The Hon. Alexander Downer, MP
The Hon. Alexander Downer, MP
 FORMER MINISTER FOR FOREIGN AFFAIRS, AUSTRALIA

Speech to the Foreign Correspondents' Association

4 September 2007, Sydney

Future Challenges Facing APEC and the Asia-Pacific Region

INTRODUCTION

Thank you.

It is a great pleasure to be here today. I last spoke to you in November 2006 about the South Pacific. But today I want to talk to you about the issue that is on the mind of everyone in Sydney - APEC.

Over the next few days, as we build up to the APEC Leaders Meeting, you will have a lot of people trying to attract your attention. Politicians, businesspeople and NGOs will all want the world's media - you - to focus on them and their ideas.

Some people will be doing this by demonstrating. I expect to see groups of people in the streets calling for an instant end to poverty; decrying the evils of globalisation; and urging immediate action on climate change.

In a democracy like Australia, people are free to put forward their own point of view and they are free to demonstrate non-violently. That is the essence of our democracy.

But I would urge you to look beyond the protesters. I would urge to look at the wider context and what others are doing and saying about policy. I would encourage you to look at what APEC is doing, what it is really about, and what it actually delivers. Because APEC's record is impressive.

The message I want to leave you with today is a simple one: APEC is playing a crucial role in building a prosperous and sustainable future in the Asia-Pacific.

APEC's ROLE

APEC is the pre-eminent forum in the region. It has grown from 12 members in 1989 to 21 now. And, as we all know, there is still a long list of economies hoping to join. APEC membership matters because APEC is a unique forum.

It brings the leaders of these 21 economies together once a year to confer on the opportunities and challenges to regional growth and prosperity. At the same time, it provides a unique chance for Leaders to address strategic issues.

APEC has a strategic role to play because of who it brings together.

I think the region's response to the crisis in East Timor in 1999 is a very good example of this. At the time of the APEC Leaders Meeting in New Zealand in September 1999, we were keen to get support for an international force to restore peace and security in East Timor. Having leaders of key countries - including the United States, Japan and China - together, in the same room, to discuss this issue played a significant role in getting a consensus in support of a multinational force in East Timor.

But in the short-term, APEC is not going to become a regional security body because APEC members place the highest priority on working together to sustain economic growth. The Asia-Pacific region is one made up of a wide range of politically, economically and culturally diverse nations.

Regional dialogue and cooperation are growing and evolving. That is why we see such a diversity of regional groupings in East Asia today. These groupings have different objectives, and many of them contribute to regional integration in their own way. But there is no suggestion that a European Union arrangement for the Asia-Pacific is around the corner.

A key interest for Australia lies in ensuring that we are appropriately represented in regional groupings, both to advance our own interests in the Asia-Pacific region, and to enhance regional cooperation, stability and prosperity.

That is also why the Australian Government has worked so hard at strengthening bilateral relationships with key regional partners such as Japan, China, and Indonesia in recent years. It is why we have further strengthened our alliance with the United States. And why Australia was a founding member of the East Asia Summit, and active in other regional arrangements, such as those associated with ASEAN.

DELIVERING PROSPERITY

APEC's broad membership, including the main world powers driving global economic growth, means it is a key forum to debate and build consensus around the big ideas we need to meet the challenges we face. APEC has been very successful in building support for the ideas of free trade and liberal markets.

This has been one of the main reasons for the economic success we have seen over the past few decades in the Asia Pacific region.

I think the evidence is clear - open, liberal economies are better off than closed, centrally controlled economies.

Just look, for example, at the growth of Vietnam in the past 20 years.

Since 1986, Vietnam has been making the transition to a more open and more market-based economy. Its economic liberalisation steps in the early-to-mid 1990s led to real GDP growth averaging nine per cent per year.

Vietnam's growth slowed in the late 1990s but the momentum has since picked up, with GDP growth averaging nearly 7.5 per cent per year since 2001. Business and financial sector reform is ongoing. Goods and services exports now constitute over 70 per cent of GDP, well more than double the share recorded in the mid 1990s.

And what has all of this led to? Poverty rates are now less than 20 per cent, down from almost 60 per cent in the early 1990s.

Vietnam is an illustration of what economic reform - always an ongoing process - and engagement with the world can bring. Economic growth lifts people out of poverty. If we want to make poverty history, we need to make economic growth a reality.

And that is what APEC is about; encouraging and sustaining policies that result in growth. GDP per capita has grown faster in APEC economies, including Vietnam, than in the rest of the world between 1989 and 2006.

Nearly 3 billion people live in the APEC economies. Between 1988 (the year before APEC was founded) until 2006, poverty has actually halved in those APEC economies. At the same time, incomes per person, in APEC economies, have more than doubled

I do not want to over-hype APEC. But we should remember that it has facilitated a lot of these changes by creating political support for market economic reforms. It has created norms that member economies have been able to adopt to drive their own economic development.

