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  • 2. INTRODUCTIONAsia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim countries (formallyMember Economies) that seeks to promote free trade and economic cooperation throughoutthe Asia-Pacific region. Established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional trade blocs in other parts of the world, initially,with the notion to the likely dominance of the sphere of economic influences of the highlyindustrialized Japan (a member of G8) in the Asia-Pacific region and for the economic interestsof Australian agricultural/raw material products to search for new buyers other than the demand-declining European market,[APEC works gradually (to include members of Newly industrializedeconomy at the time, although the agenda of free trade was a sensitive issue for the developingNIEs, and for ASEAN economies to explore new export market opportunities of the naturalresources such as natural gas and seek regional economic integration (industrial integration) bymeans of foreign direct investment on the behalf of ASEAN) to raise living standards andeducation levels through sustainable economic growth and to foster a sense of community andan appreciation of shared interests among Asia-Pacific countries. Members account forapproximately 40% of the worlds population, approximately 54% of the worlds gross domesticproduct and about 44% of world trade. For APEC Economic Trends Analysis in 2012,An annual APEC Economic Leaders Meeting is attended by the heads of government of allAPEC members except Republic of China (represented under the name Chinese Taipei) bya ministerial-level official. The location of the meeting rotates annually among the membereconomies, and until 2011, a famous tradition involved the attending leaders dressing ina national costume of the host member. 2
  • 3. HISTORYABC news report of the first APEC meeting in Canberra, November 1990. Featuring delegateswatching the Melbourne Cup.In January 1989, Australian Prime Minister Bob Hawke called for more effective economiccooperation across the Pacific Rim region. This led to the first meeting of APEC in theAustralian capital of Canberra in November, chaired by Australian Foreign Affairs MinisterGareth Evans. Attended by political ministers from twelve countries, the meeting concluded withcommitments for future annual meetings in Singapore and South Korea.Countries of the Association of Southeast Asian Nations (ASEAN) opposed the initial proposal,instead proposing the East Asia Economic Caucus which would exclude non-Asian countriessuch as the United States, Canada, Australia, and New Zealand. This plan was opposed andstrongly criticized by Japan and the United States.The first APEC Economic Leaders Meeting occurred in 1993 when U.S. President Bill Clinton,after discussions with Australian Prime Minister Paul Keating, invited the heads ofgovernment from member economies to a summit on Blake Island. He believed it would helpbring the stalled Uruguay Round of trade talks back on track. At the meeting, some leaders calledfor continued reduction of barriers to trade and investment, envisioning a community in the Asia-Pacific region that might promote prosperity through cooperation. The APEC Secretariat, basedin Singapore, was established to coordinate the activities of the organization. 3
  • 4. During the meeting in 1994 in Bogor, Indonesia, APEC leaders adopted the Bogor Goals thataim for free and open trade and investment in the Asia-Pacific by 2010 for industrializedeconomies and by 2020 for developing economies. In 1995, APEC established a businessadvisory body named the APEC Business Advisory Council (ABAC), composed of threebusiness executives from each member economies MEMBER ECONOMIESSouth Korean President roomful with Japanese Prime Minister Shins’ Abe and U.S.President George W. Bush at APEC2006 in Hanoi.APEC currently has 21 members, including most countries with a coastline on the Pacific Ocean.However, the criterion for membership is that the member is a separate economy, rather than astate. As a result, APEC uses the term member economies rather than member countries to referto its members. One result of this criterion is that membership of the forumincludes Taiwan (officially the Republic of China, participating under the name "ChineseTaipei") alongside Peoples Republic of China (see Cross-Strait relations), as well as Hong Kong,which entered APEC as a British colony but it is now a Special Administrative Region of thePeoples Republic of China.Member economy (name as used in APEC) Date of accession Australia 1989 4
  • 5. Member economy (name as used in APEC) Date of accession Brunei (Brunei Darussalam) 1989 Canada 1989 Chile 1994 China (Peoples Republic of China) 1991 Hong Kong (Hong Kong, China)[4] 1991 Indonesia 1988 Japan 1989 South Korea (Republic of Korea) 1989 Mexico 1993 Malaysia 1989 5
  • 6. Member economy (name as used in APEC) Date of accession New Zealand 1989 Papua New Guinea 1993 Peru 1998 Philippines 1989 Russia 1998 Singapore 1989 Republic of China (Chinese Taipei)[5] 1991 Thailand 1989 United States 1989 Vietnam 1998 6
