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The participation of Australia in Asia-Pacific Economic Cooperation (APEC) has long been discussed. It definitely has its gains and losses; this is why it is vitally important to decide what is really important for Australia regarding its future as a significant economic agent at the world market. APEC itself presents rather significant organization in the world. According to World Bank figures, the eighteen members of APEC, accounted for 56 per cent of world GDP and 47 per cent of world trade in 1997, with most of this share of GDP accounted for by the United States (27. 5 per cent) and Japan (14. 9 per cent). China with 2. 9 per cent of world output was the third largest economy in APEC.
Australia is the 7 th largest APEC economy with 1. 4 per cent of world GDP in 1997. The economic crisis which began in South East Asia in mid- 1997 has had a major impact on many APEC economies's hort-to-medium term growth prospects. The outlook for East Asia in particular is uncertain. While there is expected to be some recovery in growth in the nearest future, this will depend on a number of domestic and external factors. At the domestic level, the ability of these economies to recapture foreign investor confidence by addressing structural deficiencies in their economies will be important.
Substantial non-performing bank loans, which are currently preventing a resumption of credit provision to the corporate sector and lack of investor and consumer confidence, remain constraints on recovery in the East Asian economies. Furthermore, relatively high trade barriers in the region are continuing to constrain adjustment processes which would benefit the affected economies. International developments will also be crucial to the region's prospects. Economic conditions in Japan, the United States and the EU are critical to stability and recovery as the EU and United States have accounted for much of the growth in East Asia's exports over the past year. In addition, there are some statistical data concerning the performance of APEC that would be of interest to any country. The organizations share in the world GDP is 56 %, whilst occupying 47 % of the world trade.
The general outlook for the development and prosperity of Asian economies recently tends to be positive. Moreover, 71 per cent of APEC exports destined for other APEC members. APEC in many ways is a unique regional grouping. Unlike the majority of regional groups and international organizations the Asia Pacific Economic Cooperation lacks the formal bureaucratic structure which is very typical for such organizations. It also does not have the power of enforcement, like the famous World Trade Organization (WTO), and reflects the lack of formal structure. The membership of APEC includes a varied number of economies starting from the highly developed U.
S. and Japanese economies, including a number of mid-level transition-type economies such as Korea and Chinese Taipei, and finishing with those economies whose development is at the initial stage. Nevertheless, there are some doubts that APEC is a perspective organization. There are fears that there will be detrimental effects which may outweigh the benefits of APEC. Alternatively, a number of sectoral effects, which will be difficult to resolve politically, may be present. There are also serious warnings that the very diversity of economies present as APEC members may make it impossible for the whole organization to succeed.
The recent financial crisis in Asia originated a great number of doubts whether Australia is worth being a part of Asian economy, whether a close economic bond with Asia will benefit or harm the countrys economic interests. It is important to note at the outset that one of Apec's key decisions has been to ensure that changes introduced through the group are WTO consistent - i. e. that the activities of APEC will supplement the activities of the WTO and not compete with or undermine them. Thorough examination of the integration process in APEC must outline the major advantages of the process and weigh them against the cost that will be accrued regarding this integration. The current economic conditions must be key criteria for such examination.
Among the gains from the Australia APEC integration are the trade and investment liberalization. According to the goals set at Bogor, by 2020 the duty free access to the APEC economies which in 1996 / 97 accounted for 71 % of Australias total trade must be achieved. As a member of APEC Australia may expect the growing opportunities of growth, taking into account that Australia has already made significant strides toward the liberalization of its protective trade regime. According to the report made by the Bureau of Industry Economics in 1995, Australia possesses many potential gain opportunities in APEC. For Australia, the APEC process provides a significant opportunity to ensure that its largest trading partners will continue the trend towards deregulation and internationally oriented policies which has been crucial for the growing prosperity of the APEC region. Thus, the barriers to the Australian exports will be reduced and the uncertainties about the future market access will be lowered.
This can also result in new export opportunities, such as exports of services. Another report, made by the Department of Foreign Affairs and Trade (DFAT), observed that trade liberalization was only positive and beneficial for Australia, despite the short term adjustment costs. Because of tariff reductions the average Australian family had an annual $ 1, 000 gain in the past decade. Similarly, more gentle investment regulations of the economies of APEC will improve the opportunities for the investors to compete for various projects. While some of these projects may well be cancelled or delayed because of the current financial crisis, there will still be immense opportunities for Australian investors if foreign investment regimes in the region can be progressively harmonized and de restricted. Trade facilitation is another positive outcome of Australia being a member of APEC.
The program of trade facilitation among the members of APEC is aimed to reduce the transaction costs. It covers a diverse range of subjects including Customs Procedures, Standards and Conformance, Mobility of Business People, Services, Intellectual Property, Government Procurement and Electronic Commerce. The program of alignment of the national product standards with the international standards is aimed to reduce the recently problematic APEC trade flows. At present, a lot of work is done under the adoption of Mutual recognition Arrangements (MRAs), intended to ease the recognition of different certification systems and products produced by different economies by their trading partners. The most growing sector in the world economy is considered to be the services sector. The value of Australia's services trade has grown by 11 per cent per year for the last five years.
