Apec will benefit from a free-trade agreement of its own

Tang Guoqiang backs Apec's efforts to create an Asia-Pacific free trade agreement that works in tandem with existing arrangements, to ultimately boost regional economic development and improve people's lives

PUBLISHED : Friday, 04 July, 2014, 4:39pm
UPDATED : Saturday, 05 July, 2014, 3:56am

China is hosting this year's Apec meetings and is working hard to ensure their success, given the importance of the Asia-Pacific Economic Cooperation forum to the future of the region.

The establishment of Apec, in 1989, was a landmark in the region's economic cooperation. Over the past 25 years, it has achieved much, not least by playing a crucial role in promoting the liberalisation of trade and investment, as reflected by the World Trade Organisation's Information Technology Agreement in 1996 and, more recently, the WTO Bali package last year.

The average tariff levels of Apec economies has been driven down from 17 per cent in 1989 to 5.7 per cent in 2011. Trade facilitation has been even more successful, with average transaction costs reduced by 5 per cent from 2002 to 2006, and another 5 per cent from 2007 to 2010. Supply chain connectivity is set to improve by 10 per cent from 2010 to 2015.

Further, Apec has encouraged cooperation through various mechanisms. About 1,600 economic and technical cooperation projects have been completed and, at any time, more than 170 are ongoing. Businesspeople also enjoy greater mobility across the region thanks to the Apec Business Travel Card programme.

Officials from Apec member nations meet several times each year. This has built capacity and extended best practices. And Apec economic leaders meet every year to discuss regional cooperation in common areas of interest.

Apec has initiated new visions, new directions and new concepts for regional cooperation, including the Bogor Goals (towards free and open trade and investment) and an Asia-Pacific free-trade area, among other things.

The concepts of consensus, openness, inclusiveness and win-win cooperation have now taken hold. Over the past 25 years, Apec has grown into the highest-level and most influential regional forum with the broadest scope for economic cooperation, as well as a major force in promoting world economic growth.

However, at this important milestone, Apec and its members face a number of challenges. First, the region has seen the explosive growth of bilateral, multilateral, regional and subregional cooperation mechanisms. When Apec was first established, there were only three cooperation forums and three free-trade areas in the Asia-Pacific. Now there are 25 cooperation mechanisms and 56 free-trade areas. There is a trend towards integration and fragmentation, diverting the common efforts of trade and investment liberalisation. Second, work towards the realisation of the Bogor Goals has been less than satisfactory and people are unsure whether we can meet the 2020 deadline.

Third, following the global economic crisis, although the Asia-Pacific region still drives global growth, its speed has slowed considerably. Moderate growth has become the new norm for the region.

Fourth, various economies in the region are undergoing structural reforms and searching for new economic drivers.

So, how can we reinvigorate Apec and facilitate regional integration? How can we best use the forum as a bridge for synergies in free trade by following the principles of openness and inclusiveness? How can we uphold and improve the multilateral trading regime that benefits all parties? These are the pressing questions that Apec members must answer.

China is deeply aware of its heavy responsibility and has proposed as the theme for this year's Apec meeting, "Shaping the future through Asia-Pacific partnership". There are three priorities: advancing regional economic integration; promoting innovative development, economic reform and growth; and strengthening comprehensive connectivity and infrastructure development.

In the process leading up to the leaders' meeting in November, Apec members are promoting regional economic integration by defining the road map for a Free Trade Area of the Asia-Pacific, a vision which has been formally adopted by Apec leaders.

Apec must champion regional economic institutional building and promote interaction between competing agreements - such as the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) - in an open, inclusive, cooperative and flexible manner. To do so, it must prove its credibility with the Bogor Goals and a meaningful agenda for the future.

In this context, it is time for Apec to create a free-trade-agreement information exchange mechanism to aid communication and interaction between members of the TPP, RCEP and other similar arrangements. This can act as an incubator of ideas to produce a meaningful and credible road map for realising an Asia-Pacific free-trade area.

Members are seeking drivers for growth, for instance, through structural reforms, financing, taxation, green growth, urbanisation, e-commerce, mining and forestry. Some are also exploring ways to avoid the middle-income trap.

They are planning a blueprint for connectivity, focusing on the development of both the "hardware" and "software", and increasing the number of people-to-people and cultural exchanges. The hope is that this will ultimately boost economic development, improve people's lives, ensure the free flow of factors of production around the region, drive the development of subregional economic corridors and help realise a bigger market, and greater connectivity and development in the Asia-Pacific.

It is our common belief that with a concerted effort, this year's Apec meeting will produce results, achieve breakthroughs and add strong momentum to the continued development, progress and prosperity of the Asia-Pacific region.

Tang Guoqiang is chair of the China National Committee for Pacific Economic Cooperation