APEC is the premier Asia-Pacific economic Cooperation.
The primary goal is to support sustainable economic growth and prosperity in the Asia-Pacific region.
The formation of APEC also encouraged checking the proliferation of regional economic blocs, such as the European Union (EU) and the now defunct, North American Free Trade Area (NAFTA).
What is Asia-Pacific Economic Cooperation (APEC)?
The Asia-Pacific Economic Cooperation (APEC) is a regional economic forum established in 1989 to leverage the growing interdependence of the Asia-Pacific.
APEC’s 21 members aim to create greater prosperity for the people of the region by promoting balanced, inclusive, sustainable, innovative and secure growth and by accelerating regional economic integration throughout the Asia-Pacific region.
These 21 member countries collectively account for nearly 50% of the world’s trade and about 57% of GDP.
India was invited to be an observer for the first time in November 2011. India is not in the grouping and has applied for membership.
Origin and Development of APEC:
The necessity of a permanent body to coordinate the economic relations among the market-oriented nations of the Pacific rim was voiced by the then Australian Prime Minister, Robert Hawke, in January 1989.
The Pacific Economic Cooperation Council (PECC), which consisted of a group of business, academics and government representatives and had been holding informal discussions since 1980, endorsed this proposal, and the first meeting of the Asia-Pacific Economic Cooperation (APEC) was held in Canberra, Australia, on November 6-7, 1989.
The meeting was attended by five Pacific industrial economies (Australia, Canada, Japan, New Zealand and the US), the then members of ASEAN (Indonesia, Malaysia, Thailand, Singapore, the Republic of Korea and Brunei) and South Korea.
However, as the concept of regional economic groupings gained ground throughout the world, it was decided to institutionalize the grouping. The 1991 Ministerial Meeting at Seoul, South Korea, adopted a declaration outlining the objectives and organizational structure of APEC and approved the membership of China, Hong Kong (Hong Kong at that time was still under lease to the UK) and Taiwan.
The institutionalization of APEC was completed in 1992 when the Bangkok Ministerial Meeting decided to establish a permanent Secretariat in Singapore
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.
In 1994 during the Bogor, Indonesia summit, APEC set the Bogor Goals of “free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies.”
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.
Objectives of APEC:
The broad objectives are to provide a forum for discussion on a wide range of economic issues and to promote multilateral cooperation among the market-oriented economies of the region
Specifically, APEC aims to promote economic and technical cooperation among the members by stimulating the flow of goods, services, capital and technology; developing a liberalized trade and investment regime; to encourage private investment, and supporting ‘open regionalism’.
It also works on promoting and accelerating regional economic integration.
By enhancing human security, the organisation try to Facilitate a favourable and sustainable business environment.
Asia Pacific Economic Cooperation (APEC) Structural setup:
APEC consists of Annual Ministerial Meetings, Senior Officials Meeting, Working Groups and a Secretariat.
The governing body of APEC is the Annual Ministerial Meeting of the foreign and trade ministers of all the member-states. The chairmanship of the meetings rotates every year among the members.
The Senior Officials Meetings, consisting of representatives of all the member-states, are held annually and are responsible for the implementation of policies framed by Ministerial Meetings.
There are ten Working Groups dealing with Telecommunications, Trade and Investment Data, Fisheries, Tourism, Transportation, Trade Promotion, Investment and Technology, Human Resource Development, Regional Energy Cooperation and Marine Resource Conservation, and two ad hoc groups dealing with Regional Trade Liberalization and Economic Policy.
The Secretariat is headed by the Executive Director who holds a term of one year.
The founding members of APEC were Australia; Brunei Darussalam; Canada; Indonesia; Japan; Korea; Malaysia; New Zealand; the Philippines; Singapore; Thailand; and the United States.
Functions of Asia Pacific Economic Cooperation (APEC):
APEC works to help all residents of the Asia-Pacific participate in the growing economy.
APEC projects provide digital skills training for rural communities and help indigenous women export their products abroad.
Recognizing the impacts of climate change, APEC members also implement initiatives to increase energy efficiency and promote sustainable management of forest and marine resources.
The forum adapts to allow members to deal with important new challenges to the region’s economic well-being. This includes ensuring disaster resilience, planning for pandemics, and addressing terrorism.
Achievements of APEC:
1. Growth and Development of the Region
- As a result of APEC’s work, there has been a surge in growth in the region, with real GDP increasing from USD 19 trillion in 1989 to USD 42 trillion in 2015.
- Further, per capita income in the region rose by 74%
2. Promotion of regional economic integration and trade:
- The APEC removed trade barriers between members, harmonized standards and regulations, and streamlined customs procedures which have enabled goods to move more easily across borders.
- To improve behind-the-border barriers to trade, APEC has been working to foster transparency, competition and better-functioning markets in the Asia-Pacific through regulatory reform, improving the public sector and corporate governance, and strengthening the legal infrastructure.
- Average tariffs fell from 17% in 1989 to 5.2% in 2012.
- 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.
3. Ease of Doing Business
- APEC launched its Ease of Doing Action Plan in 2009 with an aim of making it cheaper, easier and faster to do business in the region.
