Conference on Asia-Pacific Regional Economic Integration and Architecture

• the New Zealand Ministry of Foreign Affairs and Trade
• the New Zealand Asia Institute
• the University of Auckland Business School
• the New Zealand Committee of the Pacific Economic Cooperation Council
• and the Auckland University of Technology

for inviting me to participate in this most topical and relevant Conference. It's a great pleasure and privilege to be here.

The focus of this session is APEC's role in the last two decades of Asia-Pacific economic development, and its future role in securing regional prosperity and stability.

This is an aptly-timed question given that, this year, the deadline on APEC's best known and most important commitment will be reached. According to APEC's Bogor Goals, APEC developed members are committed to achieving free and open trade and investment in the region by 2010.

The Bogor Goals have been criticised for their imprecise meaning, the lack of specificity about how they should be achieved, and the fact that implementation depends on the voluntary and consensual acts of APEC members.

However, they are goals nonetheless and they have been the forum's driving force since they were set down in 1994. APEC is therefore intent on conducting a thorough assessment that is analytically sound, credible and transparent.

To ensure these criteria are met, this year's assessment is being undertaken from a number of perspectives. In addition to input from the members, it will include analysis from:

• the APEC Policy Support Unit
• the Pacific Economic Cooperation Council
• the APEC Business Advisory Council
• the Asian Development Bank
• the Inter-American Development Bank
• the World Bank
• and the UN Conference on Trade and Development.

It would therefore be premature for me to pre-judge the assessment. However, there is already a weight of evidence that shows how APEC has contributed to the region's economic development, and I'd like to take this opportunity to outline some of these achievements for you today.

Before focusing on APEC's role in the region specifically, I'd like to highlight APEC's influence on global trade liberalisation:

• As many of you will know, APEC is widely credited with helping to achieve a conclusion of the Uruguay Round by presenting a coherent front in the negotiations.
• Similarly, in my time at the WTO, I've also seen the APEC caucus influence the adoption of the Swiss formula for tariff reductions in the negotiations on industrial tariffs. This formula results in a much greater narrowing of the gap between high and low tariffs than a flat rate reduction methodology.

Looking now to APEC's role in liberalising trade and investment in the region, I'd like to give you some statistics:

• Average tariffs in the region have fallen from 17 percent when APEC was established in 1989 to 6.6 percent in 2008.¹ The average for APEC's industrialised members - namely 3.9 percent - is even lower.² This compares very favourably with a world MFN-applied average tariff of 10.4 percent (as calculated by the WTO).³
• Non-tariff barriers have also substantially reduced across the APEC economies, with most of those reported being WTO-consistent.
• And in addition to advancing region-wide liberalisation, APEC has also been a facilitator of bilateral free trade. By the end of last year, there were 43 free trade agreements between members.

Targets have also been reached in the area of trade and investment facilitation, which is APEC's second pillar:

• Between 2002 and 2006, APEC's Trade Facilitation Action Plan resulted in a five percent reduction in business transaction costs across the region.
• A second Trade Facilitation Action Plan looks on track to achieve the same reduction by the end of 2010.
• A preliminary assessment of APEC's Investment Facilitation Action Plan also shows that APEC's industrialised members are close to best practices on investment.
• And perhaps Tony Nowell [New Zealand member of the APEC Business Advisory Council] who follows after me, can address what all this has actually meant for businesses in the region.

Importantly, this progress on liberalisation and facilitation has created a much greater level of regional economic integration than would otherwise be expected.

• Research by APEC's Policy Support Unit last year shows that APEC members are three times more likely to export to, and two times more likely to import from, a fellow member than a non-member.
• As a consequence, APEC economies enjoy a higher share of intra-regional trade than the EU, and a much higher share than NAFTA and ASEAN-7 economies. ⁴
• The PSU's research in fact shows that the impact of APEC membership on trade among members is comparable to that of a free trade agreement, even though APEC members are not bound by formal rules or trade treaties.

For anyone who is interested in reading this research in detail, I have left some copies of the report in question [at the back of the room].

Less quantifiable but no less important, APEC has also had a role in advancing structural reform in the region. Again, recent research shows that with tariffs at record low levels, more economic benefit can be gained by advancing structural or behind-the-border reform.⁵ That's why APEC has been focusing on reforms in the five priority areas of: regulatory policy, competition policy, public sector governance, corporate governance and strengthening economic and legal infrastructure.

Of course, given APEC's mix of industrialised and developing economies, APEC has also focused on building the capacity of all members to engage in trade and make the necessary domestic reforms. That's why APEC's Economic and Technical Cooperation agenda has had such prominence, with around 1500 capacity building projects undertaken since 1993. In fact in my view, the capacity activities are the implementation tool for APEC's agenda, transforming deliberation into action.

And finally, although APEC has been criticised for spreading itself too thinly by expanding into areas relating to human security, it has remained true to its core mission by focusing on work that benefits trade and investment. For example, APEC's activities on health pandemics and emergency preparedness have concentrated on making sure that the effects of such events on businesses are minimised, so that economic development can continue.

In terms of APEC's future role in securing regional prosperity and stability, this is again an apt time to consider the issue.

There is talk everywhere these days about shifts in global political and economic power dynamics. There is intense discussion about what countries, institutions and structures are remaking the global order; and it's accompanied by intense speculation about which will prevail.

With the imminent expiry of the Bogor Goal deadline for APEC's industrialised members, and with lessons of the financial crisis still fresh in members' minds, APEC too is considering "what next?"

That's why at the end of 2009 APEC Leaders gave APEC Officials several very important tasks.

First - to find ways to accelerate regional economic integration. This will lead to more work on liberalisation and facilitation in existing and new agenda areas. However in addition, Leaders specifically requested that officials report back on possible pathways to a Free Trade Area of the Asia-Pacific by the end of 2010. This would be a great leap forward for the region, with great economic benefits, but it is one that will take time. Work has already been done to investigate the extent of convergence and divergence between FTAs and RTAs that exist between members, to see if they can become building blocks to a wider agreement. Obviously, the TPP - which will be discussed in the next session - is one such potential building block.

Second, Leaders instructed Officials to develop "a new growth paradigm for the changed post-crisis landscape"; and they committed to put in place in 2010, a comprehensive long-term growth strategy that supports more balanced, inclusive, sustainable and knowledge-based growth. This is in line with the priorities expressed with the G20; and it is intended that such a multi-pronged approach will bring sustained growth, prosperity and stability to the region. Japan as host of APEC in 2010 is currently laying the groundwork, and an extraordinary meeting of Senior Officials scheduled for Tokyo next month, will bring us closer to having action plans for the new growth strategy's implementation.

Third, a renewed emphasis has been put on Human Security, in particular the issue of Food Security. Indeed this year, for the first time ever, APEC will be holding a Ministerial Meeting on Food Security to cover issues such as sustainable agricultural development and reliable access to food.

This 'new vision' for APEC in fact points to a broadening of the APEC agenda, from trade and investment liberalisation per se, towards broader economic policy coordination. The new paradigm, and the related reference to "the changed post-crisis landscape", underlines an APEC that is dynamic and that will remain relevant in the fast-changing economic environment.

So while much time will be spent in 2010 reviewing the extent to which APEC has succeeded in its mission to "Advance free trade for Asia-Pacific Prosperity" - it will not just be a rear vision exercise. This work will inform APEC Leaders, Ministers and Officials about what remains to be done, and the best ways forward. With this new vision firmly in place, we can expect that APEC will play an important role in the region's prosperity and stability for at least another two decades.