  • 7. POSSIBLE ENLARGEMENTIndia has requested membership in APEC, and received initial support from the United States,Japan and Australia. Officials have decided not to allow India to join for variousreasons. However, the decision was made not to admit more members until 2010. Moreover,India does not border the Pacific Ocean, which all current members do. However, India has beeninvited to be an observer for the first time in November addition to India, Mongolia, Pakistan, Laos, Bangladesh, Costa Rica, Colombia, Panamaand Ecuador, are among a dozen countries seeking membership in APEC by 2008. Colombiaapplied for APECs membership as early as in 1995, but its bid was halted as the organizationstopped accepting new members from 1993 to 1996, and the moratorium was further prolongedto 2007 due to the 1997 Asian Financial Crisis. Guam has also been actively seeking a separatemembership, citing the example of Hong Kong, but the request is opposed by the United States,which currently represents Guam. 7
  • 8. Pillars APECs Three To meet the Bogor Goals, APEC carries out work in three main areas: 1. Trade and Investment Liberalization 2. Business Facilitation 3. Economic and Technical Cooperation APEC and Trade LiberalizationAccording to the organization itself, when APEC was established in 1989 average trade barriersin the region stood at 16.9 percent, but had been reduced to 5.5% APEC has long been at theforefront of reform efforts in the area of business facilitation. Between 2002 and 2006 the costsof business transactions across the region was reduced by 6%, thanks to the APEC TradeFacilitation Action Plan (TFAPI). Between 2007 and 2010, APEC hopes to achieve anadditional 5% reduction in business transaction costs. To this end, a new Trade FacilitationAction Plan has been endorsed. According to a 2008 research brief published by the WorldBank as part of its Trade Costs and Facilitation Project, increasing transparency in the regionstrading system is critical if APEC is to meet its Bogor Goal targets. The APEC Business TravelCard, a travel document for visa-free business travel within the region is one of the concretemeasures to facilitate business. In May 2010 Russia joined the scheme, thus completing thecircle. 8
  • 9. Proposed Free Trade A rear of the Asia-PacificAPEC is considering the prospects and options for a Free Trade Area of the Asia-Pacific(FTAAP), which would include all APEC member economies. Since 2006, the APEC BusinessAdvisory Council, promoting the theory that a free trade area has the best chance of convergingthe member nations and ensuring stable economic growth under free trade, has lobbied for thecreation of a high-level task force to study and develop a plan for a free trade area. The proposalfor a FTAAP arose due to the lack of progress in the Doha round of World TradeOrganization negotiations, and as a way to overcome the "spaghetti bowl" effect created byoverlapping and conflicting elements of the umpteen free trade agreements—there areapproximately 60 free trade agreements, with an additional 117 in the process of negotiationin Southeast Asia and the Asia-Pacific region.[18][18][19][20][20] The FTAAP is more ambitious inscope than the Doha round, which limits itself to reducing trade restrictions. The FTAAP wouldcreate a free trade zone that would considerably expand commerce and economic growth in theregion.[18][20] The economic expansion and growth in trade could exceed the expectations of otherregional free trade areas such as the ASEAN Plus Three (ASEAN + China, Japan, and SouthKorea).[21] Some criticisms include that the diversion of trade within APEC members wouldcreate trade imbalances, market conflicts and complications with nations of other regions. Thedevelopment of the FTAAP is expected to take many years, involving essential studies,evaluations and negotiations between member economies. It is also affected by the absence ofpolitical will and popular agitations and lobbying against free trade in domestic politics. 9
  • 10. APEC Study Center ConsortiumIn 1993, APEC Leaders decided to establish a network of APEC Study Centre amonguniversities and research institutions in member economies.Notable centers include: Australian APEC Study Centre, Royal Melbourne Institute of Technology, Australia Berkeley APEC Study Center, University of California, Berkeley, United States Chinese Taipei APEC Study Center, Taiwan Institute of Economic Research, Taiwan HKU APEC Study Center, Hong Kong University, Hong Kong, China Kobe APEC Study Center, Kobe University, Japan APEC Study Center, Nacka, China Philippine APEC Study Center Network, Philippine Institute for Development Studies, Philippines The Canadian APEC Study Centre, The Asia Pacific Foundation of Canada, Vancouver, Canada Indonesian APEC Study Centre, APEC Study Center University of Indonesia, Indonesia. 10
  • 11. APEC Business Advisory Council The APEC Business Advisory Council (ABAC) was created by the APEC EconomicLeaders in November 1995 with the aim of providing advice to the APEC Economic Leaders onways to achieve the Bogor Goals and other specific business sector priorities, and to provide thebusiness perspective on specific areas of cooperation.Each economy nominates up to three members from the private sector to ABAC. Thesebusiness leaders represent a wide range of industry sectors. ABAC provides an annual report toAPEC Economic Leaders containing recommendations to improve the business and investmentenvironment in the Asia-Pacific region, and outlining business views about priority regionalissues. ABAC is also the only non-governmental organ that is on the official agenda of theAPEC Economic Leader’s Meeting. 11
