Possible Reform of APEC Special Lecture on the Occasion of APEC Mock Meeting November 3, 2004 Professor Sung-Hoon Park Graduate School of International Studies Korea University

Points of Discussion Main Features of APEC APEC’s Achievements? APEC at a Crossroads Alternative Long-term Scenarios for APEC

I. Main Features of APEC APEC Stands for “Asia-Pacific Economic Cooperation” Established in 1989 with 12 Member Economies Membership Expanded Successively: Now 21 Members APEC in the World Economy Total Population: 2.6 Billion People Total GDP: USD 19.2 Trillion (over 50% of World GDP) Total Trade: Over 40% of World Trade APEC and Korea The First Regional Cooperation Body for Korea Strong Economic Interactions with APEC Members 68.6% of Trade/77.4% of FDI Projects/62% of FDI Amount APEC’s Contribution to Stability on Korean Peninsula Regular Consultation with 4 Major Powers First Ministerial Meeting held in Canberra in 1989 with no solid vision for how to build an Asia Pacific organization

I. Main Features of APEC Main Characteristics WTO-Consistency: APEC’s Instruments have to be supportive to the multilateral trading system Diversity: APEC incorporates a variety of cultures, religions, population sizes and political ideologies Voluntarism and Consensus Building Approach: Members make concessions voluntarily, not relying on a bargaining process. Agreements are to be reached by consensus, rather than by majority voting Non-Binding Arrangements: APEC tries to give Flexibility in Implementation. Also Defies Possibility of Legally Binding FTA. Inter-regional Cooperation Framework: Cooperation between Asia and the Americas “Open Regionalism” as a Main Vehicle of Cooperation: Forming a Counterforce Against Increasing Worldwide Regionalism First Ministerial Meeting held in Canberra in 1989 with no solid vision for how to build an Asia Pacific organization

Open Regionalism of APEC Adopted as a Strategic Approach of APEC to Counter the intensifying Regionalist Tendency in World Economy EU’s Single European Market Program US’ Reluctance to Trigger and to be Part of a Major Regionalism Possible Contribution of APEC to Reconciliation between Multilateralism and Regionalism Anticipated OR not defined properly yet, leading to Confusions with Long-term Goal of APEC Definition of OR is Crucial to Determining and Pursuing Long-term Goal of APEC Three Possible Interpretations/Modes of Implementation Available Unconditional MFN Global Liberalization Trade Facilitation Some Analysts (e.g. Park (1999)) Recommend to Abandon OR

II. APEC’s Main Achievements? Having Started as a Ministerial Meeting, APEC soon was Upgraded to become a Summit Meeting (1993) Each Summit Meeting Produces Cooperation Programs A Series of Sequential Programs Adopted to Reach the Declared Goal of Establishing “Asia-Pacific Economic Community” via “Free Trade and Investment in the Region” 1993 (Seattle): First-ever Summit Meeting held 1994 (Bogor): Bogor Declaration 1995 (Osaka): Osaka Action Plan 1996 (Manila): Manila Action Plan for APEC 1997 (Vancouver): EVSL Adopted as a First Serious Attempt to Reach Bogor Goal Fails in 1998 to be implemented (Asian Crisis) 1998 (Kuala Lumpur): Programs for Recovery from Asian Crisis Adopted 1999 (Auckland): Stocktaking the Implementation of TILF and Ecotech 2000 (Brunei): e-IAP Adopted as a Way to Achieving the Bogor Goal/Digital Divide Addressed 2001 (Shanghai): Shanghai Accord Adopted”Pathfinder” Approach 2002 (Los Cabos): Transparency/Digital EconomyTrade Facilitation Action Plan 2003 (Bangkok): Bangkok Declaration on Partnership for the Future 2004 (Chile): ???? 2005 (Korea): ????????

III. APEC at a Crossroads Interests of Members Still Conflicting Failure of EVSL an Example Key Agenda Swinging between TILF and Ecotech Long-term Goal Still Undetermined “Forum Fatigue” Already Apparent Summit “Should Produce” Something Every YearMid- to Long-term Agenda Already Nearly Exhausted Credibility Lost vis-à-vis Non-members Difficulty in Implementing Open Regionalism No Substantial Contribution to Multilateral Trading System as Hoped for Relevance Lost Among Select Member Economies Perceived Imbalance between TILF and Ecotech Failed to Provide Immediate Assistance to Countries affected by the Asian Financial Crisis APEC a Community Building Process? ”Identity Crisis” in many Asian APEC Member Economies ”Credibility Crisis” vis-à-vis non-APEC Countries

IV. Alternative Long-term Scenarios for APEC The Status-Quo APEC APEC develops into “OECD for Asia-Pacific” APEC develops into an FTA (APFTA) APEC takes Security Agenda next to Economics  APEC as an “OSCE in Asia-Pacific?” Depends on Capacity and Will of Members Korea has Some Role to Play as Presidency of 2005

Scenario 1: The Status-Quo APEC How to Restore the Lost Credibility? Successful Pursuit of 2010/2020 Bogor Goal? Even 2015 Accelerated Liberalization Possible? How to Restore the Lost Relevance? Balancing between TILF and Ecotech Possible? What Relationship to WTO’s MFN? Making OR Work for both APEC and the WTO Crucial Overcoming Diverging Interests of Member Economies a Crucial Factor

Scenario 2: APECOECD Closed Membership/Peer Pressure/Discipline Membership of APEC to be Realigned To Devise Proper Way of Disciplining/Peer Pressuring Cooperation/Development APEC’s Agenda to be Renegotiated (Ecotech/TILF not Enough) Finance Needs Stronger Attention Macroeconomic Policy Coordination at the Core of Cooperation Policy Dialogue for the FuturePossibility Increases (or Decreases) with Increasing Networking of Intra-APEC FTAs How to Mobilize Members How to Effectively Avoid Duplication How to Coordinate with “the OECD”

Scenario 3: APECOSCE(AP) Addressing the Political/Security Instability for the Region Needed in One Form or Another North Korea Three-Chinas Issue Security as an Additional Agenda Desirable/Possible? Is There Any Venue that Can do this Job? ARF? ASEM? Unilateral or Bilateral Resolution by the United States? Then Why Not APEC? Change the Agenda Setting? Make the Membership More Comprehensive (EU?)? Change the Name?

Scenario 4: APECAPFTA Not an Easy Solution Diverging Interests among Members Two Major Regionalism Competing as a Result! Open Regionalism Main Obstacle If OR Interpreted in an Alternative Way, Why Not? EU’s Way to Practice OR Indicative! Practical Aspects WTO New Rounds/Increasing Sub-regionalism within APEC Can Pave the Way for Further Liberalization By 2015/2020 APEC Members Readier than Before Go for It through Making Sub-regionalism increasingly Overlap This has been Occuring in APEC for quite a while

Most Feasible Scenario? Hybrid Scenario Most Feasible Mid- to Long-term: “APFTA+OECD” Scenarios Long-term: “OSCE in APEC” Scenario What to Do? Prepare a Concrete Roadmap to Long-term Goal Prepare for New Membership Prepare for New Agenda A Responsibility Especially of Korea (2005 Presidency)

Thank you very much for your Attention!!