APEC under change: economic crisis and a new growth strategy

This page is an English translation of Vol. 50 of the Ministry of Foreign Affairs' Wakaru! Kokusai Jousei ("Understanding International Affairs") column, published in Japanese on December 8, 2009.

The 17th APEC Economic Leaders' Meeting was held in November 2009 in Singapore, and was attended by heads of government from member economies, including Japanese Prime Minister Yukio Hatoyama, United States President Barack Obama, President of China Hu Jintao, and Russian President Dmitry Medvedev. As cooperation within the Asia-Pacific region for dealing with the global economic crisis continues to grow in importance, Japan has been given the responsibility of hosting APEC for 2010. What kind of significance does APEC have, and what is its role?

Growth Strategy Discussed at APEC Singapore 2009

APEC Economic Leaders attending the meeting in Singapore At Leaders' Meetings, it has become customary to take a group photo of the Leaders, dressed in the host economy's traditional costume.

(See Overview and Evaluation of Singapore APEC Economic Leaders' Meeting for more details)

APEC Singapore 2009 was held under the theme of sustaining growth and connecting the region. The central issue addressed was "growth strategy," as a method for dealing with the global economic crisis. At the meeting, APEC Leaders confirmed common recognition of the importance of "inclusive growth" based on the idea of focusing on social aspects and ensuring the fruits of growth spread as far as possible, as well as the importance of "sustainable growth," remaining aware of environmental aspects including climate change and energy issues. As a result, more comprehensive growth strategy including "inclusive growth" and "sustainable growth" will be developed in order to achieve increased domestic demand and more balanced growth. Specific details of the strategy will be discussed at APEC Japan 2010. Additionally, the theme of connecting the region was addressed through discussions including early conclusion of the WTO Doha Round negotiations, resisting protectionism, and regional economic integration.

APEC, the World's Largest Economic Forum

Source: World Bank Group website Data & Statistics (http://worldbank.org) APEC Outcomes and Outlook (2007/2008)

Just what kind of economic framework is APEC? APEC is the world's largest economic forum, with participation from most major countries and regions within the Asia-Pacific. The member economies of APEC cover four continents and represent over 40% of the world's population and more than half the world's GDP. APEC's major activities include "trade and investment liberalization and facilitation," "economic and technical cooperation," and "human security," such as counter-terrorism and dealing with infectious diseases. One of the main activities is the APEC Economic Leaders' Meeting held in November each year, at which the heads of each member economy gather together for an extremely valuable opportunity to exchange opinions directly with each other.

The End of the Cold War and APEC's Inauguration

Then Japanese Prime Minister Yukio Hatoyama and Australian Prime Minister Kevin Rudd exchange opinions at the APEC Economic Leaders' Meeting in Singapore, 2009

APEC was founded in 1989, following the suggestion of then Prime Minister of Australia, Bob Hawke. It was a time of major change in the international community, with the fall of the Berlin Wall and the conclusion of the Cold War, a standoff which had split the world into east and west following the Second World War. During the Cold War, the international community was divided roughly into "the east and the west," with the ideologies of communism and capitalism, and internal cooperative relations within the two regions were maintained. However, following the Cold War the world required a new structure for international cooperation. Thus, the idea of "regional integration" - gathering nations and regions in close geographic proximity to make use of their collective strength together - was born. At this time, Europe had already developed the European Community (EC), predecessor of the European Union (EU), and America had established NAFTA (the North American Free Trade Agreement), and these were followed by the forming of APEC, an economic cooperation framework for the Asia-Pacific. APEC began with 12 member economies, and has grown to cover 21 countries and regions including Chinese Taipei (Taiwan), Hong Kong as a special administrative region of China, and Latin America.

APEC's Open and Flexible Cooperative Relations

APEC respects the autonomy and cooperativeness of each of its member economies. For this reason, member economies are not bound legally, and APEC maintains a stance of being "a framework for loose inter-government cooperation." When APEC policies are discussed at APEC meetings, the majority rule is not applied for reaching decisions; consensus from all member economies is required. Further, activity is not limited to within the Asia-Pacific region. APEC's basic stance promotes "open regional cooperation" with nations and regions outside the area in which benefits such as freedom of trade and investment can be enjoyed by all. This gives APEC a slightly different structure to the regional integration forms of the EU and NAFTA.

