Members\' Forum

APEC beyond economic cooperation
(posted on the East Asia Forum by Australian National University. 17 November 2016)
Authors: Ippei Yamazawa, Hitotsubashi University and Toshiya Takahashi, Shoin University

Brexit and refugee problems in the European Union have caused uncertainty for economic integration, but APEC’s renewed commitment to it will provide some impetus to the global economy. While APEC is regarded primarily as a diplomatic opportunity for regional leaders, APEC’s achievements, based on wide-ranging government–business collaboration, provide it with the possibility to expand its role and help nurture regional stability.

APEC began in 1989 as a series of meetings among foreign and economic ministers in Asia and the Pacific. Invigorated by the European Single Market in 1992 and the conclusion of the GATT Uruguay round of negotiations in 1993, the United States, as APEC’s chair in 1993, created the leaders’ meeting to discuss the creation of a free trade area across Asia and the Pacific. The Bogor Declaration in 1994 set out a roadmap for trade liberalisation by 2020.
APEC’s economic integration has not made linear progress despite early high expectations. The 1995 Osaka Action Agenda, which combined voluntary trade liberalisation with facilitation and technical cooperation, provided concrete measures for achieving the Bogor Goals, but the Manila Action Plan a year later resulted in only small-scale trade liberalisation. Attempts at early voluntary sector liberalisation also failed in 1998.

In the face of the Asian financial crisis, expectations of APEC’s economic integration decreased substantially. By the 2000s the WTO’s Doha Round negotiation began, while free trade agreements proliferated across Asia.
Since then APEC has adopted a modest strategy centred on trade facilitation and technical cooperation, and economists and the media have lost their interest in its message of economic integration. Some of the member economies that were unsatisfied with voluntary liberalisation formed the P4 group, which later expanded to become the Trans-Pacific Partnership (TPP).

But legally binding trade liberalisation did not make much progress in the 2000s. The Doha Round negotiation remains deadlocked even after its 15-year effort. The TPP was finally concluded in 2015 but its ratification has been delayed and is now in question. In the European Union, economic integration is highly developed, but opposition to its centralised decision-making and flows of labour from later-developed member countries shadow its future.

In contrast, APEC’s pragmatic and flexible approach to trade liberalisation has succeeded in areas like customs procedures, business mobility, and standards and conformance. The 2001 Shanghai APEC summit declared an intention to reduce trade transaction costs by 5 per cent in five years. This was achieved through various task forces composed of governmental officials and the business sector. The Busan APEC summit in 2005 announced another 5 per cent reduction that also succeeded.
APEC has provided a program for economic and technical cooperation over small and medium industry development, structural adjustment and food safety that has not been achieved through other economic institutions. And it has contributed to Asia’s globalisation, starting in the 1980s and becoming the East Asian economic miracle by the 1990s. The rapid economic rise of countries like China and Vietnam can also be attributed in part to their involvement in APEC.
But APEC’s role in sustaining regional stability should be re-evaluated. Prosperity is a condition for peace. So is an increase in economic transactions. APEC has served regional peace and stability through prosperity and

APEC’s open membership worked for mitigating ideological and political dividing lines in the Asia Pacific after the end of the Cold War. Its early acceptance of ex-communist countries such as China in 1990 and Russia and Vietnam in 1998 promoted the liberalisation of their markets and opened the door to their acceptance in the WTO. Both China and Taiwan’s participation showed that APEC’s identity was beyond political confrontation.
APEC’s wide-ranging framework for talks and its flexibility in liberalising markets helps create political background for further regional cooperation. Voluntary liberalisation allows members to compromise with domestic opposition. The APEC experience shows that different positions on economic issues can be mitigated through continuing talks rather than renouncing them, and this learning can be applied to non-economic issues.

Asia and the Pacific today face military build-up and unresolved conflicts in the Korean Peninsula, the South China Sea and the East China Sea. The APEC approach to reconciling differences provides the basis for resolving security and political confrontations in the region. While it is an economic institution, these political functions — which are the product of its twenty-eight-year history — should be remembered and reinvigorated with the aim of developing a regional consensus for ‘peace by talks’.
Ippei Yamazawa is Emeritus Professor of International Economics at Hitotsubashi University, Japan.
Toshiya Takahashi is Associate Professor at Shoin University.

