Chen-Sheng Ho
Introduction
In the "2004 ABAC Report to Leaders," ABAC suggested the development of a Free Trade Area of the Asia-Pacific (FTAAP). ABAC called for APEC Leaders to show strong political commitment to negotiate a region-wide agreement that would bring economic benefits to members. An FTAAP would accelerate the achievement of the Bogor Goals and minimize the negative effects from the proliferation of complex web of FTAs (ABAC 2004).
The most important milestone for the FTAAP idea was reached in 2010 when the APEC Leaders stated in their Declaration that APEC will take concrete steps to realize an FTAAP. The Leaders further said that an FTAAP should be a comprehensive free trade agreement that will build on regional undertakings, such as ASEAN+3, ASEAN+6 and the Trans- Pacific Partnership. In addition, APEC will serve as an incubator of an FTAAP through the provision of leadership and intellectual input into its development (APEC 2010).
With China as the 2014 APEC host, the APEC's work towards achieving an FTAAP is showing signs of renewed vigor. One of the priorities for APEC in 2014 is: "Advancing Regional Economic Integration." Specifically, APEC will pursue the realization of an FTAAP through the creation of favorable conditions for FTAAP (APEC ISOM 2013).
During the 2014 SOM1 Meeting in Ningbo, China presented a proposal titled "APEC Framework of Strengthening Regional Economic Integration." The proposal seeks to enhance the realization of an FTAAP. The framework consists of four elements: (1) Enhance transparency of RTAs/FTAs; (2) Strengthen capacity building activities to achieve an FTAAP; (3) Formulate a work plan to realize an FTAAP; and (4) Launch an FTAAP feasibility study (APEC SOM1 2014).
Most importantly, the proposal calls for the development of a work plan or roadmap. Essentially, the roadmap will identify the steps toward an FTAAP. In addition, the roadmap will clarify major principles focusing on the relationship between the pathways and an FTAAP as well as the relation between an FTAAP and the Bogor Goals. Furthermore, the proposal suggests the year 2025 to be the deadline to realize an FTAAP (APEC SOM1 2014).
Analysis
Open Regionalism
APEC Leaders stated in their 1994 Declaration that they were against the building of a trading bloc that was inward-looking and that inhibited global free trade. APEC will support the Bogor Goals in a way that advanced global trade and investment liberalization. Thus the outcome of trade and investment liberalization in the Asia-Pacific region will reduce barriers in APEC and also between APEC economies and non-APEC economies. APEC will ensure that non-APEC developing economies will also obtain benefits from APEC's trade and investment liberalization. In addition, APEC's trade and investment liberalization efforts will conform to GATT/WTO rules (Ho 2013).
The important point that can be inferred from the 1994 APEC Leaders' Declaration is that APEC promotes open regionalism which entails supporting the multilateral trading system and the Bogor Goals. Most significantly, APEC is advancing open regionalism through strengthening APEC REI and making sure that non-APEC members will benefit from APEC's trade and investment liberalization and facilitation. Therefore, the open regionalism idea that has guided the achievement of the Bogor Goals will remain valid for directing the attainment of an FTAAP. It also means that APEC Leaders want to ensure that the achievement of an FTAAP does not impede the advancement of the WTO.
Regional Undertakings-FTAAP Relationship
The APEC Leaders' support for ensuring that an FTAAP will be built on regional undertakings was clearly stated in the 2010 Declaration, as mentioned in the literature review. In the 2013 APEC MRT Meeting Statement, Ministers agreed that APEC will analyze the convergence of TPP, RCEP and other FTA/RTA initiatives within the APEC framework (APEC MRT 2013). Specifically, there is a need to study ways to converge TPP, RCEP and Pacific Alliance (PA) with an FTAAP.
An important way to converge the three major FTAs in the Asia-Pacific region is the enabling of open membership through allowing all APEC members to join them. This way can be called membership convergence. From a technical standpoint, this method is feasible in that the three FTAs can develop their own rules. The APEC members will be able to join the three FTAs, as long as they are willing to accept the rules. At the same time, the members of the three FTAs will become APEC members. Thus the TPP, RCEP and PA are linked with an FTAAP through membership convergence. In the absence of a formal agreement to realize an FTAAP, membership convergence will be an effective way to connect the three FTAs with an FTAAP. The benefit is that businesses in the Asia-Pacific region will be able to choose the FTA that satisfies their needs the most.
Recently, there is growing interest among APEC economies to develop free economic zones (FEZs). The FEZs can be seen as another way to assist with the advancement of the Bogor Goals and an FTAAP. The main purpose of FEZs is to promote economic liberalization within them. Essentially, a FEZ serves as a model for economic liberalization in which an economy could later seek full scale adoption of the liberalizing measures. For example, China has created the Shanghai Free Trade Zone. Korea has established the Incheon Free Economic Zone. Chinese Taipei has developed the Free Economic Pilot Zones (FEPZs). In addition, Japan is also promoting special economic zones.
One could say that an important feature of the FEZs is that it is designed by each economy with minimal pressure from other economies. On the other hand, FTAs are the result of negotiations among members, so that some rules are included but may not be fully supported. Thus the rising interests in FEZs are a positive development because they lead to economic liberalization. Moreover, the FEZs are assisting with the realization of the Bogor Goals and an FTAAP, as free trade is being advanced. From APEC's standpoint, the FEZs are truly in line with APEC's principle of voluntarism, since economies are creating their own FEZs. Therefore, APEC should begin to promote FEZs to a greater extent.
Suggestions
First, APEC should continue to support the open regionalism idea. This means that the realization of an FTAAP will also promote the WTO and ensure that non-APEC members are not discriminated. In doing so, APEC can serve as an outstanding example for the world that the creation of a free trade area can also benefit non-APEC members.
Second, APEC should promote membership convergence to link the TPP, RCEP and PA with an FTAAP. Specifically, APEC members will be allowed to become members of the three aforementioned FTAs, as long as they can adhere to the rules. Additionally, members of the three FTAs can become APEC members. In doing so, the difference in the rules of the FTAs will have less negative impact. Moreover, businesses can choose the FTAs that satisfy their needs in terms of less transaction costs.
Third, APEC should support the development of free economic zones (FEZs) and create an APEC Free Economic Zones Network (AFEZN). The FEZs is an effective way to advance the achievement of the Bogor Goals and an FTAAP through the implementation of economic liberalization measures. A FEZ is a model for economic liberalization within an economy and subsequent full scale adoption of the economic liberalization measures is possible. The AFEZN will serve as a platform for the sharing of experience and the strengthening of linkages.
References:
1.ABAC. 2004. "2004 ABAC Report to Leaders." Manila: ABAC Secretariat.
2. APEC. 2010. "2010 APEC Leaders' Declaration. Singapore: APEC Secretariat.
3. APEC ISOM. 2013. "Theme and Priorities of APEC 2014." Singapore: APEC Secretariat.
4. APEC MRT. 2013. "2013 APEC MRT Meeting Statement." Singapore: APEC Secretariat.
5. APEC SOM1. 2014. "APEC Framework of Strengthening Regional Economic Integration." Singapore: APEC Secretariat.
6. Ho, Chen-Sheng. 2013. "Advancing the Attainment of the Bogor Goals: The APEC Way." Paper presented at the 2013 ASCC Conference in Jakar ta, Indonesia.
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