While much of the attention surrounding President Obama's post-mid-term election trip to Asia will focus on his state visit to India, his return to Indonesia, and the G20 meeting in Korea, the most significant part of his trip may well be his last stop -- the APEC Leaders' Meeting in Yokohama, Japan.
Founded 21 years ago in part to address a growing concern about what then-Secretary of State James Baker called a "line drawn down the middle of the Pacific" separating the U.S. from its Asian allies, the Asia Pacific Economic Cooperation (APEC) Forum has become the most significant diplomatic and economic construct tying the United States to Asia. Ironically, it may also be the most overlooked.
Unlike other international institutions such as the UN, WTO or the European Union, APEC has no expensive headquarters, staff, or media department. Rather, it is a true "convening institution". Government officials from the 21 member states meet several times a year to grind though impediments to intra-regional trade and investments, promoting dialogue and occasionally even convergence around key policy areas, such as energy, transportation, and healthcare. It also is unique among intergovernmental fora in that it has a standing channel for private sector engagement with the governments -- the APEC Business Advisory Committee, composed of senior corporate executives from APEC economies.
Over the course of its history, APEC working in collaboration with industry has racked up some impressive successes, often in a quiet, low-key way consistent with its culture. For example, through a steady program aimed at harmonizing customs clearance requirements, it has succeeded in lowering cross-border transaction costs by 5 percent, and is working to reduce them by an additional 5 percent by the end of this year. It pioneered the concept of a landmark free trade agreement in IT goods and services which was subsequently adopted by the WTO as the Information Technology Agreement (ITA), an innovation that has enabled global trade in IT-related products to grow over 10% a year since its adoption in 1997. And, in times of global stress -- for instance, during the SARS crisis or after 9/11 -- APEC has served as an important forum to keep the global economy on track.
Even more impressive has been the extraordinary economic dynamism of the region APEC encompasses. Since its founding in 1989, the forum has grown to encompass 40 percent of the planet's population and includes some world's biggest economies (57% of world GDP), most active traders (44% of world trade), and fastest growers (over 60% of global growth). Most importantly for the U.S., APEC today accounts for over 60 percent of U.S. exports.
The secret to APEC's success lies in its membership and its flexibility. Its 21 members span North America (US, Canada, Mexico), East Asia (China, Japan, Hong Kong, Chinese Taipei, and 7 ASEAN economies), Latin America (Peru and Chile), Australasia (Australia, New Zealand, and Papua New Guinea) and Russia. With a few exceptions -- and notwithstanding concerning protectionist trends -- these are countries that have benefitted from and recognize the value of enhanced international trade and capital flows.
APEC's highly flexible structure has also served it well. Chairmanship of APEC rotates among APEC's members each year, and direction for APEC's work each year is provided by the hosting member economy. Initiatives that enjoy broad consensus may be agreed among all 21 members. But smaller subgroups may, and often do, form to push forward "pathfinder" initiatives.
One such initiative was the so-called "P4" initiative, recently renamed the Trans-Pacific Partnership (TPP). The TPP is a free trade agreement currently being negotiated among 9 of the most forward-leaning trading countries in APEC, and may well serve as a template for establishment of a true free trade area for the Asia Pacific region.
Next year, it will be the United States' turn to host APEC. This presents President Obama and the United States with an extraordinary opportunity to strengthen America's ties with the region and re-energize APEC as an institution. Doing so will require boldness in advancing initiatives like the TPP and the U.S.-Korea free trade agreement to promote regional economic integration and keeping both U.S. and foreign markets open to enhanced trade and investment. This will not be easy, neither in an increasingly inward-looking United States nor in a region still skeptical of U.S. commitment. But the historic opportunity to erase lines that are once again in danger of being drawn down the Pacific, and to harness the extraordinary economic power of this region to help revitalize the U.S. economy, make this an opportunity not to be missed.
Formerly the Deputy United States Trade Representative under President George Bush, Karan Bhatia today is Vice President for International Law & Policy at General Electric, and serves as Chairman of the National Center for APEC.