RCEP Puts New Life in APEC

The Asia-Pacific Economic Cooperation (APEC), has rolled back to life with the 2020 virtual Summit chaired by Malaysia on 17 November. There was no Summit last year as the host, Chile, suffered from internal political problems making it impossible to host the Summit. In 2018 the Summit was held in Papua New Guinea but due to discord among the members no final communiqué was issued. This year, Covid-19 facilitated a virtual Summit and set an ambitious agenda for itself.¹

APEC is a 21-member body which traverses mainly North and South America and the ASEAN and East Asian countries. It consists of member economies rather than States to accommodate the participation of Taiwan and Hong Kong, which China has acquiesced in since 1991. Besides the 10 ASEAN countries, it has Australia, New Zealand, China, Japan and Korea all of which are part of the recently signed Regional Comprehensive Economic Partnership (RCEP)². Beyond that it has the participation of Russia, Papua New Guinea, Taiwan and Hong Kong and from the Americas it has the USA, Canada, Mexico, Peru and Chile.

As an organisation it is unlike ASEAN and East Asia Summit (EAS) as APEC has its own secretariat in Singapore and different procedures³. It is currently chaired by Malaysia and will be followed by New Zealand in 2021. Its main aim is to be an economic forum of the region to support sustainable economic growth and prosperity.

This year’s leaders meeting rode on the positive ambience created by the conclusion of the RCEP. Besides, President Trump participated in the meeting though he had skipped the EAS the previous week.⁴ His participation was uncharacteristically quiet and straight forward.

APEC leaders issued the Kuala Lumpur Declaration on 17 November 2020 which built upon the joint statement issued by APEC ministers⁵. The emphasis is on mitigating the impact of COVID-19, the development of digital economies, driving innovative and inclusive sustainability and strengthening stakeholder engagement. The most important part is improving the narrative of trade and investment to which it has added a boost. Malaysia gave the theme, optimizing human potential towards a resilient future of shared prosperity, a forward momentum.

A significant achievement of the leaders meeting was the APEC Putrajaya Vision (PJV) 2040.⁶ It looks forward to an open, dynamic, resilient and peaceful Asia Pacific community for regional prosperity. In thePJV, trade and investment have the pride of place and commits to a functioning multilateral trading system with stable and predictable trade flows using WTO rules. This overlooks the current contention particularly with the USA in the WTO on the way forward and with China on trade imbalances.

Besides, the PJV also announced that it will continue to work on the goals of economic integration. This is expected to lead to a Free Trade Area of the Asia-Pacific (FTAAP). This is anticipated to be a higher standard, comprehensive regional undertaking which will also support connectivity, resilient supply chains and appropriate business behaviour. A reading of the PJV and seeing that various contenders were all present at the virtual meeting, indicates that the trade wars are perhaps going to be behind us. An implementation plan is to be created to pursue the wider free trade area which could link RCEP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP) and possibly NAFTA.

The Malaysian Prime Minister Muhyiddin Yassin announced that APEC had decided that it would not pull back from the commitment to openness or resort to protectionist measures in the future. That may make the FTAAP conception more valid.⁷ It appeared that the challenge of the COVID-19 had shaken the members out of their rivalries including the Sino- American trade war.

It is significant that the Americans mentioned their commitment to support economic recovery as well as promote peace and prosperity in the Indo Pacific region through economic growth.⁸ At the same time the Chinese supported a win-win process and an early conclusion of the FTAAP while also saying that they would consider joining the TPP much to the surprise of many.⁹

Some of the credit for this commitment to return to free trade is being given to the new Japanese PM Yoshihide Suga.¹⁰ Japan’s commitment to the RCEP, the expansion of the TPP and fulsome support to the FTAAP are seen as a push towards fair trade, avoiding protectionism and planning to overcome the global economic downturn. This message of trade and investment expansion of PM Suga was echoed by several leaders in the discussions. It also showed the steps towards economic re-engagement with China. This needs to be watched.

