The Hindu Business Line : Does APEC membership really matter for India?

APEC stands for Asia-Pacific Economic Cooperation. It is a process of inter-governmental economic cooperation inaugurated in Canberra in 1989 with 12 economies as members at inception. Now, APEC has 21 members: Australia, the 10 ASEAN nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam), Canada, Chile, China, Hong Kong, Japan, Korea, Mexico, New Zealand, Papua New Guinea, Peru, Russia, Taiwan and the US.The latest (2006) version of the Guidebook on Procedures and Practices issued by the APEC Secretariat in Singapore notes that the region has generated nearly 70 per cent of global economic growth since 1990 and accounts for more than 2.5 billion people or a little over 41 per cent of the world population. Its combined Gross Domestic Product of $19 trillion is 58 per cent of global GDP, while the region's share in world trade is close to half.

Consensus, commitments

As explained on the APEC Web site, the inter-governmental grouping operates on the basis of non-binding commitments, open dialogue and equal respect for the views of all participants, an arrangement with no treaty obligations required of its participants. Decisions within APEC are reached by consensus and commitments made on a voluntary basis.

Of the dozen or more meetings APEC holds annually, two are the most prominent. In November each year a ministerial meeting is held immediately before the summit meeting of presidents/prime ministers.

A key target of considerable significance relates to free trade in APEC by 2020. In November 1994, then Presidents Bill Clinton (the US) and Suharto (Indonesia) , and then Prime Ministers Paul Keating (Australia), Mahathir Mohammed (Malaysia) and Tomiichi Murayama (Japan) and 13 other leaders met for the second APEC summit at Bogor, Indonesia.

The Bogor Declaration of the `economic leaders' set the two-tier time-frame for free trade in the region. Developed APEC members such as the US and Japan are to achieve free trade by 2010 while the developing APEC economies are to achieve it by 2020.

The APEC process seemed to have worked well and holds the promise of achieving the `Bogor Goals' of free and open trade and investment in the Asia-Pacific. Average trade tariffs, for instance, have already fallen from 17 per cent in 1988 to 6 per cent in 2004.

The APEC forum has been of considerable interest to India, especially in the early- and mid-1990s, as the country's economic liberalisation has begun to move forward. The country was steadily increasing its trade orientation and opening up for foreign investments. Several in the academic and diplomatic communities in India and abroad hoped that it was a matter of a few years wait for India to become a member of APEC.

The Issue of Membership

At the conclusion of the third ministerial of APEC in Seoul in November 1991, a joint statement was issued, which, included the following provision on participation: "Participation in APEC will be open, in principle, to those economies in the Asia-Pacific region which: (a) have strong economic linkages in the Asia-Pacific region; and (b) accept the objectives and principles of APEC as embodied in this Declaration. Decisions regarding future participation in APEC will be made on the basis of a consensus of all existing participants."

At the Seattle Ministerial Meeting of November 1993, however, after admitting Mexico and Papua New Guinea and deciding to admit Chile in 1994, "... Ministers agreed to defer consideration of additional members for three years... ."

The Manila ministerial held in 1996 decided not to extend the moratorium with the view to admitting a limited number of new members, reiterated that APEC is an open and evolving process, and agreed that in Vancouver in 1997, the set of criteria for evaluating applications will be adopted, in Kuala Lumpur in 1998, new members will be announced based on the adopted criteria and they will be admitted in Auckland in 1999.

At Vancouver in 1997: "Ministers endorsed the Guidelines on APEC membership and undertook to consider them in future deliberations on this matter. A variety of views were expressed on the number of new members to be included and the timing. However, the final decision on this matter was left to Leaders."

While one does not find specifics in the Leaders' Declaration, the decision was announced that APEC imposed a fresh moratorium at the Vancouver summit in November 1997, and described the move as "a 10-year period of consolidation, following which membership issue will be considered further." Parenthetically I must add that all these did not deter Peru, Russia and Vietnam being listed as members since 1998.

The FAQ page on APEC Web site holds the following promise on membership expansion: "In 2007, additional members will have the opportunity to apply for membership."

A Different India Now

It would seem that a few nations such as Australia, Japan and the US played a key role in terms of membership expansion. Right or wrong, I used to think that Australia belonged to this part of the world, had enough of a distinctive population and wished to have as much economic linkage as possible with the dynamic Asian region. I was (and still am) of the view that Australia being the most vibrant democracy and a nation of extremely enlightened and exemplary educational, trade and immigration policies, should have canvassed for India's membership of APEC as soon as the then Prime Minister P. V. Narasimha Rao and his Finance Minister Manmohan Singh launched the economic reform programme.

India today is far more different for more than one reason. First, it has become an important investment destination, with many sectors open for foreign investment. Second, its trade has increased many fold, encompassing both goods and services. Third, it has gained experience in dealing with East Asia ever since the `Look-East' policy, with free trade agreements being worked out with ASEAN and its constituents. Fourth, as testimony to its economic importance, at the recently concluded East Asia summit at Cebu, the Philippines, Japan proposed a pan-Asian free-trade zone that would include India, Australia and New Zealand along with China, Japan, South Korea and the 10 nations in ASEAN. Finally, India's relationships with Australia, China, Japan, Russia, Singapore and the US have never been as strong and multi-faceted as now.

The APEC Guidebook provides the following "guidelines for admitting new members" include that the applicant economy should: be located in the Asia-Pacific region; have substantial and broad-based economic linkages with existing APEC members and in particular, the value of the applicant's trade with APEC members, as a percentage of its international trade, should be relatively high; be pursuing externally oriented, market-driven economic policies; and accept the basic objectives and principles set out in the various APEC declarations, especially those from the Economic Leaders' Meeting. On all these criteria, India today is highly qualified for APEC membership.

Hopefully, Australia, which is host for the 2007 APEC meetings, will, along with our other friends, invite India's application. If it happens, well and good; if not, we need not lose sleep over it, given our extremely strong relations with almost all the members of APEC.

(The author, formerly with the National University of Singapore and the World Bank, is Professor Emeritus, GITAM Institute of Foreign Trade, Visakhapatnam and Visiting Faculty, Sri Sathya Sai Institute of Higher Learning, Prashanti Nilayam. He can be reached at bhanoji@gmail.com.)

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