  • 12. Annual APEC Economic Leaders MeetingSince its formation in 1989, APEC has held annual meetings with representatives from allmember economies. The first four annual meetings were attended by ministerial-level officials.Beginning in 1993, the annual meetings are named APEC Economic Leaders Meetings and areattended by the heads of government from all member economies except Taiwan, which isrepresented by a ministerial-level official. The annual Leaders Meetings are not called summits. Meeting developmentsIn 1997, the APEC meeting was held in Vancouver. Controversy arose after officers ofthe Royal Canadian Mounted Police used pepper spray against protesters. The protestersobjected to the presence of autocratic leaders such as Indonesian president Suharto At the 2001Leaders Meeting in Shanghai, APEC leaders pushed for a new round of trade negotiations andsupport for a program of trade capacity-building assistance, leading to the launch of the DohaDevelopment Agenda a few weeks later. The meeting also endorsed the Shanghai Accordproposed by the United States, emplacing the implementation of open markets, structuralreform, and capacity building. As part of the accord, the meeting committed to develop andimplement APEC transparency standards, reduce trade transaction costs in the Asia-Pacificregion by 5 percent over 5 years, and pursue trade liberalization policies relating to informationtechnology goods and services.In 2003, leader Redman had planned to attack the APEC Leaders Meeting to be heldin Bangkok in October. He was captured in the city of Ayutthaya, Thailand by Thai police on 12
  • 13. August 11, 2003, before he could finish planning the attack.[citation needed] Chile became thefirst South American nation to host the Leaders Meeting in 2004. The agenda of that year wasfocused on terrorism and commerce, small and medium enterprise development, andcontemplation of free trade agreements and regional trade agreements.The 2005 Leaders Meeting was held in , South Korea. The meeting focused on the Doharound of World Trade Organization(WTO) negotiations, leading up to the WTO MinisterialConference of 2005 held in Hong Kong in December. Weeks earlier, trade negotiationsin Paris were held between several WTO members, including the United States andthe European Union, centered on reducing agricultural trade barriers. APEC leaders at thesummit urged the European Union to agree to reducing farm subsidies. Peaceful protests againstAPEC were staged in Bus but the meeting schedule was not affected.At the Leaders Meeting held on November 19, 2006 in Hanoi, APEC leaders called for a newstart to global free-trade negotiations while condemning terrorism and other threats to security.APEC also criticized North Korea for conducting a nuclear test and a missile test launch thatyear, urging the country to take "concrete and effective" steps toward nuclear disarmament.Concerns about nuclear proliferation in the region was discussed in addition to economic topics.The United States and Russia signed an agreement as part of Russias bid to join the WorldTrade Organization.The APEC Australia 2007 Leaders Meeting was held in Sydney from 2–9 September 2007. Thepolitical leaders agreed to an "a goal" of a 25% reduction of energy intensity correlative witheconomic development. Extreme security measures including airborne sharpshooters andextensive steel-and-concrete barricades were deployed against anticipated protesters andpotential terrorists. However, protest activities were peaceful and the security envelope was 13
  • 14. penetrated with ease by a spoof diplomatic motorcade manned by members of the Australiantelevision program The Chaser, one of whom was dressed to resemble the Al-Qaedaleader Osama bin Laden.The APEC USA 2011 Leaders Meeting was held on Honolulu, Hawaii 8–13 November 2011. CriticismAPEC has been criticized for failing to clearly define itself or serve a useful purpose. Accordingto the organization, it is "the premier forum for facilitating economic growth, cooperation, tradeand investment in the Asia-Pacific region" established to "further enhance economic growth andprosperity for the region and to strengthen the Asia-Pacific community" .However, whether ithas accomplished anything constructive remains debatable, especially from the viewpoints ofEuropean countries that cannot take part in APEC. 14
  • 15. OVERVIEW Projects are a vital part of the APEC process. They help translate APEC Ministers andEconomic Leaders policy directions into actions and create tangible benefits for people living in the Asia-PacificProjects assist member economies in building a dynamic and harmonious Asia-Pacific region bychampioning free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and facilitating a and sustainable business environment.APEC contributes funding to around 100-150 projects each year, with a total value of over $23million committed by APEC to projects in 2010-2011. Over 1600 projects have been undertakensince 1993, when APEC initiated project work. At any moment in time, up to 170 projects may be in implementation, he majority of projects are focused on transferring knowledge and skills between members and building capacity so that each economy can move closer towards the Bogor Goals of free and open trade and investment. APEC projects include workshops, symposia, publications, and research. They are open toparticipation from all 21 member economies. As well as engaging with public and government sector organizations in the 21 economies, external stakeholder engagement is encouraged. 15
