APEC's Dilemmas Institution-Building Around The Pacific Rim

APEC's Dilemmas: Institution-Building Around the Pacific Rim
Author(s): Nicole Gallant and Richard Stubbs

Source: Pacific Affairs, Vol. 70, No. 2 (Summer, 1997), pp. 203-218
Published by: Pacific Affairs, University of British Columbia
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APEC's Dilemmas:
Institution-Building Around the
Pacific Rim
Nicole Gallant and Richard Stubbs'
THE ASIA PACIFIC ECONOMIC COOPERATION (APEC) forum has made con-
siderable progress since it was formed at a ministerial meeting in
Canberra, Australia, in 1989. Indeed, it has chalked up more successes in its
first few years than even its founders and most ardent proponents had antic-
ipated. For example, APEC combines in one organization a diverse group
of economies including the biggest, and some of the most dynamic, in the
world; it brings together, at its annual summit meetings, an impressive array
of the world's leaders; and it has established the ambitious, if distant, goal of
open economies for all its developed members by 2010 and its developing
members by 2020. As a result the APEC process has garnered a good deal of
public attention and engendered a momentum for establishing greater eco-
nomic cooperation around the Pacific Rim.
Yet the more successful APEC has become and the more progress it
makes in moving the region down the road towards greater economic liber-
alization and cooperation, the more dilemmas it seems to face. These
dilemmas are essentially caused by different and often competing concep-
tions of regionalism and regionalization around the Pacific Rim and are
rooted in the different cultures, historical experiences and forms of capital-
ism of the various APEC member economies. At one time it appeared as if
these competing views of economic regionalization were represented by
APEC on the one hand and by Malaysian Prime Minister Mahathir
Mohamad's proposal for an East Asian Economic Caucus (EAEC) on the
other.2 However, it is now increasingly apparent that the competing concep-
tions of the region and how regional relations should evolve are to be found
I
Nicole Gallant would like to thank the Canada-ASEAN Centre and the Asia Pacific Foundation
of Canada for an Academic Travel Grant Award which allowed her to undertake research in
Southeast Asia. Richard Stubbs would like to thank the Social Science Research Council of Canada
for a research grant which allowed him to undertake research in East and Southeast Asia. The
authors would also like to thank the many officials of various governments and intergovernmental
agencies who granted them interviews, and Paul Irwin, Peggy Meyer and Larry Woods for com-
ments on an earlier version of this paper. It is important to note that the views expressed in this paper
are solely those of the authors and not of any institutions with which they are associated.
2
See Linda Low, "The East Asian Economic Grouping," The Pacific Review, vol. 4, no. 4 (1991);
and Richard Higgott and Richard Stubbs, "Competing Conceptions of Economic Regionalism: APEC
Versus EAEC in the Asia Pacific," Review of International Political Economy, vol. 2 (Summer 1995), pp.
522-26.
203
Pacific Affairs
within APEC, and that EAEC's future is dependent on APEC's success or
failure.
This analysis will begin by outlining the origins of the different concep-
tions of the Pacific Rim and how its economic relations should develop. It will
then go on to explore the dilemmas posed by these competing conceptions
for APEC's future. Most particularly, key issues will be discussed such as which
new members should be admitted to APEC and under what conditions they
should be allowed in, how to achieve the goal of open economies by 2010 and
2020 that have been set for APEC's members, the extent of the institutional-
ization of APEC and its bureaucracy, and the topics that should be put on
APEC's agenda for discussion. As William Bodde,Jr., the first executive direc-
tor of APEC has noted, the varying reactions of the APEC members to issues
raised at ministerial meetings "reveal underlying differences that will have to
be worked out if APEC is to become a true Asia-Pacific economic
community."' And, while working out these issues is clearly not impossible, it
will need patience, imagination and an understanding of opposing views if
they are not to derail APEC in the future.
NEO-LIBERALISM VERSUS 'THE AsLN VIEW"
The competing conceptions of regionalism which are to be found within
APEC arise in good part out of two distinct trends that currently preoccupy
different sets of member governments. Neo-liberalism, which has been widely
propagated by Western-trained neo-classical economists, has heavily influ-
enced the rhetoric and thinking, if not always the practice, of the
governments of the United States, Australia, New Zealand and Canada. On
the other hand, what may be called the "Asian view"4 is more amorphous,
but nonetheless of increasing significance, and has had an impact on many of
the Asian member governments of APEC.
Neo-liberalism emphasizes the maximization of individual economic wel-
fare and the need for markets to operate without undue interference from
governments. Governments, or more broadly states, are expected to restrict
themselves domestically to providing the "public goods" of law and order,
3William Bodde, Jr., View from the 19th Floor: Reflections of the First APEC Executive Director
(Singapore: Institute of Southeast Asian Studies, 1994), p. 38. See also Heather Dawker, "Blueprint
for the Future," FarEastern Economic Review, November 21, 1996, pp. 43-48.
4This term is adapted from Seiji Finch Naya and Pearl Imada Iboshi, "A Post-Uruguay Round
Agenda for APEC: Promoting Convergence of the North American and the Asian View," in Yue
Chia Siow, ed., APEC: Challenges and Opportunities (Singapore: Institute of Southeast Asian Studies,
1994).
