To UNIVERSITY OF MUMBAI

PROJECT REPORT ON

Economic Integration APEC

SUBMITTED BY PRASAD D. MAHAJAN

MASTERS IN COMMERCE - MANAGEMENT (Part I)

UNDER THE GUIDANCE OF: PROF. RACHANA JOSHI

PTVAs M.L DAHANUKAR COLLEGE OF COMMERCE Vile Parle (East), Mumbai 2012-2013

CERTIFICATE

I, Prof. Rachana Joshi here by certify that Prasad D. Mahajan of M. L. Dahanukar College of Commerce of MCOM - Management (Part I) has completed project on Economic Integration Of APEC during academic year 2012-2013. The information submitted is true and original to the best of my knowledge.

Signature of Internal Examiner

Signature of the Principal

Signature of External Examiner

DECLARATION

I, Prasad D. Mahajan of M. L. Dahanukar College of Commerce of MCOM - Management (Part I), hereby declare that I have completed project on Economic Integration Of APEC in the academic year 2012-13, as per the requirement of the University of Mumbai as a part of Masters In Commerce - Management (Part I) programme. The information submitted is true and original to the best of my knowledge.

Prasad D. Mahajan

ACKNOWLEDGMENT

I owe a great many thanks to a great many people who helped and supported me during this project. My deepest thanks to the Guide of this project Professor Rachana Joshi, for guiding and correcting various documents of mine with attention and care. She has taken pain to go through the project and make necessary correction as and when needed. I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

INDEX

Sr.
No.
1 2 3 4 5 6 7 8 9 10

PARTICULARS
Economic Integration Obstacles to Economic Integration Different Forms of Economic Integration Benefits of Economic Integration Economic Theory Asia-Pacific Economic Cooperation (APEC) APEC Three Pillars Regional Economic Integration Agenda Conclusion Bibliography

Page No.
6 8 9 10 12 14 19 36 38 39

Economic Integration
Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration. This is meant in turn to lead to lower prices for distributors and consumers with the goal of increasing the combined economic productivity of the states. The trade stimulation effects intended by means of economic integration are part of the contemporary economic Theory of the Second Best: where, in theory, the best option is free trade, with free competition and no trade barriers whatsoever. Free trade is treated as an idealistic option, and although realized within certain developed states, economic integration has been thought of as the "second best" option for global trade where barriers to full free trade exist.

Objective
The increase of trade between member states of economic unions is meant to lead to higher productivity. This is one of the reasons for the global scale development of economic integration, a phenomenon now realized in continental economic blocks such as ASEAN, NAFTA, SACN, APEC, the European Union, and the Eurasian Economic Community; and proposed for intercontinental economic blocks, such as the Comprehensive Economic Partnership for East Asia and the Transatlantic Free Trade Area. Comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost over another. Comparative advantage was first described by David Ricardo who explained it in his 1817 book On the Principles of Political Economy and Taxation in an example involving England and Portugal. In Portugal it is possible to produce both wine and cloth with less labor than it would take to produce the same quantities in England. However the relative costs of producing those two goods are different in the two countries.

In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce. Therefore while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely England benefits from this trade because its cost for producing cloth has not changed but it can now get wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each country can gain by specializing in the good where it has comparative advantage, and trading that good for the other. Economies of scale refer to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producers average cost per unit to fall as the scale of output is increased. An economy of scale is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase. Economies of scale is also a justification for economic integration, since some economies of scale may require a larger market than is possible within a particular country for example, it would not be efficient for Liechtenstein to have its own car maker, if they would only sell to their local market. A lone car maker may be profitable, however, if they export cars to global markets in addition to selling to the local market.

Obstacles to Economic Integration

Obstacles standing as barriers for the development of economic integration include the desire for preservation of the control of tax revenues and licensing by local powers, sometimes requiring decades to pass under the control of supranational bodies. The experience of 1990-2009 has shown radical change in this pattern, as the world has observed the economic success of the European Union. So now no state disputes the benefits of economic integration: the only question is when and how it happens, what exact benefits it may bring to a state, and what kind of negative effects may take place.