The tone for the FTAAP was set at the APEC CEO dialogues at which President Trump absented himself but made up by participating in the leaders’ meeting. CEOs dialogues provided opportunities for leaders and ministers to lay out their vision for overcoming the challenge of Covid, restoring the global economy to good health, setting out clear agendas and framing broader rules for inclusive development of trade without resort to protectionism.

APEC has contributed to making the region dynamic and a locomotive of growth. By 2018 nearly 48% of global trade and 60% of global GDP was based in APEC member economies which have almost 3 billion people. Real GDP increased from $ 19 trillion in 1989 to $ 47 trillion in 2018 making a dent in poverty and creating a growing middle class within a generation in most of its members. Average tariffs among APEC countries were reduced from 17 to 5.3% between 1989 and 2018 while its total trade grew by seven times and 60% of this was among its members.

In 1994 the Bogor goals were established when APEC met in Indonesia. They set a target for free and open trade and investment by 2020 by reducing barriers within the region and the progress made so far has been impressive. The APEC trade facilitation action plan which dealt with customs procedures reduced transaction costs at borders by 5% between 2004 and 2006 and a further 5% by 2010 bringing benefits of almost $60 billion to trade and investment in the region since then.¹¹

APEC has its own ease of doing business action plan since 2009 leading to improvements of over 11% on how business is done in the region. Faster customs procedures, structural reforms to improve border barriers to trade and connecting the region were important goals which have been undertaken indirectly and often through other regional and international mechanisms. At present the APEC supply chain connectivity initiative, which helps generate more efficient regional supply chains is of wider interest.

Increasing energy efficiency and renewable, encouraging the development of clean and green technologies and complementing those by lower tariffs and a multi-year project for green cities in the Asia Pacific have been some of the hallmarks of APECs quiet success.

Japan is the main country which is both in RCEP and TPP since the USA withdrew from the latter and China is not included. Other RCEP countries who are also TPP members are Singapore, Brunei, Malaysia, Vietnam, Australia and New Zealand. The three other TPP members Chile, Peru and Mexico are APEC members too. So, All TPP members are APEC members and most are RCEP members too.

India hasnever been accepted into APEC despite enthusiasm in the early years after it was created in 1989. Initially it was not seen as an open enough economy but after India’s positive role in EAS, Indonesia, the Chair of APEC in 2013 tried to invite India but was blocked by China. In 1998, Peru; Russia and Viet Nam joined, after which an embargo was placed and though it ended in 2010 consensus on India or other new members is lacking.

In 2015 several endorsements for India’s APEC membership emerged. The USA through a US-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region in January,¹² Japan at the Annual Summit in December,¹³ and Russia and China in the RIC in February 2015¹⁴ all welcomed Indian association with APEC. Five years later it has not been realised.

In 2016 when PM Modi visited the USA the joint statement recalled the Indo Pacific cooperation but no mention of APEC ensued.¹⁵ The same was noted in the Trump Modi meeting in June 2017¹⁶ by when the attention was more on the strategic aspects of the Indo Pacific. With Japan, the APEC position was maintained for the next 2 years but in 2018 the reference to APEC was dropped from the Joint statement.¹⁷ The Joint Statement of the First India-Japan 2+2 Foreign and Defence Ministerial Meeting on 30 November, 2019 also had no mention of APEC.

The Russia, India China (RIC) Communiqués retained the ‘welcome to APEC’ sentence for 2 further years but when RIC met after a hiatus in 2019 the line was dropped due to divergence of views on the Indo Pacific.

It is clear that as India’s participation in a more determined way in the Indo Pacific increased and its interest in RCEP diminished, its perceived interest in APEC as well as support of it from China in particular evaporated. APEC is not a strategic concept but an economic one and does not appear to fit in with Indian thinking which has largely remained inconsistent on associating with it. As India is now not part of RCEP it is unlikely to join the effort for the new FTAAP. India also does not seem to have ambitions towards FTAs in the region thus leaving associating with APEC FTAAP out of current plans.

