Long-Term Strategies and Missing Links in APEC Cooperation

Transcription

1 2016/ISOM/SYM/004 Session I Long-Term Strategies and Missing Links in APEC Cooperation Submitted by: APEC Study Center - Australia Symposium on Priorities for APEC 2017 Ha Noi, Viet Nam 8 December 2016

2 1 ISOM Contribution Long-term strategies and missing links in APEC cooperation Alan Oxley, Chair Australian APEC Study Centre, RMIT University, Melbourne I have specifically been asked to consider Hanoi 8 December 2016 long-term strategies APEC should focus on to realize its potential contribution to the Asia Pacific and the missing links in APEC cooperation agenda to strengthen its role as a driver of growth and regional economic integration and challenges for Vietnam. I have only a short speaking time, so therefore need to be precise and concise. The long term strategies. What are important? I have six suggestions One. The ultimate long term strategy on which APEC should focus is development of open, efficient, and competitive economies. A key stepping stone to that is a Free Trade Agreement among all APEC economies. In the APEC jargon, this is the FTAAP. When APEC formed, there were those who argued APEC should not aspire to a Free Trade Agreement. There were two cases. Academics had theoretical objections to FTAs. More importantly, there were APEC economies which were in no position to attempt such an outcome. China did not have the policy underpinnings to participate in any trade liberalizing agreements. Since its subsequent accession to the WTO that is no longer an in-principle difficulty. APEC has grown to cover a wide range of issues. Its original aim was to build an open market. That envisaged removal of trade barriers in goods and services and to investment. Only recently has a consensus formed that an FTA extending to all APEC economies should be considered. There are currently two prospective platforms on which to build an FTAAP. One is an agreement, similar to the draft TPP agreement, now stalled. But if the Republican President of the US Senate considers something can be done with the TPP in time, I am not one to suggest otherwise. The other is the RCEP agreement which is being negotiated. RCEP is under negotiation but it has shortcomings: The US, the leading trade and investment economy in the region, is not participating It will lack extensive commitments to liberalize services, to free flows of investment and cover contemporary issues in the fields of intellectual property and IT.

3 2 Either way, stepping stones will be created. Two. What must not be negotiated is a precursor agreement informed principally by political considerations. Given the strategic issues which now arise in the Asian Pacific egion, that is a matter for consideration. APEC is not a political organization. The success of good FTA s and trade agreements is that they are principally informed by common interest to contribute to building openness in economies and legally binding commitments to adhere to those measures. Effective trade agreements are blind to political interests and differences. Three. There is more to building an Asian Pacific economy than completing an FTA, no matter how comprehensive it is. The emphasis in today s advanced FTAs, like the draft TPP, is on opening services sectors and removing barriers to foreign investment. But they do not alone create all the achievable benefits of an open economy. High standards of competitiveness, sound competition policy, sound fiscal policy and sound monetary policy are key foundations. Good trade agreements lead to these. Their ultimate success depends upon the domestic measures which foster economic efficiency. Four. There needs to be closer association between the financial and monetary institutions and trade policy institutions and between them and the business arm of APEC ABAC on formulation on trade policy, competitiveness and investment policy. None should seek to deliberate in areas the expertise of others. But all should seek to see how their expertise combined produces economic welfare benefits for all. This should be a fundamental principal in all APEC organizations and activities. There is institutional history among governments of separation of fiscal and monetary policy from economic reform, trade liberalization and structural adjustment. I note as well as a result of the Philippines APEC year that structural adjustment is back on the APEC agenda. It was put on the agenda in Australia s APEC year in Work on advancing this as a reform tool lapsed. A key reason is that in no government is there one agency which secures Structural Adjustment. Despite the institutional difficulties of finding an agency which seeks to advance structural adjustment, it is an issue which brings to the fore the need for governments to be constantly alert to the need to ensure rules and regulations do not prevent the market from allocating resources where they can more efficiently generate an economic result. A standing review of structural adjustments issues is an appropriate function for APEC and should be permanently maintained. Five. APEC Financial and Treasury officials should meet in parallel with the final annual session of APEC Senior (Trade and Foreign Ministry) officials so their findings can inform the content of the Leaders annual communique.

4 3 I note in APEC that the Financial and Treasury officials do not meet at the same time as Trade officials or, at the end of the year, Leaders. Finance and Treasury officials meeting at the same time as Economic policy and Trade officials would create an environment where there could be parallel appreciation in related spheres of actions necessary to foster economic growth through more open markets. Getting Finance and Treasury and Trade officials to collaborative on policies in this way to advance development of open and efficient markets is a universal problem. ABAC has done sterling work in fostering the concept of a Funds Management Passport which would support expansion of the fund management industry among APEC economies. For a long time, the idea was cold-shouldered by Australian Treasury officials because they considered their established approaches to regulation were preferable. This is not an isolated instance. There is very little Treasury input to policy work on liberalization of financial services in both the WTO and bilateral and regional trade agreements in a number of APEC economies. This not more than what we call in Australia bureaucratic turf warfare. It should be put aside. Six. APEC should refine its focus on issues and sharpen the priority on economic issues. The E in APEC is Economic. It is an economic organization. It has many activities which have non-economic focus. Following is a sample of activities and committees in APEC which should not in any ordinary sense of the word could be regarded as predominantly economic policy. I appreciate what I will say here will be controversial to some. But it is an incontrovertible fact every APEC member economy loads issues with domestic political importance onto the APEC agenda to demonstrate affinity with various national interest groups. I am not saying that should stop. But it does not need to be given continuing institutional status in APEC work programs. Here is a list of some issues that fit into this category: Fostering small business Environmental issues unrelated to economic efficiency (Blue and Green economy) Social issues Education policy Gender equality To summarize with a different slant APEC should work to remain focussed on the core mission of the organization, not seek to demonstrate that it is concerned or feels the need to address whatever is a current issue of the day. This in my view is a significant failing of the G20 process. When Australia hosted the G20 summit two years ago, it had summit fora for activists, public policy think tanks and even for girls.

5 4 Challenges for Vietnam Will the stalling, if not mothballing, of the TPP agreement to which Vietnam was a contributor create problems for Vietnam in its APEC year? I think not. Decisions by other prospective parties to the TPP and negotiations of RCEP will take their own course. A key challenge for Vietnam will be to keep the focus in meetings on the economic priorities. The more economies slow, the more governments seek to talk about other things. Vietnam must keep their feet to the fire. APEC has very active program of activities which will produce valuable results in enhancing the policy capacity of APEC members to advance these issues. Signs are as well that 2017 will be a testing year for the global economy. APEC will not have any particular impact on what happens in the major economies. Their actions will be shaped by domestic considerations. Vietnam can however have a positive impact on APEC s 2017 year by guiding consideration in all its key fora to issues which directly relate to the economic difficulties which confront the global economy and which will encourage action in the domestic policy of each party to improve competitiveness. There may not be much new joint action to improve competitiveness, but there will be to plenty of scope to keep attention focussed on those matters which will contribute to that.