Levels of Integration: 1) Free Trade Area (FTA) Trade barriers eliminated against the members and each country has its own trade barriers against outside countries. EFTA, EU/EFTA, NAFTA 2) Customs Union (CU) Free trade within the union and common external trade barriers EU 3) Common market Free factor mobility factor price-equalization 4) Economic Union Fixed exchange rates and coordination of fiscal and monetary policies 5) Political Union A sovereign parliament

Different Forms of Economic Integration

Societies are complex social systems, characterized by a high degree of differentiation but at the same time held together by a high degree of integration. Although this is not always the case, some societies are fragmented, while others have a certain degree of coherence, depending on the relative strength of integration and differentiation between the subsystems. As societies are composed of different sectors, we can distinguish different forms of integration, namely: economic, political, security, integration. However, the diverse processes tend to converge as the integration process intensifies. For instance, from our perspective political integration can be regarded as the creation of order in a political system. Various scholars consider political integration as related to the different regulative, normative and cognitive layers of institutionalization. Thus, in one sense political integration refers to the building or strengthening of formal political institutions and regulative structures. In another sense, it refers to the creation of common norms. And in yet another sense, it refers to the formation of political communities and common political identities. (Kelstrup) Another distinction can be made on the basis of where the integration project is located on the continuum between shallow and deep integration. For instance, regional political integration in its weaker forms refers to cooperation between states and formations of state-based regimes, whereas the stronger forms of integration refer to the constitution of new political entities, which have a certain degree of independence in regard to the individual states.

Benefits of Economic Integration

Economic integration can be defined as a kind of arrangement where countries get in agreement to coordinate and manage their fiscal, trade, and monetary policies in order to be mutually benefitted by them. There are many degrees of economic integration, but the most preferred and popular one is free trade. In economic integration no country pays customs duty within the integrated area, so it results in lower prices both for the distributors and the consumers. The ultimate aim of economic integration is to increase trade across the world. There are many other advantages associated with this concept. Some of these are: 1. Progress in trade. All countries that follow economic integration have extremely wide assortment of goods and services from which they can choose. Introduction of economic integration helps in acquiring goods and services at much low costs. This is because the removal of trade barriers reduces or removes the tariffs entirely. Reduced duties and lowered prices save a lot of spare money with countries which can be used for buying more products and services. 2. Ease of agreement. When countries enter into regional integration, they easily get into agreements and stick to them for long periods of time. 3. Improved political cooperation. Countries entering economic integration form groups and have greater political influence as compared to influence created by a single nation. Integration is a vital strategy for addressing the effects of political instability and human conflicts that might affect a region.

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4. Opportunities for employment. The various options available in economic integration help to liberalize and encourage trade. This results in market expansion due to which high amount of capital is invested in a countrys economy. This creates higher opportunities for employment of people from all over the world. They thus move from one country to another in search of jobs or for earning higher pay. 5. Beneficial for financial markets. Economic integration is extremely beneficial for financial markets as it eases firm to borrow finances at low rate if interest. This is because capital liquidity of larger capital market increases and the resultant diversification effect reduces the risks associated with high investment. 6. Increase in Foreign Direct Investments. Economic integration helps to increase the amount of money in Foreign Direct Investment (FDI). Once firms start FDI, through new operations or by merger, takeover, and acquisition, it becomes a international enterprise. Thus economic integration is a win-win situation for all the firms, people and the economies involved in the process. Is has become a preferred strategy for most countries of the world.

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Economic Theory
The framework of the theory of economic integration was laid out by Jacob Viner (1950) who defined the trade creation and trade diversion effects, the terms introduced for the change of interregional flow of goods caused by changes in customs tariffs due to the creation of an economic union. He considered trade flows between two states prior and after their unification, and compared them with the rest of the world. His findings became and still are the foundation of the theory of economic integration. The next attempts to enlarge the static analysis towards three states + world (Lipsey, et al.) were not as successful. The basics of the theory were summarized by the Hungarian economist Bla Balassa in the 1960s. As economic integration increases, the barriers of trade between markets diminish. Balassa believed that supranational common markets, with their free movement of economic factors across national borders, naturally generate demand for further integration, not only economically (via monetary unions) but also politicallyand, thus, that economic communities naturally evolve into political unions over time. The dynamic part of international economic integration theory, such as the dynamics of trade creation and trade diversion effects, the Pareto efficiency of factors (labor, capital) and value added mathematically was introduced by Ravshanbek Dalimov. This provided an interdisciplinary approach to the previously static theory of international economic integration, showing what effects take place due to economic integration, as well as enabling the results of the non-linear sciences to be applied to the dynamics of international economic integration. Equations describing: enforced oscillations of a pendulum with friction; predator-prey oscillations; heat and/or gas spatial dynamics (the heat equation and Navier-Stokes equations)

