APEC’s New IAP Process

Ippei Yamazawa
Professor Emeritus, Hitotsubashi University, Japan

Negotiations for three economies’ accession to the TPP have started toward its final stage. While Canada and Mexico will clear additional hurdles of liberalization easily thanks to their membership of NAFTA, Japan is reported to face strong requests by the U.S. and Australia on her liberalization of agricultural products. Nevertheless, all existing members of the TPP negotiation welcome the three economies’ accession in principle since it will increase the scale economy merit of TPP.

However, it will never be easy to successfully conclude the TPP negotiation. It is not only in Japan alone that vested-interest groups resist to moves to open economic regime. Requests for exclusion are made in many economies including the U.S. How can we stress them to minimum and achieve a high level of trade and investment liberalization principle. In future we need to incorporate China, Indonesia, and other Asian economies which carry the high growth of the Asia Pacific region.

Dynamics of competitive liberalization has urged these Asian economies to accelerate their FTA moves. In the week following APEC Honolulu, ASEAN Summit in Bali proposed Regional Comprehensive Economic Partnership (RCEP), accelerating ASEAN plus FTAs under ASEAN initiative (ASEAN Summit, 2011). In December China-Japan-Korea FTA Study group completed its report proposing an early start of negotiation on the trilateral FTA among their governments.

On the way home from APEC Honolulu, Prime Minister Noda expressed his wish to promote both TPP and ASEAN plus FTAs in parallel. However, how can we connect TPP excluding China with ASEAN plus excluding the U.S? He should clarify his strategy for Japan’s initiative. Neither TPP nor ASEAN-plus is conducted within APEC, the sole inter-governmental network for Asia Pacific cooperation. APEC has continued liberalization and facilitation as its core activities for the past fifteen years. Media has not paid much attention to its proper activities, leaving public audience as well as young scholars unaware of them. I would suggest that we should make better use of APEC including both China and the U.S. Japan can claim it on the basis of her hosting and having achieved APEC Yokohama in 2010.¹

Mid-term Assessment at APEC 2010 Yokohama

Throughout last year APEC undertook a detailed examination of individual economies’ achievement toward the Bogor Goals (APEC, 2010a). Only the group assessment was published of its thirteen economies, five industrialized economies designated to achieve the free and open trade by 2010 plus eight volunteered economies. It said that APEC economies have achieved a high growth for the past fifteen years and drug the world economy thanks to the members’ efforts to achieve the Bogor Goals. However, it also indicated that impediments still remained in six sectors of tariffs, non-tariff measures, services, investment, intellectual property rights, and government purchase and stressed that all APEC economies should continue their efforts of eliminating them for the remaining ten years until 2020.

This is a fair assessment of APEC’s achievement, considering the severe constraints that the WTO/DDA negotiation has got stumbled recently and the Bogor process has been implemented under the modality of non-binding liberalization. APEC’s TILF process will continue for all APEC economies, including the 13 economies summarized as above.

New IAP Peer Review Process

Leaders committed in Yokohama to continue the TILF process toward the final Bogor Goals in 2020. SOM2 in Montana in May 2011 adopted ‘the new IAP peer review process’ for all 21 members to remove remaining barriers toward 2020 (APEC/CTI 2011).

- New IAP should cover all 14 areas of Osaka Action Agenda plus those added afterwards (transparency, RTAs/FTAs, and other voluntary reporting areas). 2010 economies (13 economies which were assessed in 2010) might give emphasis to those areas where shortcomings were highlighted by Leaders, cited above).

- Economies should describe, in brief points only significant new developments under each chapter heading.

- Economies would report in 2012, 2014, 2016, and 2018. The final assessment would be undertaken in 2020.

- Policy Support Unit support SOM in this new IAP peer review process. It will prepare a short one-two page report with key highlights on members’ main achievements and remaining areas for improvements in the year of review. PSU reports will be discussed at SOMs and finally made public.

These respond to often heard criticism of the previous IAP peer review process and, if implemented faithfully, the new IAP process will be much strengthened. In prior for APEC 2010 Yokohama, I conducted an independent quantitative assessment of all 21 economies’ achievement toward the Bogor Goals in eight are as of Osaka Action Agenda.²

I found that the thirteen economies differed greatly in their achievement and remaining eight economies have achieved much less toward the Bogor Goals. They may be treated differently according to their different level of liberalization and facilitation. The six sensitive areas suggested by Leaders above are consistent with my findings. The concise and pinpointing ways of addressing achievements will be closer to ‘negative list formula’ which I suggested earlier.

