On 15 November 1994 at Bogor in Indonesia, political leaders from eighteen Asia-Pacific economies (Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Philippines, Singapore, Chinese Taipei and the United States) reached an agreement which could have profound economic consequences for the Asia Pacific region and for the global economy. That agreement - the APEC Declaration of Common Resolve or the Bogor Declaration - contained the following principal commitment from each leader:
to complete the achievement of the goal of free and open trade and investment in the Asia Pacific no later than the year 2020, with the pace of implementation to take into account differing levels of economic development among APEC economies, with the industrialised economies to achieve the goal no later than 2010 and developing economies no later than 2020.
In addition leaders decided to:
At Bogor, APEC leaders also directed their Ministers and officials to begin preparing detailed proposals for the implementation of the Declaration. This has resulted in feverish activity over the last twelve months with APEC senior officials so far meeting five times during that period to develop the Action Agenda for the implementation of the Bogor commitments. This will be considered by APEC Leaders at their third summit in Osaka on 18 and 19 November 1995.
As Prime Minister Keating described it in a speech to a conference hosted by the Committee for the Economic Development of Australia (CEDA) in Sydney on 26 September:
"our job at Osaka will be to agree on a road map to reach [the goal agreed at Bogor]. Australia will be looking for commitments from members to table before the [1996] leaders' meeting at Subic Bay individual country plans showing how and when they will meet the Bogor free trade commitments, and to a parallel program of collective liberalisation in those areas (like mutual recognition of standards and the harmonisation of regulations) where APEC-wide commitment is the best way forward."
This then encapsulates the challenge confronting leaders at their forthcoming meeting. This paper will briefly discuss the preparation for and some of the factors that will affect the outcome at Osaka. It will also assess some of the more fundamental institutional issues that will affect the achieving of the 2010/2020 vision and the future leaders mapped for APEC at their Seattle and Bogor meetings.
Australia's initial detailed objectives for the Osaka meeting were well set out in a background paper issued by Trade Minister Senator Bob McMullan on 27 June 19952, and these have guided Australian negotiators in the officials' meetings that have taken place to prepare for Osaka.
There have been other important inputs, both formal and informal, to the preparation for Osaka. APEC's key Advisory Groups, the Eminent Persons' Group (EPG) and the Pacific Business Forum (PBF) both issued detailed reports on what should be agreed at the meeting.3 Both reports argued that leaders would not only have to agree on principles, the agenda and timetables for the implementation of the Bogor Declaration, but that specific decisions on substantive issues would be required to sustain APEC's momentum.
The EPG made some ambitious proposals for decisions to accelerate the implementation of Uruguay Round commitments (in essence that member economies could select from a menu options which would in general halve the time agreed under the Round for the implementation of tariff, subsidy or quota reductions or double the impact of already promised cuts). The EPG also identified anti-dumping and competition policy as areas where decisions could be taken to deepen and broaden the outcome of the Round. The Group called for a strengthening of APEC's nonbinding investment principles, the installation of an APEC Dispute Mediation Service, a deepening of APEC cooperation on monetary and macroeconomic issues and the adoption of an Action Plan for APEC development cooperation. The EPG also expressed concern about the incidence of trade disputes in the region and a possible threat to APEC from sub-regional trade arrangements, unless they operated on the principle of "open regionalism" - ie benefits to members of the arrangements were also open to nonmembers.
The PBF report, not surprisingly, was based on the theme that APEC should be made more relevant to business and that it should deliver concrete and pragmatic results. The PBF recommendations paralleled those of the EPG on issues such as the need for a comprehensive set of guiding principles and timelines for the implementation of the Bogor declaration, advancing the implementation of Uruguay Round commitments and strengthening the liberalisation of investment. The Business group stressed the need for a three-tiered approach to reviewing the measures taken to implement individual action plans for trade liberalisation. New proposals from the group included a call for visa-free business travel in the region by 1999 and the expediting of approvals for business residency visas. Significantly, the PBF recommended the establishment of an APEC Infrastructure Task Force to review infrastructure development in the region, consideration by each member economy of the creation of a Trade and Investment Ombudsman and a series of steps to improve the performance of Small and Medium Enterprises (SMEs).
