The role of the state in managing economic relations is challenged ever more vigorously of late. Proponents of deregulation of markets suggest that the state should be severely limited in its authority to manage economic affairs. Even those who support continued state involvement bemoan the diminishing capacity of states to manage transnational economic relations and their social consequences. Complementing these discourses on the appropriateness and feasibility of state involvement in socioeconomic life in a globalized world are matters of political expediency. While this approach might have some utility in avoiding the intrusion of local political conflicts into economic relations, the result is to diminish APEC's effectiveness.
Economic cooperation requires political accommodation.
The ongoing tension between China and Taiwan provide an example of how APEC can play a useful role. Political institutions of the state, particularly in the areas of law and socioeconomic regulation, remain critically important in fostering economic activity and sustainable development in Asia. Indeed, many knowledgeable observers suggest that the Asian economic crisis was to a very large extent the result of the inadequacy of states and their regulatory institutions to manage capital inflows and debt structuring. Just as the state remains indispensable, so too can APEC play a more effective role in fostering economic cooperation in the Asia Pacific region by recognizing the importance of its leadership in political issues. First, the importance of the state should not be dismissed.