  • 16. APEC also works to maximize the benefits of globalization. In particular, APEC supportsprojects that: promote public health; improve the skills of workers; contribute to green growth;reduce the risks of and improve responses to natural disasters and emergencies; and that helpsmall, medium and micro-sized enterprises to grow and access markets.In 2010-2011, APEC approved funding for 235 projects, focusing on trade-related issues, withparticular focus on areas of relevance to APEC’s for.Projects cover a wide range of priority sectors. Each year APEC defines the key policy prioritiesand projects aim to contribute to these directions. Please see the Funding Criteria for APEC-Funded Projects in 2012.In addition to cooperation for trade liberalization, APEC also supports projects that seek to maketrade and doing business easier and more efficient such as: agreeing to common standards forproduct testing and labeling, developing safer and more efficient transportation routes, andproviding information on each members regulatory and legislative requirements for imports andexports. 16
  • 17. Recent themes launched as APEC projects include:Regional economic integration: energy management standardization, intellectual property rights,traditional knowledge protection, self-certification of originGreen growth: low-carbon model town , green finance , phasing out fossil fuel subsidies, smartgridsStructural reform: regulatory impact analysis, principals of corporate governance, competitionlaw and policyCapacity building for APEC’s developing members: ship and port security, trade of secondgeneration bio, best practices for green ICT, infectious disease preventionInformation about individual projects can be found through the APEC Project Database. 17
  • 18. Development of APEC’s ProjectsAPEC began funding projects in 1993 with three self-funded projects. Since then, the number ofprojects funded each year has increased to up to 150 per year. Over the same period, the fundsAPEC committed to projects increased from just under $1 million to over $14 million per year, depending on members’ contributions.To implement BMC-led project management reforms and effectively build project management skills and knowledge among APEC members, the Secretariat established the Project Management Unit in 2007. The PMU brings a professionalized approach to projects and helps capacity in project management within the Secretariat and the wider APEC community. The PMU provides specialized advice and guidance to both internal and external APEC stakeholders. It provides the main link between members, Program Directors, ProgramExecutives and the Executive Office and the Budget Management Committee (BMC) regarding project matters. 18
  • 19. Multi Year ProjectsIn 2011 APEC launched a Multi Year Project (MYP) initiative, for ongoing, phased projects thatcontinue for three to five years. MYPs focus strategically on building capacity in members sothat they can take full advantage of trade opportunities. Information on eligibility criteria and theapplication process can be found on the Multi Year Projects page. The Importance of APECHosting Asia-Pacific Economic Cooperation (APEC) in 2007 allows Australia to assume a keycoordination and agenda-setting role. As host, Australia will chair most major meetings, set theannual themes and priorities, and drive substantial elements of the APEC work program. Thisprovides Australia with a valuable opportunity to set the future direction of the APECorganization and to pursue important trade and foreign policy goals.Additionally APEC provides an opportunity to promote Australian exports, economic growthand prosperity. To date, APEC Member Economies account for approximately 70 per cent ofAustralias trade and almost 50 per cent of inward investment and include eight of our top 10export markets.The 21 APEC Member Economies represent over 40 per cent of the worlds population, 56 percent of global GDP, and around 48 per cent of world trade. 19
  • 20. IMPORTANCE OF APECAPEC is strategically important to the United States because it is a primary venue formultilateral engagement with the Asia-Pacific on economic and other key interests. APEC’sgrowing economic importance is clear. The 21 APEC members account for 55 percent of worldGDP; 45 percent of global trade; and 40 percent of the world’s population. Sixty percent of U.S.goods exports go to APEC economies. Five of Americas top seven trade partners are APECmembers.Moreover, the Asia-Pacific economies are leading the global recovery, with recent forecastssuggesting that emerging Asian economies could grow by at least 5 percent in 2009 while the G-7 economies contract by 3.5 percent.APEC is the only forum in the region that meets annually at the head of state level and includesthe United States, providing our country a crucial opportunity to lead as a full member of theAsia-Pacific region. APEC brings together senior and working level officials, including fromboth China and Taiwan, several times every year to tackle an array of important issues inpractical ways. APEC’s partnership with the region’s private sector – including many of itsleading companies – ensures that its initiatives are focused, constructive, and of tangible benefitto U.S. businesses. 20
