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APEC calls for free trade and an end to creeping protectionism

APEC | APEC calls for free trade and an end to creeping protectionism Anthony Harrington

In a recent interview I had with Kleinwort Benson chief investment officer, Jeremy Beckwith, he remarked that while the mid-term elections in the US might have left Democrats and Republicans gridlocked on the political front, the one thing both embattled parties could agree on was the need to protect American companies and American jobs against foreign, currency manipulating, predatory exporters, aka the Chinese and anyone else engaging in competitive devaluation. “I think we could be looking at the beginning of the end for free trade,” he commented gloomily.

Ironically, one or two of the major players in the recent race-to-the-bottom currency wars are also committed, card-carrying members of the Asia Pacific Economic Co-operation, or APEC, the 21-member nation forum, which completed its 2010 summit on Sunday November 14th.

APEC brings together a wide swathe of Pacific facing countries, from the US and Canada to Russia, China, Singapore, the Phillipines, New Zealand and Australia. It is unique in being a non-treaty organisation that does not impose rules on its membership. Everything is done voluntarily and there is no point in signing up to APEC if you don’t embrace its goals which are, in a nutshell, to promote free trade and to end protective tariffs and practices among all its member countries.

APEC’s “big idea”, defined some years ago, is to see completely tariff free trade between all developed economy members of APEC by 2010, i.e. now, with all developing economies giving up their protective tariffs by 2020. Moreover, this is not just a pie-in-the-sky dream. APEC members have reduced the average protective tariff network among members from 10.8% in 1996 to 6.6% in 2008 and intra-APEC trade has tripled from 1994 to 2008.

Does APEC matter? Listening to media reports one would think not. There is no doubt that APEC was thoroughly upstaged by having its summit end on the same day as the latest G20 meeting ended, and the media treated it as an inconsequential afterthought that added nothing to the G20’s inconclusive waffle.

This dismissive attitude is just plain thick headed. As the APEC closing communiqué points out, APEC leaders have been able to push forward a free trade agenda, often in a bilateral, member to member way, precisely because there is consensus that is the direction that APEC is pursuing. As the APEC communiqué puts it:

“Strong progress toward the … goals of free and open trade and investment has been made possible by the decisions by APEC Leaders to liberalize their own economies, confident that others in APEC would make similar decisions. This confidence to open up domestic economies would not have been possible were it not for the formation of APEC. We reaffirm our unwavering commitment to achieving free and open trade and investment in the region.”

In the face of creeping protectionism on every hand, including tendencies in that direction among some APEC members, this kind of commitment needs to be hugely encouraged, not derided. The whole point about APEC is that it is a loose rather than a tight club, and this shows itself in a real flexibility that is prepared to take advantage of any fair wind blowing the nations of the world towards free trade.

The media were rather amused and bemused by the alphabet soup of possible forums upon which regional free trade initiatives encompassing part or all of the sprawling APEC block, could be or were being constructed. Japan, the host of this summit and an interested observer rather than a member, together with a number of APEC members, favours the Trans-Pacific Partnership, or TPP. APEC talks about a Free Trade Area of the Asia-Pacific (FTAAP), which in turn looks to build on existing regional undertakings such as ASEAN+3 and ASEAN+6. There is no doubt that this is confusing for outsiders, but the big picture is that APEC generates real initiatives and has real commitment to doing practical things like lowering the cost of doing business in the region and working at non-tariff barriers to trade.

Members also expressed themselves as fully committed to bringing the World Trade Organisation Doha Round to a conclusion by 2011. Everyone else across the planet seems to regard the Doha talks as if they were as dead as the proverbial dodo. So if APEC can breath some life into that mess, it would be a great thing in and of itself.

Further reading on APEC, protectionism, and the WTO Doha trade round:

Tags: APEC , Doha round , free trade , protectionism , TPP , World Trade Organisation , WTO
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