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Were successfully applied towards: the dynamics of GDP; price-output dynamics and the dynamic matrix of the outputs of an economy; Regional and inter-regional migration of labor income and value added, and to trade creation and trade diversion effects (inter-regional output flows). The straightforward conclusion from the findings is that one may use the accumulated knowledge of the exact and natural sciences (physics, biodynamic, and chemical kinetics) and apply them towards the analysis and forecasting of economic dynamics. Dynamic analysis has started with a new definition of gross domestic product (GDP), as a difference between aggregate revenues of sectors and investment (a modification of the value added definition of the GDP). It was possible to analytically prove that all the states gain from economic unification, with larger states receiving less growth of GDP and productivity, and vice versa concerning the benefit to lesser states. Although this fact has been empirically known for decades, now it was also shown as being mathematically correct. A qualitative finding of the dynamic method is the similarity of a coherence policy of economic integration and a mixture of previously separate liquids in a retort: they finally get one color and become one liquid. Economic space (tax, insurance and financial policies, customs tariffs, etc.) all finally become the same along with the stages of economic integration. Another important finding is a direct link between the dynamics of macro- and micro-economic parameters such as the evolution of industrial clusters and the GDP's temporal and spatial dynamics. Specifically, the dynamic approach analytically described the main features of the theory of competition summarized by Michael Porter, stating that industrial clusters evolve from initial entities gradually expanding within their geographic proximity. It was analytically found that the geographic expansion of industrial clusters goes along with raising their productivity and technological innovation.
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Asia-Pacific Economic Cooperation (APEC)

Asia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim countries (formally Member Economies) that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region. Established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional trade blocs in other parts of the world, initially, with the notion to the likely dominance of the sphere of economic influences of the highly industrialized Japan (a member of G8) in the Asia-Pacific region and for the economic interests of Australian agricultural/raw material products to search for new buyers other than the demand-declining European market, APEC works gradually (to include members of Newly industrialized economy at the time, although the agenda of free trade was a sensitive issue for the developing NIEs, and for ASEAN economies to explore new export market opportunities of the natural resources such as natural gas and seek regional economic integration (industrial integration) by means of foreign direct investment on the behalf of ASEAN) to raise living standards and education levels through sustainable economic growth and to foster a sense of community and an appreciation of shared interests among Asia-Pacific countries. Members account for approximately 40% of the world's population, approximately 54% of the world's gross domestic product and about 44% of world trade. An annual APEC Economic Leaders' Meeting is attended by the heads of government of all APEC members except Republic of China (represented under the name Chinese Taipei) by a ministerial-level official. The location of the meeting rotates annually among the member economies, and until 2011, a famous tradition involved the attending leaders dressing in a national costume of the host member.

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History
In January 1989, Australian Prime Minister Bob Hawke called for more effective economic cooperation across the Pacific Rim region. This led to the first meeting of APEC in the Australian capital of Canberra in November, chaired by Australian Foreign Affairs Minister Gareth Evans. Attended by political ministers from twelve countries, the meeting concluded with commitments for future annual meetings in Singapore and South Korea. Countries of the Association of Southeast Asian Nations (ASEAN) opposed the initial proposal, instead proposing the East Asia Economic Caucus which would exclude non-Asian countries such as the United States, Canada, Australia, and New Zealand. This plan was opposed and strongly criticized by Japan and the United States. The first APEC Economic Leaders' Meeting occurred in 1993 when U.S. President Bill Clinton, after discussions with Australian Prime Minister Paul Keating, invited the heads of government from member economies to a summit on Blake Island. He believed it would help bring the stalled Uruguay Round of trade talks back on track. At the meeting, some leaders called for continued reduction of barriers to trade and investment, envisioning a community in the Asia-Pacific region that might promote prosperity through cooperation. The APEC Secretariat, based in Singapore, was established to coordinate the activities of the organization. During the meeting in 1994 in Bogor, Indonesia, APEC leaders adopted the Bogor Goals that aim for free and open trade and investment in the AsiaPacific by 2010 for industrialized economies and by 2020 for developing economies. In 1995, APEC established a business advisory body named the APEC Business Advisory Council (ABAC), composed of three business executives from each member economy.

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How APEC Operates

APEC - A Multilateral Economic Forum Asia-Pacific Economic Cooperation (APEC) operates as a cooperative, multilateral economic and trade forum. It is the only international intergovernmental grouping in the world committed to reducing barriers to trade and investment without requiring its members to enter into legally binding obligations. APEC achieves its goals by promoting dialogue and arriving at decisions on a consensus basis, giving equal weight to the views of all members. APEC Member Economies report progress towards achieving free and open trade and investment goals through Individual Action Plans (IAPs) and Collective Action Plans (CAPs).

Mission Statement

APEC is the premier Asia-Pacific economic forum. Our primary goal is to support sustainable economic growth and prosperity in the Asia-Pacific region. We are united in our drive to build a dynamic and harmonious AsiaPacific community by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and facilitating a favorable and sustainable business environment. Our initiatives turn policy goals into concrete results and agreements into tangible benefits.

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Host Economy Every year one of the 21 APEC Member Economies plays host to APEC meetings and serves as the APEC Chair. The APEC host economy is responsible for chairing the annual Economic Leaders' Meeting, selected Ministerial Meetings, Senior Officials Meetings, the APEC Business Advisory Council and the APEC Study Centers Consortium. Until 2009, the host has also filled the Executive Director position at the APEC Secretariat. From 2010, the appointment will be made on a fixed-term basis (3 yrs) and will be open to candidates from all Member Economies.

