The Asia-Pacific Economic Cooperation (APEC) Meetings in Honolulu: A Preview
Released: 2011-10-25T00:00:00

Overview of APEC

The Asia-Pacific Economic Cooperation (APEC) was founded in 1989 for the purpose of promoting trade and investment liberalization in the Asia-Pacific as a means of fostering sustainable economic growth and prosperity in the region. APEC currently has 21 members: Australia, Brunei, Canada, Chile, China, Hong Kong (officially Hong Kong, China), Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan (officially, Chinese Taipei), Thailand, the United States, and Vietnam. APEC is one of a few international organizations in which both China and Taiwan are members.

During the 1994 Economic Leaders' Meeting in Bogor, Indonesia, APEC members agreed to the Bogor Goals of "free and open trade and investment in the Asia-Pacific by 2010 for developed economies and 2020 for developing economies." APEC has also made trade facilitation—changes in governmental procedures and controls to increase the ease and efficiency of trade—a major priority.

APEC has three distinct features among multilateral trade organizations. First, all the liberalization measures taken by its members are voluntary. Members announce their liberalization measures via "Individual Action Plans." Second, these liberalization measures are generally extended to all economies—not just APEC members—under the concept of "open regionalism." Third, decisions are made by consensus rather than through a process of formal negotiations.

Every year, a different APEC member organizes and hosts a series of meetings held throughout the year, including the annual Economic Leaders' Meeting, which is traditionally held in October or November. The United States is the host in 2011; Russia will be the host in 2012. The host member usually picks a theme for the year. The United States has chosen as the theme for 2011, "Creating a seamless economy in the Asia-Pacific region by strengthening regional integration and expanding trade, promoting a green economy and better coordinating trade regulations."

The November APEC Meetings in Honolulu

Between November 8 and 13, 2011, the United States will host several senior-level APEC meetings in Honolulu, HI. The meetings begin with the fifth and final Senior Officials Meeting (SOM) of the year, to be held on November 8 and 9. The previous SOMs—held in Washington, DC; San Francisco, CA; and Big Sky, MT—focused on such topics as energy, transportation, and the role of women in the economy. The 5 th SOM will be followed by a Finance Ministers' Meeting on November 10, to be hosted by Secretary of the Treasury Timothy Geithner. On November 11, Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk will co-host the APEC Ministerial Meeting. The agendas for these meetings have not been disclosed.

The APEC gathering in Honolulu is scheduled to conclude with the two-day Economic Leaders' Meeting, to be hosted by President Obama. He will be joined by the leaders of the other 20 APEC members, or their chosen representatives. At past meetings, the U.S. President held one or more separate bilateral meetings with other leaders, usually including a meeting with the leader of the host member. It is unknown if President Obama will hold similar meetings this year.

The agenda of the Economic Leaders' Meeting usually is based on the host's theme for the year, implying this year's meeting will center on regional economic integration, sustainable development, and regulatory convergence. As host, President Obama is likely to push for progress on the formation of a Free Trade Area of the Asia-Pacific (FTAAP), a contentious concept on APEC's agenda since 2005. While the United States seems to envision an FTAAP as a larger, binding, and comprehensive free trade agreement among all APEC members, other APEC members see the FTAAP either as the culmination of APEC's "open regionalism" model or a free trade agreement centered in Asia. In addition, the United States may use the event to inform the APEC members about the status of the Trans-Pacific Partnership (TPP) negotiations and possibly publicly announce a significant landmark in the TPP talks. The Economic Leaders' Meeting typically ends with the release of a joint Leaders Declaration which summarizes the current status of APEC and sets priorities for the organization's future.

APEC and Other Regional Fora

Since the beginning, the Obama Administration has signaled that the Asia-Pacific region is a foreign policy priority. Secretary Hillary Clinton's first international trip after taking office was to Asia, with visits to China, Indonesia, Japan, and South Korea. Prior to her trip, Secretary Clinton stated that U.S. relations throughout Asia are "indispensable to our [U.S.] security and prosperity." In November 2009, President Obama travelled to Asia, with visits to China, Japan, Singapore, and South Korea. During the trip, President Obama attended the 2009 APEC Leaders' Meeting and the first U.S.-ASEAN Leaders' Meeting, which were held in Singapore. President Obama hosted the second U.S.-ASEAN Leaders' Meeting in September 2010 in New York City and attended his second APEC Economic Leaders' Meeting in November 2010 in Yokohama, Japan.

