OPENING REMARKS BY MR RAVI MENON, SECOND PERMANENT SECRETARY, MINISTRY OF TRADE AND INDUSTRY AT APEC STUDY CENTRES CONSORTIUM CONFERENCE, PAN-PACIFIC HOTEL, 13 JULY 2009, 8.30 AM
Ambassador Kesavapany,
Dr. Fred Bergsten,
Distinguished guests, friends and colleagues, ladies and gentlemen,
Good morning and a warm welcome to sunny Singapore.
In 1989, the Berlin Wall collapsed.What collapsed was not only a wall, but a political and economic model of development based on central planning and closed borders.1989 marked the beginning of a global consensus – if ever there is such a thing – in favour of open markets, free trade, rule of law, and economic integration.
It is no coincidence that 1989 also marked the beginning of a new grouping in the Asia-Pacific dedicated to fostering growth and prosperity through the liberalisation of trade and investment. The Asia-Pacific Economic Co-operation forum, or APEC, began as an informal dialogue amongMinisters from 12 Asia-Pacific economies meeting in Canberra to discuss ways to promote economic integration in the fastest growing and most dynamic region in the world.
Today, there are 21 member economies in APEC. APEC has grown into a more formal institution with regular meetings among the Trade and Foreign Ministers, culminating in a Leaders’ Meeting at the end of each year.APEC was bound by a shared conviction - that reducing barriers to trade, facilitating investment, and liberalising markets were key to achieving sustained growth and development.In 1994, APEC forged a shared vision – the Bogor Goals of achieving free and open trade and investment in the Asia-Pacific region, by 2010 for developed economies and by 2020 for developing economies.In a world dominated by binding and legal agreements, APEC took to new heights an alternative model of co-operation based on voluntary commitments, mutual support, and capacity building.
What has APEC achieved in its 20 years?Its tireless advocacy of free trade and investment has had powerful demonstration effects.Average tariffs in the Asia-Pacific region came down by two-thirds during the first 15 years of APEC - from 17% in 1989 to 5.5% in 2004.Intra-APEC merchandise trade has grown five-fold - from US$1.7 trillion in 1989 to US$8.4 trillion in 2007.The example of a rapidly integrating Asia-Pacific provided a useful impetus to the conclusion of the Uruguay Round in 1994.
Less well-known but of significant importance to businesses is APEC’s role in what it calls trade facilitation.This refers to simplifying and rationalising customs and other administrative procedures that hinder, delay, or increase the cost of moving goods across borders.APEC’s efforts to reduce trade transaction costs, improve customs procedures, and harmonise standards, has helped to reduce the cost of business transactions in the region by 5% between 2002 and 2006.The APEC Business Travel Card allows business travellers pre-cleared, visa-free, fast track entry and exit for short-term visits to participating APEC member economies.
But this Conference is not about the past.It is about the future – the next 10 years.We are at a critical juncture today – perhaps as momentous as in 1989. The world is experiencing its worst economic recession since the Great Depression. According to the IMF, the global economy is expected to contract by 1.4% this year. Half of the 21 APEC economies will experience negative GDP growth.Although there have been encouraging signs of the global economy bottoming out, we are not out of the woods yet. Indeed, the signs point to a weak and fragile recovery at best, or a further slide into recession at worst.
How APEC deals with the crisis and its aftermath will shape its role and relevance in the regional and global architecture.APEC’s niche is not in the areas of global macroeconomics or financial stability.Issues like fiscal policy co-ordination and financial system reforms are best addressed in forums like the G8 and G20. But there are three distinct areas where APEC can make an impact, and APEC 2009 will mark a critical milestone in how APEC positions itself for the future:
- first, to resist protectionism and strengthen the multilateral trading system;
- second, to accelerate regional economic integration;
- third, to blaze the trail for new growth strategies for a post-crisis world.
Let me begin with the multilateral trading system.As the pre-eminent champion of free trade and open markets, APEC has a strong role in helping to ensure that fiscal policy measures taken by economies to address the crisis do not contain protectionist elements.Resisting protectionism is more paramount now than ever. The Global Enabling Trade Report 2009, released last week by the World Economic Forum, notes that while “protectionism is not the cause of the crisis, it could be one of its most important consequences”. There are new, emerging forms of protectionism embedded within fiscal policy packages, like “Buy Local” and “Lend Local” which are hard to detect and harder still to combat. Protectionism is a grave threat that APEC must address, to ensure that the hard-won benefits of trade and investment liberalisation over the last 20 years are not rolled back.
