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APEC: A tool for US regional domination? Helen E.S. Nesadurai

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The Pacific Review, Vol. 9 No. 1 1996: 31-57

APEC: A tool for US regional domination?

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Helen E.S. Nesadurai

Abstract This paper examines the possibility that the United States could 'capture' the Asia-Pacific Economic Cooperation (APEC) forum and use it to impose America's economic agenda on the region. It discusses Washington's ability to shape the choices of APEC's East Asian members at APEC negotiations to reflect US interests through employing its military, economic, cultural, and ideological resources as instruments of leverage and influence. While interdependence constrains Washington's use of military and/or economic leverage to influence the choices of APEC's East Asian members, the complex bargaining and consensual decision-making features of APEC further prevent Washington from imposing its agenda on APEC. On the other hand, Washington's capture of APEC could be facilitated if East Asian policy-making elites were socialized through the APEC process to accept American norms. This would tend to lead to preference convergence since the values of both the US and East Asia would coincide. The analysis suggests, however, that American norms are unlikely to prevail within APEC in the near to medium term primarily because APEC's East Asian members consider East Asian norms to be superior. American culture and especially ideology are not sufficiently attractive to East Asian elites and are thus unable to be used as instruments of influence. For these reasons, the paper concludes that the United States will find it difficult to impose its economic agenda on the region through APEC. Keywords United States; APEC; bargaining leverage; interdependence; cooptive power; socialization. Introduction The eighteen-member Asia-Pacific Economic Cooperation (APEC) forum1 which aims to promote closer economic cooperation in the Asia-Pacific region groups together diverse economies such as the newly industrializing economies (NIEs), developing countries, and industrial nations, including Helen E.S. Nesadurai is senior analyst at the Institute of Strategic and International Studies (ISIS), Malaysia. Address: Institute of Strategic and International Studies (ISIS), Malaysia, P.O. Box 12424, 50778 Kuala Lumpur, Malaysia © Routledge 1996

0951-2748


32 Helen E.S. Nesadurai the United States, the preeminent global power.2 The presence of the United States in APEC raises the possibility that APEC may be dominated by the US. Right from the time APEC was formed in 1989, some regional states notably Malaysia and Thailand have been wary of this possibility (Crone 1992: 76-7). These fears became more pronounced with the high profile given to APEC by the US president, Bill Clinton, and his openly stated wish to make APEC more results-oriented, especially in negotiating trade and investment liberalization in the region (Awanohara and Chanda 1993: 18). China and several ASEAN states declared their opposition to the US effort to turn APEC from their preferred notion of a 'loose, consultative' body into a more formal negotiating body (Bello and Cunningham 1994: 445). They felt that a more institutionalized APEC would allow the US to 'capture' APEC and use it as a vehicle to impose Washington's economic agenda on regional states. The worry was that Washington would use APEC to force the region to adopt the liberal economic norms espoused, theoretically at least, by the US. Some states, notably Malaysia, fear that convergence towards American political and social norms may be additional items on the Clinton administration's agenda for the region (Crone 1992: 77). The secretary of state, Warren Christopher, added to these fears when, at his January 1993 confirmation hearings, he argued for using 'all of our leverage . . . trade, economic, and security assistance and debt relief in promoting human rights.3 The main aim of this paper is to examine whether APEC can be captured by the US and used as a vehicle to impose America's economic agenda on regional states. The paper analyses the issue from two angles, one being Washington's ability to shape the choices of APEC member economies through employing its military, economic, cultural and ideological resources. The paper also looks at the nature and structure of APEC itself and its likely evolution since domination of any organization by a member also hinges on the way that organization is structured - whether it facilitates or hinders possible 'capture'. This two-pronged approach will hopefully provide a better understanding of whether APEC could end up by being a US tool as some regional states fear. The analytical framework While APEC has yet to become a rules-based supranational institution, it has evolved from its original conception as an informal consultative body into a more formal negotiating forum involving inter-governmental bargaining. US capture of APEC therefore depends on Washington's ability to get APEC members, particularly its East Asian members, to agree to Washington's position on key negotiations within APEC where conflicting interests and viewpoints between Washington and these members are likely to arise. The analysis will focus on the relationship between the US and the East Asian states4 since it has usually been one


APEC: a tool for US regional domination? 33 or other of these states which have voiced fears of possible US domination of the region through APEC. These states are less likely to allow Washington to take APEC down a path which compromises their interests. Washington's ability to dominate APEC will thus depend to a large extent on Washington's relationship with these states. This paper identifies two ways in which Washington could influence the behaviour and choices of APEC's East Asian members. The first is the extent to which American military and economic resources provide Washington with bargaining power or leverage over the East Asian states and which will enable Washington to influence their behaviour and decisions in APEC. Bargaining power is defined here as 'the ability to shift the probability of outcomes' (Dahl 1957). Bergsten (1988: 67-71) argued that the most effective deployment of American leverage in the 1990s is probably two-pronged, involving the carrots of market access, dollar stabilization, and military defence, coupled with the judicious use of threats to withdraw these carrots. Although power based on military and economic resources has become increasingly costly to employ in an interdependent world, it could remain relevant in APEC, particularly where the East Asian states are concerned. Not only have these states been dependent, by and large, on the US for their security and economic well-being in the past through American military defence and access to the US market, but some scholars argue that this remains true even today (Woo-Cumings 1993: 140-5). This could, as a result, tilt the outcome of APEC negotiations in Washington's favour by preventing these states from mounting more than a superficial opposition to any move by Washington to push its economic agenda through APEC. An alternative and more subtle form of exercising influence is through co-optive power which tends to be associated with intangible or 'soft' power resources of culture and ideology (Nye 1990). If the culture and ideology of the co-opting power - the US in this case - are attractive and acceptable to the East Asian states, then a situation is created such that these states develop preferences or define their interests in ways consistent with Washington's own interests since their underlying value systems coincide. Washington's dominance of APEC could thus be facilitated and consolidated if East Asian states were willing to adopt American norms. US interests in the Asia Pacific in the 1990s A useful starting point for the discussion is a definition of US policy goals and interests in the region. These are primarily economic although security concerns do exist, most notably on the Korean peninsula. Trade is viewed as the primary means of revitalizing the US economy, with the dynamic Asia-Pacific region providing massive export and investment opportunities for American businesses (Business America 1994:2-3). The Clinton administration's pro-active export and investment strategy involves bilaterally


