11 November, 2014
By S M Hali
China, which is hosting the Asia Pacific Economic Cooperation (APEC) summit after a gap of 13 years, has ventured to boost the tepid pace of economic growth in the region. APEC was established in 1989, a forum for 21 Pacific Rim member economies that seek to promote free trade and economic cooperation throughout the Asia Pacific region, meet the challenge of the growing interdependence of their economies and the advent of regional trade blocs in other parts of the world in the persisting gloom of the financial crisis. Three impediments hindered the expected progress of APEC.
First its composition of the wealthiest as well as the most impoverished countries with imbalanced economic structures contributed to an ad hoc arrangement instead of following a stringent trade understanding like the European Union (EU). Second, APEC has been seen as a forum with a basket of non-obligatory declarations, initiatives and roadmaps, and a regional arrangement born to be a compromise for economically unequal Pacific Rim members. Third, there already exist two major trade pacts in the region, the US-led Trans Pacific Partnership (TPP), which was unable to bear fruitful results since a significant player like China, the dominant economic and trading partner in Asia, was not a member. The other organisation, the Southeast Asia based Regional Comprehensive Economic Partnership (RCEP), did not achieve its full potential since it was devoid of the membership of another key member, the US, the world's largest economy and the leading recipient of goods made in Asia.
The APEC summit in Beijing has taken into account the shortcomings of the EU to avoid repeating them while it has also drawn lessons from the stalled Doha Round and taken concrete steps for fuelling the regional growth engine to create a pragmatic, innovative approach to cooperation. China's promotion of the Free Trade Area of the Asia Pacific (FTAAP) is a practical step towards integrating the TPP and RCEP and paving the way for China joining the TPP as an observer initially and later as a full member. The same standard is applicable to the US attending the RCEP as an observer initially and later attaining full membership.
As the chair of the APEC 2014, China's President Xi Jinping executed his responsibility with expediency. In his keynote address titled 'The Asia Pacific stands at a crossroads', delivered at the opening of the 2014 APEC CEO Summit, Xi took cognisance of the challenges ahead. He reminded the participants of the fragility of some of the economies, still recovering from the impact of the international financial crisis.
Xi reminded the leaders of the 21 member economies to channel attention towards next generation measures that advance regional economic integration, promote economic reform and innovative development, and strengthen infrastructure investment and comprehensive connectivity, stressing that inaction could leave the region and the entire global economy in a damaging state of flux. It must be recognised that instead of being a 'closed club' open only to executive access cardholders, APEC welcomes all its members irrespective of the strength or weakness of their economies to jointly build an open economy in the Asia Pacific. Openness, an essential criterion stressed by Xi, brings progress while closed policies lead to backwardness.
In order to ensure results from the APEC 2014 summit, the first ever strategic APEC connectivity blueprint on promoting global value chain development and cooperation, as well as a new APEC Accord on Innovative Development, Economic Reform and Growth to foster more sustainable, inclusive economies were tabled. Since most trade policies are applied only on the borders, either by tariff or non-tariff measures, another initiative by China on global value chains is expected to provide APEC members the capacity to monitor each link of the value chain to enlarge and improve them. Some other enterprises launched by China also triggered debate such as the Silk Road Economic Belt, the 21st Century Maritime Silk Road and establishing the Asian Infrastructure Investment Bank (AIIB).
Interestingly, the US expressed serious reservations regarding the AIIB, speculating that the AIIB might undercut the conditions and policies of existing multilateral development banks, such as the Asian Development Bank (ADB) and the World Bank, because a development bank should stick to high standards to ensure their projects' success and protect the interests of investors. On the contrary, the AIIB should not be perceived as a competitor, as it will be complementary to the ADB and the World Bank, and the AIIB can work in partnership with these institutions in joint financing, thus helping fund larger projects, sharing experiences and benefiting all.
It may be prudent for the US to consider joining the board of AIIB since the world's largest economy and a major player in Asia should logically be a primary shareholder of such an institution. By rebooting APEC, the development gap among its members will be narrowed, making the goal of deeper trade achievable.
The writer is a former Group Captain of PAF, who also served as air and naval attaché at Riyadh. Currently, he is a columnist, analyst and a television show host