Integrating Greater APEC Economies with Regional ... · 16 Ch. 11 Cross-cultural management, table...

Integrating Greater APEC Economies with Regional Institutionalism 1

Asia Study Center Consortium (ASCC)

Paper Topic: "Integrating Greater APEC Economies with Regional Institutionalism"

Tony Sowang Kuo Jeremy Firster

Shih Chien University, Taipei Shih Chien University, Taipei

ABSTRACT

The more successful APEC has become and as progress is reached towards moving the region

to greater economic liberalization and cooperation, the more dilemmas it seems to face. As a significant

economic community with 40.5% of world population, 54% of GDP and 43.7% of world trade, APEC

members and the world trade could be beneficial from economic liberalization. However, over twenty

years since its establishment, the economic issues in the region seem more and more complicated.

Rising commodity prices continue to contribute inflationary pressures in emerging and developing

economies in 2011. To build an efficient institution to promote policy alignment and economic and

technical cooperation among the members is the goal of this research. In East Asia, regional

integration has become very complex with several overlapping institutions and structure forms. To

improve the ease of doing business for APEC nations, three factors in East Asia are discussed: trade

implementation by public and private means, cultural differences and the impact on the business

environment, and transparency of economic integration. APEC can improve the economic integration

of its member economies through a balance of social values and efficiency.

Key words: APEC, transparency, policy alignment, regional institutions, East Asia,

1. CULTURE AND INSTITUTIONAL BUILDING: GREATER APEC ECONOMIES

APEC was created to promote and develop the economic growth of markets in the Asia Pacific

region1. Membership has grown from 12 economies to 21 and from representing 24 percent of world

GDP to 542. Currently, a large number of APEC members are in East and Southeast Asia. The main

purpose of this research is to determine how Asian APEC members are organized within the region and

to determine ways in which further integration and trade can occur between the APEC and Greater

APEC economies. Greater APEC economies are defined as economies outside of the APEC framework

which play a role in maintaining economic stability and sustainability within a regional framework.

1 Lorraine Cardenas and Arparporn Buranakanits, “The Role of APEC in the Achievement of Regional Cooperation in

Southeast Asia,” Annual Survey of International & Comparative Law, 2010 ed. 2 “About APEC,” 12 May 2011 <http://www.apec.org/en/About-Us/About-APEC.aspx>


The limitations of this paper is to located in and immediately around East and Southeast Asia.

A general theme to remember is that market access is not equivalent to growth.3 Culture and economic

prosperity are strongly linked and cultural responses affect the outcome of economic growth.4 Different

parts of the World have different institutional forms to better meet their needs and preferences.5

National cultures create a system of shared meanings and understanding patterns of cause and effect

relationships of a given concept, behavior, or attitude.6 An economic culture is defined as the beliefs,

attitudes, and values that form the economic activities of individuals, organizations, and other

institutions7

and these traits are learned and shared through generations8. Gaining an understanding of

a states culture is essential for securing successful business.

There are three levels of contextual culture in each society9 that states that our behavior is easy

to see and understand but are based on the invisible basic assumptions and meanings. Many economies

in East and Southeast Asia are considered to be a high-context culture10

. Interpretations of high-context

cultures depend largely on the relationship, place of communication, etc – there is less emphasis on

what is written and more emphasis on the actions that occur. Many economies in the Asian region are

considered to have the Clan11

organization model which forms organically and is focused on internal

maintenance of the group. In this arrangement, there are strong elements of participation and teamwork

with a strategic emphasis on commitments. Hierarchy's and authority are valued and often goals cannot

be achieved by other means. This differs greatly from the US model which is considered to be a Market

organization valuing stability and order through a mechanical process and focusing on external

positioning. Attributes to the Market form includes goal achievement and competitiveness with a

strategic emphasis on competitive advantages and superiority. Through these organizational cultures

forms the patterns of organizational functioning and the institutions they operate under.

