What is the Asia-Pacific Economic Cooperation and why was it established?
The Asia-Pacific Economic Cooperation, or APEC, was established in 1989. It started as an informal ministerial level dialogue group with 12 members comprising of Australia, Brunei Darussalam, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Canada, and the United States. The APEC was initiated as an annual meeting of foreign and trade ministers to sustain the momentum of market opening and economic cooperation which are vital to the growth and prosperity of the Asia-Pacific region.
The primary reason and purpose behind APEC’s establishment is the desire to have a forum that caters to the enhancement of economic conditions of states. This would entail the facilitation of economic growth, promotion of cooperation among states, liberalization of trade, and creation of opportunities for investments in the Asia-Pacific community.
Who are the members of APEC?
Currently, APEC consists of 21 member-economies that have diverse economic capabilities. Member economies include both developed and developing countries. The twenty one (21) member economies are Australia, Brunei Darussalam, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Canada, United States, Chinese Taipei, People’s Republic of China, Hong Kong, Mexico, Papua New Guinea, Chile, Peru, Russia, and Vietnam.
Oftentimes, the members of APEC are referred to as “economies”. The term “member economies” is used because APEC primarily addresses issues concerning trade and economy. APEC members are considered to be engaging with one another as economic entities.
The formulation of APEC was first voiced out through a speech in Seoul, South Korea in January 1989 by the Prime Minister of Australia, Mr. Bob Hawke. In the same year in Canberra, the first APEC meeting was held. The founding members of the organization were the member states of ASEAN, the market economies of East Asia which were South Korea and Japan, countries in the Southwest Pacific namely Australia and New Zealand, and the United States and Canada in North America. Aside from the fact that all these states had sovereign political status, they envisioned their economies towards attaining an internationally oriented growth. Also, all these member economies conducted a high proportion of trade with other Asia-Pacific economies. These factors – sovereign political status, economic growth, and trading with Asia-Pacific economies – served as the initial basis for membership.1 It was only after a time that the other present member economies of APEC were able to comply with the criteria for membership.
However, complications as regards the criteria for membership emerged. This was in the case of the small island economies of the Southwest Pacific which were considered as strongly internationally oriented in economic structure and traded largely with other Asia-Pacific economies. Their size and political and administrative capacity hindered Southwest Pacific states from acquiring membership in APEC, except for Papua New Guinea. Another issue was on Russia’s APEC membership following the rudimentary nature of market reform it had established and its external economic relations which were highly focused towards Europe.2
Because of these issues, APEC issued a ten-year moratorium on membership in 1997. But by the end of 2007, the moratorium was extended until 2010.
Who are the observers?
The three official observers of the Asia-Pacific Economic Cooperation (APEC) are the Association of Southeast Asian Nations (ASEAN) Secretariat, the Pacific Economic Cooperation Council (PECC), and the Pacific Islands Forum Secretariat. These observers are entitled to participate in APEC meetings and enjoy the privilege of accessing documents and any related information. In order to assist APEC in attaining its goals and implementing its initiatives, these observers provide partnership, expertise, and insights. These groups all aim for cooperation and economic growth in the region. The descriptions below provide details of their respective aims and purposes.
As stated in the ASEAN Declaration in Bangkok on August 8, 1967, ASEAN aims to promote regional cooperation and accelerate economic growth, social progress, and cultural development in the Southeast Asian region through joint endeavors in the spirit of equality and partnership. By such means, regional solidarity will be reinforced, contributing to peace, progress, and prosperity in the region. ASEAN also seeks to promote regional peace and stability by abiding to the rule of law in the conduct of its ties with other countries and adherence to the principles of the United Nations Charter.3
Unlike the ASEAN, the Pacific Economic Cooperation Council (PECC) is comprised of senior individuals from the business and industry sector, government, academic, and other intellectual circles – creating a tripartite partnership. These groups of individuals from different backgrounds participate in their private capacity to freely discuss current, practical policy issues in the Asia-Pacific region. The PECC serves as a regional forum for cooperation and policy coordination in the promotion of economic development in the Asia-Pacific region. The forum tackles issues focused on the acceleration of economic growth, social progress, scientific and technological development and environmental quality in the region, trade, joint ventures, mutual aid and other forms of linkage, fairness, respect and genuine cooperation, and lastly, the strengthening of the foundation for a prosperous, progressive, and peaceful Asia-Pacific Region.
