Q&A with Japan: Progress Report on the APEC Growth Strategy
In November 2009, APEC Leaders agreed to formulate a comprehensive long-term Growth Strategy that supports more balanced growth within and across APEC economies, achieves greater inclusiveness in society, sustains the environment, and raises growth potential through innovation and a knowledge-based economy.
Japan, as host of APEC in 2010, has led the development of the strategy, and hosted a Growth Strategy High-level Policy Roundtable in Beppu, on 7-8 August, to advance the issue further.
In an interview at the conclusion of the Roundtable, Mr. Hidehiko Nishiyama, co-Chair of the Senior Officials' Meeting for APEC Japan 2010, outlines the progress being made.
Q: Why is the development of a new growth paradigm an important issue for APEC member economies at this time?
NISHIYAMA: APEC has traditionally focused on trade and investment liberalisation and facilitation as the foundation of economic growth, and this is still the number one priority. But the APEC region is now encountering challenges such as how to incorporate environmental imperatives and energy-related constraints, how to make sure all people gain from the fruits of economic growth, and how to enhance entrepreneurship and innovation to stimulate the economy.
So now we're working to overcome these challenges by focusing on achieving better quality growth, rather than just growth as usual. By improving the quality of growth, people in the APEC region will also develop an increasing level of comfort and support for further liberalisation of trade and investment, which will foster economic growth.
Q: Why is APEC an appropriate forum in which to address these issues?
NISHIYAMA: The APEC region is the world's growth engine so it bears a great responsibility for the future course of the global economy, and the livelihoods and welfare of many. In terms of its ability to deal with these issues, APEC's advantages are that its members have geographical proximity, it has close ties with business, and members have a twenty year history of cooperating together to improve the regional economic environment.
Q: How does APEC's work on growth relate to what the G20 is doing?
NISHIYAMA: The G20's objective is to formulate an overall global strategy to achieve a strong, sustainable and balanced global economy, and a stable and secure international financial system. Within the G20 the focus is on achieving these ends mainly through macroeconomic, financial and monetary policy.
By contrast, APEC is a regional organisation with a regional focus. It has an extensive and multilayered action-oriented infrastructure - through its Ministerial, Senior Official and working group tracks. And APEC has a strong track record in structural reform and capacity building. APEC therefore has an important role to play in advancing the decisions of the G20, by aligning the regional agenda with the global agenda, and by helping to ensure that the big-picture reforms and growth policies are translated into action locally.
Q: What is meant by improving the quality of growth?
NISHIYAMA: Formerly economies just wanted to grow fast to make people wealthy. But that approach has created its own problems. We now recognise that our resources are limited - be it water, energy or food - and that not everyone has benefited equally from growth which has created frustrations both between and within economies. We therefore have to improve the quality, as opposed to just the rate of growth. APEC has selected five particular attributes or qualities of growth to pursue - namely balanced, inclusive, sustainable, innovative and secure growth.
Q: What do these attributes of growth mean in effect?
NISHIYAMA: Let's start with sustainable growth because that's the one I'm most familiar with. This refers to growth that is coherent with sound environmental management. It means for example that we have to promote energy efficiency, expand the use of renewable energy sources and accelerate the move to a low-carbon economy.
APEC has already been working in this area to good effect. We are set to beat the target, set in 2007, of a 25 percent reduction in energy intensity in the region by 2030. So we can build on these efforts by moving our targets higher and by introducing new initiatives. Most recently a low-carbon model town project was endorsed at the meeting of APEC Energy Ministers in June, and work is already being done on that. APEC's dedicated Energy Working Group is also exploring a renewable energy peer review system and the concept of region-wide energy efficiency indicators is being considered. So I am expecting a good outcome.
By innovative growth we mean the creation of an environment that promotes and facilitates the commercialisation of ideas - this can involve either the creation of new ideas or the diffusion of existing knowledge. The idea of innovative or knowledge-based growth was prioritised by APEC members who consider it the engine of future economic growth.
From my perspective, one of the most important things is intellectual property rights, and in this area Japan is currently proposing two ideas. The first involves accelerating patent acquisition procedures so that when one APEC member grants a patent, other members can accelerate the patent process in their economy based on those results. The second idea is to create a network of patent-related education institutions. This would allow the institutions to share curricula and best practices to train their patent-related officials. By having those systems we can have a good IPR system in the APEC region, and by doing so we improve the ease of diffusion of technologies from one APEC economy to another.
Q: What can APEC do in the area of balanced growth?
NISHIYAMA: The most difficult aspect of balanced growth is how to correct current account deficits or surpluses, and how to alter related monetary and exchange rate policies. These things are very controversial and sensitive and are being handled mainly in the G20.
APEC, however, does have several important features that give it a role to play. The size and dynamism of its members combined with its ability to build regional consensus is critical. Also, APEC has a strong history in the areas of structural reform, capacity building and best practice dissemination. These things are sophisticated in their own way because by removing barriers to trade and building the capacity of developing economies, APEC is also helping to correct imbalances in the regional and global economy.
Q: Why the focus on structural reform, and does the new Growth Strategy extend APEC's work on structural reform into social areas?
NISHIYAMA: In the beginning APEC focused primarily on reducing at-the-border barriers to trade and investment. However as tariffs have become much lower and less of an impediment, APEC has shifted its focus to behind-the-border or structural issues. In particular the focus has been on rectifying systems in economies that obstruct or hinder trade - for example, improving public governance and competition policies.
This new Growth Strategy does take reform further, because it's attempting to alleviate structural issues that have prevented many people from contributing to, and benefitting from, economic growth. This is what we mean by 'inclusive growth'. In our region in particular this requires that we provide better social safety nets - such as pensions, education and healthcare - to allow people to participate in the formal economy.
Q: Why was the Roundtable important to advancing the new Growth Strategy?
NISHIYAMA: This was the first opportunity for APEC Ministers and high-ranking officials to get together and focus entirely on the APEC Growth Strategy. The discussion covered all the elements of the Growth Strategy and the discussion was very candid.
The experiences and views of APEC's members were presented. Regional business representatives, including the APEC Business Advisory Council and Atsutoshi Nishida, Chairman of Toshiba Corporation, provided their perspectives. In particular, they suggested that specific policy issues such as energy and the environment be considered.
Academics including Professor Peter Drysdale of The Australian National University emphasised the importance of formulating a growth strategy for APEC and the relevance of structural reform in the strategy. In addition, international organisations including the World Bank, the Asian Development Bank, the International Energy Agency and the Economic Research Institute of ASEAN and East Asia (ERIA) also presented their views.
A lot of useful information, experience, and policy recommendations were shared and this rich discussion will be reflected in the contents of the Growth Strategy itself.
Q: How will the Growth Strategy be translated into action?
NISHIYAMA: That is a very important question that has been repeatedly raised during the Roundtable. We have now fleshed out the five attributes and agreed on what we need to do. The next stage is to consider how to implement those tasks.
APEC's Leaders are expected to discuss and adopt the new Growth Strategy in November and after that we will formulate an Action Plan that covers each attribute. We have also planned a timeline. Our current intention is to have a 5-year Action Plan that covers through to 2015. In 2015 APEC Senior Officials will evaluate progress and report back to APEC Leaders, and Leaders will then consider the future direction of the Strategy. This process will be further refined during the upcoming Senior Officials' Meeting in Sendai in September, and the proposed structures should be in place by the time Leaders meet in November.