Why We Need APEC

August 29, 2016

For the past two weeks I have been camped in a crisp but soulless hotel room in Lima, slugging daily through the Peruvian capital’s war zone traffic jams to the morgue-like Lima Convention Centre to APEC Senior Officials meetings. It is at times like this that you pause to ask “Why?”

Flying the 18,354 km to Lima from Hong Kong takes a brain-numbing 30+ hours whichever way round the world you travel. With the economy air tickets costing HK$12,000 or so, and the hotel bill mounting to HK$16,000 or more - repeated at least three times a year – we need to feel confident that we are making the world a better place. But for many of you reading this, who may not have the foggiest idea what APEC is all about, or what possible good is being achieved by these air marathons, I can feel your skeptical breath on my neck.

So it was timely on Friday, with just a couple of days to go before the final Lima meetings, to dedicate a day to what APEC has achieved over its 26-year life, and what it should be trying to do over the coming decade. For the trade policy wonks gathered at the APEC meetings, this conversation begins, and is framed by, one thing above all others: the Bogor Goals.

These Bogor goals, agreed in Bogor in Indonesia in 1994, defined a single rather radical ambition: free and open trade and investment among the 21 APEC economies by 2020. Back then, when the ink was drying on the Uruguay Round of global trade negotiations, the world was in an ambitious and optimistic place, and 2020 felt a long way off. Economies were growing strongly. The cold war was at an end. Countries across the world were signing up to the virtues of market competition and trade globalization. In Asia, China’s opening up process was providing extraordinary impetus to both regional trade and economic growth.
As the original and rather simple mandate to reduce border barriers to trade began to make progress, APEC ambitions steadily and naturally rose. It began to look at behind-the-border regulations, removing barriers to investment and the movement of people. As more and more companies began to construct regional or global supply chains to capture comparative advantage wherever it sat, APEC began to look at services liberalization, financial services liberalization, and improvements in physical connectivity – essentially, building better infrastructure between and within our economies.

As a grouping that embraced both the richest and some of the poorest economies in the world, APEC quickly began to focus on helping governments in the region’s less developed economies to build the experience and expertise to manage efficiency-driving reforms. And everything became “inclusive” – embracing the challenges faced by SMEs, helping educators to build courses that created graduates equipped with the skills to compete and thrive in the “knowledge economy”, and embracing the potential of disadvantaged parts of the community, like women.

Those innocent early years were marked by what Alan Bollard, Executive Director of the APEC Secretariat, calls “the 2-4-8 principle” – trade growth averaging 8% a year drove GDP growth of about 4% a year, which in turn lifted incomes in real terms by about 2% a year – which meant that families in each generation could expect to double their incomes.

APEC meetings in those early years could claim significant credit for the liberalizing momentum that drove the 2-4-8 principle, but over the past decade – and in particular since the spectacular 2008 global financial crash – economic growth has slowed, trade has faltered, productivity growth has stalled, and household incomes in most parts of the region have stagnated. APEC’s agendas have become more complex, and the headline progress that underpinned its “feel good” progress has become harder to describe. Populist politicians (name no names) have successfully undermined confidence that open trade and globalization were forces for good. Liberalising business leaders appointed to the APEC Business Advisory Council (ABAC) to advise on business concerns and on liberalizing priorities have found that the business consensus that globalization was a good thing, and that free and open trade strengthens our competitiveness, improves efficiency, and delivers economic growth, has crumbled (if in truth it ever really existed).

So is APEC doing good and important work that is relevant to business? Does its work justify me spending large sums flying vast distances to join its massive clusters of meetings? Perhaps unsurprisingly, I believe so – despite the jetlag and the scores of nights spent in drab, lonely hotel rooms.

The first and perhaps greatest value is a negative one. Absent a liberalising organization like APEC, driving scores of initiatives aimed at opening markets, simplifying regulations, and easing our ability to do business seamlessly across the region, many of the Asia-Pacific economies would be lured by xenophobic voices towards protectionism. Government officials spending so much time focused on liberalization means government officials NOT spending time on protection. Forward momentum may be weak, but in the present global economic funk, at least the pressure to retreat into protection is being resisted.

The second great value is also counter-intuitive. APEC does not do big, headline-catching treaties. It relies on best-practice learning, show-and-tell experience-sharing, and workshops that allow officials return to capitals and liberalise for themselves without any external pressure. And then it runs capacity-building courses to train officials how to implement change. Not glamorous, but invaluable in helping governments to avoid time-wasting policy errors, and to help themselves.

Through its 90-odd specialized working groups, APEC has also now shifted to address the seismic disruptions that have enveloped us over the past 15 years – ranging from developing rules for trade in services, harnessing the potential of E-everything, addressing the demographic revolution (did you know there are now more adult diapers sold in Japan than there are baby diapers?), to getting SMEs into international trade, making regionwide labour mobility easier, and empowering women to play a full role in the workplace.

As the voices of protectionism and xenophobia have risen, perhaps APEC’s work is more important than ever. For those of us that through the past 30 years of experience are confidently convinced that openness and globalization are on balance a very good thing, these paranoid voices need to be addressed – and no place better than APEC. Perhaps those mind-numbing plane journeys are worthwhile after all.
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