Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Regional economic cooperation: Whither APEC?

Download PDFDownload PDF







13 APRIL 1991

I want to address the issue of regional economic relations and the importance of

regional economic cooperation to Australia. In Queensland, as in the rest of

Australia, we are feeling the bite of recession, a recession that can only be overcome

by greater trade liberalisation and domestic reform. Australia needs to improve its

competitive position, which requires not only significant internal structural

adjustment, but a commitment to greater integration into the global and regional


Much has been happening to influence global economic relations over the last few

months, and these events have had, and will continue to have, an impact on

Australia's trading position and economic wellbeing. In the post-Gulf War situation,

the economic realm will come in for greater focus as economic security becomes

fundamental to the security of a state.

For Australia, this means several things. It means firstly that a commitment to a

multilateral trading regime, such as the GATT, is essential as structural change

continues in the world economy. This process of globalism requires management of

international economic relations through an international rule based regime with the

objective of furthering world trade liberalisation.

In a period of great change, such as the one we are experiencing at the moment,

there is a temptation to adopt discriminatory and protectionist economic policies in

order to attempt to reassert control over the direction of national economies. This

must be discouraged as it has detrimental effects for those not part of such


agreements, and eventually the parties to such arrangements suffer, at the very least

in terms of the economic efficiency of their production and practices.

The apparent breakdown of the Uruguay Round of the GATT talks in December

1990 and the restarting of them in February this year, is illustrative of this trend

in the global economy. Member countries have been attempting to negotiate a new

multilateral trading regime including areas not previously covered by the GATT,

such as agriculture, services and intellectual property rights. Australia has been a

player in these talks, through the Cairns Group of Agricultural Fair Trading

Nations. However, it is over this very issue - agriculture - that the talks have


The intransigence of the European Community (EC), Japan and South Korea over

the protection of their agricultural markets has meant that very little progress in

all areas has been made. Agriculture has been the key to the negotiations, with

progress on this directly related to the preparedness of developing countries to make

concessions with regard to the concerns of the more developed countries in areas

such as intellectual property rights.

Yet whilst the successful conclusion of the Uruguay Round must remain one of

Australia's highest economic priorities, attention must also be given to our Asia-

Pacific region and the opportunity for greater economic integration within it. Our

future lies in this region and we must attempt to play an active and appropriate



Australia has always been an enthusiastic initiator and supporter of regional

economic arrangements, often in tandem with Japan. Australia was instrumental

in the formation of the Pacific Basin Economic Committee (PBEC), a private

organisation of business interests which originated from Australia-Japan business

cooperation. In 1980, a seminar prompted by discussions between Prime Minister

Fraser and Japan's Prime Minister Ohira then resulted in the establishment of the

Pacific Economic Cooperation Conference (PECC) in 1982. PECC brings together

in an informal manner a combination of representatives from government, business

and the academic world which has been significant in encouraging greater economic

cooperation in the Asia-Pacific region.

More recently, there has been the establishment of the Asia-Pacific Economic

Cooperation (APEC) forum in 1989 as a result of an Australian initiative. Prime

Minister Hawke and Senator Evans have claimed it as possibly their finest foreign

policy achievement. Not surprisingly, as the Coalition was intimately involved in

the development of economic cooperation in the region over the past few decades,

we also welcomed APEC. We recognised its potential - potential clearly still present.

Yet it is not too early to assess whether that potential is being realised. It is on the

progress of APEC that I now wish to dwell.

APEC1 is designed as a ministerial-level forum to pursue three general objectives

^ P E C participation comprises Australia, Brunei Darussalam, Canada, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Republic of Korea, Singapore, Thailand and the United States.


(i) greater regional coordination of economic activities and policies, including

various practical projects;

(ii) communication and exchange of information on trade and investment

flows, including the establishment of regional information bases; and

(iii) attempts to jointly advance multilateral trade liberalisation, and to

respond to the limits of multilateral regimes for the region.

As the third annual ministerial meeting approaches2 3, there are regrettably very few

positive achievements that can yet be identified. Perhaps in part it relates to the

style in which these objectives are pursued. APEC has from the start been very

much an informal consensus-building forum, designed to be sensitive to the

heterogeneity in culture, ethnic composition, ideology, security interests and levels

of economic development of the Asia-Pacific region. Whilst this is in essence the

most productive way for a region with such diversity as this to cooperate, it must

not become an excuse for inaction.

for regional economic cooperation2 which include:

2See Jenelle Bonnor (1990) The Politics of Asia-Pacific Economic Cooperation. Masters Thesis, Australian National University, Canberra.

3The third APEC Ministerial-level meeting is to held in Seoul, South Korea in October 1991. It is also to be noted that the APEC Ministerial-level meetings are supported by more regular Officials meetings.


