WHAT ARE WE TO DO
THE 20th Asia Pacific Economic
Co-operation (Apec) meeting among 21 nations in the Pacific Rim has come and
gone not with a bang, but a whimper. It was held on an island off the Russian
seaport of Vladivostok on Sept 8-9.
The timing wasn't good. The
summit was overshadowed by continuing diplomatic strains across the region
(tensions over territorial claims and disputes over the future direction of
trade initiatives) and beyond (security issues and continuing social unrest in
the Middle-East); as well as the economic uncertainties in Europe as its leaders
grapple and struggle to resolve the 3-year old “debt” crisis amid a double-dip
recession in the eurozone, sparking concerns about the global economic
downturn.
Apec accounts for 40% of the
world's population, 54% of economic output and 44% of total trade. It has the
world's three largest economies the United States, China and Japan.
Yet, there wasn't much Apec could
do about the strong headwinds to economic recovery globally, other than
declaring: “In such circumstances, we are resolved to work collectively to
support growth and foster financial stability, and restore confidence.” How
lame has global leadership become! But life goes on.
Apec declaration
Over the past 10 years, Apec
trade has risen four times and foreign direct investment in the region rose
more than 20% a year. But the global economy has recently faced serious
downside risks. Financial markets had remained “... fagile, while public
deficits and debts in some advanced economies are creating strong headwinds to
economic recovery globally. The events in Europe are adversely affecting growth
in the region.”
Nevertheless, the Vladivostok
Leaders' Declaration strongly affirmed 12 commitments to:
Promoting trade and investment
liberalisation and facilitation;
Strengthening domestic demand, facilitating
job creation, reducing high public deficits and debts, and implementing
structural reforms;
Supporting European efforts to
safeguard integrity of the eurozone;
Reducing imbalances by
strengthening deficit (in external payments) economies' public finances, and
surplus nations' domestic demand and greater exchange rate flexibility;
Moving more rapidly towards
market-determined exchange rate regimes;
Avoiding persistent exchange rate
misalignments, and refraining from competitive currency devaluation;
Ensuring long-term fiscal
sustainability while recognising the need to support recovery within the
available fiscal space;
Strengthening the multilateral
trading system as embodied in World Trade Organisation (WTO) and working
towards the successful conclusion of the Doha Development Round;
Addressing the next generation of
trade and investment issues to further integrate Apec economies and trade
expansion;
Continuing efforts to improve
investment climate in the region;
Promoting green growth and
seeking practical trade-enhancing solutions to address global environment
challenges, including ensuring that actions to protect the environment are not
used as an excuse to introduce protectionist measures; and
Fighting against corruption to
enhance openness and transparency, as well as combat fraud, bribery and misuse
of public resources.
These commitments offer nothing
new. A mere re-statement of past commitments and intentions. So, what else is
new.
Free and open markets
Russia, as its host, was especially
keen for the dialogue to focus on freeing-up trade and investment flows to help
stimulate economic growth, taking into account the new realities of Russia's
accession to WTO. In particular, concern was expressed, and rightly so, on
growing signs of protectionism, global food security, “duties” in green
technology, “chokepoints” hampering the expansion of reliable supply chains,
and development of market-driven innovation policies.
Apec addressed these concerns
with eight new resolutions:
Refrain through end-2015 from
raising new barriers to investment and to trade in goods and services
(including rollback of protectionist measures), as well as from imposing new
export restrictions or implementing WTO-inconsistent measures.
Ruled out limiting food exports
and underlined the importance of maintaining open markets to ensure reliable
food supplies, despite severe drought that had damaged crops in the United
States, Russia and Australia (major global wheat and other food suppliers).
Raise sustainable food production
and productivity (including through adopting innovative technologies and
biotechnology), further facilitating trade and developing food markets,
enhancing food safety, improving access to food and improving farmers' welfare.
Endorsed the List of 54
Environmental Goods that directly contribute to green growth, on which import
duties will be reduced to no more than 5% by 2015, including equipment for
renewable energy, waste treatment and environment monitoring.
To promote further green growth
in Association of Southeast Asia Nations (Asean), I understand Indonesia pushed
hard but failed to include crude palm oil in the final list (which was expanded
to 54 from 25 in one day!).
Promote further energy efficiency
and cleaner energy supplies as a priority to boost both sustainable development
and energy security, and reduce carbon emissions. Towards this end, develop a
workable Action Plan to reduce by 45% Apec's energy intensity by 2035.
