The promotion of sustainable economic growth and improved living standards in the Asia-Pacific region through enhanced trade and economic integration lies at the heart of APEC’s mission.[2] Although significant tariff peaks still exist in some areas in APEC, such as food and primary production, significant progress in tariff reduction in the APEC region has been achieved (average tariffs have decreased from 16.6 per cent in 1988 to 6.4 per cent in 2004).[3] While APEC’s focus has traditionally been on trade and investment liberalisation, it has more recently turned its attention also to the role played by ‘behind-the-border’ policies in enabling or impeding regional economic integration, also commonly referred to as ‘structural policies’ or ‘structural barriers’.[4]
In 2004 APEC Leaders recognised that structural reform is essential for realising the full benefits of trade and investment liberalisation and achieving sustainable improvements in living standards by endorsing the Leaders’ Agenda to Implement Structural Reform (LAISR). There was an increased emphasis on LAISR in Australia’s 2007 host year.[5] During 2007, the mode of operations of the APEC Economic Committee was reformed to focus on the five LAISR priority areas and to inject greater impetus to structural reform in the region. In August 2008 Australia hosted the first APEC ministerial meeting wholly dedicated to structural reform. The 16th APEC Leaders’ Summit, held in Lima on 23 November, strongly endorsed structural reform.[6]
This paper provides empirical evidence for the strong impact structural policies can have on income convergence of APEC economies.
Section 2 of the paper reviews the theoretical and empirical literature on economic growth and income convergence, and the role of structural policies in impeding or promoting growth and convergence.[7] Estimates of income convergence amongst APEC economies and the effect on income convergence of structural policies are presented in section 3. Section 4 reviews APEC’s role in promoting improved structural policies in the Asia-Pacific region. Concluding remarks are provided in section 5.
[2] Founded in 1989, APEC (Asia Pacific Economic Cooperation) is a grouping of ‘economies’ on the Asia-Pacific Rim. It currently has 21 members: Australia; Brunei Darussalam; Canada; Chile; People’s Republic of China; Hong Kong, China; Republic of Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Republic of the Philippines; Russia; Singapore; Thailand; Chinese Taipei; United States; and Viet Nam.
[3] In 1996, in all countries except Australia and New Zealand, MFN average applied tariffs for agriculture are higher than for the whole economy (OECD 2001).
[4] Behind-the-border policies refer to domestic measures which enable or impede the efficient operation of markets and the capacity of businesses to operate. These can take the shape of domestic regulatory systems, competition frameworks, and governance structures.
[5] This was foreshadowed by a preliminary conference in December 2006 on ‘Reshaping APEC for the Asia-Pacific Century: Priorities and Strategies’. The program and papers prepared for the APEC Study Centre Network Preliminary Conference are available here: http://www.apec.org.au/event2.asp?event=40.
[6] The 2008 APEC Leaders’ Declaration is available from http://www.apec.org/apec/leaders__declarations/2008.html
[7] A fuller discussion of economic growth and income convergence mechanisms is provided in Buckle and Cruickshank (2007).