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Saturday, November 14, 1998 Published at 07:01 GMT

World: Asia-Pacific

Apec row over trade reform

Dr Mahathir: Driving down the protectionist road

Cabinet ministers from the Pacific Rim nations are meeting to discuss a deal to cut tariffs on global trade worth $1.5 trillion.

The BBC's Humphrey Hawkesley reports from Kuala Lumpur looks at the context to the Apec summit
But Japan and the United States have already clashed over the liberalisation package which has provoked an increasingly acrimonious row.

The meetings come ahead of next week's summit of the 18-member Asia-Pacific Economic Co-operation (Apec) forum in the Malaysian capital Kuala Lumpur.

Apec, created nine years ago to promote free trade, is trying to open up trade in nine sectors.

[ image: Leaders will thrash out their differences at this hotel]
Leaders will thrash out their differences at this hotel
Japan says it is in no position to cut border taxes in two sensitive areas - forestry products and fish - at a time when its economy is in recession.

But the US believes such a step would send a strong signal that Asian nations are not turning inward, despite their worst economic crisis in 50 years.

Ministers have been considering compromise proposals - allowing nations a longer time to cut tariffs or more flexibility in deciding which sectors to cover.

US and Japan at loggerheads

Following a meeting with Japanese Trade Minister Kaoru Yosano, US Trade Representative Charlene Barshefsky said the US was getting increasingly exasperated by Japan's stance.

[ image: Ms Barshefsky: Said to have banged the table]
Ms Barshefsky: Said to have banged the table
"We had an exceptionally blunt set of interchanges," she added.

A meeting with Japanese Foreign Minister Masahiko Komura went slightly more calmly. "She did not bang the table today," one official said.

Mr Komura repeated that Japan could not cut tariffs on fishing and forestry because they are politically sensitive sectors that could shake the government's political base, another official said.

BBC Washington Correspondent Tom Carver: The APEC summit is being closely watched by US industry
The dispute between the world's two largest economies comes days before Apec's sixth annual summit on Tuesday and Wednesday.

The original aim was to have the tariff reductions in the nine sectors effective by 2002, as a start toward Apec's ultimate goal of a free trade area in the Pacific by 2020.

The Pacific rim forum accounts for 55% of world trade worth $5.2 trillion.

The nine sectors Apec wants to open up are environmental goods and services, fish, forest products, medical equipment, energy, telecommunications, toys, gems and jewellery, and chemicals.

'Apec should to redefine its role'

Next week's talks are aimed at promoting economic recovery in the region.

The summit is being hosted by Malaysia whose prime minister has moved towards economic protectionism.

Dr Mahathir Mohamad's recovery plan amounts to a total rejection of the International Monetary Fund prescription of economic austerity and open markets.

His former deputy, Anwar Ibrahim, favoured a more cautious approach which is one of the reasons he was sacked.

Mr Anwar's dismissal has sparked violent calls for reform in a country suddenly plunged into recession.

The BBC Asia Business Correspondent, David Willis, says the irony of holding a free trade summit in a country that has such grave doubts about the benefits of globalisation is not lost on officials.

The question is whether it will act as a counterweight to protectionism or lead other countries to follow Malaysia's example.

Some economists are saying the crisis should force Apec to redefine its role and whether its philosophy of free trade and liberalisation can be sustained.

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