Why APEC matters

Our neighbourhood, the Asia Pacific region, is setting standards of trade that stand to benefit each and every business.

Once a year, usually around November, some very unusual photos appear in the world media. They typically show a stage where a group of some of the world’s most powerful political leaders stand in a line all wearing the same outfit. The outfits represent that national dress of the host nation.

In some years it is Indonesian batik, in some year’s a Chilean poncho, and more recently a traditional Vietnamese silk gown.

Of course, we all know that when politicians appear in ponchos or other forms of exotic dress, that the Asia Pacific Economic Co-operation (APEC) leader’s meeting must be on.

APEC, which comprises the world’s major economies located around the Pacific Ocean, is a relatively young international institution that promotes co-operation between nations on major economic issues by way of consensus and voluntary objectives (rather than being a highly prescriptive rules-based binding international institution).

APEC countries regularly meet to discuss regional co-operation on a whole gamut of cross-border issues from technical topics such as trade facilitation, e-commerce, transport and logistics, to people-focused issues such as human resource development. Many APEC summits take place on these various issues but the leaders’ meeting draws all these developments together and naturally attracts the media spotlight.

APEC is of particular interest to Australia for three reasons.

First, Australia had a key role to play in the origins of APEC. In fact, it was primarily Australia and The Republic of Korea that first built APEC’s foundations in 1989. According to then prime minister Bob Hawke, the APEC concept was launched in his Seoul speech in January 1989 and then followed up by the first ever APEC meeting in Canberra in November of that year.

According to Hawke, regional co-operation through the APEC concept was formed “in response to the global economic tensions resulting from the end of the Cold War, and the real risk of trade wars and currency blocs forming. It was also important to highlight the fact that the Asia Pacific was the fastest-growing economic region in the global economy.”

Second, there’s no doubt about APEC’s weight in terms of trade and economic integration. According to the Department of Foreign Affairs and Trade, APEC members accounted for 44% of world exports of goods and services in 2005 and 69% of Australia’s trade with the world. Intra-regional trade is important too, as 70% of APEC’s merchandise exports were traded within the APEC region in 2005.

Third, APEC has an important role to play in trade facilitation, which will especially benefit Australia as a small open economy. As John Wilson, lead economist with the World Bank has shown, the average time taken for exports and imports in an average APEC country is 21 days, well above the OECD country average of 14 days.

According to World Bank research, APEC-led reform in trade facilitation could therefore potentially provide gains to APEC members of $US377 billion ($A503 billion). This means that APEC could bring significant economic benefits to business, workers and consumers in the APEC region.

So what of the future? From APEC’s humble origins in Canberra in 1989, we now can look forward to the APEC 2007 meeting in September in Sydney. As host, Australia has a great opportunity to highlight the importance of APEC to the nation and the world.

As Prime Minister John Howard recently put it: “The most dynamic region in the world is, and will remain, the Asia Pacific region. And that is the reason why Australia has from the very beginning put an enormous amount of time and effort politically and diplomatically and economically in APEC.”

And of course, like all APEC leaders’ meetings, we also have a fair dinkum fashion parade to look forward to in Sydney as well.

Tim Harcourt is the chief economist of the Australian Trade Commission and the author of BEYOND OUR SHORES: www.austrade.gov.au/economistscorner

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