In 1996 / 97 it was valued at $ 24. 3 billion. Consequently, Australia has much to gain from the APEC work program aimed at facilitation of trade in services. Of particular interest to Australia is the work intended to facilitate improved trade in professional services and the development of standardized principles and guidelines for APEC trade in services. In addition to the mentioned above, Australia is deeply interested in the protection of the intellectual property rights. It gained vital importance recently in such fields of economy as pharmaceuticals, film and music industries, computer software, and other goods covered by patents and various trade marks.
The third important plus in the APEC program is Economic and Technical Cooperation, now widely known as eco tech. As well as the others, the program has at its goals reduction of the costs and the improved efficient resource allocation. Eco tech covers for the most the following industries: energy, telecommunications, transport, infrastructure, human resources development, fisheries, tourism, industrial science and technology, trade and investment data and assistance to small and medium enterprises. The Minister of Trade summarized the goals of eco tech as follows, ... to achieve sustainable growth and equitable development in the Asia-Pacific region, and to assist developing economy members to participate fully in Apec's trade liberalization agenda.
Apec's eco tech and trade and investment liberalization and facilitation... agendas are thus complementary and supportive. Many eco tech activities, such as those designed to improve regional infrastructure in energy, transport and telecommunications are of direct relevance to business. As a rule, any economic step involves certain sacrifices. Membership in APEC will definitely bring some disadvantages to Australia as economic entity.
Summarized, the detrimental effects of APEC on Australia have all chances to be the following: effects on employment, control of foreign investment, environmental issues, and technical standards. There are seriously-grounded fears that if Australia reduces its tariffs and non-tariff trade barriers, it has real chances of losing other significant sectors of industry. Low wage levels in the developing economies of APEC members lure off the investors and move their manufacturing operations offshore. This will affect any industry involving large number of labor force. Having high level of unemployment at the moment, there is a considerable support by public that the tariffs reduction will cause the export of Australian jobs abroad.
What is important to consider hear is the human and social cost of economic change. They can be difficult or impossible to quantify, but they bear an emotional effect that is usually easily taken up by media. The control of foreign investment is another area of deep concern for opponents of the APEC integration process. If the country is closely integrated, it leads to the relaxation of foreign investment laws, which results in the weakening control over the plans of foreign investments. It is evident, that under such conditions, when the investor is not satisfied with the investment terms, nothing will stop him from moving his investments elsewhere. Rapid economic growth in Asia-Pacific region cannot leave harmless the environment.
The major issues of concern being stressed recently are the depletion of forests, degradation of water supplies and growing pollution of the atmosphere. There is a substantial body of opinion that free trade is initially detrimental to the environment, mostly because it produces economic growth, which, in turn, produces higher consumption level, which in its turn increases pollution and faster depletion of the natural resources. The consequences of this can be dramatic: because without the proper standards of environmental protection industries producing high levels of pollution will gain a comparative advantage by moving to a location where there are lower standards (and hence lower costs). The result of this would be faster degradation of the environment in the host economies and a rapid widening of the gap between the poorer and richer economies. One of the main effects of tariff liberalisation is to bring non-tariff barriers to the forefront of international discussions.
In relation to standards, the concerns in Australia arise on two levels. Firstly, there is the concern that adoption of generic standards for all APEC members will result in the adoption of the lowest common denominator as the standard for all. For a country such as Australia which adheres to strict internationally accepted standards in many fields, there is a natural reluctance to see lower standards adopted. Secondly, there is dissatisfaction at the likely costs of adopting particular standards which may differ from the current Australian standard.
There is no doubt that integration of Asia Pacific region and further developments of APEC are very promising for Australia in terms of economic growth. However, the promises will remain in the void without the work being done to implement them. All the legitimate concerns about the progress of APEC must be thoroughly recognized and discussed. Probably it is much better to consider all the pros and cons rather than ignore the difficulties.
Bibliography: 1. Potential Gains to Australia From APEC, Bureau of Industry Economics, Occasional Paper No. 29, AGPS, Canberra, 1995, p. viii. 2. Trade Liberalisation Opportunities for Australia, Department of Foreign Affairs and Trade, 1997, web Executive Summary p 2. 3. Trade and Investment Facilitation, APEC Briefing Paper, November 1997, Department of Foreign Affairs & Trade. 4.
Trade Outcomes and Objectives Statement, The Hon Tim Fischer MP, Deputy Prime Minister and Minister for Trade, February 1997, p 44. 5. Bijit Bora, Foreign Direct Investment. Regional Integration and the Asia-Pacific, Edited by Bijit Bora and Christopher Findlay, Oxford University Press, Melbourne, 1996, p 90.
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Research essay sample on Asia Pacific Region Trade And Investment