Endnotes

1. Trump joins APEC summit as China counters US protectionism, Channel News Asia, 21 November 2020, https://www.channelnewsasia.com/news/world/trump-joins-apec-summit-china-13605520 [3]
2. RCEP, Asean, https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership [4]
3. APEC Secretariat. APEC, https://www.apec.org/About-Us/APEC-Secretariat#:~:text=The%20APEC%20Secretariat%20is%20based,communications%20and%20public%20outreach%20services.&text=APEC's%20annual%20budget%20is%20also%20administered%20by%20the%20APEC%20Secretariat.
4. Gurjit Singh, East Asia Summit signals India will pursue bilateral pacts with ASEAN countries, Indian Express,20 November 2020,https://indianexpress.com/article/opinion/columns/asean-summit-india-jaishankar-east-asia-summit-7057811/
5. APEC Leaders Issue Kuala Lumpur Declaration Kuala Lumpur, Malaysia, 20 November 2020, APEC, https://www.apec.org/Press/News-Releases/2020/1120_AELM [5]
6. Our Vision is an open, dynamic, resilient and peaceful Asia-Pacific community by 2040, for the prosperity of all our people and future generations., APEC,https://www.apec.org/Meeting-Papers/Leaders-Declarations/2020/2020_aelm/Annex-A
7. Apec launches Putrajaya Vision 2040, The Star, 21 November 2020,https://www.thestar.com.my/news/nation/2020/11/21/apec-launches-putrajaya-vision-2040
8. APEC leaders, including Trump, agree on free trade, The Boston Globe 20 November 2020,https://www.bostonglobe.com/2020/11/20/world/apec-leaders-including-trump-agree-free-trade/
9. Xi says China will consider joining TPP, Nikkei Asia, 20 November 2020,https://asia.nikkei.com/Politics/International-relations/Xi-says-China-will-consider-joining-TPP
10. APEC: Japan's Suga vows to push for bigger trade pacts after RCEP
    Nikkei Asia, 20 Novemebr2020, https://asia.nikkei.com/Politics/International-relations/APEC-Japan-s-Suga-vows-to-push-for-bigger-trade-pacts-after-RCEP [6]
11. Achievements and Benefits, APEC,https://www.apec.org/About-Us/About-APEC/Achievements-and-Benefits
12. US-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region. MEA, January 25, 2015, https://www.mea.gov.in/bilateral-documents.htm?dtl/24728/USIndia_Joint_Strategic_Vision_for_the_AsiaPacific_and_Indian_Ocean_Region [7]
13. Joint Statement on India and Japan Vision 2025: Special Strategic and Global Partnership Working Together for Peace and Prosperity of the Indo-Pacific Region and the World(December 12, 2015), MEA,https://www.mea.gov.in/bilateral-documents.htm?dtl/26176/Joint_Statement_on_India_and_Japan_Vision_2025_Special_Strategic_and_Global_Partnership_Working_Together_for_Peace_and_Prosperity_of_the_IndoPacific_R
14. Joint Communiqué of the 13th Meeting of the Foreign Ministers of the Russian Federation, the Republic of India and the People's Republic of ChinaMEA, 2February 2015,https://mea.gov.in/bilateral-documents.htm?dtl/24751/Joint_Communiqu_of_the_13th_Meeting_of_the_Foreign_Ministers_of_the_Russian_Federation_the_Republic_of_India_and_the_Peoples_Republic_of_China
15. India-US Joint Statement during the visit of Prime Minister to USA (The United States and India: Enduring Global Partners in the 21st Century)MEA, 7June 2016,https://mea.gov.in/bilateral-documents.htm?dtl/26879/IndiaUS_Joint_Statement_during_the_visit_of_Prime_Minister_to_USA_The_United_States_and_India_Enduring_Global_Partners_in_the_21st_Century
16. Joint Statement - United States and India: Prosperity Through Partnership, MEA, 27 June 2017,https://www.mea.gov.in/bilateral-documents.htm?dtl/28560/Joint+Statement++United+States+and+India+Prosperity+Through+Partnership
17. India-Japan Vision Statement, MEA, 29 October 2018,https://www.mea.gov.in/bilateral-documents.htm?dtl/30543/IndiaJapan_Vision_Statement

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