27th November 2024, NIICE Commentary 9760
Dr Chander Shekhar & Spurthi Sudarshan
Twenty-one economies of the Asia-Pacific region gathered in Lima, the capital city of Peru on 15 and 16 November 2024. The Asia Pacific Economic Cooperation (APEC) brings together a diverse multicultural region for shared good. United under the theme of “Empower, Include and Grow”, this summit reinforced the past summits with fewer confrontations and potential challenges emanating from Trump’s presidency, starting from next year, which would lead to sweeping tariffs on developing and developed countries to protect the domestic economy. The 2024 APEC Leaders’ Machu Pichhu Declaration acknowledges challenges such as climate change, and natural disasters in building a sustainable future for the region as well.
Rationale
The Asia-Pacific Economic Cooperation or APEC is a multilateral economic arrangement, that was established in 1989 to mutually leverage the growing interdependence among countries located in the Asia-Pacific region. The idea behind its formation was to achieve “greater prosperity” by promoting a sustainable inclusive economic integration in the region. Globalization created a ground in the 1980s for the APEC countries to prosper and achieve economic development.
The purpose of APEC is to ensure the areas it emphasizes, such as the free movement of goods, services, investment, and people, could escalate cooperation and mutual benefits by reducing regulations, creating faster customs procedures and business climate, etc. This economic forum covers countries that are surrounded by the Asia-Pacific waters, although various other entities have requested to join this organization to make it a broader organization concerned about the spillover impacts of issues faced by the Asia-Pacific countries.
The APEC summit took place against the possible global trade war under Trump 2.0. Given its nature, often national policies affect the functioning and objectives of an organization. The United States, China, Russia, Vietnam, and other members converge their economic interests and also have multiple understandings of issues such as imposing mutual tariffs on goods and services, which is not a new phenomenon. Likewise, it has grown up both a concern for the organization and an opportunity for national economies.
Before presidential elections in the United States, the Biden administration ordered new tariffs on high-tech items imported from China, as continued by the previous administration. After the election result, it was indicated during election speeches of upcoming Trump 2.0 to reimpose tariffs on goods coming from other countries like China, India, and others. India was described as the “biggest import tariff charger” during election campaigns and warned to reciprocate after being elected. However, India is optimistic about Trump 2.0 and ready “to renew collaboration to strengthen India-US Comprehensive Partnership” as progressed during his first term. However, the role of APEC cannot be overlooked which facilitated to creation of the ‘Asia-Pacific miracle’, and promoted trade, investment liberalization, economic growth, and technological progress in the region.
Protectionism and APEC’s Future
The growing protectionism worldwide is posing challenges to the world economy. APEC is not an exception. The APEC summit concluded in the background of a national strike in Lima, thereby, embassies, including the American embassy, in Peru issued a caution of potential disruption.
Is America’s shifting tariff war a bane or boon for the global economy, especially the APEC economies? The Bloomberg report cautions on the potential of Trump’s trade policy by stating “Trump’s first mention at APEC is a warning and not very good news”. Is the APEC under threat or will it compromise with that? It is a wait-and-see approach that needs to be explicit in his first 30 days. Countries need to be prepared for that.
In the age of counter-globalization, “embracing protectionism” has become a popular policy measure adopted by countries. The efforts and dreams of former Australian Prime Minister Hawke in 1989 to establish such a consultative mechanism, the APEC, for increasing trade and investment flows across the Asia-Pacific region and diagnosing the future economic threats to its existence need to be reinforced by including new members.
Although the APEC’s Putrajaya Vision aims to achieve “an open, dynamic, resilient and peaceful Asia-Pacific community by 2040” by the three economic drivers: trade and investment, innovation and digitalization, and inclusive growth. However, the unfolding global events, such as changing geopolitics and growing bipolarity, could have far and comprehensive ramifications for the future of APEC. So will the APEC achieve its Putrajaya Vision 2040 amidst shifting geopolitics? Members of APEC need to do it through joint efforts rather than creating small parochial groupings for confrontation.
In this direction, the World Bank has warned that although the global trade done in the world has proved nevertheless resilient in the aftermath of multiple shocks, but the incremental rise in protectionism, trade conflict, and geopolitical situations have posed a significant concerns on the future of globalization.
In last year’s 30th APEC Economic Leaders’ Summit, Xi Jinping underlined the objectives and contexts in which this group was formed. He also proposed four pathways that the organization should focus on: remaining committed to innovation-driven development, openness, green development, and achieving inclusive development.
To sum up, the APEC is a vital multilateral economic organization that facilitates freedom in trade and commerce as per the World Trade Organization’s norms. This consultative body has been chasing economic and as well as security challenges at the onset. The next few years for the APEC and its existence would be challenging. However, contested economic policies between major economic powers need to be managed and learned from past economic crises for common and shared good.
A practical solution is required ‘to ensure all people receive benefits of inclusive economic growth and strike down challenges. The APEC, given the interdependent nature of economies in the world, needs to step up to increase berths and welcome new rising Asia-Pacific economies, like India and others.
Dr Chander Shekhar is an Assistant Professor at PES University, Bangalore, India & Spurthi Sudarshan is a Research Analyst at PES University, Bangalore, India.
