The New Trade Agenda: APEC Negotiations Come to Big Sky

Beginning May 7th meetings of the Asia Pacific Economic Cooperation Organization (APEC) will begin in Big Sky, Montana. This two week long gathering of trade ministers and officials from 21 countries is expected to bring an estimated 2,000 people to Big Sky. Senator Max Baucus advocated long and hard to bring this meeting home to Montana in anticipation of both immediate and future benefits. As member countries rotate hosting the meeting, the US has the opportunity of hosting it, and also influencing the agenda somewhat, about once every twenty years.

APEC is an organization 21 countries bordering the Pacific Rim. Members account for 41% of the world’s population, 54% of the world’s GDP and 44% of world trade. Sixty percent of US exports are destined for APEC members, which also account for 6 out of 10 of our top trading partners. US goods trade (both imports and exports) with APEC members was $1.6 trillion in 2009 and service trade was $303 billion in 2008. And these economies are growing fast, at about twice the rate of the US economy.

Since its inception in 1989 APEC has worked to promote free trade in numerous ways but it has not been a free trade area. The Obama administration has prioritized negotiations for a Free Trade Area of the Asia Pacific (FTAAP) as a key goal for APEC. The agenda for negotiations is focused facilitating trade through preventing the introduction of new non-tariff barriers to trade, policies and regulations that facilitate communication through new technologies, and steps that make it cheaper and easier for businesses to trade - with a new emphasis on small and medium size business.

Why tackle negotiations for a free trade area in Asia now? One reason is that negotiations for further trade liberalization for the 154 members of the World Trade Organization have been stalled for years. After eleven years of negotiations and a tremendous investment in the Doha Round, it remains unclear if and when the negotiations will produce an agreement and how meaningful it might be. Another reason is that the economies of East Asia have been developing and deepening their own regional trade agreements. Bergsten and Schott, key analysts of US trade and economic interests, argue that unless the US actively pursues a trade agreement in the region that a cleavage could develop between the US and East Asian economies. As FTAs by their nature favor member countries, US exporters and investors could find it more difficult to compete. APEC already has a good track record in regulatory harmonization, and this would be advanced in negotiations for the FTAAP. Regulatory harmonization is laborious and unglamorous, and the results of this work cannot be summarized with sweeping statements. However, this work makes trade easier and cheaper by agreements between nations on standards, technical regulations and conformity assessment. Rules of origin provide an example. While the negotiations in Big Sky will take time to bear fruit, I applaud APEC for conintuing to work to facilitate trade and to make it more accessible to smaller businesses.

Bergsten, Fred C. and Jeffery J. Schott. 2010. “Submission to the USTR in Support of a Trans-Pacific Partnership Agreement.” Peterson Institute of International Economics. Downloaded from http://www.iie.com/publications/papers/paper.cfm?ResearchID=1482.