The Pacific Islands Forum is the leading regional inter-governmental forum in South Pacific comprised of 16 independent and self-governing states. Similar to the goals of the ASEAN and PECC, it also seeks to stimulate economic growth, enhance political governance and security, and strengthen regional cooperation and integration. It addresses issues relating to regional trade, economic development, environment and regional law enforcement, cooperation and security in the South Pacific region.4
What does APEC want to achieve?
The main goal of APEC is to provide an avenue in creating and maintaining sustainable economic growth and prosperity in the region. This vision was translated to the Bogor Goals of 1994 of free trade and open trade and investments in the Asia-Pacific. During its creation, APEC aimed at attaining this goal by 2010 for industrialized economies and 2020 for developing economies.
Moreover, to achieve the Bogor goals, the APEC member economies developed a framework known as the “Three Pillars” in Osaka, Japan in 1995. The three (3) pillars serve as a guiding instrument in attaining the overall goal of free trade and investments. These pillars are stated below:
TRADE AND INVESTMENT LIBERALIZATION
The trade and investment liberalization pillar aims to gradually reduce and eventually eliminate tariff and non-tariff barriers to trade and investment. Protectionism is an economic policy implemented when government protects its domestic industries against foreign competition usually by means of tariffs, subsidies, import quotas, and the like. As a result, the prices of goods, commodities, and services tend to rise. In contrast to this, trade and investment liberalization opens markets thereby increasing the volume of trade and investments among countries. Through the reduction and elimination of tariffs and barriers to trade, states would not need to worry about inflation, thus economic growth for APEC members is made visible and attainable.
APEC’s Regional Economic Integration agenda is another means by which the three pillars are to be made effective in relation to the Bogor Goals. The Regional Economic Integration works on measures to facilitate bilateral and regional trade agreements. It also examines the prospects for a free trade area in the region.
Business Facilitation aims to reduce business and trade transaction costs. The reduction in the production costs leads to an increase in trade, investments, and business opportunities for the primary reason that goods and services become cheaper. This could result in more employment opportunities which contribute to the overall improvement in one’s economy.
This pillar also aims to facilitate faster means of accessing and acquiring trade information. It aligns its policies and strategies towards the facilitation of economic growth and an open and free trade environment.
ECONOMIC AND TECHNICAL COOPERATION (ECOTECH)
Through the Economic and Technical Cooperation pillar, APEC intends to provide training and cooperation through capacity-building projects and activities among its member economies. ECOTECH prioritizes regional economic integration, addressing inclusive growth, improving and protecting people’s quality of living through sustainable growth, structural reform, and human security.5
APEC IN ACTION
How does APEC put its goals and vision into action?
To achieve APEC’s Bogor Goals of free and open trade and investment in the Asia-Pacific, the member economies of APEC formulated a strategic roadmap during the APEC Economic Leaders’ Meeting in Osaka, Japan in 1995. This roadmap is known as the Osaka Action Agenda.
The Osaka Action Agenda provides a framework for meeting the Bogor Goals through trade and investment liberalization, business facilitation and sectoral activities, subsumed within policy dialogues and economic and technical cooperation. The Osaka Action Agenda has identified General Principles in operationalizing APEC liberalization and facilitation process, these are:
- Comprehensiveness in addressing all impediments to long-term goal of free and open trade.
- WTO-consistency in its principles.
- Comparability in terms of trade and investment liberalization and facilitation, taking into consideration the general levels of each APEC member-economies.