The first APEC meeting, held in Canberra in 1989, was claimed to be significant

singly because it was held at all. A government-level forum to deal with the

economic concerns of the region was unprecedented, with the main area of

agreement arising from this meeting being cooperation with respect to the

furtherance of the Uruguay Round.

The second APEC meeting, held in Singapore in 1990, reviewed progress in work

projects, focused on APEC's commitment to the Uruguay Round and confirmed the

desirability of the participation of China, Taiwan and Hong Kong. However little

else originated from this meeting apart from reiterating previously determined


Without real progress on the crucial economic issues facing the region, APEC risks

being dismissed simply as yet another talk-shop. It is important for APEC to start

to show evidence of progress on difficult regional economic concerns and it is now

an appropriate time to concentrate on this.

Where is the evidence of greater regional coordination of economic activities and

policies, the first general objective which has been identified? Work projects have

indeed been established including the review of trade and investment data, trade

promotion, expansion of investment and technology transfer, human resources

development, energy cooperation and marine resource cooperation. But yet these

projects have produced little in the way of concrete results and little that could not

have been done by existing regional organisations such as the PECC.


The second general objective, that of communication and exchange of information

has fared little better. There has been a great deal of dialogue, at the ministerial

and officials level, which no doubt is useful, but in practical terms it has taken until

now to reach agreement on a proposal by Singapore to establish a trial regional

electronic trade and economics data bank4. The establishment of regional

information bases of standardised data should be a priority goal.

The third general objective, that of cooperation with respect to furthering the

Uruguay Round, has been hailed as evidence of APEC's success. Yet the Uruguay

Round stalled in December 1990 largely as a result of the intransigence of three

parties, two of which are participants in APEC - Japan and South Korea. Although

there are indications that if the EC made concessions with respect to agriculture, the

other two may be persuaded to as well, at present all three are unwilling to come

out from behind their protectionist trade barriers.

APEC has been of limited use in helping to resolve this. APEC aimed at adopting

a common position with respect to these GATT negotiations, but despite the

successful rhetoric of cooperation and the image of a united front, little in reality

has been achieved in this respect. Yet APEC retains the commitment, reiterated at

the most recent APEC Senior Officials Meeting in South Korea in early March, to

the successful conclusion of the Uruguay Round as its top priority.

In addition, a commitment to further the Uruguay Round sits uneasily with the lack

4APEC Senior Officials Meeting, Cheju, South Korea, 6 March 1991.


of regional commitment to trade liberalisation and trade openness. Almost all APEC

participants have significant levels of protection in some sectors. For example,

contrasted with the efficient agricultural production of Australia and New Zealand

is the protection evidenced in the agricultural sectors of not only Japan and South

Korea, but some ASEAN countries and Taiwan. In addition, protection is high in

the manufacturing industries of Australia, New Zealand, the United States and

Canada. This contrasts with Singapore and Hong Kong, which have the most liberal

import systems in the world.

Indeed, APEC has only recently agreed that general regional trade liberalisation is

an appropriate area for further detailed study and consideration5. This is in

response to an Australian discussion paper on non-discriminatory trade liberalisation

in the region. It is unfortunate that it has taken Australia, or any other regional

country for that matter, so long to circulate a paper on such a crucial topic.

Although the preferred approach of the region has always been a process of

consensus-building, and indeed APEC is considering liberalisation in specific areas,

it really does seem that regional trade liberalisation as a whole should have been on

the agenda in a much more defined way from the very beginning of APEC. The

question of regional structural adjustment is perhaps the most important one for

APEC but the one to which the least amount of attention has been paid.

Trade liberalisation is assuming increased importance in response to very definite

signs from within the region of an exploration of greater discrimination in trading

5APEC Senior Officials Meeting, Cheju, South Korea, 6 March 1991.


policies. The apparent breakdown of the Uruguay Round triggered all sorts of

propositions, including one from the Australian Prime Minister to consider using

APEC as the basis of an Asian trading bloc should the GATT Round fail completely.

This suggestion must be dismissed as totally counter-productive for the region,

indeed many of APEC's participants are committed to APEC precisely because it was

not intended as a regional bloc.

There is no doubt that certain global trade signals indicate the move towards more

defined regional trading blocs. It is still too early to say however, whether European

market integration in 1992 will result in the feared "Fortress Europe" outcome. In

turn, the agreement by the US, Canada and Mexico to negotiate a North American

Free Trade Agreement, as an expansion of the existing United States-Canada Free

Trade Agreement, has led to justifiable fears about the maintenance of market

access. The announcement by Brazil, Argentina, Uruguay and Paraguay of the

creation of the Southern Common Market Treaty (Mercosur) to aim at free trade

between the four countries is also indicative of this trend.