Other analysts have also provided advice on how APEC leaders should implement the Bogor Declaration. Andrew Elek, Hadi Soesastro and Ippei Yamazawa put forward a comprehensive set of proposals in a paper published by the Australia-Japan Research Centre in June 1995.4 This paper contained many of the items subsequently proposed by the EPG and PBF but also made some proposals not covered in those reports on further liberalisation of air transport , tourism and telecommunications in the APEC region.
As is evident from the above, leaders at Osaka will have a rich menu of measures they can agree to advance the APEC process, although as with most multilateral meetings or negotiations, the eventual outcome will almost certainly not embrace all these measures.
Each member economy will go to Osaka with a bottom line position and Prime Minister Keating outlined a number of these for Australia in his 26 September CEDA speech. He said in that speech that the "guiding principles" for trade liberalisation at Osaka would need to contain the following :
On trade facilitation and collective APEC action, the Prime Minister noted that Australia would seek some "clear targets and dates", such as the adoption by 1996 of a common basis for tariff classification, agreement to have common APEC-wide standards for electronic import clearance by 2000 and simplification and streamlining of business visas by 1996.
Another important outcome from Osaka for Australia would be agreement by APEC leaders on a package of measures to accelerate individual Uruguay Round commitments. As the Prime Minister noted such a "downpayment" on APEC liberalisation would demonstrate tangible support for the multilateral trading system.
Since the last APEC leaders' meeting in Bogor, there has also been considerable debate on two key issues of principle concerned with the Declaration. The first was whether APEC should or should not develop as a preferential free trade agreement or whether APEC liberalisation should be on an unconditional Most Favoured Nation (MFN) basis. A preferential free trade agreement would mean that non-members would only benefit from liberalisation by APEC members, if non-members made reciprocal moves on liberalisation. MFN type liberalisation would mean that non-members could benefit without having to take any reciprocal liberalisation measures. There had been concerns that Washington, in particular, might have difficulty agreeing to anything more than a preferential agreement, particularly because of the "free rider" problem.
Australia's Trade Minister, Senator McMullan, set out Australia's position on this issue in the Background paper released on 27 June. Senator McMullan noted that the issue had in fact received little attention from APEC ministers and officials, yet it had been a matter of concern for Australian media and academic circles. Senator McMullan reconfirmed that Australia's clear position, which applied as a general principle "to the breadth of [Australia's] trade policy was to pursue trade liberalisation on an unconditional MFN basis". However on occasions, such as the Closer Economic Relations (CER) Trade Agreement with New Zealand, Australia might be able to secure better and speedier market access from a preferential regional arrangement than may be possible from following a strict MFN approach.
Australia's approach was not to force the issue in APEC and to avoid having APEC taking an explicit decision on what approach would be adopted, thus not backing one of APEC's key members (United States) into a corner on the issue and risking the adoption of hardline, inflexible positions.
A second issue of principle - the comprehensiveness of the Bogor commitments - has received much more attention in the lead up to Osaka. Japan, with support from Korea, China and Chinese Taipei, has argued in recent APEC Senior Officials' meetings that complete liberalisation of agriculture by the 2010/2020 deadlines would be very difficult, and that there should be "flexibility" or "special consideration" in APEC to take account of the political difficulties involved in freeing trade in agriculture.5
Australia has vigorously contested this view and strongly affirmed the importance of comprehensiveness in implementing the Bogor commitments. Prime Minister Keating, in his 26 September speech, said :
"Australia's position is clear. The Bogor Declaration is unambiguous on the question of comprehensive coverage.......It does not say 'free trade except for agriculture'. We all have sensitive sectors - for Australia, these might include automobiles and textiles, clothing and footwear. The effect of any APEC member excluding one sector from coverage of the free trade commitment would be that others would also look for exceptions. This would paralyse APEC........The 15-25 year time period leaders set in Bogor for the achievement of the free and open trade and investment goal provides ample scope for member economies to undertake any necessary adjustments."
Senator McMullan argued this line strongly with his Ministerial counterparts in Korea and Japan in a subsequent visit to both countries, and an acceptable resolution of the problem at the Osaka leaders' meeting may be possible. Interviewed following a meeting with Japanese Trade and Industry Minister Hashimoto on 13 October in Tokyo, Senator McMullan said that he was encouraged that this "very serious" obstacle could be overcome, provided there was the political will to reach an agreement.
