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Insight: APEC and the challenges of the economic crisis
The global economic crisis creates a challenge and an opportunity for the Asia-Pacific Economic Cooperation (APEC)
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he global economic crisis creates a challenge and an opportunity for the Asia-Pacific Economic Cooperation (APEC). APEC's responses to those challenges are important not only for trans-Pacific cooperation but also as a contribution to resolving the global economic crisis.
APEC should not be indifferent, as it was during the Asian crisis of 1997, thereby losing a chance to be really relevant for the region. As a result, East Asians formed their own institutions, primarily ASEAN+3 and the so-called Chiang Mai Initiative (CMI), as well as the Asian Bond Market Initiative (ABMI) in the area of financial cooperation. Since then, even the IMF is no longer accepted in East Asia as it was before 1997, due to its extreme conditions imposed on the East Asian countries in crisis.
East Asian institutions are now also fulfilling a need for East Asia to promote regional cooperation for peace and development in the region. In the longer term, the objective is to establish an East Asian community. They should also form an important caucus within APEC to support APEC and trans-Pacific cooperation.
On the other hand, East Asians should also recognize that wider Asia-Pacific cooperation such as APEC is important for East Asia's development, because the bigger entity will have more influence and impact in global affairs. It should also have greater capacity to introduce new policies, rules and institutions globally.
In that respect, APEC has become the centerpiece for giving input to and having an influence on the formulation of global policies, including in the G20. But to be able to do all this, APEC has to consolidate and strengthen.
At the last APEC Meeting of Ministers Responsible for Trade (MRT) in Singapore in July, there was the awareness that their major challenge was to keep trade open and to resist protectionism. Trade was not the cause of the crisis but it is important in overcoming the crisis. The crisis originated in the financial sector, but the region has also been responsible for the "imbalances" across the Pacific.
The crisis started in the heartland of capitalism, the United States. That is why it has become global. While East Asians thought their region had been uncoupled from the industrialized markets of the US and the EU, that turned out not to be the case. However, East Asia is still better off than other parts of the world, because the impact of the crisis was felt somewhat later and most probably will end earlier than in the US and the EU. This is so because the big economies such as China and India have big domestic markets that protect them somewhat from the drop in exports, while the quick introduction of stimulus packages helped avert a major impact from the crisis.
The 1997 Asian crisis led them to take the necessary measures to strengthen their financial institutions as well as to accumulate huge foreign exchange reserves. Here, APEC missed the opportunity for cooperation. In part this was because the APEC Ministers of Finance meetings have not become an integral part of the APEC process. This will need to be rectified, in addition to the further strengthening of the APEC International Secretariat.
It is important that APEC formulates a clear vision of where it wants to go. It should establish a small Steering Committee to work out a medium-term plan and programs to achieve APEC's medium-term objectives.
The problem with APEC is that each year the rotating chair of APEC determines the main theme for APEC and there has not been a continuity of the programs in APEC since the 1994-1996 period that began with the Bogor Goals and the Osaka Action Agenda (OAA) and the Manila Action Plan for APEC (MAPA) to implement the Bogor Goals.
Since the 1997 crisis, APEC no longer has a common vision. The many, rather disparate, initiatives taken over the past 11 years need to be consolidated. APEC's agenda should not be focused on trade and how to keep it open, although this is obviously very important. For the medium term, it should address structural reform issues. This is particularly important for the East Asian economies, since they can no longer rely on trade as the main engine of growth.
Equally important are cooperation programs to strengthen resilience through social safety nets, pensions, health and education policies, green policies and the need to look for the fiscal funding to support them.
There is also the need to reform global financial institutions. They are difficult challenges for the region, and cooperation among APEC members will be necessary for the region to meet those challenges.
The Pacific Economic Cooperation Council (PECC), which is APEC's nongovernmental counterpart, will be launching a study on these issues, which will be submitted for consideration at the next three APEC Ministers Meetings and Summits, namely in Singapore (2009), Japan (2010) and the US (2011) as a contribution to the development of a coherent medium-term plan for APEC.
It is critical for APEC to undertake this consolidation effort so as to be able to come up with relevant answers on how the region can overcome these new challenges as well as how it can contribute to the reform of global economic governance structures, including through a coordinated involvement of the APEC members in the G20.
The author is vice chair of the Board of Trustees, CSIS Foundation.