Funding APEC is not a donor organization. Instead, APEC activities are centrally funded by small annual contributions from APEC Member Economies - since 1999 these have totaled US$3.3 million each year. From 2009 onwards, members' contribution will increase by 30% to a total of US$5 million. These contributions are used to fund a Secretariat in Singapore and various projects which support APEC's economic and trade goals. Since 1997, Japan has provided additional funds - between US$ 1.6 and 4.6 million annually - for projects which support APEC's trade and investment liberalization and facilitation goals. Projects generally Relate to the priorities of APEC Economic Leaders and APEC Ministers Cover the interest of at least several APEC Member Economies Build capacity Improve economic efficiency, and Encourage the participation of the business sector, non-governmental institutions and women. APEC's Project Database contains information about all APEC projects.

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Member Economies
APEC currently has 21 members, including most countries with a coastline on the Pacific Ocean. However, the criterion for membership is that the member is a separate economy, rather than a state. As a result, APEC uses the term member economies rather than member countries to refer to its members. One result of this criterion is that membership of the forum includes Taiwan (officially the Republic of China, participating under the name "Chinese Taipei") alongside People's Republic of China (see Cross-Strait relations), as well as Hong Kong, which entered APEC as a British colony but it is now a Special Administrative Region of the People's Republic of China.

Possible Enlargement India has requested membership in APEC, and received initial support from the United States, Japan and Australia. Officials have decided not to allow India to join for various reasons. However, the decision was made not to admit more members until 2010. Moreover, India does not border the Pacific Ocean, which all current members do. However, India has been invited to be an observer for the first time in November 2011. In addition to India, Mongolia, Pakistan, Laos, Bangladesh, Costa Rica Colombia, Panama and Ecuador, are among a dozen countries seeking membership in APEC by 2008. Colombia applied for APEC's membership as early as in 1995, but its bid was halted as the organization stopped accepting new members from 1993 to 1996, and the moratorium was further prolonged to 2007 due to the 1997 Asian Financial Crisis. Guam has also been actively seeking a separate membership, citing the example of Hong Kong, but the request is opposed by the United States, which currently represents Guam.

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APEC's Three Pillars

To meet the Bogor Goals, APEC carries out work in three main areas: 1. Trade and Investment Liberalization 2. Business Facilitation 3. Economic and Technical Cooperation

APEC and Trade Liberalization According to the organization itself, when APEC was established in 1989 average trade barriers in the region stood at 16.9 percent, but had been reduced to 5.5% in 2004.

APEC's Business Facilitation Efforts APEC has long been at the forefront of reform efforts in the area of business facilitation. Between 2002 and 2006 the costs of business transactions across the region was reduced by 6%, thanks to the APEC Trade Facilitation Action Plan (TFAPI). Between 2007 and 2010, APEC hopes to achieve an additional 5% reduction in business transaction costs. To this end, a new Trade Facilitation Action Plan has been endorsed. According to a 2008 research brief published by the World Bank as part of its Trade Costs and Facilitation Project, increasing transparency in the region's trading system is critical if APEC is to meet its Bogor Goal targets. The APEC Business Travel Card, a travel document for visa-free business travel within the region is one of the concrete measures to facilitate business. In May 2010 Russia joined the scheme, thus completing the circle.

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Proposed Free Trade Area of the Asia-Pacific APEC is considering the prospects and options for a Free Trade Area of the Asia-Pacific (FTAAP), which would include all APEC member economies. Since 2006, the APEC Business Advisory Council, promoting the theory that a free trade area has the best chance of converging the member nations and ensuring stable economic growth under free trade, has lobbied for the creation of a high-level task force to study and develop a plan for a free trade area. The proposal for a FTAAP arose due to the lack of progress in the Doha round of World Trade Organization negotiations, and as a way to overcome the "spaghetti bowl" effect created by overlapping and conflicting elements of the umpteen free trade agreementsthere are approximately 60 free trade agreements, with an additional 117 in the process of negotiation in Southeast Asia and the Asia-Pacific region. The FTAAP is more ambitious in scope than the Doha round, which limits itself to reducing trade restrictions. The FTAAP would create a free trade zone that would considerably expand commerce and economic growth in the region. The economic expansion and growth in trade could exceed the expectations of other regional free trade areas such as the ASEAN plus Three (ASEAN + China, Japan, and South Korea). Some criticisms include that the diversion of trade within APEC members would create trade imbalances, market conflicts and complications with nations of other regions. The development of the FTAAP is expected to take many years, involving essential studies, evaluations and negotiations between member economies. It is also affected by the absence of political will and popular agitations and lobbying against free trade in domestic politics