- Non-discrimination in the reduction in barriers to trade available to all APEC and non-APEC economies.
- Transparency in the laws, regulations and administrative procedures of all APEC member economies.
- Standstill or not taking measures that may increase levels of protection.
- Simultaneous start, continuous process and differentiated timetables in the process of liberalization, facilitation and cooperation towards the achievement of Bogor Goals.
- Flexibility in dealing with liberalization and facilitation process.
- Economic and technical cooperation is actively pursued.
The APEC member economies report their progress of meeting the Bogor Goals through the Individual Action Plans (IAPs) and Collective Action Plans (CAPs). These reports are submitted to the APEC Secretariat on a regular basis.
INDIVIDUAL ACTION PLANS
The Individual Action Plan (IAP) is the primary mechanism for the implementation of trade and investment liberalization and facilitation agenda. IAP is basically a record of actions taken in meeting the goals for free and open trade and investment. The IAP promotes transparency as APEC member economies report their individual progresses in undertaking their commitments to investment liberalization.
The IAP reporting is based on the following areas:
What are the benefits of being an APEC member?
As a multilateral forum, APEC provides its 21 member economies, together with the business community and other parties, an avenue to discuss issues that impact the Asia-Pacific region. It provides these stakeholders an arena to exchange ideas, opinions, concerns, and plans towards the strengthening of the region’s future growth.
Developing and developed economies benefit significantly from APEC. APEC provides developing economies additional information and guidelines relating to areas such as development of procedures, policy frameworks, and other systems that deal with contemporary issues. Some of these issues include transparency, governance, financial sector reform, and customs procedures. With the various APEC forums ranging from working group meetings, seminars, up to the leaders’ meetings, representatives from each country are given the opportunity to learn new skills and acquire the best practices from other economies. Both developed and developing member economies have the opportunity to set APEC’s agenda. APEC strengthens the individual and collective capacity of its member economies as participants for economic analysis. It also facilitates an effective consultative forum, allowing participants to promote their common interests and be able to push through these interests in larger multilateral forums.
Lastly, businesses also gain an advantage and benefit from taking part in APEC. Such benefits include the reduction of barriers and obstacles to trade across borders.
What has APEC achieved so far?
Since the establishment of APEC, its success has been notable and the Asia-Pacific has become an economically dynamic region. In 2012, the member economies of APEC comprised 40 percent of world population (2.8 billion people).6 Their economies combined make up for 47 percent of world trade (USD 21 trillion) and their share of global GDP is 57 percent valued at USD 41 trillion.7 These facts attest to APEC’s dynamism.
As for trade and investment liberalization, to date, APEC has achieved the following:
- At the outset of APEC’s establishment in 1989, the average trade barriers in the region was at 16.9 percent. Significantly, trade barriers have decreased up to 5.8 percent as of 2010.8
- The overall intra-APEC merchandise trade, has grown from $1.7 trillion in 1989 to $9.9 trillion in 2012. On the other hand, APEC’s total trade in terms of goods and services has also increased from $3.1 trillion in 1989 to $16.8 trillion in 2010.
- The APEC members have a total of 140 signed free trade agreements as of June 2013, 51 of which are with at least one other APEC member. Out of all the free trade agreements signed, 134 are in force while 49 are with at least one other APEC member.9
- The Regional Economic Integration agenda, which is a multi-year programme aimed at achieving the Bogor goals of trade and investment liberalization, is currently investigating the prospects of the creation of a Free Trade Area of the Asia-Pacific. It has developed 15 model measures for free trade agreements and regional trade agreements.10 Also, APEC is notable for being an active promoter of multilateral trade negotiations in the World Trade Organization over the past 20 years.
