The Role of APEC in the Asia-Pacific Region

Introduction

China takes the task of chairing APEC, of guiding its work and agenda, in the first year of the new millenium. That responsibility begins in little more than 18 months. I know even now, like your predecessors as Chair, thinking has already started in Beijing on the challenges and opportunities involved.

Here you will hear more and more about APEC. Is it important? Yes. Why is it important? Briefly, because it is about regional economic cooperation for economic growth.

Sustainable economic growth is undoubtedly the underpinning of regional stability and security. This strategic logic drives all APEC economies towards implementation and further development of our common agenda.

I hope therefore some reflections by me today, a somewhat personal view, on APEC’s role and activities and APEC and China may be of interest and relevance.

Secretariat

I am here as President Yang explained, in my capacity of Executive Director of the Secretariat, seconded out of the New Zealand Ministry of Foreign Affairs and Trade for a two year term. I finish my assignment at the end of December when New Zealand’s term as Chair passes to Brunei and the current Bruneian Deputy, Ambassador Serbini Ali, takes over from me. In the same way, China will send a senior official to fill his position and take the position of ED in 2001, your own year as APEC Chair, with a Mexican official taking over as his or her deputy.

The Secretariat is the core support mechanism for the APEC process, with at present 23 staff seconded from Foreign and Trade Ministries from 18 member economies and the same number of Singaporean support staff. We provide coordination, technical, advisory support to the Chair and the 250 or so meetings of different APEC working groups and other fora held annually; we maintain a huge database of information on APEC activities with a website that attracts some 170,000 hits a month; we assist member economies in formulating APEC’s economic and technical cooperation projects and we manage their finances, some 258 projects in total currently.

The Chinese Government will find a valuable source of support in the Secretariat when you take the Chair.

APEC Beginnings

Mr College President, I look back to recall that today we are only five months short of the tenth anniversary of the meeting of 12 Asia-Pacific Foreign and Trade Ministers that launched the APEC process. The meeting was convened by Australia which deserves credit for taking the initiative to develop the concept.

I remember well that in the preparatory official consultations, there were some basic hesitations about the initiative. Various proposals for some form of institutionalised Asia-Pacific cooperation had been discussed for many years by academics, business people and officials. The six ASEANs, with their own economic cooperation and moves to a free trade area under way, were quite cautious. And none of us wanted to copy institutional structures such as OECD or the European Community that we saw in other regions.

But we all shared a dependence on open markets for the exports that were driving our economic growth and we all shared an appreciation of the value of neighbourly cooperation in the wider Asia-Pacific region to foster and strengthen those export trade opportunities, to widen our links in order to support business growth, and to improve the living standards of our peoples.

There was a realisation that however diverse we were in cultures, systems and so on, we had more in common and more to gain by working together. We had no suitable regional mechanism for this. Another incentive was that we also worried about what was seen as a possible inward-looking European Community. Some commentators at the time wondered about an economic "Fortress Europe". This was before the Uruguay Round.

The Canberra meeting succeeded well. APEC was born, recognising the fact of our diversity in the region, based on a commitment to consensus-building and a goal of promoting economic growth through intensifying regional interdependence, but in a non-discriminatory setting of open regionalism.

No to a trading bloc; no to an organisational structure; we started with a modest work-programme of sectoral and trade consultations.

As a matter of interest I recall that in Canberra, Ministers spent rather little time agreeing on the terms of APEC’s establishment. More was devoted to reaching agreement on the statement to be issued about the need to move ahead with trade liberalization and the Uruguay Round of GATT negotiations. A strong supportive message was issued.

The Development Phase

Today, nearly ten years later, the attractions and value of mutual economic cooperation, and confidence about the way it works, have seen APEC expand to become a grouping of 21 member economies. China joined early together with Chinese Taipei and Hong Kong, then others later, notably in Latin America, also Russia and Viet Nam.

APEC’s present membership accounts for 55 percent of total world income, 46 percent of global trade.

The initial years of APEC were focused largely on exchanges of views on shared economic concerns and project-based initiatives. The focus in those early years was to advance the process of Asia-Pacific economic cooperation and to promote a positive conclusion to the then Uruguay Round of GATT negotiations. There is no doubt that the strong and positive positions taken together by APEC members at stages of difficulties and blockage during the long and drawn-out Uruguay Round assisted in securing an overall satisfactory outcome to those negotiations.