Besides high-level trips to Asia, the Obama Administration has sought to strengthen U.S. ties to the region. During a January 2010 trip to Asia, Secretary Clinton announced that the United States would formally request membership in the East Asia Summit (EAS). She then attended the EAS meeting in Hanoi in October 2010, at which it was disclosed that the United States—along with Russia—would become a full member in 2011. In addition, the Obama Administration has actively pursued progress in the ongoing TPP negotiations, promoting the potential trade agreement as a possible model free trade agreement for the 21 st century.

The heightened U.S. engagement in the Asia-Pacific region has raised questions about APEC's continued role and relevance in U.S. foreign policy, particularly given the growing number of alternative regional events or organizations at which the United States can present its views. The Obama Administration has frequently portrayed APEC as the premier economic and trade organization in the Asia-Pacific region, and similarly views the EAS as the main geopolitical association in the region. This view is shared by all of the other members of these two associations.

The Obama Administration has also repeatedly presented the TPP as a building stone for creating the FTAAP envisioned by APEC. Not all of APEC's members agree with this representation of the TPP and some do not share the U.S. conceptualization of a future FTAAP. Some Chinese scholars and officials have expressed considerable concern about U.S motivations behind fostering a comprehensive free trade agreement in the Asia-Pacific region. Some observers challenge the consistency of a negotiated, binding, and discriminatory TPP with APEC's Bogor Goals and its consensus-based, voluntary, "open regionalism" approach to trade and investment liberalization.

In addition, along with reemphasizing the importance of APEC to the region, the Obama Administration has spoken extensively about the "central role" of the Association of Southeast Asian Nations (ASEAN) in Asia-Pacific relations. While 7 of the 10 ASEAN members are also APEC members, there remains some tension between the supposed importance of APEC as the primary path for regional economic integration and the U.S. view of ASEAN as the pivotal player in regional relations.

APEC and the EAS

Six days after the APEC Economic Leaders' Meeting ends, President Obama is scheduled to attend the 6 th East Asia Summit (EAS) in Bali, Indonesia. The EAS first met in December 2005 in Kuala Lumpur, Malaysia, with the 10 ASEAN members, Australia, China, India, Japan, New Zealand, and South Korea attending as members, and with Russia as an observer. In the Kuala Lumpur Declaration released at the close of the meeting, the 16 members agreed that the EAS was to serve as "a forum for dialogue on broad strategic, political and economic issues of common interest and concern with the aim of promoting peace, stability and economic prosperity in East Asia." Included among the multiple goals of the EAS was the promotion of trade and investment expansion and liberalization.

On July 20, 2010, the 16 EAS members formally invited the United States and Russia to join the organization. In Secretary Clinton's speech at the meeting, she formally announced the U.S. commitment to join the EAS and laid out the "five key principles" that would guide U.S. engagement with the EAS. The first of the five principles was "to listen, to consult, and to collaborate" with the EAS members on its agenda and initiatives. The second principle was to view ASEAN as "a fulcrum for the region's emerging architecture." The third principle was to suggest that the EAS focus on the "most consequential issues of our time," such as nuclear proliferation, maritime security, and climate change. The fourth principle was to insure that the EAS "complement and reinforce the work being done in other forums," including APEC. The fifth principle was the importance of leveraging bilateral relations with other EAS members to promote U.S. goals in the region.

Clinton's speech signaled the Obama Administration's intention to focus the EAS agenda on geopolitical and security issues and reserve APEC as the primary forum for discussing economic and trade issues in the Asia-Pacific region. However, other nations may not agree with the U.S. differentiation of these two regional associations. Prior to the EAS's formal creation, the 10 ASEAN members, plus China, Japan, and South Korea—commonly referred to as either "ASEAN+3" or "10 + 3"—had met to discuss the creation of an East Asian Community and to negotiate an East Asian free trade agreement. China and Malaysia have been active proponents of the "10 + 3" approach to Asian economic integration. According to some analysts, Australia, India, and New Zealand were subsequently added to such a group at the insistence of Japan as a counterweight to China in the potential regional economic and trade organization. China, in particular, is suspicious that the United States joined the EAS to prevent it from creating an Asian-based free trade association that excludes the United States.

During both the APEC meetings and the EAS, the United States is likely to try to persuade the other association members to adopt the U.S. perspective of the relative roles of the two organizations. According to one senior Administration official, the United States would prefer to avoid needless duplication of agendas and obtain more clarity of purpose between APEC and the EAS. However, the U.S. officials say they remain open to the ideas of other nations, and have accepted a role for the EAS in discussions of paths to economic development. Whether or not this general framework will prove workable waits to be seen.