204
Institution-Building Around the Pacific Rim
economic infrastructure, sound money, fair market, and national defence.5 In
the international arena, governments should actively foster free trade by elim-
inating any barriers to the international movement of goods and capital while
encouraging other states to do the same. This is done by, for example, nego-
tiating binding and enforceable international rules and regulations that
systematically reduce tariffs and non-tariff barriers to international trade.
Generally, the argument is that a market-based private sector, not govern-
ments or international authorities, should decide how resources are allocated
in the
promotion
of economic
growth.
All four Western governments have tended to advocate a neo-liberal
approach in the formulation of APEC's goals. Indeed, one of the key rea-
sons why APEC was formed in 1989 was that each of the twelve original
members had fears about what was seen as a rise in protectionist tendencies.
The Canada-U.S. Free Trade Agreement had been signed, a North American
Free Trade Agreement (NAFTA) and a more integrated Europe were on the
horizon and there were fears that the negotiations over the Uruguay Round
of the General Agreement on Tariffs and Trade (GATT) would collapse. The
Western countries wanted to use APEC to lobby for greater liberalization of
the GATT provision, while the Asian members hoped APEC would press to
keep the vital North American and European markets open to their exports.
As a consequence the initial ministerial meetings of APEC emphasized the
inclusive, trans-Pacific nature of the organization and the importance of the
seemingly tautological notion of "open regionalism."6
The idea of an "Asian view" is based on the argument that while there
are many differences among the Asian members of APEC, there are also a
number of important similarities which have produced an increasingly vig-
orous "Asian consciousness and identity."7 As a result, a distinctive Asian
perspective on regional and international issues has emerged. The similarities
to be found
among
the Asian states have roots in the fact
thatJapan,
South
Korea, Taiwan and the original members of the Association of Southeast
Asian Nations (ASEAN)
-
Indonesia, the Philippines, Malaysia, Singapore
and Thailand
-
have the recent common historical experiences of directly
confronting Asian communism while at the same time successfully
5 See Stephen Gill, "Knowledge, Politics, and Neo-Liberal Political Economy," in Richard Stubbs
and Geoffrey R. D. Underhill, Political Economy and the Changing Global Order (Toronto: McClelland
and Stewart, 1994), pp. 78-80; and Iyanatul Islam, "Between the State and the Market: The Case for
Eclectic Neoclassical Political Economy," in Andrew MacIntyre, ed., Business and Government in
IndustrialisingAsia (Ithaca: Cornell University Press, 1994), p. 95.
6 Higgott and Stubbs, "Competing Conceptions of Economic Regionalism," pp. 518-22.
7 Yoichi Funabashi, "The Asianization of Asia," Foreign Affairs, vol. 72 (November/December
1993), p. 75. Some in Japan have referred to this phenomenon as "neo-Asianism." See Nikkei Weekly,
January 17, 1994.
205
Pacific Affairs
engineering rapid economic growth.8 In addition some have argued that
there are aspects of the diverse cultures of the region that are held in
common.9 The Asian view, then, emphasizes that the group or the community
is the most important unit in a society with the individual's interests being sub-
ordinated to the interests of the wider society. Moreover, although
authoritarian governments are generally accepted and loyalty to leaders
encouraged, there is also an obligation on the part of governments to build
a consensus in support of their policies."0 The economic dimension of the
Asian view highlights the strong links between government and business and
the role of government in shaping economic development. It also emphasizes
the distinctive East and Southeast Asian approach to doing business, which
revolves around informal flexible "network-based" economies rooted in social
relations as opposed to the "firm-based" economies rooted in laws and bind-
ing contracts which are characteristic of the West."1
Although neo-liberalism tended to be the dominant approach at the
first few meetings of APEC, particularly as members continued to prod the
GAIT negotiations towards a successful conclusion in December 1993, by the
time the APEC summit was held in Osaka in November 1995 the Asian view
was an
increasingly
influential factor.
Certainly,
the
Japanese
minister of
international trade and
industry,
Hashimoto
Ryutaro, andJapanese
officials
emphasized that decisions at the Osaka meeting had been reached using the
"Asian way," which stressed consensus, and that the flexibility to be found in
the APEC approach to achieving its goals was in line with the thinking of the
Asian majority within APEC.12 Moreover, the Asian view continued to be sig-
nificant at the 1996 Summit at Subic Bay, the Philippines. As a consequence
of the emergence of the two approaches to dealing with the series of issues
facing APEC members, neo-liberalism and the Asian view, the forum itself
must confront a number of dilemmas.
8See Richard Stubbs, "The Political Economy of the Asia-Pacific Region," in Richard Stubbs and
Geoffrey R. D. Underhill, eds., Political Economy and the Changing Global Order (Toronto: McClelland
and Stewart, 1994), pp. 366-77.
9
See Kishore Mahbubani, "The Pacific Way," Foreign Affairs, vol. 74, no. 1 (1995), pp. 100-11;
Mahathir Mohamad, "A Prime Minister Speaks," ASEAN-ISIS Monitor, vol. 6 (April 1993), and
Mahathir Mohamad and Shintaro Ishihara, The Voice of Asia: Two Leaders Discuss the Coming Century
(Tokyo: Kodansha, 1995), pp. 71-115.