East Asia and Southeast Asia are defined as two geographic realms that share similar physical

3 Barbara A.Weightman, Dragons and Tigers: A Geography of South, East, and Southeast Asia , 2010

4 David Landes “Culture Makes Almost All the Difference” 2-13

5 Dani Rodrik, :The Globalisation Trilemma”

6 “Managing Globally: Cross Cultural Management p.109

7 Michael Porter, “Attitudes, Values, Beliefs, and the Microeconomics of Prosperity 14-27

8 Orlando Patterson, “Taking Culture Seriously, p. 208-212 Discusses the effects of our environmental and historical

affects on culture 9 “Managing Globally” Introduced by Andre Laurent in 1986 p.287 Behavior; Values, Beliefs, and Preferences; and Basic

Assumptions and Meaning 10

Global Cultural Environment p.122 11

Global Cultural Environment p/ 133-135


and cultural characteristics.12 These realms represent similar functional interactions between people

and the natural environment, transportation networks, cityscapes, environmental damage, and focus on

major population clusters. East Asia is defined13

as People’s Republic of China (China), Hong Kong,

China (Hong Kong) Mongolia, North Korea and the Republic of Korea (South Korea), Chinese Taipei

(Taiwan), and Japan. Southeast Asia is defined as Myanmar, Thailand, Laos, Cambodia, Viet Nam,

Malaysia, Singapore, Brunei Darrusalam, Indonesia, Timor-Leste, and The Republic of the Philippines

(The Philippines).

An example of an organizational culture can be seen in East Asian countries and is derived from

the teachings of Confucius to form the guidelines known as “Confucian Humanism.”14

The cultural

impact this has on economic activity is the belief is that government leadership in a market economy is

needed, human connections are needed to ensure a person behaves properly (the law can not stand on

its own), and that dynamic interplay between the private and public sector provides resources for

societal advancement. The “Confucian Humanism” ideal set is a large motivator behind China's Beijing

Consensus,15

as many of it's principles are very similar to these. In terms of globalization, this is an

example of geopolitical civilizations which groups countries together based on shared cultural traits

including values, beliefs, and institutional and social structure. APEC has membership within four

different civilizations16

For example, In Chinese societies, the rule of law was completely replaced with close personal

relationships between family and to others as well. These close relationships would add security to

business because the family would be responsible for the actions of one of its members. If bad business

deals occurred, they would be banned from their family and lose the security network they had. In this

case the perceived scenario of corruption was more so the culture of their business interactions than

being corrupt. It is not to be determined that there isn't corruption in the region, however the methods

of doing business has historically been without the use of law.

12

Barbara A.Weightman, Dragons and Tigers: A Geography of South, East, and Southeast Asia , 2010 13

“About APEC,” Describing the countries with official titles. Parentheses show the terms of members for the

purpose of this paper. North American region by APEC: Canada, The United States of America, Mexico; South America:

Chile and Peru; Oceania: Australia, Papua New Guinea; The Russian Federation (Russia) 14

Wei-Ming Tu, “Multiple Modernities: A Preliminary Inquiry in the Implications of East Asian Modernity, p. 259-263 15

Kjeld Eik Brosgard, “Redefining Beijing Consensus: Ten general principles.” 16

Ch. 11 Cross-cultural management, table of culture economies. p.296 APEC has members in Far Eastern, Latin

American, Anglo, and Japan shown as an independent nation


2. THE IMPORTANCE OF THE ASIAN REGION

2.1 Strong Vertical Network

East Asia has experienced a very large amount of growth17 since the 1950s. As table 1 shows

below, several countries have experienced high levels of growth at different times. Industries in East

Asia have developed over the past fifty years in terms of production networks, processes, and

capabilities18. Stemming from Japan, vertical networks have become very extensive in East Asia, as

most countries are now specializing in creating a certain part of a product, and shipping it to another

country to be added to or finished. This has allowed for certain countries to cultivate a specialization in

an area. Malaysia, the Philippines, and Thailand are well inept at assembled of finished machinery.

These skills were passed down from Taiwan and South Korea which now perform more technical

construction. As Malaysia and the Philippines grow, as well as Taiwan and South Korea, certain

assembly and manufacturing jobs have flowed to lower wage countries such as China and Viet Nam.

