Chapter 28 - APEC §

Class: IS308 Created Time: August 3, 2021 8:50 PM Database: Class Notes Database Last Edited Time: September 6, 2021 8:39 PM Type: Lecture, Reading Notes

ORIGIN AND EVOLUTION OF APEC

• Why did Japan promote regional economic cooperation since the 1960s?
• Why was US reluctant to promote economic cooperation during Cold War?
• Why was APEC created in 1989? Was it coincident?

ROLES OF APEC IN REGIONAL ECONOMIC COOPERATION

• Why was APEC inclusive and open?
• What are pillars of APEC? Have APEC economies achieved those pillars? Why?
  1. Trade and investment liberalization to seek to reduce barriers to trade and investment.
  2. Business facilitation to reduce various ‘behind the border’ costs that trade and investment face
  3. Economic and technical cooperation to enhance the capacity of APEC member economies
  • After having more and more members, large number of members produces more difficulties. The first is the increasing member makes agreement more complex. Second, is the gap between members. Some members felt APEC should be a Pacific Rim organization, on the other hand, some felt that APEC should be a primarily an East Asian grouping. One might have expected this may have prevented expansion, but instead those keen on an East Asian focus for regional collaboration, by encouraging a broader membership APEC would become ineffective and thus lead East Asian members to turn to a narrower grouping. Expansion not only made the development of APEC’s work much more difficult, it also diluted the organization’s focus and showed the political tensions among the membership.

RELEVANCY OF APEC TO ECONOMIC COOPERATION (STRENGTHS AND WEAKNESSES)

There are three strengths of the APEC

• Improve communication across the membership and, through this, to help make states realize the character of their common interests as well as to regularize communication lines so as to reduce the asymmetries of information that can lead to poor policy choices. More broadly, regular communication provides opportunities to manage crises when they emerge and, while they may not resolve them, can help contain more damaging effects.
• the annual leaders’ summits provide a key reason for maintaining significant interest among all the members, and also present a unique opportunity to undertake statecraft in a highly efficient way. Moreover, the meeting will consist of heads of China, the US, Russia, Japan and Indonesia that consider as the big players in term of economic which will provide opportunities for all members to discuss and negotiate in order to maximize their interests.
• act as a bridge between state efforts to promote economic globalization and market-led forms of integration: APEC, through its formal links to the business sector is mindful of the need to link state and market processes. The one area in which most commentators feel that APEC has made a positive contribution is in the area of trade facilitation that is, in the reduction of the transaction costs associated with international trade.

There are 5 weaknesses in APEC.

1. Voluntarism was crucial to policy failure, as demonstrated with the trade liberalization program, which led to political disengagement and broader question about institutional credibility. Trade liberalization’s political economy necessitates mutual payoffs, which voluntarism shuts it off.
2. Commonly noted weakness relates to an important aspect of organizational design. Because APEC constrain the political potential of the secretariat and there is not enough funding, the secretariat is utterly ill-equipped to act effectively.
3. There is the absence of leadership. The decision to ensure the organization to be firmly intergovernmental, which was intended to protect members from an activist EU-style bureaucracy, limits the institution from providing leadership. The organization is dependent on its members driving the organization forward. The leaders’ summits, which was set up to maintain the interest of the institution and harness aspects of leadership, are actually dragged by domestic interests of the host.
   1. There is too much diversity, which caused a considerable burden.
      1. Different economic levels. Members includes some of the world’s wealthiest societies, such as Singapore, as well as some of the poorest, such as Vietnam => Difficulty in finding common interests, and common ground
      2. Different political systems. APEC includes liberal democracies, communist dictatorships, military dictatorships, sham democracies and even an absolutist monarchy in the Sultanate of Brunei => Difficulty in political contact, information exchange, basic administrative capacity
   2. The other problem related to membership remains the broader question of just what region APEC is actually supposed to be serving.
      1. The scale, reach, and diversity of APEC can be difficult in collaborating to achieve APEC aims (economic cooperation, free trade, investment, political cooperation), given the huge gap between former members (developed – US, SGP, etc.) and news members (developing – Vietnam, Papua New Guinea, etc.)
      2. The involvement of Russia, China, and America surely must carry weight
      3. Russia and China have different political systems – communist dictatorship, military dictatorship, comparing to former members.
      4. This political diversity creates non-transparency among members (former and later) such as information exchange, lower level of contact, basic administrative capacity of the members