APEC's progress on the Bogor Goals

Have APEC economies made significant progress towards the Bogor Goals of free and open trade in investment in the region? Just take a look at the numbers, says Carlos Kuriyama, senior analyst with the APEC Policy Support Unit (PSU).

APEC economies' liberalization efforts and economic growth have helped raise an estimated 522 million people above the poverty line. From 1994 to 2008, APEC also generated 62 percent of world growth and created millions of jobs. Life expectancy across the region has risen to nearly 74 years and adult literacy has reached almost 94 percent.

"The progress has been significant since APEC's inception in 1989 and economic, trade, investment and social outcomes have improved immensely during this time," says Kuriyama.

An assessment report on progress towards the Bogor Goals was presented to APEC Economic Leaders during their annual meeting, held in November in Yokohama, Japan. Although the Bogor Goals were set way back in 1994, they remain a driving force for APEC , and reflect a strong, shared belief that free and open trade and investment is necessary to fully realize economic growth and prosperity across the Asia-Pacific region. Leaders remain committed to the goals set out in the 1994 declaration of realizing free and open trade by 2010 for industrialised economies and 2020 for developing economies.

A thorough and transparent review of progress has been conducted for 13 economies, including the five industrialized, (Australia, Canada, Japan, New Zealand and the United States), plus eight developing economies, (Chile, Hong Kong, China, Korea, Malaysia, Mexico, Peru, Singapore and Chinese Taipei) who have volunteered to be assessed ahead of time.

Peru says it volunteered because "we had already made a great deal of progress towards the Bogor Goals and we were convinced that we could be evaluated on the same basis as the industrialized economies with whom we share almost the same degree of openness in our trade and investment regimes."

"Moreover, it was our aim to show our commitment to APEC and its objectives and that APEC has been a key tool for us to liberalize our trade and investment regimes," says Luis Quesada, Peru's senior official for APEC.

The report concludes that economies have made significant progress towards the goals. From 1989 to 2008, APEC economies lowered average applied tariffs from 16.9 percent to 6.6 percent. "That's a significant reduction," says Kuriyama, part of the PSU team that conducted research for the assessment report. Economies have also made progress to liberalize trade in services and their investment regimes. Foreign Direct Investment inflows to the APEC region increased more than four-fold from 1994 to 2008, growing at an annual rate of 13.0 percent and reaching nearly USD 791 billion, while outflows have grown by 12.7 percent annually over the same time, reaching USD 782 billion.

APEC has become the world's most dynamic region, thanks in large part to economies' individual and collective commitment to trade liberalization, and importantly APEC's agenda, initiatives and action plans to encourage this. "APEC is a driving force for this success," says Kuriyama. As tariffs have fallen and the trade landscape has changed, APEC has also been leading the way on trade and investment facilitation. Its action plan on trade facilitation met its target of reducing trade transaction costs by five percent across the APEC region between 2002 and 2006. APEC's second action plan is again making progress, with trade transaction costs down by a further 1.7 percent between 2007 and 2008, which represents savings for member economies the equivalent of USD 14 billion. Most of the reduction in costs came from improvements in document preparation and customs clearance and technical control. The World Bank's "Doing Business Indicators" also show improvement in the trading environment in terms of documents required at the border and the time taken to clear products for import and export. An investment facilitation action plan is also underway and APEC is working to better connect supply chains to promote a seamless flow of goods and people in the region.

Since APEC's inception, total trade (goods and services) in the region has increased from USD 3 trillion in 1989 to USD 14 trillion in 2009, almost a five-fold increase. APEC members also enjoy a higher share of intra-regional trade than even the European Union, growing from USD 1.7 trillion in 1989 to 7.7 trillion in 2009, now accounting for 67 percent of APEC's total merchandise trade.

"Behind the border" barriers that hinder businesses and markets -- including in the areas of government regulations, competition policy, legal infrastructure, public governance and corporate governance -- are also being tackled in a substantial way with an APEC agenda on structural reform that aims to promote higher productivity and economic growth. Noting the progress that economies have made in recent years on structural reform, Leaders meeting in Yokohama agreed on an expanded APEC agenda to continue this important work.

"Much of our attention is now focused on behind the border barriers and that's partly a recognition of APEC's success in fostering the reduction of border barriers to trade," says Ric Wells, Australia's senior official for APEC.

"As you remove these barriers, economies become more integrated and that then throws up a whole range of other impediments to regional economic integration such as structural reform which could enhance common regulatory approaches to a number of issues that affect trade and investment."

The assessment report shows that APEC still has work to do and challenges remain. Progress has not been uniform across sectors with tariff peaks and protection remaining in areas such as textiles, clothing and agricultural products. As for services, restrictions also remain in some sectors including financial, telcommunications, transportation and television and radio broadcasting. Kuriyama points to ongoing restrictions on foreign investment in some economies such as screening systems and capital thresholds for investment in some sectors as well as movement of business people.

"We are very pleased with the balanced nature of the assessment report which gives a good indication of the progress made but it doesn't try to shirk away from the need for APEC economies to do more," says Wells.

"We all know that the goal of free trade and investment becomes increasingly difficult as the barriers are removed because the ones that we are left with are the ones that are obviously the most difficult and the most sensitive and that's going to be true of all economies."