Academic journal article Multinational Business Review

APEC: A Superregional Trading Bloc

Academic journal article Multinational Business Review

APEC: A Superregional Trading Bloc

Article excerpt

Regional trading groups based primarily on economic cooperation have become the most debated topic in world trade. World leaders loudly assail regional trading blocs that serve as protectionist trade umbrellas. Nevertheless, they concede that trading blocs may be an unfortunate but emerging trend. For the first time, however, a group of countries under the name of Asian Pacific Asian Economic Cooperation (APEC) have come together by forming a trading bloc to promote global economic interests rather than defending their own narrow markets. In this article, we discuss major differences between APEC and other trading blocs.

Asia-Pacific Economic Cooperation (APEC), established in 1989 as a regional forum for economic cooperation, has expanded to 18 members: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand, and the United States. "In spite of the tremendous diversity of our cultures, political systems and stages of development of our economies, we have been able to envision a community of Asia-Pacific economies based on a growing spirit of partnership," President Suharto of Indonesia declared at the end of the 1994 APEC Summit. On November 16, 1994, leaders of the 18 Pacific Rim nations moved toward creating the largest trade zone by the year 2020. Developed nations such as the United States and Japan agreed to end trade barriers by 2010, and developing nations agreed to follow suit by 2020. APEC member countries represent more than half the world economic output. The APEC leaders agreed to meet in Osaka, Japan, in 1995 to hammer out details of how to reach the free trade goal.

APEC's guidelines stipulate the following three principles: First, cooperation should be outward looking, building consensus on a broad range of economic issues. Second, participation is to be open ended, based on the strength of economic linkages. Third, regional liberalization is to be promoted, provided it is consistent with WTO principles, not to be to the detriment of other economies. These three principles make APEC a unique trading bloc because a group of countries came together for the first time to promote global economic interests. In this paper, we discuss the nature of trading blocs, the structure of APEC, major features of APEC, and the role of the Eminent Persons Group.

TRADING BLOCS: TYPES OF ECONOMIC COOPERATION

A trading bloc is a preferential economic arrangement between a group of countries that reduces intraregional barriers to trade in goods, services, investment, and capital. There are more than 50 such arrangements at the present time. There are five major forms of economic cooperation among countries: free trade area, customs union, common market, economic union, and political union.

The free trade-area type of cooperation requires member countries to remove all tariffs among themselves. However, the member nations are allowed to have their own tariff arrangements with non-member countries. The North American Free Trade Agreement illustrates the free trade-area type of agreement. Under the customs-union arrangement, member nations not only abolish internal tariffs among themselves but also establish common external tariffs. The Andean Pact (among Bolivia, Columbia, Ecuador, and Peru) constitutes a customs union. The aims of the Andean Pact are designed to establish free trade among member countries and to impose a common tariff of 5 to 20 percent on products imported from outside.

In a common market type of agreement, member countries abolish internal tariffs among themselves and levy common external tariffs. Moreover, they allow the free flow of all factors of production, such as capital, labor, and technology. The Central American Common Market exemplifies a common-market type of agreement. The European Union exemplified a common market type of agreement until the end of 1992. …

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