Who's Afraid Of Apec?

  • Dr Lockwood Smith
International Trade

Distinguished guests, ladies and gentlemen.

You might be wondering why this evening's address is titled "Who's afraid of APEC?".

After all, the aim of all APEC members is to improve the welfare and prosperity of their citizens.

But you wouldn't think so to listen to some of APEC's critics.

In New Zealand, like most other member economies, we have a small group of critics who think APEC is something to be feared.

There are certainly some who see APEC as part of a global conspiracy which threatens our economic sovereignty, and worse.

The real beneficiaries of APEC's work, according to the critics, are the big corporations and the rich in general


Both Thailand and New Zealand, as APEC members, will have to respond to these arguments.

I'm here tonight to argue that there is no need to be afraid of APEC. And even more than that - we need APEC.

It is now ten years since APEC was formed.

Let's recall what these letters stand for: Asia Pacific Economic Cooperation.

Five years ago in Bogor, APEC leaders agreed on a set of goals.

They could see that the Asia Pacific countries were becoming more and more interdependent.

How, they asked, can we use this factor to our advantage?

The member economies produced a set of goals which include free and open trade and investment by 2010 for developed and 2020 for developing countries.

This vision has been the driving force of APEC since that important milestone.

Five years down the track I think we're showing steady progress towards achieving those goals.

And that's despite an economic crisis that no-one could have predicted at the time.

Thailand is just emerging from the worst financial crisis it has faced in decade


I have been hearing today from your Ministers about the formidable challenges Thailand faces in trying to enact the necessary reforms and stimulate economic growth so that you can turn this crisis around.

I am confident you will succeed. But I am also aware that it may be difficult for some of you to see the relevance of APEC when you are preoccupied with more pressing domestic issues.

New Zealand as the APEC Chair has an ambitious policy agenda for 1999.

It will be the biggest international event that we have ever tackled in New Zealand, with meetings throughout the year culminating in the Leaders' Meeting in September.

Auckland, our largest city, will be stretched to the limit.

As the smallest economy to chair APEC to date, it's no easy task for us.

But I can tell you that we're looking forward to the challenge, and providing a memorable taste of 'Kiwi hospitality' to those of you coming to New Zealand for APEC.

You'll be aware that meetings are already underway.

The first Senior Officials' Meeting was held this month in Wellington, and was very successful.

It showed that APEC remains on track, despite the economic crisis.

But we want to build momentum throughout the year, with an agenda based around three key themes:

  • expanding opportunities for business throughout the region;
  • strengthening the functioning of markets; and
  • broadening support for APEC;
  • These themes follow logically from the Leaders' declaration at Kuala Lumpur, and include measures to respond credibly to the region's economic and financial crisis.

Obviously, trade liberalisation remains a major component of APEC's work.

APEC is sometimes criticised for this focus, but we must not lose sight of the strong contribution that trade liberalisation makes to economic growth and general prosperity.

Take the EVSL package for example, which we estimate to be worth nearly $70 Billion Dollars US to the region.

Another important development from Kuala Lumpur, which New Zealand is fully committed to promoting, is the APEC Food System proposal.

Recent research suggests that this proposal could see gains of $100 billion dollars every year across the APEC region.

APEC's critics therefore, are right to suggest that the organisation is committed to free trade. We want our region to be at the forefront of the gains of liberalisation.

But APEC's critics ignore an important reality. We do not live in a static environment.

The world is subject to powerful forces of change, and we're all affected by these global developments.

Earlier this century, we were still physically moving gold between economies' central banks.

Now, computers, fibre optics and modern communications mean that international deals can happen in seconds.

We're finding new ways to make existing resources go further, last longer, and do more. We're finding new resources. Trade in intangible goods and services has grown exponentially.

We must be clear that it is technology, rather than a sinister global conspiracy driving these changes.

And history teaches us that it is hugely negative for countries to isolate themselves from that global market.

The Great Depression of the 1930s was a good example of how destructive turning one's back on the global market can be.

Fortress economics reduces productivity, undermines competitiveness and ultimately leads to economic decline and job losses.

OECD research into the benefits of liberalisation is unequivocal. It shows that whilst liberalisation may cause some displacement, the benefits far outweigh the costs.

This same research shows that those countries that liberalise first will benefit the most from liberalisation, generating more jobs and prosperity within that economy.

The global forces of change, driven by science and technology, will continue to change the way we do things – in New Zealand, Thailand, and across the world.

These changes bring pressures, but they also create opportunities that simply did not exist before.

People move on to jobs in more productive sectors.

Small businesses in particular, can create international niche markets overnight.

Attempting to ignore these changes would be a big mistake.

