Section 3: The Future of Regional Cooperation
According to the survey, the principal challenges facing APEC are "weak commitment from member economies", and "lack of focus", which were the choices of 63 percent and 56 percent of respondents respectively. Of potentially greater concern is the fact that 44 percent of respondents feel APEC's greatest challenge is its "lack of relevance to issues facing ordinary citizens".
Furthermore, nearly 40 percent of respondents identified APEC's "limited central budget" and "weak secretariat" as major challenges for the regional forum. When asked if "APEC is as important today as it was in 1989", only 42 percent of respondents agreed. Support for this statement was the lowest among North American respondents (25 percent) and highest in Australia/New Zealand (51 percent).
3.1 Sub-Regional Integration
East Asian Regionalism Rising
One by-product of trade and investment liberalization in the last two decades has been the greater integration of East Asian economies. More than half the trade that takes place in East Asia is conducted among East Asian economies. Until recently, East Asian integration was principally driven by business decisions. Since the Asian financial crisis, however, there has been a move to forge institutional arrangements for deeper integration in the region, in part as a response to deeper economic integration in Europe and the Americas.
Only 27 percent of respondents agreed with the statement "The East Asia Summit will eventually overshadow APEC"
Examples include the "ASEAN plus Three",China's initiative for a free trade area with ASEAN, Japan's proposed "Comprehensive Economic Partnership in East Asia," and the "East Asia Summit" process which includes not only ASEAN and Northeast Asia, but also India,Australia, and New Zealand.(see sidebar: East Asian Regionalism: From Integration to Identity?)
Respondents to our survey were generally not concerned about the East Asia Summit as a potential threat to APEC, which is consistent with the lukewarm assessment of the EAS that came across in other questions. Only 27 percent of respondents agreed with the statement "The East Asia Summit will eventually overshadow APEC".
Financial Cooperation Deepening
East Asian economies have implemented a series of measures to enhance their resilience to external shocks, including financial sector restructuring, resolution of corporate debt, and the adoption of greater exchange rate flexibility among the crisis-affected economies.
Regional financial cooperation has also been strengthened in recent years, under the aegis of the ASEAN+3 finance ministers. Key measures include:
Further work is needed in regional financial cooperation, not only for the benefit of the region, but also for the stability of the global financial system as a whole. The region's experience of excess savings is likely to continue for some time, and governments should seek to use measures to allocate them optimally between regional investment and global investment. The appropriate measures might include:
Integration in the Americas at an Impasse
Deeper economic integration in the Americas appears to have stalled, with the negotiations for a Free Trade Area of the Americas (FTAA) at an impasse. NAFTA is now well established but it is not without problems particularly in the area of dispute settlement. It is unclear if the current discussions on a Security and Prosperity Partnership (SPP) covering the United States,Canada, and Mexico will amount to another avenue for deeper economic integration in North America, and if it will be based on openness to the rest of the world, or on a fortress mentality.
3.2 Membership in APEC
A ten-year moratorium on membership expires in 2007. Non-APEC PECC members — Colombia and Ecuador are obvious candidates. So are associate member Mongolia and the non-APEC members of ASEAN. India has also been knocking at the door of APEC since the early 1990s and was turned down at least three times, most recently in 1997, however, it is unclear if a)APEC will extend the moratorium, and b) India is still interested in becoming a member. Despite a historical chariness about the role of India in Asia Pacific institutions, a robust majority of respondents (62 percent) now believes that the emerging South Asian giant should become a member of APEC.
The findings of this survey suggest that the question of Indian membership deserves serious attention. Views about Indian membership, however, vary across the region. Whereas around 65 percent of respondents from North America, Southeast Asia and South America believe India should be included in APEC, only 40 percent of experts from Australia and New Zealand held the same opinion.
In an acknowledgement of India's growing economic clout, 74 percent of respondents from Southeast Asia and 76 percent from Northeast Asia believe that India should be a member of any Asia Pacific regional organization.