34


engaging 'Big Emerging Markets' (BEMs) which were identified on the basis of their size, economic dynamism and strong growth potential as capable of providing substantial trade and investment opportunities for American businesses {Business America 1994: 60). Among the BEMs in APEC are China, Taiwan, and Hong Kong (collectively known as the Chinese Economic Area), Indonesia, South Korea, and Mexico.5 All except Mexico are East Asian states. The East Asian BEMs, as well as a number of other East Asian states (including Japan) not identified as BEMs but nevertheless important economically to the US, have generally adopted neomercantilist or statist economic practices6 which are at odds with the rhetorical liberal market or neoclassical philosophy of the US (Higgott 1995). A key foreign policy goal of Washington would thus be to obtain convergence towards more liberal economic norms (Stremlau 1994/5: 21). This will include a liberal trade and investment climate as well as minimal state involvement in the economy. These norms are expected to facilitate and reduce the risks of American commercial engagement in the region as well as to 'level the playing field' for American businesses. Not only is state involvement in East Asian states perceived to be unfair to American businesses, but at a more fundamental level, the activist state is viewed negatively in liberal American society as a force that seeks to suppress freedom of choice through 'expropriating the market and civil society' (Woo-Cumings 1993: 147). Free market capitalism and democracy both have the same underlying philosophy - freedom of individual choice - and with the end of the Cold War, the US especially, and Europe, have sought to encourage the adoption of both concepts throughout the world. They view the expansion of the community of market democracies as a necessary prerequisite for a safer and more prosperous world (Alagappa 1994: 4-6). Many East Asian leaders fear that the US will attempt to restructure economic practices in regional states in line with these norms using APEC (Bello and Cunningham 1994: 445). The East Asian states are in a dilemma when faced with demands from Washington to change their economic practices since such changes will also alter the political economy of their societies. In states such as Japan, Malaysia, Indonesia, Taiwan, China, and South Korea, the state has actively supplemented and supplanted the market in order to direct the developmental process and shape the economic structure in line with its own preferences. In the process, the state has amassed substantial power domestically through its ability to control the economic process. Economic liberalization will result in a shift of power from the state and its elites to the society at large. The resultant dispersion of power is viewed as inimical to development through compromising societal and political stability (Alagappa 1994: 8; Hitchcock 1994: 2). Compliance with Washington's economic demands will restrict the ability of national governments to direct development in ways that will lead to desired social, economic, and/or

APEC: a tool for US regional domination? 35 political goals. Hence their dilemma. These concerns will influence the way these states respond to Washington in APEC negotiations.


US bargaining power and APEC While the US retains structural power in that it continues to set the broad rules of the game by which other actors play (Strange 1987: 565; Chan 1993: 166), its ability to alter their behaviour in particular instances may be challenged by the growing imperatives of interdependence. The US may be constrained in exercising its bargaining leverage over other state and non-state actors by the need to accommodate their interests. The point is not the mere possession of vast quantities of military and economic resources but whether these are able to provide Washington with bargaining leverage in an economically interdependent environment. The following sections will examine this point.

US military power and the US-East Asia security relationship Although power has become less fungible today than in the past due to the fragmentation of world politics into many different spheres such as security, trade, and finance, nevertheless some fungibility remains (Nye 1990:158-9). As such, the protective role of military power may be a relevant asset in Washington's bargaining over economic issues with East Asian states, particularly since the US still dominates the region in terms of its military resources (Table 1). A key point to note, however, is that military power must be usable in the first place before it can become an effective bargaining tool. During the Cold War days, US military power still had a large degree of utility. As virtually the sole provider of security against the communist threat, the US was able to extract concessions from allies in the Asia Pacific. For instance, Washington was able to extract economic concessions from South Korea and Taiwan in the 1980s because the US was the only power able to effectively guarantee their security. Ronald Reagan's strategy was to extol South Korea and Taiwan as front-line political allies while at the same time presenting tough demands on economic matters (Bello and Cunningham 1994: 447). The implicit bargain was very clear. In the post-Cold War era, US military power has become increasingly constrained with the shift away from communism as a doctrine for the conduct of international affairs. This was reflected in Operation Desert Shield and Operation Desert Storm during the Gulf War. The US could not intervene directly in a case where there was no overt communist aggression. It had to be 'invited' to go to the rescue of a country which had been invaded by an aggressor. Today, the problem on the Korean peninsula notwithstanding, the communist threat in the region has abated and with it, the utility of US


Table1

Selected military resources in the Asia-Pacific region (1984 and 1994) United States 1984 1994

NUCLEAR WEAPONS Sea-launched Ballistic Missiles Inter-Continental Ballistic Missiles Intermediate Range Ballistic Missiles Medium-Range Ballistic Missiles Nuclear Submarine (SSBNs) TOTAL ARMED FORCES

Japan 1984 1994

China 1984 1994

Taiwan 1984 1994

South Korea 1984 1994

North Korea 1984 1994

— — —

12 14 60

Sov. Un. Russia 1984 1994

— 981 — 1398 — 5 9 6

700 1,161 _

79

46

592 1,037

512 705

35

17

—

2,135,900 1,650,500

245,000

237,700 4,000,000 2,930,000

484,000

425,000

622,000

633,000

784400 1,128,000 5,115,000 1,714,000

155,000 1,020 —

150,000 3,160,000 2,200,000 1,160 11,450 AFV 7,500 80 See AFV 2,000

330,000 309 1,120

289,000 509 905

540,000 1,200 —

520,000 1,900

700,000 1,000,000 1,840,000 2,675 3,700 51,000 150 500 NNG

550 414 380

50 See AFV NNG 2,800 2,800 900 510 12,800 Art 14,500 Art See Art 310 See Art

1,250 1,740 75

225 950 1,060 315

850 2,500 120

1,500 500 3,500 900

NNG 1,000 3,300 800

Army Main Battle Tanks (AFV) Light Tanks (AFV) Armoured Infantry Combat Vehicle (AFV) Armoured Personnel Carriers (APC) Towed Artillery (ART) Self-Propelled Artillery (ART) Amphibious Ships Helicopters Aircraft

780^00 11,623 400

559,900 14,524 123

1,100 17,900 2,000 3,140

6,633 28,400 2,085 3,346 40 7,430 386

Navy Submarines Aircraft Carriers Battleships Cruisers Destroyers Frigates Amphibious Ships

564300 99 14 2 28 68 94 61

9,000 625

482,800 104 11 34 41 51 47

2 60 50 1

354 33

90 20

44,000 14

43,000 17

32 18 6

7 55 6

—

780,000 19,500 350

See APC 2,500 70,000 2,300 34,000 4,500 See Towed

19,000 16,000 9,500 3,900

62

127

300 14

622 5

2,600

—

143 20

4,100

—

—

—

—

—

350,000 102

260,000 50

38,000 2

68,000 4

49,000

60,000 2

33,500 21

46,000 25

490,000 150

295,000 146

14 22 18

18 37 51

23 9 29

22 11 21

11 8 33

8 32 14

— 4 3

—

36 68 184 78

25 22 112 69

-

3

Table 1 Selected military resources in the Asia-Pacific region (1984 and 1994) continued


