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The Challenge of Structural Change in APEC Economies - WP 07/06

5  The Role of APEC in Encouraging Structural Change

5.1  Goals of APEC

The promotion of sustainable economic growth and improved living standards in the Asia- Pacific region through enhanced trade and economic integration lies at the heart of APEC’s mission. As mentioned in the introductory section, APEC’s focus has traditionally been on trade and investment liberalisation and facilitation, and technical cooperation towards these ends. However, in recent years it is increasingly turning its attention also to the role played by “behind-the-border” policies in enabling or impeding regional economic integration. These barriers can come in the form of high transactions costs and risks that arise from poor domestic regulatory systems, competition frameworks and governance structures.

In 1993, APEC Economic Leaders met for the first time (in Blake Island, United States) to outline APEC’s vision of “stability, security and prosperity for our people”. The following year APEC Economic Leaders adopted the “Bogor Goals”, of "free and open trade and investment in the Asia-Pacific by 2010 for developed economies and 2020 for developing economies".[18]

In 2004, APEC Economic Leaders highlighted the importance of behind-the-border impediments to economic growth and higher living standards by adopting the “Leaders’ Agenda to Implement Structural Reform Towards 2010” (LAISR 2010). LAISR identified five priority areas: regulatory reform, competition policy, public sector management and governance, corporate governance, and strengthening economic and legal infrastructure. The following year the “APEC Work Plan on LAISR Towards 2010” was developed which outlined a road map for addressing structural reform issues in APEC. This work plan sought to develop a “whole of APEC approach” for carrying out structural reform activities.[19] LAISR gave the Economic Committee (EC) of APEC the responsibility for leading and coordinating APEC’s structural reform work programme.[20] LAISR recognises that structural reform in APEC economies is essential for realising the full benefits of trade and investment liberalisation, thereby contributing to the achievement of the “Bogor Goals”.

A number of commentators are of the view that while the benefits from trade and investment reform are far from being exhausted, a complementary focus in the APEC context should be given to behind-the-border barriers to economic integration.[21] This sentiment has been reflected by APEC Senior Officials in 2007. The APEC Business Advisory Council (ABAC) has also expressed strong support for the structural reform agenda, as a complement to the trade and investment liberalisation and facilitation agenda.[22] Insights from Sections 3 and 4 highlight the importance of structural policy reforms to improvements in economic growth and income convergence in the region.

5.2  New Zealand’s involvement in APEC

New Zealand is a founding member of APEC and is represented at all levels of APEC, from the Annual Economic Leaders’ Meeting which the New Zealand Prime Minister typically attends, to the various officials’ committees and sub-committees of APEC.

New Zealand has long been a strong advocate for APEC’s structural reform agenda, and recently assumed the Chair of APEC’s Economic Committee which has responsibility for leading and coordinating APEC’s structural reform work programme.[23]

As a small open economy, global connections matter for New Zealand. Trade policy is an important facet of New Zealand’s external linkages strategy. This is particularly so given the tariff peaks that exist in many food and primary production sectors which are economically important to New Zealand. However, economic policy also has a role to play in New Zealand’s external linkages strategy. The economic policies of our trading partners can impact on their growth rates and their desirability as places to do business. Furthermore, economic policies that diverge markedly from our own can increase the cost of doing business across borders and lead to New Zealand businesses foregoing what might otherwise be viable market opportunities.

An external linkages strategy that addresses economic policy structures in addition to trade policy has a number of benefits for New Zealand, including:

  • Improved growth prospects for the region: Structural policy reforms will promote stronger and more sustainable economic growth among our key trading partners (identified as the major economies on the Asia-Pacific Rim, most notably Australia, the United States, Japan, Korea and China) (Rose and Stevens, 2004).
  • Domestic policy development: Greater dialogue with our key trading partners on international policy developments will also assist New Zealand in developing our own domestic policies.
  • Complementarity to trade agenda: Consistent with the “Which Countries” work, New Zealand’s preferential trade agreement strategy focuses on the Asia-Pacific region. Under-developed economic policies may make some economies reluctant to open up some of their markets to greater competition (eg, services and investment markets), which impacts on the comprehensiveness of PTAs and the benefits that we can secure for New Zealand businesses.
  • Providing a platform for deeper regional integration: Greater regional integration in the Asia-Pacific will support the development of more integrated markets for goods, services and factors of production.

From a New Zealand perspective, the APEC Economic Committee is a useful forum to promote structural reforms in the region. It is an existing institutional structure in which New Zealand has an equal voice and where the majority of our key Asia-Pacific trading partners are represented.

Notes

  • [18]Key APEC Milestones is available from
  • [19]Leaders’ Agenda to Implement Structural Reform (LAISR 2010) is available from
  • [20]In addition to the Economic Committee (EC) there are a number of APEC fora that have a focus on structural reform issues including the Competition Policy and Deregulation Group (CPDG), Strengthening Economic Legal Infrastructure (SELI) Coordinating Group, the Finance Ministers’ Process (FMP), Small and Medium Enterprises Working Group (SMEWG) and the Investment Experts Group (IEG).
  • [21]See for example presentations by Oxley (2006) and Parker (2006).
  • [22]See for example ABAC (2006).
  • [23]A key theme of APEC during New Zealand’s 1999 host year was “strengthening markets”, which stressed structural reform. New Zealand was also the inaugural Chair of APEC’s Competition Policy and Deregulation Group (CPDG) which also pushed a focus on structural reform.
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