Last year, in Lima, APEC Leaders made a pledge to refrain from raising trade-restrictive measures for 12 months.There has been some slippage in holding to that commitment.It falls on APEC economies to review the implementation of their pledge, reaffirm their commitment to refrain from protectionism, and monitor progress.
A more enduring and impactful contribution that APEC can make to supporting the multilateral trading system is to facilitate progress in concluding the Doha Round.The relevant, major economies have renewed their efforts in recent weeks to break the current impasse at the WTO and find a way forward for negotiations to resume.Facilitating a successful conclusion of the Doha Round is the best insurance APEC can make for free trade.
The second area where APEC can make an impact is to decisively shape the post-crisis landscape by accelerating its core agenda of regional economic integration.APEC 2009 is taking a more holistic approach towards regional integration, focusing on integration not just “at the border”, but also “behind the border” and “across the border”.
Integration “at the border” is what we are all familiar with.It has to do with reducing tariffs on merchandise trade, facilitating cross-border services, making Rules of Origin more business-friendly.As I noted earlier, we have made good progress in reducing tariffs on goods; going forward, more needs to be done in facilitating services and simplifying Rules of Origin.There is, of course, the ongoing process of putting in place the building blocks for a Free Trade Area of the Asia-Pacific.
APEC has in recent years begun to focus on integration “behind the border” as part of its structural reform agenda.There has been a growing realisation within APEC - in large part shaped by business feedback and academic research - that many of the barriers to cross-border economic activity really lie in the way our respective domestic markets are structured and regulated. This year, we are focusing on improving the business environment through regulatory reforms. We will identify specific areas of business activity for priority reform – for example, starting a business or getting a permit.We will then set measurable targets in these areas and put in place a capacity-building programme to help our economies achieve these targets.
The third dimension of integration is “across the border”. This is about enhancing physical connectivity through improving transport and logistics networks and making supply chains more seamless, so that goods can move faster and cheaper. Smooth supply chains are key enablers of trade, and this is why APEC has started a Supply Chain Connectivity Initiative this year. Supply chains are only as good as their weakest links.Officials have therefore been working with businesses and academics to identify key chokepoints in regional supply chains, so as to focus reform efforts.
A third important role APEC can play is in shaping the growth strategies that we need for the post-crisis world, in particular, to deal with the challenges of globalisation and climate change.
In many parts of the world, confidence in globalisation has been shaken by the current crisis. Free trade and open markets are seen as worsening income inequality, while exposing the economy to periodic external shocks resulting in job losses and industry dislocations. APEC 2009 will begin to address the issue of how we can make growth more inclusive – how we can seize the opportunities created by globalisation while ensuring that its benefits are more widely shared in our economies.
Likewise, growth strategies of the future must take account of climate change.As an economic grouping, APEC can be at the forefront of efforts to promote growth that is sustainable – to encourage policies and technologies that enhance energy efficiency while ensuring that measures to mitigate climate change do not inhibit trade or retard growth.
Let me conclude.APEC’s next 10 years look every bit as eventful and interesting as its last 20 years. It remains unique in bringing together economies from both sides of the Pacific Rim in a common journey, driven by a shared commitment to free trade and open markets, towards a shared mission of growth and prosperity. Its voluntary, non-binding character gives its members the confidence and latitude to set higher aspirational goals, while informal peer pressure keeps them working towards those goals in a manner consistent with their domestic circumstances.
Indeed, the value of getting Officials, Ministers, and Leaders to have conversations over important economic issues every year is not to be underestimated. Whether it is on Rules of Origin, trade finance, or investment regimes, such exchange of views is a great opportunity to constantly learn from one another and explore where we can collaborate. As a columnist once described, APEC is like a useful “economic support group”[1] for policy-makers.
The APEC Study Centres, an initiative started in 1993, are animportant part of this “economic support group”. The research and perspectives provided by the ASCCs have helped to shape APEC’s agenda. Today’s ASCC Conference is another opportunity to share perspectives on APEC’s way forward. I congratulate Ambassador Kesavapany for coming up with an excellent programme and bringing together an impressive array of speakers today.
I wish you fruitful conversations, and look forward to sparkling ideas on what APEC can do in its next 10 years. And to our guests from abroad, I wish you a pleasant stay in Singapore.
Thank you.