APEC and the WTO: Two Tracks To Trade Liberalisation

Singapore, 22 April 1999
  • Remarks by Ambassador Timothy Hannah, Executive Director, APEC Secretariat
Thank you for inviting me to speak to you today. I think that it is timely to examine trade liberalisation as it is executed in APEC and the WTO. Clearly the regional economic crisis in the region might be used by some to argue for protectionism rather than further economic liberalisation. The fact that APEC Leaders in KL rejected this as a solution and committed to further liberalisation within APEC and multilaterally is an achievement in itself. For APEC in 1999, the challenge is to utilise the unique but complementary WTO and APEC processes to make the commitment of our Leaders a reality.

I would like to divide my presentation into three sections. Firstly introductory comments about APEC and the role of the APEC Secretariat, secondly a discussion of the WTO and APEC and thirdly an outline of what New Zealand hopes to achieve as 1999 Chair of APEC.

1. Introductory comments about APEC

(Slide 1)
  • APEC intro

(Slide 2)
  • What APEC is not

(Slide 3)
  • Three pillars of APEC

(Slide 4)
  • APEC Secretariat - background

(Slide 5)
  • APEC Secretariat - structure

(Slide 6)
  • APEC Secretariat - outputs and services

(Slide 7: APEC and the WTO)

1. APEC and the WTO
APEC and the WTO - 2 unique processes with a common aim

APEC and the WTO share a common purpose - maximising the gains from freeing up international trade. But each grouping has its own unique mode of operation and set of activities designed to progress towards that goal:

(Slide 7.1: Membership)
  • The WTO has near-global membership while APEC's is regional, but APEC includes some economic players which are not WTO members eg China, Russia, Chinese Taipei and Viet Nam.

(Slide 7.2: Process)
  • The WTO is a rules-based multilateral trade agreement; APEC is a consultative process operating on a voluntary basis and consensus among members.

(Slide 7.3: Focus)
  • The WTO focuses primarily on tariffs and other at-the-border trade barriers, while APEC has a much broader view encompassing trade liberalisation, business facilitation and providing support through economic and technical cooperation to enable economies, particularly those relatively less advanced, to maximise their gains from trade liberalisation.
  • APEC member economies are working to achieve free trade and investment by 2010 (for developed economies) and 2020 (for developing economies) while the WTO has not committed beyond the Uruguay Round Agreements, including the Built in Agenda. We register steps towards our 2010/2020 goals, which are very comprehensive in coverage through Individual Action Plans, revised and improved annually. Also through Common Action Plans. These IAPs and CAPs are the key instruments of APEC liberalisation process. IAPs progress is entirely voluntary. But peer pressure can also be influential.
  • This year Japan, Australia and the United States have agreed to subject their IAPs to examination by other APEC member economies. I appreciate that this is a far different approach to the European Union. But it is proving effective, even in difficult economic times.

(Slide 8: APEC/WTO Cross-Fertilisation)

Cross fertilisation between APEC and WTO

In practice there is a lot of cross-fertilisation between APEC and the WTO. Some might say that APEC was born partly out of the Asia-Pacific region's frustration with the slow pace of the Uruguay Round negotiations in the late 1980's. And the linkages have continued since then at both a political and working level.

(Slide 8.1: Political commitment)
  • APEC Leaders and Ministers have repeatedly emphasised their commitment to the multilateral trading system and its further development.
  • I remember the inaugural meeting in Canberra in 1989 - the main focus of negotiations on the text of the conclusions of that occasion was on the message we wanted to send to non-regional trading partners about the need to press on with trade liberalisation. It was a strong message.
  • Then in 1990 and later, APEC Ministers again lent their weight to pressure to move ahead with the Uruguay Round.
  • APEC Leaders and Ministers have also supported the goal of universal WTO membership and the prompt accession of non-members.
  • APEC economies have adopted the WTO MFN mechanism for all their unilateral trade liberalisation commitments - APEC is not a trade bloc. In APEC this is known as open regionalism and it requires that APEC operate in a WTO consistent way.

(Slide 8.2: Development of multilateral agreements eg ITA)
  • In 1996 and 1997, APEC was instrumental in building critical mass around the embryonic International Technology Agreement (ITA) in preparation for its multilateralisation in the WTO. So too APEC provided impetus to move ahead on financial services.

(Slide 8.3: Inputs at technical level eg competition policy)
  • APEC provides input into the WTO's technical work, particularly in the trade facilitation area which is more developed in APEC than it is in the WTO. For example, the WTO Working Group on the Interaction between Trade and Competition Policy has been briefed on APEC's competition policy/deregulation work programme; and APEC has forwarded its non-binding principles and practices in government procurement to the WTO Working Group on Transparency in Government Procurement.

(Slide 8.4: Implementation of WTO agreements)
  • APEC promotes adherence to the WTO agreements through organising training and familiarisation courses and other technical cooperation programmes eg in relation to TRIPs, TRIMs

(Slide 9: Sectoral Liberalisation)
Sectoral Liberalisation

The most recent and high profile of cooperation between APEC and the WTO has been the Early Voluntary Sectoral Liberalisation Initiative or EVSL.

What is EVSL?

(Slide 9.1: Conceptualised and developed in APEC)
  • As noted, APEC has served as a 'ginger group' for past multilateral agreements - the membership of the ITA was built up in APEC and the support of many APEC member economies gave impetus to the WTO Financial Services Agreement. EVSL is a more sophisticated model. The initiative was conceptualised and developed entirely within APEC and is only now being multilateralised.