  • 21. APEC’s role is particularly important in the current economic environment. Although nations onboth sides of the Pacific have taken individual steps to respond to the economic crisis, Presidenthas emphasized that concerted action is needed to get the global economy back on track and topursue the reforms needed to protect against future crises.APEC is unique in that it already has the tools and focus to ensure regional economic prosperityby promoting policies that will spur long-term economic growth, and ensure all our citizens havethe opportunity to thrive in the global economy. It promotes free and open trade and investment,and initiatives to build healthy and resilient economies by tackling such issues as energysecurity, food security, and preparing workforces for an increasingly competitive globaleconomy.I note that there has been a proliferation of pan-Asian institutions such as the ASEAN+3 processand the East Asia Summit. The United States does not want or need to be a member of everyorganization, and we support Asia’s efforts at multilateral cooperation. But given the trans-Pacific nature of economic affairs in the region, we believe that effective regional economicinstitutions must include members from both sides of the Pacific. We also believe that trulyeffective institutions must not only be a forum for high-level dialogue, but they must also begeared toward producing tangible progress in addressing the challenges facing the Asia-Pacificregion. On the economic front, we believe APEC provides the best and most established regionalmechanism for practical cooperation and action, in no small part because the United States is anactive and contributing member. 21
  • 22. EXCUTIVE SUMMARYThe APEC economies have become the drivers of the world economy. How theyinterrelate is central to growth in those economies and global growth. All APECeconomies are undergoing significant change. APEC developed and developingeconomies are generally experiencing higher growth than their developed and developingcounterparts in other regions. A key reason is adaptability to change and a focus onmaintaining open economies.APEC needs an economic focus which is more relevant to these needs. Its focus to datehas been on trade liberalization, to a lesser extent on liberalization of investment, andrelated matters. As the pattern and movement of financial flows within the regiondemonstrate, and the importance of laying down the foundations to get domesticmarkets to function properly shows, it is now clear that institutions to promote tradeliberalization, while important for their own goals, are not now central to the task ofpromoting economic growth and integration based on open economies.Promoting growth through enhanced productivity would be natural ―vision‖ for APEC.All APEC economies understand the importance of global competitiveness and areaware of the need to enable their economies to adjust as the relative efficiencies ofindustries and sectors alter. Focusing on what generates productivity is an effectiveorganizing principle for identifying what produces growth in open economies. 22
  • 23. Reforming any multilateral institution is a challenge. APEC is a ―virtual‖ institution asmultilateral bodies go. This has advantages and disadvantages. APEC’s organizationwould need to alter if the organization adopted a new economic mission.This would be most effectively secured if Leaders adopted a new vision for APEC, for― SecuringGrowth through Productivity‖, and adopted a major multi milliondollar three year research program to support it. This would entail creation of a specialhigh level research group which would produce analysis of how productivity is improved,the levels of productivity in each economy, and what each member should do to improveproductivity and growth.II. AssumptionsThis note makes the following assumptions:APEC Governments consider APEC serves an effective purposeA core function for APEC is to foster growth based one open economiesThere is a Pacific Rim economic dynamic that is important for global growth andgrowth of APEC economies.Continuing growth of APEC economies depends on more than tradeliberalizationƒ APEC’s economic mission needs reorientation to enhance its effectivenessIII. A logical focus for APEC - Growth and ProductivityAPEC was founded on the presumption that economic integration of open economiesserved the common good. The focus was on trade liberalization because that was thecommon denominator for integration among members in 1988.It was not in Europe and North America. The need to do more than reduce barriers to 23