“Have APEC Five Got Penalized for not Achieving the Bogor Goals?”
by Ippei Yamazawa, February 4, 2013 in Asia Pacific, APEC, Bogor Goals

This was the first question I have met across at the ADBI’s seminar on APEC on January 28th. Of course they have not. No body raised this within APEC, because APEC is a non-binding organization. But “so long as APEC sticks in its weak modality, it may get left behind mushrooming FTAs. What is the APEC’s raison d’etre nowadays? “

In 1994 in Bogor Indonesia, APEC Leaders declared that its developed economy members would achieve free and open trade by 2010, while other members by 2020. It attracted the global attention to a high growth potential of the Asia Pacific. Only with two year preparation of Osaka Action Agenda (1995) and Manila Action Plan (1996), it started its liberalization process under unique individual action plan (IAP) in 1997.

At Mid-term assessment in 2010 Yokohama, Leaders summarized the achievement of the thirteen economies (five developed and eight volunteer) as ‘having some way to achieve free and open trade in the region’. They indicated remaining impediments in sensitive areas and instructed that all APEC economies, including the thirteen mentioned above, would continue to review economies’ progress towards the Bogor Goals. Thus all 21 economies have submitted IAPs for liberalization and facilitation and new IAP review process has started in 2012.

APEC economies have reduced average tariffs down to 5.4%, improved FDI regimes, and made good progress in facilitation areas. It certainly helped the region to achieve the highest growth in the 2000s. Higher tariffs in agriculture and heavy manufactures have remained constrained by the stumbled WTO negotiation. Nevertheless, we have to monitor closely this new IAP process and encourage senior officials to implement as much liberalization and facilitation as possible towards the final goals in 2020. This was the main message of our report at the seminar.

TPP, RCEP, and CJK Trilateral FTA represent leading FTAs in East Asia, but they are still in negotiation or starting negotiation this year and it is quite probable to continue to next few years. TPP aims at a high level FTA with broad area coverage, while RCEP and Trilateral focus on commodity trade with lower level liberalization. Their membership partly duplicate but partly exclusive so that some rivalry and conflict may arise with each other.

On the other hand, APEC has accumulated rich experiences and records in liberalization and facilitation towards the Bogor Goals in 2020. APEC has as wide coverage as TPP and has benefitted from its Ecotech activities, which help developing economies in capacity building needed for liberalization and facilitation. APEC includes all members of the three and free from rivalry and conflicts. While TPP, RCEP and Trilateral pull the Asian REI from above, APEC push it from behind. In this sense we propose to push APEC forward in parallel.

It is difficult to change APEC’s modality of non-binding and voluntariness. Major Asian economies, China, Indonesia, Philippines will oppose to it fiercely, which will damage the patient efforts towards the Bogor Goals. Nowadays many APEC stakeholders rather consider advantages of this modality than its constraints to liberalization. That is, facilitation and regulatory reform, where best practice and technical assistance work once member governments have convinced of their usefulness. ABAC has proposed quite a few programs of this kind and APEC has implemented many of them. Trade Facilitation Action Plan (TFAP, since 2002) and Leaders’ Agenda to Implement Structural Reform(LAISR, since 2004) are most highlighted among them.

In a broader perspective, APEC’s role has expanded to the building of free market economy system in the Asia Pacific so that all members can enjoy the benefit of globalization. In 2000 in Brunei, Leaders declared to let all APEC economies not left behind the digital divide. E-commerce has become the fast growing business among APEC economies and protection of personal information is its indispensable basis. This was proposed at OECD in 1980 but only European Union has so far established its effective legal scheme. APEC has started its Cross-Border Privacy Rules (CBPR) program among volunteer member economies since 2004. This is one of the new undertaking of APEC. Binding agreement is impossible in these new areas. This will continue to be the raison d’etre of APEC beyond 2020.

