APEC's Kuala Lumpur Meetings, 1998: Major Outcomes and Australia's Interests


Current Issues Brief 5 1998-99

Dr Frank Frost
Foreign Affairs, Defence and Trade Group
8 December 1998

Contents

Introduction

APEC since 1989

APEC's 1998 Meetings: Key Issues

Introduction

The Asia Pacific Economic Cooperation forum held its tenth annual series of meetings in Kuala Lumpur from 14-18 November. The meetings brought together the 21 members of the forum (with Russia, Peru and Vietnam attending for the first time) for a series of meetings of the members' senior ministers and heads of government. APEC's 1998 agenda included meetings of the APEC Business Advisory Council (ABAC), the Ministerial Meeting (14-15 November) and the informal leaders meeting (17-18 November).

The 1998 meetings were held under the shadow of the Asian financial crisis which has affected a number of APEC's members since mid-1997. While there have been some positive signs in late 1998, a number of states are experiencing severe problems, including South Korea, Thailand, Malaysia, and most seriously of all, Indonesia, which has been facing both an economic crisis (with GDP expected to decline by about 15 per cent in 1998) and a difficult political transition in the post-Suharto era. In this situation, in the lead up to the 1998 meetings, much attention was directed towards how APEC might be able to contribute to both short and longer term responses to the damage the crisis is continuing to impose. For Australia, which played a central role in initiating APEC and hosted its first meeting in 1989, the 1998 meetings were an opportunity to make an input into APEC's response to the regional crisis.

This paper provides a brief review of APEC's 1998 meetings, the major outcomes, Australia's interests, and APEC's position as it approaches its tenth anniversary.

Membership of APEC

Australia, Brunei Darussalam, Canada, Chile, People's Republic of China, Hong Kong-SAR, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei (Taiwan), Thailand, the United States and Vietnam

APEC since 1989

APEC was established to help liberalise flows of trade and investment in the Asia Pacific and to foster communication and a sense of shared community among the diverse economies of the region. After years of debate on the need for cooperation in the Asia Pacific, APEC was inaugurated in January 1989 at the initiative of Prime Minister Hawke and the first meeting of 12 economies was held in Canberra in November 1989.(1) In 1991 at APEC's third meeting in Seoul, the Republic of Korea was able to negotiate the entry of China, Hong Kong and Taiwan, making APEC distinctive as the only major multi-lateral forum to include the 'three Chinas'. In 1993 Mexico and Papua-New Guinea joined and Chile joined in November 1994. The acceptance of Russia, Peru and Vietnam has brought the membership to its present level of 21.

APEC has been seeking to establish a character and role different from those of other regional and international groupings concerned with economic and trade cooperation. Unlike the European Union it has not been conceived as a preferential free trade area and has no ambitions to establish elaborate supranational institutions. Unlike ASEAN, APEC is seeking to bring together both developing and industrialised states of widely varying size in both Asia and the Americas on the 'Pacific rim'. APEC is also distinct from the World Trade Organisation (WTO) in that it does not have the charter to pursue formal trade negotiations on a global basis.

APEC's basic principles were agreed at the first ministerial meeting in 1989, particularly that:

  • The objective of APEC is to sustain growth and development in the region to contribute to improving living standards and also to contribute to the growth of the world economy;
  • APEC should seek to strengthen an open multilateral trading system and not to be directed towards creation of a regional trading bloc;
  • APEC should focus on economic rather than political or security issues, to advance common interests and foster constructive interdependence by encouraging the flow of goods, services, capital and technology.

Since 1989, APEC has developed substantially but has sought to keep its activities flexible and minimise the development of a bureaucracy. APEC has been directed primarily by the annual ministerial meetings, of which the Kuala Lumpur meetings were the tenth. Following a suggestion by Prime Minister Keating in 1992, the APEC heads of government initiated in Seattle in November 1993 what has become a series of annual meetings, adding greatly to APEC's profile. APEC's ongoing activities are overseen by the Senior Officials meetings process, supported by a small secretariat in Singapore. APEC's major technical work is carried out by a series of working groups and by the Committee on Trade and Investment (CTI) which is the main forum within APEC for pursuing the liberalisation and expansion of trade and investment flows in the Asia Pacific region. The Committee has been pursuing work in a wide range of areas to help secure APEC's aims to both facilitate and liberalise trade and investment (for a summary of APEC's committees and working groups see Appendix A).

The APEC heads of government at their second meeting, in Bogor in November 1994, adopted as their goal the achievement of free and open trade and investment among their members by 2020 (with the developed economies reaching this target by 2010 and the less-developed members by 2020). This commitment was to be supported by a 'standstill' under which APEC members would not adopt any measures that would increase existing levels of protection, and continuing efforts to facilitate trade and investment by harmonising and simplifying customs procedures, standards and other regulations. The Bogor commitments are being pursued through 'individual action plans' by which members volunteer programs of liberalisation. These have been developed and reviewed since the Osaka meetings in 1995.

APEC's Initial Response to the Asian Financial Crisis

APEC was established in an environment in which the Asia Pacific economies were enjoying a remarkable pattern of rapid growth. This growth was accompanied by a widespread process of unilateral liberalisation by many APEC members: APEC's efforts towards trade liberalisation and facilitation were thus adding weight to trends already underway (for details on progress in the reduction of tariff levels among APEC members see Table 1). The onset of the Asian financial crisis from mid 1997, however, has created a new environment with which APEC has had to try to deal.

Table: Tariff Reductions in the APEC Region

 

Simple Average Applied Tariff

 

1988

1993

1997

Australia (*)

15.6

7.0

5.3

Brunei

3.9

3.9

2.0

Canada (*)

3.7

2.4

1.3^

Chile

19.9

11

11

China

39.5

37.5

17

Hong Kong

0

0

0

Indonesia

18.1

17

11.7

Japan (*)

4.3

3.4

4.6

Korea

19.2

11.6

7.9^

Malaysia

13.6

12.8

7.8^

Mexico (*)

10.5

12.6

9.8^

New Zealand

14.9

8.5

5.2

PNG

na

na

23^

Philippines

27.9

23.5

12.1

Singapore

0.3

0.4

0

Chinese Taipei

12.6

8.9

8.6

Thailand

31.2

37.8

17

United States (*)

4.2

4.2

3.4^

Note: Does not include calculation of non-ad valorum tariffs.

* Indicates trade-weighted advantage.

^ 1996 data.

Data source: Manilla Action Plan for APEC; Individual Action Plans, various (1997).

Table from: Department of Foreign Affairs and Trade, APEC Kuala Lumpur Meetings: Overview, November 1998.

As Professor Ross Garnaut (Australian National University) has recently pointed out, the 'Asian' financial crisis has not affected all major Asian economies equally, and in fact the two largest economies-China and India-have not so far suffered an economic downturn. However, from mid-1997 a number of East Asian countries have experienced severe problems, as a rapid loss of confidence among foreign investors precipitated sharp declines in currency values, major capital outflows, acute damage to companies and financial institutions, unemployment and increased poverty levels. As Garnaut has observed, 'The contraction of activity has deepened progressively since mid 1997, and is now the worst decline for many decades in Malaysia, Thailand, Korea and Japan, and the worst over a comparably short period ever in Indonesia'.(2) Falling economic activity and currency depreciations have led since 1997 to large reductions in imports in one country after another, cumulatively producing an implosion of intra-regional trade and an intensification of contractionary pressures. Garnaut warned that the Great Depression was transmitted from economy to economy through reduction of trade, driven by declining economic activity. While the analogy with the Depression of the 1930s is not precise, '...the transmission of contractionary tendencies in other economies through the implosion of import trade that was so damaging to the world as a whole in the years from 1929 has had parallels in the Western Pacific in 1998'.(3)

The financial crisis has posed severe challenges, not only for national governments, but for the regional associations they have formed in recent years to assist their growth and security. APEC has not found it easy to develop a credible and relevant response.

