A Preview of the November 11-13, 2011 APEC Leaders’ Meeting

The United States is this year’s host of the Asia-Pacific Economic Cooperation (APEC) Summit later this week. APEC leaders will meet in Hawaii, accompanied by their foreign and trade ministers and a host of senior officials.

The United States will attend APEC with some important trade policy outcomes under its belt already, most significantly the passage of the Korea-U.S. free trade agreement (FTA), Columbia-U.S. FTA and Panama-U.S. FTA. Particularly, the Korea-U.S. FTA and progress in the Trans-Pacific Partnership (TPP) negotiations will help the United States show its serious commitment to pursuing international agreements that liberalize trade and investment in the Asia Pacific region.

As with every summit, this year’s APEC Leaders’ Declaration will endorse the outcomes from the series of APEC meetings that have been taking place across the United States during the year and provide direction on work to be undertaken in the following year. However, the United States also has some more specific outcomes it is seeking, the most significant being agreement to reduce overall tariffs to 5 percent on a range of environmental goods and services.

This summit comes at a crucial time for the world economy and we can expect a range of key international economic issues to be discussed, including: the economic turmoil in the eurozone, outcomes from the recent G-20 Summit in Cannes, and a possible package for the World Trade Organization ministerial meeting in December, which includes the process for Russia’s accession to the organizations.

Progress on the so-called Bogor goals will likely also be an important theme at this year’s APEC Leader’s meeting. The Bogor goals were agreed to by APEC economies in Indonesia in 1994 and are a commitment to achieving free and open trade and investment by 2020. Free trade negotiations are seen as an important step toward achieving this goal and the 2010 Yokohama APEC leaders’ meeting in 2010 endorsed the goal of a Free Trade Area of the Asia-Pacific (FTAP). APEC economies have recognized that such a free trade area can be realized by building on the various regional economic efforts in Asia, such as ASEAN+3, ASEAN+6 and the Trans-Pacific Partnership. However, the Trans-Pacific Partnership is the only active regional trade negotiation in Asia-Pacific which makes it the most likely building block to the FTAP.

APEC, however, is not a trade negotiating forum and any trade and investment liberalization that occurs under APEC is voluntary. APEC’s voluntary nature encourages countries to experiment with new and innovative rules on trade and investment, such as on supply- chain management and innovation. Ongoing work by APEC economies in these areas with an eye to building a high quality next generation FTAP would enable them to familiarize themselves with new rules.

At the upcoming APEC meeting in Hawaii, TPP parties are expected to provide an update on the progress of these negotiations and a timeline for completing the negotiations in 2012.

Japan is also its intentions regarding participation in the TPP negotiations. As I discussed in a previous article on the TPP, Japan will need to demonstrate that it can reform its agriculture sector before it joins the TPP negotiations. Japan’s recent announcement that it would be liberalizing its restrictions on U.S. beef imports provides some evidence that the government is getting serious about agriculture reform, but this alone is unlikely to be enough to convince the TPP parties that Japan can address its key tariff and other non-tariff barriers to agricultural trade.

In the event that Japan decides not to announce its intention to join the TPP negotiations in Hawaii, expect to see a statement of Japan’s intention to join the negotiations at a later stage in order to keep these aspirations alive and to retain the potential of joining the TPP to drive efforts at domestic reform.

What to do with the WTO Doha Round will also feature prominently at APEC this year. At last year’s APEC meeting, leaders reaffirmed their “strong commitment to bring the Doha Development Agenda to a prompt and successful conclusion.” Yet, in 2011 the Doha Round has run into repeated headwinds and WTO members are now trying to piece together a package of deliverables for the December WTO ministerial meeting to provide direction on what progress, if any, can be made on Doha in 2012. Consistent with the G-20 Leaders’ Communiqué issued in Cannes last week, APEC leaders should avoid using trade protectionist measures in response to domestic economic challenges, recognizing the negative impacts these measures would have on global economic growth. Leaders should make a strong commitment to pursue multilateral trade liberalization through the WTO as this would reaffirm the centrality of the organization as the institution for governing world trade.