17

Sujin Chan, “Beyond Special and Differential Treatment,” Regional Integration As a Means to Growth in East Asia, p.

57 18

Chan, “Beyond Special and Differential Treatment,” p.100-101


2.2 Natural Resources

East and Southeast Asia are two regions which have several of the world’s highest mountains,

longest rivers, plains, and tropical forests19

providing the region with a large level of natural resources

(Table 2 for country list). The Mekong river is home to the most diverse fishery second to the Amazon

river in Brazil20. 80 Percent21

of the people in the Mekong River Basin livelihood relies on this river.

The South China Sea is another resource base,22

having said to be a rich source of oil and natural gas.

Currently, the South China Sea region has proven to have 7.5 billion barrels of oil reserves with

speculation of 213 billion barrels of oil.

2.3 Strong Exports

This region of the world produces several global exports including the types of cars and

electronic gadgets used, several types of clothes, shoes, and other products, entertainment and media - a

plethora of goods are coming from this region (see Table 3)23. Exports represent a large percentage of

growth for the East and Southeast Asian nations. Exports in Taiwan generate 70 percent of Taiwan's

growth, with the leading exports being electronics and machinery. In Thailand, exports counted for over

half of the countries GDP growth, stemming mainly from machinery, electronic parts, agricultural

commodities, and jewelry. Papua New Guinea is working on a project to export natural gas that is

19

Weightman, p.1 20

“International Rivers: People, Water, Life,” Lancang (Mekong) River, 20 June 2011

< h t t p : / / w w w. i n t e r n a t i o n a l r i v e r s . o r g / c h i n a / l a n c a n g - m e k o n g - r i v e r > 21

Derek J. Mitchell and Brian Harding, “China and Southeast Asia” 22

Ernest Bower, “The Quintessential Test of ASEAN Centrality: Changing the Paradigm in the South China Sea” p. 1-4 23

Weightman p.1

Table 2

East and Southeast Asia: Natural Resources

Mekong River China Thailand

Myanmar Laos

Cambodia Viet Nam

South China Sea China Viet Nam

Malaysia Indonesia

Philippines Thailand

Sources : Internationa l Rivers : People, Water, Li fe, accessed June 20, 2011, Ernest Bower, “The Quintissentia l Test of ASEAN Centra l i ty: Changing the Paradigm in the South China Sea,” Accessed July 13 2011


projected to double the countries GDP.24

2.5 Global Marketplace

Although once the supplier and maker of goods for the world, East Asia is transforming itself

from “Factory Asia” to be the new world’s marketplace. Currently there are half a billion people in Asia

considered to be in the global middle class,25

with 2.5 billion more to be added in the next twenty years.

The effects of this can be seen with China as people there are consuming more and more and increasing

exports from outside countries. Growth in trade between China and Southeast Asia has seen large

growth rates since the early 1990s.26

From 1993 to 2001, growth in trade was an averaged 75 percent

annual growth rate. The current trend shows China becoming the largest trading power with all the

Southeast Asian nations in the near future. The dominant form of trade with the Southeast Asian

nations is done through Chinese Southeast Asians.

24

John D. Conroy, “Papua New Guinea; The informal economy and resource boom” 25

Peter Drysdale, “Asia's middle class on the rise” East Asia Forum 26

Derek Mitchell and Brian Harding, “China and Southeast Asia” p. 77-90

Table 3

Top Exporting Countries in East and Southeast Asia – 2010

China #1 in World for export va lue

electrica l and other machinery

Japan Transport equipment, motor vehicles

semiconductors , electrica l machinery, chemicals

South Korea Semiconductors , wireless telecommunications equipment

Motor vehicles , computers

Hong Kong electronic machinery and appl iance

texti les , appeara l

Singapore Machinery and equipment, consumer goods

pharmaceutica ls

Taiwan Electronics , machinery, crude petroleum,

Chemicals : Optica l , photographic, measuring

Malaysia Electronic equipment

Petroleum, l iqui fied natura l gas

Thailand texti les , footwear, fi shery, rice

rubber, jewelry, computers

Indonesia oi l and gas , electrica l appl iances , plywood

Vietnam Clothes , shoes , marine products , crude oi l , electronics ,

wooden products machinery

Source: East and Southeast As ia , The World Factbook, Accessed Jun 25 2010


3. ASIA'S INSTITUTIONS

3.1 Comparison of Regional Institutions

Of the three types of regional institutions, ASEAN, NAFTA, and the EU, ASEAN is said to be

