Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : SANTIAGO
Tarikh/Date : 20/06/91
Tajuk/Title : THE CHILEAN COUNCIL FOR
INTERNATIONAL RELATIONS
"COOPERATION AND COMPETITION IN
THE PACIFIC"
Honourable President of the Chilean Council
for International Relations;
Distinguished Members and Guests;
Ladies and Gentlemen,
I am delighted to be here in Chile. As you know this
is my first visit to this country. We have, I think, neg-
lected each other for too long. I hope my visit can con-
tribute towards forging a new framework for mutually
beneficial cooperation.
2. I am honoured to be invited to address you and to share
with you some thoughts about the future of the Asia-Pacific
region. For centuries the Pacific Ocean has kept us apart.
However, the relentless advance of communication technology
is drawing us closer together. Far from being an ocean that
divides us, it is now becoming an ocean that links us. We
must take advantage of this shrinking ocean to restructure
our relations, particularly in economic interaction.
3. I know that you in Chile have already sensed this and
have taken steps to strengthen your Pacific identity. You
are for example, active in the Pacific Basin Economic Coun-
cil (PBEC) and have only last month joined the Pacific Eco-
nomic Cooperation Conference (PECC). You have also
expressed interest in establishing contact with ASEAN
through the Rio Group and in the APEC process. I welcome
Chile's active interest in the emerging structures of
Pacific cooperation. The strengthening of bilateral ties
between our two countries is also an intrinsic part of this
process and is one of the reasons for my visit.
4. East Asia is reputedly the world's most dynamic region.
Growth rates now average more than 5 per cent. Most East
Asian economies are expected to register even higher growth
rates of between 7 to 10 per cent this year. On the whole,
the East Asian nations already account for more than 38 per
cent of global trade. By the end of this century the region
will outrank all others in trade and investment flows, pro-
ductivity and growth.
5. The East Asian region owes its astounding economic suc-
cess to two main factors, namely free-market policies and
free trade. If you look around the East Asian region, you
will note that every country that has registered high growth
rates also practices a free-market economy. This is not a
coincidence. The free-market system is not a perfect one
but no better alternative exists.
6. This reality is now also more widely accepted in this
part of the world. The countries of South America are in-
creasingly adopting free-market policies, economic
liberalism and deregulation. State-owned industries are be-
ing privatised. I believe, these are necessary prerequi-
sites for sustained economic growth. Certainly the
Malaysian Government is committed to such an approach and
the results have been impressive. I am convinced that with
your policy shift in favour of a market economy, South Amer-
ica will begin experiencing high growth rates as well. In-
deed Chile's own high growth rates bear testimony to this.
South America will also be more integrated with the global
trading system and will benefit from trade flows and invest-
ments. These are exciting developments which augur well not
only for South America but also for East Asia as a whole.
7. The East Asian region today is at a cross-road. There
are many impulses pulling and pushing us in different di-
rections. There is for example the impetus to Pacific-wide
cooperation that has found expression in PECC and PBEC.
There is also the Asia-Pacific Economic Cooperation or APEC.
8. Malaysia of course supports such forms of cooperation
but it is important to ensure that it will genuinely serve
the needs of smaller Pacific countries such as the South
Pacific island states and groupings such as ASEAN. It must
not become a vehicle to perpetuate existing asymmetries and
policies that place us at a disadvantage. Despite these
concerns we are prepared to keep an open mind on the issue.
APEC has perhaps the potential to be a pan-Pacific
organisation encompassing a number of sub-groupings. If
APEC is to move forward however, its goal must be an
organisation of equal states committed to free trade and
economic cooperation both in principle and practice. In the
meantime it would be more convincing, and certainly it would
inspire confidence in us, if those who loudly espouse its
benefits demonstrate their commitment to free trade in tan-
gible ways. Chile and others in this part of the world, as
much as China and Vietnam, should join the APEC process and
work with us to achieve these objectives.
