Apec Regional Integration

Regional Integration: APEC

University of Phoenix

MGT 448

February 20, 2006

Introduction

Asia-Pacific Economic Cooperation, or APEC, is the premier opportunity for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region. APEC promotes global business and there are several advantages and disadvantages of this regional integration. There are numerous ramifications of APEC's economic development for global business and these will be discussed below.

APEC

APEC was established in 1989 to further enhance economic growth and prosperity for the region and to strengthen the Asia-Pacific community (APEC, 2006). APEC is the only inter governmental grouping in the world working on the basis of non-binding commitments, open dialogue and equivalent respect for the views of all participants. APEC has no treaty obligations required of its participants. Decisions made within APEC are reached by consensus and commitments that are undertaken on a voluntary basis. APEC also works to create an environment for the safe and efficient movement of goods, services and people across borders in the region through policy alignment and economic and technical cooperation.

APEC has worked to lessen tariffs and other trade barriers across the Asia-Pacific region, creating competent domestic economies and significantly increasing exports. Free and open trade and investment helps economies to grow, creates jobs and provides greater opportunities for international trade and investment. In contrast, protectionism keeps prices high and fosters inefficiencies in certain industries. Free and open trade helps to lower the costs of production and thus reduces the prices of goods and services, which is a direct benefit to all. Asia-Pacific Economic Cooperation (APEC) works in three broad areas to meet the Bogor Goals of free and open trade and investment in the Asia-Pacific by 2010 for developed economies and 2020 for developing economies (APEC, 2006).

Regional Integration

Regional integration is the formation of closer economic linkages among countries that are geographically near each other, especially by forming preferential trade agreements (U of M, 2006). Most industrial and developing countries in the world are members of a regional integration agreement, and several belong to more than one.

The structure of regional agreements varies hugely, but all have one thing in common--the objective of reducing barriers to trade between member countries. At their simplest they merely remove tariffs on intra-bloc trade in goods, but many go beyond that to cover non-tariff barriers and to extend liberalization to trade and investment. At their deepest they have the objective of economic union, and they involve the construction of shared executive, judicial, and legislative institutions (OECD, 2006).

The benefits of regional integration are easily identified. There are economic benefits such as additional trade, improved quality, increased imports and exports, high-quality international relations and an integrated market. Regional integration can enhance the general quality of life for the citizens of those states. Integration can lead to further development in nations around the world with institutional building and strengthening, coordination of economic and social policy, harmonization of external relations, and governance.

Some disadvantages of regional integration are negotiations, cost issues, the enforcement of these rules and the compliance with them by individual businesses can be a complicated task. Plus, neighboring countries differ as to their need for tariff revenue,

and hence as to the height of tariff that is appropriate. They also differ in their chosen pace of trade liberalization and in their preferences and opportunities for tariff bargaining. Finally, the common pool of revenue has to be divided on some basis, and this may strain political cooperation.

Ramifications of APEC

According to APEC, there are 21 member economies which are Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam. There are substantial differences in the economies of some of these countries. In the economic indicators table below, one can see the similarities and differences between the APEC member's economies.

Key Economic Indicators for APEC Members:

Member Economy and Year Joined Area ('000 sq km) Population (million) GDP (US$bn) GDP per capita (US$) Exports (US$m) Imports (US$m)

Australia (1989) 7,692 20.2 692.4 33,629 86,551 103,863

Brunei Darussalam (1989) 6 0.4 5.7 15,764 4,713 1,638

Canada (1989) 9,971 32.0 1,084.1 33,648 315,858 271,869

Chile (1994) 757 15.4 105.8 6,807 32,548 24,769

China (1991) 9,561 1,299.8 1,851.2 1,416 593,647 560,811

Hong Kong, China (1991) 1 6.9 174.0 25,006 265,763 273,361

Indonesia (1989) 1,905 223.8 280.9 1,237 71,585 46,525