The Board of Governors of the National Center for Asia-Pacific Economic Cooperation (APEC) is pleased to provide the Subcommittee on Trade with its views on the importance of APEC as a regional trade organization. This statement shows the clear value of such organizations by illustrating the significant potential of APEC to achieve foreign policy and economic goals critical to the United States.

The National Center for APEC is a non-profit organization whose mission is to generate U.S. support for and participation in APEC¹ with the objective of liberalizing trade and investment in the region. The National Center’s Board of Governors includes 35 major U.S. corporations with extensive operations in the Asia-Pacific region and a strong interest in APEC’s work to increase prosperity, facilitate business and open markets. APEC is important; the government and business community can work together to achieve critical U.S. objectives through the APEC forum.

Asia has the largest population in the world, some of the fastest growing economies in the world and, by a quantum measure, the greatest economic growth rates. Three powerful and related trends are fundamentally reshaping the global economy: 1) the exponential growth in Internet connectivity; 2) the convergence of content, interactivity, computer applications and communications networks; and 3) the increasing use of electronic commerce as a channel for conducting international business. This technological transformation is creating a networked global economy that is just beginning to demonstrate that e-commerce and the Internet can be powerful engines for economic growth, wealth creation and societal benefit.

Asia represents no less than the future viability of U.S. companies, as well as an important arena where U.S. leadership is critical to generating growth and prosperity. The U.S. Government and private sector have worked closely together in APEC to support U.S. objectives. As we move forward into the year of China’s APEC chairmanship, it is important that the private sector and government continue to work together to promote our common interests. The private sector has found APEC to be a successful forum in which to advance our objectives, and we look to the Bush Administration to take a leadership role in promoting APEC and continuing the momentum toward ensuring the ultimate goals are reached, as described below.

At their 1993 meeting in Blake Island, the APEC Leaders outlined their vision for a community of nations in the Pacific. The recent financial crisis and political events in the region have challenged this ideal, and a number of factions have begun to emerge that aim to exclude U.S. agenda and objectives. The absence of U.S. leadership has allowed voices critical of the U.S. to take the stage, and strong engagement from the U.S. early in the new Administration is needed to steer APEC back toward its Blake Island ideal.

The need for action is critical and immediate. In order to achieve the APEC goals of free trade and investment in the region by 2010 (for developed economies) and 2020 (for developing economies), APEC members must take concrete steps toward this end immediately. The ASEAN countries have committed to an ASEAN Free Trade Area (AFTA) that would move that grouping significantly closer to their APEC goals; the AFTA deadline is the end of 2002. If ASEAN cannot meet that commitment, it will slow the momentum on APEC’s progress and dim the chances for APEC’s success.

There is a strong and mutually reinforcing relationship between foreign policy and economic policy issues. A strong and interlinked APEC region is in the U.S. national interest. APEC provides the most immediate and far-reaching platform for U.S. leadership, with Russia, Japan, China, Korea, all the major players of the regional security and economic environment involved. APEC, while limiting its formal discussions to trade and economics, offers through the annual "Economic Leaders Meeting" a key opportunity to promote broader U.S. foreign policy objectives through the President developing personal relationships with the other APEC Leaders. The APEC meetings give the President the opportunity to broach sometimes difficult political and strategic issues with other Leaders in informal bilaterals without the rigid demands and harsh spotlight of official state meetings. The APEC meetings, with the Leaders, foreign ministers, trade ministers, APEC Business Advisory Council (ABAC) and the CEO Summit of leading regional business leaders, is the Pacific Rim's "annual meeting."

APEC serves as a perfect counter to the contentious debate that dominates the US-European trade dialogue. The common membership between FTAA and APEC (5 members) can act as a foundation for a joint FTAA/APEC coalition that can serve as a catalyst to launch a new trade round in the WTO and make progress on important trade and investment liberalization issues. The Information Technology Agreement of 1996 was a good example of an APEC agreement providing the impetus for a very successful WTO agreement. The APEC Food System initiative and the Auto and Chemicals Dialogues provide similar opportunities within the APEC process to assure progress in other sectors of global importance to U.S. business.

APEC’s umbrella can ensure that bilateral free trade agreements under negotiation in the region maintain certain common interests. Every time APEC members enter into a bilateral free trade agreement, they need to ensure the agreement meets APEC standards for market openness and comprehensiveness (including all economic sectors). APEC also allows a multilateral venue in which to address issues that cannot be addressed bilaterally and provides a way to initiate new ideas that can have regional application.

