APEC: Current Priorities - New Challenges

It is my great pleasure as we approach the 14th APEC Economic Leaders' Meeting next week to follow my APEC Secretariat predecessors in addressing the Asia Pacific Labour Network at its annual meeting. This is an important period for APEC, although I have to say that as I look back at the seventeen years since APEC was formed, it seems that almost every year over the past decade or so, commentators have said APEC was at a crossroad. As an Australian academic colleague said recently at a seminar to discuss APEC's future, being at a crossroad is not a problem - what is important is to avoid reaching a dead-end! I can say with confidence that this won't happen to APEC as it continues to build its credentials as the pre-eminent organization in the region promoting economic growth and prosperity.

It is true, however, that APEC member economies are currently examining, with a greater sense of urgency than perhaps ever before, how best to ensure that the organization remains relevant and adapts to a changing regional and international environment. Challenges which APEC is facing are many and varied. They include: uncertainty over the future of the Doha Round and how APEC can respond to this; how to address the confusing complex of regional FTAs - for example, is an APEC-wide FTA feasible, as some regional business people think; the emergence of new regional bodies which might impact on APEC's role, such as ASEAN Plus Three and the East Asia Summit; and how to ensure that APEC's work is highly focused despite the enormous expansion of its agenda and proliferation of its constituent working groups over the past seventeen years.

Dealing with these issues has dominated the APEC agenda this year and will continue to do so next year when Australia hosts.

Let me briefly outline APEC's priorities this year as these will be the focus of much of next week's deliberations:

First, the Ha Noi Action Plan will implement last year's Busan roadmap towards achieving the Bogor Goals. It will comprise three key elements: support for the multilateral trading system; promotion of high quality FTAs/RTAs; and the Busan business agenda focusing in particular on trade facilitation, private sector development, the digital economy, intellectual property rights, investment, transparency and anti-corruption, secure trade, structural reform and pathfinder initiatives.

Second, support for the WTO/DDA, in particular to contribute to the early renewal of negotiations and a successful conclusion of the DDA, with ambitious and balanced outcomes. With the new deadline of March 2007, the APEC Leaders' Meeting offers a timely opportunity to add impetus to salvaging the WTO/DDA.

Third, the development of FTA/RTA model measures. With over 20 FTA/RTAs in the region already, and more under negotiation, these model measures will help to align key topics covered in FTAs, such as rules of origin, thus making them more compatible and easier to use. It will hopefully also reduce the "spaghetti bowl" effect in which divergent treatment under different agreements causes confusion and results in unintended and wasteful costs to business. Much progress has been made this year and we hope that some key texts will be agreed next week.

Fourth, capacity building continues to be a pillar of APEC. A more streamlined approach to allocating priorities to economic and technical cooperation projects has been introduced this year, along with much improved project management practices. Importantly, there has been a significant increase in the project funding base this year, with new contributions to the APEC Support Fund expected shortly.

Fifth, human and energy security activity has been strengthened, particularly relating to counter-terrorism, emergency preparedness and health security. These issues have the potential to affect not only trade and investment but also overall goals of economic development and community building in the APEC region.

Finally, major work is underway to reform the way APEC functions. This has included streamlining APEC fora, achieving better coordination among them, introducing a more focused Senior Officials Meeting agenda and strengthening the APEC Secretariat.

APEC's core goals remain in place

All of these activities have been strengthened under Vietnam's excellent chairmanship this year and will be further strengthened next year when Australia is host. Our aim is to achieve substantial progress on APEC's core goals, namely: trade and investment liberalisation; trade facilitation; and capacity-building to assist developing member economies to become more competitive and productive, and better able to deal with the growing complexities of globalization.

But the environment is changing

It is dealing with this last phenomenon - globalization - that APEC's role is pivotal. In 1989, the year of APEC's formation, the pre-eminent issue was, in the aftermath of the Cold War, liberalisation of market access in order to open doors to greater economic integration. At that time there was much concern about what was seen as the emergence of exclusionary and protectionist trading blocs in Europe and North America, and how best economically to engage the United States with major Asian economies. How to include Japan in a pattern of regional economic interdependence was also a major concern.

Things have of course moved on dramatically since then. Integrating China's growth smoothly into regional economic patterns and dealing with the emergence of truly global markets and services-based economies - which, seen from the perspective of today, were in their infancy in 1989 - drive much of APEC's current agenda.

But what has not changed is APEC's unique character. It remains a consensus-based organization, without binding commitments by its members, and working on the basis of open dialogue and respect for the views of other members. In this way APEC can be seen to reflect the unique cultural heritage of its membership. Its non-binding rules approach has given rise to unique methods of getting things done, such as: Individual Action Plans; the peer review process involving independent experts; and the 'pathfinder' initiatives. By placing the performance of each member economy in a wide range of governance policy areas on the public record, for all to see and assess, APEC is able to ensure that compliance is constantly benchmarked. Despite the non-binding nature of commitments there is strong peer pressure to meet them.

What also has not changed - indeed has assumed even greater importance - is the sheer economic vitality and strength of the APEC region. The APEC region is enormous in terms of its size and presence in the global economy. Its total population is 2.6 billion people, its economies account for more than 48 per cent of world trade and 56 per cent of global GDP. The growth of APEC economies since 1989 has of course been stunning, with more than 26 per cent growth compared with 8 per cent in non-APEC economies.

