APEC Vision: David Dodwell

APEC has some unfinished business, writes David Dodwell from Hong Kong (published in the South China Morning Post on 29 July 2019).

No I did not spend last week in steamy Hangzhou simply to cruise the West Lake and hob-nob at sumptuous banquets. The real work was to help our region’s business leaders craft and prioritise their messages to leaders of the 21 Asia Pacific Economic Cooperation (APEC) grouping when they meet in November in Santiago.

Apart from some blunt language over the economic harm being done across the region by the US tariff war against China, there were strong words against rising protectionism. There was firm support for the World Trade Organisation as the best forum in which to set trade rules and settle trade differences.

A quieter, but equally important discussion was over the future of APEC, and its priorities, after 2020.

Why 2020? Because in 1994, when APEC was just five years old, APEC leaders met in Bogor and set in stone a bold 25-year vision: free and open trade and investment in the APEC region by 2020. The richer member economies were instructed to reach the target by 2010, and the remaining less well-endowed economies by 2020.

 And it has been for the Chilean government Chairing APEC this year, and Malaysia who take over chairmanship in January, to lead a grand audit of progress, to identify “unfinished business”, to confirm ongoing priorities – and to lay foundations for a post-2020 vision.

While APEC’s leaders back in 1994 never bothered to define in concrete terms what “free and open trade and investment” would look like, the confident view (at least up to a couple of years ago) was that impressive progress had been made.

The founding vision of Australia’s Bob Hawke, who dramatically spawned the idea of APEC as a kind of Asian OECD at a speech in Seoul in January 1989, was for APEC to fight against protectionism, to prefer multilateral forums, and to encourage the “economic enmeshment” of Asia – and in broad terms that founding vision had been well served: “We should try to investigate whether through coordinated policymaking we might better capitalise on the extraordinary complementarity of the economies of the region,” he said in Seoul.

Quite stunningly, in a world where global agreements can take decades of haggling before they get ratified, APEC was launched in Canberra just 10 months later, a combination of “the alchemy of timing, history, luck and personality – and lots of frantic follow-up.”

While Donald Trump’s “America First” mantra, and his unashamed preference for exertion of America’s unilateral power, constitute a clear attack on Bob Hawke’s vision, it is probably fair even today to say that APEC has stuck resolutely to its original liberalising mandate.

The need for APEC to find a complementary niche around global institutions like GATT (later the WTO), or regional ones like ASEAN, led to distinctive, and valuable, characteristics. It does not do treaties. It sticks firmly to trade and economics and avoids politics. It underpins its ministerial discussions with sleeves-rolled-up working groups driven by senior officials and technical experts. It formally brings the business voice, through the APEC Business Advisory Council, to the table. It concentrates its many working groups on best-practice learning that allows governments to adopt reforms unilaterally and at their own preferred pace. And it then focuses on capacity-building. As one Australian academic noted, it is “the regional expression of unilateral liberalisation.”

While the audit of APEC’s role in driving the region’s economic progress over the past three decades has been resoundingly positive, and self-evident in the millions lifted out of poverty, and the emergence of large wealthy consumer economies across the region, the list of unfinished business remains awkwardly long.

While “at-the-border” barriers to trade in manufactured goods have been dramatically reduced (let’s for now regard recent Trump-led reversals as an unhelpful but temporary blip), barriers behind the border – like regulations, standards, restrictive investment rules and so on – remain troublingly high. While barriers to trade in manufactured goods have tumbled, trade in services remains frustratingly entangled.

As the IT revolution of the 1990s has exploded into a digital revolution that is today altering every aspect of our lives, very few trade rules have yet been developed to enable digital trade and investment. Angry arm-wrestling goes on over international digital standards (not least concerning 5G), and the cross-border movement of data.

So the unfinished business as we verge on 2020 is substantial, and must form an important part of APEC’s ongoing priorities going forward. Its work will remain important in supporting liberalising progress in ASEAN, and the more-recently formed regional groupings like the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Pacific Alliance, and in facilitating progress towards regional groups like the Regional Comprehensive Economic Partnership (RCEP). It will continue to lead progress towards the ambitious Free Trade Area of the Asia Pacific (FTAAP).

Perhaps the most pregnant unaddressed post-2020 challenge is how to focus, coordinate and drive a significant regional response to climate change. APEC working groups like its Energy Working Group and the Ocean Fisheries Working Group are well placed to make a big contribution, but APEC as an institution still lacks a coherent strategic positioning on sustainability in general and climate change in particular.

The Vision process perhaps also needs to brainstorm whether the unique channel for business input, through the APEC Business Advisory Council, is today sufficient. As APEC’s own work, mainly channelled through its Working Groups, becomes more fine-grained, so there is a need for more substantive sleeves-rolled-up input built on the region’s vast business experience and expertise.

While APEC’s work on its post-2020 vision is now well advanced, with draft documents in circulation for the past 15 months still lack the one thing it absolutely needs: a vision. As yet, no-one has distilled a successor to the “free and open trade and investment” vision of the Bogor Goals. That Bogor vision may have lacked detail, but it succeeded in motivating region-wide liberalisation for a generation.

At a time of rising protection, and faltering confidence in globally-distributed business, a newly motivating vision is urgently needed. Malaysia, as chair of APEC in 2020, faces no small challenge.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view