In the months after mid-1997, APEC governments contributed to IMF 'rescue packages' to support the foreign exchange reserves of economies whose currencies had come under challenge. While many APEC governments stressed the need to adhere to the IMF's programs, they were not able to act collectively to try to ensure that IMF programs were relevant to the economic conditions in East Asia. Meetings of APEC Finance Ministers were useful in providing opportunities for affected countries to exchange views and information and APEC launched some modest initiatives to try to ease the costs of the crisis. However, in the period before the 1998 meetings APEC was not able to take more active steps on what have been seen as major aspects of the crisis: for example, it was not able to initiate significant economic and technical cooperation to help member economies strengthen the management and structure of their financial sectors.(4)

In the lead up to the 1998 meetings there was also evidence of disagreement among member countries and observers on the relevance of APEC's major agenda so far-trade and investment liberalisation-to the requirements of the financial crisis. Indonesia's Foreign Minister Ali Alatas, for example, stated in late October 1998 that APEC should adjust to the reality of the region's economic troubles by shifting the focus of the Kuala Lumpur summit from trade reform to finding ways of overcoming the recession and the side effects of huge and sudden swings in capital flows: he commented, 'How can we talk about liberalisation without also realising that the economies are in severe crisis'.(5) This emphasis is also understood to have been supported by members including Japan, China and Malaysia.

Other members argued that the agreed APEC agenda for liberalisation (including the Early Voluntary Sectoral Liberalisation-EVSL-program agreed to at Vancouver in November 1997-see Page 7) should be maintained. The US Deputy Trade Representative Richard Fisher said in late October that the key emphasis in Kuala Lumpur must be the 'commitment made by all the member nations at the last summit to voluntarily liberalise the tariff regimes affecting nine major sectors of the economy', a view which was supported by members including Australia, Hong Kong, Singapore, and South Korea.(6)

APEC's 1998 Meetings: Key Issues

Even before APEC met, the 1998 meetings were widely seen as likely to be difficult and possibly fractious. In addition to the problems over differing attitudes towards the EVSL proposals, Malaysia's role as chairman and host nation was seen as potentially posing some challenges. APEC does not have an extensive standing administrative structure or a very large secretariat and the role and input of the chairmanship (which rotates annually) is particularly important. In 1993, for example, President Clinton had taken the initiative to establish the informal leaders' meeting, while in 1994, President Suharto's leadership was seen as important in helping to secure the adoption of the Bogor Declaration. In contrast to some other East Asian members (such as Singapore or South Korea) Malaysia has often been seen as one of the comparatively less intensely committed APEC members, and one which has stressed the importance of keeping the forum as a consultative and voluntary association which does not set any precise or binding goals for its members.(7) Prime Minister Mahathir Mohamed, in addition, has championed the concept of an alternative model for cooperation in the 'East Asian Economic Caucus', a grouping which would gather together exclusively countries from East Asia and not include those from the Americas, or Australia or New Zealand. The extent of Malaysia's long term commitment to the advancement of a high profile role for APEC was therefore an issue of some uncertainty: Dr Mahathir had in fact told the Australian writer Greg Sheridan in an interview in 1993 that, 'We have been very wary about APEC, simply because there have been so many powerful members who dominate it'.(8)

In 1998, in addition, Malaysia was experiencing a substantial internal political controversy over the arrest and trial of former Deputy Prime Minister Anwar Ibrahim, developments which had attracted criticism internally and externally. While APEC's focus is intended to be explicitly on economic cooperation issues, the Kuala Lumpur meetings were, to an unusual degree for APEC, accompanied by some contentious discussions on political issues.

Political Disharmony

Anwar Ibrahim was dismissed from his position as Deputy Prime Minister on 2 September 1998 and arrested on 20 September on charges of corruption and sodomy. Anwar's trial was initiated on 2 November but was suspended for the duration of the APEC meetings. The arrest and trial of Anwar has attracted widespread criticism both within and outside Malaysia. As a result of the Anwar case, some controversy was injected into the APEC meetings from the start. The United States and Canada declared that their heads of government would not hold the customary bilateral meetings with the leader of the host nation, Prime Minister Mahathir Mohamed. Moreover US Secretary of State Albright, Canada's Foreign Minister Lloyd Axworthy and Trade Minister Sergio Marchi, and Philippines President Estrada met publicly with Anwar's wife, Wan Azizah.

The Australian Government chose to handle the issue differently to the US and Canada. Australia's Foreign Minister Downer held a meeting with Wan Azizah, but in private. This was disclosed later by Prime Minister Howard, after he had held a bilateral meeting with Prime Minister Mahathir. In a comment before he left Kuala Lumpur, Mr Howard stated that he considered he had 'got the balance right' on these issues:

There's an Australian national interest in having a good relationship between Australia and Malaysia. Now, I think I got the balance right. Nobody in the region, least of all Dr Mahathir, is in any doubt as to what I think and the concerns I have because I told him, and I told him in the Australian way and that is to his face.(9)

Additional controversy arose after a speech on 16 November by US Vice President Al Gore. Vice President Gore was attending the meetings in place of President Clinton, who withdrew shortly before the meetings were due to begin because of the pressures of policy in relation to Iraq. During his speech, Vice President Gore linked economic recovery in Asia to advancement in democracy and governmental transparency. Gore stated: 'Among countries suffering economic crisis, we continue to hear calls for democracy in many languages, 'people power', 'doi moi', 'reformasi'. We hear them today-right here, right now-among the brave people of Malaysia'.(10) Malaysian ministers reacted highly negatively to the speech: Trade Minister Rafidah Aziz called it 'disgusting' and Foreign Minister Badawi said that the US was 'trying to serve its own narrow political agenda'. Philippines President Estrada publicly supported the comments but other APEC senior ministers and leaders were either unsympathetic or reserved about what was termed 'megaphone diplomacy'. Gore's comments also received a cool response from some leading Malaysian commentators and opposition figures who expressed concern that the comments might be utilised to assert that protests in Malaysia are 'foreign-directed'.(11)

Prime Minister Mahathir himself downplayed the issue of Vice President Gore's comments, but the exchanges of opinion over Gore's speech added a note of contention to the context of the APEC meetings.(12)

Trade Issues and 'Early Voluntary Sectoral Liberalisation'>

Trade liberalisation is at the heart of APEC's agenda. The 1998 meetings reviewed APEC's progress towards this goal and recommitted the members to the goals set out in the Bogor Declaration. APEC, however, experienced difficulties in reaching agreement on the program of enhanced progress towards liberalisation which it had set for itself at its last round of meetings in Vancouver in 1997.

At the November 1997 Vancouver APEC meetings, the members had sought to add pace and impetus to their commitment towards trade liberalisation by identifying 15 sectors in which liberalisation could be sought at a schedule in advance of the Bogor targets of 2010 and 2020. Nine sectors were to be pursued first: chemicals, energy, environmental goods and services, fish and fish products, forest products, gems and jewellery, medical equipment and instruments, telecommunications mutual recognition arrangements, and toys. Six other sectors were also identified and it was suggested that these might be considered by APEC leaders in 1998: automotive products, civil aircraft, fertilisers, food, natural and synthetic rubber, oilseeds and oilseed products (for a summary of the EVSL proposals see Appendix B). The EVSL involved a wide range of trade enhancing measures including market opening (through the liberalisation of tariff and non-tariff barriers), trade facilitation (such as the harmonisation of product standards), economic and technical cooperation (such as training of customs officials), and liberalisation of trade in services (in the energy and environment sectors).

