Perspectives on APEC: Singapore 2009, Yokohama 2010 & Beyond

October 6, 2009

Speaker:
Hidehiko Nishiyama, Director-General for Trade Policy, Ministry of Economy, Trade and Industry

Presider:
Merit E. Janow, Professor, International Economic Law and International Affairs, School of International and Public Affairs & Co-Director, APEC Study Center, Columbia University; Director, Japan Society

Hidehiko Nishiyama, Director-General for Trade Policy at METI and Senior Officials' Meeting Chair of the APEC 2010 forum, visited Japan Society to talk about some of the issues and challenges that members will address this year in Singapore, at the 2010 gatherings in Japan and in the years to come.

"Today, everyone marvels at the breadth, depth, and speed of globalization," Mr. Nishiyama said. "At the same time, everyone is amazed by the change and new challenges that come along with it."

Growth in the Asia-Pacific region is increasingly important as a driver of global growth; "to preserve this trend, we must facilitate sustainable growth, while strengthening rules for trade and investment." Rising macroeconomic imbalances among the regional economies need to be corrected. Climate change problems must be faced, despite "differences between economies and their domestic concerns" that "make it difficult to agree on how to address this critical issue and share the burden multilaterally."

Globalization itself is criticized as the root of widening income disparities, and "it is necessary to develop approaches mediating these negative effects to preserve the social consensus needed to encourage further change and reform." Prices of oil, food and other commodities fluctuate widely, which "especially affects low-income individuals and disrupts incentives" for development of new and alternative resources.

As a trans-regional organization, the Asia-Pacific Economic Cooperation forum is uniquely positioned to play a role in solving these problems, Mr. Nishiyama said. Its 21 members represent over half the world's GDP and 45 percent of world trade, and their economies are more deeply integrated than those in other regions. The percentage of intra-zone trade among the APEC countries is 72 percent, versus 41 percent for NAFTA countries and 65 percent for the EU. Given this level of integration, "trade and investment liberalization and facilitation within APEC may build a powerful growth engine for the region."

Because it's a voluntary body, APEC is sometimes viewed as lacking in impact, but in truth, "APEC's non-binding nature is integral to its beauty," he declared. "Precisely because it is not binding, it enables member economies to discuss a wide range of issues not possible at the WTO." Moreover, APEC is structured so that "business leaders in the region can directly submit their recommendations on economic issues to political and government leaders in a multilateral setting."

As host of the 2009 summit, Singapore has focused on three important themes, continued Mr. Nishiyama: accelerating regional economic integration, addressing the global financial crisis and preparing for recovery, and supporting the multilateral trading system. In Japan, as newly elected Prime Minister Hatoyama and his cabinet begin to shape the country's approach to the 2010 summit, "our government's eagerness to host APEC 2010 is absolutely unchanged":

Prime Minister Hatoyama clearly stated at the United Nations meeting [on September 24] that Japan is determined to play the role of a bridge between countries in the Asia-Pacific region, and hosting APEC 2010 provides a wonderful opportunity to showcase that determination and to show yuai, fraternity, to all APEC member economies and their representatives.

At the UN meeting, the prime minister stressed Japan's desire to help build a strong East Asian community, "reducing the region's security risks and sharing each other's economic dynamism based on the principle of open regionalism," Mr. Nishiyama said. This would build on and extend cooperation on "free trade agreements, finance, currency, energy, environment, disaster relief and more."

"However, the prime minister emphasized, there is no way to realize this vision in the Asia-Pacific region without the United States," Mr. Nishiyama added. "The concept of an East Asian community certainly is not intended to exclude the U.S. dollar or the United States. Quite the contrary: as a step beyond this initiative, we believe we should envisage an Asia-Pacific community, and we do not think that this could readily be achieved without the U.S."

In 1994, APEC's Bogor Goals set 2010 as the target date for achievement of free and open trade and investment in the developed economies, he noted; "APEC 2010, therefore, is a year when progress will be evaluated and the future of the Asia-Pacific region seriously discussed."

Under Singapore's leadership this year, "work on identifying the path toward a free trade area of APEC is speeding along." Existing regional trade agreements are being reviewed for possible expansion. Also under review is the potential for trade acceleration in specific sectors, including environmental goods and services and the services sector generally.

