Major Problems Faced by APEC Since Formation

The world is a global and social one that can bring cooperation among members of the society irrespective their indifferences that range from political, economy, religious, culture and traditions to name a few.

Therefore member countries in the Asia and Pacific thought it wise to form an economic cooperation with the general aim of “promoting world trade”; “ reduce trade barrier”, open “investment opportunities”, ease the “exchange of goods”, services, resources and technical know-how, and “strengthen economic and technical cooperation “among its members.

Thus, this brought about the formation of the Asia-Pacific Economic cooperation, (APEC), with the sole aim of fostering economic ties and cooperation among its members.

As the name implied it is a regional cooperation that comprise of 90% Asian countries economies and also 10% of other members within the Pacific region. APEC member-economies include the major economies of the region and the most dynamic and fastest-growing economies in the world. The 21 economies together constitute more than half of the world’s annual output and almost half of the world’s total merchandise trade, this is seen by many critics and economics as threat to non-FTA members.”Maybe APEC is too large, too diverse. It’s different from the European Community which can deepen cooperation because the countries have a real historical identity,” says Thai political scientist Prapas Thepchatri. “I’m afraid APEC has no identity, no vision to move forward to become what? An Asian-Pacific community? That’s maybe too abstract.”

Asia-pacific Economic Cooperation with its 21 member countries was established/founded in November d 1989, during the first twelve-monthly meeting of Foreign and Trade Ministers who, met in Canberra, Australia on 6- 7 November from 12 Asia-Pacific economies whose purpose of meeting was to discuss about ways to enhanced and increased cooperation in the fast- expanding region of the world .Its summit meeting in 1993doubled the “informal economic leaders meeting”.

MEMBERSHIP OF APEC

APEC 21 membership include; Australia, Brunei Darussalam, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and the United States. China, Hong Kong, China and Chinese Taipei joined in 1991. Mexico and Papua New Guinea followed in 1993. Chile acceded in 1994. And in 1998, Peru, Russia and Viet Nam joined, taking the full membership to 21.

In 1993, the United States held the first annual meeting of APEC Leaders at Blake Island, near Seattle, to give trade liberalization and economic cooperation further impetus and high level commitment, to develop a spirit of community in the region and to promote sustainable growth and equitable development.

Since its formation in 1989, APEC has helped soothe relations among its varied membership by providing a distinctive forum for regular discussions among leaders, ministers, technical experts and corporate executives. APEC’s many committees and working groups aid the sharing of experiences among the member economies. Nevertheless, despite APEC’s many visionary activities that seem to have accomplished, yet, has been losing ground. It has been criticized by some critics that APEC 21 Pacific economies are becoming just a “talking shop” or a “bureaucratic club” “talk-fest and a colorful group photo.”At the end of the day, you won’t get anything beyond broad remarks. There won’t be any concrete plans,” Joseph Tan, an economist for the Standard Chartered Bank, says of the summit that will include US President George W. Bush, Japanese Prime Minister Junichiro Koizumi and Russian President Vladimir Putin. But APEC should remain focus; this which the executive director of the APEC Secretariat, Piamsak Milimtachinda, expresses concerns over during his address to some Singapore businessmen. “APEC needs vision and focus, and APEC needs to actively manage a wide range of inter-related groups, activities and programs, if it is to achieve its goals and live up to its potential,” [1] Therefore in the past years when more and more sub-regional/bilateral free trade agreements were signed in the region, APEC seemed ‘marginalized’.

PROBLEMS AND CHANLLANGES OF APEC

Discrimination

Creation of Sub-regional cooperatives / Shift of attention to bilateral /plurilateral

Free Trade Areas.

APECs exclusive nature

No solution to the proliferation of FTAs

Impacts on harmonization in APEC.

Exclusive focus on trade liberalization

Lack of a clear cut definition of goals

Operation mechanism and Institutionalized construction this means more talk and less work.

MAJOR PROBLEMS IN ASIA PACIFIC ECONOMIC COOPERATION

At present, APEC is confronted with a series of problems and in its implementation of the many commitments in advancing free and open trade and investment, reduces trade barrier, and building one economic community in the Asia Pacific region.

First and foremost, APEC member countries occupy 60% of the world’s total population but however have a conflicting aims and objectives towards world trade. It is clear that for any big cooperation like APEC will have its advantages and disadvantages since it has a purpose of establishment. The main aim of APEC is to promote free trade and trade liberalization among the Asian economies. Economics have always asked questions to whether APEC has been able to achieve some of its proposed plan of actions. and the answer often given is” NO”, and “WHY”? , because, within the Asia pacific region there have been the creation of sub-regional bilatereial cooperation as many member economies are losing their interest in APEC process and activities which under pin the activities of APEC. It is observed that most member economies like China, Japan, India etc are all members of these sub-regional cooperatives like ASEAN, PEE for instance, whose purpose and activities differ from that of APEC policy on free trade.

This recent move by most, if not all, APEC economies to seek to reach sub-regional free trade agreements has a negative impact on the roles APEC was originally expected to play in the region. What is worth noting is that all these free trade arrangements are of exclusive nature, which runs counter to APEC’s open regionalism.