The EVSL proposals were adopted in 1997 before the impact of the Asian financial crisis had become fully apparent to APEC members. As has been noted above, in the lead-up to the 1998 meetings reservations about the desirability of pursuing the program as specified began to arise. APEC had been able to make good progress in seven out of the nine specified sectors. However, Japan had strong objections to the proposals in two politically-sensitive sectors, forestry and fishing, and was not prepared to agree to these elements of the EVSL proposals. Faced with this opposition, APEC ministers agreed to a compromise in which sixteen of APEC's members would pursue the EVSL package in the World Trade Organisation.(13) US officials were reported to have expressed the hope that a global accord covering all nine sectors could be reached in 1999. However Japanese officials were reported to have said privately that the nine sectors would need to be part of another round of comprehensive trade negotiations, one that is due to start in the year 2000 but may well last for several years.(14)

While Japan was identified as the main obstacle to reaching agreement on EVSL, discussions during the APEC meetings indicated that the US's own support for the process was qualified. The US Special Trade Representative Charlene Barshefsky, in a press conference on 15 November 1998, said that the US administration had always held the view that agreement on EVSL by APEC would be a useful catalyst, but that wider agreement was needed for the measures (particularly by Europe) in order for sufficient 'critical mass' to be achieved if the measures were going to receive US endorsement. Ms Barshefsky noted that the US cannot legally unilaterally cut US tariffs, that binding agreements on measures like EVSL are needed in order for the US to endorse them, and that the WTO is the appropriate avenue to achieve such agreements.(15) These comments suggested that even if Japan had agreed to all nine EVSL provisions, the US would still have sought wider endorsement through the WTO.

The decision to refer the EVSL program to the WTO has inevitably been seen as a setback for APEC in that it was not able to maintain support for a set of proposals it had itself nominated as important.

The Regional Financial Crisis and Domestic and International Financial Reform

A major question in 1998 was whether APEC could develop some concerted approaches towards alleviating the regional financial crisis which has so badly affected some of its members. Before the meetings, a number of suggestions were advanced by private sector groups and think tanks. The Panel of Independent Experts, led by Professor Fred Bergsten (Institute for International Economics, Washington) advanced a proposal called the Concerted Asian Recovery Program, which recommended that APEC members take action to boost demand by cooperating to cut interest rates and boost domestic demand.(16) Other analysts suggested that APEC could play an important role in taking a leadership position on ways in which the international financial system could be reformed. APEC might also be able to take a leadership role in mobilising support for the provision of funds to support restructuring of companies and financial institutions in the region which have been devastated by high levels of bad debts: the G 7 group was reported in October 1998 to be trying to develop a plan to deal with this issue, and it was considered that APEC could contribute to these efforts.(17) In the event, APEC did take a number of useful steps, while not necessarily meeting all the wishes and expectations of its supporters and advisers.

After their two days of discussions on 17-18 November, APEC's leaders issued a declaration in which they resolved to pursue a cooperative growth strategy to hasten recovery.(18) The statement outlined measures to ease the burden of debt on companies and banks, strengthen financial systems, revive investment and growth, and cushion the impact of recession on millions of people, especially the poor. However, the statement did not seek to set precisely delineated goals or set out a detailed strategy on how these aims might be achieved and funded.

The APEC leaders' major recommendations included:

  • On the issue of proposals for reform of the international financial system, the leaders declared that they welcome the work undertaken in several fora to strengthen the international financial system. They took note of proposals made to improve transparency and accountability, to strengthen national financial systems, and to improve co-ordination and involvement of the private sector in the prevention and orderly resolution of international financial crises. The leaders recommended that this work should be continued by a forum such as an expanded G 22.(19)
  • In relation to national financial systems, the leaders called for the adoption by member economies of international best practice principles for the supervision of banking systems and securities markets, including the Basic Principles of Effective Banking Supervision and the International Organisation of Securities Commission standards. In this context, the leaders welcomed Australia's Economic and Financial Management Initiative, which provides $A50 million over a three year period to help APEC economies take practical measures to strengthen their economic and financial management. Examples include training of central bank officials and technical assistance for prudential supervision programs (for further details see Appendix C).
  • Agreement was reached on the need to set up a task force to examine transparency and exposure standards amongst private sector financial institutions involved in international capital flows, including investment banks, hedge funds, and other institutional investors. It was argued that the task force should examine the operations of leveraged offshore institutions, as well as the need for strengthened prudential regulation of financial institutions in industrialised economies, in order to promote secure and sustainable capital flows.
  • A second task force was agreed on to examine the issue of crisis management, including orderly debt workout arrangements for the private sector.
  • The leaders called for a review of the activities of international credit rating agencies, which in recent months have been the focus of strong criticism in East Asia for their downgrading of corporate and sovereign debt. Such downgrades have raised significantly the costs of raising funds for companies and governments in the region.
  • The leaders endorsed the need for increased social safety nets: they supported greater flexibility in IMF assistance programs and welcomed the increase in social sector lending by the World Bank and the Asian Development Bank.
  • The APEC leaders welcomed two initiatives made by individual APEC members to assist in the recovery of the region's economies. The first is a commitment made by Japan in September 1998 to provide $US 30 billion as an aid package for East Asia. The package aims to provide short term financial support for Asian economies, enhance their access to capital markets and help stabilise currencies. The second initiative is a commitment by the US and Japan to provide $US 10 billion (announced during the APEC meetings) to recapitalise East Asian banks and help them dispose of non-performing loans, as well as aiding distressed companies in Indonesia and elsewhere which are burdened by large domestic and foreign currency debts. The US-Japan proposal would need to be pursued in cooperation with the World Bank and the ADB and many details have yet to be arranged. However these two initiatives together did constitute a substantial concrete offer of assistance to the task of restoring viability and confidence to the financial systems of the APEC members affected adversely by the Asian financial crisis and was therefore possibly the most important single issue considered and endorsed by the 1998 meetings.

Economic and Technical Cooperation

Economic and technical cooperation has been an important part of APEC's focus from its early years. This area of cooperation, often called 'ecotech' in APEC discussions, has been seen as especially important in the context of the regional financial crisis, when skilled personnel are needed to implement policies to restore investor confidence and secure renewed growth.

To promote this area, the APEC leaders endorsed the Kuala Lumpur Action Programme on Skills Development. The Programme seeks to 'contribute towards sustainable growth and equitable development while reducing economic disparities and improving the social well-being of the people, through skills upgrading/improvement'. The Programme also aims to gain participation in funding through the business sector where possible. 'Smart partnerships' between the public and private sectors will also be encouraged, along with development of an APEC network of skills development centres.(20)

Electronic Commerce

A further area of cooperation in 1998 was electronic commerce. Under the APEC Blueprint for Action on Electronic Commerce, government and business cooperation will be expanded to help facilitate expansion of this area of trade among the culturally diverse APEC economies. In particular, the Blueprint calls for government-business cooperation on the development of communication infrastructure, effective industry self-regulation, and encouraging consumer confidence, including by providing appropriate protection for consumers.

Australia, APEC and Kuala Lumpur

Since APEC's inauguration in 1989, Australia has seen the forum as a way of advancing key economic and some wider political interests, both in the Asia Pacific and globally. Over the past decade Australia's exports to APEC economies have grown at an annualised rate of 8.5 per cent, compared with 6.7 per cent for the rest of the world. 73.2 per cent of Australia's exports now go APEC members, up from 69.9 per cent a decade ago. Some two-thirds of Australia's services exports, which are of increasing importance for Australia's overall trade, go to APEC economies. Just over half of Australia's stock of inward and outward investment is sourced from or located in APEC countries.(21)

The financial crisis in Asia has clearly affected growth rates and intra-regional trade adversely. However despite the developing impact of this crisis, Australia's exports to East Asia for 1997-98 still increased by 5.5 per cent over 1996-97 (to a value of $47.2 billion). Although exports to the most seriously affected economies (including Indonesia, South Korea and Thailand) declined significantly in 1997-98, exports to some other countries in East Asia in fact increased substantially (to China, Hong Kong, Chinese Taipei, Japan and Vietnam).