APEC has promoted trade facilitation with the globalization of the world economy. The aim of the Trade Facilitation Action Plan (TFAP) of APEC is to keep trading procedures simple, predictable, and transparent in order to allow commerce to freely flow across borders. On this note, cutting red tape for imports and exports are being implemented so that goods may be delivered efficiently and cost effectively. Between the years of 2002 up to 2006, APEC has achieved a step in reducing the cost of business transaction across the region by 5 percent. From 2007 to 2010, the TFAP II was able to further reduce the transaction costs by another 5 percent. This resulted in a total of USD 58.7 billion as savings.11
Several initiatives were implemented that contributed to the facilitation of trade. These include the following:
- Member economies introduced an electronic or…document processing.
- Through the adoption of the Single Window Strategic Plan in 2007, the development of a single window system that allows importers and exporters to submit necessary information to the government in a single transaction – instead of sending to multiple government agencies – is being promoted.
- Easy access to APEC member economies’ tariff and Rules of Origin Information is made available through the APEC webpage on Tariffs and ROOs (“WebTR”). This was launched in November 2010.
- APEC aims to improve the investment environment of its member economies and this is being promoted through the Investment Facilitation Action Plan of 2008.
- APEC member economies and businesses are guided by the APEC Privacy Framework on implementing information privacy protection policies and procedures.
- Through the APEC Business Travel Card (ABTC), traveling is made easier by allowing bona fide business travelers with pre-approved visa clearance and express lane transit at airports in participating economies.
- Behind-the-border barriers to trade will be addressed through the Structural Agenda of APEC. It will focus primarily on the domestic policies and institutions that negatively affect market operations, together with the capacity of businesses to access markers to operate efficiently.
ECONOMIC AND TECHNICAL COOPERATION (ECOTECH)
A total of 1600 projects designed for capacity building have been initiated since 1993. Yearly, APEC funds around 100 to 150 projects. In fact, in 2011-2012, a total of 73 projects were implemented, 32 of which were APEC-funded projects that were focused on safeguarding quality of life through sustainable growth, 9 projects focused on inclusive growth, 21 on human security, 2 projects on structural reform, and 9 projects on regional economic integration.12
One of the notable contributions of ECOTECH focuses on the reduction of the digital divide between industrialized and developing countries. In 2000, APEC envisioned a region having accessible internet for everyone, it therefore made a goal of tripling internet usage in the region. This goal has been achieved as it has been recognized by the 2008 APEC Ministerial Meeting on the Telecommunications and Information Industry. At present, APEC has set out another goal of providing universal access to broadband in the region by 2015, although this has been dubbed by Telecommunications Ministers in Okinawa, Japan in 2010 as an ambitious target.
Another project considered to contribute to the reduction of digital divide is the establishment of a network of 46 APEC Digital Opportunity Centers (ADOC) operating in 10 member economies at present. These centers act as local information and communication technology (ICT) resource centers that provide citizens and businesses of the region with access to ICT technologies, education, and training.
APEC has not only focused its attention on concerns and issues relating to the facilitation of free trade and investments but has also included in its agenda pressing regional priorities. These include counter-terrorism (The Shanghai Statement in 2001 and the Counter-Terrorism Task Force), human security (Health Working Group), emergency preparedness (Emergency Preparedness Working Group), climate change, energy security and clean development (The Sydney Declaration in 2007 and the APEC List of Environmental Goods in 2012), and lastly, global financial crisis (The Vladivostok Statement in 2012).
How does APEC operate?
The APEC operates as a cooperative, multilateral economic and trade forum. It is considered the only international intergovernmental grouping in the world committed to reducing barriers to trade and investments without requiring its members to enter into legally binding obligations. Participation in APEC is voluntary in nature and decisions are non-binding.13 APEC promotes dialogue and decision on a consensus basis, thus upholding the equality of its member economies. It conducts its activities on the basis of open dialogue and equal respect for the views of all the participants.14
Who sets the APEC agenda and work plan?
