APEC at 20: Recall, Reflect, Remake

1. APEC: Genesis and Challenges

1 APEC: Genesis and Challenges Andrew Elek Introduction Some of the foundations of APEC were laid more than 40 years ago. Careful consensus building, based on the achievements of ASEAN and PECC made it possible to launch APEC, based on agreed principles, in 1989.The process evolved quickly in its early years; by 1994 APEC leaders set themselves the remarkably ambitious objective of free and open trade. Much has been achieved since then, but there have also been some disappointments.The first Bogor deadline of free and open trade and investment for developed APEC economies by 2010 will not be met. Learning from experience,APEC now needs to act in line with the comparative advantage of a voluntary process of cooperation, rather than attempt to become a negotiating forum. Some traditional border barriers remain. But the negotiations needed to reduce them can be left to the forums designed to conduct them.That would allow APEC to concentrate on issues which are of considerably greater concern to most of those involved in international commerce.These are practical matters like logistic constraints, inadequate communications, security concerns and the need to cope with different regulations in other economies. APEC governments are already cooperating effectively in these areas.The constraints are lack of capacity, rather than political will.Voluntary cooperation has been proved to be feasible in these areas, but much more can be done. 1 01 APEC@20 Ch 1 10/20/09, 5:10 PM 21 APEC leaders could raise the profile of such important work by setting longterm targets in specific practical areas discussed in this paper. Achieving ambitious, but realistic, milestones on the way to such targets would allow APEC to transform itself to a process which records a sequence of realistic, ambitious and practical achievements, year after year. Sadly, this is may not be possible. Instead of steady progress in line with the founding concepts of voluntary cooperation and open regionalism, many years may be wasted in an attempt to negotiate a lowest common denominator, APEC-wide trading bloc. The Foundations of APEC APEC builds on foundations which were laid more than 40 years ago. In the 1960s, the Pacific Trade and Development (PAFTAD) conferences started to assess the changing economic environment of the Asia Pacific. Its work was complemented by the Pacific Basin Economic Council (PBEC), a group of senior business people seeking to forge closer economic links in the region. These groups analysed the growing, market-driven interdependence of AsiaPacific economies with very different and often complementary resources. Some 57 per cent of exports and 55 per cent of imports of these economies were already traded within the region. Some Asia-Pacific economies were already trading their way out of poverty and reducing obstacles to international trade and investment. Others, such as Indonesia, were engaging in the international economy, while China was beginning its “opening to the outside world”. Each opening enhanced the competitiveness of the economy undertaking the reform and created new opportunities for other economies, encouraging further reform and promoting closer, mutually beneficial integration. The work of PAFTAD highlighted the crucial role of the international trading system based on the General Agreement on Tariffs and Trade (GATT). The virtuous cycle which was leading to the relative increase in the Pacific region’s share of global economic activity relied on confidence in such an open, rules-based and non-discriminatory trading system. International consultations were seen to be needed in response to growing interdependence; to identify new opportunities for trade and investment and to anticipate potential tensions. Since the 1960s, ASEAN had demonstrated that a voluntary association of diverse nations was possible. By 1980, its members had developed a strong sense of community and were able to project a powerful, collective influence in wider forums. ASEAN’s success paved the way for policy-oriented discussions embracing the entire Asia-Pacific region. Following careful consultations, the Pacific Economic Cooperation Council (PECC) was established in 1980. In addition to researchers and business people, it engaged government officials 2 01 APEC@20 Ch 1 10/20/09, 5:10 PM 22 in discussions about international economic cooperation — at that stage in a personal capacity. It was soon recognized that organizational models developed elsewhere could not be simply transplanted to the Asia Pacific, which would not accept a supra-national authority that could impose formal obligations on its governments.Therefore, cooperation would need to be voluntary, helping to...