Having been launched only in 1989, APEC is a very young international organisation. Its success so far, particularly the Bogor Declaration, surprised observers and analysts, given the wide differences in the level of economic development among the eighteen economies currently comprising its membership. This has however produced among leaders a momentum for and the political will to sustain the APEC process. These will be very important factors for all member economies in Osaka - there will be a real reluctance to weaken or detract from that sense of momentum. Indeed if Bogor is any guide, leaders could again surprise observers by going beyond the "lowest common denominator" approach that often characterises the outcomes from other international meetings. (This assumes that all eighteen leaders attend the summit and that an acceptable compromise on issues such as comprehensiveness can be found). Increasing business interest in APEC, coupled with a measure of impatience on the part of business for APEC to produce practical outcomes will also add to pressure on some leaders.
Part of APEC's success to date undoubtedly stems from its formation at the time when key East Asian nations were looking for means to gain greater recognition and appreciation internationally for their global economic success. APEC, particularly because it includes the United States, provides such a vehicle - especially for Japan - the world's second largest economy. APEC is now a dynamic organisation for economic cooperation in the region which reflects the economic dynamism of East Asia. This in turn adds to the pressure on Japan to ensure that there is a positive outcome from the Osaka meetings. Japan's international political credibility, especially in the APEC region, will suffer if Osaka ends with a split among member economies.
Elections and domestic politics in some member economies may also impact to a greater degree on Osaka, than was the case at Bogor. National elections will be held in Australia, New Zealand and Korea in 1996 and there will also be presidential elections in the United States and in Chinese Taipei (even though its president does not attend APEC leaders' meetings). Thailand's leader will be experiencing his first APEC leaders' meeting. Japan's Prime Minister may not be secure in his position. The effects of this will by no means be uniform - there is a risk that in some cases concern for domestic constituencies may dampen the more internationalist view taken by APEC leaders at their first two summit meetings.
The bilateral disputes, particularly on trade issues, between APEC members which were noted with concern in the 1995 Eminent Persons' Group report also have to be considered for their possible impact on Osaka. Although some of these disputes were between some of the most powerful APEC member economies (eg the US-Japan dispute on exports to Japan of autoparts) bilateral disputes have not been allowed at the two previous APEC summits to have any significant effect on the outcome of those meetings.
Despite the very important differences between some member economies over comprehensiveness, there appears to be a degree of optimism that leaders will meet the challenge at Osaka and reach agreement on a viable road map for the implementation of the Bogor commitments and on further measures to carry forward the APEC process. Indeed the wording of the Bogor Declaration and the 15-25 year timeframes should be broad enough to enable an acceptable outcome on comprehensiveness. Yet the preparations for Osaka and the current nature of APEC, give rise to concerns about some wider institutional issues for the APEC process that will soon need to be addressed if APEC's momentum is to be sustained.
APEC's East Asian origins and its membership have resulted in a unique process for economic cooperation, quite unlike other global or regional economic organisations or institutions. APEC is characterised by a "flexible, open and outward looking process."6 Hadi Soesastro expanded on this in a paper presented to a conference in Tokyo in September, 1995 when he wrote that :
The development of regional economic cooperation in the Asia Pacific region in general, and the APEC process in particular, needs to be guided by the wisdom that processes are more important than structures. This does not mean that institutional structures are unimportant; however, such structures should be dictated by what is required by the process. APEC's form today is totally logical and continues to evolve. The "beauty" of the APEC process is that it is continuously injected by a kind of freshness in each succeeding cycle by having the host of the ministerial meeting chair APEC and provide the necessary leadership.7
Elsewhere in the same paper, he quoted Suhadi Mangkusuwondo as saying that "the 'Asian' approach is to agree on principles first, then let things evolve and grow gradually. This is in contrast to the 'American' approach, which is viewed by many in Asia as too legalistic and too institutional."8
While this 'Asian' approach has clearly dominated APEC's development to date, the question to be asked is whether it will remain adequate if the detailed implementation of the Bogor Declaration proceeds as expected. Osaka could well be the last APEC Leaders' meeting for some years which will deal primarily with general principles. Subic Bay should see the tabling of more specific individual member economy action plans for the implementation of the Bogor commitments and perhaps the first 'review' of those plans to ensure that there is a degree of balance in their implementation of APEC trade liberalisation.
John Edwards noted in a paper given to the CEDA Conference in Sydney in September 1995, "As APEC trade liberalisation gets more serious, it is likely to get harder and more interesting"9. This is particularly so as individual plans are likely to be rolling plans which are updated and reviewed annually. When leaders approach this point they will need to give serious consideration to the management of the review process and whether there should be a role for the APEC Secretariat in facilitating it.