United States 1994 1984 Military Sealift Command Ships Missile Attack Craft Naval Combat Aircraft Helicopters

68 6 1,450 160

290 3 2,017 27 sqns

Marine Corps Main Battle Tanks (AFV) Light Armoured Vehicles (AFV) Amphibious Assault Vehicles Fixed Wing/Combat Aircraft Helicopters

96,600 550 — 984 436 102

Coast Guard Patrol Vessels Patrol Vessels, Offshore Aircraft Helicopters Air Force Tactical Combat Aircraft Long-Range Strike Aircraft Helicopters

Japan 1994 1984

—

China 1994 1984

Taiwan 1994 1984

South Korea 1994 1984

North Korea 1994 1984

11 15 47

155 —

46 —

—

—

25,000 60 — 60

—

—

— — —

— — —

81 63

3 110 100

341 800 52

217 875 68

28 —

174,000 287 640 1,322 166 155

—

—

—

— — —

— — —

— — —

5,000 NNG NNG NNG

39,000 NNG NNG NNG

39,791 104 45 64 108

38,100 135 45 77 152

NNG 286 42 10 5

12,000 287 48 24 38

— — —

— — —

— — —

—

—

—

—

594,500 3,700 297 NNG

433300

46,000 270 —

44,500 440 —

490,000 5,300 —

470,000 4,970 —

77,000 547 —

68,000 459 —

33,000 440 —

53,000 447 —

51,000 740 —

29

40(?)

400

400

47(?)

34(?)

27(?)

42(?)

60

3329 200 240

-

52 32 22

2 —

30,000 — —

20,000 NNG —

NNG

NNG

32

Sov. Un. Russia 1984 1994

30 839 265

28 783 251

16,000 NNG NNG NNG

12,000 NNG NNG NNG

_

_

—

—

—

_

_

— — —

— — —

— — —

— — —

— — —

— — —

— — —

-

—

-

82,000 770 — 50

—

—

400,000 3,260 143 NNG

170,000 2,150 158 NNG

Source: IISS (1984, 1994), The Military Balance 1984-1985 and 1994-1995. Notes: AFV: Armoured Fighting Vehicle, which includes tanks, armoured cars, armoured personnel carriers, & armoured infantry combat vehicles. ART. Artillery, both towed & self-propelled. NNG: In holdings, but number not given. (?): Total computed from IISS figures of individual types. Sqns: Squadrons. Numbers vary from squadron to squadron, and country to country.


38 Helen E.S. Nesadurai military power. The US security umbrella is less valued although a number of regional states prefer to see a continuing American presence in the region. This time, however, the need is 'for a balancing force rather than a hegemonic deterrent' (Crone 1993: 510). To be a legitimate security partner in the region today, the US needs to be invited to play a security role in cooperation with regional actors unlike the Cold War years when it could do so unilaterally as an acceptable hegemonic deterrent. Thus, the disappearance of the communist threat has not only affected US ability to deploy its military power unilaterally in the region, it has also removed its primary bargaining chip. Even though the US may be the most effective balancer of growing Chinese military power, which many regional states fear, this will not necessarily translate into increased US bargaining power over these states, with the possible exceptions of Japan and Taiwan. There is no guarantee that Washington would take on China on behalf of regional states unless the US is directly affected by acts of Chinese aggression, such as the closure of international shipping lanes in the South China Sea. Any Chinese-American confrontation will not be welcomed by regional states which rightly fear its destabilizing effects. Some regional states, notably Malaysia and Singapore, prefer to engage rather than confront a regionally powerful China (Mak 1995). The US is likely to continue to play a security role in the Asia-Pacific region not only because the region has a number of potential flashpoints but also because the region is important economically to the US. Nevertheless, this security role will increasingly be in cooperation with regional states and will need to take into account regional concerns and interests. Thus, Washington's leverage over East Asia through its military power is likely to diminish over the years and will be difficult to translate across issue areas, particularly since Asian states perceive that the US is increasingly pulling back from the region (Shambaugh 1994: 424).

Economic power resources - trade, investment, technology, and aid While US military power as a source of bargaining leverage has diminished in importance, Washington's manipulation of its economic relations with East Asian states could be used to change their attitudes and behaviour and to provide the US with an alternative source of bargaining leverage. There is cumulative evidence to suggest, however, that Washington's bargaining leverage using its economic resources is constrained by America's dependence on external economic relations for its well-being. US exposure to international (merchandise) trade increased from 8 per cent of gross national product (GNP) in 1970 to 14.7 per cent in 1982 and about 17 per cent in 1993. The inclusion of services trade raises the 1993 figure to 21.8 per cent of GNP.7 While the US continues to absorb a sub-


A PEC: a tool for US regional domination? 39 stantial portion of East Asia's exports, the US market has nevertheless declined in significance to these states between 1987 and 1993 (Table 2). On the other hand, East Asia has itself become increasingly important as a market for American exports (Table 3). East Asia absorbed almost 17 per cent of total American merchandise exports in 1993, up from 13 per cent in 1987 and 10 per cent in 1982. This is likely to increase in the years to come as East Asian states, particularly the ASEAN countries, increase their overseas purchases with rising per capita incomes, trade liberalization, and as new development programmes get under way. Over the 1982-93 period, American exports to East Asia grew faster than US exports to both the world market as well as to the industrial countries. Moreover, about 1.5 million jobs were created through exports to East Asia in 1993 (Table 3). East Asia's continuing significance to the US is also reflected in Washington's aggressive courting of East Asian markets such as through the BEM programme. These markets are expected to provide significant trade and investment opportunities for American businesses and through them create substantial employment in the US. The East Asian BEMs are expected to absorb a total of $910 billion worth of global imports in 2010 (Business America 1994: 60). If the 1993 US market shares are maintained in 2010, this will amount to $120 billion worth of US exports absorbed by the East Asian BEMs, more than double the 1993 value of US exports to these states.8 This figure is possibly on the low side since the US market share in these countries, particularly in China and Indonesia, is likely to expand as a result of Washington's BEM programme. Economic liberalization and national development programmes in these countries suggest that they will also begin to provide substantial investment opportunities for American and other firms, especially in largescale, infrastructural development projects such as power generation and transmission, transportation, and communications. These broad trends suggest that inter-dependence characterizes the US-East Asian economic relationship. In any bargaining game characterized by the interdependence of the actors concerned, the hierarchy of state interests will play a powerful part in determining outcomes. The actor with the 'higher level' interest is more likely to pursue its interests far more vigorously and persistently than the other party (St Amand 1994: 21). Thus, the outcome of bargaining will depend not only on Washington's ranking of its economic interests relative to its non-economic interests, it will also depend on how far other states and actors are willing to compromise their respective interests. Additionally, the presence of alternative markets, investors, and sources of technology will affect the success of bargaining in which one actor employs or threatens to employ economic coercion (i.e. unilateral sanctions such as denial of market access, investment, and technology flows) or offers economic inducements (market access and offers of investment


