Text: APEC Promotes Sustainable Economic Growth in Asia-Pacific
(U.S. senior official for APEC at August 10 colloquium)The Asia-Pacific Economic Cooperation (APEC) forum has been more successful in making open trade and investment policies "part of the orthodoxy" of the Asia-Pacific region than has been generally recognized, according to Lawrence Greenwood, Jr., U.S. senior official for APEC.
Working with a small budget and staff, APEC often acts more quickly than organizations with closer ties to national trade ministries to promote free-trade policies within the Asia-Pacific region and to project its influence outside the region in forums such as the World Trade Organization (WTO), Greenwood said at a Global Business Dialogue colloquium held August 10 at the National Press Club in Washington D.C.
Greenwood told attendees at the colloquium "Pieces of the Puzzle: Trade Initiatives and Growth in Asia" that APEC now faces the challenge of translating its vision of economic cooperation into concrete action so Asia-Pacific economies will be able to take advantage of open markets and technological advances such as electronic commerce and express delivery systems.
APEC needs to continue serving as a "catalyst for economic cooperation" because some of its member economies are not keeping up with the world as a whole, according to Greenwood.
Greenwood said the United States hopes APEC economies can learn the value of open market procedures by studying what the United States has done right and what it has done wrong.
Since commitments in APEC are voluntary, members are "free to continue bad policies if they wish," Greenwood said.
However, he said, "it's getting harder and harder for the privileged few to continue to justify policies that benefit themselves at the expense of the prosperity of the entire population."
Following is the text of Greenwood's remarks, as prepared for delivery:
(begin text)
Pieces of the Regional Puzzle: Initiatives Affecting Growth in Asia
Global Business Dialogue
Presentation by U.S. APEC Senior Official Larry Greenwood
August 10, 2000I would like to talk about APEC's role in promoting sustainable economic growth in the region.
Before doing that, let me describe what APEC is and what it is not.
APEC is the world's first post Cold War, information age multilateral institution.
-- Set up as the Soviet Union was collapsing, APEC was part of an effort to create a new institution in the region that would anchor the U.S., both from the point of view of security and economic policy, firmly in Asia.
-- In the wake of the failure of communism as an economic policy, APEC aggressively promoted pro-growth, market-oriented, employment-generating policies. Trade and investment liberalization were among the key objectives of APEC from the beginning.
APEC as an institution differs significantly from the traditional multilateral institutions of the 40s and 50s, such as the UN agencies, the Bretton Woods institutions, and the WTO.
-- APEC has a small staff and a small budget (U.S. annual contribution is $601,000 a year).
-- It has an open architecture based on loose networks of officials rather than formalistic bureaucratic structures. Though loosely connected to Foreign and Trade Ministries, in fact no particular ministry owns or controls the APEC process.
-- APEC has a highly decentralized decision-making process and only general supervisory control by senior officials and ministers. The most important elements of the APEC process are the working level and the Leaders.
-- APEC is very open to outside ideas and influence from diverse sources. The private sector, labor and academia play a critically important role in APEC, generating ideas and implementation.
-- APEC is fast -- the e-commerce readiness initiative was drafted by the private sector, launched within APEC and endorsed by Leaders all within the space of about 12 months. A similar initiative in the UN would have taken years.
-- Commitments in APEC are voluntary. Unlike the WTO and other negotiating bodies, APEC doesn't normally negotiate trade agreements. APEC identifies best practices, but allows economies to continue to follow bad policies if they wish. What APEC tries to do is make clearer the costs of continuing to pursue those bad policies.
-- APEC is not a donor organization, but a catalyst for good policies and facilitator of programs to support those policies. That includes being a catalyst for substantial amounts of economic and technical cooperation, most of which is undertaken on a bilateral basis or through international financial institutions in the region.
Thus it is easy to see that APEC differs substantially from the traditional multilateral organizations, which tend to be big, expensive, highly structured, with strong bureaucracies, generally dominated by a single Ministry.
Many aspects of this -- APEC's character -- have been viewed as weaknesses; I think in this day and age where speed and flexibility are all-important, they are strengths.
APEC's Role in Promoting Growth
Let me turn now to APEC's role in promoting growth in the region.
APEC does this in two basic ways: by promoting good policies and facilitating cooperation within the region and by projecting APEC's influence outside the region.
The latter was evident in APEC's role in helping conclude the Uruguay Round and getting the WTO to agree to cut tariffs on information technology products.
Today APEC is continuing that role in its contribution to the early launch of the New WTO Round and work on a plurilateral aviation agreement that may be open to non-APEC members.
Let me focus more, however, on the first objective: promoting pro-growth policies within the region.
First, APEC has set a vision for the region: in 1994 Leaders of APEC economies committed to free and open trade and investment in the Asia-Pacific no later than 2010 for industrialized economies and 2020 for developing economies -- the so-called Bogor goals. The fact that Leaders met to make such a commitment was due to President Clinton's decision in 1993 to establish an annual meeting of APEC Economic Leaders, APEC's most important institution.
