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Policy Brief 09-16

Pacific Asia and the Asia Pacific: The Choices for APEC

by C. Fred Bergsten, Peterson Institute for International Economics

July 2009


C. Fred BergstenThe Asia Pacific Economic Cooperation (APEC) forum, which set out to achieve "free and open trade and investment in the region" and led highly significant liberalization initiatives in the 1990s, has been stagnating for the past decade. The main cause of APEC's marginalization was clearly the decision of key Asian countries to prioritize economic cooperation within East Asia itself rather than across the broader APEC construct: a focus on Pacific Asia rather than the Asia Pacific. Bergsten argues that for APEC to regain the dynamism and leadership position it enjoyed during its initial decade, it will have to reconcile the strong unresolved tensions between its original main purpose—to "avoid drawing a line down the middle of the Pacific"—and the Asia-centric cooperation priorities of most of its key members. The global environment in which APEC will be operating in the next 20 years is vastly different from that of the past two decades, with the G-20 replacing the G-7/8 as the chief steering committee for the world economy and the informal and de facto G-2 between China and the United States playing an increasingly central role.

These dramatic changes in the world economy and global governance patterns will influence the policy choices of countries in Asia but they do not alter the basic issue: Do the Asian members of APEC want a primarily Pacific Asia future or do they want an Asia Pacific dimension as well? Bergsten recommends that APEC renew aggressive leadership of the Asia Pacific. This option would reconcile the "Pacific Asia versus Asia Pacific" debate by embracing both as parallel initiatives. The United States would agree to support Asian regional integration as long as its components were compatible with the global rules, and the Asians would agree to simultaneously liberalize across the Pacific. The Obama administration is formulating a new trade policy for the United States and has already signaled a focus on Asia. The timing offers a golden opportunity for Pacific Asia to simultaneously achieve its regional objectives and solidify its relationship with the United States. APEC could thereby restore the dynamic leadership role of its initial decade and immeasurably strengthen both the region and the world economy as it addresses the likely global evolution of the next 20 years.

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RELATED LINKS

Speech: Should APEC Focus on Trade Liberalization? May 6, 2010

Speech: The Future of APEC and Its Core Agenda December 9, 2009

Paper: Submission to the USTR in Support of a Trans-Pacific Partnership Agreement January 25, 2010

Speech: Trade and the Global Economic Crisis: "If It's Not Part of the Solution, It's Part of the Problem" July 17, 2009

Policy Brief 07-2: Toward a Free Trade Area of the Asia Pacific February 2007