  • 24. trade in goods had already been accepted by then. APEC’s work programs have also since moved inexorably in the same direction. The tradeagenda has inevitably reflected the broadening of the economic integration agenda. It is nowaccepted the focus on trade policy in APEC should be ―beyond the border‖. This has come fromtrade officials, finance and treasury officials and ABAC.The primary aim of trade reform was to foster growth. The call to focus on issues―beyond the border‖ is to do the same thing. Declaring the end point of these processesas a firm goal for APEC – growth – is logical.The linkage between growth and open markets must be retained. A focus on the role ofproductivity in producing growth would be an effective organizing principle to bring thefocus onto those features of open markets which promote growth.There have already been vigorous debates in East Asia about what contributes to TotalFactor Productivity, including the intriguing public exchanges over between Paul and theSingapore Government.More importantly the OECD has recently completed a comprehensive program whichreviewed first what contributed to increases in productivity among its members states(stimulated by significant gains increases by some member over the nineties, apparentlyby rapid embrace of IT technologies). This lead to detailed studies about what generatedgrowth. Interest among APEC economies in what enhances productivity in their own economieswould have to be strong. They are highly conscious of the need to maintain global 24
  • 25. The OECD had pioneered work on the need to reform and liberalize services sectors and reducethe role of government in the national economy, particularly in the utilities. This was reflected inthe EC Single Market Program, completed in 1988, which sought to free movement of labor andcapital in Europe, liberalize services, enhance competition and reduce regulatory barriers. TheNAFTA Agreement also extended the ambit of economic integration beyond liberalization oftrade in goods, embracing investment, liberalization of services, competition policyand even intellectual property. These agreements anticipated the broadening of the internationaltrade agenda which occurred when the Uruguay Round concluded a few years later.competitiveness and the changing sources of economic strength in their economies astheir comparative advantage changes An international imperativeThere is strategic importance in this. APEC countries are very important economicpartners. There is no economic cooperation without economic rivalry. A vital functionof international economic public policy is to ensure appreciation of the benefits ofcooperation has a higher priority than the gains from rivalry. The appeal of multilateralarrangements to promote free trade is that they rest on that assumption. It is whyAPEC’s initial focus was on trade. Direction of attention to the common interest remains asignificant short and long term challenge for the management of Asian Pacific affairs, as thecurrent imbalance in financial flows between East Asia and the United States shows. They alsoshow that progressing trade liberalization, as important as it is in its own right, is no longeradequate for this task.APEC needs a new core economic mission which will serve that purpose.A focus on growth and how to increase productivity to achieve it will foster commonperspectives about the benefits of open economies and economic integration based on them.APEC as set up could not easily or successfully adopt this as a core focus. The 25
  • 26. management of APEC’s core activities is handled by officials from foreign affairs andtrade ministries for whom economic management is not a primary responsibility. Challenges reshaping APECAny proposal to reorient APEC is likely to entail suggestions to change to the structure of theorganization and its focus. It is difficult to change multilateral institutions. That is why so fewreform. Decisions are usually made by consensus which is a difficult and time consumingprocess. As organizations go, APEC is ―virtual‖. It has a very slim secretariat. A lot of itstechnical activity is funded by agencies of member states. The lack of institutionalization is anadvantage. The organization can quickly change priorities, reflecting the changing priorities ofthe leaders each year. It is also a disadvantage. Much of the technical work in APEC has a shortterm focus and is poor quality. It generally suffers lack of technical expertise. The core functionof the Secretariat is administration. V. Making ―Productivity and Growth‖ a new and effectivecore mission If APEC is to adopt ―Productivity and Growth‖ as a new core mission, this willonly succeed if 1. The relevant Ministries are in the driving seats.There is no point in Senior Officials or Ministers from foreign or trade ministriespreparing material for executive decision by Leaders on core economic issues. Theadvice will not be expert and the subject will lose its pertinence.Yet engineering a major change in the system of executive management of APEC is likelyto meet resistance. 26
