APEC at 20: Recall, Reflect, Remake

2. APEC’s Origins and its Future

2 APEC’s Origins and its Future* Peter Drysdale The idea of Asia-Pacific Economic Cooperation (APEC) has evolved over the years, but it continues to be rooted in the reality of the complex political and economic circumstance of the AsiaPacific economy and polity. Since 1989, when APEC was founded, the institution has changed profoundly. Since 1993, the leaders have met annually and these meetings bring weight to APEC’s transPacific political and economic dialogues. The East Asian financial crisis re-focused APEC’s economic agenda, albeit more slowly than some might have wished, away from trade liberalization towards financial and other behind-the-border reform. Now the global financial crisis and the longer-term change in the structure of regional and global economic power call for a new look at how APEC might serve its members down the track. Recalling its origins and the processes on which it is built are the first step in considering how APEC might move forward in the years ahead. Genesis Although the theoretical underpinnings for an Asia-Pacific community were documented with remarkable prescience by Sir John Crawford as early as 1938, the road towards the establishment of Asia-Pacific Economic Cooperation (APEC) was long and there were many vicissitudes on the way.The idea of APEC was wrought from East Asia’s rapid industrialization after the conclusion of the Pacific War. Industrialization created new, and powerful, interactions between East Asia and North America which, in turn, demanded the creation of a new 17 02 APEC@20 Ch 2 10/20/09, 5:10 PM 39 framework for the relationship, first between the United States and Japan, and gradually between America and the whole region, prominently now, China. The debate about what form and function these new relationships should assume was painstaking because the effect that growing regional economic interdependence might have on the East Asian political economy was still uncertain (Woolcott 2003). The objective was to secure and promote economic cooperation among the wider and wider group of economies in Asia and the Pacific that were becoming more deeply involved in the regional and international economy. Three factors conspired to set the context that shaped the formation of APEC.The first was the Asia Pacific’s political, cultural and institutional diversity.This led, in conjunction with the burden of imperial history (including Japan’s occupation of a large part of East Asia and its wartime aggression), to a certain agoraphobia in developing nations who would jealously guard their economic sovereignty, which initially limited broad and deep interaction among governments and community leaders in the region. Second, the Asia Pacific was a region that included economies at many stages of economic development, many of them newly committed to the process of reform and integration into the international economy.Third, and perhaps most saliently, America, a global power with global engagements, was initially not interested in the idea. In the final analysis, regional goals and policy priorities had to be patiently synergized (Funabashi 1995; Drysdale 1988), and a great deal of innovative thinking was invested in the engineering of a new form of regionalism which would fit the circumstances of the Asia Pacific. The promoters of an Asia-Pacific inter-governmental organization were policy-oriented economists, business leaders, officials and politicians, and its design took over two decades to materialize. Momentum for APEC built throughout the 1970s and 80s.What had begun, in the late 1960s, as an academic and business network for the promotion of Asia-Pacific economic cooperation through the Pacific Trade Development (PAFTAD) conferences and the Pacific Basin Economic Council (PBEC) slowly evolved, by the late 1970s, into a larger community, including government officials, with greater influence over policy thinking (Donowaki 1982). This saw, by September 1980, the inauguration of the quasi-governmental Pacific Economic Cooperation Council (PECC). PECC, in turn, played a pivotal role in laying the foundations for the establishment of APEC (Soesastro 1994). Japan, having emerged as a major industrial power over the course of its recovery from the Pacific War, was at the forefront of this process. So was Australia because of its importance as a resource supplier to the region, and, together with America and Japan, formed another hub from which sprang APEC’s various new, triangulated economic relationships. 18 02 APEC@20 Ch 2 10/20/09, 5:10 PM 40 Form and Function The nature of economic cooperation arrangements in East Asia...