Table 2

East Asia's export markets, 1987 and 1993 (% share) 1987

US

1993

Japan

Industrial countries

World

us

Japan


World

East Asia

30.5

7.8

22.0

100.0

24.4

7.6

19.8

100.0

East Asia (excl. Japan)

23.9

16.0

18.9

100.0

20.8

12.9

18.4

100.0

Brunei

1.6

61.8

1.3

100.0

1.2

54.2

19.0

100.0

China

7.7

16.2

13.1

100.0

18.5

17.2

16.4

100.0

27.9

5.1

22.8

100.0

23.1

5.2

20.2

100.0

Indonesia

19.5

43.1

11.8

100.0

14.2

30.3

17.9

100.0

South Korea

38.9

17.8

21.1

100.0

21.7

13.8

14.9

100.0

Malaysia

16.6

19.5

18.1

100.0

20.3

13.0

18.0

100.0

2.1

28.8

45.8

100.0

4.4

27.4

53.6

100.0

Philippines

36.2

17.2

23.0

100.0

38.3

16.3

20.5

100.0

Singapore

24.4

9.1

17.1

100.0

20.4

7.5

18.7

100.0

Thailand

18.7

15.0

28.0

100.0

21.6

17.0

21.8

100.0

Japan

36.8

—

—

100.0

29.5

—

—

100.0

Hong Kong

Papua New Guinea

Source: IMF, Direction of Trade Statistics Yearbook, 1994 Notes: Data for Taiwan is not available; Industrial countries as classified by the IMF excluding the US and Japan.


Table 3

US exports (US$ million) 1982, 1987 and 1993, and job creation, 1993 % growth p.a. 1982-93

1993 estimated jobs created*

10.7%

7.4%

8,878,196

8.8%

7.8%

5,105,621

47,950

9.2%

7.8%

915,845

78,003

15.4%

12.8%

1,489,857

1982

1987

1993

% growth p.a. 1987-93

World

212,274

252,884

464,827


117,195

161,579

267,310

Japan

20,966

28,249

East Asia

20,783

32,996

79

93

478

31.4%

17.8%

9,130

China

2,912

3,497

8,767

16.6%

10.5%

167,450

Hong Kong

2,453

3,983

9,873

16.3%

13.5%

188,574

Indonesia

2,025

767

2,770

23.9%

2.9%

52,907

South Korea

5,529

8,099

14,776

10.5%

9.3%

282,222

Malaysia

1,736

1,897

6,065

21.4%

12.0%

115,842

Brunei

66

51

50

-0.3%

-2.5%

955

Philippines

1,854

1,599

3,529

14.1%

6.0%

67,404

Singapore

3,214

4,053

11,676

19.3%

12.4%

223,012

915 na 9.8

1,544

3,769

16.0%

13.7%

71,988

7,413

16,250

14.0%

—

310,375

13.0

16.8

Papua New Guinea

Thailand Taiwan East Asia/world (%)

Source: IMF, Direction of Trade Statistics Yearbook, 1986 and 1994 Notes: na: not available; growth rates are compounded annual averages; * based on a US Commerce Department estimate that approximately 19,100 jobs are created for every billion dollars worth of exports (St Amand 1994: 21).


42 Helen E.S. Nesadurai and technology). The attractiveness of economic inducements is reduced if alternative choices exist, particularly if the 'price' of the former is unattractive. These points are clearly illustrated by recent instances of US bargaining with China. President Clinton had announced in 1993 that renewal of China's most-favoured nation (MFN) status in 1994 would be dependent on Beijing's progress on human rights. In this instance, China had more at stake than Washington and thus persisted with its hard-line stance towards the US. To Beijing, American demands in the area of human rights would have compromised its political stability and regime survival, interests which China considered superior to its other interests, even its economic well-being which the loss of MFN status would have compromised. On Washington's part, China's human rights record posed no immediate threat to the US, with only general principles at stake (St Amand 1994: 21). It could afford not to pursue the matter more vigorously. More importantly, the economic well-being of the US was at stake. China threatened to discriminate against American investors and exporters, and this would have led to the loss of export and investment income as well as export-related jobs (see Table 3). This episode also illustrates the growing influence of non-state actors in inter-state relations. American businesses with existing or potential links to the China market strongly opposed Washington's efforts to couple human rights progress in China with MFN privileges (New Straits Times 1994a: 20). There was a divergence of interests between many US firms and Washington, with American businesses implicitly allied with Beijing on this issue. China recognized this and used it to Beijing's advantage. In May 1994, Clinton renewed China's MFN privileges unconditionally and de-linked the two issues forever as well. American firms are unlikely to support Washington's bargaining position with other states unless it is in their commercial interests or if these interests are not compromised. This was seen in the US-China negotiations on intellectual property rights leading up to the February 1995 agreement where the US was in a superior position. American firms were clearly allied with Washington on this issue since it was in their commercial interests to ensure that their technologies would be adequately protected. These firms included not only the film and music industry firms but also electronics firms, automobile manufacturers, and other firms whose technologies were in danger of being pirated in China. Even non-American firms supported Washington's tough negotiating position (Business Times 1995a). China's need for technologies owned by US and other firms reduced Beijing's bargaining leverage over Washington on this issue (Lachia 1995; Table 3). Beijing recognized that China's attractiveness as a destination for foreign investment, particularly in technologically advanced sectors, depends on a strong intellectual property protection regime in the country that would prevent piracy of the technologies


