APEC's Manila summit: Why India should care

India’s inclusion in APEC will give a boost to its ‘Act East Policy’ and will further integrate the Indian economy into the Asia-Pacific economic milieu. India’s accession to APEC will be equally advantageous for the forum.

The ‘Missing link in India’s Act East Policy’, as India’s former foreign secretary Shyam Saran calls it, needs to be filled sooner rather than later, says Dr Rahul Mishra.

The 2015 Asia-Pacific Economic Cooperation summit is slated to take place in Manila, the Filipino capital, on November 18-19, 2015. Philippines had chaired the APEC summit earlier in 1996.

With the gruesome Paris terror attacks, and the South China Sea issue hovering around in the media, the stated agenda of the meeting, as decided during the APEC senior officials’ meeting in December 2014 in Manila, would be to focus on the priority areas including but not confined to:  ‘enhancing regional economic integration; fostering micro, small and medium enterprise participation in regional and global markets; investing in human capital development; and building sustainable and resilient communities.’

The motto of APEC 2015 is ‘building inclusive economies, building a better world’, suggesting that APEC is attempting to reconcile the perennial differences between economic growth and development.

In addition to facilitating greater regional economic integration, APEC promotes the development of small and medium enterprises in the member countries. Focus has also been paid on ‘removing hurdles to starting a business, getting credit, dealing with permits, enforcing contracts and trading across borders, in line with APEC’s goal to make it 25 per cent easier to do business in the region by the end of 2015’.

For the purpose of developing human capital, intra-APEC student exchange will be further facilitated. Finally, to achieve these objectives, APEC will also try to reduce the tariff on a list of 54 environmental goods.

A closer look at the media reports and official statements from across the region suggests that APEC is subtly turning into a facilitator for a range of other regional economic integration mechanisms. It is believed to be a stepping-stone towards Trans-Pacific Partnership.

Some of the TPP members have indicated their preference for TPP over other mechanisms such as the proposal to realise the Free Trade Agreement for the Asia Pacific. To realise FTAAP in its fullest potential was one of the major takeaways of the 2014 Beijing APEC summit. In fact, ‘The Beijing Roadmap for APEC’s contribution to the realization of FTAAP’ was a major outcome of the last year’s Summit.

Once fully operationalised, the share of FTAAP’s intra-regional trade will be much higher than that of European Union or North America Free Trade Agreement. However, TPP members have already indicated that until TPP is ratified and realised, FTAAP will have to wait, thereby making their choices clear.

It is also speculated that between TPP and the ASEAN-led Regional Comprehensive Economic Partnership, TPP norms would be given preference, thus making the issue more convoluted.

With a range of regional economic arrangements, often with overlapping members, the Asia-Pacific region is indeed enmeshed in an ‘alphabet soup’. For instance, six of the 16 RCEP members -- Australia, Brunei, Malaysia, New Zealand, Singapore and Vietnam -- are also members of the 12-member TPP. FTAAP includes all RCEP and TPP countries except India, while both India and China are not part of the TPP.

So far as APEC is concerned, while all TPP members are also a part of APEC, not all APEC members are a part of the negotiating team for TPP.

Likewise, not all APEC members constitute the negotiating team for RCEP.

As of now, the United States is kept away from RCEP.

Streamlining membership issues including coalescing the RCEP, TPP and FTAAP together, straightening tariff and non-tariff issues will be a huge challenge to any meaningful regional economic mechanism. APEC could provide a useful platform in that context.

Nevertheless, United States President Barack Obama will try to use his presence in the Southeast Asian region to reinforce TPP. This may also lead to a clash of interests with China, which is pitching for FTAAP. Thus turning APEC into another battleground for the United States and China to preserve their economic influence in the Asia-Pacific region, which has always been a region of paramount importance.

Russia’s Vladimir Putin has already questioned the rationale for TPP.

For India, the 2015 APEC summit is not likely to bring in membership, and New Delhi may have to wait for some more time. While APEC is an economic forum with 21 Pacific Rim countries as its members, India, despite its request for membership, is not a member of the forum yet.

It must be remembered that India of 2015 is not the same as India of 1998, when its application was turned down over Peru, Russia and Vietnam. Today, major economies such as the United States, Japan, Russia and China have extended their support for India’s APEC membership. President Obama, during his visit to India in January 2015, advocated for India’s membership.

In fact, in 2011, as the host country, United States had invited India to participate as an observer in the APEC Summit.

India’s inclusion in APEC will give a boost to its ‘Act East Policy’ and will further integrate the Indian economy into the Asia-Pacific economic milieu. India’s accession to APEC will be equally advantageous for the forum.

India is the third largest economy in GDP (PPP) terms. India has strong bilateral economic ties with most of the individual APEC countries.  More importantly, APEC may be a step towards entry in TPP.

APEC is a “gentleman’s promise to ensure entry in the TPP”, as Vikram Nehru of the Carnegie Endowment for International Peace likes to call it.

Clearly, APEC would provide India with an opportunity to socialise with the developed economies of the Asia-Pacific region, move quickly along the reforms path and work towards making the economy more competitive rather than one miserably fighting for differentiated tariff liberalisation.

The US$ 2.6 billion deal between GE and Indian Railways to setup a manufacturing hub and supply a thousand diesel locomotives has already been applauded at the APEC CEOs summit in Manila. Clearly, fast-tracked, a transparent and business friendly investment climate is a must for India to become a manufacturing hub, as Prime Minister Narendra Modi wants India to be.

Without APEC, India is out of all groupings except RCEP; however, with its entry in APEC, India’s chances to get into TPP and FTAAP brighten, not to mention the other advantages APEC brings along.

The ‘Missing link in India’s Act East Policy’, as India’s former foreign secretary Shyam Saran calls it, needs to be filled sooner rather than later.

Though extending an invitation for APEC membership to India is not likely to happen in Manila, this might happen in Peru (2016) or Vietnam (2017).

Given that India is a rising economy, the inclusion of India may inject new dynamism to the group, and work as a catalyst to bring about more economic reforms in India.

Image: Protestors march to the American embassy in Manila, Philippines, ahead of the APEC summit in the city starting November 18, 2015. Photograph: Ezra Acayan/Reuters.

Dr Rahul Mishra is Asia Fellow at the East-West Center, Washington, DC. He can be reached at rahul.seas@gmail.com