However, proposals for Asia-Pacific regional trading blocs are not a useful response

to these indications. Malaysia's proposal for an East Asian Economic Group (EAEG)

in December 1990 appeared to aim at the formation of an inward looking trading

bloc: to include the ASEAN nations, Japan, South Korea, China, Hong Kong, Burma

and Indochina; but excluding the US, Canada, Australia and New Zealand.

This call seemed not only designed as a response to the global devolution towards


trading blocs, but as a response to developing countries' concerns that they were

being excluded by developed nations. If this indeed is the case, then APEC is failing

in its attempt to bring the countries of the region together in a manner which

enables equal exchange of views. Perhaps there is a perception that the developed

nations are dominating APEC which could help explain why Malaysia found it

necessary to make such a proposal.

It is encouraging to note that Malaysia has since moved away from the trade bloc

idea, although it is still not entirely clear as to just what is being proposed. It is also

encouraging to note that two potential members, Japan and Indonesia, have rejected

the idea, with China giving a fairly cautious response. It is more surprising however

for Singapore, a model of openness, to be expressing support.

What also needs to be cautioned against in APEC is a domination of APEC's agenda

by the United States-Japan trade friction. This is likely to assume a greater

importance as the two experience disputes over areas such as semiconductors,

construction, Japan's role in the Uruguay Round, the Structural Impediments talks

and Japan's financial contribution to the Gulf War.

These disputes will inevitably affect the countries of the Asia-Pacific region as the

US and Japan dominate so much of regional trade. Both are the major trading

partners of most in the region and therefore market access becomes an issue, with

fears of greater protection in the US or managed bilateral trade if disputes are not

resolved. Depending on how these disputes are managed, it is possible that APEC


will spend increasing amounts of time trying to deal with issues arising from the

differences between the two.

In addition, apart from not meeting its claimed objectives, there is still the question

of APEC's inadequate membership. A body to reform economic relations in the

region will exist in a world of unreality if it does not include China, Taiwan and

Hong Kong. Yet so far APEC has been unable to find criteria for eligibility and a

way of allowing the political sensitivities of China to be accommodated.

China, Taiwan and Hong Kong are all distinct economies which should be included

in APEC as a matter of priority due to their economic importance to the Asia-Pacific

region. Indeed, the inclusion of Hong Kong should never have been a real problem

as it has not yet reverted to Chinese control, is a member of the GATT and an

exemplary free trader.

With adequate resolve it should be possible to find a formula, perhaps the Asian

Development Bank or PECC model where the issues of names was resolved and both

regarded as "economies" and not countries. One therefore questions whether the

resolve is present.

There is also the question of APEC's relationship with other countries of the region.

Participating states have not worked out a formula for linkage with the Soviet

Union and the Pacific states of Latin America despite being pressed to do so.


Indeed the region needs to decide how the Soviet Union is relevant and engage it in

some form of greater interaction. This might avoid proposals such as one rumoured

that President Gorbachev is expected to propose a Japan Sea economic bloc,

incorporating China, North and South Korea, Japan and the Soviet Union. The

combination of technology from Japan and South Korea, Soviet resources and

Chinese labour may well be tempting, but the region generally would suffer with

such an inward looking arrangement6.

However, even resolving questions of participation, one must question the effective

usefulness of APEC whilst there is no satisfactory interface with business. From the

outset business was not included which struck the Coalition as a fundamental flaw.

Business interests need to have an input into APEC's working groups and

representation, perhaps through observer status, at APEC meetings. Economic

development cannot be examined in isolation from commercial realities. Regional

economic cooperation is not just about changing government policy, at the

commercial level it will be business interests that determine the success or failure

of such policies.

APEC must produce concrete results. Dialogue and exchange of views at a

government level is always useful but more must be achieved. The more practical

outcomes: the changes in government policy, the alteration of business practices, the

communication of information to improve economic performance, have to be the

6Steve Burrell "Gorbachev to push USSR-Japan bloc", Australian Financial Review. 8 March 1991.


priority. By achieving positive outcomes dialogue and cooperation will be reinforced.

Without practical results APEC will become a disinterested forum incapable of real

progress on regional issues.

Regional issues must become APEC's primary focus. It will be too easy to focus on

multilateral causes, such as the GATT, and although attention should indeed be paid

to this, there are already appropriate multilateral forums in which to do this. By

contrast, there are a limited number of regional forums designed specifically to cope

with regional economic cooperation and structural adjustment. APEC must not

become distracted from regional issues.

It is time for governments to take a hard look at APEC and its objectives. It is time

to evaluate whether useful outcomes are being achieved and whether there is room

for greater productive interaction. Consensus-building is a slow process but it must

not be used as an excuse for lack of progress. With a firm commitment to regional

economic cooperation, APEC has the potential to not only liberalise trade, but to

play a useful role in the resolution of regional differences and help carry the region

through a difficult time into the twenty-first century.