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Achievements and Benefits The Asia-Pacific region has consistently been the most economically dynamic region in the world. APEC member economies together account for: 40 percent of world population (2.7 billion people); 44 percent of global trade ($16.8 trillion) and 53 percent of world real GDP in purchasing power parity (PPP) terms ($35.8 trillion). The regions real GDP (PPP) has also doubled from $17.7 trillion in 1989 to $35.8 trillion in 2010. By comparison, real GDP (PPP) in the rest of the world has only grown at 3 percent per year, from $17.2 trillion to $31.9 trillion. This means that APECs share of world real GDP has increased from 51 percent in 1989 to 53 percent in 2010. APEC's work under its three main pillars of activity, Trade and Investment Liberalization, Business Facilitation and Economic and Technical

Cooperation, has helped drive this economic growth and improve employment opportunities and standards of living for the citizens of the region.

Trade and Investment Liberalization APEC is the premier forum for trade and investment liberalization in the AsiaPacific and has set targets dates for "free and open trade": no later than the year 2010 for industrialized economies, and 2020 for developing economies (the Bogor Goals). When APEC was established in 1989 average trade barriers in the region stood at 16.9%; by 2010 barriers had been reduced to 5.8%. As a consequence, intra-APEC merchandise trade (exports and imports) has grown from $1.7 trillion in 1989 to $9.9 trillion in 2010, nearly a six-fold increase; now accounting for 67 percent of APECs total merchandise trade.

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Similarly, APECs total trade (goods & services) has increased from $3.1 trillion in 1989 to $16.8 trillion in 2010, over a fivefold increase. In the same period, total trade by the rest of the world has gone from $4.6 trillion to $21.1 trillion (a multiple of 4.6 times). By June 2011, 48 FTAs had been signed between APEC members; there are currently 42 FTAs in force between APEC member economies. APEC is also pursuing trade and investment liberalization through its Regional Economic Integration agenda. Progress to date includes: Investigating the prospects of and options for a Free Trade Area of the Asia-Pacific. The development of 15 model measures for RTAs/FTAs that serve as a reference for APEC members to achieve comprehensive and highquality agreements. APEC has also acted as a catalyst in the advancement of World Trade Organization multilateral trade negotiations over the past 20 years.

Business Facilitation As a result of the APEC Trade Facilitation Action Plan (TFAP I) the cost of business transactions across the region was reduced by 5% between 2002 and 2006. A second trade facilitation action plan (TFAP II) reduced transaction costs by a further 5% in real terms between 2007 and 2010, representing total savings for business of $58.7 billon.

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APEC initiatives that help facilitate trade include: The introduction of electronic/paperless systems by all member economies, covering the payment of duties, and customs and traderelated document processing. The Single Window Strategic Plan, adopted in 2007, provides a framework for the development of Single Window systems which will allow importers and exporters to submit information to government once, instead of to multiple government agencies, through a single entry point. The APEC webpage on Tariffs and ROOs ("WebTR") launched in November 2010 provides users with easy access to APEC member economies' tariff and Rules of Origin information. In 2008, a groundbreaking Investment Facilitation Action Plan was endorsed; it aims to improve the investment environment in Member Economies. The APEC Privacy Framework provides guidance and direction to both APEC member economies and businesses on implementing information privacy protection policies and procedures. By facilitating information flows it will facilitate trade and e-commerce. The APEC Business Travel Card (ABTC) provides substantial time and cost savings to business people and facilitates their travel in the region, by allowing visa free travel and express lane transit at airports in participating economies. APEC is also removing behind-the-border barriers to trade through its Structural Reform agenda, which focuses on reforming domestic policies and institutions that adversely affect the operation of markets.

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Economic and Technical Cooperation APEC's Economic and Technical Cooperation (ECOTECH) activities are designed to build capacity and skills in APEC member economies at both the individual and institutional level, to enable them to participate more fully in the regional economy. Since APEC first began to undertake capacity building work in 1993, around 1600 projects have been initiated; at any moment in time, up to 170 projects may be in implementation. APEC contributes funding to around 100-150 projects each year, with a total value of over $23 million committed by APEC to projects in 2010-2011.

A particular focus has been reducing the digital divide between industrialized and developing economies: In 2000, APEC set a goal of tripling internet usage in the region and that goal has now been achieved, as recognized by the 2008 APEC Ministerial Meeting on the Telecommunications and Information Industry. APEC is now focusing efforts on achieving the goal of universal access to broadband in the APEC region by 2015 an ambitious target reaffirmed by Telecommunications Ministers in Okinawa, Japan in 2010. A network of 46 APEC Digital Opportunity Centers (ADOC) now operate in 10 member economies. ADOC's objective is to transform the digital divide into digital opportunities and the centers act as local information and communication technology (ICT) resource centers, providing citizens and businesses of the region with access to ICT technologies, education and training.