Reference:
Ippei Yamazawa, Toshihiro Atsumi, and Hikari Ishido, APEC’s New IAP Process: How Can we Strengthen it toward the Bogor Goals in 2020, APEC Study Center Japan
October 2012. Availbale on-line a ASCJ homepage ascj.web.fc2.com/

APEC’s New IAP Process: How Can we Strengthen it toward the Bogor Goals in 2020 (November 6, 2012)

APEC Study Center Members and Academic Experts
Dear ASC Members and Friends,
APEC 2012 Meetings were successfully held in Vladivostok in September and we have got in recess for a while. The new IAPs by all 21 economies, together with Policy Support Unit’s Progress Reports and Dashboards have been published on the APEC’s website.
At 2010 APEC Yokohama, APEC Leaders conducted the mid-term review of their efforts for achieving the Bogor Goals and renewed their commitment for all 21 economies to continue their IAP process toward its final goals in 2020. We would like to call my fellow experts’ attention to this renewed IAP process and encourage you to closely monitor this process. We believe it is the role for us academics to monitor and advise our senior officials and their staffs to implement the IAPs effectively.
APEC, with its non-binding modality, tends to be neglected in the big tide of mushrooming FTAs in the Asia Pacific, but it has accumulated rich experiences in liberalizations and facilitations together with capacity building assistance and it includes all economies in Asia Pacific, meeting regularly on the regional economic integration (REI) activities.
APEC Leaders announced FTA in the Asia Pacific (FTAAP) as a long term goal beyond the Bogor Goals and identified TPP and ASEAN + Six (predecessor of RCEP) as well as APEC’s REI as parallel routes toward FTAAP. TPP and RCEP will pull Asia Pacific from above, while the APEC’s IAP process will push it up from behind.
We have conducted an independent academic assessment of their progress toward the final Bogor Goals in 2020. The IAPs have still remained no easy readings but PSU’s reports convey their main inputs in a concise summary of 3-4 pages (altogether 70-80 pages for all APEC). Its concluding part conveys a group assessment of all 21 economies by individual areas of Osaka Action Agenda, constrained by the APEC modality. We have undertaken an objective quantitative assessment of individual economies by areas in order to supplement it
? Steady progress in many facilitation areas such as Standard and Conformance, Customs Procedure, Business Mobility thanks to APEC’s Collective Action Plans and capacity building assistance
? Limited progress in sensitive areas of Tariffs and Investment, due to the delay of WTO/DDA conclusion.
? Poor progress in NTM and Services. Further encouragement is needed for the next round of IAPs 2014.
We would like to propose our fellow academics to monitor the PSU’s reports closely and conduct own assessments. We wish we will have a few occasions next year, say ASCC meeting in Indonesia, to discuss all of our assessments and send our advices to SOM and Ministers.
Your kind acceptance of our proposal will be greatly appreciated. Incidentally we plan to send a copy of this communication to APEC senior officials and ABAC members.
Sincerely Yours,
Ippei Yamazawa, Toshihiro Atsumi, and Hikari Ishido
APEC Study Center Japan

APEC Priorities for 2012 (Purpose: Information, Submitted by: the Russian Federation, Informal Senior Officials’ Meeting, St. Petersburg, Russian Federation, December 13, 2011)

APEC’s mission to support sustainable economic growth and prosperity encourages APEC economies to focus on elaborating concrete measures and reaching tangible results in order to boost trade and investment. To support the regional and world economic growth APEC in cooperation with G20 should make an inclusive comprehensive response to the arising world economic and financial challenges. Along with the upcoming accession to the WTO Russia will support the efforts within APEC to secure the conclusion of the WTO Doha Round in order to move towards trade and investment liberalization.

With a strong commitment to effectively proceed in this direction, Russia as the host of APEC 2012 will build on the extensive work that has been done and do its best to increase sustainability and the pace of future common development. To this end, tangible results should be achieved in the following areas: (I) trade and investment liberalization, regional economic integration; (II) strengthening food security; (III) establishing reliable supply chains; and (IV) intensive cooperation to foster innovative growth.

I. Trade and investment liberalization, regional economic integration. The 2011 APEC Leaders’ Declaration states that “APEC’s core mission continues to be further integration of our economies and expansion of trade among us” and that “strengthening regional economic integration … plays a key role in promoting regional peace and stability”. To reach this goal, it is necessary to facilitate progress on the recently raised issues of trade and investment liberalization as well as to proceed with the regulatory coherence searching for the achievable ways to align technical regulations and standards. APEC should continue to expand discussions of next generation trade and investment issues and to search for a long-term agenda for APEC regional economic integration.