  • 27. 2. APEC’s capacity to produce substantive analysis and research is strengthened.Analyzing what determines productivity and how to capture those benefits to securegrowth, then applying that to twenty-one economies, for many of whom the basicresearch has not been conducted, requires considerable expertise and substantialresearch. APEC’s current funding arrangements which depend on short term fundingcycles or voluntary short term contributions by member states cannot support such aprogram. Yet substantial strengthening of the Secretariat or expansion of APEC’s budget islikely to be resisted because of the cost. 3. The interest of Leaders is engagedAny reorientation will only succeed if leaders see substantive merit and political benefit init. Politicians invariably focus on the substance and have little patience with theorganizational changes which are usually needed to effect any change. 4. Growth and Productivit becomes the leading economic activity in in APEC.APEC’s core economic mission will not be re-oriented unless this is the result.Yet Suggestions that the relative importance of existing programs, for example, those inthe CTI area, be downgraded in relation to new programs would only engenderresistance from those with long involvement in them. 27
  • 28. VI.A.Strategy to build the new economic mission.Create a program, not an institution Organizations will reshape around the realities. They changemost readily when the reality carries political endorsement and is well funded.A program should be prepared for the endorsement of leaders. B. Adopt a new vision for APEC – “Growth from Productivity”Recognize in a declaration that continuing prosperity and sustainability in APEC dependson achieving high levels of productivity. All APEC economies are changing.Maintenance of open economies is essential if productivity is to be maintained orincreased as the relative importance of sectors and comparative advantage alters.Give it political appeal – APEC Leaders pledge to make APEC the most productiveregion in the world; to guarantee growth and prosperity for their peoples; todemonstrate how integration of open economies fosters cooperation; and to provideleadership in the global economy.Set new policy (not quantitative) targets for APEC – secure optimal levels ofproductivity, maintain them as economies adjust, remove barriers to integration of openeconomies; build the foundations for consistent growth of open economies. 28
  • 29. C. Adopt a program to build the visionImplement a large, three year research program on Growth and Productivity in APEC,modeled on the recently completed OECD program.The program will first report on what drives productivity and assess the rates ofproductivity each APEC economy.The study could move to a second phase where analysis is provided on what each APECeconomy should do to increase its productivity.This program would provide economic deliverables each year for leaders. D. Volunteer fund the program.The program should be large - US$10 million a year for three years. This would enablerecruitment of the best set of technical experts available in the region.It should be volunteer-funded, but cover all APEC economies.If the output is valuable, member states will contribute. Contributions from lowerincome members of APEC could be on concessionary terms. 29
  • 30. E. Locate a temporary research task force for the program alongside theThe taskforce should be kept separate from the Secretariat to protect the integrity of theresearch program. The head of the taskforce should be an eminently international figurefrom the region who would report directly to Finance Ministers/Treasurers and Leaders. F. Maintain existing economic programsUnder this scenario, trade policy would become relatively less important. However, itstrade program would remain important in its own right and the goals of the BogorDeclaration would remain as key goals for APEC. VII. An enduring legacyOne of the major weaknesses in institutional arrangements in the APEC region is lack ofaccess to the type of high quality economic research that is available from the OECD tomembers.As new and dialogue members to the OECD from the APEC region have found, this is avaluable source of policy research and advice.There is every reason to suppose that access to and experience of the sort of high qualityeconomic advice that would be produced by this program would demonstrate to APECmembers the value of continuing access to such a resource. 30
  • 31. This would build recognition of how APEC can provide increasing value to membersand suggest a long term direction for APEC which would distinguish it from otherregional institutions. ACHIEVEMENT & BENEFITSThe Asia-Pacific region has consistently been the most economically dynamic region in theworld. Since APECs inception in 1989, APECs total trade has grown 395%, significantlyoutpacing the rest of the world.1 In the same period, GDP (in purchasing power parity terms) inthe APEC region has tripled, while GDP in the rest of the world has less than doubled.2APECs work under its three main pillars of activity, Trade and Investment Liberalization,Business Facilitation and Economic and Technical Cooperation, has helped drive this economicgrowth and improve employment opportunities and standards of living for the citizens of theregion. 31
