Asia-Pacific Economic Cooperation (APEC) Overview and Background

The APEC forum was established in 1989 to promote economic cooperation and integration in the Pacific region. The United States was a driving force behind APEC's creation, as a means of anchoring the United States more firmly in the region in the post-Cold War era. APEC subsequently grew to 21 members, called "economies" because Taiwan (called Chinese Taipei in APEC), Hong Kong, and China are equal members of APEC.

The dynamic of APEC as a ministerial-level organization changed dramatically in 1993 when the United States invited member economies' leaders to Blake Island, instituting the annual Leaders Meetings. Leaders called for continued reduction of trade and investment barriers, envisioning an Asia-Pacific that promotes prosperity through cooperation.

From 1994-96 APEC was devoted to formalizing the Leaders' vision for free and open trade. Leaders at Bogor, Indonesia (1994) set the goals of reaching free trade and investment by 2010 (for developed economies) and 2020 (for developing economies). The next year they adopted the Osaka Action Agenda (OAA), a blueprint for implementing the Bogor Goals through the three pillars of trade and investment liberalization, business facilitation, and economic and technical cooperation. In Manila (1996), Leaders adopted the mechanisms of Individual and Collective Action Plans to achieve the Bogor Goals.

Since 1997 APEC's focus has been on OAA implementation, but with mixed results. The 1997 targeted-sector approach to reducing trade barriers (Early Voluntary Sectoral Liberalization, or EVSL) has produced some gains but has remained controversial. In 1998-99, APEC helped Asian economies "stay the course" of reform during and just after the Asian Financial Crisis, by promoting financial stability and reducing vulnerabilities to crisis through structural reforms and sound economic policies. However, not all viewed APEC's response as timely or effective. In 1999, APEC made efforts at Auckland to reinvigorate its role in multilateral trade liberalization by issuing a strong statement on the WTO. The subsequent failure to launch a new WTO Round at Seattle, however, has led to questions about APEC's ability to move forward on trade and investment liberalization. In 2000 under the Brunei chair, APEC focused on information technology and called for a tripling of Internet access by 2005. In its "Action Agenda for the New Economy," Leaders pledged a mix of market-based policies and capacity building actions to help transform the region through greater development and use of information technology.

APEC developing economies believe that liberalization has been over-emphasized in the APEC agenda. While still committed to the Bogor Goals, developing members want economic and technical cooperation, including human resource development and capacity building, reinforced as an equal pillar in the APEC agenda. Organizationally, APEC has approximately 16 special committees and working groups, whose work is overseen by Senior Officials. In 1995, APEC established a business advisory body, called the APEC Business Advisory Council (ABAC), which consists of three business executives from each member economy. The U.S. ABAC representatives are Paul Song, Chairman of Aris Corporation; Ernest Micek, former Chairman of Cargill; and Sy Sternberg, Chairman of New York Life Insurance Company. With Mexico, Thailand, Chile and Korea lined up to chair APEC through 2005, the U.S. and like-minded economies will face a continuing challenge of keeping APEC's liberalization agenda on track while addressing technical cooperation needs.