From the Australian Government's perspective, the slowing of growth in a number of regional economies makes progress in liberalisation of trade even more important. Hence APEC's potential to add to progress in liberalisation makes it very important for Australia's interests. A recent Department of Foreign Affairs and Trade briefing on APEC argued that:

Implementation of the Bogor Declaration will result in significant improvements in access for Australian exporters and investors. Within the region tariff barriers on many products of interest to us, including agricultural products and manufactured products are often extremely high. Non-tariff barriers (NTBs) are prevalent in the region and a significant impediment for Australian exporters. Reports from Australian business-about quotas, product regulations and packaging standards, lengthy and expensive product registration and quarantine inspection procedures-are consistent with PECC's finding that some 13 per cent of tariff lines of APEC economies are affected by NTBs. There are major barriers to services trade and investment, which in some cases, prevent Australian firms from servicing local markets except as minority shareholders in local firms.(22)

Australia can gain from liberalisation in a number of ways: from increased growth driven by advantages flowing from lower trade barriers, through improved market access, through improved transparency of trade and investment regimes, and from lower transaction costs in doing business (ranging from simpler business visas to faster processing of shipping). For all these reasons, Australia has supported APEC's cooperative efforts towards liberalisation and facilitation of trade and investment.

APEC has been designed to focus on economic and not political or security issues. Nonetheless, successive Australian governments have seen major advantages in the development of a forum which includes China along with Hong Kong and Chinese Taipei, and the two largest economies in the Asia Pacific, the US and Japan. The annual leaders' meetings provide a unique opportunity for Asia Pacific leaders to hold discussions-even if they do not always agree-and the APEC meetings also provide the venue for many bilateral discussions which otherwise might either be more difficult to organise or which might not otherwise occur at all.

This combination of economic, political and strategic issues makes APEC of substantial importance for Australia's foreign policy and trade interests.

For the 1998 Kuala Lumpur meetings the Australian Government hoped to see continued progress made with APEC's agenda for trade liberalisation, especially through the EVSL. Australia also sought to advance the idea that recovery would be facilitated through improvements in APEC governments' standards of economic and financial management. APEC, it was hoped, could also help galvanise efforts through the G 7 and G 22 and other forums to promote the reform of the international financial system.(23)

In the event, the Australian Government was disappointed with the decision to pass the EVSL program to the WTO; Prime Minister Howard described this as 'second best from an APEC point of view'.(24) The Government however saw a number of positive outcomes from the meetings. The Minister for Foreign Affairs, Alexander Downer, said in Parliament on 24 November that the APEC leaders had agreed to a number of proposals advanced by Australia:

The first was to reaffirm the commitment to APEC's free trade and investment goals for free trade and investment by 2010 and 2020. The second was to adopt national policies to promote economic growth. The third was to endorse best practice international codes in transparency and financial sector management. The fourth was to endorse a future role for the G 22, of which Australia is a member, in pursuing initiatives to strengthen the international financial system. The fifth was to establish a working group on private sector involvement in crisis management, which Australia has offered to chair.(25)

Mr Downer also expressed satisfaction at progress on several other areas, including the Individual Action Plans, the endorsement of a blueprint on electronic commerce, cooperation on the 'year 2000' problem, and on APEC's endorsement of an Australian initiative to improve community awareness of the benefits of open markets. He also emphasised the political importance of the leaders' meetings as a venue for discussion of regional and global issues.(26)

Conclusion

APEC experienced considerable difficulties at its 1998 meetings. The non-attendance at the leaders' meeting by President Clinton (his second absence since he initiated these meetings in 1993) was a disappointment. It also quite possibly had a significant impact on the tone of the meetings, since it seems unlikely that the President would have delivered exactly the same kind of speech which the Vice President presented on 16 November. The discord over Gore's speech clearly was not in the spirit of Asia Pacific community-building which APEC aspires to foster. APEC's inability to agree on further immediate progress in the EVSL process which it had set out for itself just a year ago was a setback for the substance and image of APEC cooperation. In relation to the regional financial crisis, while APEC endorsed a number of important principles and initiated some useful processes of research, it was not itself able to place its own 'stamp' on any substantial proposals.

However APEC's Kuala Lumpur meetings can nonetheless be seen to have offered more evidence of progress than some observers have suggested. In spite of the obvious difficulties, the leaders of the member economies were able to reinforce a consensus on a recovery strategy based on market forces, domestic financial reform, the return of private capital flows, trade liberalisation and stronger economic governance. The meetings also reinforced a wide range of economic and technical cooperation programs which will gain added value if private sector participation can be increased in line with the aims of the Kuala Lumpur Programme on Skills Development. The commitment of funds by Japan and by the US and Japan jointly-while not specifically an 'APEC initiative'-were given heightened prominence by the meetings and are an important step forward for the Asia Pacific region. The $US 40 billion which was committed may only constitute about 20 per cent of the total funds needed for restructuring and debt alleviation, but the funds are nonetheless an important contribution to support those countries committed to reform and restructuring of their financial systems.(27) Moreover, the 1998 meetings took some additional useful initiatives, particularly by deciding to pursue agreed goals in relation to electronic commerce, in endorsing the Australian proposal for improved economic governance and in committing the members to develop human resources and enhance the base of skills among the members.

APEC clearly should not be assessed solely on the basis of one set of unusually difficult meetings. APEC is valued by its members, not least because of the unique opportunity for dialogue that its annual leaders'meetings offer a region which has very few cooperative institutions at governmental level. APEC, however, was developed in a climate of rapid and widespread growth in the Asia Pacific region. In the current climate of economic problems and uncertainty APEC faces some significant challenges about its identity and direction. In 1998 APEC's trade liberalisation agenda has encountered problems and its major recent set of proposals (EVSL) has been referred to the WTO. APEC made some useful commitments about international financial reform, but it is recognised that the appropriate forum to deliberate on these issues is the G 22 or a variant of it. An important question for APEC-as it approaches its second decade as a regional group and its next series of meetings in Auckland in September 1999-is whether it can make a distinct contribution towards the new task of promoting and supporting recovery and renewed growth. In a paper delivered on 7 October 1998, shortly before the Kuala Lumpur meetings, Dr Andrew Elek summed up the ongoing challenge for APEC:

The perception that APEC has been a mere bystander as this drama has unfolded, is a serious blow to the credibility and cohesiveness of the process. The financial crisis has clarified both the limitations and the potential of APEC; it has become evident that effective cooperation cannot be based on trade and investment liberalisation and facilitation alone. Whatever is achieved in terms of trade and investment liberalisation and facilitation, including early voluntary sectoral liberalisation in 1998, APEC will not be seen as credible and relevant to the region unless it can also play a part in restoring short-term market confidence and to set the stage for building more robust financial sectors for the future.(28)

Endnotes

  1. The twelve original participants were Australia, Brunei Darussalam, Canada, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, The Philippines, Singapore, Thailand and the United States.

  2. Ross Garnaut, 'The Way out of the Western Pacific Crisis', Address to Australia Japan Business Co-operation Committee, Melbourne, 19 October 1998, p. 2.

  3. Ibid., p. 3.

  4. Forging New Partnerships: Economic and Technical Cooperation and the APEC Process, Brisbane, Foundation for Development Cooperation, Brisbane, 1998, p. 10.