  • 32. Trade and Investment LiberalizationAPEC is the premier forum for trade and investment liberalization in the Asia-Pacific and has settargets dates for "free and open trade": no later than the year 2010 for economies, and 2020 fordeveloping economies (the Bogor Goals).When APEC was established in 1989 average trade barriers in the region stood at 16.9%; by2004 barriers had been reduced by approximately 70% to 5.5%.3As a consequence, intra-APEC merchandise trade (exports and imports) has grown from US$1.7trillion in 1989 to US$8.44 trillion in 2007 - an average increase of 8.5% per year; andmerchandise trade within the region accounted for 67% of APECs total merchandise trade in2007.4Similarly, trade with the rest of the world has increased from US$3 trillion in 1989 to US$15trillion in 2007, an average increase of 8.3% per year. Trade in the rest of the world hasincreased at 7.6% over the same period.Over 30 bilateral free trade agreements (FTAs) have been concluded between APEC MemberEconomies.APEC is also pursuing trade and investment liberalization through its Regional EconomicIntegration agenda. Progress to date includes:Investigating the prospects of and options for a Free Trade Area of the Asia-Pacific.The development of 15 model measures for RTAs/FTAs that serve as a reference for APECmembers to achieve comprehensive and high-quality agreements.APEC has also acted as a catalyst in the advancement of World Trade Organization multilateraltrade negotiations over the past 20 years. 32
  • 33. Business FacilitationAs a result of the APEC Trade Facilitation Action Plan (TFAP I) the cost of businesstransactions across the region was reduced by 5% between 2002 and 2006.A second trade facilitation action plan (TFAP II), aims to reduce transaction costs by a further5% between 2007 and 2010.APEC initiatives that help facilitate trade include:The introduction of electronic/paperless systems by all member economies, covering thepayment of duties, and customs and trade-related document processing.The Single Window Strategic Plan, adopted in 2007, provides a framework for the developmentof Single Window systems which will allow importers and exporters to submit information togovernment once, instead of to multiple government agencies, through a single entry point.Providing business with a concise one-stop repository of customs and trade facilitation relatedinformation for all APEC economies through the APEC Customs and Trade FacilitationHandbookThe APEC Tariff Database provides users with easy access to APEC member economies tariffschedules, concessions, prohibitions and other information.In 2008, a groundbreaking Investment Facilitation Action Plan was endorsed; it aims to improvethe investment environment in Member Economies.The APEC Privacy Framework provides guidance and direction to both APEC MemberEconomies and businesses on implementing information privacy protection policies andprocedures. By facilitating information flows it will facilitate trade and e-commerce. 33
  • 34. The APEC Business Travel Card (ABTC) provides substantial time and cost savings to businesspeople and facilitates their travel in the region, by allowing visa free travel and express lanetransit at airports in participating economies.APEC is also removing behind-the-border barriers to trade through its Structural Reform agenda,which focuses on reforming domestic policies and institutions that adversely affect the operationof markets, and the capacity of businesses to access markets and to operate Economic and Technical CooperationAPECs Economic and Technical Cooperation (ECOTECH) activities are designed to buildcapacity and skills in APEC Member Economies at both the individual and institutional level, toenable them to participate more fully in the regional economy and the liberalization process.Since APEC first began to undertake capacity building work in 1993, more than 1200 projectshave been initiated; and in 2008, APEC was implementing a total of 212 capacity buildingprojects with a total value of US$13.5m.A particular focus has been reducing the digital between developed and developing economies:In 2000, APEC set a goal of tripling internet usage in the region and that goal has now beenachieved, as recognized by the 2008 APEC Ministerial Meeting on the Telecommunications andInformation Industry. APECs new goal is to achieve universal access to broadband by 2015.A network of 41 APEC Digital Opportunity Centers (ADOC) now operate in seven MemberEconomies. ADOCs objective is to transform the digital into digital opportunities and thecentre act as local information and communication technology (ICT) resource centre, providingcitizens and businesses of the region with access to ICT technologies, education and training.APEC is also developing a Digital Prosperity Checklist that outlines specific steps economiescan take to enable them to utilize ICT as catalysts for growth and development. 34
  • 35. Other AchievementsAPEC has also been able to evolve its agenda to include pressing regional priorities. Examplesinclude: counter-terrorism (The Shanghai Statement in 2001, and the Counter-Terrorism TaskForce); human security (Health Working Group); emergency preparedness (Task Force forEmergency Preparedness); climate change, energy security and clean development (The SydneyDeclaration in 2007); and the global financial crisis (The Lima Statement in 2008). 35