APEC Update: October 2007

Topics this issue:
A real commitment to Doha?
No new members, for now
Next stop, Peru 2008
Creating a Pacific Arc
Other summit outcomes

Asia-Pacific Economic Cooperation (APEC) members account for 48 percent of global trade and almost 60 percent of the world’s GDP. But looking beyond just the 21 member countries, in 2006, total Latin America-Asia trade flows reached $226 billion. With Latin American growth forecast at 5 percent this year and a 7.9 percent prediction for Asia, inter-regional trade is expected to continue reaching new heights.  

The Americas Society and Council of the Americas take a look at September’s Asia-Pacific Economic Cooperation (APEC) forum in Sydney, Australia, and some of the next steps for APEC and Latin America.  

Despite pledging to prioritize World Trade Organization (WTO) negotiations and move forward with the Doha Development Round, bilateral trade talks dominated side conversations at the summit. Trade deals between APEC members continue to flourish.  One week prior to the summit, the Chile-Japan Strategic Economic Partnership took effect, representing the most recent of Chile’s many bilateral trade agreements with Asian countries. 

Canada announced it will hold trade and investment talks both with Vietnam and the overall Association of South East Asian Nations (ASEAN) bloc. Negotiations are close to conclusion for Canadian trade deals with Singapore and South Korea and talks are underway with Peru and Colombia. Outside the summit, the Mexican and South Korean foreign affairs ministers discussed steps to move ahead with a free-trade agreement (FTA).  Peru and Singapore finalized FTA negotiations shortly before the summit, and a meeting between Chinese President Hu Jintao and Peruvian President Alan García resulted in an agreement to launch bilateral trade negotiations. 

With 21 member countries, APEC leaders agreed to delay any expansion and revisit the issue in 2010. The moratorium on new members established in 1997 was slated to end this year, but complex negotiations—mostly regarding intra-APEC power sharing—froze membership requests from several countries including Colombia and India. This decision was made to ensure that “the momentum APEC has developed towards regional integration and open economies is enhanced.”  Costa Rica, Ecuador, El Salvador, and Panama have also expressed interested in joining the trade and investment group.

Four years after Chile hosted the 2004 APEC annual meeting, Peru will be hosting next year’s summit. This presents a great opportunity for both Peru and the region, but several challenges lie ahead.

Domestically, a recent IPSOS poll showed that 92 percent of Peruvians are unfamiliar with APEC and many are skeptical of the benefits in hosting a summit.  However, the government is engaging in a campaign to highlight the relevance of the summit to everyday Peruvians. At the Third AS/COA Asia-Latin America Conference, Ambassador Juan Carlos Capuñay, the newly appointed Executive Director of APEC, noted that more emphasis would be placed on addressing social concerns. In an effort to reach out to more Peruvians and highlight the many potential areas of investment, several cities outside the capital will host ministerial meetings.

On the international front, Peru must still prove its ability to undertake the enormous logistical and financial burdens of hosting such a large-scale international event. 

As a first step in shaping next year’s agenda, President García recently proposed a Pacific Arc—including Peru, Chile, Colombia, Mexico, and Panama—to advance inter-regional trade. According to the President, the Pacific Arc will unite Latin American APEC countries with other countries in the region that have FTAs with the U.S. or are close to solidifying one. He has also noted that the new political and economic bloc will work with “countries that share the view of using trade and investment agreements as a tool to eradicate poverty from the region.” On September 25, Chilean President Michelle Bachelet noted at an Americas Society and Council of the Americas event that that the Pacific Arc seeks to be a “bridge from the Atlantic to the Asia Pacific.”

Hailing it as timely and innovative, supporters believe the Pacific Arc will promote economic growth across the region through a "modern social model" for free trade.  President García assures that it will deliver clearer and more successful results than those of other ideological models.  But critics see many weaknesses, including a lack of domestic and international consensus.

To confront these challenges, the Peruvian President will seek further trade cooperation and a unified stance toward Asia.  Leaders from all Pacific Arc countries will convene in Mexico early next year for a crucial meeting to strengthen the bloc’s leadership and reinforce it as a strong collective endeavor.

Climate change dominated much of the summit discussion. APEC members are responsible for over 60 percent of global greenhouse gas emissions.  After tense negotiations, leaders signed the Sydney APEC Leaders Declaration on Climate Change, Energy Security and Clean Development.  However, achieving consensus proved difficult and binding targets were not set.  Instead, APEC members settled for “aspirational targets” for each country to assign itself. The declaration pledges to “slow, stop and then reverse the growth of global greenhouse gas emissions.”

While developing countries favored the individual non-binding controls, both Australia and the U.S. would like to see APEC-member China included in any future climate change plans. Many felt the voluntary goals were an empty gesture, but Australian Prime Minister John Howard pushed the Sydney results as a jumping point for future discussions. For some, the vague outcome of the summit’s environmental goals reaffirmed APEC’s inability to achieve a consensus on non-trade related issues.

Other key results include:

• Trade: Call for Doha round to finish by year’s end; and the proposed Free trade Area of the Asia-Pacific (FTAAP) will be addressed in practical and incremental steps.
• Human Security: Contaminated products were declared a threat to human security and a call was issued to reinforce product safety standards; and a pledge was made to dismantle terrorist groups and prevent their abuse of the economic and financial system.