the least integrated.27 The European Union is the most integrated having a ‘one market’ principle by

removing trade barriers on all goods, services, labor, and financial capital. In this organization

structure, however, there are members which have rules for acceptance and are expressing similar

levels of economic development. NAFTA, the North American Free Trade Agreement, had the most

comprehensive agreement for goods and services through it’s diverse membership of Canada, the

United States, and Mexico. NAFTA allows temporary movements of labor for business purposes. The

interesting point of NAFTA is that it is a successful example of a regional economic institution with

members of different sizes, income levels, legal traditions, regulatory regimes, and cultural

backgrounds. ASEAN development isn’t quite so clear. Often referred to as the ‘noodle bowl,’ ASEAN

infrastructure is a complex web of regional agreements and preferential trade agreements for bilateral

and triangular purposes. In total, there are forty different trade agreements in place that are both

connecting the members of East Asia together and with members outside of the region.28

3.2 Development of East and Southeast Institutions

The institutional structure in East Asia has seemed to develop out of reactionary terms instead

of planned terms. Beginning in the late 1960s,29

ASEAN' original six members (Indonesia, Malaysia,

Thailand, Singapore, the Philippines, and Brunei) grouped together to protect each others national

sovereignty during the Cold War era and to solve disputes peacefully30

. National sovereignty would

remain a pillar of institutional frameworks in the region still to come. After the Financial Crisis of

1997, East Asia was treated as a whole due to economic contagion31

and from this point East and

Southeast Asia began to cooperate as an economic entity32

with the formation of ASEAN+3.

27

(Chan) p.124 28

“Institutions for Regional Integration” p. 114-120 29

“About ASEAN” <http://www.asean.org/about_ASEAN.html> Accessed March 8, 2011 30

Sheldon Simon, “ASEAN and multilateralism: the long, bumpy road to community.” 01 Aug 2008 31

Chakraborti, “India and the Asia-Pacific Region” 32

Simon Sheldon, “ASEAN and multilateralism, the long and bumpy road” The CBS Interactive Business Network:

Institute of Southeast Asian Stuides


In terms of ASEAN infrastructure and regional institutions that are formed from it with geopolitical

concerns distort trade patterns and send false messages about economic prosperity33

ASEAN also

distributes a principle of non-interference34

with the domestic concerns of it's members, which greatly

weakens it's strength as a regional institute. A great agent of change in the region is the evolving form

of the international economic system. To reflect transparency, the system is becoming more based on

the rule of law than informal arrangements.35

Although adjustments are being made to the regional

institutions in East and Southeast Asia, more can be done to improve transparency as well as increasing

understanding between the cultural differences between APEC members.

3.3 Differences Between Trade Deals Regionally and Bilaterally

To increase economic stability, ASEAN has been noted to support the process of open

regionalism,36

which is defined as “external liberalization of trade blocs.” The first and most

understandable meaning of open regionalism came from the 1980s during Asia Pacific discussions for

deeper integration of regional trade expansion. It is argued that all successful countries have liberalized

in gradual stages with stages of removing protectionist barriers to trade37

. Through the ASEAN FTA

process38

, 95 percent of tariffs have been reduced to less than five percent, as trade accounts for nearly

100 percent of aggregate GDP, the efforts to remove trade barriers has greatly improved economic

sustainability in the region.

Within this realm comes many special differential trade agreements being made in order to

pursue multilateral trade agreements. An example of this is the special trade agreement between China

and Taiwan known as ECFA; Economic Cooperation Framework Agreement.39

ECFA is to promote

economic integration through staged trade liberation where certain protected sectors often remain

untouched through the process. This example cites how some cultural traits in the region are changing

to foster economic growth and stability.

