Motivated by decades of work by social scientists, the first Asia–Pacific Economic Cooperation (APEC) forum in Canberra marked the beginning of a new era in economic cooperation through the Asia-Pacific region.  Since then, APEC has grown and now has 21 member economies, including world powers China and the United States.  Today it is one of the premier forums for dealing with evolving regional economic and political challenges.

Professor Peter Drysdale AO FASSA, Crawford School of Public Policy, ANU, discusses the process that led to the development of open regionalism in Asia-Pacific.


PC: Korea Institute, ANU.

ASSA: Thank you for joining us today, Peter.  Can you tell us about the roots of APEC and what motivated the multilateral agreement?

Drysdale: As early as 1935 the young Australian research economist John Crawford suggested Australia should shift its trade focus from Britain and Europe to Asia, or what he referred to as the ‘Near North’. At the time this proposal was highly controversial and it wasn’t until after World War II that the idea of cooperating economically with Japan was seen as palatable and necessary for both economic and security reasons by the Australian government.

Through the 1970s Australian and Japanese scholars — including Crawford, Saburo Okita (who went on to become Japan’s foreign minister), myself and Kiyoshi Kojima — developed a proposal for a regional forum focused on forging a comprehensive bilateral relationship between Australia and Japan. It promoted a high degree of economic interdependence and would be built on mutual trust. We also argued that this model could be applied to the whole Asia-Pacific region to the benefit of individual nations — a concept that would become known as open regionalism.

To help develop these ideas and tackle some of the big issues facing the region, Crawford and Okita established the Pacific Economic Cooperation Council in the early 1980s. This group continues to operate today, but by the late 1980s the group recommended setting up a government-to-government regional forum to address pressing trade issues and encourage trade and investment liberalisation. The result was APEC, or the Asia-Pacific Economic Cooperation process.

ASSA: So how has the concept of open regionalism been important in the development of trade policy in Asia-Pacific?

Drysdale: My research on the region suggested three principles for successful cooperation: openness, equality and evolution. Openness depends on a non-discriminatory approach to trade policy. Equality requires activities to be conducted on a basis of mutual benefit and equal participation for all members, large and small. Evolution involves a consensus-based, step-by-step approach to cooperation, with voluntary participation. These principles are the foundations of ‘open regionalism’.

These principles featured heavily in the early thinking about APEC. The Seoul APEC Declaration of November 1991, for example, recognised that ‘openness and a spirit of partnership are essential for the prosperity, stability and progress of the entire region’. More broadly, the declaration enshrined APEC’s objectives to reduce trade barriers without negatively affecting other economies, to commit to open dialogue and consensus-building and to maintain the flexibility to evolve in line with changes in regional and global economic circumstances.

ASSA: In a 2009 study you found that APEC members’ trade is 32 per cent higher against its potential than that of European Union members and 10 per cent higher than that of NAFTA members – why is APEC so successful?

Drysdale: A critical factor to APEC’s success is that it doesn’t restrict trade between members and countries outside the region, unlike other trade blocs. It was originally focused on the conclusion of the Uruguay Round of multilateral trade negotiations. Instead, it aims to increase prosperity for the people of the Asia Pacific by promoting economic growth that is ‘balanced, inclusive, sustainable, innovative and secure’. All decisions are made by consensus and all nations have an equal say. There are no binding commitments or treaties and all actions are undertaken on a voluntary basis. This reflects social norms within many Asian nations and allows the agreement to nest well with existing cultural practices. APEC’s history of non-exclusiveness means that trade and other transactions have not been diverted away from lower cost sources of supply outside the region. In consequence,  APEC economies realise more of their trade and growth potential both because of freer trade within the region and because the region has become more open to trade with the whole world at the same time.

ASSA: How does the APEC model compare with other models of regional cooperation?

Drysdale: Open regionalism was not the only model of regional cooperation being examined when we advocated a regional trade organisation in the 1980s. The European Economic Community (EEC) was also being developed then. But this adopted a much more hierarchical structure, with discrimination against non-member states. And the North American Free Trade Agreement (NAFTA), which also emerged around this time, was modelled on a system of trade barriers that discriminated against non-member states.

Both the EEC and NAFTA involve the exercise of supranational authority to ensure over member nations — something that is absent from the APEC commitments.

Critics have said that the absence of consequences limits the influence of APEC, but my research has shown that APEC’s voluntary economic performance compares more than favourably with the outcomes in NAFTA and the European Union.

The APEC process has brought many tangible benefits to the region and beyond. Members have higher trade volumes not only among themselves but with non-member nations.

APEC shows how open regionalism is not just good for the region, but a boon for the whole world. East Asia is now a force of stability and dynamism at a turbulent time in the global economy. And it is important to be absolutely clear that the evidence is that APEC has mattered to securing this outcome.

ASSA: What about the fact we are now entering a new geopolitical era – how will this affect open regionalism in Asia-Pacific?

Drysdale: The European Union has been shaken by the withdrawal of the United Kingdom. Protectionist, isolationist sentiments have shaped the tone of US political debate across the mainstream parties and resulted in President Donald Trump axing the 12-country Trans-Pacific Partnership, and Asia is challenged to exercise economic leadership in an increasingly multipolar international order.

The need for an open, equal and evolutionary approach to economic cooperation and international integration is perhaps even greater now than when APEC was created.  And there are strong headwinds against an open global economy.

Yet there are also some grounds for cautious optimism. New multilateral negotiations are on the table is Asia.  East Asia (including Australia) is negotiating another regional deal based, at least in important ways, upon the notion of open regionalism. The Regional Comprehensive Economic Partnership includes China, India and Japan and all of ASEAN’s membership as well as Australia and New Zealand. An important feature of RCEP is that it not only seeks to multilateralize bilateral trade agreements within the region but also to conclude an ongoing economic cooperation agenda in which all can join.

Asia’s leaders can look to APEC for the proof that open regionalism and evidence-based economic diplomacy can have long-lasting, positive effects for the whole region and beyond. It is an important example of a big policy development that was grounded solidly on research collaboration.  That research was critical to refining the concepts and setting out the evidence for initiating policy strategies that have had lasting benefits for the welfare of people all around the region and around the world

Peter Drysdale is Emeritus Professor, Head of the East Asian Bureau of Economic Research and Editor-in-Chief of the East Asia Forum in the Crawford School of Public Policy at The Australian National University, and Fellow of the Academy of Social Sciences in Australia.

Read more about this work, and other interesting social science research, in the Academy’s report The Social Sciences Shape the Nation.