Today, APEC’s role goes further. It has evolved with the pressure of the member economies into a forum of greater substance and higher purpose: to build an Asia-Pacific community through achieving economic growth and equitable development through trade and economic cooperation.

At Blake Island near Seattle in November 1993, when the Economic Leaders met for the first time on the proposal of President Clinton, they envisioned a community of Asia-Pacific economies based on the spirit of openness and partnership, of cooperative efforts to solve the challenges of change, of free exchange of goods, services and investments, of higher living and educational standards and of sustainable growth that respects the natural environment.

In subsequent meetings, APEC Ministers and Leaders further refined the vision and launched mechanisms to translate it into action. In 1994 in Bogor, Indonesia they translated the vision of an open trading system into the very ambitious goal of free and open trade and investment in the Asia-Pacific region by 2010 for developed member economies and 2020 for developing ones. The next years in Japan and Philippines, Leaders put more flesh on these bones with the Osaka Action Agenda and Manila Action Plan.

These decisions by Leaders, established a clear framework and objectives for APEC’s work. They also laid down the basis on which it should go forward by measures of trade and investment liberalisation, of business facilitation and economic and technical cooperation or ecotech.

A special comment on ecotech. APEC has never aimed to be a grouping for transmitting aid, development assistance, from the developed to developing member economies. It is not a classic donor/recipient body.

But there is strong commitment to Ecotech, the sharing of experience, skills, expertise, training and so on. It is seen as an important means to reduce economic disparities between member economies, to assist members that may be less well advanced to gain the necessary strength to benefit fully from the liberalisation process and ensure equitable development in APEC. Everyone must have a stake in the process; maximum opportunity to exploit its possibilities.

Vision and Action Agendas need follow-up. Since the 1996 Manila meeting, the main emphasis in our work has been on translating Leaders’ vision and plans into practical steps forward. Since 1996 during Canada’s and Malaysia’s years as Chair and now with New Zealand, a major emphasis has been on implementation and thickening the scope of our cooperation.

I note some examples we have to show for APEC’s contribution on our 10 year record.

Trade and Investment Liberalisation

Encouraged successful conclusion to GATT Uruguay Round
Leadership in WTO Information Technology Agreement
Leadership in WTO Basic Telecommunications Agreement
Individual Action Plans (IAPs)
Collective Action Plans (CAPs)
Early Voluntary Sectoral Liberalisation: Liberalisation in 8 sectors for WTO follow-up

Sectoral Cooperation and Development Initiatives

Agenda for Science and Technology Industry Cooperation into the 21st Century
Integrated Plan of Action for SME development
Principles for facilitating private sector participation in Infrastructure
Blueprint for action on Electronic Commerce
Kuala Lumpur Action programme on Skills Development
Cleaner Production Strategy

Financial Crisis

APEC is not a rules based grouping. Nor does it have a major resource funding. And the crisis has not been limited to our region. Member economies recognise the need to avoid duplication of the activities of the International Monetary Fund, World Bank and other competent organisations.

Notwithstanding there are some important areas where APEC has or is adding value to international efforts to deal with the crisis and, no less important, to help avoid the recurrence of such a setback to our regional growth.

Business Facilitation

Standards and Conformance: APEC members have committed to align domestic standards with international standards in the four priority sectors of electrical and electronic appliances, food labeling, selected rubber products and machinery by 2005. It has been calculated that complying with different standards in different importing countries can add between 5 and 10% to exporters costs.

Customs Procedures: APEC economies are promoting and improving the flow of goods through the region’s customs administration by "paperless trading". The simplification and harmonization of customs have already resulted in significant cost savings for exporters and importers. The potential savings are enormous when you consider that on average, international transactions involve 27-30 different parties, 40 documents and 200 pieces of data (60-70% of which are rekeyed at least once and some up to 30 times)

Business Mobility: APEC has made it easier for business people to travel around the region by offering multiple-entry visas to frequent business travelers; by raising standards for processing applications for temporary business residency; and through the APEC Business Travel Card scheme, which offers visa-free travel and expedited airport processing to its holders.

