The G20 and APEC: Building Synergies 

Although there are stark differences between the G20 and APEC - the G20 is a global institution to provide global public goods, while APEC is a regional institution operating under the Asia-Pacific context, both of them act based on the same modality, namely cooperative, non-binding and consensus-based tradition.  Both of these institutions are not - and should not be - negotiating forums.  But, most importantly, they need to pull resources.  APEC should work under the bigger umbrella of the G20 framework, while the G20 may learn from APEC's experiences, such as successfully getting member countries committed to strategies on a voluntary basis. 

The G20 Summit was initiated to weather the 2008 Global Financial Crisis (GFC), and its focus has been on the global macroeconomic coordination - starting with coordinated expansionary fiscal policy to cushion the falling demands and confidence globally, hence, forestalling the global economy from plunging into a deeper or double recession, or even a depression. It represents two-third of the global population, 85% of the global GDP and 80% of the global trade. It is a belated recognition of the shifting of the global economic power from the over-the-hill West and the emerging East. 

Meanwhile, APEC has been successful in promoting free trade and investment around the Asia-Pacific countries.  Its inception in 1989 was a response to the growing inter-dependence among the Asia-Pacific countries and to the growing regional economic blocs in other parts of the world, including the European Union and the North America Free Trade Area.  It consists of 21 Pacific Rim countries, and it represents 40% of the global population, 54% of the global GDP, and about 44% of the global trade. 

The G20's long-term goal is to reach a strong, balanced, and sustainable growth (SBSG) globally.  The Mutual Assessment Process or MAP has become the mechanism to achieve this global coordination.  "The mutual assessment process involves assessing and monitoring whether or not individual countries’ policies and plans are collectively consistent with the G20’s main objective of restoring high, sustainable and balanced global growth." (IMF, 2009, "The G20 Mutual Assessment Process and the Role of the Fund") After each G20 country submits her national economic framework, including policy plans and macroeconomic projections in three broad areas of monetary and fiscal policies as well as structural reforms, the IMF with the support of other international organizations will check for internal consistencies (stage one), multilateral consistencies of national policies (stage two), as well as develop policy recommendations (stage three).

APEC's main objective is to enhance trade and investment liberalization in Asia-Pacific region by reducing barriers to trade and investment and by promoting the free flow of goods, services and capital, as stated in the 1994 Bogor Declaration.  Furthermore, member countries agreed to the completion of this commitment by 2010 for the industrialized economies (which, along with eight volunteer countries, are called "the 2010 Economies") and by 2020 for the developing economies ("the 2020 Economies").  APEC is based on the Individual Action Plan (IAP) mechanism.  Before 2010, all economies conducted self-assessments that were in turn assessed by an independent evaluator and then both were presented before a peer review process.  Now, post 2010, it is still not clear how the 2010 Economies (the five industrialized and eight volunteer economies) will be evaluated and against what they will be evaluated, while the 2020 Economies will continue to be assessed based on their IAPs.  From the 2010 assessment, the average Most Favored Nation-applied tariff across the APEC region fell from 16.9% in 1989 to 6.6% in 2008, with the world WTO average of 10.4% in 2008.  Zero-tariff product lines rose to 40% in 2008 from 29% in 1996.  Barriers on trade services and investment as well as non-tariff barriers were also substantially reduced across the APEC economies.                  

The G20's agenda has widened since its first Summit in Washington, D.C., in 2008 amidst the GFC, although widening agenda can either be praised or criticized.  While broader agenda may mean more inter-sector coordination and more accomplishments, it may hurt their performance if they lose their laser-like focus and credibility should they fail to realize their commitments.  Its new areas now include development, global financial safety net, financial inclusion, and anti-corruption.  Recently, the idea of enacting the G20 secretariat has also been deliberated. 

Last year's Summit in Seoul has helped the global economy to achieve a few stepping stones, including the new financial reforms formulated by the Financial Stability Board and the Basel Committee on Banking Supervision including reducing moral hazard risk posed by systematically important financial institutions and setting a new bank capital and liquidity framework; the extension of the standstill trade agreement until 2013; and the approval to increase the IMF voting shares of emerging market and developing countries by over five percentage points.  There were two special themes that colored the Seoul Summit: the growth-led development and global financial safety net.  This had led to the endorsement of the Seoul Development Consensus for Shared Growth and Multi-Action Plan, and to calls for regional arrangement cooperation along with the IMF's Precautionary and Flexible Credit Lines.  Despite these achievements, the last Summit was overshadowed by the tension between the U.S. and China over currency issues.  The two main outcomes from the currency discussion were an agreement to refrain from currency devaluation arms race and a commitment to a market-based exchange rate system, although these merely echoed the outcomes of the G20 Finance Ministerial Meeting in October 2010.                               