The challenge is to identify changes as they occur, and to provide a stable economic environment which allows our business people to respond quickly to new economic opportunities.

Viewed in this context, liberalisation is a tool for managing global change, rather than change for its own sake.

And trade and investment liberalisation is just one part of APEC's work.

Recently, our region was hit by economic shocks described as "one of the worst financial crises in the post-war period".

In what your Foreign Minister has described the 'tom yam koong' effect, it all started in Thailand.

APEC responded quickly to the challenge.

In Kuala Lumpur, Leaders and Ministers sent a clear message to international markets.

They said "Yes, we are determined to go ahead with our commitments because it's the best way to help us out of the crisis".

The challenge for New Zealand now is to translate this determination into concrete outcomes – to deliver results.

New Zealand hopes to support APEC's response to the economic crisis by bringing the role of Finance Ministers into greater sync with the rest of APEC.

After all, it's Finance Ministers who have had to shoulder the burden of painful economic adjustment measures in many APEC countries.

And APEC provides much more than a mechanism for responding to regional economic shocks.

We've learnt that sustained economic growth requires strong, well functioning markets.

But it can also be fostered by reducing the costs and barriers to doing business through trade facilitation work within APEC.

I suspect there are many business people here tonight that have had their goods delayed at the airport or port while their staff fill out confusing forms, gain several separate approvals, argue over duty assessments, and distribute "tea money".

Did you know that the average international business transaction involves around 30 different parties, and 40 documents?

Two-thirds of the information generated is retyped, at least once. Much of this is unnecessary, and imposes a cost on business, limiting growth and investment.

APEC's work will reduce these costs and barriers. We're developing mutual recognition arrangements which will mean that product testing to Thailand's standards will be equally acceptable in Tokyo, California, or anywhere else in the region.

Mutual recognition of qualifications is another important area of APEC work.

And there is much more that can be done. Competition and regulatory principles could be introduced to provide an easier, cheaper and more certain environment for business.

We could explore opportunities to introduce modern accounting standards, or some form of competition law.

As APEC Chair, New Zealand will be actively promoting this work on both trade facilitation and strengthening markets.

Remember our aim is to make it easier to do business - to help make business more prosperous.

Because business is the lifeblood of economic development. Business creates the wealth which pays for our hospitals and schools.

It is business that ultimately raises our standards of living.

Remember also the vast majority of companies across the region are not multinationals. They're Small or Medium sized Enterprises - SME's. And APEC is especially important for them.

SME's can't afford, and shouldn't have to spend time and money wading through red tape in other countries.

Making trade simpler, quicker and cheaper means higher profits, new investment and ultimately, more jobs.

The critics have got it wrong. APEC will directly benefit all our people.

The benefit of APEC's work to consumers is immense. In New Zealand and in other economies that have embraced liberalisation, consumers enjoy cheaper products, access to new technology, and increased prosperity.

But its critics remain unconvinced, and vocal in their condemnation of APEC's work.

We must accept some responsibility for this outcome.

Maybe we - and I mean governments and the private sector - have not always done a good job of emphasising the benefits of APEC, and the relationship between trade liberalisation and facilitation work, and improved living standards.

New Zealand is fully committed, during its year as Chair, to build broader support for APEC among the wider community.

We've established consultative networks with key groups in our communities, and we're looking at ways to involve them in the APEC process in a meaningful way.

For example, a business forum will run concurrently with the SME Ministerial in April 1999.

Following their respective meetings, Ministers and business people will discuss how best to advance SME growth in APEC - a key element to responding to the financial crisis.

They should expect the opportunity for direct interaction with Ministers.

I'm also keen to involve business in the upcoming Trade Ministers' meeting in Auckland in June.

APEC is undoubtedly a positive thing. It provides an opportunity to increase the region's wealth by allowing people to work more effectively with other people in other places.

It liberates people to contribute to growth without being held back by unnecessary regulations and red tape.

APEC is not something to be afraid of.

The arguments of its critics don't stand up to scrutiny.

But we must not leave them to promote their ideas in an intellectual vacuum.

It is incumbent upon us as community leaders to ensure that people see the link between APEC, and improvements that mean something to them:

  • That continuing progress is achieved on ATL and EVSL;
  • That APEC ensured the launch of a comprehensive WTO round;
  • That work progresses on the development of the APEC Food System;
  • That a tool-box of policies for strengthening markets is developed; and
  • That business feels fully engaged in the APEC process.

I want to encourage you today – as politicians, business people and academics – to join New Zealand in demonstrating that APEC still works, and helping us to make it work better still.

Let's hope that next year, my successor's speech topic will read "Why does everybody love APEC?"