AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies
IIPSRIPSInstitute for International

The Japan Institute ofResearch Institute for

Policy Studies

International Affairs

Peace and Security

Editor:Akio Watanabe

No.140.

Editorial Board:

A NEW ERA FOR APEC AND TPP

Hideki Asari
Masashi Nishihara
Taizo Yakushiji

Takashi Omori

Online Publisher:
Yoshiji Nogami
President, JIIA

13 January 2012

With the Honolulu summit in November, Asia-Pacific
Economic Cooperation (APEC) wrapped up its so-called"golden three years" forged through the presidency ofSingapore, Japan and the United States in turn. The
East Asia Summit, held a week later in Bali, witnessed
the first official participation of the United States andRussia. The Japanese government took the opportunityof the annual APEC summit to announce its intention tojoin the Trans-Pacific Partnership (TPP) negotiations
despite split public opinion at home. If Canada andMexico, which similarly expressed interest in the TPP
talks, are added, the future TPP could have 12 member
countries, a majority of the 21 APEC economies.
The views expressed in this piece are the author’s own and should
not be attributed to The Association of Japanese Institutes ofStrategic Studies.

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

When we look back at the past three years, we note some major
developments in APEC. The first is a new approach to cooperation in thisdiverse region. In its scheme to improve the business environment using WorldBank indicators, APEC has made it a rule that an economy wanting to improve ina certain field can seek guidance from a fellow member economy that is doing
well in that field. The latter provides advice based on its own experience buttaking due account of the needs and circumstances of the former rather thansimply imposing "the best practice". It has been reported that the success stories
told by key persons who actually achieved breakthroughs have muchencouraged the relevant bureaucrats facing difficulties.
The second is the Growth Strategy, compiled last year, whose five pillars
are inclusive, sustainable, balanced, innovative and secure. There may seemnothing particularly eye-catching at a glance, but what is remarkable is the factthat countries in different stages of development with different cultural
backgrounds and political regimes agreed to common agendas and objectives. Itwas indeed the world’s first such attempt. The experience will enhance a senseof unity among APEC economies and become the foundation of regional
cooperation from now on.
The third is America’s return to Asia. The re-engagement of Washington
in the Asia-Pacific region, driven by its eagerness to catch up with the economic
integration developing on the opposite side of the Pacific Ocean, should haveprovided a sense of security for the member states of the Association ofSouth-East Asian Nations (ASEAN).
Challenges remain, however. Firstly, where and how regional economic
integration will proceed remains unclear. It has been a while since the APEC
members agreed in principle to realize a comprehensive Free Trade Area of theAsia-Pacific (FTAAP) as they witnessed a random formation of bilateral free
trade agreements (FTAs) on the rise. Despite the growing importance of TPP,
the route to that final destination is not yet in sight.
The second challenge is how to manage the two great powers in theregion. With growing confidence in its power backed by its economic growth andother factors, Beijing is reinforcing its assertive stance. Washington, for its part,

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AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

appears to be rushing toward a conclusion due to the impatience it feels towards
regional economic integration and its wish to expand its exports. There is agrowing need for Japan to coordinate between these two great powers.
The third challenge is how to address social problems, such as aging
populations and deepening economic gaps, creeping up on the region. The
aforementioned growth strategy recognizes the gravity of these problems, but noconcrete measures are yet apparent. The research project by the Japan National
Committee for Pacific Economic Cooperation (JANCPEC) provides many useful
insights in this field.
Finally, what are the prospects of TPP? Given the hardship encounteredby the nine countries already in negotiation, it may take time for the threecountries that have recently expressed interest to actually join the talks.
Furthermore, Japan’s involvement will be first screened by Washington inaccordance with US interests. To maintain sufficient leverage on the negotiations,
it is desirable for Japan to envisage various scenarios that could lead to theFTAAP, including ASEAN + 6, its trilateral partnership with China and South
Korea, and its bilateral partnership with Australia.
At the same time, the government needs to convince the Japanesepeople of the considerable benefits of the regional economic partnership. It istrue that static merits calculated in quantitative terms are not so impressive, but
its dynamic effects, such as the promotion of technical and human resources
development through competition, will likely be significant. On the other hand,
the government must provide sufficient safety nets to mitigate the expected
shocks from structural change caused by trade and investment liberalization.
Unemployment insurance and welfare public assistance alone will not beenough. A flexible labor market, in which people can switch jobs and professions
as they need or desire, is urgently needed.

Takashi Omori is Chair of the APEC Economic Committee (till 2011) andProfessor of Economics at Tokyo City University.

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