Intellectual Property Rights: APEC has an extensive cooperation program that will help members comply with their obligations under the WTO Trade-Related Intellectual Property agreement.

Government Procurement: APEC has developed a set of non-binding principles on GP based on the free trade principles already embraced by APEC: transparency, value for money, open and effective competition, fair dealing, accountability and due process. This year it aims to complete work on 4 of them: Important work – Government Procurement is worth over 10% of all trade in the Asia-Pacific Region.

Economic and Technical Cooperation

At their meeting in 1996 in Philippines, Leaders singled out six ecotech areas for priority attention

developing human capital,
fostering safe and efficient capital markets,
strengthening economic infrastructure,
harnessing technologies of the future,
promoting environmentally sustainable growth, and
encouraging the growth of small and medium enterprises
Though with a limited budget, APEC member economies have put in hand some 258 ecotech projects relevant to these priority areas, trade liberalisation and other initiatives by Leaders in the past two years, some self-funded.

Trade and investment liberalisation, business facilitation, ecotech, the financial crisis. I believe the record shows an extensive and substantial contribution by APEC to regional cooperation.

Many of our successes may not pass the media test for big headlines but they all go towards promoting opportunities for higher living standards and growth in Asia-Pacific.

The momentum continues in 1999. Seen from the Secretariat there is a strong commitment among member economies to move ahead.

The New Zealand Economic Leader, Prime Minister Shipley, has highlighted that responding to the crisis should be reflected in APEC’s activities across the board. She has suggested three themes as framework reference for work in APEC this year.

This practical approach appears to have met with wide endorsement.

The first theme is ‘expanding the opportunities for business’.

This theme focuses on the ways that we in government can provide the conditions needed by business to increase the prosperity of the region. The key objective is to reduce barriers to imports and exports. Trade has already been identified as a key growth engine for the APEC economies.

Tariff cuts are of course a key component. But business is increasingly telling us that non-tariff barriers are costing them money and hampering trade flows. In 1999 both these issues are being addressed on a number of fronts:

Each APEC member produces an annual Individual Action Plan reporting their planned and already-implemented trade liberalisation activities. This year APEC will review progress made under the IAP system since IAPs were first developed in 1996. In addition five APEC members (US, Japan, Australia, the Philippines and Brunei) are submitting their IAPs to the rest of the APEC membership for peer review.
This year APEC has a unique opportunity to provide input on the proposed new round of multilateral trade negotiations. APEC Economic Leaders meet not long before the next WTO Ministerial. In addition, APEC has already developed tariff liberalisation packages for 8 sectors and passed them to the WTO via the Early Voluntary Sectoral Liberalisation (EVSL) process. Work is underway within APEC on the complementary work programmes in each sector in areas such as trade facilitation and capacity building.
APEC’s trade facilitation work is also progressed through the Collective Action Plan process. I mentioned earlier a number of examples of trade facilitation activities underway. Some key initiatives this year are:
Development of Mutual Recognition Arrangement on Conformity Assessment of Electrical and Electronic Equipment.
Development of Arrangement for the Exchange of Information on Food Recalls and Recall Guidelines.
Compilation of "Information on Food Labeling Laws, Regulations and Standards in the APEC Region".
Establishment of guidelines for the simplification and standardization of IPR administrative systems.
The second theme is Strengthening Markets.

The need to strengthen markets in the region has been brought into sharp focus by the recent economic crisis. Opening markets to foreign participation, while a key part of the path to sustainable growth, is not on its own enough. There is also a need to build institutional capacity and to guide regulatory reform so the benefits of liberalisation are maximised.

In 1999 APEC is looking to respond to these needs on two fronts:

A set of principles for competition policy and regulatory reform is under development. They are not envisaged as set practices but aim to provide a tool-kit of policies that APEC economies can draw from as they reform. These principles will stress the need for markets to be open, transparent and well governed. Deregulation does not mean no regulation – quality regulation is the objective.
Complementing such reform is the requirement to build institutional and human resource capability. This is occurring through APEC’s ongoing ecotech agenda and related projects. These include:
A study on competition laws in developing economies
Work by Australia on economic governance initiatives in the region
An initiative by Japan on strengthening human resources development for structural reform
Finally Broadening Support for APEC. APEC has made a difference to the prosperity of our region. Members have, however, recognised that we need to do a better job in demonstrating this to the wider APEC community.

