Crossroads (Toward Philippine economic and social progress)
Philippine Star, 18 November 2015


The Asia Pacific Economic Cooperation (APEC) summit meeting in Manila puts the country on the international map this week.

APEC as an organization.  The APEC as an organization was established in 1989. It has 21 member countries.

APEC’s mission is “to build a dynamic and harmonious Asia-Pacific community by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and facilitating a favorable and sustainable business environment”.

It is backed up by active official support of academic and research centers that are strategically located across the region.

Among these are prominent economic centers and think-tanks located in the United States, in Japan, in Australia. Our own PIDS (Philippine Institute of Development Studies) is among these institutions.

Global networks for discussion and decision-making. The APEC is essentially a “discussion group”, a group making “suggestions” on what to do to advance international economic integration.

Summit meetings of the leaders’ of APEC enhance the stakes for discussions to political levels. It is possible for summit leaders to shake up the emphasis on issues for future attention and discussion.

Will this happen in Manila’s APEC Summit?

Action institutions within APEC are plentiful. The world’s most openly trading countries are members of APEC. The US, Japan, and China are the big three countries when measured in GDP and in volume of trade in goods and invisibles. Flows of payments and investments with all the member countries and each member with the others are rising as economies grow.

Among the APEC members, there are countries that are involved in activities through action groups and institutions they have created. These sub-groupings are separate and distinct from each other.

For instance, the Asean is a grouping of 11 countries (all members of APEC individually) that are also actively promoting their separate interests. As a group, Asean also undertakes separate dialogues of a bilateral nature with each of these countries and other countries such as Australia-New Zealand.

Other countries are also members of separate groupings and bilateral trade arrangements with other countries.

The United States has its own networks of free trade agreements (FTAs). It is a part of the NAFTA (North American Free Trade Agreement), along with Canada and Mexico as members. Moreover, it has separate bilateral free trade agreements with Australia, South Korea, and Singapore.

Most recently, the US and 11 other individual members of APEC, have signed an agreement to put in place the Trans-Pacific Partnership (TPP), which is a far larger trading group in the region (discussed further, below).

For their respective parts, China, Japan and South Korea have also been engaged in promoting their respective FTAs. (Japan and the Philippines have a bilateral FTA.)

China, for its part, is trying to set up a mega-trade regional trade agreement known as Regional Comprehensive Economic Partnership (RCEP) which is designed to rival the TPP.

What is APEC’s reason for being? APEC is a discussion group – a “suggestions club” – while TPP, Asean, or NAFTA are relevant examples of outcomes of discussion groups which are themselves “action institutions.” Some of these institutions were created even before APEC was organized, but others are a consequence of APEC.

TPP, specifically, is an action group – the result of a trade treaty involving a smaller subset of APEC countries. The nuances of particular aspects of this trade agreement were studied, analysed and debated among potential stakeholders that belong to the APEC.

In due time, a widening of acceptance of TPP would depend on actions the individual countries themselves would have to decide, unless a better arrangement or alternative action institution is created.

Thus, transformational creations of new “institutions” that are committed to action and enforcement of agreed rules” have resulted from  “discussion groups.”

The process is not necessarily quick and easy. It took so many decades of discussions, meetings and breakup group meetings for countries to realize that certain principles of trade relations to improve global trade could be agreed upon.

In fact, the creation of the WTO (World Trade Organization), which was founded in 1994, is one major result. And even in this case, not all of those that are members of the new organization agree on all the issues. As a result, there is much that needs to be done. There is room for new ways of advancing.

Past history is a reminder how difficult is the process. In the first instance, at the birth of the post-World War II international institutions under the United Nations, the International Trade Organization (ITO) failed because the US decided not to join. What came out in substitution was a weaker form, the General Agreement on Tariffs and Trade (GATT).

It would take decades of discussions and negotiations and a long line of untoward country experiences for the rules of international trade to reach the state in which we are now, with WTO in charge of the new rules.

The advance toward this route traces back to the Kennedy Round of multilateral tariff negotiations (1960s), then the Tokyo Round (1970s), and then the Uruguay Round (1980s) to closure when WTO was agreed upon and founded.

The progress in these rounds of negotiations was supported by many discussion groups in various corners of the world, that eventually formulated the solution.

Yet, as we find the world today, there are still many disagreements, many perceived inequities and disadvantages that need correction. Such standing issues are accompanied by barriers and regulations that stifle trade and progress. And many sectors of potential trade in goods and services still need to be clarified and agreed upon.

Philippine hopes and expectations from APEC.  Philippine hosting of this year’s APEC summit highlights the policies we need to change to gain from an open international trading system.

This calls attention to the reforms we need to take to make domestic industries more open to trade and to competition.