Asia-Pacific Economic Cooperation (APEC)

Context: APEC members failed to agree on a communique at a summit in Papua New Guinea

What is APEC?

The forum initially started as an informal dialogue of economic leaders in 1989 in Canberra, Australia. It was formally established in 1993 with 12 members. Currently, APEC has 21 member economies.

Goal and objectives:

1. The primary goal of APEC is to support sustainable economic growth and prosperity in the Asia-Pacific region.
2. Objectives:

• Promote free and open trade and investment
• promote and accelerate regional economic integration
• encourage economic and technical cooperation,
• enhance human security,
• facilitate a favourable and sustainable business environment

Member countries:

• The founding members of APEC were Australia; Brunei Darussalam; Canada; Indonesia; Japan; Korea; Malaysia; New Zealand; the Philippines; Singapore; Thailand; and the United States.
• China; Hong Kong, China; and Chinese Taipei joined APEC in 1991. Mexico and Papua New Guinea joined in 1993. Chile acceded in 1994. And in 1998, Peru; Russia; and Viet Nam joined.

Achievements of APEC

Growth and Development of the Region:

• As a result of APEC’s work, there has been a surge in growth in the region, with real GDP increasing from USD 19 trillion in 1989 to USD 42 trillion in 2015.
• Further, per capita income in the region rose by 74%

Promotion of regional economic integration and trade:

• The APEC removed trade barriers between members, harmonized standards and regulations, and streamlined customs procedures which have enabled goods to move more easily across borders.
• To improve behind-the-border barriers to trade, APEC has been working to foster transparency, competition and better functioning markets in the Asia-Pacific through regulatory reform, improving public sector and corporate governance, and strengthening the legal infrastructure
• Average tariffs fell from 17% in 1989 to 5.2% in 2012.
• APEC region’s total trade increased over seven times—outpacing the rest of the world with two-thirds of this trade occurring between member economies.

Ease of Doing Business:

• APEC launched its Ease of Doing Action Plan in 2009 with an aim of making it cheaper, easier and faster to do business in the region.
• Between 2009 and 2015, member countries improved ease of doing business in the Asia-Pacific by 14.8% across all areas of the initiative

Initiatives for a cleaner environment:

• APEC has been encouraging the development of clean technologies and greener growth across the region by lower tariffs on environmental goods.
• APEC has helped urban planners develop low-carbon model town plans for a series of cities throughout the Asia-Pacific. These cities are reducing their carbon footprint by adopting a set of carbon emission reduction targets and energy efficient initiatives from solar panels to electric vehicles.

Inclusive growth:

• APEC has launched a wide variety of initiatives that have helped foster SME development in the Asia-Pacific region. For example:
• In 2005, the APEC SME Innovation Center was established in Korea to help improve the competitiveness of SMEs in the region through hands-on business consulting.
• In 2013, The APEC Start-up Accelerator Network was launched to promote entrepreneurship and innovation by connecting technology start-ups with funding and mentors.

Issues and challenges

1. Trade War:APEC members have a conflicting aims and objectives towards world trade. Rising protectionism and US-China Trade war, threatens economic growth in the region. The 2018 APEC Summit, to produce a joint communique because of tensions between the US and China over trade and security issues.
2. Creation of Sub-Regional Agreements: Many APEC economies seek to reach sub-regional free trade agreements has a negative impact on the roles APEC was originally expected to play in the region. Scholars argue that the negotiations over Trans-Pacific Partnership and Regional Comprehensive Economic Partnership (RCEP) had further undercut the importance of APEC.

3. Free-Trade Areas: The FTA members do their trade and achieve their self –trade interest at the expense of the non-FTA members. Further, the FTA economies contradict with APEC initiatives.
4. Lack of implementation: Scholars argue that APEC members are more of proposes rather than implementers. Member countries hardly put their proposals into action because of economic indifferences
5. Development gaps: APEC has predominantly focussed on exclusive trade liberalization Ecotech which was created by APEC member economies to bridge the trade gap between Developing and developed countries have not yielded much positive results. Critics argue that development gaps between APEC countries have widened over the years.
6. Unclear goals and agenda: Over the years, APEC’s significance has been undermined by the fact that its agenda has been repeatedly changed, depending on the whims and interests of the country presiding over the summit. This has resulted in APEC facing crisis of identity and credibility
7. Non-Binding nature: Critics argue that APEC’s non-binding nature has allowed overlapping, and sometimes contradictory, economic and trade agreements to be negotiated.
8. Exclusion of India:The 6^th largest economy, India is not included in APEC. This undermines APEC’s efforts to expand trade and innovation throughout the region.

India and APEC

• For several years, India has aspired to become a member of the Asian-Pacific Economic Cooperation Organisation (APEC). However, India’s request for becoming a formal member of the group, first made in 1993 and then in 2007 is yet to be accepted.

Why has India not got membership of APEC?

In 1997, APEC put a moratorium on new memberships for a ten-year period, extending effectively till 2007.In 2007, APEC decided to extend the moratorium till 2010. However, even after the moratorium expired in 2010, it admitted no new members. The reasons cited for not including India are as follows:

1. India was denied APEC membership in 2007 on the ground that its economy was not integrated into the global system
2. lack of consensus on including any new member
3. fears of disrupting consensus procedures
4. extra-regional status of India: expanding westward to include India would cast APEC’s geographic net beyond the Pacific Rim.
5. large trade deficit of India
6. APEC members do not view India’s politics and policies as supportive of wide regional integration and wider trade options.

Advantages for India if it joins APEC:

1. Membership in APEC would allow India to negotiate trade, integrate with the global economy, and help boost growth
2. India willbenefit from investments inflows that are crucial for advancements in different sectors of the economy
3. APEC mechanisms and best practices will help Indian officials and businesses become more competitive and better prepared for the changing global economy.
4. Through its processes and guidelines, APEC will facilitate India’s implementation of the economic reforms it needs to compete

Advantages for APEC if India joins:

1. Including India in APEC would provide its members a mechanism to deepen their economic engagement with India and more easily partner with India in its economic growth.
2. APEC members would gain greater access to India’s growing market, robust labour supply, and ample investment opportunities
3. Further, India’s inclusion in APEC would help offset the overwhelming influence of the Chinese economy. It would also send a strong message to the region about increasing free and open trade at a time of rising protectionism.
4. Indian membership in APEC would increase opportunities for interaction and confidence-building between political leaders from these major countries in the region

Way Forward:

1. The APEC member countries should work together to ensure their collective and individual interests are best represented.
2. At a time of global and regional geopolitical uncertainty and domestic challenges, it is of paramount importance to craft solutions that are designed to promote sustainable and equitable growth and development according to the specific circumstances of the Asia-Pacific region.
3. With the rise of India as one of the global economic power and its changing regional economic and political influence, necessitates that India is included APEC. This would ensure a free and open trade and investment in the Indo-Pacific region and foster growth.