APEC and the TPP

APEC and the TPP are bound together by the goal of creating a Free Trade Area of the Asia-Pacific (FTAAP). However, among APEC members, there is no consensus on the proper path to forming an FTAAP or precisely what form of trade association an FTAAP should take. Since the decision to begin negotiations with the existing Trans-Pacific Strategic Economic Partnership Agreement, the United States has supported the creation of a high-standard, binding free trade agreement. President Obama reiterated that goal in a press briefing following his meeting with Chile's President Sebastian Pinera on March 21, 2011, saying, "It's my hope that, along with our other partners, we can reach an agreement on the framework for the TPP by the end of this year, an agreement that can serve as a model for the 21 st century." However, some APEC members, especially China, are not convinced that the TPP is the correct path to creating an FTAAP—or that the TPP currently being negotiated is consistent with APEC approach to regional economic integration.

The APEC Economic Leaders Declaration of 2006 "acknowledged the role of high-quality, consistent, transparent and comprehensive Regional Trade Agreements/Free Trade Agreements (RTAs/FTAs)" and instructed APEC's officials to "undertake further studies on ways and means to promote regional economic integration, including a Free Trade Area of the Asia-Pacific as a long-term prospect, and report to the 2007 APEC Economic Leaders' Meeting in Australia." Since then, in part due to pressure from the United States, APEC has continued to explore the possibility of forming an FTAAP based on alternative models, including ASEAN+3, ASEAN+6, and the Trans-Pacific Partnership. Last year's Economic Leaders' Declaration stated:

We will take concrete steps toward realization of a Free Trade Area of the Asia-Pacific (FTAAP), which is a major instrument to further APEC's regional economic integration agenda. An FTAAP should be pursued as a comprehensive free trade agreement by developing and building on ongoing regional undertakings, such as ASEAN+3, ASEAN+6, and the Trans-Pacific Partnership, among others. To this end, APEC will make an important and meaningful contribution as an incubator of an FTAAP by providing leadership and intellectual input into the process of its development, and by playing a critical role in defining, shaping, and addressing the "next generation" trade and investment issues that FTAAP should contain. APEC should contribute to the pursuit of an FTAAP by continuing and further developing its work on sectoral initiatives in such areas as investment; services; e-commerce; rules of origin; standards and conformance; trade facilitation; and environmental goods and services.

The expectation is that the nine representatives of the current APEC members involved in the TPP negotiations—Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore, the United States, and Vietnam—will announce the broad framework of a TPP agreement during the APEC meetings in Honolulu. In addition, Japan's Prime Minister Noda may also make an announcement, either at the APEC meetings or during the EAS, regarding Japan's possible request to be included in the TPP negotiations.

Chinese officials and analysts have expressed serious apprehension about U.S. intentions in pursuing a high-standard TPP. Some Chinese scholars see the free trade agreement as part of a larger U.S. policy of economic and geopolitical containment of China. In their view, the U.S. decision to join the EAS is also part of this containment policy; they point to U.S. efforts to exclude economic and trade issues from the EAS agenda as evidence (see " APEC and the EAS "). Chinese officials also complain about the perceived lack of transparency with other APEC members regarding the content of the TPP negotiations. However, according to an Administration official, the TPP negotiation parties have routinely briefed APEC members during the SOMs.

Beyond the concerns expressed by other countries, analysts have frequently raised the more general issue of TPP's compatibility with APEC's historical approach to trade and investment liberalization and facilitation. If the TPP is successfully concluded, it presumably will be a binding agreement that will extend trade privileges only to the members of the agreement, which is contrary to tradition of APEC's "open regionalism." Furthermore, it is unclear if and how current APEC members, such as Hong Kong and Taiwan, would be allowed to join the TPP.

Some recent statements by U.S. trade officials appear to indicate one formulation that attempts to reconcile the historical APEC approach with the TPP. According to the U.S. officials, APEC's primary role would be as an incubator for developing cutting-edge approaches to emerging trade issues (such as incorporating innovation and supply chain issues into FTAs), and the TPP would be the formal trade agreement which would adopt the agreed-upon, mature, formal results of APEC's trade and investment innovations. This formulation seemingly inverts the relationship between APEC and the TPP, making APEC a vehicle that provides input to a TPP, the forerunner to a even larger FTAAP.

APEC and ASEAN

The Obama Administration has made a concerted effort to elevate relations with the Association of Southeast Asian Nations (ASEAN). It has chosen the first resident U.S. Ambassador to ASEAN (David L. Carden, confirmed by the Senate on May 4, 2011); held two U.S.-ASEAN Summits, with a third scheduled to be held in Bali, Indonesia, on November 18, 2011; signed ASEAN's multi-party Treaty of Amity and Cooperation (TAC); and joined the EAS.

