How Can We Strengthen the APEC’s New IAP Process?

1. How Can We Strengthen the APEC’sNew IAP Process? By Ippei Yamazawa At ASCC 2012 Kazan May 26-27, 2012

2. 1. New IAP Process has Started • All 21 economies submitted IAPs according to the revised formula, which, together with supplements by PSU, will be released after MRT review them. • This presentation aims to - Introduce the new IAP process - Stress three points to strengthen them - suggest to incorporate the FTA effects • And propose to utilize APEC as the ground base for TPP and ASEAN++ converging to FTAAP

3. 2. Mid-term Assessment of Bogor Goals • AT Yokohama 2010, APEC made an mid-term assessment of its 13 members’ achievement toward the Bogor Goals • TILF helped China and ASEAN economies achieve rapid growth • but suggested further efforts of eliminating remaining impediments in sensitive sectors: tariffs, NTMs, services, investment, IPR, & government purchase

4. 3. New IAP peer review process • In 2010 Yokohama, Leaders committed to continue the IAP process toward the final Bogor Goals in 2020 • May 2011 Montana USA, APEC/SOM adopted the ‘new IAP peer review process’ to be followed by all 21 economies toward 2020. • Each economy submits new IAP every other year from 2012 for peer review with 2016 and 2020 targets • Cover OAA’s 14 areas plus transparency, FTAs etc. • Short 1-2 page report focusing on new L&F measures, supplemented by PSU report

5. 3.2 My Three Points Need To strengthen the new IAP process, keeping its non-binding voluntarism • Individual assessment rather than group assessment, should be released publicly • Not only current liberalization but also their accumulated achievement, in order to identify remaining impediments. Shift from positive list to negative list formula in due course • Open the “peer review” among SOM&MRT to outside critics (ABAC and ASC)

6. 4. Need for Incorporating the FTA Effects • FTAs with trade-diverting effects is never the best policy measure but have become a dynamic source of REI. • FTAs mushroomed among us, their effects need to be incorporated in our review process • New IAP process requires report on FTAs, either concluded an in negotiation, but we need to know their impacts on L and F.

7. 4.2 Preferential treatment should be reported • In IAPs, all economies report on simple average tariffs for all and by sectors, and some add weighted average by import values; only tariffs applied on MFN basis. • Few reports average tariffs weighted by import values of sectors by country of origins, which reflect actually applied tariff levels. • The former deviates far from the latter after the spread of FTAs among APEC economies. • Similarly preferential treatment applied to FTA partners in other L&F areas need to be reported

8. 4.3 Let FTAs Converge to FTAAP • Identifying FTAs as dynamic integrating instrument, Russian SO proposed to guide them to merge to FTAAP. • APEC’s Best Practice for FTAs (2006) and FTA/RTA Model Measures (2009) provide technical guidance to convergence but • Sub-regional FTAs like TPP, ASEAN++, CJK FTA require direct apeal to their promotors. • APEC’s own REI should be utilized as the ground base and Its new IAP should be strengthened along this line.

9. 5. Alternative Processes toward FTAAP 2010 Yokohama: Leaders declared (Pathway to FTAAP) • ‘FTAAP should be comprehensive and high quality and incorporate and address next generation trade and investment issues’ • ‘It should be pursued by developing and building on going regional undertakings such as ASEAN+3, ASEAN+6, and TPP’ • ‘APEC should make an incubator by providing leadership and intellectual input into the process’ • They will proceed in parallel but need to converge toward FTAAP

10. 5.2 TPP • Japan, Canada, and Mexico applied for TPP in Honolulu, Nov 2-011 • Accession negotiations proceed between each of the three and current nine members • Its 12th negotiation in Dallas, US last week ‘made better-than-expected progress’ ‘seeing a clear path forward in more than its 20 chapters’. • TPP, with its current nine participants, cannot achieve sufficient scale economy. In order to invite ASEAN plus members, TPP need to introduce flexibility, while keeping its high level FTA in principle.

11. 5.3 ASEAN ++ and CJK FTA • ASEAN+3 and +6 FTAs have been studied by a task force of Asian government officials for several years. • ASEAN satisfied with ASEAN+1 and not ready to go further, but urged by the move of TPP and CJK FTA • ASEAN Summit (Nov 2011) proposed Regional Comprehensive Economic Partnership (RCEP), including all ASEAN + 6 • Set up 3 Task Forces on commodity, services, and investment to be reported to their Summit in Nov so as to start negotiation in 2012

12. 5.3 (cont’d) ASEAN ++ and CJK FTA • China, Japan &Korea concluded trilateral investment treaty in mid-May and agreed to start FTA negotiation within this year • Based on ASEAN+C, J, K FTAs, Asian FTAs are likely to be lower liberalization than TPP both at coverage and extent

13. 5.4 How to converge them toward FTAAP? • Dynamics of competitive liberalization works among theses sub-regional FTAs but can we expect it work to converge toward FTAAP? • Conflict between TPP without China and Asian FTAs without U.S. can be dissolved easily? • APEC with both China and U.S. should play a converging role.

14. 6. APEC: More than an Incubator • APEC can play a more positive role in merging TPP and ASEAN++ • Its new IAP process has a comprehensive coverage, closer to TPP’s high level FTA, except for its non-binding modality • However, if its process is strengthened and effectively implemented, it will pave a road for ASEAN ++ members to join TPP and FTAAP

15. 6.2 Concluding words • APEC provides necessary capacity building • Above all, APEC is the least multiple of the Asia Pacific. • TPP and ASEAN++ pull the Asia Pacific from above, while APEC pushes it up from behind • Mapping exercise of TPP, ASEAN++ and CJK FTA help us to assess APEC economies’ progress in the new IAP process