3.4 Hub-and-Spoke System

East Asian institutions had developed out of geopolitical terms rather than a sense of equal and

33

Porter p.25 34

Sheldon Simon, “ASEAN and multilateralism: The long, bunpy road to community” 35

Porter p. 25 36

Chan p. 52-54 37

Chan p. 28 38

Ernest Z. Bower, “ASEAN's Opportunity to Become the Core of Asian Regionalism” accessed 13 Jun 2011,

< h t t p : / / c s i s . o r g / p u b l i c a t i o n / a s e a n s - o p p o r t u n i t y - b e c o m e - c o r e - a s i a n - r e g i o n a l i s m > . 39

Mignonne Man-jung Chan, “The Cross Strait Relations: an Update”


common purpose40

and send false messages about economic prosperity.41

This has led to a region in

which members are of very different sizes in many criteria including market size, development,

openness and economic structure. The regional institution structure in East Asia and Southeast Asia is

referred to as a 'Hub-and-Spoke' 42

system. This system creates regional instability as the smaller spoke

economies are politically and economically marginalized as they integrate themselves with the larger

hub economies43

. The European Union is known as a central hub, for the membership have equal

benefits. In East Asia, China and Japan are the natural Hub nations while the remaining East and

Southeast nations represents the spoke nations.

The idea of the hub and spoke framework is an application of the world system theory.44

In this

'world system,' developed and large economies try to draw in resources from small developing

countries. In the context of East Asia, Several East and Southeast nations are favoring industry towards

China, which causes stability problems45

in the region. In regards to institution building, the hub-and-

spoke system allows for the growth of preferential trade agreements to continue, feeding into the

unplanned regional structure of East and Southeast Asia as well as weakening regional institutions.

Trade diversion46

from more efficient trading partners is enhanced which further reduces sustainability.

Even as culture can explain how an economy runs, it can also explain how economic cultures turn

unproductive. Sometimes a society maintains traditional beliefs, values, and social institutions that are

inefficient.47

3.5 Problems Caused by Hub-and-Spoke Framework

3.5.1 Natural Resources

Although the region is abundant in natural resources, the management of these assets is largely

mismanaged in that there are strong inefficiencies which are not only affecting the countries within the

region, but the world as well.48

The growth of Asia is dependent on the proper use of natural resources

for both living and energy. There is a growing threat to energy security in East Asia as the demand from

countries within and outside of the region continue to grow. The importance of the proper use of these

40

(Chakraborti) p. 1 41

Porter p.25 42

Chan (p. 45-51), 43

Richard Baldwin, :The Spoke Trap” p. 2-3 44

Weightman p. 21, summary of Immanuel Wallerstein's model of the World's System Theory 45

Baldwin, p. 3-7 46

Baldwin p. 28 47

Robert B. Edgerton, :Traditional Beliefs and Practices” p.131 48

Ernest Bower, “The Quintessential Test of ASEAN Centrality: Changing the Paradigm in the South China Sea,” p. 1-2


natural resources is to sustain the economic development. Although the growth in the region has been

significant, energy is needed to sustain this growth. Energy supply shocks can wreck an International

economy.49

The issues of improper resource management can be viewed through shared resources by

rivers such as the Mekong and the South China Sea.

On the Mekong river, there is an uncoordinated and environmentally unsustainable rush to

obtain the natural resources in the river.50

China has made fifteen dams in the Yunnan Province and has

granted development of eleven dams on the lower half of the Mekong river to Chinese and other

foreign companies. The benefits of hydroelectric power is absorbed by China, while the costs are felt

by the affected Southeast Asian nations. Instead of sending scientists and businesses to uncover the true

level of assets in the South China Sea,51

countries in the region have been sending their navies as

territorial disputes are made. The shared interdependence of resources is facing strong nationalistic

views of development on the resources, creating an inefficient use of these key assets. The sovereignty

issues facing East Asia integration is causing a dilemma in the efficiency of using natural resources to

support the economic growth evenly in the region.