10
Noordin Sopiee, "Asian Approach Best Way to Build Enduring APEC," The Straits Times,
September 1, 1994.
11 See Stephen Bell, "The Collective Capitalism of Northeast Asia and the Limits of Orthodox
Economics," Australian Journal of Political Science, vol. 30 (July 1995), pp. 264-87; and Richard Stubbs,
"Asia-Pacific Regionalization and the Global Economy: A Third Form of Capitalism?" Asian Survey,
vol. 35 (September 1995), pp. 787-96. See also James Fallows, Looking at the Sun: The Rise of the New
East Asian Economic and Political System (New York: Pantheon Books, 1994), pp. 207-40.
12 See "Changing of the Guard: After Osaka, APEC Begins to March to an Asian Beat," Asiaweek,
December 8, 1995, pp. 21-24; and David Hulme, "Asia Takes Charge of the APEC Train," Asian
Business (January 1996), pp. 32-35.
206
MEMBERSHIP
The membership issue is fundamental to the future of APEC. With few
rules and regulations at present governing APEC it is the membership which,
collectively, will decide on the way APEC will evlove. Any change in the mem-
bership is, therefore, crucial. Certainly, the question of which countries were
to be invited to the inaugural meeting in Canberra proved to be contentious.
The initial Australian proposal did not include the United States or Canada.
However, the Japanese insisted that the North American countries were
included so as not to jeopardize trans-Pacific trading relations. The twelve
countries that met in Canberra in 1989 were, then, Australia, Canada,Japan,
New Zealand, South Korea, the United States and the members of ASEAN
-
Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. In
1991 at the meeting in Seoul, China, Hong Kong and Taiwan were admitted
as full members, with the politically contentious issue of sovereignty being cir-
cumvented by referring to APEC members as economies, not states. Mexico
and Papua New Guinea were admitted at the Seattle meeting in 1993 and
Chile atJakarta in 1994. At the
meeting
in Seattle members
recognized
that
APEC needed to develop a "more systematic means of addressing the issue
of new members""3 and imposed a moratorium on future membership while
senior officials were asked to conduct a study of membership policy and pro-
vide recommendations to the ministers on the criteria for the admittance of
future members.
But it will not be easy to agree on the recommendations that should be
made to the ministers. Indeed, at the 1995 Osaka summit officials declared
their intentions to continue working on the issue, even though their recom-
mendation was supposed to have been ready for the Osaka meeting. At the
meetings in the Philippines in 1996, the process was again delayed. However,
officials did agree to announce the criteria for membership at the Vancouver
Summit in 1997, the decision as to which economies should be admitted at
the Malaysia Summit in 1998, and the actual admission of new members at
the New Zealand Summit in 1999. The membership issue forces APEC to con-
front a clear dilemma. On the one hand from its inception APEC has
emphasized its inclusive, trans-Pacific, nondiscriminatory character. Indeed,
its adherence to increased economic liberalization and the opening of
borders to greater trade and investment are key principles of APEC. This
would strongly suggest that the more economies that can be made members
and can thus be committed to the liberalizing goals of APEC the better. On
the other hand APEC operates by consensus. If APEC is to expand to include
13
Asia-Pacific Economic Cooperation, Ministerial Meeting, Joint Statement, Seattle, 17-19
November 1993, Section 36.
207
Pacific Affairs
an even more diverse set of members than it has at present, then reaching
consensus on the forum's goals and the best path to these goals will become
increasingly difficult.
In practical terms it seems highly likely that APEC, at the Malaysian
Summit in 1998, will grant membership to Vietnam, which joined ASEAN in
1995, and Peru. Beyond that, however, it will not be easy to pick and choose
among the long list of economies knocking on APEC's door. These include
such diverse economies as Russia, which has a strong claim because of its
18,000-km Pacific coastline, India, Sri Lanka, Pakistan, Ecuador, Mongolia,
Panama and Colombia. Some clear criteria have to be laid down for mem-
bership so that there is a way of selecting from among the approximately
fifty countries located in a broadly defined Asia Pacific region."4 But reach-
ing consensus will be difficult. Malaysia, for example, is most likely to be
content with the very loose criteria agreed to at the 1991 meeting in Seoul15
as it would allow for a greater number of members which together could
counter the influence of the economically powerful United States. Moreover,
it would likely limit APEC's capacity for future action bringing it in line with
how Malaysia would like to see the forum evolve. Other members want much
stricter criteria so as to let prospective members know of the requirements
and responsibilities of membership and to allow APEC to deepen existing
relations before bringing on board more participants."6 Establishing criteria
for its membership policy, which have been agreed to by all current members,
will be a test of APEC's capacity to move forward.
REACHING APEC's GoALs
APEC's major achievement has been the commitment of its members to
initiate moves towards free and open trade and investment and to complete
the process by 2010 for developed economy members and 2020 for develop-
ing economy members. The setting of target dates for the completion of the
liberalization process was an attempt to demonstrate to the wider global
community that APEC was more than an informal exercise in promoting
friendly relations in the region. With both the European Union (EU) and
NAFTA having established clear milestones on the march towards the liber-
alization of their respective regional economies, APEC felt pressure to follow
suit. Moreover, it was argued that "once governments credibly commit to
achieve free trade among their economies, the private/business sectors
4 Irene Ngoo, "Need to Work Out Criteria for Full Membership," The Straits Times, November 13,
1994; and The Star (Malaysia), November 26, 1996.
