Critically Evaluate the Asia-Pacific Economic Co-Operation (APEC) Forum’s Attempts to Enhance Regional Economic Integration in the Asia-Pacific Essay
The Asia-Pacific Economic Co-operation (APEC) was created in 1989 as a regional discussion forum for fostering “closer economic relations within the region through inter-governmental consultations and other non-binding mechanisms. ” (Dent, 2007:449). To a large extent the forum echoed “many decades of proceeding ideas and initiatives on Pacific regional community-building. ”(Dent, 2008:120). One factor in APEC’s formation arose from the situation at the end of the Cold War whereby there was a growing market-driven economic interdependence which “created fresh opportunities for regionalism. (Feinberg, 2008:67). Significantly, APEC was in an ideal position to benefit.
(Beeson (2006:1). Since inception, the main agenda of APEC has focused on trade and investment liberalisation, although it has also focused on Economic and Technical Cooperation (Ecotech) and Trade Facilitation; these are known as the three pillars of APEC). In the initial years there was enthusiasm and optimism for APEC’s potential for the enhancement of regional economic integration. However the Forum’s progress has stumbled on a number of obstacles along the way.
One such obstacle has been the irreconcilable national interests of member states which have ‘impeded the organisation’s progress, as well as that of Asia-Pacific trans-regionalism generally. ’ (Dent, 2008:144). This argument is used in support of the neo-realist assessment of APEC. Furthermore, neo-realists argue the sub-grouping of nation states as well as the competing interests for hegemonic position and influence of more powerful nations, such as China and Japan, have been additional obstacles to APEC’s success.
As a consequence APEC has been labelled as being ‘all talk no action,’ and a mere ‘talk shop’ which has been very much ‘adrift’. (Ravenhill, 2001, Dent 2008, Beeson 2006). On the other hand there are those who argue that “the very existence of APEC, linking countries of enormous diversity, a grouping that spans Southeast and Northeast Asia and the Pacific Ocean, is itself an achievement. ” (Ravenhill, 2001:220).
This concurs with the neo-liberal institutionalist evaluation of APEC which highlights the organistaion as being “essentially a tool for managing the interdependent links and interests that have developed amongst a regional group of states. ” (Dent, 2008:144). The neo-realists view identifies a ‘lack of consensuses between APEC member states (Ravenhill, 2000) as being a principal weakness to the core agenda of trade and investment liberalisation.
At the launch of APEC at the first Ministerial Meeting 1989, the Australian Prime Minister Bob Hawke referred to the Paris based organisation for Economic Co-operation and Development (OECD) as a possible model for the new transpacific multilateral forum (Morrison, 1998:318) . This was in recognition of the membership diversity, the East Asian member concerns, and the lack of enthusiasm for previous (unsuccessful) initiatives such as PAFTA, PBEC and PECC.
The new OECD style model put an emphasis on consultation activity rather than on the negotiation of formal agreements. As Ravenhill (2000:321) importantly recognises, this model was not meant to be “a forum for trade negotiations and APEC initially was not intended to be either. ” However this all changed in 1992 with the inauguration of an Eminent Persons Group (EPG) which sought to develop a collective ‘future vision’ of APEC on how it should best progress.
Its first report recommended that a programme for trade and investment liberalisation measures be implemented by all APEC members (APEC1993). Otherwise known as the Bogor Goals, APEC’s leaders agreed in the Eminent Persons Group’s second report to “complete the achievement of our goal of free trade and open trade and investment in Asia-Pacific no later than the year 2020” (APEC 1994 summit, official declaration) in accordance with the principle of ‘open regionalism’.
Although the proposal was accepted by all members, it was pushed primarily by APEC’s Western states, namely the US, Canada, Australia and New Zealand. However, many of the Asian member states were much less committed and viewed the EPG initiative as “a departure from APEC’s original aims of promoting informal economic co-operation rather than commercial liberalization. ” (Dent, 2010:38). “Most of which moreover wished to maintain some kind of trade protection in strategic or infant industries for developmental purposes. (Dent, 2008:125)
There was much concern over perceived Western states’ aspirations towards trade liberalisation to the extent that they wanted to “avoid APECs evolution into yet another forum in which Western governments could attack their trading policies. ” (Ravenhill, 2001:321). Arguments from Western members that APEC should endeavour to be similar in concept to a ‘GATT/WTO Plus’ reinforced these fears . (Ravenhill, 2001: 238). In ddition to the apparent lack of interest by Asian states over trade liberalisation, there was considerable disappointment with EPG’s lack of emphasis and success with their Ecotech and Trade facilitation measures which was supposedly their preferred focus. Differences in opinion soon arose over the Modus Operandi of ‘open regionalism’ on which the Bogor Goals were to be achieved. (Dent, 2008:126).