APEC should continue to ensure sustainable and innovative growth, develop secure trade and liberalize investment in the region. We should be ready to respond to new challenges of global economic development and trade and bear a responsibility for global economic growth and financial stability. We also reaffirm APEC’s aspiration for achieving the Bogor Goals and while seeking to promote consistency among free trade agreements, ensure further progress towards the FTAAP. APEC economies in 2012 need to effectively proceed with the structural reforms agenda, and to be even more active in engaging business – both major companies, and small and medium enterprises – in discussions of trade and investment liberalization issues and undertaking concrete steps in implementing Public-Private Partnership approaches.

II. Strengthening food security. As reaffirmed by Niigata declaration and discussed in 2011 APEC has an important role to play to improve regional and global food security searching for the sustainable development of the agricultural sector and facilitation of investment, trade and markets. While deepening discussions on food security and helping APEC economies to fight volatility of international food prices, in 2012 APEC should continue to elaborate proposals for sustainable agriculture development and stable markets including the increased transparency, monitoring and information exchange on agricultural production, supply and demand; developing markets infrastructure, reducing costs and losses in food production and food supply chains. APEC economies also need to contribute to joint efforts on food supply support, including liberalization of investment and innovative agricultural development.

To ensure future health of APEC citizens, it is necessary to work out and implement measures aimed at raising quality and safety of food products, easier conformity to food safety standards and provision of food for socially vulnerable population groups. APEC should also discuss an interconnection between future sustainable growth and food security, elaborate measures on responsible maintenance of ecosystems, on combating illegal fishing and trade in other biological and wildlife resources.

III. Establishing reliable supply chains. To ensure APEC-wide connectivity in the region that strongly supports the economic growth APEC should continue to elaborate and implement steps towards reliable, competitive and barriers-free supply chains both within the APEC region and covering APEC and other major markets. It is highly important to implement concrete steps in tackling the bottlenecks, including barriers on trans-border movement of goods and obstacles that increase the time and cost of transportation. APEC should contribute to transparency and visibility of supply chains identifying and consistently removing restrictions on information exchange and telecommunication interconnectivity, applying promising satellite-based tracking technologies.

APEC should continue helping economies in advancing modern logistics, as well as navigation and customs technologies aiming at efficient interaction of transportation systems. Furthermore, future supply chains in APEC should respond to possible risks related to their maintenance and development; it is necessary to ensure appropriate risk management, safe operation and protection of transport and transportation facilities. APEC should strengthen capacities of APEC economies in emergency prevention and relief, development of related coordination and information exchange.

IV. Intensive cooperation to foster innovative growth. Putting to practice the Leaders’ 2011 commitment to set a model for innovation in the region as the best path toward fostering innovations that will increase productivity and ensure economic growth, APEC should fruitfully contribute as a part of the Growth strategy to the economies’ innovation strategies and policies. We should elaborate measures to foster cooperation among the economies in major innovation related areas, further develop hi-tech sectors and address barriers to investment in these sectors. It is necessary to promote technological progress among all APEC economies through strengthening trans-border cooperation and networking among innovation centers, high-tech clusters, universities and research institutions.

APEC should elaborate and implement measures that conform the business’ interests in innovations and build up a basis for intensive cross-border businesses, science and government cooperation. Innovative growth in APEC should be based on adoption of cutting-edge telecommunication technologies, bridging of digital gap and development of Internet economy. It is also important for APEC to contribute to the discussions on the issues of human capital: human resources development, support for global life-long education, balanced gender policy, support for youth, creativity, healthy lifestyle and relevant healthcare issues.