3.4.2 Uneven Growth

As East Asia is growing, growth is not even in the region. This is expressed in terms of poverty

and GDP per capita (see table 4 below). Although many countries have experienced incredible growth

within the region, there still remains high levels of poverty in many of the countries. From the countries

selected in the study, regional poverty as of 2010 stands at an average of 17.78 percent52

with poverty

reaching higher than 25 percent in many Southeast Asian countries including Laos, the Philippines, and

Papua New Guinea. Given that some countries are densely populated, economic growth rates need to

be high in order to provide jobs for new workforce entrants, Indonesia needs to maintain an annual

growth rates of seven percent.53

49

Peter Drysdale, "Threat to Asia's energy security," East Asia Forum, accessed 20 Jun 2011

50 Richard Cronin and Timothy Hamlin, “Mekong Tipping Point”

51 Bower, p. 1

52 “East & Southeast Asia,” The World Factbook, data could not be found for Singapore, Brunei, and Hong Kong

53 Bower, “ASEANs Opportuntiy to Become the Core of Asian Regionalism


4. SOLUTION TO PROBLEMS

4.1 Different Institutions in East and Southeast Asia

Although East and Southeast Asia are facing several constraints to continue stable, sustainable

economic growth, there are several things which can be done to improve the current situation. As the

growth in Asia is changing the structure of the global economy, the global economy should change the

structure of Asia. This region of the world is said to be a promoter of open regionalism where countries

are building towards multilateral trade agreements to enhance this process. Global welfare is improved

once regional agreements are expanded as foreign investments help to ensure development.54

However

many elements are needed to ensure access turns into growth, as the hub and spoke paradox had

explained. The multilateral agreement of ASEAN+3 was formed to accomplish three broad tasks;

leverage bargaining power by weaker countries on multilateral stage, win domestic battles, and use

external partners to break regional inefficiencies.55

However this regional integration needs to be

expanded to more partners including trans-regional partners. As these APEC economies are strongly

54

Chan p.53 55

Chan p. 98

Table 4

East Asia Poverty % of Population 2010 East Asia GDP (Per Capita PPP) 2010 Taiwan 1.16% Singapore $62,100

China 2.80% Brunei $51,600

Malaysia 3.60% Hong Kong $45,900

Thailand 9.60% Taiwan $35,700

Vietnam 10.60% Japan $34,000

Indonesia 13% South Korea $30,000

South Korea 15% Malaysia $14,700

Japan 15.70% Thailand $8,700

Laos 26% China $7,600

Cambodia 31% Indonesia $4,200

Mayanmar 32.70% Philippines $3,500

Philippines 33% Viet Nam $3,100

Papua new Guinea 37% Laos $2,500

Singapore - Papua New Guinea $2,500

Brunei NA% Cambodia $2,100

Hong Kong NA% Myanmar $1,400 Source: “East and Southeast As ia ,” The World Factbook Accessed Jun 25 2011


linked with the other APEC members and the international community, the increased integration to

include influences from outside the region can only provide benefits. An example of this is Singapore56

which requires technology transfers, trade, and foreign direct investment which it's geographic region is

not able to provide.

4.2 Balancing the Hub-and-Spoke Framework

APEC can serve a role to break the inefficiencies caused through the hub-and-spoke framework

by the inclusion of Greater APEC Economies. APEC can introduce new regional trading partners into

the region to create a higher level of stability by offsetting the hub nation dominance, and interact with

smaller nations to build economic ties in order to reduce instability. Including India as a member of the

Greater APEC Economies has several benefits including a regional member to balance the rise of

China, offer further sustainable growth to the East Asian region, and to build on existing economic ties

within the region57

. Much has changed in a decade for India, which makes it a very attractive country

for inclusion in APEC operations. In 2010, India was ranked the fifth largest economy in the world

having annual growth rates averaging 7 percent since 1997.58

Inclusion of India as a greater APEC

economy can not only benefit the East Asian region by maintaining stability, but it can also help to

propel other nations forward, such as Indonesia. Indonesia and India are close not only geographically,

yet by cultural and civilization traits as well. Including North Korea as a Greater APEC Economy can

add a large level of economic stability to the region. Leaving issues of politics and security aside, an

economic secure North Korea59

could relieve tensions of economic instability by increasing confidence

of peace with its neighbors.