  5. Michael Richardson, 'APEC's free trade push in jeopardy', The Australian, 27 October 1998.

  6. Ibid.

  7. For example, in November 1995 Malaysia's Minister for Trade and Industry, Rafidah Aziz, said, 'We do not want APEC to be a negotiating process. No way will we allow the APEC process to trading partners to start negotiating trade-offs to liberalisation or even to have negotiations on tariff cuts and demand reciprocity for example. APEC should be an agenda everybody can subscribe to, not an agenda that belongs to a select group' ('Malaysia supports Mahathir on APEC', The Weekend Australian, 4 November 1995).

  8. Greg Sheridan, Tigers: Leaders of the New Asia Pacific, Sydney, Allen and Unwin, 1997, p. 199.

  9. Ross Peake, 'Fischer swipe at Gore "play for cameras" ', Canberra Times, 20 November 1998.

  10. Keith B. Richburg and Paul Blustein, 'Gore's remarks in Malaysia stir dispute', The Washington Post, 18 November 1998.

  11. Chen May Yee, 'US support makes anti-Mahathir movement uneasy', Asian Wall Street Journal, 18 November 1998.

  12. Thomas Fuller, 'Foes of Mahathir see US misstep', International Herald Tribune, 19 November 1998.

  13. The five members not participating in the EVSL process are the three new members Peru, Russia and Vietnam (who only joined at the time of the Kuala Lumpur meetings) and Chile and Mexico.

  14. Michael Richardson, 'Economic turmoil means lower expectations for APEC', International Herald Tribune , 20 November 1998.

  15. 'USTR Barshefsky briefing on APEC ministerial outcomes', 15 November 1998, p. 4.

  16. Paul Kelly, 'Blueprint to rescue Asia', The Australian, 21 October 1998.

  17. Michael Dwyer and Tony Boyd, 'Corporate debt rescue for Asia', Australian Financial Review, 26 October 1998.

  18. APEC Economic Leaders' Declaration, Kuala Lumpur, Malaysia, 18 November 1998.

  19. The 'G 22' refers to a meeting of Finance Ministers and Central Bank Governors first convened by the US in April 1998. The aims of the meeting were to examine issues relating to the stability of the international financial system and the efficient operation of capital markets. The meeting was attended by both the US and Australia, along with Argentina, Brazil, Canada, China, France, Germany, Hong Kong-SAR, India, Indonesia, Italy, Japan, Korea, Malaysia. Mexico, Poland, Russia, Singapore, South Africa, Thailand and the United Kingdom. Three working groups were established to take the work of the meeting forward, in the areas of transparency and accountability, strengthening financial systems, and managing international financial crises. Australia has participated directly in the first and third working groups.

  20. 'Kuala Lumpur Programme on Skills Development (Attachment to the APEC Economic Leaders' Declaration, 18 November 198).

  21. The following paragraphs draw from Department of Foreign Affairs and Trade, APEC Kuala Lumpur Meetings: Overview, November 1998.

  22. Ibid., p. 7.

  23. Prime Minister John Howard, Hansard, 12 November 1998, p. 303.

  24. Peter Alford, 'APEC backs reform plan', The Australian, 19 November 1998.

  25. Minister for Foreign Affairs Alexander Downer, Hansard, 24 November 1998, p. 441.

  26. Ibid.

  27. These comments are based on a discussion with Dr Andrew Elek, 1 December 1998.

  28. Andrew Elek, 'ECOTECH at the Heart of APEC: Economic and technical cooperation for financial sector recovery, and the facilitation and liberalisation of trade and investment in the Asia Pacific', Presentation to an international conference on APEC liberalisation and the

Appendix A: Asia-Pacific Economic Cooperation-Organisation and Process

APEC - Asia-Pacific Economic Cooperation

Organization and Process

 

APEC operates by consensus. In 1991, members committed themselves to conducting their activities and work programs on the basis of open dialogue with equal respect for the views of all participants.

Ministerial and Senior Officials Meetings  

The APEC Chair, which rotates annually among members, is responsible for hosting the annual ministerial meeting of foreign and economic ministers. At the 1989 Canberra Ministerial Meeting, it was agreed that it would be appropriate that every alternate ministerial meeting be held in an ASEAN economy. Senior Officials Meetings (SOM) are held regularly prior to every ministerial meeting. APEC senior officials make recommendations to the Ministers and carry out their decisions. They oversee and coordinate, with approval from Ministers, the budgets and work programs of the APEC Fora. APEC member economies have hosted a number of other ministerial meetings for Ministers of education, energy, environment and sustainable development, finance, human resources development, regional science and technology cooperation, small and medium enterprises, telecommunications and information industry, trade, and transportation. APEC operates by consensus. In 1991, members committed themselves to conducting their activities and work programs on the basis of open dialogue with equal respect for the views of all participants.

Advisory Groups

 

APEC Business Advisory Council  

In November 1995 in Osaka, APEC Economic Leaders established a permanent business advisory council, composed of up to three senior business people from each member economy, to provide advice on implementation of APEC action plans and on other specific business sector priorities. ABAC has published two reports on the theme of "APEC Means Business," in 1996 and 1997, providing a number of specific recommendations for improving regional business conditions and expanding trade and investment. In 1998 ABAC is focusing on proposals to alleviate the regional financial crisis by restoring confidence in private sector of affected economies, and providing views on APEC's initiative for early voluntary sectoral liberalization. ABAC is also providing business advice for improving APEC action plans, measures to support SMEs, development of electronic commerce, enhancing public-private collaboration in APEC's economic and technical cooperation activities, and achieving freer trade in food. ABAC members will meet again with APEC Ministers and Economic Leaders in November.  In its first report in November 1996, APEC means business: Building prosperity for our community, ABAC recommended the removal of impediments to cross-border flows of goods, capital and business people, enhanced protection for foreign investors, expanded private investment in infrastructure projects, an improved environment for small and medium-sized enterprises, and private sector participation in economic and technical cooperation. The Council's 1997 report, APEC Means Business, ABAC's Call to Action, further developed these recommendations, gave suggestions for making APEC action plans more relevant to business people, and proposed a new private sector-led Partnership for Equitable Growth (PEG) to expand business involvement in ecotech activities. APEC Economic Leaders have welcomed ABAC's recommendations, many of which have been adopted. In 1998 ABAC has focused on the need for action to address the regional financial crisis, realize APEC's initiative for early voluntary sectoral trade liberalization, promote electronic commerce, support SMEs, and achieve what ABAC calls the APEC Food System. ABAC has provided advice to Ministers throughout the year on these issues and also worked to establish the PEG as a viable new organization. ABAC members meet again with Economic Leaders in November 1998 in Kuala Lumpur.  ABAC was preceded by the Pacific Business Forum (PBF), which Economic Leaders set up in 1993 "to identify issues APEC should address to facilitate regional trade and investment and encourage the further development of business networks throughout the region." The PBF prepared two reports for Leaders. In 1992, APEC ministers set up an independent, non-governmental Eminent Persons Group (EPG) to develop a vision for the region and make recommendations for achieving it. The EPG published three reports before disbanding in 1995.

APEC Fora  

At each year's Ministerial Meeting, members define and fund work programs for APEC's three committees, ad hoc policy level group, ten working groups and other APEC fora.