- Between 2009 and 2015, member countries improved the ease of doing business in the Asia-Pacific by 14.8% across all areas of the initiative
4. Initiatives for a cleaner environment
- APEC has been encouraging the development of clean technologies and greener growth across the region by lower tariffs on environmental goods.
- APEC has helped urban planners develop low-carbon model town plans for a series of cities throughout the Asia-Pacific.
- These cities are reducing their carbon footprint by adopting a set of carbon emission reduction targets and energy-efficient initiatives from solar panels to electric vehicles.
5. Inclusive growth
- APEC has launched a wide variety of initiatives that have helped foster SME development in the Asia-Pacific region.
- In 2005, the APEC SME Innovation Center was established in Korea to help improve the competitiveness of SMEs in the region through hands-on business consulting.
- In 2013, The APEC Start-up Accelerator Network was launched to promote entrepreneurship and innovation by connecting technology start-ups with funding and mentors.
6. Cooperation and Consensus
- APEC operates as a cooperative, multilateral economic and trade forum.
- Member economies participate on the basis of open dialogue and respect for the views of all participants.
- In APEC, all economies have an equal say and decision-making is reached by consensus.
- There are no binding commitments or treaty obligations. Commitments are undertaken on a voluntary basis and capacity-building projects help members implement APEC initiatives.
- APEC’s structure is based on both a “bottom-up” and “top-down”
- Four core committees and their respective working groups provide strategic policy recommendations to APEC Leaders and Ministers who annually set the vision for overarching goals and initiatives.
- The working groups are then tasked with implementing these initiatives through a variety of APEC-funded projects.
- Members also take individual and collective actions to carry out APEC initiatives in their individual economies with the assistance of APEC capacity-building projects.
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. The moratorium was 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.
Why India has not got membership in APEC?
- India was denied APEC membership in 2007 on the ground that its economy was not integrated into the global system.
- Lack of consensus on including any new member
- Fears of disrupting consensus procedures
- Extra-regional status of India might undermine APEC’s geographic net beyond the Pacific Rim.
- A large trade deficit in India
- APEC members do not view India’s politics and policies as supportive of wide regional integration and wider trade options.
Why APEC needs India?
- India is the region’s third largest and now fastest growing major economy. APEC economies, which account for 60 per cent of global GDP, are experiencing sluggish growth and must look for opportunities to bring new markets
- India is also projected to be the world’s third largest economy by 2030 and will need well over $1 trillion of investment in infrastructure over the next decade.
- With Trans-Pacific Partnership (TPP) trade agreement becoming a reality APEC needs to reinvent itself.
- On the supply side, India’s labour force, which will be the largest in the world by 2030, will help offset the impact of ageing populations and shrinking workforces in APEC economies.
- India’s trade with APEC economies, which has grown rapidly over the last fifteen years will grow further once it joins APEC.
- A forward-looking commitment to India’s economic future is precisely the kind of bold initiative needed to boost stubbornly sluggish regional and global growth.
Advantages for India:
- Membership in APEC would allow India to negotiate trade, integrate with the global economy, and help boost growth.
- India’s inclusion in APEC will give a boost to its ‘Act East Policy‘ and will further integrate the Indian economy into the Asia-Pacific economic milieu.
- Apart from facilitating greater regional economic integration, APEC promotes the development of small and medium enterprises in the member countries by removing hurdles for trading across borders.
- APEC mechanisms and best practices will help Indian officials and businesses become more competitive and better prepared for the changing global economy.
- The inclusion of India in APEC will act as a catalyst for further economic reforms in the country.
Issues and challenges:
- Trade War – APEC members have conflicting aims and objectives toward world trad e. Rising protectionism and the US-China Trade war threatens economic growth in the region. The 2018 APEC Summit, to produce a joint communique because of tensions between the US and China over trade and security issues.
- Creation of Sub-Regional Agreements – Many APEC economies seek to reach sub-regional free trade agreements has a negative impact on the roles APEC was originally expected to play in the region. The negotiations over Trans-Pacific Partnership and Regional Comprehensive Economic Partnership (RCEP) further undercut the importance of APEC.
- Shrinking Economy due to Covid – The Asia-Pacific Economic Cooperation (APEC) region is expected to post a 7 per cent economic decline in 2020 due to the impact of Covid-19.
- Rising Unemployment – The region’s unemployment rate is projected to rise to 5.4 per cent in 2020 from 8 per cent in 2019, or an additional 23.5 million workers being unemployed in 2020.
- 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.
- The APEC member countries should work together to ensure their collective and individual interests are best represented.
- At a time of global and regional geopolitical disturbances, the Covid pandemic situation and domestic challenges, it is of immense importance to find a wise solution that is designed to promote sustainable and equitable growth and development according to the specific circumstances of the Asia-Pacific region.
- The rise of India as one of the global economic power and its changing regional economic and political influence necessitates that India is included in APEC. This would ensure free and open trade and investment in the Indo-Pacific region and foster growth.
Article written by: Aseem Muhammed