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.