Postscript December 1993

Summary

In the last two months of 1993, the regional and international context of Asia-Pacific economic growth has come together in a favourable way, as a result of three major events: the passage of the NAFTA arrangements through the United States Congress; the successful meeting of APEC Heads of Government in Seattle; and the successful completion of the Uruguay Round.

While NAFTA in itself has undesirable features, by 1993 its passage through the Congress had become an essential condition for the United States administration holding the line on inward-looking tendencies in the national polity. Victory in the Congress gave outward-looking elements of the Clinton Administration confidence and momentum that was important to success in the APEC leaders meeting and the final stages of the Uruguay Round negotiations.

The undesirable features of NAFTA include its embodiment of trade discrimination under Article XXIV of GATT, and additional distortions associated with unwieldy rules of origin.

For East Asia, NAFTA always presented substantial problems. Trade and investment diversion raised concerns in East Asian countries. But to East Asia, the direct damage was less important than the larger threat NAFTA posed to the international trading system. Within Southeast Asia, the United States discussion of NAFTA was a trigger for Malaysian Prime Minister Mahathir's idea of an East Asian Economic Caucus (EAEC), and for commitment to the ASEAN Free Trade Area (AFTA).

As 1993 drew towards a close, however, the reservations in East Asia and the Western Pacific about the dangers of NAFTA were overwhelmed as the Clinton Administration faced the test of getting NAFTA through Congress, and East Asia considered the impact of his possible failure upon the constituency for open trade in North Aemrica. Western Pacific reservations about NAFTA were used as it became clear that its main proponents within the administration saw NAFTA in a wider context that included commitments to trade facilitation among APEC countries and to the successful conclusion of the Uruguay Round.