Getting the WTO negotiations back on track is a priority issue for the United States. The fact that China is chairing the APEC meeting just before the next WTO Ministerial provides an opportunity to both cement China’s WTO commitments and push the cause of a new round of negotiations. As it has done in the past, if APEC can provide a positive impetus to the WTO Ministerial, it will further serve to bolster APEC’s own reputation and effectiveness.

Digital trade presents a new opportunity to advance the goal of expanded international trade in a converging environment. Trade policymakers must now ensure that new technologies, new business models, and new products are available to consumers, businesses, and governments around the world so these users can benefit from increased productivity, competition, and choice.

The U.S.-sponsored APEC E-Commerce Readiness Initiative has set the stage for improving positioning for the digital economy and opportunities for U.S. industry. APEC Leaders in Brunei recognized this U.S. initiative for its global leadership in enabling economies to assess and improve their readiness for the New Economy.

The Asia-Pacific region is experiencing the most extensive and strategic build-out of major infrastructure since WWII. If U.S. technology is not the standard used, it creates significant national security implications for the future as well as a lack of economic benefits for the U.S. economy. The U.S. Government’s active involvement in APEC will reinforce the reliability of U.S. technology for critical applications.

APEC’s commitments to liberalizing trade and investment in the region have been hard fought victories for U.S. trade policy. It is imperative that APEC economies enact their implementation strategies immediately in order to meet the deadlines of 2010 for developed economies and 2020 for developing economies. Each economy’s Individual Action Plan (IAP) provides the business plan to accomplish this. The U.S. should ensure APEC members take this process seriously.

The position of the APEC chair – this year China, next year Mexico – has a considerable impact on the progress APEC makes toward meeting its liberalization goals. The U.S. public and private sectors should be delivering a strong message to both members to take a proactive approach toward shaping the agenda during their year in the chair. China and Mexico are two of the United States’ most important trade partners and an unprecedented number of U.S. firms will be on the ground at each of these APEC meetings and will be working their key issues through the APEC Business Advisory Council (ABAC) process. Full engagement from the U.S. Government at all levels will ensure maximum results for both the U.S. Government and the U.S. business community.

APEC is unique in integrating the business community into its decision-making process and has made considerable progress in this regard. This offers a great opportunity for setting a practical agenda for both achieving free trade goals and for building up the capacity of the developing economies to participate effectively in a globalized economy. The ABAC has been an effective focal point of business engagement in APEC. The U.S. ABAC members, the U.S. business community, and the National Center for APEC are committed to working with the Bush Administration to achieve our mutual goals for the Asia-Pacific region in APEC.

How the U.S. Government and U.S. business community can achieve their objectives in APEC:

The U.S. private sector can help the Bush Administration achieve its foreign policy objectives through the APEC process. The U.S. business community is looking to the new Administration for greater involvement and leadership in APEC and believes APEC can serve the Administration’s policy objectives in the region.

To be most effective, the U.S. public and private sector should speak with one voice, reinforcing each other in relevant APEC fora; the U.S. should identify its key messages for 2001 and systematically deliver them in various APEC fora as well as in U.S. speeches.

The U.S. government should organize the policy process for APEC to ensure it is integrated into the overall Asia-Pacific policy process at a very high level and maximizes the role of the private sector.

APEC, through its many working groups and committees, is working on dozens of meaningful projects that will have a positive impact on the region’s economic and business climate. Work on a number of these is progressing well this year and may produce solid deliverables for the Leaders Summit in October, 2001 in Shanghai:

• Expanded membership in plurilateral air services agreement
• China APEC Shanghai Model Port Project
• A standards harmonization outcome (material safety data sheets) at first public-private sector Chemicals Dialogue in October
• Leaders Declaration forswearing food embargoes in APEC
• Commitments to financial sector reform and restructuring
• Continued prioritization and progress towards establishing policies which advance the goal of expanded international trade in a converging, digital environment

The Board of the National Center is hopeful Congress will recognize and support the important role APEC can play in achieving U.S. foreign, economic and trade policy objectives, with clear deadlines for achieving comprehensive trade liberalization and business facilitation goals while fostering greater economic cooperation.