Declare Japan’s Vision on the Asia-Pacific Liberalization
By YAMAZAWA Ippei
     Japan's course for participating in negotiations on TPP was supposedly set by Prime Minister Noda's decision and manifestation in Honolulu APEC. Criticized as "participation dragged by the U.S." in the discussion on the pros and cons of participating in negotiations on TPP, PM Noda declared Japan's initiative in the Asia-Pacific liberalization during his return from Honolulu. Japan should clearly state her strategy on how to bridge TPP, without China, and ASEAN+, without the U.S, at home and abroad. In my view, Japan should utilize APEC which includes both China and the U.S. as a link between the two countries, for which Japan's past initiative until Yokohama and Honolulu APEC will be of assistance.
     The dynamics of competitive liberalization - formation of an FTA promotes participation of other countries or solicits formation of more FTAs - are affecting the moves around TPP, ASEAN+, and Japan-China-Korea FTA. It seems that PM Noda intends to carry them forward in parallel. The vision of Yokohama APEC positions the first two as a way to FTAAP. However, in the Asia-Pacific region, there is a difference between the advanced economies and the developing economies in their readiness for liberalizing trade and investment. Also, there is a confluence of interests to which each economy adheres. Therefore, FTAAP can hardly be expected to be easily achieved. Indispensable are efforts leading them to convergence with FTAAP. I would like to propose that APEC can be a convergent framework and that Japan should declare taking a leadership role.
    Yokohama APEC in 2010 published the interim assessment of achievements of the Bogor Goals on individual liberalization and facilitation. It stated that the Bogor Goals on liberalization and facilitation helped the APEC economies achieve high growths and lead the world economy for the past 15 years. It also pointed out that barriers still existed in six areas, namely, tariffs, nontariff barriers, service, investment, intellectual property rights and government procurement, and that efforts to remove those barriers must be continued over the coming 10 years, the remaining term of the Bogor Goals. The opening part of the ministerial statement in Honolulu indicated implementation of "The New IAP Peer Review Process," which aimed at elimination of the remaining barriers by all the 21 economies for 2020. Though APEC should maintain the principle of voluntarism and flexibility, APEC must not only upgrade effectiveness of the Peer Review in order to remove the remaining barriers by 2020, but also address domestic regulations behind the border measures in order to achieve the Bogor Goals. For developing economies to achieve as well, indispensable is capacity building in each area, the technical cooperation projects for which APEC has implemented. In other words, APEC itself can be a foundation to achieve FTAAP. While TPP and ASEAN+ pull the Asia-Pacific from the top, APEC pushes it from the bottom.
    Moreover, APEC, which includes the U.S. and China, is able to bridge TPP and ASEAN+. Japan must make best use of her past initiatives in APEC, and play the central role in the promotion of the Asia-Pacific liberalization.
(Originally posted on the Council of East Asian Community’s CEAC Commentary, Dec. 19, 2011)

Three reasons why Japan should join the TPP
By Ippei Yamazawa, December 2010
        The 2010 APEC meeting in Yokohoma ended one month ago but the Japanese media is still discussing whether or not Japan should join the Trans Pacific Partnership (TPP [1]). Prime Minister Kan planned to announce Japan’s accession officially at the leaders’ meeting so as to make it a highlight of APEC 2010 but he had to postpone it until June next year because of strong objections of agricultural protectionists.
        Two arguments in favour of Japan’s joining the TPP have already been made. The first centres on ‘second country opening,’ and the second centres on ‘discrimination’. But both of these reasons appeal to a domestic audience but are not persuasive to Japan’s foreign partners. Japan needs to present a third reason to persuade its Asia Pacific partners why it should join the TPP and lead regional integration efforts in the Asia Pacific.
Turning to the first reason, the ‘second country opening,’ as Prime Minister Kan has explained, as Japan’s economy and society have matured, it has become inward-looking. Japan should join the TPP in order to arrest this process and promote active advancement overseas. To this end, Japan must undertake agricultural reform so as to remove the agricultural protection that is currently impeding its accession to the TPP.
        But in any case, the fact is that the number of Japanese farmers has decreased by 25 per cent over the past decade. Reform that produces a competitive agricultural sector is therefore imperative regardless whether or not Japan joins the TPP. An opinion group, of which I was a member, proposed [2] a program of nurturing competitive farming without protection to then Prime Minister Aso two years ago but no response was forthcoming. Indeed, there is a need to reform Japanese institutions and practices in quite a few areas, but strong political leadership is currently blocked by huge vested interest groups.
        Turning to the second reason, business leaders have argued that Japan will be discriminated against and left behind the globalisation trend if she does not join the TPP. This is the domino theory of FTA or competitive liberalisation which urges you to ‘join as your neighbors do’. Once joined, you can gain from trade diversion by discriminating against non-members.. This justification is shallow – by itself, it cannot provide the best possible policy.
This brings us to the third reason. As made clear by the first reason, Japanese firms cannot survive global competition by targeting a domestic market with an aged population.. It is thus imperative to produce a seamless business environment in which both Japanese and other Asian firms can do free and stable business internationally. This environment is the East Asian community. Joining the TPP should lead eventually to the merging of the Pacific and Asian markets. This is the third, and most compelling, reason for Japan to join the TPP.
The current design of the TPP seems to exclude fast growing Asian economies, which may impede the move toward the Asia Pacific-wide market. As my third reason makes clear, the TPP is trans-Pacific, but it should not divide Asia from the Pacific.
（posted on East Asia Forum, Australian National University, 22 December 2010 ）

