Trade & Investments

APEC has helped facilitate the opening up of trade and investment in the region and around the globe by serving as an important forum to build consensus and commitment on policy measures and reforms. Eschewing the hard, rules-based institutional framework of organizations like the WTO, APEC is instead predicated on the idea of “concerted unilateralism”.

This means that member economies are not bound by APEC’s liberalization agenda, and can choose their own pathways and timeframes for achieving the overarching goals. Built within this, however, is recognition that the benefits of reform for members are greatest when they are enacted in concert, rather than in isolation.

This approach has meant that its list of achievements in terms of trade and investment liberalization appears modest. While APEC has certainly fallen short of the breadth of reform some of its members and commentators might have liked, it is important to note that it has greatly encouraged world leaders to think cooperatively and creatively about potential avenues of mutual economic cooperation.

APEC’s objectives in respect of trade and investment reform are enshrined in the Bogor Goals of 1994, which set a target of ‘free and open trade and investment by 2010 for industrialized economies and 2020 for developing economies.5 How these goals are to be achieved, and how progress is to be measured, were subsequently developed at the 1995 Osaka Summit and are contained in the Osaka Action Agenda.6 The Agenda outlines ten general principles to guide the APEC liberalization process: Comprehensiveness; WTO-consistency; Comparability; Non-discrimination; Transparency; Standstill; Simultaneous start, continuous process and differentiated timetables; Flexibility; Cooperation; Relevance, progressiveness and effectiveness.

Along with the principle of flexibility, the notion of non-discrimination is closely tied to APEC’s identity as an organization. Choosing from the beginning to pursue a unique model of “open regionalism”, APEC mandates that provisions agreed to under its auspices must be extended to non-APEC economies in a non-discriminatory fashion. While this stipulation can have the effect of reducing incentives for broad concessions on the part of member economies, due to a fear that non-members will simply free ride, it is also central in ensuring the benefits of APEC agreements reverberate and are felt around the globe.

The major mechanism for achieving the Bogor Goals is through the creation of Individual Actions Plans (IAPs), which are designed by the member economies themselves and outline unilateral actions that are to be taken to achieve certain goals. In order to encourage members to comply with these plans, a regular process of peer review is typically undertaken.

Interim assessment reports show that there has been progress. In the 2014 Bogor Goals Progress Report, numerous achievements were laid out, such as reduction in the average tariff rates of member economies from 16.9% in 1989 to 5.7% in 20127, an increase in Regional Trade Agreements and FTAs with service commitments and a reduction in the time taken to import and export among APEC economies.8

The report did note, however, that many countries are still struggling to progress towards some of the measures outlined in their IAPs. Detailed reports on the progress of APEC as a whole, as well as individual members can be accessed here.

Multilateral ventures have also been used for the purpose of striving towards the Bogor Goals. One of the most promising endeavours in this regard was the program of Early Voluntary Sector Liberalization (EVSL), which called for member economies to identify sectors for early liberalization, as well as facilitation and Ecotech reform. After a period of consultation, 15 sectors were initially identified for EVSL.

In the ensuing phase of negotiations for the design and implementation of the program, however, serious divisions emerged among member economies, some of whom were reticent about liberalization in “sensitive sectors” and wanted the program to be run in line with the concerted unilateral principle (that is, for compliance to be voluntary), while others wanted the adoption of all sector provisions to be compulsory and for GATT enforcement mechanisms to apply.

Eventually, a GATT-style, “take all or nothing” platform was adopted for EVSL negotiations. Strong resistance from countries like Japan, which was staunchly opposed to liberalization of fisheries and forests, as well as the deepening of the Asian Financial Crisis, all but deprived APEC of the support it needed to realize EVSL. The eventual failure of the EVSL experiment dealt a significant credibility blow to APEC, which had hoped to more clearly position itself as a constructive player in facilitating GATT / WTO negotiations.

That being said, APEC has achieved some success in the multilateral sphere, as evidence by the role it played in the eventual adoption of the Information Technology Agreement (ITA) by the WTO. The Agreement had its provenance in industry and business group recommendations to the Group of Seven (G7) for the removal of tariffs on a range of technological goods.

During their meeting in Manila in 1996, the member countries of APEC confirmed their support of the ITA and recommended that it be forwarded to the WTO for consideration and adoption by 2000. APEC’s support for ITA played an influential role in its formal adoption.

Another notable multilateral achievement is the introduction of the APEC Business Travel Card. The card allows business travellers from APEC economies, who have applied and qualified for the scheme, to travel between select member countries without having to comply with typical visa requirements, and to receive expedited immigration processing. This scheme is seen as playing an important function in reducing the costs associated with the flow of business and business people among the member economies. While most members are part of the scheme, Canada and the United States are still transitionary members.

Most of the recent focus on APEC has been on the promise of the Free Trade Area of the Asia-Pacific (FTAAP). Originally proposed by the APEC Business Advisory Council in 2004, FTAAP would create a Free Trade Area in the region, thus transforming APEC into a formal trading bloc. The issue of FTAAP was taken up by leaders at the 2006 Hanoi Summit, where they ordered that further studies be conducted to scope the potential for such an agreement. At the 2014 Beijing Summit, leaders re-affirmed their commitment to the idea, ordering that “concrete steps” be taken towards its development.

FTAAP would likely build on existing FTAs in the region in a bid to link member economies. The most likely backbone to the FTAAP would be the Trans-Pacific Partnership, which has concluded negotiations and is currently being ratified by various governments. It includes several APEC members. Even if the TPP is to be successfully implemented, there will still be a long way to go before the FTAAP is formed.

While the use of the TPP as a backbone of such a trading area is seen as exciting because it is seen as a “high-quality”, expansive agreement, this in itself may pose considerable road blocks to other member countries in the region joining the FTAAP, some of whom may not be willing or able to dedicate themselves to such extensive levels of liberalization. Another, more basic, impediment is the fact that China – a core component of any FTAAP – is not a member of the TPP.

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