Substantiate APEC as a regional economic and trade arrangement. (200 words) (2013, 15 Marks)
Asia-Pacific Economic Cooperation (APEC) grew out of Australian Prime Minister Bob Hawke‘s Seoul proposal of January 1989. It first met at Canberra that November with twelve members. Its 21 member economies accounted for about 62 per cent of world GDP and 48 per cent of world trade in 2021. APEC is clearly a regional economic arrangement, but an unusual one: open, voluntary and non-binding.
Why APEC counts as a regional economic arrangement
- A defined region with a purely economic remit. Membership follows the Pacific rim, from Chile to Russia. Members are called “economies” under the 1991 Seoul formula, which allowed China, Chinese Taipei and Hong Kong to join together by setting statehood aside. Security was left off the agenda to reassure ASEAN.
- Shared goals. The Bogor Goals (1994) committed members to free and open trade and investment by 2010 for developed economies and 2020 for developing ones. The Putrajaya Vision 2040 has since replaced them.
- A distinctive method. Under concerted unilateral liberalisation, each economy sets out its own Individual Action Plan, and peers review it under the Osaka Action Agenda (1995). Three pillars structure the work: liberalisation, business facilitation, and economic and technical cooperation.
- Open regionalism. Building on the work of Peter Drysdale and Ross Garnaut, APEC offers no preferences and has no common external tariff. It extends its liberalisation on a most-favoured-nation basis, which places it outside GATT Article XXIV.
Evidence of results
- Average tariffs among members fell from 17 per cent in 1989 to 5.3 per cent in 2021.
- Trade facilitation is APEC’s strongest record. Two action plans (2002–06 and 2007–10) each met a target of cutting transaction costs by 5 per cent. The APEC Business Travel Card speeds visa clearance; members adopted customs single windows and aligned standards.
- APEC incubates the Free Trade Area of the Asia-Pacific, which the 2016 Lima Declaration placed outside APEC, with CPTPP and RCEP as routes to it.
- Convening power: the Xi–Trump meeting at Busan on 30 October 2025, alongside Korea’s APEC year, paused a tariff conflict. China hosts the 2026 Leaders’ Meeting at Shenzhen (18–19 November) and has used the FTAAP’s twentieth anniversary to press for regional economic integration.
Qualifications
- APEC has no treaty, no binding commitments and no dispute settlement. Japan blocked Early Voluntary Sectoral Liberalisation in 1998, and the Bogor Goals were missed.
- Attribution is uncertain: much of the tariff cutting came from WTO accessions and domestic reform rather than APEC commitments.
- Members later signed preferential bilateral FTAs, producing Jagdish Bhagwati‘s “spaghetti bowl” of overlapping rules.
- APEC was marginal in the 1997–98 financial crisis, which pushed East Asia towards ASEAN Plus Three.
- India, which first sought membership in 1991, remains outside. No economy has been admitted since 1998, even though the formal moratorium lapsed in 2010.
Conclusion
APEC is a genuine regional economic and trade arrangement in its aims, scope and facilitation results. It is not a trade bloc. Its value lies in setting norms, building capacity and bringing the United States and China together each year, not in enforceable market opening.