APEC is working this year to boost regional integration not only at the border, but behind the border and across the border. This includes measures to improve scores on the World Bank's Ease of Doing Business Index and to relax regulations on logistics services.

"Next year, it will be necessary to develop ways to expand these efforts across the region to improve the flow of ideas and technology and to create a seamless business environment, including competitiveness policies and corporate governance."

To relieve the hardships of the global financial crisis and help businesses and individuals reap the benefits of globalization, APEC 2009 Singapore has brought forward two new themes, Mr. Nishiyama noted: "inclusive growth," which will support worker retraining and small businesses, and "green growth," which aims to make growth more sustainable in the face of climate change. "In Japan’s year as host economy, it will be necessary to construct a program that further defines and establishes the foundation of these two new growth concepts. We must also expand and maintain an innovative environment for new growth within the Asia-Pacific region."

"APEC is a fortress of free trade, and it fights resolutely against the foe of protectionism," Mr. Nishiyama concluded. "As a result, it must work both toward completing the WTO Doha development agenda and support still further efforts to ensure free and open markets. Of course, we must also protect human security, for example, expanding cooperation on swine flu, which has already become an issue this year, and food security, which has become a global challenge and since last year is likely to remain an important priority."

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Presider Merit Janow of Columbia University began the Q&A:

Could you say a little bit more about Japan's priorities in terms of international support for green technology and for inclusive growth?

"It is a little bit premature to speak on behalf of our whole government," but "Prime Minister Hatoyama and his cabinet are quite eager to promote those agendas supporting Singapore," Mr. Nishiyama responded. In particular, Prime Minister Hatoyama's commitment for a 25 percent reduction of carbon emissions from 1990 levels speaks to his dedication to promoting green growth strategies.

The audience members joined in:

On Japan's major objectives for APEC, how would you rank them in terms of priority? Are there some issues where APEC members are less likely to be constrained by domestic politics and more likely to find common ground?

Regional economic integration, new growth strategy and human security will be the key topics for next year, Mr. Nishiyama said. Within these areas, fostering integration in the services sector and in environmental goods and services is going to be important, as is work to support small and medium enterprises and to make environmental restrictions and energy efficiency measures into a source of economic growth.

What's the interaction between the G-20 and APEC on issues of macroeconomic imbalances?

G-20 deals with the whole world economy and has an emphasis on financial regulation and coping with the financial crisis, whereas APEC is a regional organization and prioritizes specific projects and specific policies, said Mr. Nishiyama. "So APEC should of course look at the outcome of G-20 and think about how to implement or how to enhance, region-wise, those policies."

How does Japan obtain input from the business community on APEC issues?

Business people who are members of ABAC, the APEC Business Advisory Council, have good contacts with the prime minister and government officials, and there are frequent meetings in Japan with ABAC people to report on the results of APEC meetings and consult on the business community's views, Mr. Nishiyama replied. There's also a good relationship with the ABAC support organization in Japan, which is headed by former Toyota CEO Watanabe.

The U.S. seems to be stuck on signing off on an FTA with Korea. What is APEC's position on having more free trade agreements in the region--is it a positive development, or does it really get in the way of concluding business through the WTO?

"APEC itself is aiming at open regionalism, so FTAs are in one sense good" in promoting trade liberalization, "but it's a kind of closed regionalism," Mr. Nishiyama responded. "Overall, APEC is supportive" because FTAs and RTAs can be a vehicle to achieve liberalized structures in a regional economy.

Is there any effort within APEC to look at harmonizing the various FTAs that are being negotiated?

There are these discussions, particularly on rule of origin adjustments, which are the toughest issues because they're almost equivalent to levels of concession, he said.

Professor Janow asked:

In the early days it was often said that APEC's purpose was three-fold: trade liberalization, trade facilitation and capacity building. The U.S. for a time pressed for trade liberalization as the paramount concern, but over the years there's been a shift towards the other two goals. Where do you see the energy being the greatest going forward?

As liberalization has become something that gets addressed by the WTO and through FTAs, "I think naturally, APEC's priority has been shifted toward the facilitation aspect, and I think that will continue in the future too," Mr. Nishiyama replied.

--Katherine Hyde