A VISION FOR APEC: TOWARDS AN ASIA PACIFIC ECONOMIC COMMUNITY
November 1993

EXECUTIVE SUMMARY

1. At their Fourth Ministerial Meeting, in Bangkok in September 1992, APEC Ministers created an Eminent Persons Group to "enunciate a vision for trade in the Asia Pacific Region." This Report presents such a vision and recommends a series of actions to begin its realization. The Report is submitted unanimously by the eleven members of the Group. We convey it to APEC members with the hope that it will provide the foundation for the creation of a true Asia Pacific Economic Community, beginning at their Ministerial Meeting and Informal Leadership Conference in November 1993.

2. We recommend that APEC set a goal of free trade in the Asia Pacific to help realize the full economic potential of the region. To begin the process of achieving that goal, the members should promptly launch an ambitious but pragmatic and evolutionary trade facilitation program. In addition, technical cooperation among the members can help develop needed infrastructure and promote development in the less advanced parts of the region. Finally, a modest institutionalization of APEC is essential to facilitate and provide continuity for the process. This four part strategy can, over time, create a genuine Asia Pacific Economic Community.

3. Every member of the Asia Pacific region has a vital interest in the health and openness of the global economy and its institutions, notably the General Agreement on Tariffs and Trade (GATT). Our goal of "free trade in the Asia Pacific" should be pursued to the greatest extent possible through multilateral liberalization.

4. APEC should thus make every effort to achieve the successful conclusion of an ambitious Uruguay Round (UR) by the end of 1993. If the outcome is still uncertain at the time of the Seattle meetings, APEC should seek to break the deadlock by offering an additional package of liberalization and other proposals.

5. Many vital trade issues will remain unresolved even with a successful UR, however. Moreover, protectionism flourishes in the absence of continuing progress toward liberalization. Hence APEC should seek agreement in the GATT to launch another major global negotiation by the end of 1995. It should immediately initiate international consultations to begin planning that effort and urge GATT to create a Wise Persons Group to recommend a detailed strategy.

6. To the extent necessary to achieve the ultimate goal of free trade in the region, APEC should also pursue an active program of regional trade liberalization. All such efforts should proceed on a GATT-consistent basis and maximize their contribution to global openness. For example, APEC should seek regional agreement on proposals which had been considered in the GATT (e.g., during the UR) but could not yet be adopted there. It should offer to multilateralize, in future global negotiations, all steps taken at the regional level. The Asia Pacific Economic Community should seek to "ratchet up" the process of global trade liberalization.

7. We recommend that APEC members agree now to reach agreement in 1996 on a target date and timetable for the achievement of free trade in the region. It would be premature to set such schedules at this time: we do not yet know if the UR and subsequent GATT negotiations will revitalize the global trading system, it will take time to work out the agenda and modalities for the regional liberalization effort, APEC itself is still at an early stage of development, and the preparation of each member for participation in the process must be carefully assessed. But we believe that it is vital to set a date certain to make these fundamental decisions, to install an action-forcing timetable for implementing the vision that we recommend.

8. We recommend immediate commencement of an extensive series of APEC trade and investment facilitation programs. These programs would further enhance the prospects for trade and investment expansion, and hence rapid economic growth, in the region. In addition, their adoption would accelerate the process of active cooperation and institution-building among the members of APEC -- and hence help lay the foundation for achieving the ultimate goals of free trade in the region and creation of an Asia Pacific Economic Community.

9. One such measure should be the adoption of an Asia Pacific Investment Code, to reduce the uncertainties and transaction costs of investment (and related trade) in the region.

10. APEC should adopt an effective dispute settlement mechanism. Such a mechanism could be based on either the Draft Final Act of the UR (the "Dunkel text"), if it is not adopted there, or the relevant provisions of the Canada-United States Free Trade Agreement [CUSFTA] (which would be largely incorporated as well in the proposed North American Free Trade Agreement [NAFTA]).

11. APEC Ministers and officials responsible for macroeconomic and monetary policy should begin to meet regularly. Cooperation on these issues is essential to support trade liberalization and facilitation, and could help promote regional growth and external equilibrium.

12. Similar cooperative efforts should be pursued in such areas as competition policy, especially as it relates to antidumping issues, mutual recognition of product standards, mutually accepted testing and monitoring procedures for standards in key sectors such as telecommunications and aviation safety, environmental protection and rules of origin.

13. APEC's annual meetings should review, monitor and guide all aspects of this trade facilitation program and integrate it with pursuit of the ultimate goal of free trade in the region. The annual meetings should also review the progress of each of the subregional arrangements within APEC presently the Asean Free Trade Agreement [AFTA], The Australia New Zealand Closer Economic Relations Trade Agreement [ANZCERTA], the CUSFTA and potentially the NAFTA to assure their consistency with the overall process.

14. APEC should help generate region-wide support for the improvement of public infrastructure in such areas as higher education, transportation and telecommunications, and energy. Improved infrastructure will further improve the economic environment and speed the progress of the less advanced APEC members. The private/business sector should be encouraged to participate in developing most of this infrastructure and there is no need to create an "APEC fund" or other new financial institutions at this time.

15. APEC must develop its own institutional infrastructure to help implement the vision that we offer. Leaders should meet at least once every three years to review and guide the process. Ministers responsible for economic policy must meet frequently to do so in the interim. The Secretariat should be staffed with permanent officials and be headed by an effective official of ministerial rank, but remain small and achieve maximum efficiency -- in part by drawing on existing public and private organizations as extensively as possible. An effective decisionmaking process will have to be adopted.

16. Our Eminent Persons Group believes that the APEC members face an historic opportunity. The Asia Pacific is the most dynamic region of the world economy. It is likely to remain so over the coming decades. The end of the Cold War has opened new and unprecedented possibilities for international economic cooperation. The time has thus come to create an institutional framework that will help sustain rapid growth and development in the region, promoting its stability and security as well as its prosperity. We recommend that APEC members endorse our vision and launch the program proposed here to begin the process.