Cooperation Between APEC and the Business World

Another major characteristic of APEC is its ability to reflect through its forums the voices of people associated with business. The APEC Business Advisory Council (ABAC) is made up of a board of representatives from business sector (up to three people are selected from each economy), who make proposals to Leaders and Ministers on topics such as how to achieve free and open trade and investment. According to the Ministry of Foreign Affairs' survey of Japanese Nationals Overseas (2008), more than 70% of the 1.1 million Japanese people living overseas reside in APEC member economies. These figures suggest the extremely important role that trade and investment relations between APEC member economies, and the APEC Business Advisory Council hold for the economy of Japan.

Towards Free and Open Trade and Investment

APEC promotes trade and investment in the region from two main standpoints. One focuses on eliminating tariff and non-tariff barriers, as well as other obstacles in the region in service, investment, and other fields. The second focuses on simplifying procedures related to trade and investment and harmonizing standards to ensure a smooth flow of people, products, and money. In order to steadily move forward on these issues, at the 1994 APEC Economic Leaders' Meeting (in Bogor, Indonesia) adopted targets, known as the Bogor Goals, aimed at achieving free and open trade and investment by 2010 for industrialized economies and 2020 for developing economies. The following Economic Leaders' Meeting in 1995 (in Osaka, Japan) adopted the Osaka Action Agenda as a framework for achieving the Bogor Goals, which provides a set of general principles and activities and actions to be taken in specific areas including customs procedures and deregulation/ regulatory reform. Individual action plans have since been developed.

APEC, Evolving with Ages

In the 20 years since its inauguration in 1989, APEC's role has gradually transformed in response to changes in the global situation. Although APEC started out as a forum for regional economic cooperation without political tone, the shocking terrorist attacks in the United States of September 11, 2001 were a turning point which shifted APEC towards regional cooperation from a viewpoint of ensuring human security also. For example, the Counter Terrorism Task Force (CTTF) was established in 2003. CTTF has been discussing issues including promotion and coordinating of counter terrorism activities, and implementation of capacity building programs for counter-terrorism. In addition, APEC has issued declarations on issues of infectious diseases such as the H1N1 influenza virus, climate change, and food security.

Free Trade Area Framework Talks Accelerated by Lehman Shock

Katsuya Okada, Japan's Minister for Foreign Affairs at the APEC Ministerial Meeting in Singapore, 2009.

In recent years, the financial crisis sparked by the collapse of American financial services firm Lehman Brothers, has prompted serious discussions towards achievement of a Free Trade Area of the Asia Pacific (FTAAP), in order to strengthen economic ties in the area. This aims to achieve integrated policies on trade, investment, economy and finance in the Asia-Pacific region, and realize a stable regional economy. At the APEC Economic Leaders' Meeting in Singapore in November 2009, it was agreed upon that a comprehensive approach should be taken to accelerate regional economic integration, regarding improvement of business environment and enhancement of connectivity. The methods by which an FTAAP should be realized, including the relationship to existing Economic Partnership Agreements (EPA) and Free Trade Agreements (FTA) are topics for future discussion.

Change and Action: Towards APEC Japan 2010

APEC Ministerial Meeting in Singapore, November 2009

APEC has gradually come to hold a more multifaceted role in accordance with changes of the times, and in 2010 the industrialized economies face a major turning point as it is their target year for achieving. the Bogor Goals. It is in such a year that Japan will be hosting APEC.. Over the next year, various APEC-related meetings will be held across the country, and Japan will exercise its leadership as host economy, proceeding in highly transparent and reliable assessment of the achievement of the Bogor Goals, and bringing together the discussions about embodiment of the growth strategy. The theme for APEC 2010 is "Change and Action." Japan, in collaboration with the United States, host of APEC in 2011, will expend every possible effort to aim for a reconstruction of APEC and to uncover new values.