APEC deserves a lot more credit than it gets for its role in those achievements. And it is important that it continues to play this important role.

One of the goals we have set ourselves for this year is to reinforce APEC's liberalisation drive. We are going to do this by asking members to commit to more "behind-the-border" reform. This means going beyond tariffs to work on domestic economic and regulatory issues that inhibit growth. It's about giving markets a greater role in domestic economies.

I know that business groups want APEC economies to undertake deeper structural reform to make them more open, more efficient and less bureaucratic. Business groups know that these sorts of reforms can deliver real benefits.

In fact, researchers at the Australian National University in Canberra estimate that deep structural reform in East Asian economies would be worth US$107 billion in extra income every year.

In APEC, this does not mean we impose reform plans on each other. APEC works because it recognises that the diverse economies will best be able to come up with their own plans. But what APEC can do is facilitate members sharing experiences and modelling successful policies. For instance, Australia can share its expertise on domestic deregulation. We don't tell other economies how they should reform, but we show them what we have done and how it has helped us.

This approach is one of the key foundation principles of APEC and we call it "concerted unilateralism".

This sort of practical cooperation can lead to real improvements in economic management. And better economic management in a more liberal economic environment drives economic growth.

FREEING UP AND FACILITATING TRADE

Domestic economic reform is crucial to economic development but we also need to free up international trade. The freeing up of international trade in the past 30 years has been one of the key drivers of economic growth.

A recent opinion survey found that, on average, Australians feel that freer international trade delivers net benefits to Australia and helps to increase prosperity around the world. People recognise that freer trade opens new markets for our exports and it leads to lower prices and more consumer choice.

And, here too, APEC has played an important role. Since 1989, average tariffs in APEC economies have fallen from 17 per cent to around five per cent. And, in the same period, trade among member economies has grown at an average of eight per cent per year. It has increased more than four-fold in the past 18 years. Last year, nearly 70 per cent of member economies' merchandise trade was with other member economies.

In 1994, at the Leaders Meeting in Bogor, Indonesia, Leaders signed onto a Declaration that put trade liberalisation at the top of member economies' policy objectives. Since then, that commitment to free and open trade has led the APEC region to emerge as one of the engines of global economic growth. It is vital that APEC members keep up this momentum.

Global negotiations on a new round of trade liberalisation are at a crucial stage; and our top trade policy priority is to get the WTO Doha Round to deliver commercially meaningful outcomes.

So our goal this year is to get APEC to send a strong signal on the importance of driving forward towards an effective conclusion to the Doha Round of WTO trade negotiations. After all, APEC includes key WTO members like Japan, the United States of America and China.

But trade liberalisation is not only about the WTO. Of course a free trade area that spanned the globe would be the best result, but we also have to consider other options.

And I think there is a growing view within the APEC economies that we should look at a Free Trade Area for the Asia Pacific region as a possible long-term goal.

Achieving a worthwhile free trade agreement among all of the APEC economies would present some real challenges. But in the future it could become more of a reality and, from Australia's point of view, there would be great benefits in eventually having some sort of a free trade area for the Asia Pacific.

But, practically, in the here and now, APEC is also supporting members as they seek to expand trade opportunities outside the Doha Round through bilateral and sub-regional free trade agreements (FTAs).

APEC is developing what we call "model measures". The idea is that we will have some guidelines and common features we will encourage members to include in FTAs to help them negotiate comprehensive, high quality agreements. And this process also gives members the chance to develop a dialogue about FTAs and to encourage the negotiation of genuinely liberalising agreements and reduce the problems the might arise from a proliferation of agreements with inconsistent features.

Beyond the fundamental task of freeing up trade, APEC is also about making it easier and safer for goods and businesspeople to move around the region. The goal is simple - to make it easier to do business.

In July, APEC Trade Ministers agreed to a new Trade Facilitation Action Plan to reduce trade transactions costs in the Asia-Pacific region by five per cent by 2010. According to a World Bank report, this could boost the collective trade performance of APEC economies by nearly $170 billion.

These reduced costs will be achieved through integrated action to create mechanisms like Customs Single Windows. This is an electronic document lodgement system that will allow businesses to fulfil all import, export and transit-related rules by lodging one set of standardised information and documents. It will cut the red tape necessary to export goods.

The Action Plan also aims to harmonise food safety requirements and standards. This will respond to the health challenges posed by food safety, and at the same time ensure that solutions do not create unnecessary barriers to trade.

The APEC Business Travel Card is another element of APEC's work. The card deserves more recognition. In 10 years, APEC economies have come up with a system that makes it easier for businesspeople to move around nearly all the members of APEC.

The card opens up priority immigration for cardholders to enter and exit major international airports throughout the APEC region. And it gives businesspeople multiple entry visas for travel to 17 APEC economies. For businesspeople, the card can represent the equivalent of hundreds of individual visas - a big saving in time and money.