APEC has broadened its agenda from the initial understanding of its work, which is trade and investment in the traditional sense, now it covers human security issues that relate to trade and investment - for example, food security, health, anti-corruption, and counter-terrorism.  Through the inauguration of Leaders' Agenda to Implement Structural Reform (LAISR) in 2004 that is completed in 2010 and continued as APEC's New Strategy for Structural Reform (ANSSR) in the post 2010, APEC countries had come to realize that "on-the-border" issues of trade and investment must be supported by "behind-the-border" issues of structural reforms, including regulatory reforms, competition policy, legal and economic structures, bureaucratic reforms, corporate governance, and ease of doing business.  The agenda for APEC 2011, which will be hosted by the U.S., will focus on building flawless regional economy by strengthening regional economic integration and expanding trade; expanding regulatory cooperation and advancing regulatory convergence; and promoting green growth, while the 2010 APEC Finance Minister meeting in Kyoto launched a financial inclusion initiative.   

The latter initiative can work well within a broader framework of the G20's Financial Inclusion Action Plan.  In fact, the synergy between the G20 and APEC is vital and their objectives must be in accord.  A very significant outcome from the 2010 APEC summit in Yokohama is the APEC Leaders' Growth Strategy, which reiterated "the support for efforts to achieve strong, sustainable and balanced growth of the world economy as called for by the G20 Framework." 

Both forums can reinforce each other in urgent issues, in particular the conclusion of the Doha WTO Round this year.  2011 is a critical window of opportunity.  Indonesian Trade Minister, Mari Pangestu, argued that "The G20 and APEC should maintain focus on a renewed effort at completing Doha.  It will need a strong political and policy coalition to get there. But, it can be done." (East Asia Forum, December 6, 2010). Moreover, she argued that "trade issues extended well beyond the traditional border barriers to trade, and a clear system-reform agenda beyond Doha" were needed to secure a success.  

This "system-reform" (or may be called structural reforms), is what both the G20 and APEC must also build synergies on.  At least, the G20 can learn from the APEC's LAISR Stock-take Survey Responses in 2010 on the keys to success of structural reform.  These include (in order of importance): leadership, effective communication and consultation with stakeholders, institutional framework, and the use of independent experts and analysis.  Structural reforms, as endorsed by the G20 Leaders in Seoul, can be broad in scope and might include reforms in the product market, labor market, taxes, domestic demand market for surplus countries and export competitiveness for deficit countries, social safety net, and infrastructure.  Anti-corruption efforts can be a part of structural reforms agenda, especially since some of the APEC Member Countries and G20 countries, such as Indonesia and Russia, were still ranked low on their Ease of Doing Business Index. 

The importance of private sector-led growth and job creation has also been increasingly recognized by both institutions.  For the first time since its inception, the G20 Business Summit was held a day before the Leaders' Summit.  Instead of a one-off event, the G20 Business Summit will continuously take place in the upcoming Summits.  In November 2010, APEC Business Advisory Council (ABAC), the sole non-governmental agency that has an official role within APEC, expressed its supports for G20 Finance Ministers and Central Bank Governors' Initiatives.  It was also ABAC that drove the financial inclusion agenda, mentioned above, into the APEC Finance Ministers' Process.  Another issue that the G20 and APEC must build synergy on is climate change.  Both forums have committed to green growth agenda.  These should be a part of the "sustainable" growth strategy.  Lessons may be learned from some of the G20 and APEC countries, such as South Korea, who has successfully incorporated green growth strategies in her national agenda.  Moreover, environmentally friendly goods, services, and investments should be relieved from heavy trade barriers and taxes. 

Looking at these issues, there are certainly enough common grounds for the G20 and APEC to work together.  There are nine countries, who sit at both the G20 and APEC: Australia, Canada, China, Indonesia, Japan, Mexico, South Korea, Russia, and United States.  Moreover, seven of them (except Canada and Mexico) also sit at the East Asia Summit - a new rising strategic regional institution.  They are the global and regional strategic players that should be concerned with and push for the alignment of APEC and G20 objectives, although the G20 will provide a broader framework than APEC.  Otherwise, domestic economic policies may soon eviscerate.         

Maria Monica Wihardja, Research Fellow, Center for Strategic and International Studies, Jakarta/From the Epicenter