Eminent Persons Group (EPG)
EXECUTIVE SUMMARY: IMPLEMENTING THE APEC VISION
This third report by the Eminent Persons Group (EPG) seeks to build on the bold initiatives undertaken by APEC Leaders at Seattle and Bogor. At Seattle in November 1993, APEC Leaders envisioned the creation of a community of Asia Pacific economies. At Bogor in November 1994, they adopted a timetable for the achievement of free and open trade and investment in the region that took into account the differing levels of development among the APEC economies. The APEC Leaders have undertaken these initiatives on the basis of their commitment to an open multilateral trading system and the concept of "open regionalism" while explicitly opposing the creation of inward-looking trading blocs.
APEC's present challenge is how to translate the vision embodied in these bold initiatives into a reality which is both meaningful to, and achievable for, its diverse membership. This third report by the EPG addresses this challenge with a strategy for commencing the implementation of the Bogor commitments. In developing this strategy we have been mindful of the need for APEC to proceed, in the words of the Bogor Declaration, "on the basis of equal partnership, shared responsibility, mutual respect, common interest and common benefit..."
The EPG is encouraged by the impressive progress of APEC to date. It played a major role in bringing the Uruguay Round to a successful conclusion in the GATT and thus in creating the World Trade Organization. It has agreed on a code of nonbinding investment principles. Its Economic Leaders meet annually. It has launched extensive work programs on a wide range of highly practical trade facilitation topics. Most importantly, its Bogor Declaration sets a clear objective for the future of the region.
We are deeply concerned, however, by the intensification of economic disputes in the region. The region is experiencing a growing number of rancorous trade conflicts, including several between its largest economies. There is a dangerous tendency to ignore multilateral norms and mechanisms despite a growing pluralism of economic and political capabilities that clearly calls for collective leadership. It is a matter of urgency for APEC to move promptly and decisively to implement the vision embodied in the Seattle and Bogor initiatives.
The Leaders and Ministers will begin this process at their meetings in Osaka in November 1995. They need to agree on the principles, agenda of issues and timetables that will guide the implementation process. They must also make a series of specific decisions on substantive issues that will provide a meaningful "down payment" on the journey toward the community of Asia Pacific economies adopted at Seattle and Bogor.
In doing so, we believe that the Leaders must answer four key questions. First, they have agreed on the goal of achieving a community of free and open trade and investment in the Asia Pacific. What can they do to translate this goal into practical reality? We believe that several steps are ripe for action.
The Bogor Declaration states that "We decided to accelerate the implementation of our Uruguay Round commitments..." The EPG believes APEC member economies should do so, as part of the "down payment" at Osaka, by adopting, wherever possible, a 50 percent rule that would apply to a menu of possible actions.
The industrialized member economies could choose to:
- cut by half the period to phase in the reductions they have already committed to make in their tariff schedules and/or;
- accelerate the agreed reductions in their agricultural subsidies from six years to three years, and/or;
- increase by 50 percent the volume of imports covered in each of the succeeding stages of phasing out their import quotas on textiles and apparel.
The developing member economies could choose to:
- cut by half the period to implement the new obligations they have already committed to accept regarding intellectual property rights and/or trade-related investment measures and/or;
- double the speed of implementing their agreed reductions in subsidies, and/or;
- cut in half the gaps between their bound and applied tariff rates.
The Leaders also agreed at Bogor "to undertake work aimed at deepening and broadening the outcome of the Uruguay Round." We recommend several ways that they could do so, some of which could also be included in the Osaka "down payment":
- APEC should commit itself to address the problems associated with the abuse of antidumping policies. Member economies should take full account of the interests of consumers and industrial users of imports, as well as importcompeting firms and workers, in implementing antidumping policies. They should discourage frivolous antidumping initiatives. They should authorize their competition policy officials to challenge antidumping actions that run counter to the goals of competition policy.
- APEC should agree to immediate cooperation between national authorities in implementing their present competition policies and launch an extensive study of the prospects for limiting unproductive differences between national competition policies over time. Differences in national competition policies underlie some of the most important "trade disputes" in the region. These disputes could become even more serious in the future as individual member economies adopt new or more elaborated competition policies.
- APEC should make an immediate contribution to trade facilitation by adopting a multifaceted program for product standards and testing. The Leaders should commit their economies to adopt international product standards, ask the relevant business/private industries to develop standards for their sectors, and concentrate governmental efforts on working out Mutual Recognition Agreements(MRAs)on acceptance of test data and product certification in major regulated sectors.