Here I would like to stress the importance of ‘individual assessment’ and ‘make it public outside APEC rather than peer review within SOM’. While the final report of the mid-term assessment tells us only the group assessment of the thirteen volunteered economies, individual senior officials, both the thirteen economies and the rest of APEC economies, have understood well how far they have achieved toward the Bogor Goals and how much still remain. It is no use of keeping the ‘no name, no shame’ modality, but make them known to outside APEC officials, such as ABAC and PECC experts. APEC may keep its modality of non-binding nature and voluntarism but should open their review process to outside critics.

Alternative processes toward FTAAP

At APEC 2010 Yokohama APEC Leaders declared as ‘FTAAP should be pursued as a comprehensive FTA by developing and building on ongoing regional undertakings such as ASEAN+3, ASEAN+6, and TPP. To this end APEC will make an important meaningful contribution as an incubator of a FTAAP by providing leadership and intellectual input into the process’. (Pathway to FTAAP , APEC/LM 2010b). We, PECC experts, should monitor the progress of individual paths and advise so that they will merge toward FTAAP. Otherwise, TPP and RECP proceed separately so that two blocs be formed dividing Asia, and ‘free trade in Asia Pacific’ will end in dream.

ASEAN+3 and +6 have been examined together by a task force of member governments’ officials, following the suggestions of ASEAN+3 Summit and East Asian Summit. Media made fun of the rivalry between China and Japan, while China pushing East Asia FTA (EAFTA) and Japan pushing Comprehensive Economic Partnership for East Asia (CEPEA). However, as is apparently urged by the TPP negotiations, China and Japan made a compromise proposal at the last ASEAN +6 Economic Ministers’ meeting in Indonesia last August. They proposed ‘ASEAN +α’, not specifying either +3 or +6.

ASEAN Summit’s proposal of RCEP conceded to the China-Japan proposal but maintained the ASEAN initiative for Asia-wide FTA. It will be interacted with the China-Japan-Korea FTA in due course. RCEP will have a narrower coverage of commodity trade, services trade, investment, and ecotech and is likely to remain at a lower level of liberalization than TPP.

APEC more than an incubator

Here I would like to stress that APEC can play a positive role in merging TPP and RCEP. The new IAP Peer Review mentioned above has a comprehensive coverage, including WTO plus areas and is close to the TPP’s high standard, except for its non-binding modality. APEC, with its two decade experience in Ecotech and capacity building, helps developing economies to implement various facilitation programs, thus inviting them to join high level FTAs. Above all APEC is their least common multiple, that is, includes all members of the Asia Pacific. TPP and RCEP pull the Asia Pacific from above, while APEC pushes it up from behind.

As regards the follow-up of the new IAP process, PSU is assigned an important job of organizing this process for effective liberalization and facilitation programs. It should not merely summarizing individual IAPs but helping them publicizing their commitments and achievements. A mapping exercise can be attempted to clarify the differences among the three.³

If necessary, PECC experts are willing to provide assistance. This will encourage SOM to get concerned about reducing differences of the three so that their possible convergence will be seen toward 2020. I expect the final assessment of the new IAP process dated in 2020 will announce the converging stage toward FTAAP.

References:

APEC/CTI, 2011 The Individual Action Plan (IAP) and IAP Peer Review, May, presented at the 2nd APEC/SOM, Big Sky, U.S. May

APEC/LM 2010a. Leaders’ Statement on 2010 Bogor Goals Assessment, Nov. 2010/11/27, 4p

APEC/LM 2010b Pathways to FTAAP, Nov. 2010, 3p

APEC/PSU 2011, The Mutual Usefulness between APEC and TPP, Oct.

ASEAN Summit 2011, ASEAN Framework for Regional Comprehensive Economic Partnership (RCEP), Bali, Nov. 19,.

Yamazawa, Ippei 2011a. ‘New IAP Peer Review Process toward FTAAP’, posted in APEC Study Center Consortium Conference 2011, Key Findings and Policy Recommendations: Green Growth, Trade Integration and Regulatory Convergence, Nov.

Yamazawa, Ippei 2011b, Asia Pacific Economic Cooperation: Its New Agenda for the Third Decade, Institute of Southeast Asia Studies, Singapore

¹This is an updated and abridged version of Yamazawa (2011a)

²Yamazawa, Ippei, A Quantitative Assessment of APEC’s Achievement towards the Bogor Goals, presented at a seminar ‘APEC Japan 2010 Symposium’ organized by Japanese senior officials in Tokyo, December 2009. It is reprinted in Yamazawa (2011b).

³APEC/PSU(2011) indicated the complementarity between APEC and TPP in the sense that, although APEC does not conduct negotiation and keeps its non-binding formula unlike TPP, it nevertheless aims at trade and investment liberalization with similar area coverage.