Has APEC Achieved Its Mid-term Bogor Target? – An Assessment of 2010 APEC Yokohama –
Ippei Yamazawa, December 2010
    2010 APEC Yokohama was completed three weeks ago with three major achievements, first the mid-term assessment of its Bogor target, second a concrete direction toward Free trade Area for the Asia-Pacific (FTAAP), and third APEC’s growth strategy. The first two give us a future prospect for APEC’s main activity of Trade Investment Liberalization and Facilitation (TILF), while the last packages its new initiatives undertaken for the past decade in order to combat with changing economic environment in the region. Discussion has so far focused on TPP as a possible route to FTAAP but others seem to be missed since the Yokohama meetings. This short essay aims to discuss both the first agenda and continued TILF of the second.
      APEC SOM reported the assessment of the Mid-term Bogor Goals achievement to Leaders’ Meeting in 2010 (APEC/SOM 2010). It included five industrialized economies designated to achieve the free and open trade by 2010 plus eight economies which volunteered to be assessed this time, namely Chile, Hong Kong, ROK, Malaysia, Mexico, Peru, Singapore, and Chinese Taipei. They were not assessed individually but as a group of five plus eight economies. Leaders summarized their achievement as the 13 economies as follow (APEC/LM 2010b).
- The overall growth in commodity trade for all APEC economies increased by 7.1% annually for 1994-2009, services by 7.0%, and inflow and outflow of FDI by 13.0% and 12.7% respectively.
- The 13 economies reduced their simple average tariffs from 8.2% to 5.4% for 1994-2009, far lower than the world average of 10.4%, as well as further tariff reduction within their FTA framework.
- They opened their services markets through unilateral reform of domestic policy and maintained liberalized investment regime.
- They have also taken significant steps on trade facilitation to streamline customs procedures and align standards and conformance procedures. Under the Trade Facilitation Action Plan (TFAP) they have reduced transaction costs in the region by 5% for 2002-2006 and are achieving an additional 5% under the second TFAP by this year.
      On the other hand, Leaders also noted that impediments still remain in sensitive sectors;
- Higher tariffs in agricultural products and textile and clothing,
- Remaining restrictions in financial, telecommunications, transportation, and audiovisual services, and the movement of people least liberalized,
- Sectoral investment restrictions in the form of prohibitions or capital ceiling and continuing general screening system.
- Non-tariff measures need further efforts
- Further works need to be done in standard and conformance, customs procedures, intellectual property rights, and government procurement,
- Behind-the-border issues need to be addressed by facilitating structural reform.
      Leasers concluded as “It is a fair statement to say that the 2010 economies have some way to go to achieve free and open trade in the region. APEC challenges in pursuing free and open trade and investment continues. APEC will continue to review economies’ progress towards the Bogor Goals of free and open trade and investment. We recognized that all APEC economies must maintain their individual and collective commitment to further liberalize and facilitate trade and investment by reducing or eliminating tariffs, restrictions on trade in services, and restrictions on investment, and promoting improvement in other areas, including non-tariff measures and behind-the-border issues.” (APEC/LM 2010b)
“APEC has achieved much since its inception, evolving to become the pre-eminent economic forum in the Asia-Pacific, the world’s most dynamic and open region. Looking back over the past 15 years, the progress made by APEC in pursuit of the goal of free and open trade and investment has reinforced the fact that full achievement of the Bogor Goals for all economies should continue to provide direction for APEC’s work of trade and investment liberalization and facilitation” (APEC/LM 2010b)
     This is a fair assessment of APEC’s achievement, considering the severe constraints that the WTO/DDA negotiation has got stumbled and the Bogor process has been implemented under non-binding liberalization modality. APEC’s TILF process will continue for all APEC economies, including the 13 economies summarized as above. However, it is not clear from the Leaders’ statements and report how this process will be conducted.
- Will all 21 economies conduct the peer review process of IAP/CAP at SOM?
- Will the 13 economies assessed this time be subject to a new form of review, focusing on their remaining impediments?
- Will all 21 economies be subject to a new review process toward the final target of 2020?
     The past three rounds of the IAP peer review process were criticized occasionally because of its huge works and voluminous documents and ambiguous focus due to its positive list formula. SOM’s assessment report this time is also based on detailed data collection and reports submitted by the 13 economies. This is a good opportunity at the mid-term assessment for reshuffling the IAP review process.

