Building on the work of the Pacific Economic Cooperation Council (PECC), APEC has created effective networks for communication among officials, researchers and business, which has built significant mutual trust and mutual respect. Cooperative policy development helps the region identify shared interests and anticipate problems across many sectors.

China’s increasingly confident engagement in this process helped it to join the WTO with the support of other Asia Pacific governments in 2001. Based on the 1995 Osaka Action Agenda, Asia Pacific governments have also reduced behind-the-border and across-the-border obstacles to trade. Cooperative policy development based on growing mutual trust and capacity-building has led to more efficient customs procedures, progress towards paperless trading, mutual recognition of standards and other practical arrangements to facilitate trade and investment. These are already saving billions of dollars per year.

Between APEC’s launch in 1989 and 2000, most traditional trade barriers were reduced to low levels. Asia-Pacific governments recognised that it was in their interest to engage in global markets, as living standards were rising faster in economies which were opening themselves to trade and competition. By 2010, the share of actual to potential trade among APEC economies was higher than within the EU or for NAFTA. Although some sensitive products like agricultural commodities and low-technology manufactures remain protected, these products account for a rapidly shrinking share of international commerce.

Promoting mutually beneficial economic integration should remain a core objective of the APEC process, but this does not require negotiating a Free Trade Area of the Asia Pacific (FTAAP). At this year’s meeting in Peru, APEC leaders are unlikely to initiate negotiations on any APEC-wide deal in light of the serious difficulties with the Trans-Pacific Partnership. This is good news, because it will direct attention to more efficient ways to integrate Asia-Pacific economies. Leaders can focus on practical opportunities for integration where far larger gains can be made through voluntary cooperation, leading to mutual benefits.

A rapidly growing body of evidence from the OECD, Asian Development Bank, the World Bank and the World Economic Forum confirms that readily achievable gains from better connectivity far exceed the potential gains that come from getting rid of all remaining traditional border barriers to trade. For perspective, goods spent stuck in a port or at a border crossing for one day costs as much as a tariff of one per cent. In this era of rapid digitisation, affordable access to high quality broadband and good transport networks are more important to businesses than the residual barriers to importing and exporting a few commodities.

This suggests that the main emphasis of economic integration should be on improving connectivity. Many ways to do so are identified in APEC’s Blueprint for Connectivity. There is no need to tackle all of these at the same time; seizing some opportunities for mutual benefit will provide the confidence to do more. And there is certainly no need to delay potentially huge mutual benefits from better connectivity by waiting for progress in complex trade negotiations. Voluntary cooperation is the most efficient way to make progress.

Some parts of the region already have excellent transport and communications links. In order to continue meeting these targets the region will need to commit to significant financial investments in hardware including roads, harbours, airports and energy grids as well as widespread institutional and human resource development to operate and maintain new assets.

APEC can learn about resource mobilisation from China’s ‘One Belt, One Road’ (OBOR) initiative. The Asian Infrastructure Investment Bank stands ready to invest in soundly prepared projects to improve connectivity among OBOR economies. APEC can establish similar relations with development banks. But that is only a first step. Infrastructure gaps in both developing and developed economies are in the order of trillions of dollars. This is far beyond the scope of development banks’ capacity to lend; therefore private sector investment must be accelerated.

APEC countries should not neglect trade liberalisation while they focus on connectivity. Significant cuts to protection of sensitive products will not happen, either in the WTO or regional trade negotiations, until perceptions of the relative costs and benefits are changed. That will take some time, so APEC networks should continue to present evidence that unilateral trade liberalisation benefits economies when backed by policies that reduce short-term adjustment costs.

Meanwhile, it should be possible for APEC to build on the WTO’s Information Technology Agreement experience and ensure new products don’t become sensitive products in future trade liberalisation discussions. To anticipate future tensions, APEC can work towards a consensus that products can be protected by traditional border barriers, or by protection of their intellectual property rights, but not by both.

APEC’s cooperative policy development can underpin a smart economic integration agenda. APEC groups have already generated a great deal of economic analysis and practical options for cooperative arrangements. This information and experience can be shared with APEC’s neighbours. Both APEC and the Pacific Economic Cooperation Council should encourage policy synergy between APEC, ASEAN, Latin America’s Pacific Alliance and the OBOR initiative.

Andrew Elek is a Research Associate at the Crawford School of Public Policy, The Australian National University. He was the inaugural Chair of APEC Senior Officials in 1989.