APEC marks 20th birthday but no free trade yet

AP News
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Posted: Nov 09, 2009 12:07 PM

It's been called A Place to Enjoy Coffee, and the less charitable Aging Politicians Enjoying Cocktails.

Derisive definitions of APEC, or Asia-Pacific Economic Cooperation forum, spring from its reputation as simply a chance for 21 leaders, including the U.S. president, to meet every year and make lofty but nonbinding promises to boost trade and investment within the region.

Familiar questions of APEC's relevance promise to crop up at the forum's annual summit Nov. 14-15, a meeting weighed down by economic crisis and the unfulfilled goal of free trade and investment among the group's developed members by 2010.

Unfazed, some APEC members are now talking about turning the group, which marks its 20th anniversary this year, into the world's largest free-trade area _ one that is home to about 40 percent of the world's population across four continents and generates about half of global trade.

Plus, a new study indicates that APEC might actually be more effective at promoting trade than previously thought.

Prime Minister Lee Hsien Loong of host Singapore said the organization should try to find "possible pathways toward the long-term vision" of a free-trade area in the Asia-Pacific.

"It will be a bumpy ride," he wrote in an invitation letter to other leaders. "We need to explore new growth paradigms and take our efforts to integrate the region to the next level.

APEC was never meant to be a round table for trade negotiations. It was merely a way to bring together leaders of industrialized and developing countries with a common commitment to free trade despite their differences.

The highly diverse APEC region ranges from the impoverished Papua New Guinea to the United States, the world's biggest economy at $13.8 trillion.

Still, there is evidence the forum may be instrumental in promoting free trade, despite its nonbinding nature, by giving leaders and senior officials a chance to meet and mingle.

According to a new analysis released Monday, APEC members trade with one another more than they do with nonmembers.

While the report did not try to determine whether APEC's membership was the main reason for the increased trade, the statistical analysis suggests that is the case, said Philip Gaetjens, director of the independent Policy Support Unit research group, which conducted the report.

The report, Gaetjens said, "shows that regional integration is strong and has prospered under a voluntary and nonbinding approach to enhancing trade."

Between 1989 and 2007, APEC's total exports increased from $1.2 trillion to $6.2 trillion, an annualized average growth rate of 9.5 percent compared to the world average of 8.9 percent.

The analysis also found that the share of exports and imports within the APEC region is marginally larger than comparable estimates for the European Union _ and much greater than those of the North American Free Trade Area or Southeast Asian trade area.

Even so, some APEC members, including Australia and Singapore, are pushing to turn APEC's commitment to free trade into a formal agreement.

The idea for an Asia-Pacific free-trade area was originally proposed during the group's summit in 2006.

Proponents say the proposed trading zone would bring together a hodgepodge of 42 free-trade agreements in the area _ many of them overlapping or duplicating _ under one roof and mean greater prosperity for regional economies.

But other countries are wary of moving away from a voluntary approach toward trade liberalization to a legally binding commitment. It would also be hard to smooth out and harmonize the many different, inconsistent provisions that already exist in certain trade agreements.

Smaller countries with emerging industries such as Malaysia and Thailand are not fully convinced and oppose binding commitments to trade.

At the same time, China's priority interest right now is an East Asia free-trade agreement, while agricultural liberalization remains a difficult domestic political issue for Japan, South Korea and the Philippines.

Whether or not the regional free-trade idea takes off, host Singapore has already pulled a coup of sorts by arranging the first ever summit _ on APEC's sidelines _ between a U.S. president and the 10 members of the Association of Southeast Asian Nations, which includes Myanmar.

President Barack Obama will sit at the same table with Myanmar Prime Minister Thein Sein at the meeting on Nov. 15, the highest-level contact between the two countries in decades.

Under Obama, Washington has reversed the Bush administration policy of shunning Myanmar in favor of direct talks with the Southeast Asian country that has been ruled by the military since 1962.

"There is a lot of hope clinging to the change that has taken place in the U.S., and Obama brings that hope to Asia at this summit," said Rebecca Fatima Sta Maria, a senior Malaysian trade official.

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Associated Press writer Alex Kennedy contributed to this report.