Consistent with APEC's uniqueness as an international economic organisation and as an implicit response to concerns, particularly from ASEAN, about APEC's institutionalisation, there has been a deep reluctance on the part of member economies to establish more than a minimally-staffed and resourced Secretariat. In an era of reaction to bloated international bureaucracies, particularly evident with the United Nations and some of its agencies, this reluctance is at once commendable and fully understandable until it begins to impact on efficiency and the capacity of APEC to achieve its objectives.
When it was first established the APEC Secretariat had eleven professional (policy-level) staff, servicing ten working groups, two APEC committees, meetings of the EPG and the PBF, and Senior Official, Ministerial and Leaders' meetings10 . This inevitably constrained the servicing that the APEC Secretariat could provide for the rapidly growing agenda of APEC meetings, yet despite this the quality of the staff has been such that high standards have been maintained.
APEC, however, is about to enter a new and much more complex phase with the expected development of action plans for liberalisation by each member economy and their subsequent continuing review. While all member economies are keen to stress that they do not envisage this review process as a GATT/WTO style negotiation, there will still be basic requirements if it is to work efficiently. A degree of standardisation for each action plan, for example, would facilitate comparisons and an evaluation of the balance leaders will wish to obtain. An efficient way of revising and updating plans for all APEC members would to centralise this process through the APEC Secretariat. Secretariats bring to such processes a degree of impartiality and this too could be very important in the review process.
There is no doubt that despite the excellent assistance the APEC Secretariat has so far been able to provide for its clients, it is not currently resourced to play a role as envisaged above, which would almost certainly be more efficient than a review process handled without Secretariat involvement or assistance. Even if the Secretariat's professional staff doubles in number, this would only bring additional capacity to service the growing range of APEC meetings and activities. Assuming Osaka is a success and the road map and guiding principles are in fact agreed, this will make it an appropriate time to look again at some significant structural change in the Secretariat as a whole.
There are in addition other issues which will influence the future development of the Secretariat and ultimately the institutionalisation of APEC. The 1995 PBF report contained two specific proposals for the establishment of an APEC Infrastructure Task Force, and for the creation of an APEC Business Council - the latter to formalise business input to the APEC process. Similarly the EPG's proposal for an APEC Development Cooperation Action Plan also provides another area (and one which is known to be of particular interest to Japan) of expanding work for APEC and ultimately greater institutionalisation. Similarly other region-wide issues, particularly environmental protection and sustainable development, which are currently discussed in several existing working groups in APEC, may well demand their own working group and more formalised pattern of Ministerial meetings in the near future.
How do such developments, and the growing APEC agenda, sit with fears among some member economies about institutionalising APEC and how should leaders handle this issue? The answer depends partly on changing perceptions in APEC member economies about the process and what it might achieve and whether APEC might eventually become a "community" in the broadest sense of that word.
Australia's Foreign Minister, Senator Gareth Evans, dealt with this at some length in his Asia lecture, given in Sydney on 20 March 1995.11 Senator Evans argued that the concept of an Asia Pacific community had taken hold and was spreading with accelerating speed, despite the great heterogeneity of the region in its political cultures and basic value systems. He suggested that economic self-interest and technological and cultural convergence were powerful factors driving the development of a sense of community and that APEC and the ASEAN Regional Forum were in some senses manifestations of these forces.
A contrary view was put by former United States Secretary of State, Henry Kissinger who wrote in 1994 that :
[United States President] Clinton's proposal for a more institutionalised Pacific Community on the European model was received with polite aloofness, largely because the nations of Asia do not view themselves as a community.12
Kissinger went on to state that Asian nations did not want an institutional framework that might give potential Asian superpowers - or even the United States - a major voice in their affairs.
While there might not yet be the degree of real convergence on values or cultural issues between East and West in the Asia Pacific of the mid 1990s that Senator Evans suggests, APEC, contrary perhaps to Kissinger's view, certainly represents a step along the road to a loose community, even if it is not structured along European lines. Yet it could also be argued that it is because the United States, in particular, has so far been prepared to go along with the more Asian approach to APEC that this sense of community has begun to grow.
However, as is implicit in the comments above, the degree to which APEC continues to sustain and develop a sense of community will depend a great deal on how member economies handle the move to an APEC agenda which will include some of the harder issues such as agreeing a balance on liberalisation action plans.