APEC can also move toward implementing the Bogor commitment by strengthening the nonbinding investment principles(NBIP)agreed in 1994 and applying them in practice. Both goals can initially be accomplished through unilateral action by individual member economies. APEC as a group should subsequently seek to reach collective agreement on strengthening the principles. It should then convert the arrangement into a voluntary code, which members would accept as binding once they voluntarily agreed to adopt it in their own economies, and perhaps ultimately into an agreement that itself was binding on all members.
The EPG conducted its first comprehensive "assessment of the progress of APEC," as the Bogor Declaration requests it to do, on this investment issue because it is the first on which APEC has taken collective action - quite appropriately, in light of the central role played by investment in the economic dynamics of the region. We concluded that the NBIP represent a useful first step, with five of the ten agreed principles meeting or exceeding international norms. We also concluded that the other NBIP need to be strengthened and that the member economies should then start implementing them in their national laws and policies.
The second question facing APEC Leaders is why, if they are committed to creating a community of Asia Pacific economies, are they involved in so many disputes? What can they do to reduce the incidence of conflict in the region?
We believe there is a two-fold answer to this question. One part is to reduce the causes of conflict by removing impediments to trade and investment. The steps just outlined will help APEC move in this direction.
In addition, the Leaders should immediately install an APEC Dispute Mediation Service. Such a facility would provide APEC members with a multilateral means to address economic disputes that are not covered by the World Trade Organization(WTO)or other existing international arrangements. It would offer a technique, mediation, that would supplement the practices of the WTO(which emphasize arbitration). It could thereby help resolve trade conflicts in the region. It could also help counter the tendency to resist multilateral action in favor of unilateral steps.
A third question facing some APEC Leaders is why, if they seek free and open trade in the region, have they created their own subregional trading arrangements within the region? Why are they expanding the membership of these arrangements or otherwise accelerating their activities?
The Bogor Declaration called on the EPG "to review the interrelationships between APEC and the existing subregional arrangements(AFTA, ANZCERTA and NAFTA)and to examine possible options to prevent obstacles to each other and to promote consistency in their relations." After conducting that review, we conclude that further liberalization within the existing subregional trading arrangements(SRTAs), and any linkups between them, would be constructive and supportive of the overall APEC process only if they were pursued within the principles of "open subregionalism." These principles are identical to those previously recommended by the EPG to implement the concept of "open regionalism" by APEC as a whole toward its nonmembers:
APEC should thus deepen its cooperation on monetary and macroeconomic issues. The Finance Ministers of the member economies have already begun that process through annual meetings. The EPG believes that the Leaders at Osaka, and subsequently the Finance Ministers, should strongly support the several initiatives to deal more effectively with Mexico-type crises in the International Monetary Fund(IMF)that were launched by the Group of Seven industrial countries(G-7)at Halifax in June 1995. These include more extensive publication of data on individual countries to enable private markets to perform better and thus minimize the risk of new shocks, conveyance of more candid IMF advice to coutries that are avoiding neccessary adjustment actions, and provision of additional financing to the IMF to support the proposed Emergency Financing Mechanism that could respond to future crises.
All APEC economies that are members of the IMF should themselves participate in these new programs to the maximum extent that is consistent with their capabilities. Those that provide additional funds to the IMF should partcipate fully in the decision-making process on using the Emergency Financing Mechanism(and acquire an increased role on international monetary issues more broadly).
Another vital area of community-building is development and technical cooperation. Development and technical cooperation programs are needed in APEC to fill the gaps in technology, management, and planning and administration among its diverse members. However, APEC should depart from the conventional donor-recipient cooperation framework and articulate a new approach, one that stresses empowerment of all the participants in the cooperation process. APEC should play a unique coordinating role in the new cooperation programs. The EPG believes that, at Osaka,APEC should launch a four-part Action Plan in this area:
- adoption of a set of principles to govern APEC development cooperation;
- application of those principles through a new APEC technical cooperation initiative that will include a statement of APEC cooperation priorities, appointment of a technical cooperation task force, formulation of a technical cooperation framework, and establishment of national APEC technical cooperation funds;
- liberalization of APEC's decision-making on development and technical cooperation ; and
- immediate implementation of an APEC Infrastructure 2020 Program, an accelerated action plan designed to support capacity-building and thereby contribute directly to achieving free trade and investment, along with an APEC-wide infrastructure benchmarking program.
This report thus offers a series of practical proposals through which APEC can implement, over the coming months and years, the decisions made by the Leaders at Seattle and Bogor. We believe that the procedures now being developed by the member economies can lead to the effective implementation of that program. We believe that major parts of it can, and should, be included in the "down payment" at Osaka. We believe that commencing the realization of the Bogor commitments in this way will place APEC firmly on the path to success and credibility, both in the region and around the world. We believe it will enable Leaders to answer the four crucial questions that they face as they navigate the future course of economic cooperation within the region and as they translate their visions and initiatives into reality.
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