Current Issues
The 2003 APEC Bangkok meetings and President Bush's
East Asia visit
E-Brief: Online Only issued 15 October 2003
Dr Frank Frost,
Analysis and Policy
Ann Rann,
Information/E-links
Foreign Affairs, Defence and Trade Group
Introduction
The Asia Pacific Economic Cooperation (APEC) grouping will hold
meetings in Bangkok from 17 October, including the eleventh annual
Economic Leaders Meeting on 20-21 October. President George W. Bush
will attend the Leaders Meeting and is also visiting Indonesia,
Japan, the Philippines, Singapore and Australia. This brief
introduces the APEC meetings and major issues likely to arise
during President Bush s East Asia visit.
APEC since 1989
The Asia Pacific Economic
Cooperation group was inaugurated at a meeting of
representatives of twelve economies in Canberra in November 1989.
The group has since expanded to its current level of 21 members:
Australia; Brunei Darussalam; Canada; Chile;
People s Republic of China; Hong Kong, China; Indonesia; Japan;
Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea;
Peru; the Republic of the Philippines; the Russian Federation;
Singapore; Chinese Taipei (Taiwan); Thailand; the United States of
America; Vietnam. APEC agreed in 1997 to maintain a moratorium
on new members for ten years. APEC has placed a premium on
voluntary participation, operates by consensus and does not seek to
enforce decisions taken by members. It maintains a small
Secretariat in Singapore.
APEC s members account for nearly half the world s trade. Eight
of Australia s top ten trading partners are APEC members. APEC
includes the world s three largest economies (the United States,
Japan and China) and seven of the 21 members have had growth rates
of more than five percent over the past decade. In 2002, 62 percent
of Australia s investment overseas and 68 percent of its trade was
directed towards APEC members.
Economic leaders from the 21 APEC economies meet annually to
review and develop strategies to advance growth and economic
development in the Asia-Pacific region. Ministers, government
officials and all major sectors of business and industry also
cooperate to address barriers to trade and investment. The
APEC Business Advisory Council (ABAC), a high level permanent
forum of regional business leaders, advises APEC on private sector
interests and goals.
APEC s work is based on three pillars trade and
investment liberalisation, business
facilitation, and economic and
technical cooperation. APEC s most prominent commitment was
made at the meetings in Bogor, Indonesia in 1994, when members
adopted the goal of achieving free and open trade and investment
among members by 2010 (for industrialised economies) and 2020 (for
developing member economies).
APEC has sought to achieve progress through a series of
annual dialogues (Dick K. Nanto, Asia Pacific
Economic Cooperation (APEC), Free Trade, and the 2003
Summit in Bangkok,
Thailand, CRS Report for Congress, 1 August 2003) and many
supplementary meetings. The group s profile was raised in 1993 when
President Clinton convened the first of what has become an annual
series of informal leaders meetings. While APEC was originally
intended to focus on economic issues, the leaders meetings have
also come to provide valuable avenues for multilateral and
bilateral dialogue on regional and international security matters.
The APEC meetings in Auckland in 1999 provided the opportunity for
Australia to mobilise support for assistance to East Timor s
transition to independence. Since the terrorist attacks in the
United States on September 11, 2001 APEC has also developed
cooperation programs to counter terrorism.
Back to top APEC: progress and challenges
Up to the mid 1990s APEC achieved a high profile and through the
Bogor declaration was seen to be at the centre of moves towards
trade and investment liberalisation in the Asia-Pacific. APEC was
established at a time when there was a major process of unilateral
trade liberalisation underway in many countries in the Asia-Pacific
(including Australia) and was thus in a favourable position to
support widely prevailing trends. APEC pursued trade and investment
liberalisation on the basis of
open regionalism , (Ross Garnaut, Trading blows ,
Australian Financial Review, 26 September 2003) so that
liberalisation measures were offered by APEC members to all other
trading countries on a non-discriminatory basis. However the impact
of the Asian financial crisis from mid 1997 contributed to a
slowing of progress towards APEC s goals and some key members
continued to be unwilling to liberalise sensitive sectors (such as
agriculture).
Since the late 1990s attention in the Asia-Pacific has focussed
on the prospects for the WTO s negotiations (currently being
pursued through the Doha
Round ) and on opportunities for speeding liberalisation
through bilateral or multilateral Free Trade Agreements (FTAs). A
number of APEC members are currently engaged in efforts to secure
free trade agreements including Singapore, Thailand, the United
States and Australia. China and ASEAN have announced a program to
secure a free trade agreement over the next decade.