 

The Committee on Trade and Investment (CTI). In 1993, APEC Ministers adopted a Declaration on a Trade and Investment Framework to increase economic activity and facilitate the flow of goods and services among member economies. Based on the Declaration, Ministers formed the CTI. The committee aims to create an APEC perspective on trade and investment issues and to pursue liberalization and facilitation initiatives. The CTI is responsible to senior officials for coordinating APEC's work on trade and investment liberalization and facilitation. It implements the liberalization and facilitation components of the Osaka Action Agenda, including work on Tariffs, Non-tariff Measures, Services, Deregulation, Dispute Mediation, Uruguay Round implementation, Investment, Customs Procedures, Standards and Conformance, Mobility of Business People, Intellectual Property Rights, Competition Policy, Government Procurement and Rules of Origin. The CTI also has a key role in APEC's development of initiatives for early voluntary sectoral liberalization. The current CTI chair is the Philippines. The Economic Committee (EC) was established by APEC Ministers in November 1994. The Committee analyzes economic trends and cross-cutting issues in support of APEC's trade and investment liberalization and facilitation and economic and technical cooperation agendas. The Committee's current research includes the information society, cost and productivity trends, intra-regional migration, and trade and environment linkages. The Committee's annual economic outlook in 1998 will focus on the regional financial crisis and the role of science and technology in regional growth and development. Through its Infrastructure Workshop, the Committee facilitates private infrastructure investment by encouraging best practices and a more predictable and transparent investment environment. The Committee is also addressing the impact of expanding population and economic growth on food, energy and the environment, including the Task Force on Food. The current EC Chair is Canada. The Budget and Administrative Committee (BAC) advises APEC senior officials on budgetary, administrative and managerial issues. It assesses and makes recommendations on the budget structure, considers budget requests, drafts the annual APEC budget and examines all questions relating to the APEC budget and budgetary process. In addition, it is empowered by the senior officials to monitor and evaluate the operations and overall performance of working groups and make recommendations to the Senior Officials' Meeting for improved efficiency and effectiveness. The BAC holds two regular meetings each year. In 1998, Hong Kong, China chairs the BAC. The SOM Sub-committee on Economic and Technical Cooperation (ESC) was established in 1998 to assist the SOM in coordinating and managing APEC's ECOTECH agenda, as well as identifying value-added initiatives for cooperative action. The main objective of the SOM Sub-Committee is to advance more effective implementation of the APEC's ECOTECH agenda by consulting with and integrating the efforts of various APEC fora through a results-oriented, outcomes-based approach which benefits all member economies; providing a policy management tool for strengthening and streamlining APEC's work; and providing guidance on possible actions which could be undertaken to achieve APEC ECOTECH goals. These goals are: to attain sustainable growth and equitable development in the Asia-Pacific region; to reduce economic disparities among APEC economies; to improve the economic and social well-being of the people; and to deepen the spirit of community in the Asia-Pacific.  The Ad Hoc Policy Level Group on Small and Medium Enterprises (PLGSME), established in 1995, oversees activities for SMEs across all APEC groups. There is a consensus in APEC that free trade and economic globalization have implications, challenges, and opportunities for SMEs. Since 1995, the group has organized workshops. In 1996, the workshop authorized Chinese Taipei to publish the APEC Directory of Support Organizations for Small and Medium Enterprises. As part of its action program, five major priorities are identified for the development of SMEs: human resources development, information access, technology and technology sharing, financing, and market access. The SME Ministers in 1977 endorsed it 1997 Framework for APEC SME Activities and a Guide to SMEs. Other meetings held in conjunction with the Ministerial meeting were: 1997 Business Forum, Youth Entrepreneurs and the Women Leaders Network. The fifth Ministerial Meeting will be held in Kuala Lumpur in September 1998. The Energy Working Group commenced in 1990 and has responsibility for the development of the energy component of APEC Action Agenda. Major aims of the Group over the next few years will be: to enhance regional energy security by addressing the policy implications of the issues identified in the APEC Energy Demand and Supply Outlook produced by the Asia Pacific Energy Research Center and by improving the operation of the fuel supply market for the power sector; to develop and implement a program of work aimed at promoting the adoption of environmentally sound energy infrastructure and investment in natural gas supplies, infrastructure and trading networks; to develop guidelines aimed at improving energy efficiencies; and to develop proposals for establishing a basis on which mutual acceptance of accredited test facilities and standard test results obtained at these facilities can be achieved. A Third meeting of Energy Ministers will be held in Japan in October 1998. The Fisheries Working Group, established in 1991, aims to maximize the economic benefits and sustainability of fisheries resources for all APEC members. Its work complements and contributes to the work of other international and regional fisheries organizations in the Pacific and has related to compliance issues and coordination based on member economy inspection systems, standards, and other requirements aimed at improved seafood inspection regimes in APEC member economies. Since 1996, the working group has been conducting a four-year study of fisheries sector trade and investment liberalization in the areas of tariffs, non-tariff measures, investment measures, and subsidies. The first part of the study on tariffs was completed in 1997 and the second part on non-tariff measures will be completed in 1998. In 1997, the group also began implementation of a project entitled "APEC Markets for Airshipped Live and Fresh Food Fish" and conducted a workshop addressing destructive fishing techniques with a focus on cyanide fishing in an effort to conserve natural resources and protect the marine environment. In 1998, the group will hold the first APEC Aquaculture Forum to discuss sustainable long-term development of aquaculture in the APEC region. The group has also commissioned a study on the economic analysis on tariffs in the fisheries sector which will be completed in 1998. In addition the group will be supporting EVSL in Fish and Fish Products by implementing some of the ECOTECH measures developed under the EVSL Initiative.

 