(Slide 9.2: 15 sectoral packages with participation by 16 economies)
  • Over a two-year period APEC developed 15 detailed sectoral packages through the EVSL process. 16 economies participated in the consultation which encompassed tariffs (end rates, end dates, product coverage and guidelines of flexibility provisions), facilitation (including cross-recognition of standards where these are of trade significance) and ecotech for each sector.

(Slide 9.3: Trade significance of package developed in APEC)
  • In most sectors, intra-APEC trade represents a significant proportion of world trade. Thus the agreement to liberalise within APEC already represents a significant critical mass.
  • Moreover economies with world market-dominant trading positions in particular sectors are prepared in liberalise under EVSL. eg the one economy which represents 24% of world forest product imports, more than any single importer outside APEC, is offering full participation in the forest sector package.

(Slide 10: EVSL packages cover)

(Slide 10.1: trade liberalisation)
  • For 9 of the 13 sectors involving tariff reductions, the target is tariff elimination.
  • As all APEC economies are already committed to free trade by 2010 (for developed economies) and 2020 (for developing economies) all sectors provide for tariff reduction end-dates in advance or ahead of the Bogor goals.

(Slide 10.2: facilitation)
  • For a number of sectors, tariffs are already relatively low. Recognising that the real challenge for these sectors is other trade constraints, work programmes have been put in place to identify and remove NTMs, and for further work on trade facilitation measures such as standards and conformance. Eg The forest and forest products initiative includes work on improving consistency in standards for building and construction codes across APEC economies.

(Slide 10.3: ecotech)
  • The economic and technical cooperation component will enable economies to maximise the gains of liberalisation. Eg the energy sector initiative includes a database on mining and energy-related investment opportunities in APEC economies; and an APEC-funded project to provide technical assistance to support implementation of the telecoms MRA is already underway.

(Slide 11: EVSL in 1999)

Where is EVSL at now?

(Slide 11.1: Telecoms MRA)
  • One of the 15 initiatives, the Telecommunications Mutual Recognition Arrangement is already being implemented by APEC economies

(Slide 11.2: Facilitation and ecotech)
  • The facilitation and economic and technical cooperation work programmes are already being implemented and further developed in APEC. Officials are due to report on this to APEC Trade Ministers in June

(Slide 11.3: First package of tariff liberalisation measures moved to WTO)
  • In order to maximise the gains from EVSL the tariff elements the first package of 8 sectors is being moved into the WTO with a view to endeavouring to conclude an agreement in 1999. In the WTO, the initiative has been renamed - ATI (Accelerated Tariff Liberalisation Initiative). The objective is to build on the level of agreement already achieved by APEC economies by bringing in non-APEC members through the WTO process. This would enable the sectoral agreements to cover an even greater proportion of world trade, thereby maximising the benefits for all participating economies.

(Slide 11.4: Second package under development in APEC)
  • APEC is also agreed that the tariff elements of a second package of sectors be further developed by June, with a view to multilateralisation.

3. New Zealand Objectives for 1999

My presentation so far has looked at only one aspect of APEC's 1999 work programme - linkages into the multilateral trade agenda. One of the strengths of APEC is the range of economic issues it works and the fact that it is expected to produce annual results.

(Slide 12: Expanding opportunities for doing business throughout the APEC region:)
  • This involves continuing trade liberalisation and business facilitation through the IAP and CAP process. A major review of IAPs and CAPs is underway to stocktake how far APEC economies have come since Bogor.
  • With the WTO Ministerial in November 1999 taking place shortly after the APEC Leaders Meeting, APEC has a major opportunity to influence the shape of further multilateral trade negotiations under the WTO
  • Further progress is also expected on the ecotech and facilitation aspects of EVSL and the ATLI initiative in the WTO

(Slide 13: Working with other economies to strengthen the functioning of markets:)
  • The economic crisis has shown up the need for work on strengthening markets to build confidence and resilience and speed the recovery of growth in the region. APEC will be looking to develop further its work on the internal competition and regulatory frameworks employed by member economies towards a set of APEC principles for competition and regulatory policy.
  • An important aspect will be addressing institutional weakness and capacity shortages, particularly skills shortages to ensure that full benefits of market systems can be utilised by all APEC members.
  • Electronic commerce has the potential to revolutionise the functioning of markets. APEC's Blueprint for Electronic Commerce has been working on ways to facilitate its usage. Y2K will also be a particular priority for 1999 - in particular a Y2K Symposium on the transborder impacts of Y2K has just been held in Singapore.
  • Work on social impacts of the financial crisis is underway. Activities include a forum on pension fund reform, a US-led taskforce on the social framework for growth, the annual Economic Outlook and ongoing human resource development activities. In particular the Human Resource Development Working Group (HRD) has established a Task Force on the Human Resource and Social Impacts of the Financial Crisis, which has recommended new or expanded projects in key areas of crisis response. They include:
  • examining best practices in member economies on balancing market liberalization with labor market adjustment;
  • assessing the nature and scope of social safety nets and their significance in the current crisis;
  • examining business-labor-government cooperation in workplace training;
  • examining along with other APEC fora the social impact of regional growth and liberalization; and
  • assessing training needs to strengthen corporate governance in affected economies.
  • APEC Food System is an integrated approach to improving food supply in the region. originally proposed by ABAC. It would include promotion of trade in food products, upgrading of rural infrastructure and diffusion of new agricultural technologies.

(Slide 14: Broadening support for and understanding of APEC in the community:)
  • There is a need for APEC to more effectively engage in the debate about market reforms and trade liberalisation in order to demonstrate the benefits of the APEC vision.
  • APEC already has institutional links with business and will in 1999 be developing a framework for integration of women into APEC, holding a Ministerial Meeting on SMEs and a private sector CEO Summit at the time of the Leaders' meeting.