Regional Integration

APEC Regional Integration

Asia-Pacific Economic Cooperation (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. APEC was established in 1989 at the suggestion of Australia, to further enhance economic growth, prosperity and strength for the Pacific Rim area. APEC consists of twenty-one countries. Decisions made within APEC are reached by consensus and commitments that are undertaken on a voluntary basis. APEC has no treaty obligations required of its participants and it represents the most economically dynamic region in the world having produced nearly seventy percent of the global economic growth in its first ten years (APEC, 2006). APEC works in large areas of trade and investments to help the member economies grow and prosper.

The goal of regional integration is to encourage the reduction of barriers to trade that prevent the free flow of goods, services, and production factors between countries. Reducing trade barriers requires agreements between trading nations. In theory, several levels of economic integration can help to achieve these goals вЂ" free trade areas, customs unions, common markets, economic unions, and political unions (OECD, 2006).

In free trade areas, any barriers to free trade that restrict trade such as tariffs, quotas, or subsidies do no exist. However, member nations are free to establish trade polices with non-member nations. In a customs union, barriers to free trade do not exist between member nations while the union establishes a common external policy for trade with non-member nations. Common markets do not have any barriers to trade, have a common external trade policy, and allow the free flow of resources between member nations. An economic union is similar to a customs union with the addition of a common currency, harmonization of tax rates, and common monetary and fiscal policies. An extension of the economic union, the political union, monitors and coordinates economic, social and foreign policies of the members of the union (Hill, 2005, p.275).

Ideally, regional integration should increase efficiencies through competition and lower and reduce variation of prices across the region. Reality, however, often falls short of this ideal. Even in Europe where there has been a sustained effort and high impetus for regional integration, neither of which are evident in APEC, it took the adoption of a common currency for the costs of automobiles to begin to normalize from county to country (Hill, 2005, p.268). Some of the other benefits of the preferential trading agreements that are negotiated within regional blocs like APEC are the liberalization of services including financial, investment, protection of intellectual property rights, better labor and environmental standards, and dispute resolution (Carstens, 2005).

The benefits of regional integration can easily identify. 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.

One of the negative aspects of regional integration is the loss of low-skilled, low paying jobs in some member countries to other member countries where labor and other costs are less expensive. 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.

A comparison of the APEC nations shows that all the countries are working to achieve the goal of the trading bloc through various individual efforts. For instance, the Competition Policy and Deregulation Group within APEC developed a regulatory reform checklist using a voluntary qualitative self-assessment to investigate and measure regulatory management systems. In 2006 the U.S., Chinese Taipei, Hong Kong, and China went through the self-assessment while Australia and Korea did so in 2007 (APEC, 2006).

In contrast, the key economic indicators of the member nations indicate how the countries are different. For instance, 2006 real GDP growth ranges from a low of 1.6% change for New Zealand to a high of 11.1% for China. Inflation ranges from a low of 0.2% for Brunei Darussalam to 13.1% in Indonesia; government balance in APEC member economies ranges from -4.1% for Japan to a high of 6.4% for Singapore, and short term interest rates range from 0.12% in Japan to 9.18% in Indonesia (APEC, 2006).

Japan is one of APEC countries and which is doing very well in world economy. Japan’s free economy is the second largest in the world. Japan has many industrial leadership and technicians, well-educated work force, high savings and investment rates, and positive goals towards industrial development and foreign trade. Their productivity is on the rise, which is positive as their