Reaffirmed its commitment to an
Apec-wide target of 10% improvement in supply-chain performance by 2015 in
terms of reducing time, cost and uncertainty of moving goods and services
throughout the region.
Progress has since been made at
addressing chokepoints in supply chains through targeted capacity building and
concrete steps taken in making supply chains more reliable, resilient, safe,
efficient, transparent, diversified and intelligent; and expects greater
progress through 2014.
Remained committed to encourage
innovation and the building of capacity to innovate. Towards this end, it will
promote effective, non-discriminatory and market-driven domestic innovation
policies by implementing innovative practices in 2013 that will assist
economies to integrate these commitments into their domestic policy framework.
Take steps in 2012 to enhance
practical and sustainable educational collaboration, especially in cross-border
co-operation and facilitation of exchanges in education and through bilateral
agreements within the region to enhance the mobility of students, researchers
and education providers. Apec recognises education to be the essential driver
of innovative growth.
Apec-integration
The Free Trade Area of the
Asia-Pacific (FTAAP) is a major instrument to further Apec's agenda for
regional integration. But various sectional-regional undertakings are in the
pipeline. China, Japan and South Korea have begun intense work to form a
free-trade group with Asean, known as Asean+3 free-trade area. Meanwhile, the
United States is leading an initiative with Canada, Australia, Vietnam and
eight others towards a Trans-Pacific Partnership (TPP).
Unlike traditional free trade, as
I understand it, this pact is reported to focus on stronger protection for
intellectual property and stronger and longer patent protection that ironically
would possibly “restrict” competition to the detriment of consumers. The TPP
talks have since, however, experienced a major setback with the recent
withdrawal of Japan. Recognising all these, Apec has directed its ministers to
continue to facilitate Apec's role as an incubator of FTAAP in providing
leadership to bring the parties together.
As host, Russia whose trade with
the European Union (EU) accounts for about one-half of its total trade, is
already shifting its strategy in practice towards Asia-Pacific. Then, there is
its creation of a common market with Belarus and Kazakhstan.
This and the Customs Union and
Common Economic Space agreements (which are already implemented) as well as the
prospective Eurasian Economic Union are all designed as an integral part in
shaping its regional and international agenda, especially as a seamless bridge
between EU and Apec across a vast area, including development of Siberia and
its far east.
According to new Russian
President Vladimir Putin, this approach now provides a “transport profile” for
integration, aimed at building an efficient system for managing logistical
risks and diversifying trade routes. Already, modern ports are being built in
the Russian Far East, including investments to modernise transportation and
shipping infrastructure, as well as improving customs and other cross-border
facilities.
Assessment by Apec's Business
Advisory Council concluded that the new Russian initiatives will raise traffic
flow between Europe and Apec across Russian territory by no less than 5-fold by
2020. These new routes can prove to be more cost competitive compared with
traditional routes through Suez Canal and Straits of Malacca, and can offer
advantages of speed and safety. This is the new challenge.
In addition, there is the
opportunity to promote real sustainable growth. For the future, the quality of
growth matters. This simply means placing more emphasis on innovation and the
development of human capital, and taking advantage of new partnerships, remove
barriers to the movement of ideas, expertise and technology, co-ordinate
scientific policy and jointly shape innovative markets.
Education holds the key. Russia
can provide a network of universities to promote student and teacher exchanges
and create an environment for greater academic mobility. Russia has since
proposed forming a common educational space for the Asia-Pacific region,
offering broad opportunities to join forces in advancing Apec's common creative
goals.
What, then, are we to do?
With each passing G-20 meeting,
questions are raised about Apec's long-term mission to create a region-wide
free trade area, as competing trade and educational groupings emerge. The new
Russian initiatives offer a fresh perspective. No doubt, Russia, the United States
and EU are all looking towards Asia and China in particular, where continuing
robust economic development is providing the engine of activity and future
drive.
At the summit, Russia advertised
its vast country and resources, and advanced its unique location as the new
gateway and technology hub for Asia to European-wide markets.
The time has come to re-assess
Apec in this new perspective. We know China (with its new infrastructure
investments in Russia's agriculture, energy, railways and roads) and Japan
(investments in gas supply and liquefied natural gas plant on Russia's Pacific
coast) already have a head-start. Can the United States and Europe afford to be
left behind?
TAN SRI LIN SEE-YAN
A former banker, Dr Lin is a Harvard-educated economist and a British
Chartered Scientist who speaks, writes and consults on economic and financial
issues.
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