APEC: a tool for US regional domination? 43 belonging to investors. In this particular instance of bargaining, China's economic well-being was at stake, and thus, the chips were stacked in Washington's favour and allowed an outcome favourable to the US. Nevertheless, the actual impact of the agreement in terms of curbing intellectual property piracy in China remains to be seen although it met almost all Washington's demands including those relating to market access in the audio-visual, software, and publishing sectors (Business Times 1995b: 1; Chen 1995: 1). Alternative sources of foreign direct investment and technology allow regional states a degree of leverage over investors not seen in the past.9 As one American businessman pointed out after the Chinese MFN case in May 1994, 'the premise behind the threat of withdrawing MFN was that the US had exclusive technology in certain sectors that would force a country to change its policies [in line with US dictates]. That may have been true ten years ago but not now'.10 The point is, threats to withhold American investments are not likely to work because viable alternatives do exist. European investors possessing advanced technologies demanded by East Asian states provide alternatives to the traditional American, and even Japanese, sources of investment. The fast growing or 'miracle' East Asian economies, particularly the ASEAN states and China, hold the promise of substantial economic benefits for foreign investors and traders which adds to the attractiveness of these states to non-traditional investors. In any case, Washington is unlikely to restrict overseas economic investment or trading by its nationals unless national security risks are involved such as the 1995 ban on American oil companies from dealing with Iran. Even then, American companies can get around the ban by trading through third countries as they have done in past episodes involving US sanctions, against Nicaragua for instance (Rodman 1995: 120). Only if the US succeeds in building a multilateral consensus on sanctions will economic coercion have some chance of succeeding in altering the behaviour of other states in ways desired by Washington. In addition to trade, investment, and technology as sources of leverage, aid flows could provide an additional source of bargaining leverage. The US is, however, a minor aid player in the East Asian region where Japan constitutes the major source of bilateral aid. US aid to the region has declined significantly over the years (Crone 1993: 508). Japan's aid strategy has complemented its investment strategy since the late 1980s and provides benefits related to the investment needs of the recipient countries. The latter usually receive Japanese official development assistance (ODA), other lending, and technical assistance in infrastructure development and skills training for instance, to improve the conditions for and to attract Japanese investment to East Asian states (Machado 1995: 61). Tokyo has also used its technical assistance programme to advise regional governments on appropriate development strategies; needless to say, these strategies have reflected interventionist approaches to economic management

44



rather than a purely free market approach which Washington preaches (Fallows 1994: 205-7). While Tokyo has not explicitly used its aid to East Asian states as a means of bargaining, Japan's instrumentalist aid policy is likely to have an impact on the region's growth and development, and especially on its attitudes to development policies (Rix 1993: 75-6). Washington's ability to influence the preferences of East Asian states will depend to a large extent on their preferred approach to development. This point will be debated in a later section.

The US dollar and bargaining power Apart from trade, investment, aid, and technology, the international position of the US dollar11 could allow Washington to derive some bargaining leverage over other states. As Fred Bergsten suggested in 1988, offers of dollar stabilization could be used to obtain concessions from states hurt by sharp movements in the dollar. In fact, Bergsten points out that the US had substantial leverage in the late 1980s because of the credibility of any threats made by US officials to drive down the value of the dollar. US willingness to stabilize the dollar was therefore highly valued by other countries and was used to elicit concessions. Japan, for instance, agreed to expand its fiscal stimulus programme in April 1987 in exchange for a US dollar stabilization pledge (Bergsten 1988: 68). Some financial analysts believe that the Clinton administration deliberately tolerated the initial fall of the dollar in August 1993 to pressure Japan to spur economic growth and boost imports, supporting the currency once Tokyo showed signs of acceding to Washington's requests (Business Times 1993: 15). There are also suggestions that Washington used the dollar's plunge in 1995 against the yen as a weapon to get Japan to agree to US terms in the auto-parts negotiations. The Japanese appear to have adopted a hardline position on this issue (Reitman and Davis 1995: 1). It is not likely, however, that the US will be able to use the dollar's value as a bargaining tool in the future. The country against which this was mostly applied in the past - Japan - is beginning to resist issue linkage between currency values and trade and other economic concessions. Resistance will become easier once the yen is more widely used in trade and capital transactions as well as a reserve currency. Although the yen is some way off from being a global or even regional currency, its use in Asia is growing (Tavlas and Ozeki 1992: 31-40). Moreover, the recent yen-dollar realignment12 has convinced Tokyo, which has strongly resisted internationalization of the yen in the past, that the yen must take on an increasingly international role. This will allow a more stable international financial system which will prevent undue stresses on the Japanese economy through sharp currency realignments (Gyohten 1995) This psychological and policy shift will ensure that the needed reforms are put in place to ensure a more open, transparent, flexible, and liquid domestic


APEC: a tool for US regional domination? 45 financial market to support internationalization of the yen. The current structure of Japanese financial markets cannot support an international role for the yen (Gyoten 1995). The dollar's weakness since 1993 and its sharp plunge since the beginning of 1995 have raised questions regarding its international role. There has been a loss of confidence in the dollar as a reliable store of value (Economist 1995a: 19-20). The shift out of dollars into other more attractive currencies and into emerging markets (Sesit 1995:1) may reflect this loss of confidence as much as it reflects portfolio diversification. Perhaps more importantly, America's role as the custodian of the key international currency has begun to be questioned (Economist 1995a: 20; Helleiner 1993: 219-20). In fact, there is growing international acceptance for a more stable, multipolar global financial system involving the dollar, the yen, and either the deutschmark or the ECU rather than one based on the dollar alone (Helleiner 1993: 219-20; Economist 1994a: 86; Gyoten 1995).13 Washington may find it increasingly difficult to be able to act as independently as in the past in financial matters as it will now have to consider the repercussions of its actions, or inactions, on the US economy itself. Any move to force the dollar in a certain direction could have unplanned consequences. Increasingly independent and deregulated financial markets with the ability to make real time responses may respond to these signals in a way that policy-makers find extremely difficult to reverse. Moreover, the reduction in constraints to the free international movement of capital makes it more difficult for national governments to control financial markets and currency values. Financial deregulation has, in effect, decoupled the real economy from the financial system and has made financial markets, and even individual speculators, independent actors with substantial influence over national policy decisions.14 For these reasons, the usefulness of the dollar as a bargaining lever will be limited. APEC's institutional evolution The preceding analysis suggests that Washington's ability to dictate outcomes through employing its security and economic power resources is constrained by the growing interdependence between the US and East Asian states. The respective hierarchy of interests of these actors will condition the outcomes of negotiations or bargaining. America's need to cooperate with regional states to support domestic economic growth, its need to accommodate the interests of non-state actors such as US businesses, and the growing assertiveness, confidence, and economic integration of East Asian states combine to circumscribe Washington's bargaining leverage over these states. As such, it is not certain that Washington's preferences will be entertained by APEC's East Asian members in APEC negotiations or bargaining unless their interests are


