ASIA-PACIFIC ECONOMIC COOPERATION (APEC)
- Recently, a virtual meeting of the21-member Asia-Pacific Economic Cooperation (APEC) forum was hosted by Malaysia.
- With growth in the Asia-Pacific region expected to decline by 2.7%this year, from a 3.6% growth in 2019, APEC’s focus was on accelerating economic recovery and developing an affordable vaccine.
- APEC leaders adopted the Putrajaya Vision 2040,a new 20-year growth vision to replace the Bogor Goals named after the Indonesian town where leaders agreed in 1994 to free and open trade and investment.
- Recognised the importance of a free, open, fair, non-discriminatory, transparent and predictable trade and investment environmentto drive economic recovery at such a challenging time (Covid-19).
- Discussed the Free Trade Area of the Asia-Pacific (FTAAP) agendaand the APEC Internet and Digital Economy Roadmap (AIDER).
Back to Basics
- APEC is the premier Asia-Pacific economic forum. Primary goal is to support sustainable economic growth and prosperity in the Asia-Pacific region.
- It is regional economic forum of 21 Pacific Rim member economies that promotes free trade throughout the Asia-Pacific region.
- These 21 member countries collectively account for nearly 50% of world’s trade and about 57% of GDP.
- It was established in 1989 in order to leverage growing interdependence of Asia-Pacific region’s economies and promote free trade in the region.
- The 21 Members Economies are Australia, Brunei, Canada, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, United States, Taiwan, Hong Kong, China, Mexico, Papua New Guinea, Chile, Peru, Russian and Vietnam.
- India is an observer of APEC since 2011 and has applied for its membership.
- Free and open trade and investment.
- Promoting and accelerating regional economic integration.
- Encouraging economic and technical cooperation.
- Enhancing human security.
- Facilitating a favorable and sustainable business environment.
- Professionalism – We value a work environment grounded in cooperation and a shared vision. We provide excellent service delivered in an ethical and timely manner.
- Respect – The Asia-Pacific region is diverse, and so is the APEC Secretariat. We treat everyone with dignity.
- Integrity – We are entrusted with important work which demands accountability and transparency. We strive to always stay true. We do what we know to be right.
How Has the Region Benefited?
- APEC has grown to become a dynamic engine of economic growth and one of the most important regional forums in the Asia-Pacific. Its 21 member economies are home to around 2.9 billion people and represent approximately 60 percent of world GDP and 48 percent of world trade in 2018.
- As a result of APEC’s work, growth has soared in the region, with real GDP increasing from USD 19 trillion in 1989 to USD 46.9 trillion in 2018. Meanwhile, residents of the Asia-Pacific saw their per capita income rise by 74 percent, lifting millions out of poverty and creating a growing middle class in less than three decades.
- Bringing the region closer together, reducing trade barriers, and smoothing out differences in regulations have boosted trade which, in turn, has led to this dramatic increase in prosperity.
- Average tariffs fell from 17 percent in 1989 to 5.3 per cent in 2018. During that same time period, the APEC region’s total trade increased over seven times—outpacing the rest of the world with two-thirds of this trade occurring between member economies.
- APEC implements a wide variety of initiatives to help integrate the region’s economies and promote trade while addressing sustainability and social equity.
- Promoting Regional Economic Integration and Trade
- Making it Easier to Trade Across Borders
- Making it Easier to do Business
- Faster Customs Procedures
- Structural Reform
- Connecting the Region
- APEC Business Travel Card
- Inclusive Growth: Ensuring Everyone is On Board
- Increasing Energy Efficiency and Renewables
- Green Towns in the Asia-Pacific
- Enhancing Social Equity in the Region
- The economic rivalry between US and China appeared to have fractured the 21-nation summit into two segments.
- The source of the friction stemmed from the “America First” policy, under which U.S. led the charge on “unfair trade practices”.
- This was an implicit accusation that China was not levelling the playing field in global trade.
- The U.S. has been urging China so far –
- To increase market access and grant intellectual property protections for American corporations
- Cut back on industrial subsidies
- Bringing down the $375-billion trade gap
- The Belt and Road Initiative of China has worried smaller Asian nations and the U.S., particularly given that China views the Asia-Pacific landscape as a means to secure economic predominance worldwide.
- It also highlights the key impediments to Indian accession and suggests potential steps that India, APEC, and key APEC economies could consider to tackle these obstacles and build support for Indian membership.
- The Asia-Pacific region through this “Act East” initiative, and APEC membership would be a major step in that direction.
- Indian membership in APEC would also bolster India’s economic growth and support its development agenda.
- Four key steps may help India address concerns regarding its membership in APEC, particularly in the United States:
- A major breakthrough in India’s domestic economic and/or trade policy, such as a goods and services tax (GST) or land and labor reforms, that sends a strong signal of greater market opening.
- An accelerated effort to improve the ease of doing business for both foreign and domestic firms.
- A significant indication of India’s willingness to engage constructively in international negotiations, such as BITs.
- A vigorous diplomatic effort by the Indian government and key APEC members that supports India’s bid.
INDIA AND APEC:
- APEC’s efforts have focused on simplifying regulatory arrangements; reducing barriers to foreign trade and investment; and, cultivating a culture of economic openness, dialogue, and cooperation.
- India has long been interested in APEC. It unsuccessfully requested APEC membership in the late 1990s and was subsequently not considered because of a moratorium on new members initiated in 1997. With the moratorium finally lifted in 2010.
- Integrating an economy, the size of India’s would be a major step toward regional connectivity in the Asia-Pacific.
- India has been an important destination for APEC members’ foreign investment over the past 25 years, with three APEC economies—Singapore, Japan, and the United States—among the top five countries providing FDI inflows into India.
- An improvement in investment-friendly policies has contributed to India’s becoming the world’s top greenfield FDI destination in the first half of 2015, after being the ninth-largest global FDI recipient in 2014, and the fifteenth largest the previous year.
- SUPPORTING INDIA’S GROWTH
- PREPARING INDIA FOR A CHANGING GLOBAL ECONOMY
- India could take a more proactive approach in its international investment and trade negotiations.
- India would have to overcome strong domestic protectionist sentiments and build a robust, reliable, long-term domestic constituency for trade reform.
- APEC might also consider changes to its current decision-making processes to mitigate concerns among current members that expanding membership would dilute the forum’s impact
- APEC could welcome India as a member after securing assurances that India would implement specific measures to signal its commitment to APEC’s mission.