I proposed earlier how to reshuffle the IAP review process so as to make it more effective in encouraging APEC economies’ liberalization efforts (presented at APEC Tokyo Seminar in December 2009 and included in Yamazawa 2010). I found by my independent quantitative assessment that the thirteen economies differed greatly in their achievement and remaining eight economies have achieved much less toward the Bogor Goals. They may be treated differently according to their different extent of liberalization and facilitation. What about each of the thirteen economies list up the areas which it perceives insufficiently achieved the Bogor Goals and voluntarily report its continuing efforts every three years? It will become another IAP reporting in negative list formula. On the other hand, it is no use for the remaining eight economies to continue their current IAP reporting as before. They may be better advised to change it to the IAP in negative list formula to be submitted every three years. It will change the IAP process more effective in promoting liberalization and facilitation.
(posted on PECC Forum, December 9, 2010)

Negotiations for three economies’ accession to the TPP have started toward its final stage. Canada and Mexico will clear additional hurdles of liberalization easily thanks to their membership of NAFTA. Japan is reported to face strong requests by the U.S. and Australia on her liberalization of agricultural products. Nevertheless, all existing members of the TPP negotiation welcome the three economies’ accession in principle since it will increase the scale economy merit of TPP.

However, it will never be easy to successfully conclude the TPP negotiation. It is not only in Japan alone that vested-interest groups resist to moves to open economic regime. Requests for exclusion are made in many economies including the U.S. How can we stress them to minimum and achieve a high level of trade and investment liberalization principle. We need to incorporate China, Indonesia, and other Asian economies which carry the high growth of the Asia Pacific region.

Dynamics of competitive liberalization has urged Asian economies to accelerate their FTA moves. In the week following APEC Honolulu, ASEAN Summit in Bali proposed Regional Comprehensive Economic Partnership (RCEP), accelerating ASEAN plus FTAs under ASEAN initiative. In December China-Japan-Korea FTA Study group completed its report proposing an early start of negotiation on the trilateral FTA among their governments. The United States is not included here.

On the way home from APEC Honolulu, Prime Minister Noda expressed his wish to promote both TPP and Asian FTAs in parallel. However, how can we connect TTPP without China with Asian FTAs without the U.S? He should clarify his strategy for Japan’s initiative. Neither TPP nor ASEAN- plus FTAs is conducted within APEC, the sole inter-governmental network for Asia Pacific cooperation. APEC ha continued liberalization and facilitation as its core activities for the past fifteen years Media has not paid much attention to its proper activities, leaving public audience as well as young scholars unaware of them. I would suggest that we should make better use of APEC including both China and the U.S. Japan can claim it on the basis of her hosting and achievement of APEC Yokohama in 2010.

Throughout last year APEC undertook a detailed examination of individual economies’ achievement toward the Bogoal Goals. Only the group assessment was published of its thirteen economies, five industrialized economies designated to achieve the free and open trade by 2010 plus eight volunteered economies. It says that APEC economies have achieved a high growth for the past fifteen years and drug the world economy owing to the members’ efforts to achieve the Bogor Goals. However, it also indicated that impediments still remained in six sectors of tariffs, non-tariff measures, services, investment, intellectual property rights, and government purchase and stressed that all APEC economies should continue their efforts of eliminating them for the remaining ten years until 2020.

This is a fair assessment of APEC’s achievement, considering the severe constraints that the WTO/DDA negotiation has got stumbled recently and the Bogor process has been implemented under the modality of non-binding liberalization. APEC’s TILF process will continue for all APEC economies, including the 13 economies summarized as above.

Leaders committed in Yokohama to continue the TILF process toward the final Bogor Goals in 2020. SOM2 last May in Montana adopted ‘the new IAP peer review Process’ for all 21 members to remove remaining barriers toward 2020.

