However, its large number of member states and broad geographic spread has posed significant challenges for APEC to develop a meaningful economic union. It has faced criticism for failing to meet expectations during its 21 years of existence. This paper examines APEC’s accomplishments as well as its shortcomings to provide a balanced view of the benefits and drawbacks it provides for the participating economic markets.
Economic Advantages Under the theme of “Resilient Asia-Pacific, Engine of Global Growth”, the 21st APEC summit agreed that a strong multilateral trading system is a key driver for economic growth, Job creation and sustainable development (Dan, 2013). APEC is committed to removing protectionist trade barriers for its member economies in an effort to promote economic growth in the Asia-Pacific region. APEC accounts for approximately 44 percent of the global trade giving APEC countries leverage in regards to improving trading systems.
The cooperation has vowed to put this objective at the forefront as n improved trading system, which will promote economic growth for its member economies.
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Asia-Pacific economies will count on enhanced regional connectivity to stimulate trade and attract investment as the member countries seek decisive measures to improve regional economic integration, industry experts say (Nan, 2013). This effort involves improved logistical support, and transport routes to stimulate economic growth for APEC members.
The new cooperative mechanism will fully support trade, private investment, industrial productivity and the service industry across APEC etween governments and multinational corporations, which will promote more fluent business transactions. The goal is to encourage stronger logistical channels to remove international business barriers and promote economic growth. The growth of APEC’s 21 member economies bucked global trends and outpaced the rest of the world in 2012 despite the uncertain environment (APEC, 2012). APEC successfully boosted economic growth for its members in times of economic downturn for many countries.
In 2012, the APEC region’s growth was forecasted to accelerate to 4. 3 percent and climb further to 4. 7 percent in 2013. By comparison, world growth was projected to decelerate to 3. 5 percent in 2012 before rebounding to 4. 1 percent in 2013 (APEC, 2012). APEC’s growth is not only stimulating member economies; it is promoting global economic growth. Developing and emerging APEC members’ GDP growth was forecasted to soften to 6. 3 percent in 2012. Yet they remained the world’s fastest growing economies, contributing more than 50 percent of global real GDP growth (APEC, 2012).
The twenty-one member economies are accounted for fifty percent of global GDP, which in return stimulated economic growth over the past few years. Rule-Making and Dispute Handling APEC’s functions of promoting trade liberalization, trade facilitation and cooperation between its member economies mandate consistent rule-making and functionally successful dispute handling. The members must all be WTO-compliant and concur to an APEC code of practice to settle policy or investment-related disputes, based on existing multilateral mechanisms (Yamazawa, 1997).
These basic elements create the foundation that develops into a much broader function, that has evolved over the past two decades, to specifically address the extremely complex omplaints from several of its members regarding trade differences (such as the United States and China) and perceptions of unfair tactics to their economies. APEC ministers adopted a declaration on a trade and investment framework to increase economic activity and facilitate the flow of goods and services among member economies. Based on the declaration, ministers formed the Committee on Trade and Investment (CT’) (APEC, 1997).
The CT’ is responsible to senior officials for coordinating APEC’s work on trade and investment liberalization and facilitation. The CT’ is one of the key APEC organs, including work on tariffs, non-tariff measures, ervices, deregulation and dispute mediation (APEC); thereby, making the CT’ one of the primary means by which disputes are heard and resolved. Further clarification for dispute mediation was agreed upon in 2003 under the Dispute Mediation Collective Action Plan. This outline covers three topics, the objective, the guidelines, and the collective actions.
The WTO Agreement and other international agreements that do not duplicate or detract from the dispute procedures of the WTO are used to prevent confrontation and escalation of disputes. Members agree to facilitate and encourage procedures for timely and effective resolution, and ensure ransparency of government laws, regulations and administrative procedures. CT’ aims to reduce and prevent disputes regarding trade and investment matters in order to promote a secure and predictable business environment (APEC, 2003).
APEC ministers established the Economic Committee in November 1994. This Committee developed the foundation for the organization’s rule making that is based greater private sector investment in the region’s infrastructure by encouraging the removal of impediments and creating a more predictable and transparent investment environment (APEC, 1997). The desires of the development of rulemaking were to enhance the free trade between economies and reduce barriers to the governmental and private sector barriers while creating a level playing field for every member economy.
APEC welcomes the progress made by economies towards implementing the 2011 APEC Leaders’ commitment to strengthen the implementation of Good Regulatory Practices (GRPs) by ensuring internal coordination of rule-making, assessing the impact of regulations, and conducting public consultation on proposed regulations (APEC, 2013). APEC welcomes further work to enhance cooperation in romoting cross border privacy rules and encourages member economies to participate in the Cross Border Privacy Rules (CBPR) system on a voluntary basis.
CBPR aims to reduce barriers to information flows and enhance consumer privacy interoperability across regional data privacy regimes. As the products change and evolve from tangible materials to intellectual properties, knowledge becomes one of the most sought after commodities for the member economies. APEC continues its efforts to create some boundaries that will prevent disputes from escalating further. Economic Disadvantages With 21 member economies, APEC has a very diverse membership portfolio that includes both emerging markets such as Indonesia and Philippines, as well as developed economies such as the United States and Japan.
This diversity also portrays itself in the varying scales of economic activity in its member states such as the export giant China, along with much smaller sized economies such as Vietnam and Papua New Guinea (“Kemlu: diverse,” 2013). Scale of economic activities in the member states provide varying power gradients among APEC members and can lead to unequal distribution of economic benefits. Economically powerful nations tend to dominate the weaker members and lobby for trade agreements that favor their interests.
This is evident in China’s efforts to reduce tariffs imposed on its exports as it is aiming to overtake the US in becoming the largest economic superpower. As China focusses its efforts to expand trade of manufactured goods, many other APEC nations are concerned with agricultural trade agreements. Countries such as Thailand, Malaysia and Philippines still rely on trading agricultural products and natural resources as a major segment of their incomes. Unfortunately, larger conomies dominate the playing field and reap larger segment of the rewards, leaving smaller member states with reduced stakes.
APEC’s diverse structure and varying interests of its member states also prevent APEC from establishing a clear direction towards which the union may move. Developed nations are continuing their efforts for Trade and Investment Liberalization and Facilitation (TILE), while the emerging economies depend on APEC’s progress on Economic and Technical Cooperation (ECOTECH). APEC, unfortunately, has so far failed to set a clear agenda for its future and have not solidified its position hether to prioritize TILF or ECOTECH as it moves into the future.