Has APEC Achieved Its Mid-term Bogor Target?

Ippei Yamazawa
Professor Emeritus, Hitotsubashi University, Japan

2010 APEC Yokohama was completed three weeks ago with three major achievements, first the mid-term assessment of its Bogor target, second a concrete direction toward Free trade Area for the Asia-Pacific (FTAAP), and third APEC’s growth strategy. The first two give us a future prospect for APEC’s main activity of Trade Investment Liberalization and Facilitation (TILF), while the last packages its new initiatives undertaken for the past decade in order to combat with changing economic environment in the region. Discussion has so far focused on TPP as a possible route to FTAAP but others seem to be missed since the Yokohama meetings. This short essay aims to discuss both the first agenda and continued TILF of the second.

APEC SOM reported the assessment of the Mid-term Bogor Goals achievement to Leaders’ Meeting in 2010 (APEC/SOM 2010). It included five industrialized economies designated to achieve the free and open trade by 2010 plus eight economies which volunteered to be assessed this time, namely Chile, Hong Kong, ROK, Malaysia, Mexico, Peru, Singapore, and Chinese Taipei. They were not assessed individually but as a group of five plus eight economies. Leaders summarized their achievement as the 13 economies as follow (APEC/LM 2010b).

- The overall growth in commodity trade for all APEC economies increased by 7.1% annually for 1994-2009, services by 7.0%, and inflow and outflow of FDI by 13.0% and 12.7% respectively.

- The 13 economies reduced their simple average tariffs from 8.2% to 5.4% for 1994-2009, far lower than the world average of 10.4%, as well as further tariff reduction within their FTA framework.

- They opened their services markets through unilateral reform of domestic policy and maintained liberalized investment regime.

- They have also taken significant steps on trade facilitation to streamline customs procedures and align standards and conformance procedures. Under the Trade Facilitation Action Plan (TFAP) they have reduced transaction costs in the region by 5% for 2002-2006 and are achieving an additional 5% under the second TFAP by this year. On the other hand, Leaders also noted that impediments still remain in sensitive sectors;

- Higher tariffs in agricultural products and textile and clothing,

- Remaining restrictions in financial, telecommunications, transportation, and audiovisual services, and the movement of people least liberalized, - Sectoral investment restrictions in the form of prohibitions or capital ceiling and continuing general screening system.

- Non-tariff measures need further efforts

- Further works need to be done in standard and conformance, customs procedures, intellectual property rights, and government procurement, - Behind-the-border issues need to be addressed by facilitating structural reform.

Leaders concluded:

“It is a fair statement to say that the 2010 economies have some way to go to achieve free and open trade in the region. APEC challenges in pursuing free and open trade and investment continues. APEC will continue to review economies’ progress towards the Bogor Goals of free and open trade and investment. We recognized that all APEC economies must maintain their individual and collective commitment to further liberalize and facilitate trade and investment by reducing or eliminating tariffs, restrictions on trade in services, and restrictions on investment, and promoting improvement in other areas, including non-tariff measures and behind-the-border issues.” (APEC/LM 2010b)

“APEC has achieved much since its inception, evolving to become the pre-eminent economic forum in the Asia-Pacific, the world’s most dynamic and open region. Looking back over the past 15 years, the progress made by APEC in pursuit of the goal of free and open trade and investment has reinforced the fact that full achievement of the Bogor Goals for all economies should continue to provide direction for APEC’s work of trade and investment liberalization and facilitation” (APEC/LM 2010b)

This is a fair assessment of APEC’s achievement, considering the severe constraints that the WTO/DDA negotiation has got stumbled and the Bogor process has been implemented under non-binding liberalization modality. APEC’s TILF process will continue for all APEC economies, including the 13 economies summarized as above. However, it is not clear from the Leaders’ statements and report how this process will be conducted.

- Will all 21 economies conduct the peer review process of IAP/CAP at SOM?

- Will the 13 economies assessed this time be subject to a new form of review, focusing on their remaining impediments?

- Will all 21 economies be subject to a new review process toward the final target of 2020?

The past three rounds of the IAP peer review process were criticized occasionally because of its huge works and voluminous documents and ambiguous focus due to its positive list formula. SOM’s assessment report this time is also based on detailed data collection and reports submitted by the 13 economies. This is a good opportunity at the mid-term assessment for reshuffling the IAP review process.

I proposed earlier how to reshuffle the IAP review process so as to make it more effective in encouraging APEC economies’ liberalization efforts (presented at APEC Tokyo Seminar in December 2009 and included in Yamazawa 2010). I found by my independent quantitative assessment 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 extent of liberalization and facilitation. What about each of the thirteen economies list up the areas which it perceives insufficiently achieved the Bogor Goals and voluntarily report its continuing efforts every three years? It will become another IAP reporting in negative list formula. On the other hand, it is no use for the remaining eight economies to continue their current IAP reporting as before. They may be better advised to change it to the IAP in negative list formula to be submitted every three years. It will change the IAP process more effective in promoting liberalization and facilitation.

References:

APEC/LM 2010a. 2010 Leaders’ Declaration, The Yokohama Vision – Bogor and Beyond, Nov.

APEC/LM 2010b. Leaders’ Statement on 2010 Bogor Goals Assessment, Nov.

APEC/LM 2010c  Pathways to FTAAP, Nov.

APEC/LM 2010d. The APEC Leaders’ Growth Strategy, Nov.

APEC/SOM 2010, Report on APEC’s 2010 Economies Progress Towards the Bogor Goals, November

Yamazawa, Ippei 2010. Asia Pacific Economic Cooperation: New Agenda in its Third Decade, forthcoming from ISEAS Singapore