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APEC 2010 and the Role of Japan as the Chair

Shujiro Urata
Professor, Graduate School of Asia-Pacific Studies, Waseda University

Japan chairs the Asia-Pacific Economic Cooperation (APEC) conference in 2010, for the first time after the meeting held in Osaka in 1995. In this article, we discuss the current situation of APEC-established for contributing to economic growth in the Asia-Pacific region and in the world through cooperation in the region-as well as the role of Japan as the chair.

Established in 1989, APEC marked its 21st anniversary this year. It started with 12 member countries and has grown into a large organization consisting of as many as 21 countries and regions (called economies in APEC). As member economies increased, each of those economies also grew rapidly, resulting in the increased significance of APEC in the world economy. APEC membership of economies influential on the global economy such as the United States, Japan, and China makes APEC an important player in developing rules for trade, finance, and various other economic areas.

APEC has been promoting the liberalization and facilitation of trade and investment as well as economic and technological cooperation as means of achieving economic growth. Some argue, however, that their specific outcomes are disappointing due to occasional disputes among economies about the process of trade liberalization. In fact, disappointment at stalled trade liberalization, in addition to serious terrorism issues, has once shifted the focus of APEC discussion from economy to security. Recently, active regionalism in East Asia and the emergence of China as an economic power brought the discussion back to the realm of regional economic cooperation. As the future of the global economy is increasingly uncertain following the deadlocked Doha Round of the World Trade Organization and the prolonged impacts of the world financial crisis originated in the U.S., APEC has been attracting attention again.

Japan played an important role in establishing APEC and has contributed to its organizational development and many other aspects since its inception. In 1994, APEC set up their supposedly most important goals called the Bogor Goals, which provide that free and open trade and investment shall be achieved by 2010 for advanced economies and by 2020 for developing economies. In 1995, an action agenda for achieving them was adopted at the APEC meeting held in Osaka. Because this is the year that the goals for advanced economies will be achieved, Japan must play the central role as the chair to assess the progress of the achievement.

One important issue for regional cooperation through APEC is the deepening of regional economic integration. In 2006, the U.S. proposed the initiative for the Free Trade Area of the Asia-Pacific (FTAAP) comprising the APEC member economies, and the approach to its realization is expected to be developed this year. While the economies have not agreed on the details of FTAAP, many argue that FTAAP should be a Free Trade Agreement (FTA) framework where trade barriers are lifted among APEC economies but remain against non-APEC countries.

One potential path to the realization of FTAAP would be through the Trans-Pacific Partnership (TPP), which was formed by Singapore, New Zealand, Chile, and Brunei in 2006. This year, the TPP started negotiations for its expansion with the U.S., Australia, Peru, Vietnam, and Malaysia. Involvement of the U.S. in the negotiations implies more likelihood of the TPP becoming the foundation for the future FTAAP. In principle, the TPP requires high-level trade liberalization through eliminating tariffs for all items immediately or incrementally within 10 years. In addition, the TPP is a comprehensive framework incorporating new rules that meet the needs of corporations and consumers for such areas as the environment, labor, and food safety, as well as the liberalization of trade and investment. While Canada, Mexico, Korea, Thailand, and Japan are also interested in the TPP, Japan has been indecisive about participating in the TPP negotiations because Japan feels that it is difficult to liberalize its agricultural sector. Absence from the TPP would mean not only a loss of export opportunities but also exclusion from the development of trade and economic institutions in the Asia-Pacific region, leading to a significant loss for Japan. By opening the agricultural sector, Japan would achieve not just participation in the TPP but more efficient resource allocation in the country to drive economic growth. Japan should join the TPP on the condition that those who would suffer from damage by rapidly increased imports are provided with safety nets including temporary income support and education or training for enhancing human resources.

APEC agendas this year include drafting growth strategies. Japan is playing the leading role based on five types of growth-balanced, inclusive, sustainable, innovative, and secure-recognizing the importance of achieving growth in terms of quality as well as quantity. In so doing, one challenge is creating benchmarks for assessing progress toward the achievement of the growth strategies. Attaining desirable growth would be difficult without appropriate benchmarks.

Issues for Japan as this year's chair include assessing progress toward the Bogor Goals; deepening regional economic integration and determining the process toward FTAAP related to it; and developing growth strategies. Among these, the most difficult for Japan is the decision on participation in the TPP related to the deepening of regional economic integration. Within the ruling Democratic Party of Japan, in fact, there is heated debate about the TPP among proponents of agricultural protection and those in favor of opening the market. Prime Minister Kan must announce his decision to open the market and participate in the TPP in order to create a bright future for Japan.

Shujiro Urata
Professor, Graduate School of Asia-Pacific Studies, Waseda University

[Profile]
Mr. Urata is a Professor of International Relations at the Graduate School of Asia-Pacific Studies at Waseda University. He is also a Senior Economist for the Japan Center for Economic Research; a Faculty Fellow for the Research Institute of Economy, Trade and Industry; and a Senior Research Advisor for the Economic Research Institute for ASEAN and East Asia (ERIA). He specializes in International Economics. Professor Urata graduated from the Faculty of Economics at Keio University and received his M.A. and Ph.D. from the Department of Economics at Stanford University. He has been a Fellow at the Brookings Institute, an Economist at the World Bank, and a Professor at the School of Social Sciences at Waseda University, before assuming his current position in April 2005. Professor Urata's major publications include Introduction to International Economics [Kokusai Keizaigaku Nyumon] (Nikkei, 1997); The World Economy in the 20th Century [Sekai Keizai no 20 seiki] (co-authored, Nihon-Hyoron-Sha, 2001); Sustainable Economic Development in East Asia [Higashi Ajia no Jizokuteki Keizai Hatten] (co-authored and co-edited, Keiso Shobo, 2001); FTA Strategies of Japan [Nippon no FTA Senryaku] (co-authored and co-edited, Nikkei, 2002); Winning in Asia, Japanese Style (co-authored and co-edited, Palgrave, 2002); Competitiveness, FDI, and Technological Activity in East Asia (co-authored and co-edited, Edward Elgar, 2003); The Era of Asian FTA [Ajia FTA no Jidai] (co-authored and co-edited, Nikkei, 2004); New Trade Strategies of Japan [Nippon no Shin Tsusho Senryaku] (co-authored and co-edited, Bunshindo, 2005); Bilateral Trade Agreements in the Asia-Pacific (co-authored and co-edited, Routledge, 2006); Multinationals and Economic Growth in East Asia (co-authored and co-edited, Routledge, 2006); Prospects for an Economic Community [Keizai Kyodotai eno Tembo] (co-authored and co-edited, Iwanami Shoten, 2007); and FTA Guidebook 2007 [FTA Gaidobukku 2007] (co-authored and co-edited, JETRO, 2007).