9. In the opposite direction is the trend towards economic
regionalism. In Europe, this trend will in the immediate
term culminate in EC 1992 and in the longer haul in greater
European integration. In the Americas, the US-Canada Free
Trade Area has already taken shape. It may soon lead to the
formation of a North American Free Trade Area or NAFTA. Un-
der the Enterprise for Americas Initiative, the concept will
be extended to cover all of the Americas. Judging from the
many statements that have been made by its principal propo-
nents, the rationale behind these groupings are certainly
good. The removal of tariffs and trade barriers and efforts
to encourage greater investments are all laudable.
10. The emergence of large and powerful regional economic
groupings will however also impact upon the Asia-Pacific and
on other developing countries in many other ways. NAFTA
alone will have a market of 360 million people with an an-
nual output of US$6 trillion while the EC will have a market
of 340 million people with an output of nearly US$5
trillion. If these groups remain committed to free-trade
internally and externally, it would greatly stimulate global
economic growth. But let us not forget that these groupings
also have the potential to do enormous harm if the fundamen-
tal principles of free-trade are sacrificed for political
expediency. Even before these groupings took full shape, we
have experienced their intemperance. What is there to guar-
antee that things will not get worse when their influence
and weightage increases?
11. Let me illustrate these concerns with some tangible ex-
amples. Meeting in the New York Plaza Hotel in September
1985, the G-7 nations decided that a weaker US dollar was
needed to stimulate U.S. exports. They subsequently inter-
vened in foreign exchange markets to give effect to this de-
cision. As a direct result of this policy, now known as the
Plaza Accord, the dollar weakened and the Yen and other ma-
jor currencies appreciated. This was of course good for
U.S. exports but for Malaysia it meant that we had to take a
very big revaluation loss on our Yen-denominated external
loans. Although we and other smaller nations were so ad-
versely affected by the Plaza Accord, we were not consulted.
We the poor nations were simply expected to adjust to these
changes meant to benefit the rich.
12. A few years later, our palm oil was targetted by power-
ful lobby groups in the U.S. which were envious of our suc-
cess in producing a wholesome oil at competitive prices.
They launched a smear campaign against palm oil, branding it
a poison. Discriminatory legislation against palm oil was
introduced at both federal and state levels. When we sought
to defend ourselves we were hauled up before the Interna-
tional Trade Commission, a U.S. federal agency, which ac-
cused us of making unsubstantiated claims. Those who
claimed that palm oil is damaging to health have also no
proven evidence to support these allegations. But they were
not subjected to action by any U.S. agency. In the meantime
pressure applied on palm oil users forced them to label
their products as free from tropical oils, thus insinuating
that palm oil is dangerous. Only 3% of edible oil consumed
in the U.S. is made up of palm oil, yet all the heart dis-
eases in the U.S. are attributed to it.
13. Chile itself has not been immune from such unfair prac-
tices. It was not so long ago when one or two contaminated
grapes led to the imposition of a total ban on the export of
all Chilean grapes to the U.S. I am told that Chile lost
over US$340 million as a result.
14. When the big countries are disadvantaged, when their
beef exports are discriminated against because of arbitrary
standards, when their rice exports face high tariffs, they
are able to use their economic clout to protect their inter-
ests. But what do the smaller countries do when we face
such difficulties?
15. And these are not the only issues developing countries
have to contend with. A recent UNCTAD report, for example,
estimated that at least US$25.6 billion of exports from de-
veloping countries are affected by non-tariff measures such
as import quotas and voluntary export restraints. Again the
big countries have the power to force open the markets of
developing countries with the Super 301 enactments, an exam-
ple of an international application of a national law. What
however do we do when our exports face non-tariff harassment
and are adversely affected by non-trade issues like labour
rights, environmental problems and even over whether we
should accept illegal aliens?