The bilateral and regional FTAs are seen as beneficial by
proponents dissatisfied with the slow pace of multilateral trade
negotiations, but are not in line with APEC s original principles
of non-discriminatory liberalisation. FTAs confer benefits not to
all other parties (as envisaged by APEC s concept of open
regionalism ) but to chosen partners only. A recent report by
Oxford Analytica commented that:
A web of complex bilateral pacts across the region was not part
of the Bogor formula and APEC has yet to come to grips with the
implications for its role and approach . (Oxford Analytica,
APEC squeezed between WTO and new bilateralism, 18 June
2003)
APEC nonetheless remains of major importance to economic and
security dialogue in the Asia-Pacific. Richard
Woolcott (a former Secretary of the Department of Foreign
Affairs and Trade closely involved in APEC s establishment) has
argued that:
APEC has evolved and is just as relevant in
2003 as it was in 1989. It remains an essential and effective part
of the regional and international architecture for economic
cooperation. (Richard Woolcott, APEC: its standing and prospects
after 14 years, APEC Economies Newsletter, v 7 n 8, August
2003)
Woolcott stresses the importance of APEC in advancing trade
facilitation measures, in supporting improvements in corporate
governance and economic reforms, and in cooperation to prevent
terrorism from disrupting regional trade.
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APEC s 2003 Bangkok meetings
The eleventh APEC Economic Leaders
Meeting (informal summit) will be held in Bangkok on 20-21
October 2003. It is to be preceded by meetings of ministers, of
senior officials from member economies, a CEO summit of business
leaders, and the APEC Business Advisory Council meeting. The theme
for APEC 2003 is A World of Difference: Partnership for the Future
. This central theme is amplified by a series of sub-themes that
are designed to assist APEC Working Groups and Forums to achieve
their goals.
APEC s leaders meet in 2003 against the background of the recent
failure of the
Cancun WTO ministerial meeting ( The WTO under fire , The
Economist, 20 September 2003) and of continuing concern about
the threats posed to security and commerce by international
terrorism. In the lead-up to the meetings, APEC officials and
observers have highlighted a number of issues that may be expected
to be important in the meetings.
The Executive Director of the APEC Secretariat, Piamsak
Milintachinda, in a
briefing on 8 October 2003 emphasised the wide range of areas
of cooperation that should be reaffirmed and advanced in the
Bangkok meetings. He noted that APEC s current focuses include:
improving the functioning and stability of financial markets,
cooperating on counter-terrorism and security, improving
cooperation on epidemiology and health issues (such as Severe Acute
Respiratory Syndrome SARS), and a range of programs to reduce
business transaction costs including the Secure Trade in the APEC
Region (STAR) program and an Advance Passenger Information system
that should enhance and speed up immigration processing for
travellers in the APEC region.
The APEC Business Advisory Council (ABAC) has provided an
additional input into APEC s discussion in Bangkok. In its latest
annual report (which has been submitted to APEC leaders but not yet
released publicly), it is understood that ABAC has set out an
ambitious set of issues it is requesting APEC leaders to pursue.
The
New Zealand Herald reported on 3 October (Chris Daniels, Time
for APEC to take lead , The New Zealand Herald, 8 October
2003) that ABAC s report suggests that APEC should:
- Take the lead in strengthening the WTO system.
- Quickly resolve agricultural trade issues, especially high
tariffs, domestic support and export subsidies.
- Take resolute steps to achieve the APEC goal of reducing
transaction costs by 5 percent by 2006.
- Ensure that bilateral trade agreements help rather than hinder
broader trade facilitation.
- Work with the private sector in good corporate governance and
transparency.
- Ensure that new anti-terrorism measures do not hinder
commerce.
- Improve anti-dumping laws.
- Increase the liberalisation of trade in services, multilateral
investment rules and in transport, particularly cargo.
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President Bush s East Asia visit: major issues
President George W. Bush is making a ten day visit to East Asia
from 17 October. The centrepiece will be his participation in the
APEC Economic Leaders Meeting but he is also making bilateral
visits to Japan (17-18 October), the Philippines (18 October),
Thailand (18-19 October where he will also attend the APEC meetings
on 20-21 October), Singapore (21-22 October), Indonesia (22
October) and Australia (22-23 October). The APEC meeting also
provides opportunities for discussions with other major regional
leaders, particularly President Hu Jintao of China, President
Vladimir Putin of Russia and President Roh Moo-hyun of South Korea.
