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Summit Wrap-up
Summit Wrap-up
UPDATED: November 22, 2010 NO. 47 NOVEMBER 25, 2010
The Price of Free Trade
APEC faces many obstacles in establishing an Asia-Pacific free trade area

PLEASANT CHAT: U.S. President Barack Obama chats with Sultan of Brunei Hassanal Bolkiah (center) and Chilean President Sebastian Pinera during the 18th APEC Economic Leaders' Meeting in Yokohama, Japan, on November 14 (FAN RUJUN)

Twenty-one years after its founding, the Asia-Pacific Economic Cooperation (APEC) is facing major challenges. As a leading regional trade and investment forum with 21 member economies, its future development direction will be watched closely.

At the 18th APEC Economic Leaders' Meeting, held on November 13-14 in Yokohama, Japan, leaders agreed to promote the establishment of a Free Trade Area of the Asia-Pacific (FTAAP) with practical actions, as part of the regional economic integration efforts.


The FTAAP is not a new topic. Actually, after being proposed in 2004, it has been brought to the APEC discussion desk on many occasions. But little progress has been made, due to differences among member economies. This often-shelved proposal was put on the agenda again in 2009, when the United States announced that it would pursue the Trans-Pacific Partnership (TPP), a proposed free trade area that now includes Brunei, Singapore, Chile and New Zealand.

The FTAAP could mean many benefits. It could help promote the currently stagnant WTO negotiations and could help overcome the harmful overlapping of regional trade agreements that currently exists.

In addition, the FTAAP can serve as an alternative to the Doha Round of WTO negotiations in case of its failure. It can also prevent the United States from being excluded from East Asian cooperation. What's more, it can help solve the trade imbalance between China and the United States, and increase the possibility of China being accepted into the U.S. free trade area network. The FTAAP could also benefit regional welfare to a huge degree.

However, the FTAAP also faces difficulties. First of all, large differences exist in the economic development levels of APEC member economies. For instance, the 2008 per-capita GDP of Australia, the highest in APEC, was 45.6 times that of Viet Nam, the lowest in APEC.

In addition, the adoption of the FTAAP may signal a move away from the organization's original principles—featuring "open regionalism" and "concerted unilateral action"—which have persisted for two decades. APEC's non-binding way, which places emphasis on acting on one's own accord and reaching consensus through consultation, will be abandoned.

The implementation of the FTAAP could also lead to a split between developing members and developed members. Developed members are so anxious to promote the FTAAP that they tend to ignore their commitments to the Bogor Goals. This has aroused the concerns of developing members. The Bogor Goals, which were proposed at the APEC Summit in Bogor, Indonesia, in 1994, call for the realization of free and open trade and investment for developed member economies by 2010, and for developing members by 2020.


What's more, there is no driving force for the establishment of the FTAAP, as East Asian economies lack a so-called Asia-Pacific identity. Also, it is difficult for any free trade area including China to pass muster with the U.S. Congress. And the FTAAP cannot guarantee the United States will achieve its key goal in WTO negotiations: opening the agricultural product market. This is extremely difficult when it comes to Japan, as Japanese farmers are strongly against this. Difficulties also exist for Japan in opening its service sector.

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