46


not compromised or there is no conflict of fundamental interests. Conflicts are likely to characterize APEC negotiations and decision-making given the fundamentally different norms and interests of the US on the one hand and the East Asian states on the other. While Washington's reduced bargaining leverage over the East Asian members of APEC may limit Washington's ability to capture APEC, recent institutional developments have been met with deep concern by some APEC members. APEC has evolved from a loose, consultative body to a more formal negotiating forum.15 It has been undergoing a process of institutionalization over the years, characterized by the annual ministerial meetings and the more frequent senior officials meetings. Moreover, the informal leaders' summit first held after the fifth ministerial meeting in Seattle in 1993 is likely to become a regular feature of APEC. The second leaders' summit was held in Bogor in 1994 while the third will be held in Osaka in 1995. Discussions are currently underway on the possible expansion of the small permanent secretariat in Singapore. Institutions, procedures, and rule-based regimes can consolidate dominance through established guidelines for behaviour which are based on the norms of the dominant power (Ikenberry and Kupchan 1992:153). Since APEC has yet to become a formal institution or rule-based regime based on rules and norms preferable to US policymakers, notwithstanding these recent developments in institution building, it is doubtful if Washington could attempt to dominate APEC at this point. On the other hand, if APEC evolves into a rule-based regime or institution there may be a chance that the US could dominate APEC through attempting to write its rules and procedures. This will depend on whether the East Asian members of APEC allow Washington to do so, which, however, they are not likely to do for the reasons already discussed. The recent developments in APEC's structure suggest that the grouping is already evolving in line with US preferences. The US has long advocated turning the forum into a negotiating body (Awanohara and Chanda 1993: 17). When it took over the chair from Thailand in 1992, the US let it be known that it wanted APEC to be transformed from a 'talking shop' to an achievement-based group (Awanohara and Chanda 1993: 17). The free trade in APEC concept is seen to be very much a US idea although Australia, Canada, Singapore, Hong Kong, and Indonesia, the host of the 1994 APEC meeting,16 also came out in full support of the concept which was proposed by the Eminent Persons Group (EPG), a team of experts from APEC member countries under the chairmanship of an American economist, C. Fred Bergsten (EPG 1994). The acceptance by regional leaders of the principle of free and open trade and investment in the region by 2010/2020 (the Bogor Declaration) implies that APEC's agenda is also shifting in line with US norms and suggests that US interests are being served through APEC, albeit over 15-25 years. It is, however, difficult to see APEC developing as a US tool even if the US position appears to have 'triumphed', both with the adoption of


APEC: a tool for US regional domination? 47 the Bogor Declaration at the 1994 leaders' summit and with APEC's growing role as a negotiating body as preferred by Washington. Firstly, much negotiation and bargaining is needed to flesh out the Bogor Declaration. Bargaining will, furthermore, involve multiple parties and will therefore be more complex. Outcomes will be even less predictable for Washington than in two-party negotiations given the limits to US bargaining power in the region. Moreover, there is no guarantee that APEC members will be forthcoming with ambitious concrete programmes or offers to flesh out the Bogor Declaration's goal of trade liberalization notwithstanding the leaders' agreement.17 In addition, conditions can change over the 15-25 year period allowed for liberalization to be achieved. Leadership change in some regional states, notably Indonesia and China, could complicate matters if new leaders are not supportive of the Bogor Declaration, which is, after all, a statement of intent. Obtaining commitments from members will not be easy since it is likely to challenge entrenched interests in each country. The US holds no preeminent position within APEC unlike in the United Nations with its veto power or in the World Bank and the International Monetary Fund where the weighted voting system allows Washington to exert a preponderant influence in these institutions (Spero 1977/92: 33; Helleiner 1993: 211). The 'one among equals' position of the US within APEC limits Washington's scope to assert its dominance. The APEC agenda also appears to depend on which country is in the chair. The current chair, Japan, feels that APEC should place greater emphasis on development cooperation projects, the original focus of the grouping, rather than on trade and investment liberalization issues (Maruko 1994; Oishi 1994). This feeling is shared by the developing country members of APEC (Hadiwinata 1994). While Tokyo has committed itself to working out an action plan to support the Bogor Declaration, Japan is also likely to be more sensitive to the reservations of some East Asian states over the Declaration's trade liberalization aspect and could attempt to use its position as chair to soften the programme. Japan itself has a vested interest in doing so. Thus, US interests depend very much on who chairs APEC. Given that there are 18 APEC members, each with their own peculiar national interests and relationships with the US and with each other, it will not be easy to predict when US interests will prevail, especially since Washington's ability to influence the decisions of East Asian states is in question. The 'agreement by consensus' principle adopted by APEC will further work against US interests. There is also the spectre of the East Asian Economic Caucus (EAEC). It is possible that Washington would constrain its actions in APEC in order not to push East Asian states into embracing the EAEC more warmly. This caucus of only East Asian nations was proposed by the Malaysian prime minister in 1991. So far, the EAEC has not really taken off although it has been endorsed by ASEAN as well as by APEC members as a


48 Helen E.S. Nesadurai

caucus within APEC. Singapore has officially put APEC before the EAEC, at least for the present (Business Times 1994:19). Japan has yet to come out in favour of it although it was invited by Malaysia to lead the caucus. The common assumption is that the US has, thus far, successfully exerted diplomatic pressure on Tokyo and prevented Japan from actively participating in the caucus.18 The Japanese deny this (Business Times (Singapore) 1995:16). Whether the EAEC will eventually become a counterweight to the US depends on whether Japan continues to refrain from accepting EAEC leadership. It also depends on the responses of other countries to the EAEC. Thus far, APEC appears to be the preferred organization although Malaysia continues to stress the EAEC as a useful consultative platform for East Asian states. Their preference for APEC does not, however, imply that the East Asian states will allow Washington to dominate APEC. It merely indicates their acceptance of the need for greater regional economic cooperation which was APEC's original aim and remains its official goal. In fact, it appears more likely that APEC will constrain Washington from pushing its agenda on the East Asian states rather than facilitate it. Perhaps this can explain Washington's continued use of bilateral negotiations with a number of these states in pursuit of its interests. Nevertheless, transaction costs associated with bilateral bargaining are rising and its outcomes increasingly uncertain. For instance, the Framework Talks between the US and Japan begun in July 1993 to hammer out a marketaccess agreement between the two countries were tedious, and the agreements finally signed in October and December 1994 fell short of US demands since they made no mention of numerical targets. Japanese trade officials further predicted that the US will have a harder time pressing Japan for 'results-oriented' trade agreements in the future (Economist 1994b; Hamilton 1994: 1). The intellectual property protection agreement finally signed with China in February 1995 was the result of extremely long and often acrimonious negotiations over more than a year while its actual impact remains to be seen. Despite these rising costs and uncertainties, the US will probably continue to use bilateral negotiations to shape outcomes in the region rather than attempt to use APEC to do so. US 'soft power' and APEC - dominance through socialization? APEC could be 'captured' by the US over the longer term if APEC facilitated the socialization of its members to embrace US norms through normative or ideological persuasion. The ongoing institutionalization of APEC through ministerial and senior officials meetings, leaders' summits, and working groups could facilitate interaction of regional elites with their American counterparts and might result in the former coming to accept US norms (i.e. becoming socialized), in particular, accepting its liberal market philosophy. These norms are then internalized by regional elites who move