Yet the undeniable increase in an APEC sense of identity, even if that has not matured to the level as yet of a community, would seem to support greater institutionalisation of APEC where this will clearly add to the efficiency of the organisation in delivering the level of cooperation pledged by APEC leaders.
It is also important to note that the Kuching Consensus,13 which sets out the principles adopted by ASEAN Ministers early in 1990 on the basis for ASEAN participation in APEC, contains as its last point "APEC should proceed gradually and pragmatically especially in its institutionalisation without inhibiting further elaboration and future expansion". APEC has not only survived but developed apace since 1990 - a modus vivendi has been worked out for its relationship with the East Asia Economic Caucus, whereby the latter is regarded as a caucus within APEC, and APEC is now entering a new phase in its development. Events since 1990 suggest that the concerns advanced at that time over institutionalisation have had an impact on APEC but should not now hamper the ability of the APEC process to achieve the objectives now set for it.
Not all analysts believe that APEC will in fact achieve the goals set out in the Bogor Declaration. Some argue that because APEC's members are reluctant to make binding commitments and develop adequate powers of enforcement, APEC's attempts to liberalise trade will be largely nullified and that it may at best end up as a Asia Pacific version of the Organisation for Economic Cooperation and Development or at worst an expensive talk-shop. Some of these arguments have most recently been developed in a paper written by George Fane from the Research School of Pacific and Asian Studies at the ANU.14
Fane notes the dangers inherent in not deciding whether APEC liberalisation should be MFN or preferential, argues that preferential arrangements are the only ones likely to avoid excessive free-loading and that APEC is unlikely to have more than a small, short run liberalising effect on trade policy. Fane also suggests that unilateral liberalisation, as happened with Indonesia, Malaysia and Thailand15 over the last twelve months would have happened without APEC.
It is certainly the case that there is ambiguity on issues such as how the Bogor commitments will be achieved. Osaka may go some way to resolving that ambiguity, although despite the firm policy and best efforts of members such as Australia, it is still possible that there may be ambiguous compromises on issues such as comprehensiveness.
Several points have to be remembered, however, when assessing APEC and what it might produce. First it is unlike any other trade negotiating body and clearly enjoys considerable political commitment and ownership from the leaders of its member economies. Second, despite it being a very young organisation, it has already achieved a great deal - particularly in terms of broad commitments. Third it has had to operate on the basis of compromise and consensus to ensure that all eighteen members could accept the decisions taken. Those decisions are still guidelines rather than being legally binding but that is not to say that binding decisions will not be taken when detailed consideration is given to individual action plans. (It is exactly this point that underlines the need for leaders to give further consideration now to institutional issues). Fourth, as with any relatively new undertaking, it will take time to build trust and understanding on the part of all members - it is not surprising for example that APEC's first investment code was non-binding, but that does not prevent a binding code in APEC at a later time. Fifth the substantive work on trade facilitation and other economic cooperation underway in APEC will produce considerable benefits in the next few years. Finally it is the sense of APEC being mainly an Asian body and reflecting the dynamism of this region which underpins the attachment by leaders to it as an institution - they are now not likely quickly to jeopardise the opportunity it continues to present.
So there are still strong reasons to believe that APEC will have a major impact on regional and global trade and it will be a vehicle for significant and highly beneficial trade liberalisation, especially for countries like Australia. There are too many variables to give other than a very broad indication of possible impacts, but it is worth quoting Prime Minister Keating again on this issue. He told the Sydney CEDA Conference on 26 September:
"We estimate that APEC-wide free trade will bring gains to Asia Pacific economies of around three times the benefits of the Uruguay Round outcome alone - an amount of more than $300 billion a year."16
At the very least the prospect of further trade liberalisation in APEC, which contains among its members the world's fastest growing economies and which accounts for half the world's output and nearly half global exports, will be a powerful incentive for a further global round of multilateral trade negotiations.17 That too would obviously be trade enhancing at the regional and global levels.
APEC remains an exciting opportunity - a process where some key decisions still need to be taken, but a process that can bring great benefit not just to Australia but to all APEC members and to the rest of the world, particularly if APEC liberalisation proceeds on an MFN basis. Benefits from APEC, however, will derive not just from trade liberalisation, but the extensive programs of trade facilitation and cooperation on economic and human resource development on which APEC has embarked.
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