Asia-Pacific Economic Cooperation

The Asia-Pacific Economic Cooperation (APEC) forum is a supranational association of Pacific Rim economies whose leaders and other representatives meet with the purpose of improving economic linkages within the region. Australia played a pivotal role in establishing APEC in 1989 at the end of the Cold War to promote economic growth and to strengthen the economies of the region.

APEC was formed against the background of increasingly protectionist sentiment around the world, particularly in the United States and the European Union (EU). APEC was conceived partly as the result of concern that the world could divide into three trading blocs: Asia, the European Union (EU), and the Americas. APEC exemplifies the growing interdependence among Asia-Pacific economies. The heads of government of all APEC members meet annually in a summit that rotates between APEC's member economies.

APEC is not a trade bloc, but it includes other trade blocs such as the Association of South East Asian Nations + 3 (ASEAN's 10 members plus China, Japan, and South Korea); North American Free Trade Agreement signatories (Canada, Mexico, and the United States); and Australia and New Zealand, which have a long-standing Closer Economic Relations (CER) Free Trade Agreement (FTA).

APEC is the largest loosely coupled economic community of its type in the world. It currently has 21 members: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the United States, and Vietnam (Figure 1).

APEC began as a relatively informal group of government officials, mainly from departments of trade or the equivalent. It claims to be the only intergovernmental group in the world operating on the basis of nonbinding commitments, open dialogue, and equal respect for the views of all participants. APEC's decision making by consensus and the diversity of its membership are sources of strength and weakness.

In contrast with the EU, the World Trade Organization (WTO), and other multilateral trade bodies, APEC does not require treaty obligations of its participants; members make commitments only on a consensual and voluntary basis. Thus, many of APEC's goals are expressed in vague terms that are more practicable for national governments’ diplomats to agree on. The vague terms provide diplomats with space to negotiate trade agreements that cannot be covered in WTO treaties. There are benefits of using APEC as a channel for signing such bilateral trade agreements, which otherwise might not be practicable in other forums.

APEC has become a vehicle for promoting the liberalization of trade and investment around the Pacific Rim. This agenda includes promoting FTAs and other forms of practical economic cooperation such as facilitating economic development, the growth of small- and medium-sized enterprises, the mobility of businesspeople, and more equitable participation by women and young people in the labor market.

While APEC countries include approximately 40% of the world's population, they represent approximately 49% of world trade and 55% of world gross domestic product (GDP). APEC represents a dynamic economic region in the world, which has been fuelled especially by the rapid growth rates of China and some other Asia-Pacific economies.

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