15
Seoul APEC Declaration, Seoul, November 14, 1991, Section 7.
16
See, for example, Bodde,Jr., Viewfrom the 19th Floor, p. 54.
208
immediately begin to plan and invest for the world that will eventuate at the
culmination of the process."'17
The dilemma for APEC lies in how best to reach the ambitious economic
goals it has set for itself. On the one hand the Americans and the Australians
want to establish comprehensive, binding targets for the near and medium
term. They have argued for a fixed timetable in order to ensure that all mem-
bers, without exception, maintain a firm commitment to liberalization by
the 2010 and 2020 deadlines. As the U.S. secretary of state, Warren
Christopher, stated at the Osaka summit, "when one member protects even
one sector, many members suffer lost economic opportunities."1 The U.S.
and other developed economies are particularly worried about the free-rider
problem. They are concerned that having fulfilled their commitment to fully
liberalize their economies by the 2010 deadline the developing economies
might renege on their commitments to the later, 2020, deadline. The prob
lem with this approach, however, is that decisions in APEC are made by
consensus, and compliance with any commitment is, as the Malaysians are
quick to point out, voluntary. Hence, establishing concrete binding objectives
for all member economies is virtually impossible.
On the other hand a number of Asian members of APEC led
by Japan
have argued for a "concerted unilateral" approach to reaching APEC's liber-
alization goals. This would get everyone to the final destination but would
allow for flexibility so that each member economy could move at its own pace.
Liberalization, it is argued, "should come about fundamentally through the
unilateral best endeavour and action of every member economy, acting with-
out intimidation.
"19
Certainly, many of the developing countries wish to
ensure that they are not forced to liberalize before they are fully ready to do
so. For example, "China has a huge array of daunting barriers; the World
Bank reckons the average to be around 30%. Worse, the customs regime
varies from one Chinese port to the next. "20 It would seem, then, that the
Chinese government will need a good deal of flexibility in terms of delivering
on its liberalization commitments. In addition other Asian member
economies have experienced rapid rates of growth by employing policies
which subsidize export industries and protect "infant" and import-substitu-
tion industries. They are not likely to want to radically change these successful
policies in the short or medium term. Hence, the concern with the concerted
1 "Achieving the APEC Vision: Free and Open Trade in the Asia-Pacific," Second Report of the
Eminent Persons Group to APEC Ministers, August 1994, p. 38.
18 "Three 'C's Key to Successful APEC Action Agenda," U.S. Statement by U.S. Secretary of State
Warren Christopher at the 7th APEC Ministerial Meeting, November 16, 1995, Osaka,Japan.
19 Noordin Sopiee, "Asian Approach Best Way to Build Enduring APEC," The Straits Times,
September 1, 1994.
20
"The Opening of Asia," The Economist, November 12, 1994.
209
Pacific Affairs
unilateral approach is that an impatient United States may feel that the Asian
countries are not opening their economies to trade and investment fast
enough and that, therefore, U.S. interests are not being fully served. As a con-
sequence the U.S. could withdraw from APEC. This would severely weaken
the forum and jeopardize its future.
The major area of contention between the comprehensive binding
approach favoured by the Anglo-Saxon members of APEC and the unilateral
flexible approach favoured by most Asian members is the issue of domestic
sectoral protectionism. The U.S. ambassador to APEC, Sandra Kristoff, has
pointed out that "for many of us, to provide for sectoral exclusion because
of domestic sensitivities would be to turn Bogor [the agreement signed at
the 1994 APEC summit in Bogor, Indonesia that targets 2010 and 2020 as
the dates for full liberalization] on its head and to call into serious question
the continued interest of many of us to participate."21
Yet it has to be noted that all APEC member governments will face diffi-
cult choices as the deadline for full liberalization draws closer. At the Osaka
summit in 1995 it wasJapan, China, Taiwan and South Korea which sought
special treatment for their agricultural industries, much to the displeasure
of agricultural exporting economies such as the U.S., Canada, Australia and
New Zealand. However, even the developed countries have sectors which
domestic interests will fight to the end to safeguard against unrestrained
imports. Examples might include Canada's healthcare and cultural industries
and Australia's auto industry. Moreover, the actions of the U.S. in negotiating
NAFTA and its subsequent actions in attempting to block increased imports
of such diverse products as steel rails, pork, softwood lumber and men's suits
suggest that while the administration may be willing to commit the country to
the full liberalization by 2010, Congress and significant parts of the business
community might not be so enthusiastic when it comes to specific products.22
This raises the allied problem of how APEC's "open regionalism" will be
reconciled with the "closed regionalism" of NAFTA, the ASEAN Free Trade
Agreement and the Australia-New Zealand Closer Economic Relationship.
Open regionalism is usually thought of as a process of regional cooperation
whose outcome is not only the reduction of intraregional economic barriers
but also the reduction of external barriers to trade and investment with
21
"Deep Fracture May Destroy APEC, Says U.S. Official," The Sunday Times, November 5, 1995.
