Author: Andrew Elek, ANU
For Apec, 2020 will be an opportunity to declare victory on the Bogor goals. While completely free and open trade and Investment will not ever be achieved, APEC leaders can take pride in remarkable progress since 1989. A high share of trade in goods faces no, or very low trade barriers, significant progress has been made towards reducing restrictions on trade in services and most sectors are now open to international investment.
Looking beyond 2010, APEC leaders can move beyond trade policy. They can recall the much wider objectives for the region set at their first meeting in 1993. These included cooperative policy development to cope with emerging challenges, including the need to protect the environment, promote better connectivity and human resource development. Among these, they can set realistic targets for progress on those issues which are most urgent and important and where voluntary cooperation among Asia Pacific Economies can make worthwhile gains.
Global warming is the most urgent economic challenge facing the region. APEC can already take some credit for the Paris Agreement, where the APEC model of voluntary concerted unilateral decision-making led to Nationally Determined Contributions to reduce emissions of greenhouse gases. Sharing information, experience and expertise among Asia Pacific economies can help speed up the adoption of new technological opportunities to reduce emissions. Leading by example, some Asia Pacific economies can encourage others to set progressively more ambitious and tighter emissions targets to be met while living standards continue to rise.
Advances in information technology, robotics and artificial intelligence will lead to sweeping structural adjustments and changes in the labour market. These new technologies are an opportunity, not just a threat. APEC, in cooperation with the OECD, can think ahead about how new technologies can revolutionise the ability of individuals, starting from a very early age, to acquire and use new skills.
New skills and institutions which can take full advantage of new technology will also be needed to improve physical, institutional and people-to-people connectivity among Asia Pacific economies. The potential gains from better connectivity are now far greater than from any marginal liberalisation of trade in the few products still heavily protected by traditional trade barriers.
APEC is helping to identify opportunities to make international commerce cheaper, easier and faster by improving policies and institutions. Acting on those opportunities will require funding. High quality connectivity in the Asia Pacific will need trillions of dollars in investment for economic infrastructure. Such investment will need to be supported with many millions of dollars of spending in human resource development and institutional upgrading, to ensure the investment in infrastructure is viable and affordable.
The rates of return for investments in people and institutions are high. Governments of all economies, even the poorest, should be willing to make such investments — development banks have the resources to help shape and finance these vital investments in capacity-building.
Governments will also need to lead investment in economic infrastructure and in particular in public goods. But neither governments nor development banks have enough resources to finance the construction phase for all of the economic infrastructure projects needed. It is essential to find ways to attract private sector investment on a large scale.
Private sector savings are available — trillions of dollars are held by institutional investors, but only a tiny fraction is being invested in infrastructure. The risk of investments in infrastructure projects with long lead-times are seen to be too high in most economies, especially developing economies. Some so called public-private partnerships (PPPs) have been negotiated to finance construction, but the experience has proved to be disappointing due to the high share of risks imposed on governments, inflated financing costs and unaffordable user charges. It is not realistic to expect cost-effective private investment in economic infrastructure until projects are running efficiently and project risks are lowered.
The precedent set by Infraco (Asia) demonstrates that engaging high quality teams of professionals who understand project cycles, public policy and commercial requirements can mobilise significant private investment in economic infrastructure at a reasonable cost. Small amounts of public investment in such teams have mobilised 20 times as much private sector investment in infrastructure once it was operating successfully. APEC can build on this precedent.
Seizing such opportunities does not mean neglecting free and open trade and investment. But APEC should not allow itself to be bogged down in negotiations over trade in a few sensitive goods. Voluntary cooperation among Asia Pacific governments can help implement many of the more important opportunities set out in APEC’s Services Competitiveness Roadmap Implementation Plan. For example, it could develop and support innovative information and communications technology and to help create a global, resilient, secure and trusted ICT environment.
Rather than setting another unattainable target date for the dream of free and open trade and investment, APEC can set specific ambitious but realistic medium-term objectives for less restricted delivery of domestic and international services, as well as people mobility. For example, it should be possible to implement an APEC Frequent Travellers Card, based on the success of the APEC Business Travel Card. Starting with pilot tests by pathfinder economies, this trusted travelers program could be expanded significantly, with realistic targets for wider coverage set for 2020 and 2025.
In all of these ways, APEC can move beyond its current obsession with trade liberalisation and record significant, measurable gains from cooperation, year after year.
Andrew Elek is Research Associate at the Crawford School of Public Policy, Australian National University. He was the inaugural chair of APEC Senior Officials in 1989.