5. CONCLUSION

Enhanced inter regional structures can benefit East and Southeast Asia by first expanding trade

creation. International institutions currently have rules and guidelines over how to use resources

responsibly and can help expand gains in welfare. Gains in welfare are accomplished by reducing

higher trade barriers, diversifying trade partners, and stabilizing commodity and resource prices by

further integration to reflect world prices60

. A role for the international economy is needed due to the

56

Chan p. 95 57

Chakraborti, p. 7-11 58

“South Asia: India,” The World Factbook 59

Danielle Chubb, "North Korea Watching: 2011" East Asia Forum, Accessed 15 Jul 2011

60 Chan p. 98

http://www.eastasiaforum.org/2011/02/19/north-korea-watching-2011/


instability of the region. The initial low levels of economic opportunity creates an economic

environment where acquiring skills has no economic reward. There are often information externalities

in discovering the economic cost structure61

for developing a country. This “cost discovery” is often

found by private actors who accrue all costs for adapting new production lines and technologies;

known as the 'cost of discovery.'

Inter-regional actors can help to reduce these costs by working with members of local countries

to develop adaptations at a cheaper cost than the local adaptations. Inter-regional arrangements can help

speed up the process of liberalizing trade. In 1993 when the first APEC summit announced it's

commitment to free trade, the European Union had liberalized its agricultural sector to a level

unexpected. Their response was that the APEC conclusions meant there were now more options for

different regions.62

APEC can serve as the institution to improve economic integration within East and Southeast

Asia economies, and the world. APEC can serve as the forum for instilling economic stability in the

region where most of its members are in, including economies outside its membership for inclusive

growth. In particular, a committee within APEC can be set up to select a market economy in which to

heavily invest in infrastructure. Given the differences in development levels between APEC members,

the growing economic development in the East and Southeast Asian nations, and the need for quick

action, the broad development of all APEC members creates more benefits to the members and the

international economic system. In reducing poverty, a nation must upgrade its inputs, institutions, and

skills that will allow for more productivity.63

The improvement of the infrastructure can be done in a

standardized process to allow for easier economic integration and reduce the costs of doing business

internationally by having the same set of standards, thereby increasing transparency and efficiency to

trade.

Within the APEC framework, the developed nations can assist the developing nations by

helping national economies improve their living standards and infrastructure. On the basis of

international cooperation, a committee is formed consisting of membership from the APEC economies

to provide substantial investment in infrastructure for an economy in need. In order to ensure

transparency and that the use of funds are allocated correctly, the APEC committee will oversee the

budget for each infrastructure development budget. In selection of an economy, those nations whom are

61

Rodrick, p. 107-110 62

Fred C. Bergsten "Plan B for the World Trade: For Regional" 63

Porter, p. 18-22


wanting an investment can apply for the funds, agreeing to the terms, and must state the current

economic situation and a proposed plan for investment. Although localized, it will be the responsibility

of the committee to develop a plan to create standardized infrastructure systems, or ones in which can

also beneficial to the international economy. Examples include standards in highways, public

transportation system, sewage and drainage, and information technology. This will increase

compatibility and enhance the ease of doing business between members. Once an infrastructure plan is

decided upon, this committee will work with the local economy to determine the cost structure of

adapting the planned infrastructure, and setting up a contract system in which domestic and

multinational companies can apply to work on the project.

Within this system allows for transparency to flourish as APEC creates a code of conduct to be

followed through the system. It promotes integration through a fair and international mechanism while

following the Asian culture of building relationships and strong commitments and adhering to the

Western culture of efficiency, and transparency. In the system where the government is involved of

developing an industrial policy, corruption is reduced by deduction of public interference in the

private's sector affairs. Since the investment is a choice made by individual countries, the economic

culture will support these investments as economic growth is supported. In this process, stability is

assured through the region allowing for a strong regional market to form.


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