Robert Zoellick, former World Bank President and USTR, on the Importance of APEC

June 19, 2014

Trade ministers from the U.S. and the 20 other Asia-Pacific Economic Cooperation member economies will gather in Qingdao, China this weekend to chart a path for sustained economic growth. Past initiatives facilitated the Asia-Pacific's emergence as the predominant driver of global growth. The challenge for this generation of leaders and diplomats is to employ APEC to deepen cooperation in the region to meet new challenges.

When I worked with Secretary of State James Baker in 1989 to help launch APEC, we believed that the U.S. would benefit from an Asia-Pacific economic network that would complement and underpin America's Pacific security alliances. That strategic logic remains sound today.

We hoped that APEC could become part of a post-Cold War international architecture. It could fuse U.S. economic and security interests across key regions, link U.S. policies and businesses to the development of East Asia and encourage Asia-Pacific economies to be a constructive force in a changed global system. This economic partnership could also strengthen U.S. public support for our ongoing security commitment.

Asia-Pacific Economic Cooperation (APEC) Summit in Nusa Dua on the Indonesian resort island of Bali on October 8, 2013. Agence France-Presse/Getty Images

At the time, some in the region advocated an East Asian bloc that excluded both the U.S. and Canada. Instead, APEC became a tie that has helped bind the Americas to East Asia. Given the ongoing need for a reassuring U.S. security presence across the Pacific, such inclusiveness has proven strategically rewarding. It offers a winning proposition for the region's businesses and the livelihoods of its nearly three billion people.

From the beginning, the Association of Southeast Asian Nations has been at the core of APEC—reflecting and supporting the growing significance of those economies. Adding China, Hong Kong and Taiwan in APEC's early years helped all three economies reform and interconnect regionally and globally.

APEC's "open regionalism" also recognized that deeper regional integration should occur within an open global system. The subsequent involvement of Pacific-facing Latin American economies strengthened their reform and commitment to free trade. It has led to the rise of the promising "Pacific Alliance" of Mexico, Colombia, Peru and Chile.

The APEC drive for open trade advanced World Trade Organization breakthroughs, such as the Information Technology Agreement that reduced tariffs on IT products, and has facilitated the development of wide-ranging supply and logistical networks in the region. Business integration has boosted trade and growth. Technologies and know-how have been transferred from multinational companies to emerging markets.

The APEC method of policy development confounds some people, especially in the U.S. Rather than draft grand bargains, APEC encourages the practical—accumulating accomplishments and learning—and connecting policy, business, and scholarship. These foundations have become the basis for free-trade agreements and other accords among members.

APEC rarely produces formal agreements. Instead, it identifies emerging topics, facilitates "pathfinders" in developing new policies, encourages expansion based on experience, and draws on the power of demonstration. Diverse economies and governments can then move at different paces.

Yet APEC's very success, including through the extensive Trans-Pacific Partnership pressed by the U.S., risks diverting attention from APEC's future possibilities. The APEC method requires a combination of continuing creative leadership and practical cooperation.

Consider some examples. Many of the middle-income countries of APEC are determined to avoid the "trap" of slowing productivity growth–a problem that has impeded the climb to high-income levels. These APEC economies would benefit from the liberalization of service sectors and expanded free trade in IT goods and services under a second Information Technology Agreement, which are subjects of negotiation in the WTO.

Other middle-income countries need infrastructure investments, which could be facilitated by Public-Private Partnership models for designing, financing, operating and maintaining facilities. APEC economies, which are embarking on a multi-year plan for infrastructure development and investment, could work more closely with the Asian Development Bank and World Bank. They could also better engage private investors, to learn how to move from "one offs" to a PPP infrastructure deal flow.

Human capital development could be boosted by innovation in tertiary education, employing new information technologies, hybrid models and public or private providers. Energy innovators, especially in natural gas and its liquefaction, could fuel new networks and hubs across APEC. Bilateral investment treaties could encourage foreign direct investment, two-way partnerships, and development gains.

Given the security tensions roiling East Asia's seas, APEC could offer common ground to consider shared interests in economic and resource development as well as open sea lanes.

APEC members, partnering with the multilateral development banks and others, could take further steps to counter natural disasters in the "Ring of Fire," the source of about 90% of the world's natural disasters. They could promote disaster monitoring, prevention, early warning systems, rapid response and reconstruction. New ideas about fish conservation could help save, and even extend, this vital source of protein, while assisting small island states and conservation.

The U.S. has, from its founding, valued innovation, flexible adjustment and practical experiments. These are all features of the APEC method. Its flexibilities enable it to explore where more rigid accords and sovereignties cannot yet reach. U.S. strategy, in turn, should remain rooted in the logic of APEC's creation: the entwining of American economic and security interests, in accord with political objectives, across the Asia Pacific. In Qingdao and beyond, U.S. diplomacy for APEC needs to be creative and adept at connecting practical steps with this strategy.

Mr. Zoellick has served as president of the World Bank Group, U.S. trade representative and deputy secretary of state.

Originally published on Wall Street Journal, 15 May 2014. 

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