The activities of APEC are guided by the Economic Leaders and Ministers of APEC member economies who meet throughout the year to determine the future of trade and investment cooperation in the Asia-Pacific region. In the APEC Economic Leaders’ Meeting which is held at the end of each year, a declaration enumerating the priorities of APEC for the following year is issued. Ministers representing various portfolios, Senior Officials and members of various APEC forums meet throughout the year to launch new initiatives, track the progress of existing programmes and implement directives from economic leaders. APEC promotes the involvement of developing and developed countries, small and large in its decision-making process.
SCOPE OF WORK
What is the scope of work of the APEC?
APEC is currently working on three broad areas to meet its Bogor Goals of achieving free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies. These key areas, identified as APEC’s
Three Pillars are:
- Trade and Investment Liberalization
- Business Facilitation
- Economic and Technical Cooperation (ECOTECH)
APEC is considered among the pioneering international institutions that closely link economic and technical cooperation to trade and investment liberalization.15 It has facilitated conferences and training sessions on timely and significant important topics such as corporate governance, financial supervision, competition policy, electronic commerce, educational reforms, and efficient energy production, among others.
Who sets the policy direction of APEC?
The policy direction of APEC is provided by the 21 APEC Economic Leaders. Strategic recommendations by APEC Ministers and the APEC Business Advisory Council are considered by APEC Economic Leaders as part of this process.
The following meetings are conducted annually to shape the policy direction of APEC:
APEC ECONOMIC LEADERS’ MEETING The APEC Economic Leaders’ Meeting is held once a year in the APEC host economy. It is attended by the heads of state of member economies except for the Republic of China (represented by a ministerial-level official under the name Chinese Taipei). The 2013 APEC Economic Leaders’ Meeting was held on October 5-7, 2013 at Bali, Indonesia. The Philippines will be the host and chair of APEC 2015.
The declarations from the Leaders’ Meeting set the policy agenda of the APEC.
APEC MINISTERIAL MEETING: The Annual APEC Ministerial Meeting of the foreign and economic/trade ministers are held a day or two prior to the APEC Economic Leaders’ Meeting. The objective of the ministerial meetings includes assessment of the year’s activities and providing recommendations for APEC Economic Leaders’ consideration.
SECTORAL MINISTERIAL MEETINGS The Sectoral Ministerial Meetings are held regularly to discuss issues relating to education, energy, environment and sustainable development, finance, human resource development, regional science and technology cooperation, small and medium enterprises, telecommunications and information industry, tourism, trade, transportation and women’s affairs. Similar to the APEC Ministerial Meetings, outputs and recommendations from the sectoral meetings are forwarded to APEC Economic Leaders for their consideration.
BUSINESS ADVISORY COUNCIL (ABAC) Established in 1995, the APEC Business Advisory Council (ABAC) is a private sector body that offers recommendations to APEC Leaders through their annual dialogue and advises APEC officials on business sector priorities and concerns. ABAC convenes four times per year.
It also sends representatives to the APEC Senior Officials’ Meeting, Annual Ministerial Meeting and Sectoral Ministerial Meetings. ABAC consists of three senior business leaders per APEC member economy.
Who hosts the annual APEC Leaders’ Meeting?
Every year one of the 21 APEC Member Economies hosts the APEC Meetings and serves as the APEC Chair. As host, the member economy is responsible for chairing the annual Economic Leaders’ Meeting, selected Ministerial Meetings, Senior Officials Meetings, and the APEC Business Advisory Council and the APEC Study Centers Consortium.
APEC features an annual cycle of leadership, with a member economy assuming the task of being the APEC Chair for one year. This cycle ends with the convening of the ministerial meeting and the Leaders’ Meeting (APEC Summit).
The APEC Chair has a critical role in influencing the direction of the development of APEC in terms of the content of cooperation and nature of process.16 Furthermore, the rotational character of the chairmanship ensures that the broad scope of the agenda will somehow reflect the varying interest of its member economies.
Where does APEC get funding to finance the various activities and meetings held?