22
Thomas M. Boddez and Michael J. Trebilcock, Unfinished Business: Reforming Trade Remedy
Laws in North America, Policy Study No. 17 (Toronto: C.D. Howe Institute, 1993), pp. 109-56; Micheal
B. Percy and Christian Yoder, The Softwood LumberDispute and Canada-U.S. Trade in Natural Resources
(Ottawa: Institute for Research on Public Policy, 1987), ch. 5; Grace Skogstad, "The Application of
Canadian and U.S. Trade Remedy Laws: Irreconcilable Expectations?" Canadian PublicAdministration,
vol. 31 (Winter 1988); and Drew Fagan, "U.S. Revives Wool Suit Dispute," The Globe and Mail, June 24,
1996.
210
economies which are not part of the regional organization. The assumption
would seem to be that APEC's open regionalism will either supersede the
closed regionalism of the established trading agreements or at least put con-
siderable pressure on them to reduce their trade barriers with the outside
world.
This assumption may prove to be questionable for two reasons. First, a
great deal of political capital has already been invested in creating these
closed agreements, especially NAFTA, and the political support that has been
generated for them may well trump any attempts to mobilize the political sup-
port necessary to pass the enabling legislation so as to comply with the APEC
goal of full liberalization by the target dates. Second, it may be politically
very difficult in some countries to sell the idea of opening up their domestic
market to economies
- in say, for example, the EU - which have not signed
any reciprocating agreement. This prospect evokes the spectre of the free-
rider problem that so exercises the U.S.
At present the concerted unilateral approach developed by theJapanese
in the period leading up to the Osaka summit has gained the support of
most of the Asian members of APEC. Certainly, Asian officials are much more
comfortable with the rather vague and loose language that came out of the
Osaka and Subic Bay meetings than with a uniform fixed timetable or across-
the-board binding targets for all members that Western governments were
proposing. At the same time agreement was reached at Osaka for each APEC
member to commit voluntarily to take initial market-opening steps, termed
"down-payments." It was agreed that each member's plans for liberalization
including "specific concrete details" and "time frames" would be presented at
the Subic Bay summit in 1996. However, at the 1996 summit the individual
action plans (LAPs) of each member economy were met by a variety of reac-
tions, none of them enthusiastic. The failure of many LAPs to be little more
than vague declarations of intent led APEC officials to rationalize that they
are flexible guidelines, or frameworks, for liberalization which can be revis-
ited and revised on a continuing basis by each member economy.23 Obviously,
then, there is a need for imaginative ways of balancing the different perspec-
tives to be found within APEC in dealing with the tensions that surround the
issue of how to realize APEC's overall goals of economic liberalization and
how to assess each member's progress towards the 2010 and 2020 deadlines.
23
'The Osaka Action Agenda: Implementation of the Bogor Declaration," November 19, 1995,
Osaka, Japan, Section B; and "Manila Action Plan for APEC (MAPA)," Volume 1 (Singapore: APEC
Secretariat, November 1996).
211
Pacific Affairs
INSTITUTIONALIZATION
The first APEC meeting in 1989 concluded that it was "premature at this
stage to decide upon any particular structure for a Ministerial-level forum or
its necessary support mechanism and that cooperation should be based on
non-formal consulatative exchanges of views among Asia-Pacific
economies."24 Despite the rapid expansion of APEC in terms of members and
meetings, this view has continued to predominate, and APEC's institutional-
ization has, therefore, been gradual and incremental. At the Bangkok
ministerial meeting in 1992 it was agreed to establish a secretariat which was
eventually based in Singapore. However, it remains small and its responsibili-
ties limited. The largest structural change has been in terms of the number of
committees and working groups that have been set up at the ministerial and
various bureaucratic levels. But the coordination of these committees and
groups is limited and tied to the capacity of the government that is hosting
the summit meeting in any given year. In essence, then, compared to other
regional organizations APEC remains relatively unstructured.25 While this
lack of structure clearly has advantages, it also creates a number of dilemmas
for APEC.
There are those who would like to see a greater institutionalization of
APEC. For example, the now defunct Eminent Persons Group (EPG) argued
for the need "to upgrade APEC's operational efficiency and to reduce possi-
ble institutional impediments to the APEC process."26 Among the member
economies of APEC it is Australia, the United States, South Korea, New
Zealand and Canada which favour strengthening the institutional structure of
APEC. Like the EPG they were quick to point out how the status bestowed
on APEC by major world governments and other regional and international
organizations improved markedly once the Bangkok Declaration was adopted
and the secretariat established.27 There is, clearly, a sense that greater
24
Asia-Pacific Economic Cooperation, Ministerial Meeting,Joint Statement, Canberra, November
6-7, 1989.
25
See the discussion of this point in Charles E. Morrison, "The Future of APEC: Institutional
and Structural Issues," Analysis, vol. 6, no. 1 (1994), p. 81; and Martin Rudner, "APEC: The
Challenges of Asia-Pacific Cooperation," Modern Asian Studies, no. 2 (1995), p. 410.
26 "A Vision for APEC: Towards an Asia-Pacific Economic Community," Report of the Eminent
Persons Group to APEC Ministers (Singapore: APEC Secretariat, October, 1993), p. 55. See also the
argument in Donald C. Hellmann, "APEC and the Political Economy of the Asia-Pacific: New Myths,
Old Realities," Analysis, vol. 6, no. 1 (1994), p. 36.
