APEC’s over, and many may be asking “What’s in it for us?” Actually, quite a lot…
Last week during APEC, many Australians were asking: “What’s in it for us?” with the answer being “actually, quite a lot”.
After all, like the Hills Hoist and Vegemite, APEC is an Australian invention – created in 1989 by then prime minister Bob Hawke with a little bit of help from his friends in the Republic of Korea – designed to ensure that Australia was not locked out of the world economy.
And in terms of trade, APEC has delivered great success for Australia. After all, APEC now accounts for 69% of Australia’s trade with the world, 13 out of our top 20 exporter destinations are in the APEC member economies and APEC member economies account for 41% of the total stock of foreign direct investment (FDI) in Australia.
APEC has delivered for our exporting businesses and for workers too. After all, exporters, on average, pay higher wages, provide higher standards of occupational health and safety and more job security, than non-exporters. With APEC accounting for so much of our export action, we’ve had real improvements in our living standards as a result of being part of the Asia Pacific region – which accounts for nearly half of the world’s trade.
But let’s not be too parochial. How has APEC affected the rest of the region? There’s evidence that APEC has also helped our neighbours. For instance, before the inception of APEC, per capita incomes in the region were $5205 in 1989 (on par with the world average) but by 2006 were $14,000 (well above the world average of $10,305). APEC has really helped some countries get a leg up in the global economy.
For example, countries with large poor rural populations, like China and Vietnam, have been able to display their modern economic credentials at APEC and helped fast-track their WTO entry, while Russia’s membership has helped its economy stabilise after the financial shocks of the late 1990s. APEC has also given the Latin American economies – particularly ”red hot” Chile, the South American Jaguar, a chance to integrate closer with Asia.
But what about the future? What should APEC do? Here in Australia, exporters do see APEC as their future path to success. According to a survey produced by Austrade in conjunction with DHL, 93% of Australian exporters expect to be selling to APEC countries in five years time compared to 60% to non-APEC countries.
But despite the focus on reducing trade barriers in the past, exporters are not looking for APEC to be a mini-WTO. In fact, exporters now see trade facilitation as the name of the game now as around one in three exporters don’t experience formal trade barriers. Things like customs harmonisation, ensuring consistent product standards, and providing a one-stop shop for trade documentation, are all practical things that exporters are looking for from APEC.
For example, most exporters with an APEC Travel Card (available in 17 out 21 APEC economies) rave about how easy it has made business travel around the region. Exporters are also looking for structural reform in different APEC economies to reduce the “behind the border” regulatory obstacles often faced. It’s not about having no regulation, just simplified regulation that is consistent and transparent across the region.
Could this work on a global or even regional scale? After all we are talking about 21 very different economies. Well, there’s some evidence that it could. According to World Bank research, APEC led reform in trade facilitation and could therefore potentially provide gains to APEC members of $US377 billion ($A503 billion). This means that APEC could bring significant economic benefits to business, workers and consumers in the APEC region.
The World Bank believes that trade facilitation gains could well reduce the time it takes to trade within the APEC region. Currently, according to the World Bank’s own research, the average time taken for exports and imports in an average APEC country is 21 days, well above the OECD country average of 14 days. So there’s still much more to be done.
In conclusion, APEC has been integral to Australia’s economic success, integral to the region’s success, and has added momentum to the global economy that, according to the IMF and private sector forecasts, is in its best shape in 30 years. APEC is a complement – but not a substitute – to other institutions that are lowering trade barriers such as WTO.
APEC can also help social cohesion by encouraging stronger social institutions and safety nets that are needed alongside deeper trade and investment integration in the region.
APEC fast facts:
APEC accounts for 43% of world exports of goods and services in 2006.
- Per capita incomes in APEC were $5205 in 1989 (on par with the world average) and $14,000 in 2006 (well above the world average of $10,305).
- APEC accounts for 69% of Australia’s trade with the world and increased by 14% in 2006 to $294 billion.
- Australia’s trade in goods and services with the APEC region has increased from $81.6 billion in 1989 to $294 billion in 2006, by an average annual rate of 7.5% every year.
- Most (70%) of APEC’s merchandise exports were traded within the APEC region.
- APEC accounts for $130 billion or 41% of the total stock of foreign direct investment (FDI) in Australia as at 2006.
- Thirteen out of Australia’s top 20 exporter destinations are APEC member economies.
- Most Australian exporters (93%) expect to be selling to APEC countries in five years time compared to 60% to non-APEC countries.
- The average time taken for exports and imports in an average APEC country is 21 days, well above the OECD country average of 14 days.
- APEC led reform in trade facilitation could potentially provide gains to APEC members of $US377 billion ($A444billion).
Source: Austrade, DFAT, ABS, Invest Australia
Source: DFAT STARS database & ABS Cat. No 5368.0
*Tim Harcourt is the chief economist of the Australian Trade Commission and the author of BEYOND OUR SHORES: www.austrade.gov.au/economistscorner
For nmore Gone Global blogs, click here.