3.3 Trans-Pacific Ties
A defining feature of APEC-and PECC - is the trans-Pacific composition of its membership. The fact that leaders of economies from both sides of the Pacific meet annually under the auspices of APEC is an essential political anchor for trans-Pacific cooperation across a broad range of issues. Despite the rise in intra-Asian trade and investment, the health of trans-Pacific ties continues to be critically important for the world economy. East Asian integration is characterized by its outward orientation, with much of the intra-regional trade in intermediate products leading to final exports intended for the rest of the world.
APEC should embrace the discussions on new regional architecture as an opportunity to reform and to renew the organization
The United States in particular is still a very important source of final demand for products from Asia, especially China, and trans-Pacific investment has been an important factor in the expansion of production networks in Asia. East Asia's exports to the United States in 2005 totaled over US$500 billion, close to 90 percent of all of Asia's trans-Pacific trade and more than double the United States'exports to Asia.
The massive current account deficit between the United States and Asia has a financial counterpart in the substantial holdings of U. S. treasury bills by Asian central banks. There is also a substantial volume of foreign direct investment from Asia into the Americas. Japanese companies have led the way with their extensive holdings in the automobile sector, and Chinese enterprises have more recently shown interest in acquisitions throughout North and South America, especially in the resource sector.
There is, however, considerable concern on the Asian side of the Pacific that the North American countries, particularly the United States, give less attention to APEC than they once did. This is in part because of the heavy emphasis in the United States on the Middle East and on security-related issues following the September 11 attacks. While these are very important issues,Asia has by far the greater impact on America's society and future. We believe the United States needs to clarify and revitalize its APEC commitments.
APEC Should Embrace Discussions on New Regional Architecture
APEC may or may not be in a position to directly address the challenges to economic growth in the previous sections, but the need for Asia Pacific economic cooperation is as important as ever. It used to be said that APEC has a future because it is the only trans-Pacific regional institution and therefore cannot be allowed to fail.
As economies on both sides of the Pacific Rim contemplate new forms of regional and sub-regional architecture,APEC can no longer be complacent. On the contrary,APEC should embrace the discussions on new regional architecture as an opportunity to reform and to renew the organization.
As the results of PECC's survey show, opinion-leaders appreciate the continued importance of APEC, but are doubtful about the commitment of member economies to the regional forum.APEC leaders meeting in Hanoi should send a clear message to dispel such doubts, and then follow up with the political will, financial resources, and institutional support to prove the doubters wrong.
PECC Update for APEC SOM1, February 2014, Ningbo, China
State of the Region 2013-2014 (pdf, 3MB)
PECC Statement to APEC Ministers, 5 October 2013, Bali, Indonesia
PECC Update for APEC CSOM, 2 October 2013, Bali, Indonesia
PECC Update for APEC SOM3, July 2013, Medan, Indonesia
Vancouver Statement, 21st PECC General Meeting, 3-5 June 2013
The Relative Significance of EPAs in Asia-Pacific
Kenichi Kawasaki, Adjunct Fellow, Japan Institute of International Affairs (JIIA)
Getting Across the Finishing Line: Canada and the Trans-Pacific Partnership
Don Campbell, Co-Chair PECC; Chair CANCPEC
Hugh Stephens, Vice Chair CANCPEC
Enough of TPP Paranoia, already
Hugh Stephens, Vice Chair CANCPEC
Insight: APEC: They came, they saw, they ...?
Eduardo Pedrosa, Secretary-General, PECC
APEC 2013 in Bali - a foretaste of APEC in Manila 2015
Federico Macaranas, Professor, Asian Institute of Management
Yuen Pau Woo (State of the Region Report Coordinator, President & Co-CEO Asia Pacific Foundation of Canada)
Gary Hawke (Head, School of Government, Victoria University of Wellington, New Zealand)
Charles E. Morrison (PECC Chair, President East-West Center, USA)
Jusuf Wanandi (Member, Board of Trustees, Centre for Strategic and International Studies, Indonesia)
Soogil Young (President, National Strategy Institute, Korea)
Mark Borthwick (Director, US Asia Pacific Council)
Masahiro Kawai (Head, Office of Regional Integration, Asian Development Bank)
Eduardo Pedrosa (Secretary General, PECC International Secretariat)
Robert Scollay (Head, APEC Study Centre, University of Auckland)
Hadi Soesastro (Executive Director, Centre for Strategic and International Studies)