APEC, or the Asia Pacific Economic Cooperation, was established in 1989 as a forum for regional economic cooperation for countries within the Asia Pacific region.
To date, its 21-member countries are China, Vietnam, the Philippines, Japan, Russia, Papua New Guinea, Malaysia, Australia, Chile, Canada, New Zealand, South Korea, Singapore, Peru, Taiwan, Thailand, Brunei, Indonesia, Hong Kong, Mexico, and the US.
Malaysia joined Apec in 1989, discouraged by the stalled progress in the Uruguay Round at the World Trade Organisation.
Apec serves as a platform to discuss mechanisms for the growing inter-dependence of the Asia Pacific.
Malaysia, as a small open economy, is very much dependent on trade to boost economic growth.
Trade ties between Malaysia and India were established in 2003, through the Asean-India FTA or free trade agreement.
In 2011, eight years after the signing of the trade pact, India entered the Comprehensive Economic Cooperation Agreement with Malaysia.
This came six years after it signed a similar agreement with Singapore. At that time the agreements included areas of economic cooperation and contained a common list barter as an assurance-building measure.
Later in 2010, seven years after Asean-India ties were established, an upgraded Asean-India FTA came into force.
In 2014, India signed a separate FTA in services and investments with Asean, marking a strong and close partnership.
India has been interested in joining Apec long before 2015. Even though India is one of the fastest developing countries in the region, members of Apec are divided about its membership.
India’s entry into Apec has been blocked due to different reasons, namely its unfair treatment of foreign direct investments in the country and its perceived inability to carry out steady economic reforms.
India in Apec can be beneficial for all members in terms of market access. Market access beyond national boundaries is a critical factor in strengthening export performance.
Our region has undertaken a drastic improvement in foreign market access since the late 1980s. This has been accompanied by an improvement in trade, especially in exports.
An analysis undertaken by United Nations Conference on Trade and Development in 2005 highlighted this relationship within the East Asian and Pacific countries. These countries were found to be the biggest beneficiaries due to the increasing foreign market access. A bigger market within and beyond the region served as a stepping stone for their diversification efforts and participation in a more dynamic and intricate linkage of global value chains.
To date, countries in the region are already signatories to a number of bilateral and multilateral FTAs.
In a nutshell, bigger is better when it comes to the size of trade blocs in the Asia Pacific as emphasised by Peter Petri of Peterson Institute of International Economics.
For Apec members, greater integration with India would translate into an alternative source of intermediary goods, especially manufactured goods. India as a new trade partner can serve as an alternative and possibly a sustainable avenue in balancing out the high dependence of member countries on China.
It does not hurt that India has a sizeable labour market. This gives it advantages in sectors, such as information technology and financial services, and textile.
Apart from offering large market access to Apec members, India is also of the view it can offer another channel in diluting the trade tensions between China and the US.
Additionally, with its strategic location in the Indian Ocean, India can play a role in championing smaller countries in the region that are not keen on aligning with the US.
If Apec is seriously thinking of formalising the framework in the future, it needs to identify the shape and size of the Free Trade Area of the Asia-Pacific (FTAAP). FTAAP is an ambitious trade deal that will encompass countries in the Pacific Rim, from China to Chile, including the US.
As the future of mega-trade deals will not only encompass traditional trade chapters, it is inevitable that non-traditional trade chapters will be included as well.
If FTAAP is realised, it will be just as ambitious and contentious as the original TPP, if not more.
Looking at this very future, Apec needs to attract and retain counterparts who are open and willing to liberalise and reform their trade structure and commit to cooperation beyond trade. The question remains if India can be such a partner for Apec.
This article first appeared in the New Straits Times on May 23, 2019
