Asia Pacific Economic Cooperation (APEC)
The Asia Pacific Economic Cooperation (APEC) process was the first structured forum for intergovernmental cooperation among the economies of East Asia and their main trading partners in North America, Australasia, and Russia. It was launched in Canberra, Australia, in 1989 to promote closer communications to help seize the opportunities for trade and investment among a diverse group of economies with different resources and comparative advantages, as well as to anticipate the inevitable tensions when comparative advantage changed as economies developed. APEC’s central objective is to sustain the growth and development of the region by promotingmutually beneficial economic integration and by encouraging international flows of goods, services, capital, and technology. Asia Pacific Economic Cooperation has adopted the principle of open regionalism, seeking to reduce impediments to international economic transactions among participants without diverting economic activity away from other economies.
APEC was built on foundations laid during the preceding decades. Since the 1960s, the Association of Southeast Asian Nations (ASEAN) has demonstrated that a voluntary association of diverse nations with diverse economies can be valuable and effective. Since those years policy-oriented analysis by researchers and business people with a broad international outlook noted the growing, market-driven interdependence of Asia Pacific economies. This included thework of the Pacific Forumfor Trade and Development, a group of policy-oriented researchers that has met annually since 1967 to assess the changing environment for economic development in the Pacific and its policy implications; the Pacific Basin Economic Council, a group of senior business people with a broad international outlook that also began to meet in the late 1960s; and the Pacific Economic Cooperation Council, established in 1980. APEC has also set up its own privatesector advisory group, the APEC Business Advisory Council.
In a January 1989 speech in Seoul, Australian primeministerBobHawke advocated the creation of a new intergovernmental vehicle of regional cooperation. The first ministerial-level meeting brought together representatives from twelve Asia Pacific economies. The initial participants were the then six members of ASEAN (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) together with Australia, Canada, Japan, the Republic of Korea, New Zealand, and the United States. Subsequently, Asia Pacific Economic Cooperation developed a comprehensive work program to promote economic integration and agreed on itsmain objectives and principles set out in the 1991 Seoul APEC Declaration.
APEC further distinguished itself fromthe legally binding and preferential arrangements adopted by the European Union (EU) and others by agreeing that Asia Pacific cooperation should be voluntary. Asia Pacific Economic Cooperation would not be a negotiating forum: instead it would seek to identify opportunities to promote mutual economic benefit through consultation, building consensus around a widening range of shared interests. APEC’s nonformal structure made it possible to include all three Chinese economies. Taiwan participates as the economy of Chinese Taipei, and since 1997 Hong Kong has participated as Hong Kong, China. Membership has since expanded to 21: Chile, Mexico, Papua New Guinea, Peru, Russia, and Vietnam joined between 1993 and 1997. A subsequent moratorium on expanded membership was set to end in 2007.
Free and Open Trade and Investment
Asia Pacific Economic Cooperation leaders met for the first time in 1993. At their 1994 meeting, in Bogor, Indonesia, theywere able tomake a political commitment to eliminating barriers to trade and investment by no later than 2010 for developed economies and 2020 for developing economies. A midterm stocktaking, conducted in 2005, showed considerable progress toward this goal. Average tariffs were considerably lower than in 1989 and border barriers to trade inmost goods andmany services were already set at zero or negligible levels. People and capital were moving much more freely around the region.
By harmonizing customs procedures, increasing the scope of mutual recognition of standards, adopting agreed principles for more transparent and competitive government procurement, and reducing impediments to international business travel, APEC made substantial progress in reducing other costs and risks of international commerce. This progress has led to the emergence of the Asia Pacific region as the engine of global economic growth, outpacing the rest of the world in terms of opening itself to international trade and investment and increasing its share of global output, trade, and investment (APEC 2005; Elek 2005).
Strengths and Weaknesses
Asia Pacific Economic Cooperation’s experience has also revealed some of theweaknesses aswell as the strengths of voluntary cooperation among widely diverse economies. Coordinated unilateral actions have helped to bring down many impediments to trade and investment, but voluntary cooperation has not proved adequate to liberalize ‘‘sensitive sectors,’’ such as agriculture, textiles, and clothing. APEC’s limited ability to respond to the serious financial crises in EastAsia in the late 1990s also demonstrated the value of attending to all of the foundations of sustained economic growth, not just the reduction of obstacles to international trade and investment.
By 2007, it was evident that one dimension of the vision of free and open trade and investment, the elimination of all traditional border barriers to trade, would not be achieved according to the 2010/2020 timetable. At the same time, there was growing realization that the removal of tariffs or quantitative restrictions on trade in goods, or even in services, would not be enough to promote deep economic integration. The experience of the EU had shown the value of a comprehensive programto reduce regulatory impediments to internationalmovement,not only of products, but also of factors of production.
Facilitating economic integration by closer coordination or harmonization of policies on matters such as customs procedures or standards, adoption of compatible policies to encourage e-commerce, and reduction of the cost of international transportation have become relatively more important means of promoting economic integration. In these areas, the effective constraint on cooperation is not the shortterm political cost of overcoming narrow vested interests but the capacity to implement more efficient policies. Facilitating trade by dealing with logistic or regulatory obstacles to trade is largely a matter of enhancing human, institutional, and infrastructure capacity.
The Busan roadmap for promoting progress toward free and open trade and investment, based on the 2005midtermevaluation, takes account of these issues. Accordingly, the focus of attention is shifting from the remaining traditional border barriers to trade toward the sharing of information, experience, expertise, and technology to help all Asia Pacific economies build the capacity for designing and implementing better policies, which strengthen domestic as well as just international markets. At the same time, Asia Pacific Economic Cooperation economies would support traditional trade liberalization through the WTO. This could bring about a practical division of effort between APEC and the WTO, based on the comparative advantages of institutions for voluntary, rather than negotiated, cooperation.
Especially since 2000, APEC has needed to define its role alongside many other bilateral and subregional forms of economic cooperation. Inresponse to the inability to make further significant progress on sensitive issues, such as agriculture, in either the WTO or APEC, combined with the need to address many new issues that influence international economic transactions, there has been a proliferation of mostly bilateral preferential trading arrangements. Yet bilateral preferential trading arrangements have also been unable to achieve significant liberalization of trade in sensitive products, while complicating all international trade due to complex, and often overtly discriminatory, rules of origin. It remains to be seen whether that problem can be overcome by preferential trading arrangements among larger groups of economies.
Concurrently, reflecting the growing share of international production and trade in East Asia, several East Asia centered forums have emerged. As in Asia Pacific Economic Cooperation, members of the wider networks of cooperation in East Asia will resist ceding powers to any supranational authority. This suggests that they might best focus on issues of perceived shared interests, rather than the negotiation and imposition of binding constraints on one another.
In summary, APEC members havemoved toward their original goals but their institution has been redefining its own goals and operation. At the same time, other institutional developments in the region now create the prospect of competition and overlap with APEC (Soesastro and Findlay 2005). Progress on economic integrationmay prove easier in an East Asian, rather than in awider trans-Pacific, forum.On the other hand, East Asia is itself a very diverse grouping and will face constraints quite similar to those encountered by APEC while the United States will seek to sustain trans-Pacific cooperation. One outcome may be ‘‘variable geometry,’’ with Asia Pacific Economic Cooperation wide consultations encouraging different groups of economies to pioneer cooperation on issues of shared interest, not necessarily in the institutional context of the APEC process itself. See also Association of Southeast Asian Nations (ASEAN); free trade area; regionalism