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Takeaways of APEC 2023

Spotlights Shifted

The US hosted the 30th Asia-Pacific Economic Cooperation (APEC) meeting in San Francisco from 11-17 November 2023. It was the third time the annual meeting was held in the US (1993 Blake Island; 2011 Honolulu). Leaders, government heads, entrepreneurs, scholars, and other stakeholders of the member states gathered for discussions on various topics related to bi-lateral or multi-lateral economic cooperation, global development, and commitments. The focus was diverted by the summit between President Biden and President Xi held in Woodside, California on November 15 before the Chinese leader formally attended APEC. There hadn't been a face-to-face meeting between two leaders since G20 Bali in November 2022, which drew world attention to the Sino-US Summit. Frictions between two countries, "decoupling" or "de-risking" were always in the news headlines for the last 12 months; people were curious to see how the meeting would turn out. As most of the news focuses on the Sino-US Summit, we would like to draw attention to APEC: its history, present, and future.

  

Origins & Development

According to APEC's official publication, “the idea of APEC was firstly publicly broached by former Prime Minister of Australia Bob Hawke during a speech in Seoul, Korea on 31 January 1989”. Within the same year, 12 Asia-Pacific economics met and established APEC as founding members: Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and the United States.

9 other members: China, Hong Kong, Taiwan (joined as "Chinese Taipei"), Mexico, Papua New Guinea, Chile, Peru, Russia and Vietnam joined at different stages within 1990's. A total of 21 countries are members of APEC, with a total population of 2.95 billion, contributing 62% of global GDP and 48% of global trade (in 2021). Thus, APEC played a significant role in global trade.

APEC's mission included aligning regulations and standards across the region for more favorable business climates behind borders, as well as facilitating trade between members. Having just one set of common standards across economies would make exporting products easier. At the time of its establishment, APEC established this as a symbol of globalization.

Prior to 1992, APEC members met as informal senior official- and ministerial-level dialogues. Former US President Bill Clinton established the annual APEC Economic Leaders' Meeting in 1993 to provide greater strategic vision and direction for Pacific Rim cooperation. The week-long Economic Leaders' Meeting has been hosted by member countries in rotation with other important official events, including Leaders' Summit, Ministerial Meeting and Senior Financial Officials' Meeting. Parallel to the official events, APEC organizers and host countries organized External Stakeholders and Public Events.

As a conclusion of this year's Leaders' Summit, the 2023 APEC Leaders' Golden Gate Declaration titled "Creating a Resilient Future for All" was signed on November 17 with the following key contents: Building renewable energy capacity; Establishing a Food Security Roadmap; Supporting the expansion of Micro, Small and Medium Enterprises (MSMEs); and Creating a Digital Ecosystem for Business and Consumers.


Polarizations in Trade Agreement

In 2022, China exported 2,139 billion USD to other members of APEC (60% of its global exports) and imported 1,621 billion USD from other members (59% of its world imports). During the same period, the US exported 1,031 billion USD to APEC (62% of its worldwide exports) and imported 1,902 billion USD from APEC (67% of its worldwide imports). According to the figures, these two largest economies wish to have control over the formation and implementation of trade agreements with the APEC members.

APEC, which has its headquarters in Singapore, promotes free trade agreements/regional trade agreements in the region as a means of regional economic integration. Although APEC does not form any trade agreements or treaties on its own, it serves as a policy support for the Free Trade Area for Asia-Pacific (FTAAP) pathway for agreement conclusion. It was difficult to form a "One for Satisfying All" agreement because the program involved a multi-literal network with differing interests. Several agreements were generated, but all had their pros and cons:

Regional Comprehensive Economic Partnership (RCEP)

RCEP was first discussed at the ASEAN Summit in 2011, signed in November 2020, and launched in 2022. In addition to the 10 ASEAN countries (Cambodia, Laos, and Myanmar are not members of APEC), China, Japan, South Korea, Australia, and New Zealand were also part of this partnership. As per the agreement, the number of duty tariff lines within members will increase from 22.9% (at the beginning of negotiations) to 63.4% when all members are fully functional. The goal of RCEP is to reduce or eliminate customs duties imposed by each member state on originating goods by approximately 92% over a period of 20 years. It was alleged, however, that this agreement had shortfalls, including inadequate intellectual property protection, and inadequate consideration of human or labor rights. RCEP's power is also weakened by US non-participation.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 

As early as 2005, the Trans-Pacific Partnership (TPP) initiative aimed to lower both non-tariff and tariff barriers to trade, and was signed between 12 Pacific economies, including the US, in February 2016. As a result of the agreement not being supported by congressmen from both parties and causing a lot of debate within the US after the deal was signed, President Trump formally withdrew from the deal in 2017. After that, the remaining signatories agreed to amend the agreement (removing the measures favored by the US) and form CPTPP in 2018. Despite this, both China and the US were not members of CPTPP, so its impact was not well recognized. Despite the applications made by the UK, China, Taiwan and four other countries to join the partnership, there has not been any outcome of rectification because an additional member needs the approval of all 11 signatories.

Indo-Pacific Economic Framework for Prosperity (IPEF)

On May 23, 2022, President Biden announced four pillars of the initiative: Fair and Resilient Trade; Supply Chain Resilience; Infrastructure, Clean Energy, and Decarbonization; and Tax and Anti-corruption. As of now, 12 APEC members are participating in the framework: the US, Australia, New Zealand, Japan, South Korea, and seven ASEAN members. With the addition of India and Fiji, IPEF now has 14 members. At the APEC meeting in San Francisco, the US used the opportunity to market the agreement to the leaders and create their interest in participating. Starting in 2024, IPEF will hold a minstrels' meeting annually and a leaders' meeting every two years. Because of the considerable importance of this agreement in terms of counterbalancing China's influence in trade and supply chain, Chinese officials were strongly against it and expressed their disapproval.


Outlook

As the agreement was 30 years old, the economic and political environment had changed, which makes APEC an important forum and meeting place for leaders. In addition, the organization last admitted new members in 1998, indicating a need for new impact. Furthermore, the sanction of US entry for certain leaders also casts a shadow on the forum. Next November 2024 at Lima, Peru, some might wonder if the APEC Leader's Week will still exist or if it will vanish completely.

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