Throughout its history APEC has had a strong business focus, not just on big enterprises, but especially on small and medium enterprises which provide massive employment (80 per cent in the APEC region) and constitute the economic lifeblood of all APEC economies. From the outset APEC Governments considered that lowering business costs, improving governance and regulatory environments, eliminating corruption and a host of other policy measures to facilitate business were fundamental in achieving economic growth and advancing economic integration. APEC has been criticized by some for being too focused on business and for not placing enough emphasis on social and labour issues. I understand this view but would stress that APEC's overriding mission is to increase wealth and reduce poverty among its members by promoting economic growth. Growth based on open economies is what APEC is about.

From its inception APEC members saw increased intra-regional trade and investment through market liberalisation as the key to growth and substantial gains have been achieved in this area. Whether one is an optimist or a sceptic about the prospects for achieving the Bogor goals of free trade and investment by 2010 and 2020 (for developed and developing economies respectively) the fact remains that enormous progress towards their achievement has been made. Efforts to continue this progress will remain a top priority for APEC.

But it is clear that members see this as only part of the picture. Thus we are seeing that APEC's goals and priorities are not only confined to market access issues at the border. Increasingly APEC's focus is on those issues that go behind economies' borders, such as investment barriers, competition policy, intellectual property rights, anti-corruption, deregulation of services industries, etc. I am pleased to inform you that APEC's Economic Committee has this year taken on a new, policy-driven agenda on structural reform, which is, of course, a key aspect of reforming behind-the-border economic barriers. While it is early days for the Economic Committee's new agenda, I am sure that under the chairmanship of Dr Bob Buckle from the New Zealand Treasury, starting in 2007, it will make an important impact on APEC's work.

It is important to stress that reforms in behind-the-border areas will promote not just economic growth, but sustainable economic growth. Moreover, they will improve the economic environment not just for the foreign trade and investment-exposed sectors in member economies but, because they entail systemic change, for those also engaged in domestic economic activity. APEC, with its mix of peer reviews, individual action plans and pathfinder initiatives, along with an increasing pool of funding for capacity-building in developing member economies, is uniquely placed to contribute to these reforms.

In highlighting the importance APEC attaches to economic growth I should stress that APEC member economies would all agree that it is not the only thing that matters. APEC's work on social safety net issues has been highly valued in the region. Last year's APEC host, Korea, initiated a study on ways to confront the challenges and impediments related to socio-economic disparity in the APEC region. The final report of this study was submitted to an APEC symposium on socio-economic disparity in Seoul in June. This project demonstrated how to narrow disparity through the activities of APEC fora and recommended further policy tools to combat socio-economic disparity. This work is expected to continue.

Another essential part of APEC's work is to improve skills and human resource capacity in the APEC region through the work of the Human Resources Development Working Group.

The HRDWG is an essential link in APEC's work to build capacity in economies, especially through the development of policies that will facilitate skills development and improve the extension of education in the workplace. In particular, through this group's active participation in the Labour and Social Protection Network the promotion of training and employment practices in increasingly flexible labour market systems has been enhanced in the APEC region. The next HRD Ministerial Meeting, to be attended by APEC labour ministers, is scheduled to be held next year. Its theme will be "Globalization and HRD Policy" and its sub-themes will be: "Productivity and Competitiveness", "Labor Force Participation" and "Labor Mobility". This will be a valuable opportunity to address the labour situation in the region.

I should also note the work of APEC's Gender Focal Point Network which seeks gender equality and the empowerment of women in the social and economic life of the region.

It is worth noting that funding of capacity-building projects through APEC's economic and technical cooperation program has so far amounted to around 72 million US dollars. More than one hundred ECOTECH related projects are typically underway throughout the year (which in 2007 will amount to at least 8.5 million US dollars). Around one third of these are directed towards developing human capital and will increase the skills of government agency employees and private sector workers, many of whom are from small business, thereby increasing employment prospects in the region.

From these few but illustrative examples, I hope you will go away from this meeting today with a broader understanding of APEC's commitment to addressing new challenges and to adjusting its goals to changing international and regional conditions. While I have not been able to address all issues of concern to APLN, I hope you will see that APEC, through its capacity-building efforts, is contributing significantly to improving the livelihoods of people throughout the region.

In summing up, it is fair to say that while it is a trade forum, the human and social dimensions of trade are important for APEC. We do not force trade liberalization at any cost but promote it at a speed that suits members' development levels. Moreover, from an employment perspective, APEC's work on SMEs, human resource development, social safety nets, social disparity, gender equality and other behind-the-border impediments is contributing to job security and well-being for people in the Asia Pacific region.

I have read with interest APLN's statement that you have submitted to this year's APEC Leaders' Meeting ("Towards an APEC Community for Sustainable Development and Rights"). Your objectives are, without doubt, ambitious and wide-reaching. It is of course for APEC member economies to decide how they might wish to address labour standards issues or whether they might wish to establish institutional links between APEC and the labour movement. At this stage, as you are aware, no consensus has emerged within APEC around these ideas. But I sincerely wish to acknowledge the very real interest that APLN has shown in the work of APEC and its commitment to enhancing economic conditions in the APEC region.

I wish you a most successful and enjoyable conference and I thank you for your kind invitation to address you.