27
Hellmann, "APEC and the Political Economy of the Asia-Pacific," p. 36.
212
Institution-Building Around the
Pacific
Rim
institutionalization is necessary in order to press forward towards the goals
of greater trade and investment facilitation and increased trade liberalization.
But greater institutionalization would undoubtedly alienate a number of
Asian members of APEC. As Miles Kahler has noted, many APEC members,
particularly the Asian members, "find the incremental approach to institu-
tional evolution more congenial than what they perceive as a 'Western'
emphasis on constitution-making."28 Asian developing countries are con-
cerned that a further strengthening of APEC as an institution would result
in an increasingly legalized contract-based organization capable of enforcing
compliance.29 Indeed, many
Asian members of APEC view the forum as more
of a process than an institution and would like to see it stay that way.30
For the time being, then, APEC's institutional arrangement is likely to
remain tied to the annual summit meetings. This means that the designated
APEC host for a particular year's summit takes on the bulk of the responsi-
bilities for the agenda and coordinating the various satellite workshops and
meetings of ministers and officials. This host system has slowly evolved. For
example, it was agreed at the inaugural meeting in Canberra that an ASEAN
member would host the annual ministerial meeting every second year
-
in
other words in even-numbered years. This was done to assuage the fears of the
ASEAN members that their association would be overtaken by APEC. In 1991
the Seoul APEC Declaration of 1991 guaranteed that all members who
wanted to hold a summit meeting would have the opportunity to do so.3" And
in 1993 the United States turned the annual ministerial meeting into a
summit of government leaders.
While most members of APEC, especially the Asian members, are gener-
ally satisfied with this arrangement it does have its limitations. First, those
governments hosting the APEC annual meetings in the first few years were
APEC boosters and wanted to see APEC realize its open regionalism goals.32
As a result APEC moved forward at a surprisingly rapid rate. In 1998 Malaysia,
the most notable APEC skeptic, will act as host, and a few years later China,
another reluctant APEC member, will drive the process for a year. It is possible
28
Miles
Kahler,
"Institution
Building
in the Pacific," in Andrew Mack and
John Ravenhill, eds.,
Pacific Cooperation: BuildingEconomic and Security Regimes in the Asia-Pacific Region (St. Leonards, New
South Wales: Allen and Unwin, 1994), p. 34. Similar comments are made by David Rapkin,
"Leadership and Cooperative Institutions in the Asia-Pacific," in Mack and Ravenhill, eds., Pacific
Cooperation, p. 118.
29 See the discussion of this problem in Sopiee, "Asian Approach"; and David Rapkin, "Leadership
and Cooperative Institutions in the Asia-Pacific," in Mack and Ravenhill, eds., Pacific Cooperation, pp.
118-21.
30
SeeJoceline Tan, "Putting APEC Back on Track," The New Straits Times, January 5, 1994.
31
Seoul APEC Declaration, Seoul, November 14, 1991, Section 11.
32
The first five governments to host APEC's annual meeting were Australia, Singapore, South
Korea, Thailand - under the interim government of Anand Panyarachun, which was dominated by
Western-trained technocrats - and the United States. All were strong supporters of liberalization.
The next three hosts, Indonesia, Japan and the Philippines, were APEC moderates.
213
Pacific Affairs
that the Malaysian prime minister, Dr. Mahathir, will have stepped down by
then or that he will, as he did over the Commonwealth, have a change of
heart. However, it is also possible that Malaysia, while wanting to put on a
successful summit that makes a unique contribution to the process, will not
press forward towards all of APEC's goals with the same enthusiasm as other
hosts. Other APEC members will have to guard against the process stalling
while it is in the hands of governments such as Malaysia and China.
Second, there is the problem of whether, as the APEC agenda gets more
crowded and more complex, some of the ASEAN members will have the
bureaucratic capacity to move the APEC process forward during the years in
which they host the APEC summit. This is not to suggest that the ASEAN
states have weak bureaucracies. Clearly, this is not the case. Rather it needs
to be noted that with rapidly expanding domestic economies, a large number
of ASEAN meetings to host or attend each year, and other regional and
international obligations, some ASEAN bureaucracies are already stretched to
the limit. Hosting a summit and coordinating a year of APEC meetings may
prove to be almost impossible when added to the other responsibilities that
are already in place. Multilateralism exacts a high price in terms of bureau-
cratic resources.
Third, there is the issue of how to treat recent and new members in terms
of their place in the cycle of hosts. Should, for example, Papua New Guinea
or Chile host an APEC summit in the near future? If new members are
brought into APEC does that mean that APEC boosters such as Australia and
the United States will have to wait until after the new members have taken
their turn as hosts before they can once again drive the APEC process? If
new members do host an APEC summit before Australia gets another chance
it may mean that the 2010 deadline will go by before APEC returns to
Canberra. These issues and the others noted above can be resolved.
Ultimately, a balance will likely be found which, as one insider has noted,
will mean that "the pace of institutionalisation will not be as fast as the
Americans or the Australians would like, and will be faster than some of the
Asian's would prefer."33 However, it will take patience, persistence and imagi-
nation to devise a
strategy
that can ensure that APEC does not founder on the
issue of institutionalization.
