I am delighted to speak to you today about APEC - what APEC is, what we do, and some of the work APEC is undertaking in the maritime transportation sector.
The APEC region has experienced tremendous gains since its formation in 1989. Our members account for around half of world trade, 41 per cent of world population and 57 per cent of world GDP. Per capita GDP has increased by 26 per cent compared with eight per cent for non-APEC economies. Tariffs in APEC economies have decreased from an average of 17 per cent in 1988 to six per cent in 2004. At the same time more efficient customs procedures, progress towards paperless trading, and other trade facilitation measures are saving businesses millions of dollars each year.
In achieving its status as the pre-eminent organization for promoting economic growth in the Asia-Pacific region, APEC has developed some unique ways of conducting business. Unlike negotiating bodies such as the WTO, APEC works on the basis of voluntarism, consensus and concerted unilateralism, and provides a forum for discussing best practice advice and guidelines in a wide range of governance and technical issues.
While some see the lack of negotiated binding rules in APEC as a shortcoming, APEC's approach of voluntarism and consensus in developing best practice guidelines is often a more constructive and productive way of dealing with complex issues, many of which are sensitive in domestic economies. It is moreover an approach that fits well culturally with Asian economies.
During each year, there are a large number of APEC meetings at ministerial, senior officials and expert working group level. But the Leaders' Meeting is the most visible event, and the highlight of the APEC year. At this meeting Leaders set priorities for APEC and make the key decisions that are then implemented by ministers and officials from each economy. This year's Leaders' meeting was held in Sydney in early September and the key priorities for the coming year were set.
While priorities may vary from year-to-year, APEC's core activities can be summarized as follows; first, to support multilateral trade negotiations, especially by working to achieve the Bogor goals of free and open trade in APEC developed countries by 2010 and in developing countries by 2020, and to contribute to a successful outcome of the current Doha Round of WTO negotiations; second, to make it easier and cheaper to conduct business in the APEC region in particular by removing behind-the-border barriers to trade and investment and by encouraging structural reform changes in the regulatory environment in domestic economies; and, third - through APEC's growing capacity-building program - to assist member economies, especially developing economies, to compete more effectively in an increasingly globalized world.
More recently, new issues have emerged on APEC's agenda. One of these - in response to health crises such as SARS and bird flu and to the threat of global terrorism, has been human security. Human security, broadly defined, is, of course, an area of prime focus for the work of this meeting, and I would like to provide you with some greater background to APEC's work in relation to human security and maritime transportation.
To put the issue into context, APEC Member Economies are home to most of the world's largest seaports and busiest airports. Terrorist activities, natural disasters and health pandemics all pose a serious threat to regional economic growth and stability. Ensuring the safety of our people and enhancing the security of our transportation sector have become a major focus of APEC in recent years. We know that even the slightest interruption to regional supply chains would produce a multiplier effect damaging to business activities all along the supply chain with resultant economic downturns, diminished business growth and lost jobs well beyond the country in which an event takes place.
Unlike other trade disruptions, a terrorist attack carries with it the real risk that other attacks may be planned for the near-term, or that "copy-cat" attacks could occur at other locations. Depending on the type of terrorist attack, there is also the potential for latent effects due to the nature of the incident, such as biological or radiological exposure to cargo and personnel. A 2002 Booz Allen Port Security War-Game demonstrated that every day of diminished trade activity requires multiple days for restoration. A potential scenario that concerns APEC is that during the period of disruption following a terrorist attack, ships will be forced to wait at anchor, trade will slow and losses will build.
A simulation run under the Trade Recovery Program - an APEC Counter-Terrorism Task Force project conducted by a group of member economies under the leadership of Singapore - demonstrated just such concerns. The simulation indicated that the combined potential economic impact, measured in lost GDP, of U.S. port closures on 12 APEC economies and the U.S. through a series of 15, 30 and 60-day interruption scenarios would be significant.
