The biggest gains from economic reform come from doing the hard yards on getting regulation of the economy right at home. This means getting tariffs and other barriers down, but more importantly, it means developing domestic regulations that strengthen markets and contestability and build economic institutions that enhance economic performance.
The Asia Pacific economy is a region that ought to understand that you get what you get in the way of higher growth and productivity from what you put in the way of reforming national regulations and institutions that stop the economy from performing at its best.
The huge tasks of economic and structural reform, in Australia, China, Indonesia, Japan or everywhere else in APEC, are the responsibilities of national governments. Getting national policies right is a technical challenge but it is also a political challenge. This is where APEC can help, by supporting reform agendas and bringing our economies closer together on the same footing.
At the same time APEC can forge a new strategy and framework for promoting Asia Pacific economic integration.
As a first step, APEC’s Economic Committee needs to be given a new role in articulating strategies that lift economic policy performance. There needs to be a new focus on sharing ideas about how to accelerate economic reform through building stronger policy making institutions throughout the region. There also needs to be a commitment to putting in place the capacity in APEC to analyse and review the benefits of different reform and policy strategies.
The Policy Support Unit that Australia is helping to establish at the Singapore Secretariat of APEC is an important first step. APEC economies can choose, as they want, to use these capacities to lift their performance. Australia, having got this initiative in place, needs to give it every support and continue to play a leadership role at the ministerial level. This is important to the economic dimension of the promise of an Asia Pacific Community.
APEC Structural Reform Ministers will begin the work of setting priorities in developing and deploying these new APEC capacities and developing these initiatives in detail to carry this work on economic reform forward over the next several years. This is designed to make APEC institutions for economic cooperation stronger and more robust. It sets APEC on a new course, with a new policy agenda. The new structures that are being put in place represent a real milestone in the institutional development of APEC itself.
It is in Australia’s national interest to be at the forefront of this process, at the same time re-asserting its own commitment to outward-looking structural reform.
The analysis by Philippa Dee and Christopher Findlay focuses [http://www.eastasiaforum.org/2008/06/17/services-negotiations-in-the-wto-are-stuck-what-is-the-circuit-breaker/] on what is needed to enable the WTO to address the opaque ‘behind-the-border’ barriers that are pervasive in the markets for services. In that context they emphasise the important contribution of domestic transparency arrangements. Peter Drysdale’s post, which focuses entirely on APEC, raises two questions: 1/ Does it mean he believes the initiatives in APEC (however worthwhile in themselves) are a substitute for supporting the multilateral system, and that we should consequently forego the greater domestic rewards available from liberalising in a multilateral context?
2/ If that was not his intention, why did his response focus on issues that have no relevance for those raised by Dee and Findlay.
One message from the Doha Round is that we can exercise the opportunity we have to help restore nationally rewarding outcomes from multilateral trade negotiations, or we can ignore the opportunity to support the WTO system. Another is that the range of domestic policy reforms contemplated in APEC, while well worthwhile in that context, go well beyond what would be acceptable to WTO member countries.
Bill Carmichael
I cannot see how my piece on the APEC structural reform ministerial could be construed as seeing these efforts in APEC as a substitute for support for the multilateral system. They are a complement to it not a substitute for it and, as Bill says, the domestic reform initaitves in APEC ‘go well beyond what would be acceptable to WTO member countries.’
And, on the contrary, the issues raised in my piece relate directly to Dee and Findlay conclusions that:
‘Among the items that should be on the agenda are:
• Cooperation on transparency and review.
• Efforts to bind current policy.
• A focus on market access and domestic regulation in further liberalisation.
• Clarity on scheduling.
• Specification of paths of evolution of regulatory reform.
• Capturing the spillovers in that work.
These are primarily matters of the design of domestic reform, not international negotiation on the exchange of commitments to provide foreigners with options for market entry.’
The WTO’s contribution is through its principles not necessarily its traditional processes, and in that sense, services cannot be a deal-maker in the Doha Round oftrade negotiations.The question, in other words, is not what services can do for the WTO and its negotiations,but what the WTO and its principles can do for services.’
I could not agree more, especially with the view that, given their nature, these issues cannot be resolved through exchange of concessions in negotiation. And nor can ‘transparency institutions’ be parachuted in from the WTO to deal with domestic reform issues as Bill appears to agree.
So there remains a big and complementary role for the structural reform work in APEC.
As Peter confirms, the work on reform in APEC and the WTO complement each other.
It is not difficult to find examples supporting that view. For instance, neither initiative will be achieved quickly. Both will require ongoing effort, extending beyond the life of the present government and perhaps several subsequent governments. It is therefore important that they are presented, pursued and recognised by the government as related elements of long-term policy. Both draw on Australian experience, which began with unilateral trade liberalisation in the seventies and was extended to include other impediments to domestic efficiency in the eighties. (As Gary Banks has observed, “Reducing tariffs…set in train further ‘behind the border’ reforms that have…brought further substantial benefits to our economy”). The key to both initiatives is a domestic process–designed, owned and operated by individual APEC and WTO countries—to provide the policy information their governments need to reform domestic barriers to trade and other impediments to domestic efficiency.
The lesson from the Doha Round is that the problems facing world trade reform will only be resolved if a way can be found to help national interest prevail over pressure from protected interests in domestic preparations for multilateral trade negotiations. The experience of the Productivity Commission in providing advice on regulatory reform confirms that the pressures from domestic interests comfortable with established arrangements is not limited to trade reform. In tackling ‘behind-the-border’ barriers and other impediments to domestic efficiency, the APEC initiative will face those same pressures. As Gary Banks has observed, those whose interests are best served by existing regulatory arrangements are quite unlikely to acquiesce in having the costs to others identified and aired in public. That underlines the importance of working together on issues that are common to both initiatives.