Author: Philippa Dee

The good news is that the APEC ship is slowly turning around. Rather than keeping its prime focus on trade and investment liberalisation, with the fixation on foreign discrimination that this brings, APEC Ministers are embracing the importance of behind-the-border reforms. The change in focus is vital because the barriers that are doing the biggest damage are the ones that are holding back domestic players. The gains from reforming the non-discriminatory barriers — those that affect domestic and foreign players equally — are an order of magnitude greater than those typically delivered by trade agreements.

In Melbourne yesterday, APEC Ministers announced a joint commitment to structural economic reform, and agreed to voluntary reviews of national regulatory frameworks.

APEC nay-sayers may scoff at the voluntary nature of the commitment, but in the area of behind-the-border reforms, nothing else will work. The political economy of structural reform is primarily domestic — typically an incumbent versus a group comprising new entrants, upstream and downstream using industries and consumers. The political battle needs to be fought domestically, and regional input cannot afford to be intrusive. Policy reviews can help to highlight who the players are, what their interests are, and by how much they would gain or lose from reform. It can make the pro-reform coalition members aware of each other, and help to push the cause domestically. Arguably, it is this lack of a domestic sales job that has led the Doha Round to falter. But the sales job needs domestic political backing. This can’t be forced from outside. It has to be voluntary.

Turning the APEC ship around is taking time, and progress is slow. Similarly, as Australians well know, the domestic reform agenda is a difficult one, the sales job takes time, and progress in member countries must be expected to be slow. What APEC can do is help with the process. It cannot be held directly accountable for outcomes, because these will need to be delivered by the domestic political processes in Member countries. So if yesterday’s announcement looks like progress at a glacial pace, so it should be.

The bad news is not the ‘weak’ or ‘slow’ nature of yesterday’s outcome.

One part of the bad news is that the wrong people came to the party. A few countries sent Ministers from central domestic economic policy making agencies, but many sent their trade ministers — often (but not always) the same people with the hang-up about discrimination against foreigners. No wonder the journalists stayed away in droves.

Another bit of bad news was the failure to set a date for another Ministerial. There was no effective Ministerial follow-through. But I guess that if you have had gate-crashers, you probably don’t want to repeat the party.

Australia will need to work harder to ensure that the right people are there next time and demonstrate a commitment to follow-through that seems to have been totally absent.

For further reading see my article East Asian Economic Integration and its Impact on Future Growth, The World Economy, 30(3), 2007, pp. 405-23.

Related articles:

1. APEC goes ‘BISK’
2. Japan in the spotlight in the lead-up to APEC
3. APEC turns 20: new opportunities
4. Quiet but real progress in APEC in Singapore

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3. Getting East Asia’s act together on the G20 Summit

This entry was posted on Wednesday, August 6th, 2008 at 4:06 pm and is filed under Economic Policy, Institutions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.