The Human Resources Development Working Group, through its various networks, will implement about 38 projects in 1998 addressing its eight point Medium Term Strategic Priorities and responding to various Leaders and Ministers directives. Foremost among them will be the Symposium in June on The Social Impact of the Financial and Economic Crisis, that is intended to generate recommendations on possible short tem responses to the crisis, and on how to address the long term and preventive aspect of these issues. Projects range from cooperation in higher education to development of standards and training in vocational and technical teaching and include arrangements for accreditation, recognition and development of professional engineering qualifications. Labor market information and analysis, lifelong learning and SMEs will also be at the top of the agenda of the working group. Private/business sector inputs are expected to be generated through the establishment of the APEC Chief Human Resources Officers Network, an APEC-wide network of senior executives who are responsible for human resources management in their organizations. The Second APEC HRD Ministerial Meeting in Seoul in September 1997 stressed the need for the working group to focus activities on school-to-work transition, skills development and the participation of labor and management in APEC HRD activities. The Industrial Science and Technology Working Group, set up in 1990, has recently updated its Action Program, to focus on harnessing technology for the future. It has six priorities: improved availability of information; improved human resources development; improved business climate; contribution to sustainable development; enhanced policy dialogue and review; and facilitation of networks and partnership. The WG has conducted various kinds of activities and projects to help achieve the APEC goal of sustainable development. It is making its best efforts to contribute to formulating an APEC Agenda for Science and Technology Industry Cooperation into the 21st Century. It is also supporting the preparation for the 3rd APEC Ministers Conference on Regional Science and Technology Cooperation, to be held in October 1998, the main theme of which is Partnership and Networks: Capturing the Benefits of Innovation across APEC. It developed a Cleaner Production Strategy in 1997, and an APEC action plan for infectious diseases in early 1998. It also conducted several other projects that include: establishment of the APEC Virtual Center for Environmental Technology Exchange (Japan); Inaugural meeting for Science and Technology Industry Parks Network (China); International Molecular Biology Network for the APEC Region (Korea); establishment of APEC Centre for Technology Foresight (Thailand); 2nd APEC Technomart (Chinese Taipei); and Experts' Meeting on Gender and Science and Technology. IT is going to hold an APEC Youth Science Festival (Korea) and the 2nd Meeting of APEC Network of Science and Technology Parks (Australia). The Marine Resource Conservation Working Group promotes initiatives within APEC to protect the marine environment and its resources. The APEC Action Plan for Sustainability of the Marine Environment guides regional efforts on: promoting integrated approaches to coastal management: prevention, reduction and control of marine pollution; and sustainable development. In addressing these, the WG promotes research, exchange of information, technology and expertise. It also seeks strategic opportunities for capacity building, training and education. In the long term, APEC recognizes the success in sustaining socio-economic benefits from marine resources depends on private sector participation and partnership with the public sector. The Telecommunications Working Group was formed in 1990 to address human resource development, technology transfer and regional cooperation, opportunities for on-site visits observerships/fellowships, and telecommunications standardization. The 1995 Seoul Declaration on an Asia Pacific Infrastructure Information (APII), adopted at the first APEC Ministerial Meeting on Telecommunications and Information, contains ten core principles aimed at facilitating trade and investment. In 1996, the working group set up steering groups for Liberalization, Business Facilitation, Development Cooperation, and Human Resource Development. These four subgroups are developing a telecommunications action plan and a series of collective actions for trade and investment liberalization in the sector in areas such as conformance to the Guidelines for Trade in International Value Added Network Services (IVANS) and finalization by 1997 of a model mutual recognition arrangement for trade in telecommunications equipment. The Second Ministerial Meeting took place in September 1996. Ministers adopted the Gold Coast Declaration containing a Program for Action to guide further the APEC activities in the sector. They also recognized a Reference List of Elements of a Fully Liberalized Telecommunication Sector - adopted by the working group - as representing elements expected to be present in each economy by or before the 2010/2020 Bogor timetable. The 3rd Ministerial Meeting will take place in June 1998. On the table for discussion is a APEC Mutual Recognition Arrangement (MRA) to be implemented in June 1999. The Working Group focused on electronic commerce by organizing a seminar in March 1998, with the participation of the private/business sector. The Tourism Working Group plans to achieve long-term environmental and social sustainability of the tourism industry and its economic impact, through human resources development, an enlarged role for the business/private sector in policy formulation, removing barriers to tourism movements and investment by liberalizing trade in services associated with tourism, and using tourism as a means to achieve sustainable economic development and mutual understanding among APEC member economies. It has also studied tourism and environment issues to highlight the diversity of circumstances and best practices among APEC economies between tourism growth, and the natural and cultural environments. The group has published a learning package covering key tourism management and marketing issues for tourism public administrators. It is studying impediments to tourism growth in the region as a step towards identifying challenges to be addressed in building an efficient infrastructure sector that would benefit the development of the tourism sector. The working group, which already benefits from the participation, as guests, the World Tourism Organization, the Pacific Asia Travel Association and the World Travel Tourism Council, is building links with the business/private sector aiming to work together on the Group's activities. The Trade and Investment Data Review Working Group started in 1990. The working group has concentrated on improving the comparability of published data on merchandise trade and has started work on trade in services and international investment data among member economies in order to minimize the discrepancies in merchandise and services trade statistics and investment flows data. The working group began developing the APEC Trade and Investment Data database called TIDDB, initially with merchandise trade data and then with services trade and international investment data. In the process of developing its own databases, the working group has reviewed the international trade data holdings of other international organizations to avoid duplication. The working group has completed the establishment of the TIDDB system , the server of which is now installed in the APEC Secretariat. The working group has run workshops to provide experts with the technical expertise they need for the current projects. The working group is producing a publication on the TIDDB in 1998 to promote greater public knowledge and understanding of the TIDDB. The Trade Promotion Working Group. Trade promotion has been for APEC a significant area for regional economic cooperation. The group has held ten meetings since it first met in Seoul in June 1990. Its work centers on trade promotion activities, trade financing, trade skills and training, trade information and networking, and cooperation between the business/private sector and public agencies, including trade promotion organizations. The working group has provided the business community with information through APEC-Net, publication of an APEC Trade-Show Directory, and held a venture capital workshop and a seminar on credit guarantee system to exchange views on trade financing. It demonstrates its interest in business engagement through the APEC International Trade Fair and the Asia-Pacific Business Network and its meeting back-to-back with the meetings of the APEC Trade Promotion Organization. The working group will hold the third APEC Trade Fair in November 1998. The working group will strive to incorporate measurable objectives and targets in the initiatives, actions and programs it agreed to, in pursuit of its primary objectives. The vast distances which characterize the Asia-Pacific region and the dynamic growth of its economies underscore the importance of adequate transportation to guarantee further development. Since its creation in 1991, the Transportation Working Group has conducted important initiatives of trade facilitation as well as projects of cooperation in close contact with the business sector, aiming to increase the efficiency and safety of the regional transportation system. For instance, the Road Transportation Harmonization Project will provide the basis for standard harmonization in the automotive sector in the Asia-Pacific region. The group is focusing on three main areas: More competitive transportation industry (including infrastructure), safe and environment-friendly transportationÿ systems (including technologies), and Human Resources Development (including training, research and education).ÿ Covering all types of transportation systems, the Group has published surveys, directories, best practice manuals and databases, as well as an inventory on regional cooperation on oil spills preparedness and response arrangements. Transportation Ministers have met in Washington, D.C. in June 1995 and in Victoria, B.C., Canada in June 1997.

Agricultural Technical Cooperation Experts' Group (ATC)

In October 1996, the importance of the work on agricultural technical cooperation was recognized with the establishment of the Agricultural Technical Cooperation Experts Group (ATC) as a formal APEC body. By strengthening agricultural technical cooperation, APEC economies are seeking to enhance the capability of agriculture and its related industries to contribute to economic growth and social well-being. The areas identified for cooperation were: conservation and utilization of plant and animal genetic resources; research, development and extension of agricultural biotechnology; marketing, processing and distribution of agricultural products; plant and animal quarantine and pest management; cooperative development of an agricultural finance system; and agricultural technology transfer and training. Subsequently, sustainable agriculture was identified as an additional area for technical cooperation, whose first meeting will be held in 1998.

Sustainable Development

In Blake Island in 1993, Economic Leaders gave a call to action to APEC members to manage their resources in such a way as to ensure that growth take sustainability into consideration. APEC addresses environment/sustainable development as a key cross-cutting issue relevant to all APEC fora. The Ministerial Meeting on Sustainable Development in Manila in 1996 developed an action program integrating economic and environmental considerations and identified three sustainable development priority issues of Sustainable Cities, Cleaner Production/Clean Technology, and Sustainability of the Marine Environment. At the Environment Ministerial Meeting on Sustainable Development in Toronto on 9-11 June 1997, Ministers determined specific action items to further advance each of these themes. APEC senior officials will annually review sustainable development work within APEC through a stocktaking exercise of projects related to sustainable development. This exercise will help promote and coordinate activities in this area.

Gender Issues and the First APEC Women's Ministerial Meeting

In 1997, APEC Economic Leaders made the commitment to integrate women into the mainstream of APEC activities. As part of this program, the first APEC Ministerial Meeting on Women will be held in Manila 15-16 October 1998. The ministerial meeting offers an excellent opportunity to examine the links between gender and trade liberalization issues and the value of taking gender into account in the development of APEC Fora has been noted and will be reviewed regularly.

Appendix B: Proposals for Early Voluntary Sectoral Liberalisation

Sectors Selected for Early Voluntary Sectoral Liberalisation

Fast Track Sectors

Second Track Sectors

Chemicals

Automotive

Energy

Civil Aircraft

Environmental Goods and Services

Fertilizers

Fish and Fish Products

Food

Forest Products

Natural and Synthetic Rubber

Gems and Jewellery

Oilseeds and Oilseed Products

Medical Equipment and Instruments

Telecommunications Mutual Recognition Arrangement (MRA)

Toys

Source: 'APEC Australia Brief: Trade and Investment Liberalisation', Department of Foreign Affairs and Trade, Canberra, November 1998.

Sectors Selected for Early Voluntary Sectoral Liberalisation (Continued)

Sector

EVSL Proposal

Toys

Progressive reduction to zero of tariffs on toys, preferably by 2000 (and no later than 2005). Elimination of unjustifiable non-tariff barriers. Economic and technical cooperation.