This year sees a number of specific initiatives in this spirit:

A major high-level seminar on communicating the benefits of liberalisation will be held in association with the Meeting of APEC Ministers Responsible for Trade in June.
Major business events will be held alongside the Ministerial and Leaders Meetings.
A Ministerial joint meeting with business people from throughout APEC members focusing specifically on the needs of SMEs was held in April
A Meeting of HRD Ministers will take place in July
A Women Leaders’ Network meeting will be held and a Framework for Integration of Women into the APEC process is under development.
With this review of APEC activities and the current 1999 agenda, I want to go on to say something, if I may, about China’s role in APEC.

Of course as you would expect, your representatives in all APEC fora are actively involved in shaping initiatives and actions such as I have mentioned among APEC achievements.

From my own time in the Secretariat I would highlight four leading contributions by China:

promoting the ecotech agenda and in developing the work programme for the 21st Century in the Industrial Science and Technology sector. This was an initiative proposed by President Jiang Zemin.
Hosting the Second APEC SME Technology Exchange and Fair in Yantai last October.
Managing and preparing the APEC Economic Outlook report for 1998 – an important reference point particularly in terms of APEC’s response to the regional financial crisis.
Chairing one of the key Working Groups, on Human Resources Development. This body drives our capacity building agenda and is at present overseeing a major project on the social impacts of the crisis.
China’s role and interests in the APEC agenda should be important: the third largest GDP in APEC, an average annual growth rate of close to 9% over the past three years, a major trading nation and an important destination of foreign investment flows. You have provided very important stability through exchange rate policy during this period of regional financial turmoil.

Worth noting in relation to APEC’s current agenda: the Securities and Contracts Law relate to competition policy, a current focus; similarly there is also the Government Procurement Law, listed in the Legislative Agenda of the 9th National People’s Congress, building on the non-binding Interim Measures on Government Procurement Administration of April this year. Tariff and non-tariff barriers reductions are a feature of your IAP and China participated in the EVSL initiative.

As your Chief Representative for Trade Negotiations, Mr Long Yongtu, made clear last month at a conference in Japan, the Chinese Government has the consistent intention to actively participate in Asia-Pacific economic cooperation, to realise free and open trade and investment in this region.

APEC membership for any economy in the region, large or small, offers valuable opportunities – for example:

to shape the regional agenda for economic growth and benefit from the extensive personal and institutional relationships possible at all levels in APEC’s dealings with key issues of cooperation;
to influence developments in the WTO such as the ITA, Government Procurement principles and indeed with EVSL as well as opportunity for prior training on implementation of WTO agreements to which it is not yet a party;
more widely to share experience information and expertise on common concerns – investment issues, SME development, environmentally sustainable growth and the integration of women in development, to name just a few.
So I personally have a very positive conclusion regarding China’s role, China’s interests and China’s contribution to APEC.

From my earlier remarks, you can see the extensive and challenging agenda member economies are working on together.

Looking ahead one cannot see today what the economic environment in the region will be in 18 months time. Or the commitment to regional cooperation in APEC.

We have had a nasty shock in the past two years. There has been a lot of criticism of APEC for developments quite beyond its scope of cooperation.

Most of the criticism has been unfounded. I put it down in part to frustration with the action or inaction of, for example, the IMF or the other international bodies designed to address the development and consequences of the financial crisis. APEC has in practice made – is making – a solid contribution to dealing with its impacts where it can and should do so.

I also see the criticism as due to some excessive expectations of APEC’s role as a quick-response instrument to regional difficulties. It was not envisaged as such.

But, though real risks remain, there are growing grounds for optimism about the regional economic outlook. And recognition of the benefits of economic cooperation, of working together, remains strong and widespread throughout the region.

As I said at the outset, sustainable economic growth is undoubtedly the underpinning of regional stability and security. This strategic logic drives all APEC economies towards implementation and further development of our common agenda.

I am sure the role of APEC will be enhanced over the year of China’s tenure of chair and leadership of APEC in 2001. I wish you well.

Thank you for your attention.