APEC 2008: Commitment to free trade reaffirmed

As is customary, the 2008 APEC Leaders’ Meeting culminated in a formal declaration.  In the Lima Declaration of Nov. 23, the 21 leaders of the member economies addressed the current global financial crisis with a commitment to open their economies, promote growth, restore confidence, increase SME competitivity, support the Doha Round as regards global trade liberalization and foment greater regional integration, in addition to the recommendations made by the so-called ABAC (business sector of each economy APEC).

As is well known ever since the Bogor meeting, the liberalization goals that were set by the 21 economies (developed economies by 2010, emerging economies by 2020) have been slow to flourish, though basically under the proliferation of trade agreements among its economies (spaghetti bowl), some questioned regarding their know-how. APEC reform has emerged as a necessity for the various Asian initiatives that reaffirm this APEC penchant, perhaps to the detriment of other economies and whenever it interacts with the global economy. What is clear is that the efforts by Peru to capitalize on its status as host country, agreeing to free trade negotiations with various countries and making efforts to attract Asian investment to itself.

Another highlight has been the fact that Australia, which has an initiative for the Pacific, has shown interest in joining the P4, which is currently comprised of Chile, Brunei, New Zealand, and now the US. It is not inconceivable to think Australia is after South-South leadership for APEC. Peru, Japan, Vietnam also showed interest in joining the TPP. It seems that while reaffirming the Asian initiatives, a horizontal cooperation is emerging in which Chile could play an important role if it maintains its dedication to economic openness, even more so in the face of Peru’s declared competition with Chile in the Pacific, whereas it is an exporter of the selfsame products and President Garcia’s demonstrating he has the political will to negotiate an FTA with China, Japan and other Pacific Rim countries.

In any case, it is certainly not without merit the 21 economies which account for 55% of world GDP and nearly 50% of global trade, agreed by consensus to seek effective mechanisms to form a free trade area in response to the current crisis and in spite of the crisis, as a specific response to the slow pace of the Doha Round. The Lima Declaration is a NAY vote for protectionism, which is important for emerging countries. In this sense, the Lima Declaration is an extension of the G-20 meeting, held in Washington, DC recently, where the major industrialized nations, the EU and 12 developing countries pressed for a conclusion to the Doha Round.

APEC 2008 addressed other important issues such as North Korean denuclearization, sea piracy, and climate change. These are issues with a certain political connotation, and which were not being addressed by any of the Asia-Pacific economic organizations. Their presence on agendas of late demonstrates that these issues adversely affect free and secure trade, which is an APEC pillar.

APEC reform is another relevant issue so that the bloc does not disintegrate, given the various initiatives and Asian strength led by China, as well as the need to reform financial institutions in the West that have failed to respond to the current reality of international trade. It is clear that after this crisis a new global architecture may emerge or APEC may be integrated into a regional FTA or financial institutions that are responsive to the financial crisis and safeguard against them in the future. Colombia and Costa Rica are waiting to join APEC. In the meantime, Chile has enough merit for its state policy towards the Pacific to drive a mini Pacific arch including Colombia, Costa Rica, El Salvador and Mexico (to the extent that it may diversify its foreign trade, given its strong links to NAFTA). The convergence of economic systems is relevant to this and also the political will of the economies.

Apparently, nothing very dramatic occurred at APEC 2008, but the commitment of member economies to free trade is important, during a time when it is still unclear which way the US will take to emerge from the crisis with a new president and the temptations to statism and protectionism increase precisely in times of crisis.