The activities of APEC are centrally funded by annual contributions from APEC member economies presently totaling US$5 million. These contributions are used to fund a Secretariat in Singapore and various projects which support APEC’s economic and trade goals. Member economies also provide voluntary contributions to support projects that advance APEC’s trade and investment liberalization and facilitation goals and meet capacity-building needs, especially for APEC developing economies.
Aside from the meetings identified, how are APEC’s working level activities being carried out?
APEC’s working level activities and projects are guided by the APEC Senior Officials from the 21 APEC member economies. Such activities and projects are being carried out by four high level committees: (1) Committee on Trade and Investment; (2) Senior Officials’ Meeting Committee on Economic and Technical Cooperation; (3) Economic Committee; (4) Budget and Management Committee. The various sub-committees, experts’ group, working groups and task forces all support the activities and projects led by these high level committees.
What is the role of the APEC Secretariat?
The APEC Secretariat operates as the core support mechanism for the APEC process. It is tasked with coordination, technical and advisory support including information management, communications and public outreach services. The APEC Secretariat performs a central project management role, assisting the APEC member economies in overseeing the various APEC-funded projects, and in administering the annual budget. The APEC Secretariat maintains a capacity to support research and analysis in collaboration with APEC Study Centres and PECC as required by APEC fora. The APEC Secretariat is headed by an Executive Director,Dr. Alan Bollard. The Executive Director is responsible to APEC Senior Officials through the SOM Chair and manages the Secretariat in line with priorities set by SOM on behalf of the Ministers. Appointment to the Executive Director position is on a three-year-fixed-term basis, and is open to professional candidates from any of the APEC member economies. The APEC Secretariat is housed at the University of Singapore.
Learn about the Philippines’ hosting of APEC 2015.
Prepared by the Foreign Service Institute in partnership with the Department of Foreign Affairs
Layout by Presidential Communications Development and Strategic Planning Office / APEC 2015 Strategic Communications Committee
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1 Ippei Yamazawa, Asia-Pacific Economic Cooperation (APEC): Challenges and Tasks for the Twenty-First Century (London: Routledge, 2000), 2-4.
3 Association of Southeast Asian Nations, “The ASEAN Declaration (Bangkok Declaration) Bangkok, 8 August 1967” http://www.asean.org/news/item/the-asean-declaration-bangkok-declaration (accessed January 10, 2014).
4 Pacific Islands Forum Secretariat, http://www.forumsec.org/pages.cfm/about-us/ (accessed January 10, 2014).
5 APEC Secretariat, APEC: Economic and Technical Cooperation, (October 2013)
6 Policy Support Unit of APEC Secretariat, APEC in Charts 2013. (October 2013)
8 APEC Policy Support Unit, APEC’s Bogor Goals Progress Report. (September 2012)
9 Policy Support Unit of APEC Secretariat, APEC in Charts 2013. (October 2013)
10 APEC’s Committee on Trade and Investment, CTI Annual Report to Ministers 2008. (December 2008)
11 APEC Policy Support Unit, APEC’s Achievements in Trade Facilitation 2007-2010: Final Assessment of the Second Trade Facilitation Action Plan (TFAP II). (January 2012)
12 APEC Secretariat, APEC: Economic and Technical Cooperation, (October 2013)
13 Soesastro, Hadi, “APEC’s Overall Goals and Objectives, Evolution and Current Status” in Feinberg, Richard (ed.) APEC as an institution: Multilateral Governance in the Asia-Pacific, (Singapore: Institute of Southeast Asian Studies, 2003)
14 Candelaria, Sedfrey, “The Legal Characterization of the Asia-Pacific Economic Cooperation and the Individual Action Plans in International Law” in Villacorta, Wilfredo (ed.) Coalition-Building and APEC, (Makati City: Philippine APEC Study Center Network (PASCN), 2001).
15 Feinberg, Richard and Ye Zhao, Assessing APEC’s Progress: Trade, Ecotech and Institutions, (Singapore: ISEAS, 2001)