APEC: What's in store in Vancouver

By Steve Parker

The APEC meeting in Vancouver in November will be workmanlike, with nothing spectacular expected.

The Asia Pacific Economic Cooperation (APEC) Forum consists of 18 member economies surrounding the Pacific Ocean. These diverse economies are pulled together by a common goal of creating a Pacific community with prosperous economies, expanding trade and investment flows, and mutual understanding and respect.

APEC's agenda has been pushed forward dramatically over the past four years, starting with President Clinton's Blake Island meeting of the leaders in 1993, followed dramatically by President Soeharto's orchestration of the 1994 Bogor Declaration that called for all APEC economies to achieve free and open trade and investment by 2010 for developed economies and 2020 for developing economies. The Osaka Action Plan was developed in 1995 to provide a road map for achieving the Bogor objectives, reiterating APEC's commitment to full and comprehensive liberalization.

In 1996, under Philippine leadership, APEC broke new ground -- creating the Manila Action Plan for APEC (Mapa) where, for the first time, every APEC economy laid out concrete steps for how they would achieve the Bogor objectives, stimulating trade and investment liberalization and facilitation (TILF) through Individual Action Plans (IAPs) and Collective Action Plans (CAPs), and economic and technical cooperation (Ecotech) through a wide range of joint activities (fostered by a Ministerial Declaration on Economic and Technical Cooperation).

APEC leaders also agreed last year to call for a major initiative to lower tariffs to zero on information technology products. An Information Technology Agreement (ITA) was accepted on a global basis shortly thereafter by the World Trade Organization (WTO) at its Singapore Ministerial meeting last December.

The year 1997 has been one of consolidation for APEC under Canadian leadership, working to strengthen and deepen its increasingly well-formed work agendas. The leaders meeting, which has become the focus of the annual APEC process, is not expected to generate "spectaculars". Canada's leadership theme is organized around a call to expand infrastructure in the region and to enhance civil society participation in the APEC process, especially youth and women.

It is not expected, for example, that the leaders will make any substantive announcements regarding the WTO negotiations on financial services that are scheduled for completion in December, or on the South-east Asia financial and currency situation. Similarly, leaders are not expected to promote an APEC view on the upcoming Kyoto Conference on Global Warming.

In line with the workmanlike nature of this year's APEC process, attention is likely to be focused more on a range of ministerial-level work. Most economies will be announcing improvements to their IAPs and CAPs, and the formats for these plans will be standardized to foster monitoring and comparing the implementation of commitments. Highlights of these improvements are expected to involve lower tariff and non-tariff levels spread over a number of economies and sectors, acceleration towards a paperless customs regime and improved harmonization of product standards and testing in the region, and streamlined business visas. Through this process, APEC is working to reduce many of the costs that businesses complain most about.

Probably the biggest surprise for the year has been the acceleration of the process to achieve early sectoral voluntary liberalization (ESVL) that was stimulated by a mid-term Ministers of Trade meeting in Montreal.

Following on last year's dramatic precedent with the ITA, they have called for APEC to identify specific sectors for accelerated liberalization, including not only tariffs and non-tariff barriers, but also facilitation, infrastructure and human resource development needs.

Over the year, APEC has established a procedure for voluntary submission of sectors and related policy reforms by each economy, and are currently working to achieve a critical mass of economies around specific sectors (key officials will be meeting in late October in Singapore for a special set of meetings to further this process).

There is still considerable uncertainty regarding what this process will produce, and negotiations can be expected to continue right up to the Vancouver meeting deadlines. It is most likely, however, that a handful of sectors -- like fish and environmental products -- will be named for early liberalization. It is not clear, however, what the time frame will be, nor whether liberalization will be done on an unilateral, most- favored-nation basis or as an initiative for WTO action. It seems unlikely that ESVL will involve preferential regional schemes.

APEC has struggled with two "structural" issues -- management of the Ecotech activities and membership expansion. A number of economies in APEC, including developing economies such as China, have pushed to create a separate committee on Ecotech to heighten its prestige and mandate, and to improve its management and funding base. By all accounts, the Ecotech process has been unwieldy and lacking in focus. Ecotech activities are a fundamental innovation by APEC, acting to balance the needs of developing and developed economies in the region, to support implementation of reforms and the building of needed social and physical infrastructure to make those reforms effective, and to advance the underlying understanding and mutual respect required for a successful community to flourish. Although the 1996 Manila Declaration on Ecotech set an important benchmark, accommodating the desire for "focused outcomes" on one hand, and softer community building and development objectives on the other, has proven difficult. It appears unlikely that a major breakthrough on Ecotech will be accomplished by Vancouver.

Expanding APEC's membership has occupied a surprising amount of time, at the bureaucratic level and even among the leaders. At stake is the desire by some to solidify the APEC work agenda with a strong track record of accomplishment, given that it already includes an amazingly diverse set of economies while maintaining a comprehensive approach to TILF and Ecotech. And yet, a number of economies are pressuring hard to be invited into APEC, which has always promoted itself as an open and non- exclusive club. Agreement has been made this year to present clear guidelines for new membership selection, with specific economies named in 1998 for formal entry in 1999. Compromises are likely in this process, and several new members may even be announced ahead of schedule in Vancouver (leading candidates include Vietnam and Peru).

Although some fret about the expected low-key nature of this year's meetings in Vancouver, the APEC process remains alive and well. APEC needs to strengthen its internal processes and needs to move forcefully from rhetoric to action. APEC's success this year will be measured in terms of starting the process of concrete improvements in policy reform, facilitation, infrastructure and community building, laying a basis for ongoing broad-based economic prosperity in the region and resolution of inevitable disputes.

APEC's credibility will be questioned over time, however, unless these promised, pragmatic contributions are made and unless it can deal effectively with the many emerging issues that affect the region's economic performance.

Looking beyond Vancouver, Malaysia will take over leadership of APEC in 1998 at a critical period when expectation and performance will be expected to meet. Although early indications are that Malaysia will emphasize Ecotech issues, especially human resource development, APEC will need Asean's typically dynamic leadership to push APEC forward on a number of fronts, including trade and investment liberalization and facilitation, and attention to emerging issues such as financial market development, currency policy and sustainable development.

The writerDr Steve Parker is Chief Economist, The Asia Foundation, San Francisco and, U.S. Coordinator, Trade Policy Forum, Pacific Economic Cooperation Council.