33
Bodde,Jr., Viewwfrom the 19th Floor, p. 65.
214
THE AGENDA
From the beginning strict parameters have been set around APEC's
agenda. Certainly, the activists who have been pushing APEC as a vehicle for
greater economic liberalization around the Pacific Rim have argued
convincingly that APEC should concentrate solely on economic issues.
However, as APEC has raised its profile and demonstrated that it may be able
to influence the process of regional and even international economic liber-
alization so the questions of which economic issues should be given priority
and how broadly "economic" should be defined, have begun to be discussed.
As a result APEC faces a number of difficult decisions.
Two ways of approaching the issue of liberalization have come to domi-
nate APEC discussions. The first approach is represented by the target dates
of fully open economies by 2010 for the developed economies of APEC and
2020 for the developing economies. The principle of adopting target dates
was given priority at the Seattle summit of 1993 and the Bogor summit in 1994
and has been actively promoted by the U.S., Australia and Canada among
others. The second approach is centered on attempts, through the many
and various working groups, to introduce mechanisms, such as the harmo-
nization of customs procedures or a dispute mediation service, that will
facilitate greater trade and investment among APEC's member economies.
The dilemma for APEC is how to manage the two approaches. Full eco-
nomic liberalization by specific target dates is a high-reward but high-risk
approach. Achieving fully open economies around the region by 2010 and
2020 would be a major accomplishment for APEC. However, should the polit-
ical will to implement the necessary enabling legislation dissolve as the
deadlines get closer then the resulting recriminations may affect the whole
liberalization process and undermine any gains made on the trade and invest-
ment facilitation front. Concentrating on facilitating trade and investment
will bring less dramatic results but is more likely to succeed. But the progress
that various working groups have made in simply making trade and invest-
ment easier is a far cry from, and attracts less media attention than, the lofty
open regionalism goals that have preoccupied the APEC boosters, and may
mean that key member economies, such as the United States, will become dis-
illusioned and abandon APEC, making even the more limited trade
facilitation goals difficult to achieve. Moving foward with both approaches at
the same time is an obvious compromise. Yet, it is not clear that either APEC
as whole or individual host governments will in the future have the
bureacratic capacity and political energy to pursue both approaches
simultaneously.
An additional complication is that Malaysia, which will host the summit in
1998, appears interested in shifting the economic emphasis in APEC away
from trade and investment liberalization and towards economic and technical
cooperation. This so-called 'Third Pillar of APEC" was introduced in Osaka,
215
Pacific
Affairs
and for many of APEC's members, particularly the developing ones, it has
more appeal than the free trade issues championed by the developed APEC
member economies. Certainly development assistance was pushed at the
Subic Bay summit and will continue to have a significant place on an agenda
which is becoming more crowded with each summit.
While there is agreement that APEC should concentrate on economic
issues, there is also a sense in some quarters that the discussions to date have
been too narrow and should be broadened to encompass all aspects of eco-
nomic liberalization. Hence, for example, it has been argued that, "at the very
time governments are making it easier through trade agreements for business
to trade and invest and build alliances and associations so that they can profit,
many of the same governments reduce, hold back or totally violate the free-
dom of working people to build alliances and associations so they can
survive."34 Also part of the argument is that non-governmental organizations
(NGOs)
should also be more
directly
involved in the APEC
process
-
notjust
in the unofficial parallel meetings that were held in Osaka and Subic Bay
-
and that no trade agreement ought to be signed without a clause protecting
those basic human rights pertinent to economic life.35 This argument is also
tied in to the "social dumping" argument of the U.S. and other Western gov-
ernments which are concerned that as liberalization takes place businesses
in Asia's developing countries will be at a distinct advantage because they
will not have to meet minimum labour and environmental standards nor
respect Western concepts of human rights.
But should the Western economies attempt to raise these issues in APEC
they will be firmly rebuffed by most of the Asian member economies. Asian
opposition is based on the perception that the issue of human rights is rooted
in Western conceptions of human dignity, individual freedom and justice and
is essentially a smokescreen for Westernization and globalization on Western
terms.36 It is widely believed in Asia that Western notions of human rights and
individual liberties are incompatible with Asian notions of the importance of
community and the values associated with Confucianism and Islam. Nor is it
thought among the Asian members that APEC is the place to debate these dif-
34 Ed Broadbent, "Globalization the Democratic Challenge" (Paper presented at the Conference
on Globalization, Trade and Human Rights, Toronto, Ontario, Canada, February 22, 1996).
35 Ibid. See also "APEC: The Challenge of Human Rights," Libertas, vol. 5 (February 1996); and Far
Eastern Economic Review, November 14, 1996.
36 See Brian S. Turner, "Human Rights: From Local Cultures to Global Systems," in Damien
Kingsbury and Greg Barton, eds.,
Differences
and Tolerance: Human Rights Issues in SoutheastAsia (Victoria:
Deakin University Press, 1994), p. 9. See also Diane K Mauzy and R S. Milne, "Human Rights in ASEAN
States: A Canadian Policy Perspective," in Amitav Acharya and Richard Stubbs, eds., New Challenges for
ASEAN. EmergingPolicy Issues (Vancouver: University of British Columbia Press, 1995), pp. 115-29; and
James C. Hsuing, "Human Rights in an East Asian Perspective," in James C. Hsuing, ed., Human Rights
in East Asia: A Cultural Perspective (New York: Paragon House, 1985), pp. 5-6.