In principle, open regionalism meant “APEC members would open up their economies in a unilateral and non-discriminatory manner not just with each other but also to non-members”. Dent, 2008:125). However, “Considerable ambiguity existed over the exact meaning of open regionalism” (Dent, 210:40) and it was clear from the outset that there was a divide between East Asian and Anglo Pacific members on whether this guiding principle was the best way to approaching trade liberalisation. The view of Western governments, voiced by Fred Bergsten , saw this non-discriminatory free trade principle as being undesirable as it did not enable APEC any leverage in global trade negotiations, opting instead for more definitive commitments.
Whereas East Asian governments advocated in favour of a less radical approach, one that had more flexibility “both in terms of what was implied by trade and investment liberalisation and the means by which it was to be realised. ” (Dent, 2008:126). Given this widely divergent starting point of APEC economies it was subsequently agreed at the Osaka APEC summit in 1995 that a new modus operandi of ‘concerted unilateralism’ would be adopted.
The Bogor targets of free trade by 2010/20 instead would be accomplished through “transparent iterations of nationally-based Individual Action Plans (IAPs)”. This new scheme ultimately relied on “moral persuasion rather than binding contractual obligation” and furthermore “there was very little pressure upon APEC member states to make substantive progress with their IAP schemes” (Dent, 2007:450) which subsequently resulted in a “massively underwhelming” commitment amounting to little more than an “oxymoronic commitment to work together by working separately. (Shearman and McDougall, 2006:134). The IAPs produced the following year at the Manila Summit in 1996 were said to be lacking substance to the extent that they were “vague on overall goals and short on specifics” with the result that few member economies managed to liberalise “beyond their commitments they had already made in the Uruguay Round of the GATT negotiations. ” (Yamazawa and Urata 1999 cited in Ravenhill 2000:322).
Even in cases where some substantive progress on IAPs were made (e. g. China and Chile), Ravenhill (2000:322) observes that it was for reasons that had little to do with APEC and more to do with a desire by these countries to enter the WTO and NAFTA . Disappointingly in practice many East Asian members “dragged their feet on either initiating their IAP commitments or incorporating substantive liberalization measures and targets in their Plans. ” (Dent 2008:127) One year after the Manila Summit, when member states produced their IAPs, there was a general consensus that they lacked substance to the extent that they were “vague on overall goals and short on specifics. Furthermore, Ravenhill (2000:322) notes “member economies lack transparency (… ) making comparison across countries almost impossible. ”
A consequence of the IAPs apparent ineffectiveness, and America’s “impatience with the slow pace of trade liberalization under APECs voluntary unilateralism process” (Ravenhill, 2000:324), led the US to advocating a sectoral approach as an alternative means of enhancing regional economic integration. This sector-led initiative titled the Early Voluntary Sectoral Liberalization (EVSL) was devised at the Canadian hosted 5th APEC Summit in Vancouver in 1997.
The scheme sought to increase economic and technical cooperation through tariff reductions in 15 specific sectors targeted for accelerated liberalisation which would act as a catalyst towards the broader trade liberalisation process. (Dent, 2008:129) The schedule for EVSL envisaged that the implementation of the plan would take place the following year at the 1998 Trade Ministers Meeting: yet this was not to be and the ministers failed to reach a consensus. The failure stemmed from “disagreements arising over the perceived nature of the scheme and how it was to be operationalised” (Dent, 2008:128).
On the one hand pro-liberalising members believed that, in agreeing to the scheme, all members had voluntarily agreed to adhere to all the liberalisation measures. (Dent, 2008:129) However, this was largely at odds with a predominantly East Asian consensus who instead interpreted the EVSL’s ‘V’ as allowing them to voluntarily pick or leave certain sectors at their choice. In light of this interpretation Japan refused to implement liberalisation commitments to some of its agricultural sectors (fisheries and forestry) as it would have created “unacceptable levels of political difficulty in the domestic context ” (Feinberg, 2003:119).