The FTA members do their trade and achieved their self –trade interest in partial at the expense of the non-FTA members. The diversification of trade among the FTA members effects will do harm to the establishment and development of multilateral trading system. The FTA members and non-FTA members will have to address various kinds and types of issues and measures when engaging in trade and investment in the region.

Non-FTA economies have to face discrimination of trade policy of FTA economies, which will result in the increase of transaction costs. In many cases, the interests of

FTA economies may contradict with APEC initiatives. The exception lists in free trade arrangements will exclude some important sectors and commodities from

APEC’s trade liberalization process and the rule of origin will exclude many entrepot trade commodities and exports relying on import of foreign intermediate goods or raw materials from preferential arrangements. Differences in level of liberalization and stages of development process in FTAs will have negative impacts on harmonization of liberalization and facilitation in APEC and make it more difficult than before in coordination of various aspect of cooperation efforts.

Secondly, Scholars are arguing that APEC members are more of proposes rather than implementers. This means that member countries hardly put their proposals into action because of economic indifferences and therefore APEC members are said to have set “Bogor goals” or “Osaka Action Agenda of 1997″ [2] with disagree strategies set for its implementation which makes it almost impossible for its effectiveness. The time for liberalization set in Bogor goals is closely drawing nearer; however, there is still disagreement in understanding of the goals. Economist world are always remembered of the Malaysia’s 6-point reservations and Thailand’s 7-point observations on the Bogor Declaration in 1994. There was also difference among developed economies regarding the “time gap” in the Bogor goals. According to the Tokyo. In his press interview (New Straits Times, 16 November 1994), Prime Minister Mahathir suggested that member economies should express their differing opinions in the form of an annexure. Malaysia’s submission gives its interpretation of the APEC goal as contained in the Declaration, namely that: the liberalization process to achieve the goal will not create an exclusive free trade area in the Asia Pacific; the liberalization process will be GATT/WTO-consistent and on an unconditional MFN basis; the target dates of 2020 and 2010 are indicative dates and non-binding on member economies; the liberalization process to be undertaken will be on a best endeavor basis; APEC member economies will liberalize their trade and investment regime based on their capacity to undertake such liberalization commensurate with their level of development; and the liberalization process will only cover a substantial portion of Asia Pacific trade and should not go beyond the provisions of GATT/WTO.

Thailand’s observations contain the following points: the goal is not to create a free trade area, and APEC liberalization must proceed in consonance with the decision of the

Uruguay round and the WTO; the time frame specified should be seen as the target for achieving the goal; the “elimination” of trade and investment barriers in the region should be done on a gradual basis.

Thirdly, APEC whole heartedly focuses on exclusive trade liberalization in order to promote regionalism; which seems to be a serious problem on the part of APEC. Ecotech which was created by APEC member economies to bridge the trade gap between Developing and developed countries have not yielded any positive results because of the lack of attention it is receiving from its founders. Since Ecotech has not received due attention, the results have not been satisfactory and, to some extent, it dampens the enthusiasm of the developing economies in regional cooperation. Though Ecotech is generally considered to be one of the two major pillars of APEC, its importance in economic and social development and narrowing the gap between developed and developing economies has not been fully realized.

Instead, it is often regarded as a “soft task” in practice and the projects have not yielded significant outcome. The shortage of funds is one of the bottlenecks. As shown in ESC’s report to ministers’ meeting, there was a steady decline of number of cooperation projects from 238 in 1998 to 125 in 2003. Besides, the past experience shows the lack of long-term plan and comprehensive arrangements, coordination and linkages among different projects, and a mechanism of supervision and valuation.

Declaration and the ASEAN-Japan action plan signed in December 2003,

Japan-ASEAN FTA will be established in 2012. That is to say, liberalization of bilateral trade and investment will not be able to achieve until 2012. This example shows the different attitudes towards the Bogor goals among member economies. The lack of a clear-cut definition for the goals, different attitudes and inadequate progress towards the goals make people doubt if the goals can ever be achieved in time.

Fourthly, though some changes can be observed in APEC’s operation mechanism of consensus and non-binding, the basic principle remains more or less the same ever since its establishment. Even the collective action plans are basically formulated on voluntary basis. Structures that have been adequate at the initial stage are now insufficient as APEC enters into its adolescence. Norms that were practical a decade ago are now constraints that are preventing APEC from adjusting to new realities. Comparatively speaking, the supervision mechanism is somewhat lacking. Since the close economic linkages among the member economies have been established mainly due to market mechanism, many economies have shown less interest in institutionalization of the organization in the cooperation process. Therefore, more efforts have been made in formulating action goals and agendas and there is a lack of institutional construction in supporting their implementation. Since the themes of annual Leaders Meetings are decided mainly by the host economies, what can be seen is that more emphasis is put on new topics and initiatives while less discussion is carried out on concrete measures of implementation and supervision.

APEC is facing keen competition from other community building initiatives and projects in East Asia, many of which are more active and dynamic. It is imperative for APEC to find its “market niche” in the future regional architecture. Looking into future, APEC will be only one of several Asia-Pacific regional fora. How to define its future role in an appropriate division of labor with other regional arrangements and organizations is a challenge that requires a forward-looking answer. In order to survive, APEC may need to scale back some of its current over-ambitious agendas and initiative-conscious activities, and transfer them to other East Asian fora and mechanisms.