Climate change is not a regular issue for the agenda of the Leaders. John Howard has put it on the agenda.

It is appropriate APEC address climate change. Climate change strategies, particularly under the Kyoto Protocol, impact on energy production and consumption.  Energy has been a long standing priority question in APEC. There is a Ministerial Working Group on Energy.

Developing country members of APEC have shared the developing country wariness about getting drawn into discussions on climate change outside the formal policy limits of the Kyoto Protocol which levies responsibility to reduce emissions on industrial party signatories.

Kyoto is now formally stalled given recognition of this at the G8 Summit in June. The search is on for a new consensus.

Given APEC’s membership (contributing around half of global emissions, the largest industrialized and developing economies which have to date refused to set mandatory limits on emissions, a strong position that strategies to reduce emissions should inhibit the capacity to raise living standards), a position on how to approach climate change in the future would point to the only viable options in future to build a global consensus.

APEC Leaders will not go very far. Any outcome is likely to be criticized by Greens as too weak on climate change. But whatever they do come up with will be a good pointer to whatever consensus can be struck in future (and this may take several years) on climate change.

 

New research shows strategies proposed by British Treasury economist Sir Nicholas Stern to tackle climate change would cause severe economic damage to developing countries. The Stern report assessed the strategies would not cost more than one percent of world GDP. Analysis shows the impact will be much greater on a number of individual countries which are more dependent on coal to generate power, particularly in the developing world. It would reduce GDP in China by 15 percent, in India by 13 percent and GDP of most ASEAN economies by 12 percent. House expenditure of ordinary people in those countries would be cut even further. 

The analysis by Australian consultants, ITS Global for the APEC Centre, concludes such strategies will not be acceptable as the international community embarks on a mission to find a successor to the moribund Kyoto Protocol. If developing countries are to support a new strategy, it must not harm their capacity to eliminate poverty and raise living standards.

Click here for the paper.

 

The usual proclamations have been made that leaders will focus on how to add impetus to the Doha Round. The key problem is the EU and they are not around the table in Sydney.

It is time Governments recognized that serious pressure has to be mounted on the EU, who have determined that they will not address subsidies for agriculture internally until 2013 and have no commitment internally to review barriers to imports.

 

The idea of an FTA including the US, Japan and China has long been regarded by trade experts as impractical.

The trade landscape in the APEC region has changed with the negotiation of an FTA between the US and South Korea. While not yet endorsed by Congress, it will be: South Korea is an important US ally.

Few expected this agreement to be completed at all, let alone within year, least of all Tokyo. It is a serious agreement, that is it covers all sectors and entails serious commitments to liberalize. It contrasts with the sort of FTAs being negotiated by China which leave to later entire sectors, particularly services, and investment.

Tokyo is now seriously considering an FTA with the US. We think this will be a reality within five years. With both Korea and Japan negotiating serious agreements, the pressure will then be on China to follow suit.

An APEC FTA no longer looks impracticable.

The Economic Committee of APEC has been revamped and given a sharper mandate to consider structural reform.  Australia’s Treasurer Peter Costello is lobbying for establishment in APEC of a forum of Deputy Economic Affairs Ministers.

APEC has a Finance Minister’s forum but it has tended to focus on financial regulatory matters. There has been little organized review in APEC by Economic Planning Ministers of economic reform questions.

While trade has been the economic banner headline since APEC was established, this is now an outdated focus. With significant liberalization of trade in the APEC region, attention is required on domestic economic issues.

The structural changes on the handling of economic issues in APEC engineered by Australia in its year will generate dull news stories, but build a legacy of re-orienting APEC’s economic focus towards domestic economic reform – where the cutting edge issues are to be found – and away from trade.

That may be the lasting contribution of Australia’s APEC year.

 

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APEC Currents is edited and published by The Australian APEC Study Centre.
Copyright 2007, Monash University.

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