APEC: a tool for US regional domination? 49 to adopt new state policies that are compatible with the American norms they have internalized 'and which produce cooperative outcomes' (Ikenberry and Kupchan 1992: 154). This long-term socialization process may eventually lead to a situation where the US is able to set the rules and agenda of APEC. Even if it does not, socialization towards American norms would bring about a situation in which Washington's preferences are more likely to be assured. American dominance is facilitated through a process of value change. This is closely related to the notion of 'complex' learning where changes in the underlying value systems occur as opposed to 'tactical' learning in which only behaviour changes without any underlying value change (Higgott 1993: 106). The degree to which socialization towards American norms takes place through APEC depends, to some extent, on the intrinsic qualities of these norms. This is where the co-optive or soft power resources of culture and ideology are particularly relevant. If American culture and especially its ideology are attractive to East Asian states, their preferences are likely to converge toward Washington's preferences since their value systems will eventually coincide with American values. There is no doubt that American popular culture has widespread appeal, particularly among the young all over the world. The spread of television and films has facilitated this development. Food, music, and dress styles to name a few have, to all appearances, imposed a set of values and shaped youth behaviour in countries geographically distant from the US and from each other, including the East Asian region. Joseph Nye points out that although 'there is an element of triviality and fad in popular behaviour', the US has more opportunities as a result of this to 'get its message across and to affect the preferences of others' (Nye 1990: 169). It is, however, incorrect to assume that control over popular culture will enable the US to shape more fundamental issues in regional states. The values imposed through popular American culture generally portray a certain image or lifestyle rather than convey any deeper ideological message. Basically the trappings or the outward symbols of American culture are adopted. Food habits through the ubiquitious American fast-food chains, dress styles, and entertainment forms copied through films and music videos need not necessarily translate into acceptance of their underlying American values. While some aspects of popular American culture may convey deeper values, such as freedom of choice and the rights of the individual, and hence might be expected to shape the recipients' value system with regard to political and economic norms, this depends on whether the underlying message is accurately transmitted and finds a receptive audience. Most of East Asia comprises non-English speaking populations such as in Japan, South Korea, Thailand, and Indonesia, with deep cultural and historical roots. In these states, it will be more difficult for any fundamental message or value system inherent in popular American culture to be transmitted and received, particularly if these values are alien to local norms. Much


50 Helen E.S. Nesadurai of the fundamental values underlying popular culture can be lost through translation, intentionally or otherwise, into the local language. What is more easily conveyed are the outward trappings. It is instructive to note that both Singapore and Malaysia, whose populations are more fluent in English than those of other East Asian states, are the most vocal in espousing 'East Asian values' and an 'East Asian identity' and in highlighting what they perceive as the worst aspects of American (often perceived as Western) values (Hitchcock 1994: 18; Mahbubani 1994; New Straits Times 1994c). One reason for their sharp criticism of Western values could be to counter American influence on the general Singaporean and Malaysian public who may be better able to understand any American ideological 'message', either underlying popular American culture or as found in foreign media reports, in their original (untranslated) form.19 A more effective channel of influence is through American ideology, provided it is accepted by regional elites, since ideology deals with fundamental values unlike popular culture. The primary elements of US ideology today are the promotion of a liberal market economy, democracy, and human rights, particularly with the end of the Cold War and the 'triumph' of Western capitalism and values. Nevertheless, governing elites in many East Asian states strongly contest the view that democracy and human rights are universally valid norms (Alagappa 1994: 8). In particular, East Asia's economic dynamism, sustained during severe recessions in Western democracies and within domestic political systems which were more authoritarian than democratic, has increased the self-confidence of regional leaders and allowed a number of them to reject American ideology for their own states and to propound an East Asian brand of economic and political/social philosophy. Many Japanese scholars, writers, government officials, and politicians have become increasingly assertive with regards to Japan's model of economic development which emphasizes a strong industrial policy role for government and have begun offering this advice to Japan's East Asian neighbours (Economist 1995b: 13). Training courses for foreign governmental officials, scholarships to study Japan's developmental model, and seminars/workshops to discuss industrial policy and economic success through government intervention are increasingly a part of Japan's 'soft' diplomacy, as was Japan's funding for the World Bank study on the East Asian economic miracle to examine the role of government intervention in economic development (Economist 1995b: 20; Fallows 1994: 204-7). Since economic practices in a number of East Asian states including South Korea, Taiwan and Malaysia have followed the Japanese model, this further increases the affinity of the region for Japan. The US espouses, theoretically at least, a pure neoclassicial economic model and virtually free markets with minimal government intervention. This model is not attractive to many East Asian policy-making elites as a suitable developmental model for their own states. By and large, the interventionist model based on Japanese


APEC: a tool for US regional domination? 51 practices is preferred. Taken together with the extensive Japanese investment and aid presence in the region, the attractiveness of this alternative norm can be tremendous. This is not to imply that Japan rather than the US will dominate APEC through being able to influence its East Asian members. It merely indicates that a viable and successful alternative to the US liberal market economic model is available and generally preferred by ruling elites. Moreover, in terms of performance criteria, the 'East Asian' model has proven itself to be a sound developmental model. Most East Asian states have sustained high growth rates of more than 7 per cent annually for the past eight years while the US and other Western economies have floundered amidst recession, slow growth, stagnation, and unemployment. East Asia's export growth has been impressive while per capita incomes and other quality of life indicators have improved significantly.20 This has given the East Asian states a degree of confidence not evident in the past and, as discussed earlier, has led a number of their leaders to question the validity and suitability of US norms in the economic as well as the social and political spheres. The spectacular growth of Japan after the devastation of the Second World War, and of South Korea after the Korean War has been especially illuminating since these two countries departed from the pure neoclassical economic model and adopted a state-led industrial policy to support their economic reconstruction. While growing international interactions and advances in telecommunications will create a freer flow of information and expose elites and a growing number of the general public in East Asia to new ideas and alternate systems of government, this does not automatically imply acceptance of US ideology (Alagappa 1994: 27). Information flows can, in fact, be a double-edged sword. They have drawn attention to the social decay in the US and economic stagnation in other Western democracies. In the minds of a number of Asian elites and the public, whether rightly or wrongly, these ills are associated with American/Western political and social norms and are therefore rejected although other Asian observers view these as negative effects of modernization rather than Westernization.21 In fact, the social decay in the West/US has been attributed to excessive individualism which is in turn associated with liberal democracy (Alagappa 1994: 27). On the other hand, the large numbers of East Asian students in the US may become a channel of American influence in these states, especially if these returning students enter policy-making positions. While they may forge a special relationship with the US, it is, however, unlikely that they are willing to personalize their American experiences and interests to the extent that they favour Washington over their own governments in situations where US preferences conflict with those of the latter. Higgott suggests that while the APEC process has led to changes in the behaviour of regional states such as their growing receptivity to greater economic cooperation, there is no evidence that these behavioural changes