216
ferences. Interestingly, environmental issues have been discussed by APEC. In
March 1994 ministers responsible for the environment met in Vancouver to
review the potential role of APEC in "promoting environmental cooperation
in the Asia-Pacific."37 However, while it is obviously beneficial for all APEC
members to participate in cleaning up the environment no binding decisions
have been reached. Certainly, no environmental standards have been set or
enforceable actions agreed to. Indeed, if the Western members were to
attempt to impose such an approach they would be strenuously opposed by
the Asian members.
Finally, there is mounting pressure on APEC members to put security
issues on the agenda. The argument here is that economic and security issues
are interdependent38 and, indeed, that many Asian states define national
security to include economic security.39 Others have suggested that by main-
taining American interest in the economic life of East Asia, APEC can ensure
that the U.S. will also maintain its security involvement.40 Moreover, as the
G-7 summit meetings have shown, when leaders get together they are prone
to talk about security even when they are supposed to be discussing economic
issues. However, while there is a general acknowledgement that security issues
are important and pressing, there is considerable resistance to departing
from what is seen as APEC's original mandate to stick strictly to economic
matters.41 The Asian members, in particular, are not interested in seeing
APEC move into the security realm especially now that the ASEAN Regional
Forum has been created specifically to deal with these kinds of issues. It is also
felt that APEC could be seriously imperilled if China-Taiwan or U.S.-Japan
security relations became part of the forum's discussions.
As APEC evolves, and especially if new members are admitted, the ques-
tion of what should go on the agenda, and in what order, will get more
complicated. APEC's success brings with it a higher profile and the more
APEC accomplishes the more its goals and achievements will be questioned
and challenged by those who are put at a disadvantage by its actions. The
increasing pressure on APEC to expand its agenda means that careful
37 APEC Meeting of Ministers Responsible for the Environment, Summary Report, Vancouver,
March 23-25, 1994.
38 See Hee Kwon Park, "Multilateral Security Cooperation," The
Pacific
Review, vol. 6, no. 3 (1993),
p. 251.
39
See David Dewitt, "Common, Comprehensive, and Cooperative Security in the Asia Pacific," The
Pacific Review, vol. 7, no. 1 (1994).
40 This point is made by Fred Bergsten, the chair of the EPG, who also notes, somewhat ambigu-
ously, that "APEC does not
-
and should not - discuss security issues but its security implications
are profound." See Fred Bergsten, 'The Case for APEC: An Asian Push for World-Wide Free Trade,"
The Economist, January 6, 1996.
41 Douglas H. Paal, "APEC and Regional Security," Analysis, vol. 4, no. 4 (1993), p. 91; and Far
Eastern Economic Review, December 5, 1996.
217
Pacific
Affairs
planning and a great deal of consultation will be needed to ensure that a
consensus is reached on what should be discussed and the priority to be given
to each issue.
CONCLUSION
APEC's potential for generating better regional economic relations has
become more apparent with each annual meeting. Yet as APEC moves
beyond the original "talk shop" mandate the fundamental differences among
its member economies become sharper and create unanticipated dilemmas.
Differences of opinion over membership, attaining the liberalization goals,
institutionalization, and agenda items reflect differences of opinion about the
direction and pace of APEC's development as a forum for regional economic
cooperation. On the one hand there are those, primarily the Western mem-
bers, who would like to see a more activist APEC, working to deregulate
domestic regional economies as well as the international economy and sys-
tematically reducing barriers to international trade and investment. On the
other hand many Asian states tend to the view that APEC's role should be to
"hold discussions and policy dialogue on matters of common concern to its
members, foster a common understanding regarding measures to strengthen
regional cooperation, and contribute to policy making at the national as well
as regional level."42 In other words APEC should become a less bureaucra-
tized and distinctly "Asia-Pacific version of the OECD."43
Ensuring a balance between these two approaches will take diplomatic
skill and energy. As oneJapanese analyst puts it, in seeking to push APEC into
action "its more ambitious members must not aim too high, lest they alien-
ate their more cautious counterparts. At the same time, a cooperative
framework like APEC is devoid of meaning if it fails to undertake meaning-
ful projects."44 Certainly, keeping boosters like the U.S. and Australia and
skeptics like Malaysia and China all committed to APEC will not be easy. The
dilemmas produced by the many different perceptions of how Asia-Pacific
regional economic cooperation should evolve will keep APEC's diplomats
working hard well into the future. But APEC has forged ahead based on the
principles of consultation and consensus and as long as expectations remain
realistic there is reason to believe that APEC will emerge on a path which is
rather more proactive than the OECD model favoured by some Asians and
rather less of a liberal trading arrangement favoured by Western economists.
McMaster University, Canada, January 1997
42
Nobutoshi Akao, "A Strategy for APEC: Ajapanese View,"Japan Review of International Affairs,
vol. 9, no. 3 (1995), p. 171.
43 Ibid., p. 170.
4 Akio Watanabe, "What is Asia-Pacific Regionalism?"Japan Review of International Affairs, vol. 9,
no. 3 (1995), p. 194.
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