APEC - the case study of regionalism and multilateralism
APEC which means Asian-Pacific Economic Corporation is one of the biggest trading regions that consist of twenty-one countries in it. All the countries within this corporation are known as the rim of the Asia-Pacific and able to perform well as compared to other regions. Countries that are heading under APEC are performing quite efficiently especially countries like China, Hong Kong and Vietnam. On the other hand, the United States is playing a major role in generating much more wealth by trading activities, whereas the performance of Japan is a bit weaker as compared to the trading region of the United States. However, the performance of Japan is improving now due to the rising demand of trade, technology and business activities. It is recorded that the inflation rate is low, whereas the fuel and commodity prices are going higher in these trading region. Moreover, the investment and the trade in the APEC region are increasing rapidly.
World economy projections suggest that due to slow growth, trade could be wreck which might result in a disparity between the United States and other countries especially East Asia. The two most important drivers for this disparity are American consumers and investors in China. China's leverage is mostly depended upon its export to U.S.. The market of China completely own businesses based on the replication of the major products and services and export their quality to other regions like America, Pakistan and Middle-Eastern side.
Chapter Two: Literature review
APEC -- Trading Bloc
APEC (Asia-Pacific Economic Cooperation) is a forum made up of 21 countries which promotes free trade in Asia-Pacific Region. It was established in the year 1989 (Frankel, Stein and Wei 1997). APEC works on living standards, education and stable economic growth. Annual APEC Economic Leaders Meeting takes place each year from the heads of Government except China (Taiwan). The meeting is placed in one of the member countries of APEC.
The first Economic Leader meeting took place in 1993 in which head of countries participated like Australia, the U.S. etc. The APEC secretariat was established in Singapore so that activities can be coordinated among the countries. In year 1995, APEC Business Advisory Council (ABAC) was formed.
APEC is a giant vehicle through which major economies of the region can do economic analysis and enforce policies which can help them is landing safely. However, it is also seen that APEC is not fulfilling its role because governments are diverted to other issues like terrorism (Morrison 2010).
Compatibility of Regionalism and Multilateralism
According to Groser (2010), the concept of regional trade agreements acts as building bloc. It focuses on the interests and benefits of a region. Regionalism favours less restricted federations like Regional Trade Agreement (RTA) etc.
According to Yamada (2002), many countries think that multilateralism is the first best option. It is easier for them to deal with a set of countries rather than all the countries within the globe. Countries may be the member of WTO or countries that have almost same cost structures can form multilateral liberalization so that the trading activities could take place easily.
There are two different schools of thoughts. Those who are in favour of multilateralism have three major concerns. First that regionalism diverts trade by giving preferences to member countries and not in non-members. The critics of regionalism label its manifestations as "preferential trade agreements" (Bergsten 1997).
The second concern is "attention diversion." They think that due to regionalism countries lose their interest in the multilateral system because countries are greatly involved in regional initiatives. In early 1980s the U.S. gave priority to global trade and refused to participate in regional initiatives. U.S. attracted free trade with Israel and Canada and later made it NAFTA and included Mexico also (Bergsten 1997).
Third concern is "geopolitical impact" of regionalism. In history, it is noted that regionalism has contributed to political and military clashes among nations. The famous example is the United Kingdom imperial. The extensive and regional ties sometimes lead to irritation and conflicts which goes beyond international relations (Bergsten 1997).
The proponents of regionalism take these three concerns in a different way. They say that regional arrangements promote free trade and multilateralism in two ways: firstly, trade has generally exceeded diversion in trade and regional trade enhance the capability of trade not only regionally but also globally.
Secondly, regionalism increases the probability that they can easily move into multilateral actions and development. Thirdly, regionalism creates positive impact rather than negative. Trade has created the European Union whose purpose was to eradicate war between France and Germany. This means that trading blocs bring positivity and harmony among the countries of the same region by helping each other and reducing the state of conflicts. Even if there is any conflict than it should be resolved under the laws and forum governance.
Multilateralism follows the principle of non-discrimination among the countries that fall under the same region. Those countries and regions that support the regionalism should know that the article 24 of GATT, which now WTO, explicit the permission to regional trading agreements (RTA) and consequently, there is a compatibility to the multilateral policies of trading. To be the part of WTO, it is important to meet three criteria, sustainability should be created among all the member of the trade, new barriers should not be raised for the non-members and free trade should be agreed within the certain date and time that is usually for 10 years. The major regions like the EU and NAFTA were able to follow all the trading policies suggested by WTO and GATT, therefore it claims the full compatibility with multilateralism (Bergsten 1997).
For APEC, the regionalism and multilateralism compatibility lies at the basis of the five characteristics that include i) Open Membership where the regionalism is promoted based on openness. ii) Unconditional Most-Favoured-Nation (MFN) that means APEC promotes trade liberalization to all its trading partners. iii) Conditional Most-Favoured-Nation (MFN) where APEC takes the initiative to reduce its barriers on non-members who are agreed to follow same trading policies that APEC offers and this represents multilateral liberalization. iv) Global liberalization that reduces barriers to pursue regional goals of trade. v) Trade facilities that focus on tariffs and trade barriers (Bergsten 1997).
The conclusion of the above discussion is that success of both regionalism and multilateralism depends upon the management of key countries. They can have war between them or could create a good example of trade (Peterson 2003).
Comparison between APEC and EU
The European Union is a single market that holds the trading facilities among the countries that only fall under the European continent. The purpose of the EU is to develop the competitive advantage among the united countries. It is the trade union and its purpose is to share the wealth among the Western, Scandinavian and Eastern parts of the Europe in order to stimulate the overall economy of this region (Frankel, Stein and Wei 1997). The EU region bloc follows strong barriers for the non-member country because this region doesn't accept the external market to enter easily. There are many laws imposed on every corporation to perform its business in this region. Moreover, EU follows great liberalization within their union members (Beeson and Jayasuriya 1998).
On the other hand, the regional economic cooperation in APEC is to maintain the overall competitive advantage of this region. It is also based on settling the economic condition of the members of APEC so that growth and stability could be stimulated and living standards could be raised. In the APEC region, it is easier for any non-member country to enter and to perform its business operations. All members of APEC don't support liberalism. On one side of the coast that is Japan, Indonesia and New Guinea are under political influences, whereas on the other side U.S., Australia and Canada completely supports liberalization like the EU (Beeson and Jayasuriya 1998).
Chapter Three: Methodology
Approach of Research
The methodology of this paper is purely based on explanatory approach. The reason for suggesting this approach is that, the data and information that is gathered is based on all the existing facts. The trade agreements and the economic corporation activities are preset and all those regions that fall under the APEC are abided to follow it. Moreover, the purpose of this paper is to give understanding to readers regarding the activities and ideas of APEC about the regionalism and multilateralism.
Method of data collection
The method of data collection for this paper is qualitative method. This method is more useful to gather data based on the qualitative means. In this method, the information is gathered based on all the theories and principles instead of any quantitative means like using mathematical equations, statistical tools etc. However, in order to explain this topic charts are used.
Sources of Information
The source of information is secondary. In this method the data are gathered from books, journals, articles and websites.…