52 Helen E.S. Nesadurai have been accompanied by value change (Higgott 1993: 106). Although further institutionalization of APEC may support value change in the future through greater interaction, there is little to suggest that the direction of convergence will be towards US norms. Generally speaking, it will not be easy for Washington to influence the preferences of the East Asian states through a process of value change towards US norms.22 These states do not view American norms as superior to their own value systems and practices. Moreover, any attempt to change economic practices in East Asian states in line with American preferences, particularly to liberalize fully the economy and minimize state involvement in the economic process, is unlikely to be acceptable to political elites in these states. Such changes would tend to shift power from the state to society at large and restrict the state's ability to direct development in line with desired economic, social, and political goals. As such, it is not likely that US norms will prevail in the near to medium term through socialization of regional elites through the APEC process. Conclusion The main aim of this paper was to examine whether APEC could be captured by the US and used as a means to impose Washington's economic agenda on the East Asian states. The paper comes to the conclusion that Washington is not able to use APEC as a tool to dominate the region. This is because US ability to dictate outcomes to the East Asian states is constrained by the imperatives of interdependence. Since APEC itself represents a process of complex bargaining, Washington's circumscribed bargaining power gives the US no inherent advantage in APEC. Washington has no preeminent position within APEC which might allow it to mould APEC to its own advantage. The wariness of regional states towards US actions will further hinder US efforts to shape APEC as it wishes. It is a paradoxical situation since it is precisely because some regional states are wary of APEC becoming a US tool that any attempts by Washington to use APEC to serve its own interests will be thwarted. In fact, the indications are that, despite Washington's increasingly circumscribed bargaining power, the US will continue its previous practice of bilateral bargaining outside the APEC framework to try to shape outcomes in line with its preferences. While it is possible that the APEC process may, over the longer term, facilitate the socialization of regional elites towards accepting US norms, these norms are unattractive to many East Asian elites. An alternative to US or Western norms is perceived to exist in the region in the form of the East Asian model which has apparently proved to be far superior to the US model. The former is also preferred for political economy reasons. It is clear that the US will increasingly need to work with the East Asian states, not necessarily on the latter's terms, but definitely on some middle

APEC: a tool for US regional domination? 53 ground rather than attempt to impose US economic norms on regional states before they are ready and willing to accept them.

Acknowledgments


The author would like to thank Richard Higgott, J.N. Mak, and Craig Snyder for their comments on an earlier draft of this paper

Notes 1 The inter-governmental APEC forum includes the US, Canada, Mexico, Chile, Japan, China, South Korea, Hong Kong, Taiwan, Thailand, Malaysia, Singapore, Indonesia, Philippines, Brunei, Australia, New Zealand and Papua New Guinea. 2 Although US global dominance has been declining since the end of the Second World War, it nevertheless continues to be a dominant international power. See Chan (1993: 173), Kelleher (1990/91: 23), and Nye (1990: 171). 3 Quoted in Hitchcock 1994: 27. 4 East Asia includes all APEC countries except Canada, the US, Chile, Mexico, Australia, and New Zealand. 5 Other BEMs are India, Argentina, Brazil, South Africa, Poland, and Turkey. See Business America 1994: 60. 6 See Chalmers Johnson (1986: 557-65; 1990: 44-58) and Woo-Cumings (1993: 146-7) for a discussion of the Japanese and other East Asian economic systems. 7 Calculated from IMF, International Financial Statistics, various issues. 8 Calculated from Business America 1994: 60. 9 Although American firms dominate the Fortune 500 list of top global corporatins, substantial numbers of non-American, particularly Japanese and European, firms are also important players in key strategic sectors such as telecommunications, chemicals, electronics, metal products, and steel, to name a few. See Fortune International (1992: 74-92). 10 As stated by Jack Shaw, chairman and chief executive officer of Hughes Networks Systems which has a joint-venture in China to produce satellite telecommunications systems (New Straits Times 1994b: 21). 11 See Tavlas and Ozeki (1992: 35-40) for a discussion of the US dollar as the key international currency and Kwan (1992: 74-78) for its role vis-à-vis the Japanese yen in East Asia. Both Japan and Germany, the two other economic powers, had not been keen to allow their currencies to play a major global role (Kwan 1992: 78; Rowley 1990: 74). 12 The dollar has been declining in value since 1993, and fell 16 per cent against the yen and almost 7 per cent against the mark in the first four months of 1995. 13 The Bundesbank is, however, unlikely to officially sanction an international role for the mark as this will expose it to more volatility (Mori 1995). 14 Note the role palyed by international speculative pressures in the partial collapse of the European Monetary System in 1992 (Peterson 1994: 66). 15 APEC's negotiating role was most evident prior to the sixth ministerial meeting in Indonesia and the Bogor leaders' summit when details of the various recommendations, joint communiques, and declarations to be adopted had to be negotiated (Bayuni 1994).


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16 In fact, the current thinking is that President Suharto's strong support for the liberalization aspect of the Bogor Declaration stems from his desire to be personally associated with a milestone agreement in Asia-Pacific economic cooperation (Bowring 1994). 17 Malaysia formally declared its reservations in an appendix to the Bogor Declaration (1994). Despite President Suharto's full support for the Declaration, many Indonesian political and intellectual elites question the merits of trade liberalization in APEC as outlined in the Bogor Declarataion (Jakarta Post 1994). Thailand also voiced its disagreement with the binding deadline of the Bogor Declaration. 18 Japan may be unwilling to jeopardize its special relationship with the US, particularly if Japan views the US as the only effective counterweight to China's growing power in the region. Since the EAEC excludes the US, it is also possible that Japan is not keen on participating in a grouping where China will eventually emerge as the dominant member. 19 Ang and Stratton (1995) argue that Singapore's conscious policy of attacking Western social and political norms lies in its need to construct a national identify as an 'authentically Asian nation diametrically opposed to its western counterparts'. 20 See the World Development Report of the World Bank, various issues. 21 See for instance the views of Kishore Mahbubani, the permanent secretary of the Ministry of Foreign Affairs, Singapore (Mahbubani 1994), the Malaysian prime minister (New Straits Times 1994c), and a prominent Japanese philosopher, Mr Takeshi Umehara (Economist 1995b: 21). See also Hitchcock (1994). 22 Muthiah Alagappa (1994) provides an insightful discussion of the prospects of Asian adoption of the key Western norms of democracy, free market capitalism, and human rights.

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