16. Unfortunately things will not get better, at least in
the near term. The Uruguay Round has floundered principally
because of differences between the U.S. and the EC. Indeed,
these two giants can hold the entire multilateral trading
system to ransom because of their differences. At this
stage, I am not hopeful that the Uruguay Round can be suc-
cessfully concluded. The world economy also faces uncertain
prospects. The industrialised countries are already facing
recession. As demand weakens and the terms of trade deteri-
orate further, protectionism will increase. Trade tensions
can therefore be expected to rise with adverse consequences
for developing countries.
17. Against this backdrop of an uncertain international
economic situation, Malaysia has proposed the formation of
the East Asia Economic Group (EAEG), a forum of East Asian
nations to consult on ways to uphold the free-trade system.
We have explained that as East Asia is so heavily dependent
upon the free flow of trade both internally and externally,
we feel the need to come together to ensure an open trading
system within our group and between any member and the rest
of the world. Like NAFTA, we hope that we can also discuss
ways to reduce trade barriers and promote investments and
cooperation. Such a grouping will never become inward look-
ing or protectionist simply because we would have most to
lose by doing so. As a first step this proposal is now be-
ing discussed within ASEAN though much outside pressure is
being exerted against ASEAN to abandon it. It would seem
that East Asians are not to be allowed to even set up a
consultative mechanism while trade blocs take shape else-
where. We are not even allowed to call ourselves East
Asians. We prayed for an end to the wasteful East-West con-
frontation, but the unipolar world which has emerged does
not seem any less threatening.
18. Those who claim to abhor trade blocs must not them-
selves retreat behind blocs of their own while they forced
others to open their markets. Free trade must be universal
and must be so structured that it will be possible for the
poor to grow and become developed. A demand for national
status to be mutually practiced may sound fair. But in
practice the rich and powerful with the capacity to go
abroad will be the real gainer. Of what benefit will it be
for a tiny bank in the developing country to gain national
status in the land of corporate giants?
19. Still developing countries must continue to build up
bilateral linkages and widen our trading base to include
non-traditional markets. It is always unhealthy to be too
dependent on one or two markets. Some time ago several de-
veloping countries established a forum to promote South-
South cooperation. It has come to be known as the G-15. I
am convinced that South-South trade can yield good divi-
dends. I am convinced also that this will be demonstrated
by Malaysia-Chile relations. I am realistic enough to ac-
cept that South-South cooperation is not the solution to all
our problems but it can certainly be an important part of
the answer.
20. As for Chile, I hope that apart from enhancing trade
with developing countries in general, you will continue to
give priority to ties with East Asia. With its high growth
rates and its ever increasing demand for machinery, consumer
products, food and raw materials, East Asia should be an at-
tractive profit center for Chilean businessmen. East Asian
countries are also looking for new markets and new opportu-
nities for investment. They can be encouraged to look to
Chile and South America.
21. Chile in fact is uniquely placed to act as a bridge be-
tween East Asia on the one hand and the rest of South Amer-
ica on the other. Certainly Malaysia would like to use
Chile as a base to expand its economic and trade ties with
the rest of South America. You have an open economy and
good infrastructure. The Port of Valparaiso is already
emerging as an entrepot for the surrounding states. To reap
the full benefits of cross-Pacific linkages, serious efforts
should also be made to strengthen shipping and air links be-
tween Chile and East Asia. The decision of both our govern-
ments to discuss these issues in the next few days will
contribute to this. I look forward to the day when Malaysia
Airlines and Lan Chile fly to each other's capitals, estab-
lishing for the first time a southern route linking both our
countries and regions. There are thus bright prospects for
cooperation between Chile and Malaysia and on to East Asia.
22. Chile is joining the Asia-Pacific community at a crit-
ical juncture in the history of the Asia-Pacific. The
Pacific can offer much to Chile and other South American
Pacific states, but only if it remains open to free trade
and cooperation. The events that are shaping the Asia-
Pacific today are not merely of academic significance. For
countries like Malaysia and Chile who depend on free trade
to prosper and grow, it may be the key to our survival.
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