- New IAP should cover all 14 areas of Osaka Action Agenda plus those added afterwards (transparency, RTAs/FTAs, and other voluntary reporting areas). 2010 economies (13 economies which were assessed in 2010) might give emphasis to those areas where shortcomings were highlighted by Leaders, cited above).

- Policy Support Unit support SOM in this new IAP peer review process. It will prepare a short one-two page report with key highlights on members’ main achievements and remaining areas for improvements in the year of review. PSU reports will be discussed at SOMs and finally made public.

These respond to often heard criticism of the previous IAP peer review process and, if implemented faithfully, the new IAP process will be much strengthened. In prior for APEC 2010 Yokohama, the author conducted an independent quantitative assessment of all 21 economies’ achievement toward the Bogor Goals in eight are as of Osaka Action Agenda. I found that the thirteen economies differed greatly in their achievement and remaining eight economies have achieved much less toward the Bogor Goals. They may be treated differently according to their different extent of liberalization and facilitation. The six sensitive areas suggested by Leaders above are consistent with my findings. The concise and pinpointing ways of addressing achievements will be closer to ‘negative list formula’ which I suggested earlier.

Here I would like to stress the importance of ‘individual assessment’ and ‘make it public outside APEC rather than peer review within SOM’. While the final report of the mid-term assessment tells us only the group assessment of the thirteen volunteered economies, individual senior officials, both the thirteen economies and the rest of APEC economies, have understood well how far they have achieved toward the Bogor Goals and how much still remain. It is no use of keeping the ‘no name, no shame’ modality, but make them known to outside APEC officials, such as ABAC and ASCC experts. APEC may keep its modality of non-binding nature and voluntarism but should open their review process to outside critics.

‘FTAAP should be pursued as a comprehensive FTA by developing and building on ongoing regional undertakings such as ASEAN+3, ASEAN+6, and TPP. To this end APEC will make an important meaningful contribution as an incubator of a FTAAP by providing leadership and intellectual input into the process’. (Pathway to FTAAP , APEC/LM 2010c). We, PECC experts, should monitor the progress of individual paths and advise so that they will merge toward FTAAP. Otherwise, TPP and ASEAN plus proceed separately so that two blocs be formed dividing Asia, and ‘free trade in Asia Pacific’ will end in dream.

ASEAN+3 and +6 have been examined together by a task force of member governments’ officials, following the suggestions of ASEAN+3 Summit and East Asian Summit. It was reported that China submitted a concept paper on East Asia FTA (EAFTA), while Japan submitted a concept paper on Comprehensive Economic Partnership for East Asia (CEPEA). Media makes fun of their rivalry reflecting different perspectives on regional cooperation framework, which tends to impede their smooth conversion in future. However, as is apparently urged by the TPP negotiations, China and Japan made a compromise proposal at the last ASEAN +6 but maintained the ASEAN Economic Ministers’ meeting in Indonesia in August. They proposed ‘ASEAN +α’, not specifying either +3 or +6.

ASEAN Summit’s proposal of RCEP conceded to the China-Japan proposal but maintained the ASEAN initiative for Asia-wide FTA. It will be interacted with the China-Japan-Korea FTA in due course. RCEP will have a narrower coverage of commodity trade, services trade, investment, and ecotech and is likely to remain at a lower of liberalization than TPP.

Here I would like to stress that APEC can play a positive role in merging TPP and RCEP. The new IAP Peer Review mentioned above has a comprehensive coverage, including WTO plus areas and is close to the TPP’s high standard, except for its non-binding modality. APEC, with its two decade experience in Ecotech and capacity building, helps developing economies to implement various facilitation programs, thus inviting them to join high level FTAs. Above all APEC is their least common multiple, that is, includes all members of the Asia Pacific. TPP and ASEAN plus pull the Asia Pacific from above, while APEC pushes it up from behind.

As regards the follow-up of the new IAP process, PSU is assigned an important job of organizing this process for effective liberalization and facilitation programs. It should not merely summarizing individual IAPs but helping them publicizing their commitments and achievements. A mapping exercise can be attempted to clarify the differences among the three. If necessary, PECC experts are willing to provide assistance. This will encourage SOM to get concerned about reducing differences of the three so that their possible convergence will be seen toward 2020. I expect the final assessment of the new IAP process dated in 2020 will announce the converging stage toward FTAAP. 　　