow growth, high unemployment and internal discord over matters as diverse as Bosnia, agriculture and monetary union. The Asia-Pacific region, with its spectacular growth rates, is held up as containing rich promise.

Indeed, the word from the White House is that President Clinton will use the Apec meeting to articulate his vision of a new US partnership with Asia. Sceptics rightly ask the questions: 'Why Apec?' and 'Why now?'.

As organisations go, Apec is a toddler, conceived in 1989 but not born until 1992. A permanent secretariat now has its headquarters in Singapore.

Until the US decided to canonise the organisation with a big ministerial meeting, few paid it much attention. However, all the relevant economies are members, most notably Japan and China.

On the surface, and in part to allay Europe's fears, high-level US officials downplay the significance of Apec as a 'relatively new but extremely important institution'. The aim of the Seattle meeting is to devise foundations or rules of global commerce that will integrate and open up the Asian market through access agreements covering tariff reductions, anti-dumping statutes, competition policy and the like. At this stage, according to US officials, Apec represents more of a commitment to dialogue than a cohesive regional institution.

Nevertheless, the US is increasingly using its potential link to Apec through Nafta as a threat to Europeans in the contentious negotiations over the Uruguay Round.

Meanwhile, those versed in geo-politics point to Apec as the beginning of a dynamic Asian regional growth bloc that will grow stronger with US support. The founders of Apec were motivated by their own fears of being left out as a result of European and North American integration.

The location of the ministerial meeting is more than a little symbolic. Thanks to Boeing, it is the top-rated exporter among US states. Nine of its 12 biggest export destinations are Apec economies, with Japan and Korea the leaders. Exports to the region account for 70.7 per cent of the state's trade total.

The message from the organisers is loud and clear: the US counts increasingly on growth in Pacific trade and must therefore devote more attention to these regions.

There is another motive, too. The US is looking hard at projections of a doubling of real incomes in the Asian region over the next decade, and it sees it has been left out. Japan's investment outflows to east Asia since 1985 have been spectacular, particularly in the car industry, where US Asian investment is largely absent. The big three US car makers ignored the more distant Asian markets when they tried belatedly to break into the Japanese market.

Meanwhile, Japanese car and electronics manufacturers began to spread their influence, promoting scale economies by removing barriers to trade in components through the region.

Reports that Japanese firms are creating a de facto trade bloc in the Asian region are overstated, but they are dominant in some key areas. That the US is reacting to this should come as no surprise, but it leaves a question mark over relations with Europe.