The opposition “effectively extinguished the EVSL process” (Ravenhill, 2000:324). The failure of the EVSL proposal highlights APECs lack of consensus and flexibly to adhere to the diversity amongst its members (Ravenhill, 2000:188) and in the words of one economist, Jiro Okamoto (2000), “revealed or reconfirmed that any non-voluntary tariff reduction measure could not proceed within the APEC frame work. ” As Ravenhill (2001:241) summarises “the ineffectiveness of the member economies’ individual action plans for realising the Bogor agenda and the breakdown of the EVSL programme spelled the end of APEC’s ambitious trade liberalization agenda. By the end of the decade the EVSL was dissolved.
There was a futile effort to salvage something when it was referred to the WTO which “severely damaged APECs credibility” (Ravenhill, 2000:325). Frustration with APEC’s slow progress to advance its trade agenda led some governments to pursue new discriminatory regional arrangements (Ravenhill, 2001). The first wave of bilateral projects (Korea-Chile, Japan-South Korea, Thailand-South Korea) was launched in 1998. This marked the beginning of a wave of Free Trade Agreement (FTA) activity in Asia Pacific which temporarily threatened APEC’s relevance (Dent, 2008:32).
Member states increasingly used these preferential agreements to meet their liberalization goals, which combined with mounting frustration among APEC leaders over the variance in trade rules (Dent, 2007:456), led the Business Advisory Council to propose a new initiative called the Free Trade Area of the Asia-Pacific (FTAAP, 2004) in an attempt to bind individual FTAs into a singular APEC framework to provide consistency. The FTAAP proposal sought to revive APEC’s commercial liberalisation programme” (Dent 2008:135) but once again there was a lack of consensus and divergence of interest over the new initiative.
The proposal had strong backing from mostly Anglo Pacific nations as well as Singapore and Taiwan but there was fierce opposition from East Asian countries who scuppered the proposal. Thailand (Dent, 2008:136) considered FTAAP was ‘impractical owing to the diversity that existed amongst APEC member economies the initiative was against APEC’s original objective of voluntary economic co-operation. ’ Furthermore, Dent (2007:458) recognises further difficulties “because the Asia-Pacific’s bilateral and regional FTA’s are extremely heterogeneous they cannot simply be merged by a technocratic fix. For example, the United States, Japan and China have “developed their own quite distinct approaches to constructing free trade agreements, and these have influenced the formation of other countries FTAs”(Dent, 2007:464). This subsequently begged the question as to which FTA model would be most appropriate. Economic and Technical Cooperation (Ecotech) is one of the pillars of APEC but its progress has been evaluated by many as largely disappointing. (Garnaut, 2000; Ravenhill, 2000 and Dent 2008). APECs Ecotech projects “receded into the background when APEC gave pride of place to trade liberalisation” (Ravenhill, 2000:325).
The various programs came across a number of setbacks, primarily due to a lack of adequate funding and capacity “to achieve the level of coordination required for effective implementation” (Feinberg, 2001:119) of the wide ranging initiatives. Although a number of Ecotech projects have been setup in areas of technical cooperation, infrastructure building and financial cooperation, many of them “were neither goal orientated with explicit objectives or performance criteria not matched, nor where they subject to rigorous external assessment of their outcomes” (Dent, 2010:46).
Despite strong East Asian support, many of the industrialised states in APEC viewed Ecotech as “a competitor rather than a complement to the trade liberalization agenda” (Ravenhill, 2000:325). Dent (2010, 46) criticises that richer member states could do more to directly foster the development of weaker member states which would subsequently better enhance a sense of regional solidarity. APEC are aware that in order to make progress in this area of activity the apparent divergence and lack of confidence between member states needs to be overcome. Financial Cooperation is another area where APEC has failed to make substantive progress.
This is fundamental as the “European experience has demonstrated, financial sector cooperation is critical to the promotion of deeper regional integration. ” (Ravenhill, 2001:194). Shortcomings here lie in the politics of bureaucracy as the “unwillingness of much Asian government to cede to a regional institution any role on even basic matters in the financial area. ” An example of APEC’s perceived lack of effectiveness over financial cooperation was the aftermath of the Asian financial crisis in 1997/98 when ‘as an organisation APEC failed to address the fallout’ (Dent, 2010:42).
