Why APEC still matters —more than ever

Author: Peter Drysdale, ANU

The online APEC economic leaders meeting chaired by New Zealand Prime Minister Jacinda Ardern over the weekend underlines just why APEC still matters.

In this year’s APEC agenda New Zealand sought to build agreement on economic and trade policies to strengthen the COVID-19 recovery, increasing its inclusivity and sustainability and enhancing the role of innovation in a digitally enabled recovery.

The goals set at the 2020 summit in Malaysia have been given a harder edge with members committing to detailed reviews of progress towards implementation by 2040.

There was practical progress on elimination of tariffs and restrictions on trade in COVID medicines, support for a temporary waiver on intellectual property on COVID-19 vaccines and on the digitalization of trade clearance procedures.

In the wake of the Glasgow COP26 Summit, major achievements were agreements by the 21 APEC economies for a standstill on fossil fuel subsidies by 2022, on stronger targets for renewable energy by 2030, and to remove trade restrictions on an additional list of environmental goods and services.

Another big achievement was to get behind ‘re-stabilising’ the World Trade Organization (WTO) and outcomes on trade reform (including agricultural subsidies and fisheries). APEC has been crucial in defending multilateral principles in trade as the United States walked away from them under former President Donald Trump and sought to emasculate the WTO. APEC members stood firm against Trump at the Vietnam APEC Summit in 2017. Auckland is an important step in bringing the Biden administration back into the fold, though it still plays by Trump managed-trade rules with China and in its settlement on steel and aluminium with Europe.

The post-war global economic order that has shaped relationships between the United States and Asia — and underpinned the prosperity and security of Asia — is under strain. Small and middle powers like New Zealand and Australia rely on the multilateral order as much as they do their alliance relationship with the United States as a pillar in national security, anchoring their integration into the dynamic regional Asian economy.

The structure of global power has changed dramatically. This change was in large part wrought by the success of the post-war order itself, as Asia (in particular, China) joined the global trading system to achieve rapid economic growth. The rise of China, with its new economic heft and political clout, is no longer seen within the United States and elsewhere as a cause for celebration but is instead a wellspring of disquiet. The stoush between the United States and China, and China’s coercive trade tactics, have done serious damage to confidence in the global trade regime. These pressures have intensified sharply through the COVID-19 pandemic and its impact on great power tensions and the global economy.

So the background to APEC’s achievements in New Zealand is a continuing, hard-ball game between the major players in the great struggles over how the world should be run today. The protagonists are structured into APEC’s membership, as are China and Chinese Taipei (Taiwan). Throw in China’s and Taiwan’s applications this year to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), for which New Zealand now has coordinating responsibility, for the additional diplomatic toxicity that had to be managed this year.

Therein lies APEC’s great value.

The United States and China both have skin in the APEC game. The setting in which they must deal is multilateral, and their dealings are on full display to all other 19 members. APEC is not a negotiating forum that delivers formal inter-state agreements or has legal supra-national authority. It gives equal voice to, and requires consensus among, all its members, large, small and middling. It is no accident that the Biden-Xi summit follows hard on the heels of APEC.

APEC’s now entrenched cooperation processes build familiarity and engage officials as well as business. Its membership provides an ideal platform for dialogues on complex and difficult issues, exploring their solutions and shaping strategies for separate negotiation. The architecture of regional cooperation and engagement through APEC has been deliberately framed to complement and strengthen the rules-based global order, not to serve as a substitute for it. On occasion it has done that in exemplary fashion, for example, through trade reform on technology and environmental goods.

Preserving the core principles and rules of the global trading, investment and finance system is now a strategic priority. A retreat from multilateral rules will unravel economic and political arrangements globally, and Asia will be particularly hit hard because of the intense nature and structure of its regional interdependencies.

The global trade rules are outdated and cover a smaller proportion of global commerce each year. Rules are needed for trade in services, investment and the digital economy, and disciplines are needed on subsidies to fisheries, agriculture and industry. Upgrading rules where there are substantial gaps, like in those governing the digital economy, is also a priority. APEC serves to mobilise political capital around a package for comprehensive reform of the WTO, as well as steering the region through the COVID-19 recovery and following through on climate change and sustainable development.

In a world that has changed so vastly, the big challenges today are to work through what’s important in the global economic order, what is broken and what needs to be done to fix it, as well as how to fill the gaps that have appeared because the rules have not kept up with blindsiding, rapid change.

That’s core APEC business and New Zealand’s host year attests that, at this time of global upheaval and uncertainty, it matters more than ever.

Peter Drysdale is Emeritus Professor, Editor-in-Chief of East Asia Forum and Head of the East Asian Bureau in the Crawford School of Public Policy at The Australian National University in Canberra. He is widely acknowledged as the intellectual architect of APEC.

The post Why APEC still matters —more than ever first appeared on East Asia Forum.

from East Asia Forum