This scenario projected that following a prolonged period of diminished trade activity due to closures, the estimated impact measured in loss of GDP increased substantially, to nearly US$500 billion. Using the 30-day equivalent scenario, the ripple impact on just those 12 economies alone (excluding the U.S. which was the event economy) was estimated to be US$137 billion in lost GDP and US$159 billion in reduced trade.
Thus, to help protect this vital part of our regional economy, total supply-chain security is now a major APEC agenda item - particularly as it relates to cooperation with the private sector.
Engaging industry is critical when considering APEC's transportation agenda. Importantly, the business community is strongly supporting APEC's work on these issues and is looking to work closely with APEC in public-private partnership. Open dialogue can be advanced through ongoing consultation and information sharing. To that end special workshops and seminars will be arranged to discuss key issues and consider options for practical responses involving actions by competent authorities and industry.
For example establishing partnerships with business makes it easier to align customs requirements with end-to-end business operational models. Discussions between customs administrations and a number of business representatives from a range of sectors are ongoing. The purpose of this dialogue is to look at how business and government can work together to ensure that assessed security risks are addressed while trade facilitation levels are maintained or increased.
APEC's Transportation Ministers have indicated that further efforts will focus on working with industry on how to address issues such as the harmonization of standards and regulatory practices, transparency in the application of regulations, improved investment in infrastructure and practical approaches to dealing with increased security requirements. The aim of public-private sector engagement is to ensure a strong balance between free trade and a safe, secure and sustainable sector.
To further improve maritime security, APEC has done a great deal of work to comply with theISPS (International Ship and Port Facility Security) Code*. As an illustration, a series of workshops have been conducted in the region under the ISPS Code Implementation Assistance Program involving port security plans, access controls and Code compliance, and workshops involving drills and exercises, audits and 'train-the-trainers' initiatives are underway.
Relevant standards and procedures for practical implementation have also been established including Guidelines and a Procedures Manual. A Catalogue of Available Maritime Security Training, and capacity building and technical outreach initiatives have been developed and a Maritime Security Point of Contact Network established to identify subject matter experts for capacity building needs.
I would like to now briefly outline some of the work in the maritime sector that is continuing outside the area of human security. For example APEC has been working on the establishment of an APEC Port Service Network. The goal is to stimulate trade and investment in the region by integrating various sectors in the shipping business, and to facilitate convenient and secure freight transportation. Other aims of the network include enhancing exchanges and cooperation among ports and related sectors and the promotion of their development, as well as improving the efficiency and security of logistics systems.
When is comes to the trade liberalization aspect of the wider APEC agenda, our organisation is engaged in the progressive removal of regulatory constraints. In 2007 Ministers encouraged member economies to develop market-based solutions to meeting the region's increasing demands for service, so as to develop innovative, efficient and safe transport services. The importance of continued investment by economies, including the private sector in transport infrastructure, is critical in facilitating increased productivity and growth.
A great deal of other important APEC work is also in play that has direct benefits for maritime trade. For example, the development of electronic tracking tools to share information on the passage of goods in a supply chain; and establishing a guide to improve the efficiency of moving goods through sea ports and airports are just a few of the projects underway.
I would like to conclude by saying that we believe the ongoing challenges in the transport sector lie in addressing issues relating to how the region can balance evolving security, safety and environmental requirements with trade facilitation, while recognizing cost as a key consideration. It is important therefore that processes and regulatory and governance frameworks evolve in a way which does not impede efficiency and growth.
For Singapore in particular, as one of the great shipping ports of the modern global economy, the stakes are high. A serious interruption to the shipping in Singapore could prove enormously costly to both the people of Singapore and economies in the hundreds of destinations where ships out of Singapore are bound. For this reason , Singapore which will host APEC in 2009, is taking a leading role in APEC in developing work on total supply chain security.
Conferences such as this one offer participants the opportunity to have their ideas heard and to make a contribution to affect change in the maritime sector. Your attendance is a strong expression of your desire to make a contribution and I wish you a successful next few days.
* ISPS: the IMO International Ship and Port Facility Security Code (effective from July 2004) introduces a standardized framework for the evaluation of risk to ships and ports to maximize maritime security, following the 11 September 2001 attacks in the USA.