In another respect the crisis encouraged closer collaboration among East Asian governments, as opposed to the wider Asia-Pacific region, owing to a perception that Washington, London and the IMF were conspiring to exploit the situation. (Ravenhill 2000: 333). This is an example of the neo realists interpretation of sub groupings of nation states being an obstacle to APEC; specifically “APEC’s failure to address the concerns of East Asian countries galvanised them into establishing their own regional institutional framework, ASEAN Plus Three. (Dent, 2008:142). Despite this APEC has made progress in promoting trade facilitation to cut business red tape, reduce costs for traders and increase the interaction of economies within the Asia-Pacific region. For example, in Shanghai in 2001 “APEC leaders agreed to reduce transaction costs across the region by 5% over the next five year” (Ravenhill, 2010:2) in its first Trade Facilitation Action Plan. This target was realised two years ahead of schedule.
Subsequently it was agreed to reduce transaction costs by an additional 5% by 20010 which APEC claims is well on track. When evaluating APEC’s institutional framework there are a number of weaknesses which have prevented it from implementing new initiatives aimed at enhancing economic integration. APEC established a secretariat in 1992 but it is viewed by many as a primary source of the groupings failure to progress forward its ambitious agendas. (Beeson,2002; Dent,2008; Ravenhill,2000).
APECs secretariat operates in a “narrow sense of the word: a body to coordinate the grouping’s meetings and activities between its members, (… ) enjoying only negligible autonomy and lacks the capacity to play an independent leadership role in promoting Asia Pacific cooperation” (Beeson, 2002:329). The secretariat is restricted by size and function: there are only 22 program officers lent from member governments on a temporary basis, so their primary loyalty remains with their home agencies. There are no permanent senior staff and the chief executive is rotated annually. ’ (Feinberg, 2008:69). As a result the secretariat lacks the internal capacity to drive through its own agenda or even to monitor and evaluate the implementation of key programmes under its auspice (Feinberg 2001:09). Morrison (1995) goes as far as stating that without a stronger central institution, APEC is unlikely to ever progress beyond being a ‘shoptalk. ’ Other attempts to provide a body within APEC “that would be an independent source of ideas were short-lived” (Beeson, 2002:329).
For example, the EPG played an important role in “setting an agenda for action and, through public advocacy of its proposal, in placing pressure on the member states to move forward on trade liberalisation. ”(Ravenhill, 2000:326). However the content of some EPG reports, and the aggressive manner in which it attempted to impose its agenda, made many Asian members so unhappy that the Group’s mandate was not renewed after its third report in 1995. (Beeson, 2002:329). The combination of APEC’s weak secretariat and the dissolution of its EPG have prevented the grouping from having the “body to provide it with vision and to drive it forward. (Ravenhill2001:326).
APECs lack of engagement with civil society has compounded these failings. APEC has become “largely an intergovernmental institution” whereby governments have crucially failed to involve the business academic and civil society and “missed opportunities to widen APECs constituencies and basis of Public support. ” (Feinberg, 2008:72). As Ravenhill (2000:327) notes NGOs have been particularly critical and “their relationship with APEC has been primarily adversarial. Twenty one years after its formation APEC is arguably a long way from achieving its attempted aims within the Asia-Pacific region; more specifically the developed countries have failed to meet the objectives for free trade and investment based on the Bogor Goals in 1994. The neo-realist assessment of intrinsically Asian nationalist self interests, whilst grouping for protectionism on the one hand and defense against perceived US geo-political regional aims on the other, inevitably led to further obstacles including the sub-grouping of East Asian member states.
Yet “the very existence of APEC, linking countries of enormous diversity, (… ) is itself an achievement” (Ravenhill, 2000:320) which is a neo-liberal institutionalist evaluation where the base line is in the theme of achieving co-operation. In this latter respect regional integration in Asia-Pacific has been enhanced. Nonetheless trade liberalisation has failed due to a lack of consensus which has primarily derived from economic and cultural difference between member states. (Dent, 2008:143). It is additionally apparent that APEC’s other pillars of activity have also made disappointing progress.
Whilst trade facilitation has measurable advancements and some success it has been a minimal contribution in the overall attempt to enhance closer economic integration within the region. In conjunction, the lack of leadership, the absence of a strong secretariat and binding rules have constrained any attempts by APEC to harness an efficient infrastructure. In the final analysis, even the neo-realist assessment cannot disguise the fact that APEC in itself has led immeasurably to the rise in confidence of the Asia-Pacific countries and, ultimately, in the popularising of the concept of ‘Asia-Pacific’.
The question remains, however, whether member states can rectify the inherent weakness of APEC which is “the wide diversity of nation states encompassed within APEC’s membership that has ultimately been the organisation’s undoing” (Dent, 2008:144).
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