Dr Hew speaking with representatives of the government, business, media and other sectors at “Thirty Years of Fostering Growth: APEC Chile 2019 Priorities for Regional Cooperation,” a seminar held in Singapore this July.
When the G20 met in Osaka in mid-2019, many observers naturally strayed their gaze to the sidelines where the United States and China were meeting, hoping that they’d manage to soothe the trade tensions between their economies.
The summit has been criticized for not resolving all the issues that were on the table. Nonetheless, some progress was made. It resulted in a joint communique, an agreement to speed up much-needed reforms, and a truce agreed upon on the sidelines for a trade standoff that was heating up at an alarming rate just weeks prior.
It’s easy to imagine that concessions were given in large part because leaders met face to face. This should put to rest musings by commentators that multilateral meetings of this kind are useless or relics of the past.
Among the groups that will hold high-level meetings within the year is the 21-member Asia-Pacific Economic Cooperation (APEC), which will gather leaders in November in Chile. It will surely be subject to scrutiny as well. Many participants in APEC Economic Leaders’ Meeting will overlap with the G20, such as the presidents of China, Russia and the United States.
Last Monday, I got the chance to speak at a gathering of media professionals and some of APEC’s observers who will be tuning in for the Economic Leaders’ Summit, and hopefully all the smaller meetings before that.
From an outsider’s perspective, APEC is harder to wrap your head around compared to the G20, which holds top-level meetings more often, and which is simply a group of the world’s largest—and therefore most powerful—economies.
APEC is smaller than G20; it is about 60 per cent of G20 in terms of population and GDP. But as a whole APEC represents more diversity, including in its roster more economies that are developing and have achieved middle-income status. This diversity lends it a unique perspective. Coupled with APEC’s system of voluntary participation and 30 years of experience, this has given the forum an understated reputation for dynamism and creative problem solving.
One of APEC’s flagship initiatives, aimed at achieving “free and open trade and investment” by the year 2020, contributed to an eight-fold increase in the value of the region’s trade between 1989 and 2018.
Growth is slowing and the economic outlook over the next few years look pessimistic. As I’ve mentioned before, trade used to be the biggest driver of growth in the APEC region, but is no longer as reliable. New sources of growth are clearly needed for the region to keep going and to maintain its economic dynamism. More worryingly, many APEC members have transitioned into middle-income economies, as well, and are at risk of falling into the “middle-income trap” of stagnant growth. Structural reform will be needed to address this, which is no easy task for policymakers.
Doubts are also growing about globalization. Many people feel that they are not getting their fair share of the benefits of economic and trade growth and that they are on the losing end of the deal. Stagnating real wage growth and widening income gaps only add fire to this skepticism. In this context, there is a need to be more transparent on the benefits and costs of globalization and economic integration and work towards a more equitable distribution of their gains.
Friction between the world’s biggest economies complicates the situation, adding policy uncertainty to the brew. Economic repercussions are starting to become evident in lower GDP growth in 2018. A protracted dispute could further undermine global trade, investment, and growth, and a quick and positive resolution will not likely result in immediate positive gains.
Sustaining economic growth amid trade tensions and policy uncertainty while having to contend with idiosyncratic factors is a delicate balancing act. Solutions to this and other challenges, all of which involve many actors, should involve more multilateral and regional cooperation, and not less.
Dr Denis Hew is the director of the APEC Policy Support Unit.