Date : 28/11/2023

Relevance: GS Paper 2 : International Relations - Regional Grouping

Keywords: Asia Pacific Economic Cooperation (APEC), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), The Indo-Pacific Economic Framework for Prosperity (IPEF), WTO

Context-

The recently concluded 2023 Asia Pacific Economic Cooperation (APEC) summit in San Francisco marked a pivotal moment in regional economic discussions. Despite being a significant player in the Asia-Pacific region, India is not a member of APEC, posing questions about its role in this influential forum. In this analysis, we look into the key outcomes of the APEC summit, reasons behind India's non-membership, and why India must actively engage with APEC for its economic aspirations.

APEC Overview

• APEC's Genesis and Objectives
  APEC, established in 1989, aims to foster regional economic integration in the Asia-Pacific, emphasizing cooperation and mutual benefit. With 21 member economies, it accounts for a substantial portion of global GDP and trade, making it a critical forum for economic discussions.
• Operating Principles
  APEC operates on non-binding commitments, decisions made through consensus, and voluntary participation. The emphasis has been on trade liberalization, economic cooperation, and the creation of a liberalized free trade area in the Pacific Rim.
• Significance of APEC
  APEC's economic clout is undeniable, contributing nearly 62% of global GDP and half of global trade. The forum has historically championed the reduction of trade tariffs and economic liberalization, promoting a collaborative approach to regional development.

Key Outcomes of the APEC Summit

• Eased US-China Relations
  The summit played a role in restoring communications between the US and China after a year of suspension. Military communications were reinstated, marking a potential de-escalation in the geopolitical tensions between the two superpowers.
• Regional Dialogues and Agreements
  Noteworthy regional collaborations occurred during the summit, including the US-Japan-Korea Trilateral Summit and the Japan-China Summit, which focused on trade-related issues like semiconductor restrictions. Taiwan's participation highlighted its economic concerns and aspirations.
• CPTPP Member Meetings
  Members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) met around APEC, addressing trade and economic cooperation. The absence of the US in these discussions raises questions about its role in regional trade dynamics



CPTPP

• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also known as TPP11 or TPP-11is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It evolved from the Trans-Pacific Partnership (TPP), which was never ratified due to the withdrawal of the United States.
• CPTPP covers virtually all sectors and aspects of trade between 11 member countries to reduce trade barriers and facilitate trade.


• Setback for US-Led Indo-Pacific Economic Framework (IPEF) While the IPEF achieved success in certain areas, challenges in the trade pillar were evident. Internal issues made the US an uncertain trading partner, impacting its efforts to position the IPEF as a symbol of economic re-engagement in Asia.



IPEF

• The Indo-Pacific Economic Framework for Prosperity (IPEF) is an economic initiative launched by U.S. President Joe Biden on May 23, 2022.
• The 14 IPEF partners represent 40 percent of global GDP and 28 percent of global goods and services trade. The launch began discussions of future negotiations on the following pillars: (1) Trade; (2) Supply Chains; (3) Clean Energy, Decarbonization, and Infrastructure; and (4) Tax and Anti-Corruption.


• Talks on WTO Reform The Golden Gate Statement outlined APEC's commitment to establishing a well-functioning dispute settlement system for the World Trade Organization (WTO) by 2024, reflecting a commitment to global trade norms.

Why India is Not a Member of APEC

• APEC's Resistance to Protectionism
  Despite India's geographical proximity to the region, APEC has resisted including India due to perceived protectionist policies. The forum has historically aimed to resist protectionist measures and promote trade liberalization, which some argue does not align with India's economic approach.
• India's Record on Economic Reforms and WTO Engagement
  Opposition from some participants stems from concerns about India's economic reforms and engagement with the WTO, with assessments of India's record deemed unsatisfactory.
• Membership Freeze
  A membership freeze, implemented in 1997 but not extended in 2012, further complicated India's path to APEC membership.

Why India Must Engage with APEC

• Fulfilling Economic Aspirations
  India, aspiring to become a $5 trillion economy, requires substantial investment in infrastructure. APEC, representing over a third of the world's population and 60% of global GDP, offers a vast pool of potential investors, aligning with India's economic goals.
• Natural Corollary to Act East Policy
  As India actively pursues its Act East Policy, becoming a member of APEC is a natural progression. This move would complement India's existing membership in the Shanghai Cooperation Organization (SCO) and enhance its regional diplomatic standing.
• Expanding Economic Opportunities
  APEC's extensive market, comprising over 2.9 billion consumers across 21 economies, provides India with significant trade and investment avenues. Membership could boost India's export capabilities, attract foreign investment, and foster overall economic growth.
• Minimizing Trade Obstacles
  APEC's commitment to trade liberalization can benefit India by reducing tariffs and non-tariff barriers. This could enhance India's competitiveness in the global trade landscape, translating to lower costs for businesses and consumers.
• Streamlining Trade Processes
  APEC's successful initiatives in simplifying customs procedures and optimizing border processes can be valuable for India. Adopting these strategies can lead to reduced trade costs and improved logistical operations.
• Tapping into a Global Knowledge Pool
  APEC serves as a platform for the exchange of knowledge and best practices among member economies. India's participation would provide access to expertise in crucial areas such as trade policy, technology, and economic development, contributing to its overall advancement.

Conclusion

In conclusion, the APEC summit in San Francisco showcased the dynamics of the Asia-Pacific region and its implications for global trade and diplomacy. India's non-membership in APEC reflects historical concerns but also underscores the potential benefits of active engagement. Aligning with APEC's principles can propel India toward its economic aspirations, presenting it as a proactive player in the region. As APEC emphasizes sustainability and innovation, India can position itself as an alternative for foreign direct investment, challenging China's dominance. Therefore, India's increased engagement with APEC is not just a strategic imperative but a crucial step toward shaping the economic landscape of the Asia-Pacific region.

Source- The Indian Express