APEC: Challenges and Opportunities

By Harvey Dzodin

The Asia Pacific Economic Cooperation (APEC) summit this weekend in Danang, Vietnam promises to usher in a new era of economic partnership and synergistic cooperation of epic proportions marking a new milestone in the history of this voluntary consensus-driven organization founded in 1989.  It also reflects China’s intensified efforts to assume its place as a world leader as enunciated by President Xi Jinping in his speech to the World Economic Forum in January and his recent report to the 19th National Party Congress of the Communist Party of China. The wild cards at the meeting include the unpredictable US President Donald J. Trump, fresh off his visits to Japan, South Korea and China.

Chinese President Xi Jinping delivers a keynote speech at the 25th Asia-Pacific Economic Cooperation (APEC) CEO Summit in Da Nang, Vietnam, November 10, 2017. [Photo: Xinhua/Wang Hua]

APEC is a regional economic forum that leverages the growing interdependence and prolific economic growth of the Asia-Pacific. APEC’s 21 member states aim to create greater prosperity for the people of the region by promoting balanced, inclusive, sustainable, innovative and secure growth and by accelerating regional economic integration. APEC is clearly a force to be reckoned with. It includes less than half of global population, but accounts for more than half of global GDP.

APEC’s 2017 theme is “Creating New Dynamism, Fostering a Shared Future” and has four priorities: promoting sustainable, innovative and inclusive growth; deepening regional economic integration; strengthening micro, small and medium-sized enterprises’ competitiveness and innovation in the digital age; and enhancing food security and sustainable agriculture in response to climate change. It’s a tall order and could not be timelier.

Among troubling signs of increasing global protectionism and a selfish, inward focus as exemplified by Trump and Brexit, organizations like APEC will have to bear an even greater burden to make sure that the world trading regime remains open and free.

President Barack Obama invested significant political capital into the Trans-Pacific Partnership. President Trump killed it on his first day of office. It would have been the largest regional trade pact and set new terms for trade and business investment amongst the US and 11 Pacific Rim countries with about 40 percent of global GDP and one-third of world trade but excluded China.

APEC and its sister organization, the Association of Southeast Asian Nations (ASEAN) are trying to fill the void with the Regional Comprehensive Economic Partnership (RCEP). RCEP’s goal is to create the largest free trade area in the world and harmonize regional rules and regulations. This in turn would significantly reduce the cost of doing business in the region.

Once RCEP is established in the next few years, the next goal would be to broaden it towards greater regional economic integration through the Free Trade Agreement in the Asia-Pacific (FTAAP) that includes all 21 economies of APEC. Notably FTAAP currently is the only existing proposal that includes both the US and China.

To me, another important issue on the APEC agenda includes the development and standardization of the fast growing area of cross-border e-commerce, APEC is attempting to harmonize it within a facilitation framework.  Closely related is connectivity of national economies. This inevitably leads directly to China’s Belt & Road Initiative, which since being proposed by President Xi in 2013, is revolutionizing trade and transport on both land and sea in the region and beyond.

Clearly China will be assuming a larger role in this APEC summit and those that follow. President Xi has made clear his intentions to do so. And many countries in the region agree with his stance. A March survey of influentials in Southeast Asia found that around three-quarters of the respondents saw China, not the US, as the most influential player now and for the next decade. Two-thirds of respondents also viewed the US less favorably than before. 

Many of us are waiting with a mix of anticipation and dread of what thoughts are expressed by Presidents Trump. Trump is likely to bring his message of anti-globalization and “America First” to APEC.  According to his National Security Advisor, Trump wants to "ensure that governments do not unfairly subsidize their industries, discriminate against foreign business, or restrict foreign investment”. This makes China’s ability to fill the vacuum left by Trump all the easier. 

Albert Einstein once said that “'I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.” So we need to keep focused on the big picture. After all, if a solution to the nuclear situation in North Korea cannot be found, there isn’t much use in discussing economic development.

With that sobering thought in mind, it’s comforting to know that not all of APEC’s or any multilateral summit’s benefits are achieved during formal sessions. Much work takes place on the sidelines. So it is of particular note that the two leaders of China and South Korea will meet to try to resolve their recent differences. Equally important is the likelihood of a meeting between President Trump and President Vladimir Putin of Russia to also discuss the situation on the Korean Peninsula. For the sake of the world and all its people, we hope that these talks will lead to a step back from the precipice.

(Dr. Harvey Dzodin serves as Nonresident Research Fellow of the think tank Center for China and Globalization)