INTRODUCTION AND SUMMARY

The APEC Business Advisory Committee (ABAC) has recommended for the past two years that APEC Leaders launch a study of a Free Trade Area of the Asia-Pacific (FTAAP). The Leaders have been unwilling to do so for at least two reasons: a fear that even such a limited move in the direction of an FTAAP could undercut the ongoing Doha Round in the World Trade Organization (WTO), which remained their trade policy priority and was already in parlous condition, and the (presumably related) unwillingness of the major APEC powers (China, Japan and especially the United States) to endorse the idea. ABAC thus decided to launch its own study of the FTAAP, and alternative trade policy ideas for APEC, in an effort to restore APEC's contribution to global trade liberalization and to revitalize APEC as an institution. The immediate objective is to advance the discussion of these issues at the Leaders Meeting in Hanoi in November 2006 and during the Australian chairmanship in 2007.

This paper argues that the case for studying, beginning an APEC process of intergovernmental discussion and consultation on, subsequently launching negotiations towards, and perhaps ultimately completing an FTAAP is much more powerful in 2006–2007 than when the idea was initially raised in 2004 (or indeed when its conceptual predecessor, the Bogor Goals, were adopted by the Leaders in 1993–94). There are four reasons for this important change.

First, the Doha Round is faltering badly. It now seems unlikely to achieve even minimal success without a “political jolt” of the type that an FTAAP launch by the APEC Leaders could provide. The model is the Leaders’ adoption of the goal of “free and open trade and investment in the region”, at the first APEC summit in Seattle in 1993, that galvanized the successful conclusion of the Uruguay Round in the General Agreement on Tariffs and Trade (GATT) shortly thereafter.