As Prime Minister Lee explained, while tariffs are now low, ‘much work remains: to harmonise trade rules, to remove non-tariff barriers, to simplify customs regulations, [and] to help companies realise more fully the benefits of free trade’
There is more to APEC than trade and investment. In a world emerging from a global financial crisis and seeking to grapple with climate change, it is clear that not all problems have regional solutions and there is far more to economic cooperation than simply reducing policy obstacles to trade.
The new G20 forum allows Asia Pacific governments to increase their role in global deliberations and accept responsibility for problems which need global solutions, including financial regulation, climate change and the future of the WTO.
Within the region, APEC needs to focus on all the foundations for balanced, inclusive and sustainable growth at the upcoming annual summits in Japan and the US. Recent meetings in Washington offer the suggestion that APEC now embark on a broad strategy promoting inclusive growth by encouraging all Asia Pacific governments to improve international and domestic market efficiency.
The challenge of promoting mutually beneficial, deeper integration has changed remarkably in recent decades. Opportunities created by advances in transport and information technology mean thatinternational commerce is coming to be dominated by production networks and supply chains which are increasingly global, rather than regional.
The relative importance of obstacles to trade and investment has also changed. Some traditional trade barriers remain on a few sensitive products; these residual problems are costly, but they affect only a small and rapidly shrinking share of international commerce. The greatest gains from cooperation now come from dealing with problems of communications and logistics, often linked to security concerns, and the efficiency and transparency of economic policy implementation in national markets.
APEC economies now need to choose between two quite different ways of dealing with these new challenges.
The first approach is based on the experience in the Asia Pacific region, driven by APEC governments’ eagerness to participate in the international economy and international production networks. Progress in this area is not limited by international political constraints, but by the capacity of national governments to design and implement appropriate national policy strategies. In this approach, statements of intent to cooperate need to be followed up by policy development and sharing of expertise, not by the enforcement of legal commitments.
APEC has an established comparative advantage in promoting policy development to address behind-the-border issues, which affect international trade and investment today. Successful cooperation relies on a combination of sharing the expertise needed to implement coordinated reforms and pioneering practical arrangements, such as harmonisation of customs procedures or the APEC Business Travel Card, then encouraging others to follow these examples.
Progress can be accelerated by high-level commitment to a long-term vision of deep economic integration. The concept of a single market was helpful for the European Union to take this agenda forward and a unifying vision of the same kind will also be useful in the Asia Pacific. This region will need to find a different approach to deep economic integration because this diverse region will not accept a supra-national authority in the foreseeable future. A new long-term vision would need to be backed by realistic, medium-term milestones by which to measure progress.
The second approach, strongly favoured by Fred Bergsten, continues to see regional trade negotiations as the main vehicle for regional economic integration. This would place the highest priority on concluding negotiations for a Trans-Pacific Partnership (TPP) among eight APEC economies. That should be completed as soon as possible, ideally by the time of the 2011 APEC meetings in Honolulu, even if that meant excluding sensitive products from the coverage of the agreement. Advocates of the TPP see it as a natural stepping stone for an eventual APEC-wide trading bloc: a Free Trade Area of the Asia Pacific (FTAAP).
If there were to be serious negotiations for a TPP (which may not happen for some years) APEC is not the body to handle them. APEC’s constitution is not designed for that and it has a more important and comprehensive job to do. If APEC is to support trade liberalisation by negotiation it needs to keep driving these through the WTO.
The second approach, based on discriminatory trade negotiations, is a strategy that may have been relevant in the 1950s or 1960s, but is not capable of dealing with the main issues in international commerce today. Nor is it a relevant strategy for APEC in the next two years and beyond.
The first approach is the one consistent with what APEC was set up to do and is good at doing. APEC’s agenda is to promote and shape growth, including a regional economic integration effort that reflects fundamental changes in the nature of international commerce. APEC also has a constructive role to play in global as well as regional cooperation which complements the work of the new G20 forum.
I have to confess from the outset that I am not familiar to the different schools of thought in regionalism, so I am not necessarily an enemy or a fried to any schools, although some of my former supervisors may feel disappointed in hearing this.
But I think that may not necessarily be shameful, because better progresses may be made when one takes all knowledge including being taught or heavily influenced by his teachers’ thoughts and still be able to analyse and approach issues with an independent mind. And the teachers should be proud of such students.
Having said that, I find it extremely interesting to note that Elek’s preference for the two extremes in the spectrum of his discussion over Bergstan middle ground, unless I have profoundly misunderstood Elek’s point.
For a layman to the different schools of thought like me, Bergstan’s approach appears to be a mix of the advantages of the APEC and WTO. However, Elek is arguing that APEC members should go either what they have been doing or are used to do, that is, a loose and non legalistic approach to economic matters concerned to them and within them, or to the more difficulty WTO and legalistic enforceable approach, nothing should stand in the middle ground that might take the advantages of the two approach and come to a compromise and suggesting a possible evolution of APEC business.
I assume it is the case that both the APEC way and the WTO way coexist and APEC members subscribe to both of them if they are also members of WTO. Then to me it is possible for them to also accept some compromises in between, unless of course there “preferences” are for extreme contrast but harmony!
That is how I find Elek’s posting interesting, and thought provoking.
I will be the second to Lincoln Fung. I fully agree on Andrew on the first seven paragraphs and support his ‘first approach’. The conventional APEC approach, with encouragement but without legal binding, has worked well so far. The Asia Pacific economies, especially East Asian members, have expanded trade, investment and GDP faster than in the EU economies, in spite of still remaining barriers to trade and investment. The trade/GDP and investment/GDP ratios of all APEC economies have also increased, following closely the EU economies.
However, his second approach will need to be introduced, in stead of rejected, to strengthen the APEC approach. Late Hadi Scesastro suggested that we would have to change from Voluntary-APEC to Binding –APEC some day and some day is coming now. ASEAN members are trying hard to implement its economic community on binding basis. The on-going Greek crisis and resulting disturbance in EU tell us that, if East Asia aims at an economic community, its members have to be disciplined in implementing economic policies and we have to start moving in that direction now. I am not well informed of the ongoing negotiation of TPP but I expect it will set a role model of better coordinated economic community. It is currently carried out outside of APEC but will be accepted by other APEC members as a path-finder approach, toward FTAAP as a long term goal. Andrew’s second approach will not be an alternative to the first but supplement it.