Some ASEAN members and analysts remain skeptical about the U.S. commitment to ASEAN; some suspect that U.S. interest in ASEAN is primarily focused on U.S. relations with China. While the United States recognizes the centrality of ASEAN in the EAS and welcomes ASEAN's plans to achieve an ASEAN Community by 2015, they note that the Obama Administration has indicated that it does not view the EAS as being a forum for discussing regional economic integration. The 10 ASEAN members have already concluded a free trade agreement amongst themselves, as well as with China and South Korea, and are negotiating a free trade agreement with the European Union. ASEAN also is central to the ongoing ASEAN+3 and ASEAN+6 talks. It is unclear if the United States would welcome the conclusion of a free trade agreement between ASEAN and other nations that did not include the United States.

The elevated position the Obama Administration has given ASEAN in U.S. policy in Asia may generate some tension with the supposed importance of APEC, particularly with respect to trade policy. While the United States would prefer to use APEC and the TPP to discuss trade relations in the region, several ASEAN members have expressed an interest in exploring alternative models for regional economic integration that place ASEAN in a pivotal role. ASEAN has supporters for this approach, especially China. It is currently not possible for ASEAN to participate in the APEC/TPP approach in part because three of its members—Burma, Cambodia, and Laos—are not APEC members. The meetings to be held in November—the APEC Economic Leaders' Meeting, the U.S.-ASEAN Summit, and the East Asian Summit—may provide an opportunity for the Obama Administration to clarify the roles and relevance of each of these fora.

U.S. Agenda for 2011 APEC Meetings

The Obama Administration has indicated that it wishes to prioritize three issues during the APEC meetings in November. First, the meetings will explore ways to strengthen regional economic integration and expanding trade by developing practical approaches to "next-generation" trade and investment issues. Among the top "next generation" issues identified by the United States are establishing trade policies governing the promotion of innovation; encouraging the participation of small and medium-sized enterprises in international trade; and making supply chains more friendly to international trade. Second, the leaders and ministers will discuss the promotion of sustainable economic growth and creating jobs in "green industries." Third, the meetings' participants will focus on regulatory cooperation and convergence to help facilitate trade in the region.

Beyond these three topics, the Obama Administration is eager to explore ways to make APEC a more effective and productive means of promoting trade and investment liberalization and facilitation. Critics of APEC have portrayed the annual Economic Leaders' Meeting as a "talk shop" that fails to produce significant results. Supporters point to the general decline in tariff and non-tariff barriers among APEC members since the Bogor Goals were announced, and its considerable success in trade facilitation measures. In part, APEC's poor image among some observers may be due to its voluntary, consensus-based approach, which rarely results in newsworthy events, such as the signing of binding trade agreements.

Issues for Congress

Congressional interest in APEC has generally focused on three issues—implications for U.S. trade policy in general, potential effects on relations with China, and budgetary matters. APEC's original vision of a voluntary "open regionalism" approach to trade and investment liberalization has proven difficult to implement in the traditional structure of U.S. trade policy. On occasion, the trade liberalization measures proposed to APEC by the United States in its Individual Action Plan (IAP) have required changes in U.S. trade laws, such as the lowering of tariff rates.

One such issue is currently before Congress. The United States agreed in 2007 to join APEC's Business Travel Card (ABTC) program, which allows business travelers pre-cleared, facilitated short-term entry to participating member economies. Valid for three years, the card permits multiple entries into participating APEC member territories and eliminates the need to obtain visas or entry permits. H.R. 2042 would partially fulfill the U.S. commitment to join the ABTC program by requiring the Secretary of Homeland Security, in consultation with the Secretary of State, to establish a program to issue APEC business travel cards and integrate it with existing registered traveler programs, such as Global Entry, NEXUS, and SENTRI. On October 25, 2011, the House of Representatives passed H.R. 2042 by a voice vote. The bill has been sent to the Senate for consideration.

Over the last few years, APEC has emerged as an issue in U.S. relations with China. While some U.S. observers are apprehensive about China's growing assertiveness in Asia and its active program to negotiate free trade agreements in the region, some Chinese officials and scholars view the U.S. effort to use APEC to promote an FTAAP and negotiate a TPP without China's participation as part of a greater U.S. strategy of containment of China.

Finally, as an APEC member, the United States must contribute to the annual budget of APEC to maintain the APEC Secretariat in Singapore and finance various APEC activities and programs. In previous fiscal years, the level of direct U.S. financial support for APEC was $901,000 per year. Congress appropriated additional funds in fiscal years 2009, 2010, and 2011 to finance preparations and programs related to hosting APEC in 2011.