1

Structural Reform: An Important Structural Reform: An Important Aspect of Regional Economic Aspect of Regional Economic

IntegrationIntegration

2007. 2. 26Kyung-Tae Lee

2

Regional Economic Integration in East Asia and APEC region

Two main aspects of enhancing economic integration

Eliminating Trade Barriers Harmonizing Regulations and Standards

across Members Countries

3

Deepened Integration in the Region

Through Eliminating Trade Barriers There has been much progress in

“eliminating trade barriers.” In APEC region, simple average applied tariffs for

APEC have fallen from 12.2 per cent in 1995 to 6.8 per cent in 2005.

Bound tariff rates also declined from 20.6 per cent to 15.3 per cent between 1996 and 2004.

As a result, the economic integration has deepened both in APEC region.- E.g. Intra-regional trade flows, inward FDI, etc.

4

Deepened Integration in the Region

Through Harmonizing Regulations and Standards across Members Countries . Laws, regulations and standards of a country

significantly different from the global standard often work against attracting foreign investments and thus being significant barriers of integrating their economy to the world.

Because of that, many countries set out and practice good microeconomic policies including structural reforms in various areas including reforms of regulations and standards to satisfy a global standard.

5

Importance of Structural Reform

In general,

successful reform will remove impediments to full and efficient use of resources.

=> The functioning of markets will improve.

=> Economies will achieve higher productivity and living standards

6

Importance of Structural Reform

Regional Economic Integration and

Structural Reform • Structural reform will assist East Asian countries and

APEC economies in realizing the full benefits of trade and investment liberalization and facilitation

=> Promoting further economic integration in the region.

7

Importance of Structural Reform

Implication to Developed Countries For developed countries, gaining more from trade

liberalization does not come much from further opening-up but rather comes from reducing “behind-the-border barriers” which have hampered full benefit of liberalization.

Developed countries may use the trend of economic integration, which is an external factor, as a driving force of domestic structural reforms.

8

Importance of Structural Reform

Implication to Developing Countries Efforts in both structural reform and capacity

building need to be made at the same time Developing countries can learn from shared

experiences by developed countries who have gone through problems of “inefficiency in timely structural adjustment” in the course of economic growth, which resulted in enormous adjustment costs in restructuring and reforming their economic system.

9

LAISR 2010

APEC, over the last few years, have realized the significance of structural reform and carried out a work plan on structural reform

In 2003: Adoption of the APEC Structural Reform Action Plan

In 2004, adoption of the Leaders’ Agenda to Implement Structural Reform (LAISR)

In 2005: Adoption of APEC Work Plan on the Leaders' Agenda to Implement Structural Reform toward 2010 (LAISR 2010)

10

Focus of the Leaders’ Agenda to Implement Structural Reform

(LAISR) The priority areas of LAISR

Regulatory Reform Strengthening economic legal infrastructure Competition policy Corporate governance Public sector management

11

APEC Economic Committee (EC) on Structural Reform

Time Frame of EC’s LAISR 2010 Work Program Regulatory Reform in 2005-2007 Public Sector Governance in 2006-2007 Competition Policy in 2007 Strengthening Economic and Legal

Infrastructure in 2008

12

Further Roles of APEC

The Ways to Forward 1 To tightly link structural reform work in APEC to

its goal of trade liberalization even further, which will enhance and facilitate deeper integration of Asia-Pacific region, APEC should focus on “developing guidelines to harmonize of different regulations and standards” To tightly link structural reform work in APEC to its goal of trade liberalization even further, which will enhance and facilitate deeper integration of Asia-Pacific region. reform

amongst various work programs in structural reforms.

13

Further Roles of APEC (Cont’d)

The Ways to Forward 1 (Cont’d) Learning from EU’s example EU set out the European Approach to Regulatio

ns and Standards, which mainly include: The New Approach to Technical Harmonization and Standardization (to setting of Directives);The Global Approach (to conformity Assessment); Product Liability and The General Product Safety Directive; Information Procedure Directive, Strategy for external trade in the fields of standards and conformity assessment.

14

Further Roles of APEC (Cont’d)

The Ways to Forward 1 (Cont’d) Good Practice in APEC :APEC-OECD Integrated

Checklist for self-assessment on regulatory, competition and market openness policies.

In 2006, Chinese Taipei, United States and Hong Kong China volunteered in this process and Korea is going to participated in the session in 2007.

15

Further Roles of APEC (Cont’d)

The Ways to Forward 2• APEC is not an institution or organization that is run

based on large amount of funds and thus carrying out “long-term” and “costly” projects may not be an area with comparative advantage APEC – Focusing on “Consulting and

Coordinating” role Other organizations e.g. World Bank and IFI -

“Implementation” role through cooperation with APEC

16

Conclusion

• In the sense that economic integration aims eventually at forming a single market, the great disparities in laws, regulations and standards may become serious barriers to leading East Asia and APEC to this eventual goal.

• I hope that, APEC continues to strengthen its efforts in structural reform, especially on “harmonizing regulations and standards across member economies” which will enhance further the economic integration in the region and that East Asian countries also benefit from implications of APEC.