Gems and jewellery

 

Elimination of trade-restrictive measures on these products (tariffs phased out by 2005), which include pearls, diamonds, silver, gold, platinum, jewellery, goldsmiths' and silversmiths' wares. Address non-tariff measures and promote Economic and technical cooperation.

Environmental Goods and Services

Elimination of tariffs by 2003 on environmental goods and liberalisation of environmental services. Work on non-tariff barriers. Economic and technical cooperation.

Food

Further impetus to trade facilitation work on food. Studies on market prospects on sugar, processed food. Tariff liberalisation by 2004 for fruit and vegetables, processed food and beverages. Economic and technical cooperation.

Energy

Removal of tariffs on coal, gas, electricity and energy-related equipment by 2004. Work on non-tariff measures, services, government procurement, facilitation. Economic and technical cooperation.

Fish/fish products

Elimination of tariffs by the end of 2005. Elimination of non-tariff measures. Work on subsidies, sanitary and phytosantitary measures. Economic and technical cooperation. International fisheries management.

Forest Products

Elimination of tariffs on paper and wood products by 2000 and 2002 respectively. Work on non-tariff measures. Detailed provisions applying to building codes. Economic and technical cooperation.

Oilseeds/oilseed products

Elimination of all tariffs, non-tariff barriers, export subsidies, quotas and other trade-distorting measures by 2002. Economic and technical cooperation.

Chemicals

Tariff harmonisation by 2001/2004 in line with the Chemicals Tariff Harmonisation Agreement and eventual elimination of tariffs. Work on non-tariff measures, investment and economic and technical cooperation.

Telecommunications

Development of Mutual Recognition Arrangement. Aims to allow parties to test and certify equipment to an importing economy's mandatory technical requirements. Endorsed by APEC Telecommunications Ministers in June 1998.

Rubber

Reduction/elimination of tariff and phasing out of unjustifiable non-tariff measures. Economic and technical cooperation.

Fertilizers

Elimination of tariffs by 2002/2004. Work on non-tariff measures. Economic and technical cooperation. Trade facilitation.

Automotive Products

Private-public sector automotive dialogue. Harmonisation of standards. Work on customs issues. Identifying barriers to trade and investment. Economic and technical cooperation.

Medical Equipment

Tariffs on medical equipment and instruments to be eliminated by 2001. Work on non-tariff measures. Technical assistance.

Civil Aircraft

Elimination on tariffs on civil aircraft and related equipment by 2000 and 2002 respectively. Trade facilitation. Economic and technical cooperation.

Appendix C: Australian Economic and Financial Management Initiative

Australian Economic and Financial Management Initiative


BACKGROUND

The East Asian Financial Crisis

In the decades before the financial crisis in East Asia, economic growth transformed the region. East Asian economies grew at extraordinary rates. Millions of people were lifted out of poverty and many other economies benefited from this growth through increased trade and investment returns.

Many of these achievements are now threatened. GDP growth in the region has dropped significantly, unemployment and inflation have increased, families are facing great hardships, food shortages have reappeared and children are being withdrawn from school.

The problems that have led to the present situation stem from a variety of sources: inadequacies in the management of national economies, inadequacies in corporate and financial sector behaviour, and inadequacies in the world's financial system, which have resulted in an increased volatility in international capital flows. Efforts to rebuild stability need to take account of the part that each of these factors has played.

The International Response

Internationally, there is widespread appreciation of the local and global impacts of the dramatic downturn in East Asia, and a growing level of serious international interest in reform of the international financial system.

The international community has committed substantial resources to help address the impacts of the crisis and to promote recovery.

In addition, recent meetings of the G7, World Bank-IMF and G22 have given some focus to the international debate on reform of the international financial architecture. Specifically, the G22 meeting in early October identified three core areas where action is needed to strengthen the international financial system: enhancing transparency and accountability, strengthening national financial systems, and managing international financial crises.

Australia's Response

Australia has been active in helping to address the immediate impacts of the crisis and to contribute to the longer-term process of recovery.

In 1997, the Australian Government agreed to join IMF-sponsored support packages for Thailand, Indonesia and South Korea.

In July this year, the Government announced an increase in aid flows to Indonesia, and further increases since then have taken total aid to Indonesia in 1998-99 to more than $127 million. This includes almost $60 million in humanitarian assistance in 1998-1999.

The Government has also pledged to increase aid to Thailand by $10 million over the next two years and has established a $6 million Asia Crisis Fund to strengthen economic governance and financial sector reform in the region.

Australian aid programs in other regional economies are also being adjusted to address the effects of the crisis.

In addition to immediate financial assistance, the Government has emphasised the need to ensure regional economies and markets remain open, to take decisive action to improve the transparency and accountability of government and corporate decision making, and to support reform of the international financial system.

To help develop proposals to address these issues, the Government has established a Task Force, chaired by the Treasurer, to put forward substantial and imaginative suggestions for Australia to contribute to appropriate international forums.

The Economic and Financial Management Initiative

Australia's Economic and Financial Management Initiative for APEC has been developed to enhance APEC's response to the East Asian financial crisis. The objective is to assist the affected economies to strengthen economic governance and thereby help to restore international confidence and promote economic recovery.

A central feature of this initiative is an economic governance survey commissioned by the Australian Government and undertaken by the Centre for International Economics, an Australian private sector consultancy firm. The survey was carried out in Indonesia, Malaysia, South Korea, the Philippines, Thailand and Vietnam.

The survey report, which was tabled at the November APEC meetings in Kuala Lumpur, presents the first comprehensive picture of the extensive range of economic governance activities currently being implemented by the affected economies, the international financial institutions, multilateral organisations, the APEC Finance Ministers' process, and APEC bilateral donors.

Importantly, the survey report documents areas identified by key authorities in the surveyed economies where further economic governance cooperation would be welcomed. It is therefore a valuable reference tool on which key players, within and outside APEC, can draw in developing responses to the financial crisis and in improving coordination and targeting of these responses.

The survey confirms that APEC economies are already engaging in a broad range of economic governance activities in the region. It also identifies substantial scope for further action. Indeed, one of the main findings of the survey report is that, despite the wide range of measures undertaken by Governments in crisis-hit economies and the international community, there is a need to build specialist skills in key areas to facilitate the implementation of institutional and policy reforms.

The causes, extent and nature of the economic and social impacts of the crisis vary significantly among the surveyed economies. Despite these important differences, the survey identified several shared needs, including the need to:

  • improve information flows and the quality of economic analysis;
  • increase the capacity to provide early warning of adverse economic trends;
  • strengthen legal frameworks and institutions, public sector governance and public administration reform;
  • develop the skills needed to implement financial sector reforms; and
  • adopt and/or improve codes of corporate governance and their effective application.

The survey confirms that activity in economic governance can extend beyond official cooperation, and that the private sector has an important role to play in promoting transparency and best practice in this area.

Another key finding of the survey report is the scope for APEC members to facilitate cooperative actions to improve economic governance in the region. The diversity of APEC economies provides a good opportunity to enhance the potential for a productive exchange of ideas and practices in addressing common challenges. The need to promote enhanced coordination and information sharing was highlighted as a high priority for APEC, particularly in facilitating networking among practitioners.

Australia's $50 million, three-year package provides a clear and substantial demonstration of Australia's commitment to cooperate with economies most directly affected by the crisis to improve economic governance. Key activities to be funded under the package include efforts to enhance economic policy development, including through improved collection and analysis of economic information; to reform state-owned enterprises; and to improve financial management.

The package builds on the outcomes of the survey and has a strong focus on the provision of technical assistance and expertise required to facilitate a successful implementation of the difficult reform processes regional economies are undergoing.

Source: Australian Agency for International Development.

 

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