Member economies are working together at a very practical level to facilitate trade.

For example, there is the Secure Trade work. It may not attract many headlines, but it is about defending against threats to supply chains and international travel. And this means it protects and promotes trade.

APEC members are developing security standards that are harmonious, consistent and give everyone certainty. This will make it easier for people to ship their goods around the APEC region more reliably. With APEC economies now accounting for more than half of global GDP and nearly half of world trade, securing APEC's trade routes is essential.

So APEC supports trade on two levels. First, and most importantly, it helps forge a consensus in support of free trade. Secondly, it develops some real, practical measures to make it easier, cheaper and more efficient to do business.

APEC'S CLIMATE CHANGE AGENDA

APEC is built on the principles of liberal markets. And it aims to deliver practical solutions to make it easier to do business. But its agenda covers much more. APEC economies recognise that prosperity is linked to stability and human security. APEC's agenda also covers counter-terrorism, health and emergency preparedness, and energy security, and now climate change.

As host this year, we have put climate change on the APEC agenda. We have done this because we recognise the fact that climate change is a key economic issue, not just an environmental issue.

APEC includes some of the world's biggest energy producers and consumers. In total, the APEC economies account for around 60 per cent of global energy demand and a similar share of global greenhouse gas emissions. APEC members have an opportunity in Sydney in a few days time to help shape the global response to climate change at a crucial time.

Climate change presents a real challenge. Global growth has been powered by ready access to energy resources over the past 30 years. We cannot stop global growth. We should not want to. After all, as I said earlier, it is economic growth that has lifted millions of people out of poverty in the Asia-Pacific region.

So there is a dual challenge here. We have the challenge of lifting people out of poverty, and we have the challenge of doing that with lower levels of CO2 emissions in the interests of stabilising the climate.

To achieve those two things, we have to bring everyone into the picture. We cannot try and solve climate change while leaving the biggest emitters out of the solution. Australia's emissions account for around 1.5 per cent of global emissions. No country can solve climate change by itself. Climate change demands an effective, comprehensive global response.

We will be pressing for a commitment by all APEC economies to the key elements of a genuinely global response to climate change. Australia would like to see the APEC Leaders agree for the first time that a new international agreement should include an agreed long-term aspirational goal for reducing greenhouse gas emissions.

We would like to see APEC Leaders endorse an approach that includes meaningful contributions from all economies. An approach that recognises differing national circumstances, and that recognises different countries will choose different policy paths in lowering their emissions.

For instance, some countries might be able to do a lot in the area of reforestation. Indonesia has 10 per cent of the world's forests. And, across the globe, 20 per cent of annual CO2 emissions are generated by deforestation. So some APEC economies might be able to make a big contribution on climate change by slowing or stopping deforestation, developing sustainable forestry and investing in reforestation. And members may be able to work together through forest stewardship arrangements.

APEC can, of course, do a lot in the technological area. Members might be able to offer support for the development and deployment of clean coal technologies, and renewable energy sources through energy partnerships.

APEC can also drive gains in energy efficiency, which makes sense from both environmental and economic points of view.

It will also be important for APEC Leaders to support a more bottom-up approach to national commitments towards a shared goal on climate change, similar to APEC's philosophy of "concerted unilateralism".

The other related issue is energy security.

APEC includes countries with high rates of growth and high energy demand: China, Japan and Korea. These countries need access to energy resources. And our view is that the best way for consumers to be guaranteed a stable supply of energy is to have efficient, transparent markets.

We want to avoid quick fix market interventions and special deals. We do not want to see energy supplies tied up for the benefit of some, but with other economies excluded.

Energy prices might rise and fall, but these are important market signals that help companies and individuals make the right short- and long-term investment decisions.

APEC's voice matters in this energy security debate. With major suppliers like Australia and Indonesia on the one hand and major consumers like China, Japan and Korea on the other, it is significant that the APEC Energy Ministers in Perth in May agreed that markets were the best way to allocate resources. That is a major endorsement of a market-based approach by key energy market players.

CONCLUSION

When the Leaders of the APEC economies sit down each year to discuss the big issues and the challenges we face, it is the culmination of a year of other ministerial meetings and behind the scenes work by officials.

Over the course of a year, each member devotes sizeable resources to APEC. And they do so very willingly.

APEC matters to Australia and to its other member economies because of who it brings to the table and because of the results it delivers. APEC has been a key vehicle for economic and trade reform and this has been one of the drivers of growth and prosperity for its members and the wider world.

Greater prosperity and stability for a combined population of nearly 3 billion people is a great achievement.

Ladies and gentlemen, I started by mentioning the protests you are likely to see over the next couple of days. I want to finish by reiterating that the protests are not the real story at APEC. The real story is that APEC is driving towards a better and sustainable future for nearly half the world's population. That is something worth reporting.

Thank you.