President Bush will thus be able to review and pursue a wide range
of both bilateral and multilateral issues.
In his
bilateral visits (Murray Hiebert and Shawn Crispin, Bush
Catches up with Asia , Far Eastern Economic Review, 16
October 2003), President Bush will be able to explore specific
bilateral issues such as progress in domestic economic reforms,
measures to protect intellectual property rights, and moves to
increase transparency in government procurement programs. Other
issues for discussion are likely to include Japan s provision of
financial aid and possibly of non-combat defence force assistance
to Iraq, plans to initiate negotiations with Thailand on a free
trade agreement in 2004 and US support for military reform in the
Philippines. In addition to and alongside the formal APEC
cooperation agenda, President Bush s discussions in East Asia are
also likely to involve several issues of major concern to the
region overall.
Terrorism is certain to be a central theme of President Bush s
talks both bilaterally and at APEC. While there have been some
successes in counter-terror activities in the region, particularly
the arrest of the Jemaah Islamiah leader Hambali in Thailand in
August, there have also been setbacks, such as the escape from
custody of the convicted terrorist Fathur Rohman al-Ghozi in the
Philippines in July (al-Ghozi was reported on 13 October to have
been killed in an armed clash). The bombing of the Marriott Hotel
in Jakarta in August has highlighted the continuing potential of
Jemaah Islamiah,
as a recent report on JI by the International Crisis Group has
emphasised. As a result, terrorism is likely to be a major focus of
discussion for President Bush in his visits especially in the
Philippines (where the US has been assisting the government in the
south), Thailand and Indonesia (where the US has a program to
extend the capacities of the police).
The US is also keenly interested in the contribution which APEC
can make to counter-terror programs, as a briefing paper by the
Heritage
Foundation, released on 10 October notes. The October 2002 APEC
leaders meeting at Los Cabos, Mexico agreed to adopt the
Counter-Terrorism Action Plan whose objectives include
implementing common standards for electronic customs reporting and
blocking terrorists' access to financing. It is considered that
there is considerable room for improvement in restricting terrorist
financing in a number of regional states, including the Philippines
and Indonesia. The US is also interested in improving
container security measures (Nigel Brew, Ripples from 9/11:
the US Container Security Initiative and its
Implications for Australia, Parliamentary Library,
Information & Research Services Current Issues Brief No. 28,
2002 03), given that containers now move about 90 percent of the
world s freight traffic and that seven out of the top ten nations
shipping containers to the US are APEC members. Improved management
of passports and visas is another essential task in
counter-terrorism policies for the APEC region.
The crisis over North Korea continues as the East Asia region s
most serious source of instability. The isolated and secretive
North Korean regime has continued to pursue a nuclear program
against the wishes of all of its neighbours and of the United
States. The
six party talks (Oxford Analytica, North Korea:
Brinkmanship increases North s isolation, 1 September 2003)
held on 27-29 August in Beijing (involving China, Japan, Russia,
the US and North and South Korea) represented a success for US
efforts to pursue the potential for negotiations on a multilateral
basis although they produced no clear result. The US is still
attempting to resolve the dilemma of how to try to develop
meaningful negotiations with North Korea without rewarding
blackmail . With expectations of a further round of six party talks
later this year (despite North Korea s attempts to oppose Japan s
participation), close communication and coordination of approaches
between the US and the other parties is essential and President
Bush s participation in the APEC meetings are a valuable way of
extending this.
The US is also likely to seek ongoing support for the
Proliferation Security Initiative (Oxford Analytica,
International: China, Russia
crucial to PSI success, 7 October 2003.) (PSI - designed
to prevent the proliferation of weapons of mass destruction by
rogue states ). The United States s regional allies including
Australia and Japan have supported the PSI. Russia and China have
not participated so far but the policy will depend on at least
passive support from them and President Bush may seek to advance
the basis for such an approach.
Relations with China continue to be one of the most complex and
challenging areas of US foreign policy. Relations have improved
since the September 11 terrorist attacks after some tensions early
in the Bush administration over China s detention of a US
electronic surveillance aircraft on Hainan island in March 2001.
China has provided useful support to the US in the war on terror
and cooperation has increased over the North Korea issue.
