Vietnam Navigates Change to Defuse APEC's Internal Crisis

Abstract

The Asia-Pacific Economic Cooperation (APEC) forum is at a critical juncture caused by Washington's withdrawal from the Trans-Pacific Partnership and Beijing's support for the Regional Comprehensive Economic Partnership. As the APEC Chair in 2017, Vietnam is urging members to focus on "Creating New Dynamism, Fostering a Shared Future," renewing APEC's agenda, and reaffirming objectives central to its development. After a solid start and initial achievements, APEC has often been criticised for its slow delivery of tangible outcomes in regional trade and investment liberalisation. In 1994, APEC agreed to create a free trade and investment zone by the two-stage deadlines of 2010 for developed members and 2020 for developing economies. APEC is viewed as failing to expedite this agenda and as having credibility and identity crises. The "flexibility" principle has caused sharp divisions within APEC: trade liberalisation energised by neoliberal ideologies and structural reforms on the one side, and economic and technical cooperation underpinned by developmentalist ideologies on the other. The APEC agenda has been swinging between different priorities depending on which member is chairing APEC in a given year. Such wavering has added to its identity crisis. The APEC Summit in November 2017 is under pressure to deliver a bold initiative to revitalise the forum and handle Trump's protectionism. Vietnam is striving to strike a balance between liberal trade and development. The four priorities – sustainable and inclusive growth, regional economic integration, digitalisation, and sustainable agriculture in response to climate change – demonstrate the host’s attempt to align APEC with global agendas, reassert APEC's relevance, and defuse its internal crisis. The road to freer trade in APEC looks bumpy. Although the United States has yet to clarify its new relationship with APEC, a likely outcome is that Asia may choose to transform APEC into an Asia-led grouping and balance US unilateralism via closer ties with the EU. The door is open for the EU to reinforce its focus on Asia. If so, the Asia-Europe Meeting (ASEM) might be enhanced at APEC's expense.