The next few years in APEC were devoted to setting up a plan of action and mechanisms to promote accelerated trade and investment liberalization in the APEC region. Those mechanisms ranged from endorsement of best practices, to commitments to principles, to concrete arrangements such as one for mutual recognition of standards. They covered sectors from energy to investment to the environment and labor. Today we face the much more difficult task of translating those principles into real concrete progress.
APEC also works to facilitate trade within the region by such things as harmonizing standards, streamlining customs procedures, and simplifying customs procedures.
Finally, APEC also acts as a catalyst for technical assistance to better equip APEC members to undertake trade and investment liberalization and benefit themselves from it.
APEC's Record
APEC has been far more successful in this effort than most give it credit for:
A recent PECC study shows significant progress to realizing the Bogor goals as barriers to trade, both tariffs and NTMs, have fallen throughout the region over the past ten years.
Studies also show that the market-oriented pro-growth policies espoused and promoted by APEC have led to real results. According to a recent study by the Australian government, over the past decade APEC as a region has grown faster, traded more, enjoyed greater inward foreign investment, created more jobs, and generated higher standards of living for its people than in non-APEC economies on average.
Growing trade played an important role in that success -- one study, for example, concluded that for every one percent point increase in the ratio of trade to GDP creates a 2-3 percent increase in income per person. By the way, the important number is not the ratio of exports to GDP, but total trade to GDP. In fact, the same study showed that open economies enjoy better export performance than closed economies -- an indictment of mercantilism that still maintains a surprisingly strong grip around the world.
APEC has played a vital role in making market-oriented, open trade and investment policies part of the orthodoxy of the region. A decade ago this was not the case, but today no one questions the benefits of open trade and investment, deregulated and competitive markets and strong efficient capital markets.
Translating that recognition into action is obviously much more difficult as it requires moving vested interests that benefit from the old regime. That is a political challenge that some APEC economies have been more successful than others in meeting. However, by exposing the costs of protecting vested interests, it is getting harder and harder for the privileged few to continue to justify policies which enrich themselves at the expense of the prosperity of the broader population.
There is an inevitable start-and-stop aspect to progress in this area. Currently, there are signs that special interests around the region, smarting from the reforms that came in the aftermath of the financial crisis, are digging in and slowing further reform efforts.
Indeed the annual international competitiveness index put out by the highly respected International Institute for Management Development in Switzerland shows a secular decline over the past five years for the 17 APEC economies covered in that survey vis-¡¦vis other economies in the world. This is a worrying trend.
New Economy
Not keeping pace with the rest of the world has special significance today in light of the new challenge posed by the realities of the new economy. Precise definitions are difficult in this area, but I would define "new economy" as the application of information technology to all areas of economic activity, resulting in new ways of doing old businesses. This phenomenon is probably the greatest source of productivity gains for the APEC region in the coming years.
APEC needs today to move quickly to better prepare its members for the new economy. That means in short:
-- Paying even more attention to market fundamentals, including trade and investment liberalization, deregulation, competition policy and the legal framework in which business is done.
-- Taking full advantage of electronic tools. Today most APEC economies have agreed to undertake an self-assessment using the E-commerce readiness guide which partners government with their private sectors to examine in a systematic way changes it needs to make to fully benefit from the potential of e-commerce. Governments must also move more quickly to make themselves e-governments, putting all government functions on line.
-- Web of connections: APEC economies must move to liberalize and remove between each other impediments to the development of e-commerce, starting from the first click of the mouse, to the delivery of a product at home or factory. This entails opening up air cargo services and express delivery services; it means liberalizing advertising and other professional services; it means simplifying and harmonizing customs procedures.
Conclusion
So how do the pieces of the puzzle of trade and investment liberalization fit together?
First, there is the WTO and the global trading system. Since world trade liberalization is one of the most important engines of growth for all our economies, this must continue to be our highest priority.
In Asia, APEC promotes, but does not negotiate, free trade and investment, by (1) convincing its members, through deed and word, that protectionism is foolhardy and (2) setting up cooperative programs to lower the transaction costs of trade.
Regional free trade arrangements are another way to generate trade and growth and, if done properly, can be used as building blocks for a stronger multilateral trading system.
At the bottom of this pyramid are market forces, the most powerful force for trade and investment liberalization. Market forces include the decisions of businesses, workers and consumers, domestic and foreign, that every day reward good actions and policies and penalize bad. Those forces translate in the political arena as the constant struggle between those who want more economic opportunity and those who would use government's power to cling to their privileged position.
Given the growing importance of the region to our own economic prosperity, it is very important we put the pieces of this puzzle together properly. I'm proud to be part of this important work and pleased that you all have taken so much time to hear my colleagues and me talk about it this morning. Thank you.
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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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