Nonetheless a significant
basis for tensions continues (Adam Ward, China and America:
Trouble Ahead? , Survival, v 45, n 3, Autumn 2003, pp. 35-56) ,
particularly over Taiwan.
An issue of significant current concern to the East Asia region
overall is the potential for tension in US-China economic
relations. China s rapid economic growth and growing
competitiveness in many areas of manufacturing has helped increase
its penetration of the US market. The US has a large trade deficit with China
(Oxford Analytica, United States: Trade
Deficit with China Record High, 12 September
2003) and it has been growing further in 2003 (the deficit for this
year exceeds $US 100 billion). The US trade deficit with China is
occurring at a time when the US also has both a large overall
current account deficit and a growing budget deficit (the budget
position under the Bush administration has changed from a surplus
of 1.4 percent of GDP to a deficit of 4.8 percent). China s
competitiveness in the US market has been assisted by the Chinese
policy of fixing the value of the Yuan against the US dollar. This
has been criticised heavily by US manufacturers, who argue that the
Chinese currency is artificially undervalued. There has also been
criticism over the slow pace of Chinese trade liberalisation since
it joined the WTO in 2001.
The US has argued that China s currency is undervalued and
Treasury Secretary John Snow advanced this issue (Corinne Lim,
Asia blocks US drive to free currencies , Australian Financial
Review, 11 September 2003, p 23) in September 2003 at a
meeting of APEC finance ministers. Other countries in the region
however are concerned that any rapid move by China to revalue its
currency could produce instability in China and damage its economy
overall.
It is also pointed out (Catherine Armitage, Trade partners get
little value out of China , The Australian, 13 October
2003, p 13) that China invests much of its foreign exchange
surpluses in the US official money market and thus effectively
helps finance the US budget and fiscal position and helps contain
upward pressures on US interest rates.
Given the importance of China s economic growth to the whole
East Asia region there is
concern in the region (Michael Richardson, Uncle Sam s Eastern
Plans , OUTLOOKindia.com, 8 October 2003) that disputes should not
disrupt US-China trade and that protectionist sentiment should not
advance in the US. A significant disruption in US-China trade would
have an adverse impact in many other East Asian economies, given
their increasing reliance on exports to China. The issues of the
US-China trade deficit and of China s currency policies are thus
likely be important and sensitive areas of discussion during
President Bush s regional visit.
As a founding member of APEC Australia has a vital interest in
the continuing progress of the group and its agenda at the Bangkok
2003 meetings (the Government s commitment to APEC was reaffirmed
in a recent speech by the Minister for Trade the
Hon Mark Vaile). Australian Prime Ministers have been
participants in the APEC Economic Leaders Meetings since their
inception in 1993. Australia s role in APEC is advanced both by
governmental involvement
and by non-government bodies including the Australian division of the APEC Business
Advisory Council and the Australian APEC Study Centre at
Monash University.
Australia s involvement in APEC s cooperation and its leadership
dialogues is especially important given that Australia has so far
not been able to participate in the
heads of government meetings pursued by the Association of
Southeast Asian Nations (Mark Baker, Australia drops bid to
join summit , The Age, 7 October 2003, p 2) (ASEAN whose annual
leaders dialogue also involves China, Japan, South Korea and India)
or its trade liberalisation program (the ASEAN Free Trade
Agreement) although a Closer
Economic Partnership cooperation program is underway between
Australia, New Zealand and ASEAN.
After the 2003 APEC meetings, President Bush s bilateral visit
will provide Australia s political leaders with further
opportunities to pursue dialogue across the range of issues
discussed above and to review the bilateral relationship overall.
The Prime Minister the Hon John
Howard and the Leader of the Opposition the Hon Simon
Crean have reaffirmed in recent speeches the value the
Government and the Opposition place on the relationship with the
US.
The prospect of a free trade agreement between the US and
Australia is likely to be a major focus for discussions during
President Bush s Australian visit the proposal has received both
strong support
from the Australian government and criticism from some analysts
including
Professor Ross Garnaut, (Ross Garnaut, An Australia-United
States free trade agreement , Australian Journal of
International Affairs, v 56, n 1, 2002, pp. 123 141)
Australian National University). If an agreement is to be pursued
it has been suggested that there may be a relatively limited
window of opportunity ( Roy Eccleston, Bush in push to seal
deal on trade , The Australian, 13 October 2003, p 13) for
negotiations to be concluded before the US Congress and the Bush
administration are dominated by the lead up to the elections in
November 2004.
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