An Overview of Asia Pacific Region’s Most Pressing Issues
for Discussion at APEC
The November 10-11 APEC Summit in Beijing could be one of the most divisive in recent memory, as its members, particularly the US and China, grapple with when and how to launch the long-awaited Free Trade Area of the Asia-Pacific (FTAAP). Regardless of the outcome of that debate, a number of other APEC initiatives should place the organization front and center in tackling some of the region’s most pressing issues. New guidelines against corruption, stepped up efforts to empower the region’s women, and the greater use of infrastructure projects to boost economic growth are just a few of the challenges to be taken up at next week’s summit.
This month’s Asia-Pacific Economic Cooperation (APEC) forum in Beijing is likely to be a divisive affair, with the US and China jockeying for regional leadership on several fronts. On trade, China has been pushing the 21members of APEC, which is now celebrating its 25th anniversary, to launch the Free Trade Area of the Asia-Pacific, or FTAAP, which APEC has been laying the groundwork for over the past eight years.
First floated in 2006, the FTAAP has been billed as a comprehensive Asia Pacific-wide free trade agreement that builds on the numerous existing FTAs in the region, including the Transpacific Partnership (TPP), which is still under negotiation. As an incubator for the FTAAP, APEC will be expected to provide the leadership and intellectual input for defining, shaping and addressing the “next generation” trade and investment issues that an FTAAP would embrace, if it is ever launched.
At next week’s APEC summit, China was hoping that APEC members would launch a feasibility study on the FTAAP agreement. Such a roadmap would outline the various modalities for information sharing and capacity building, as well as commission a number of analytical studies on how APEC would move toward a free trade area. But not everyone is on board. The US, citing its need to first complete the TPP, reportedly blocked efforts to launch the FTAAP during the Beijing Summit. The final communiqué, however, could still make reference to the FTAAP as a “long term vision” of APEC members.
Regardless of how the FTAAP plays out at the summit, a number of other APEC initiatives are likely to have a more immediate impact on the region’s businesses and suppliers.
One of these is a proposal, endorsed by both the US and China, to beef up the region’s anti-corruption efforts, an issue that distorts and raises the costs of doing business globally. Working through APEC’s Anti-corruption and Transparency Network (ACT-NET), APEC members will agree in Beijing to begin a process of information sharing on regulations and bribery cases in each member country. Law enforcement officials will also exchange best practices and look for areas to cooperate more closely, for example, in asset recovery.
A new issue that has received a lot attention is how to boost women-empowerment in APEC economies. Next week’s summit will look specifically at how to provide greater opportunities for women to access finance and be more involved in higher levels of management in the private sector. Each economy has been asked to showcase five companies that have best practices in promoting women and women’s issues. APEC will also develop a set of 26 indicators to gage members’ performance in terms of women’s participation in their economies.
On a more macro level, APEC leaders are on track to call for greater infrastructure spending to boost economic growth. With concern growing over a slowing global economy, particularly in China, APEC finance ministers issued a statement on October 22 calling for APEC to lead a “global recovery towards strong, sustainable and balanced growth.” In endorsing calls for stepped up infrastructure investment, APEC leaders will point to public-private partnerships as the best way to attract long-term financing and leverage private resource flows to fill gaps in public funding, particularly in developing APEC economies.
While not part of the official APEC agenda, China’s proposal to create an Asian Infrastructure Investment Bank should dominate backroom discussions. This is because the US and some of its allies have expressed serious concerns over the new bank. Topping the list is whether it will be able to meet the rigid standards of other multilateral banks in terms of transparency, environmental protection, governance, labor rights, and corruption.
But while infrastructure investment has become a hot topic, there are serious questions about its effectiveness. A recent IMF paper argues that faith in infrastructure as a sure-win strategy for growth in developing countries is misplaced. It notes that there is little evidence of long-term positive impacts from surges in infrastructure spending. This is because such spending is financed by big buildups of debt that undermine long-term growth. It is also difficult to shut down wasteful projects once they get strong political backing, the IMF report stated. Next week’s summit will need to take account of the dangers of highly leveraged infrastructure investment, and APEC economists will no doubt be tasked to study the issue further.
In addition to launching new initiatives, some areas that APEC has been working on for some time should make additional progress in Beijing. One of these is “supply chain connectivity,” which is aimed at improving supply chain performance and removing bottlenecks. This includes improving customs transparency or cross-border physical linkages, such as roads and bridges. Next week’s summit should endorse the creation of an APEC Alliance for Supply Chain Connectivity, a public-private forum that would work with economies to develop and implement recommendations already made in APEC’s supply chain connectivity comprehensive capacity building plan.
Other issues that the business community has identified for action in Beijing include promoting good regulatory practice, supporting the development of SMMEs, accelerating the green growth agenda, energy and food security, promoting a healthy workforce, financial market development, and facilitating trade and supply chain finance.
With APEC economies now accounting for 44% of world trade and 55% of global GDP, the forum has never been more ready to advance the objective it set for itself in the 1994 Bogor Declaration -- that of achieving free and open trade and investment in the Asia-Pacific region by 2020. But whether the US, China, and other APEC members can reach political consensus to make that great leap forward remains another matter.