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Policy Level
Policy Development Asia-Pacific Economic Cooperation (APEC) policy direction is provided by the 21 APEC Economic Leaders. Strategic recommendations provided by APEC Ministers and the APEC Business Advisory Council are considered by APEC Economic Leaders as part of this process. The following meetings are conducted each year, which help shape APEC's policy direction. APEC Economic Leaders' Meeting APEC Economic Leaders' Meetings are held once a year in the APEC host economy. Declarations from these meetings set the policy agenda for APEC.

APEC Ministerial Meeting Annual APEC Ministerial Meetings of foreign and economic/trade ministers are held immediately prior to APEC Economic Leaders' Meetings. Ministers consider the year's activities and provide recommendations for APEC Economic Leaders' consideration.

Sectoral Ministerial Meetings Sectoral Ministerial Meetings are held regularly covering areas such as education, energy, environment and sustainable development, finance, human resource development, regional science and technology cooperation, small and medium enterprises, telecommunications and information industry, tourism, trade, transportation and women's affairs. Recommendations from these meetings are also provided to APEC Economic Leaders for their consideration.

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APEC Business Advisory Council (ABAC) ABAC provides APEC Economic Leaders with a business perspective on APEC issues through an annual meeting and a formal report. The annual report contains recommendations to improve the business and investment environment in the APEC region. ABAC also meets four times per year and a representative attends Ministerial Meetings. Commerce is the lifeblood of the region and business is the engine of economic growth. Recognizing the integral role of business and the value of representative business advice on key issues, APEC Leaders established the APEC Business Advisory Council (ABAC) in 1995. This private sector body presents recommendations to APEC Leaders in an annual dialogue and advises APEC officials on business sector priorities and concerns. ABAC meets four times per year, and ABAC representatives also attend Senior Officials' Meetings, the Annual Ministerial Meeting and the sectoral Ministerial Meetings. ABAC comprises up to three senior business people from each APEC economy and the appointments are made by the Leader of the member economy concerned. The Chair of ABAC comes from the economy that is hosting APEC and therefore changes annually. ABAC represents a diverse range of sectors and includes small and large enterprises.

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Working Level
APEC's working level activities and projects are guided by APEC Senior Officials from the 21 APEC member economies. These activities and projects are carried out by four high level committees: Committee on Trade and Investment Senior Officials' Meeting Committee on Economic and Technical Cooperation Economic Committee Budget and Management Committee Sub-Committees, Experts' Groups, Working Groups and Task Forces all support the activities and projects led by these four high level committees.

Senior Officials' Meeting (SOM) Working under direction from APEC Ministers, Senior Officials guide the activities of the Committees, Working Groups and Task Forces. Senior Officials develop recommendations for APEC Ministers and APEC Economic Leaders. Senior Officials' Meetings are held three to four times a year with the chair from the host economy.

Committees, Working Groups, SOM Task Groups A brief description of the Committees, Working Groups and SOM Task Groups is given below. Additional information on the groups can be accessed via the APEC Groups link on this page.

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Committee on Trade and Investment (CTI) The Committee on Trade and Investment coordinates APEC's work on the liberalization and facilitation of trade and investment. The Committee on Trade and Investment also works to reduce impediments to business activity through its Sub-Committees and Experts' Groups.

SOM Committee on Economic and Technical Cooperation The SOM Committee on Economic and Technical Cooperation assists APEC Senior Officials in coordinating and managing APEC's economic and technical cooperation agenda, as well as identifying initiatives for cooperative action by member economies.

Economic Committee (EC) The Economic Committee (EC) has a mandate to promote structural reform within APEC by undertaking policy analysis and action-oriented work. The EC progresses this mandate in close coordination with other relevant APEC groups; for instance, the Competition Policy and Law Group (CPDG) and the Finance Ministers' Process (FMP)

Budget and Management Committee (BMC) The Budget and Management Committee advises the SOM on budgetary, administrative and managerial issues. It also monitors and evaluates project management aspects of the operations of Committees and Working Groups and makes recommendations to SOM for improved efficiency and effectiveness.

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Working Groups Working Groups carry out APEC's work in specific sectors as directed by APEC Economic Leaders, APEC Ministers, APEC Sectoral Ministers and Senior Officials.

SOM Special Task Groups/Ad-hoc Groups Senior Officials set Special Task Groups to identify issues and make recommendations about important areas for APEC's consideration. Ad-hoc Groups have also been established in APEC to provide topical and relevant information or to fulfill important tasks not being covered by other groups.

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Osaka Action Agenda

The Osaka Action Agenda provides a framework for meeting the 'Bogor Goals' through trade and investment liberalization, business facilitation and sectoral activities, underpinned by policy dialogues and economic and technical cooperation. As part of this framework, General Principles have been defined for Member Economies as they proceed through the APEC liberalization and facilitation process. The following General Principles are provided in the Osaka Action Agenda and are applied to the entire APEC liberalization and facilitation process Comprehensiveness - addressing all impediments to achieving the long-term goal of free and open trade. WTO-consistency - measures undertaken in the context of the APEC Action Agenda are consistent with the principles of the World Trade Organization (WTO). Comparability - APEC Member Economies endeavor to have comparable trade and investment liberalization and facilitation, taking into account the general levels achieved by each APEC economy. Non-discrimination - reductions in barriers to trade achieved through APEC are available to all APEC Member Economies and non-APEC economies. Transparency - the laws, regulations and administrative procedures in all APEC Member Economies which affect the flow of goods, services and capital among APEC Member Economies are transparent. Standstill - APEC Member Economies do not take measures which have the effect of increasing levels of protection. Simultaneous start, continuous process and differentiated timetables APEC Member Economies began simultaneously the process of liberalization, facilitation and cooperation and continuously contribute to the long-term goal of free and open trade and investment. Flexibility - APEC Member Economies deal with the liberalization and facilitation process in a flexible manner, taking into account differing levels of economic development.
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Action Plans
In order to meet APEC's Bogor Goals for free and open trade and investment in Asia-Pacific, APEC Member Economies follow the strategic roadmap as agreed by APEC Economic Leaders in Osaka, Japan. This roadmap is known as the Osaka Action Agenda. APEC Member Economies report progress towards achieving free and open trade and investment goals through Individual Action Plans (IAPs) and Collective Action Plans (CAPs), submitted to APEC on an annual basis. Individual and Collective Action Plans are available through the dedicated e-IAP website. This site provides the ability to search individual APEC Member Economy IAPs,compare IAPs across years and view CAPs. Information on the assessment of the achievement of Bogor Goals by APEC and its twenty-one member economies can be found here.

Individual Action Plans Every Member Economy submits annually an Individual Action Plan (IAP). This is a record of actions taken to meet its stated goals for free and open trade and investment. APEC Member Economies set their own timelines and goals, and undertake these actions on a voluntary and non-binding basis. As specified in the Osaka Action Agenda, reporting is based on 15 issue areas: Tariffs Non-tariff measures Services Investment Standards and Conformance Customs Procedures Intellectual Property Competition Policy Government Procurement

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 Deregulation/Regulatory Review WTO Obligations (inc. Rules of Origin) Dispute Mediation Mobility of Business People Information Gathering and Analysis

Each year, several APEC Member Economies volunteer to have their IAPs reviewed. Known as Peer Reviews, this process involves a formal review team considering each volunteer economy's IAP. Experts conducting independent in-country research and analysis and the involvement of the independent private sector body, the APEC Business Advisory Council (ABAC) are also part of the process.

Collective Action Plans Collective Action Plans (CAPs) detail the collective actions of all APEC Member Economies in the 15 issue areas outlined in the Osaka Action Agenda. The 15 issue areas mirror the IAP's. CAPs are used by APEC to outline actions and objectives to meet the free trade and investment goals, as well as to monitor and report on progress. More details about CAPs can be found in the Committee on Trade and Investment Annual Report to Ministers publication, and in the APEC Groups section of this website. CAPs can also be viewed on the e-IAP website.

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Stakeholder Participation Strong and vibrant economies are not built by governments alone, but by partnerships between government and its key stakeholders including the business sector, industry, academia, policy and research institutions, and interest groups within the community. APEC actively involves these key stakeholders because it welcomes participation that Facilitates the attainment of APEC goals through appropriate partnerships Strengthens the quality of APEC's work by drawing on relevant insight and expertise Strengthens understanding and support for APEC's goals through openness, transparency and a broad-based partnership that seeks multiple perspectives from the community. In general, non-member economies, organizations, business/private sector representatives, academic bodies and other experts may apply or be invited to APEC activities subject to guidelines.

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Business Participation
APEC fully appreciates the key role that business plays in driving economic growth and involves the international business community at all levels of the APEC process. At the highest level, APEC has created the APEC Business Advisory Council (ABAC). ABAC comprises up to 3 high-level business representatives from each of APEC's 21 Member Economies and it meets 4 times a year. In an annual dialogue with APEC Economic Leaders ABAC presents recommendations to improve the business and investment environment in the APEC region and outlines business views about priority regional issues. ABAC also has a representative at APEC sectoral Ministerial Meetings, and advises APEC officials on business sector priorities and concerns throughout the year. At the working level, representatives from the private sector are invited to join APEC working groups and expert groups. This process provides an important opportunity for industry to provide input into various areas of APEC's ongoing work. Example of where this arrangement has been formalized include the APEC Automotive Dialogue and the APEC Chemical Dialogue.

Academic and Research Institution Participation Through the APEC Study Centres (ASC) Consortium, APEC Member Economies actively engage academic and research institutions in the APEC process. Amongst a range of key activities, the ASC Consortium facilitates cultural and intellectual exchanges in the Asia-Pacific region and assists the APEC process by undertaking advanced, collaborative interdisciplinary and policy-relevant research from an independent and long-term perspective. There are ASCs in 20 APEC Member Economies, comprising some 100 universities, research centers and centers of academic excellence across the APEC region. Academics and research institutions also participate in the working level of APEC through meetings, seminars and other activities.

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Women's Participation APEC actively encourages and seeks the input and participation of women in the APEC process. Currently, the Policy Partnership on Women and the Economy, which comprises government representatives from all 21 APEC member economies, encourages the consideration of gender issues within APEC, provides gender-based analysis training for APEC officials, and is a resource for gender-related information and advice for the integration of gender perspectives in APEC. APEC projects and activities are monitored to ensure that gender issues are considered.

APEC Observers Asia-Pacific Economic Cooperation (APEC) has three Official Observers: the Association of Southeast Asian Nations Secretariat, the Pacific Economic Cooperation Council and the Pacific Islands Forum Secretariat. These observers participate in APEC meetings and have full access to documents and information related to these meetings. The observer groups provide partnership, expertise and insight that assist APEC to attain its goals and implement its initiatives.

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Regional Economic Integration Agenda

The Regional Economic Integration (REI) agenda is a multi-year programme for APEC's work toward the Bogor Goals - that is, toward its goals of free and open trade and investment. As an ideal, APEC envisions a single, region-wide FTA. This is commonly known as the Free Trade Area of the Asia-Pacific (FTAAP) and analysis indicates that the establishment of such a comprehensive agreement would both benefit member economies and stimulate world trade. Progress toward Regional Economic Integration The FTAAP is a long-term goal and requires extensive preparatory work. Nonetheless, APEC has made significant progress:

Leveraging existing agreements: No less than 42 bilateral and regional free trade agreements have already been established among APEC member economies. The idea of enlarging, docking or merging these agreements has been considered and next steps recommended.

Analysis: Convergences and divergences among already existing RTAs and FTAs have been identified, a study of bilateral investment agreements has been studied in order to develop a set of principles for future investment agreements and ideas such as the possibility of enlarging, docking or merging existing agreements have been explored.

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Establishment of Model Measures: As they negotiate their own free trade agreements, economies refer to model measures in order to improve quality and transparency. Fifteen such measures have been completed to date, including trade in goods, technical barriers to trade, transparency, government procurement, cooperation, dispute settlement, trade facilitation, electronic commerce, rules of origin and origin procedures, sanitary and phyto-sanitary measures, environment, competition policy and temporary entry of business persons.

Adoption of Key Performance Indicators: As per a 2007 agreement, the Trade Facilitation Action Plan II calls for a reduction of trade transaction costs by an additional 5 percent before 2010. The action plan recommends actions and measures to be considered in areas of customs procedures, business mobility, standards and conformance and electronic commerce. An assessment of the plan reveals that an additional 5 percent reduction in business transaction costs between 2007 and 2010 has been achieved, translating into US$58.7 billion in savings for businesses in the APEC region.

Adoption of an Investment Facilitation Action Plan: This plan is a set of actions to be taken by member governments, in order to attract foreign investment and to maximize the effectiveness and efficiency of administration at all stages in the investment cycle. Ultimately, the purpose is to maximize the benefits of investment through transparency, simplicity and predictability.

Establishment of the APEC Policy Support Unit: The APEC Policy Support Unit assists the implementation of regional economic integration by providing policy and research. Currently, priority has been given to structural (behind-the-border) economic reforms and at-theborder trade policy reforms.

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Conclusion
The name, Asia-Pacific Economic Cooperation, does not have a noun such as a community, agreement nor summit to go after it. Skeptical viewers convey that this represents an institutional underdevelopment because the member nations cannot even reach an agreement on the basic character of the organization. The fact that APEC covers a large part of the region and includes nations with diversity in culture, political interests economic development, and absence of strong leadership are seen as a cause of difficulty to formalize the institution. Due to the existence of INGOs, such as PECC, for trade facilitation and development cooperation since the late 1960s, and acts of regional economic cooperation, this sort of just became the name for the organization. However, APEC has recently been trying to make itself matter more, and this flexible feature of APEC is adjusting towards the original intention of the organization, to concentrate on the economic cooperation aspect to obtain more equitable development in the region towards economic globalization. APECs future role is to strengthen and re-address the already existing principles, so that SRTAs and bilateral FTAs within the region will not serve as a stumbling block, but as a building block with special concerns for the economic growth of developing members

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Bibliography
www.apec.org/ www.apec2012.ru/ www.apec.org/About-Us/About-APEC/Member-Economies.aspx

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