APEC Meeting -- Good for emerging market funds

November 21, 2006

Last week, the nations that border the Pacific Ocean gathered in Hanoi for the annual Asian Pacific Economic Cooperation (APEC) summit. Combined, the APEC member countries contribute 70% of the world's growth, and include three of the world’s largest economies--the U.S., China and Japan--as well as Russia, Vietnam, South Korea, Chile and Australia.

The APEC summit agreed upon the following:

• Holding off, for now, talks to establish a Pacific-wide free trade area.
• Pledges to resume the Doha round of world trade talks,
• A resumption of the Six Party Talks with North Korea. South Korea agreed to join a UN resolution condemning North Korea for human rights abuses (something it was reticent to do before).

APEC also hosted the APEC CEO summit, where over 1,000 local corporate executives met to discuss ways to increase business investment in the area. Since1996, the annual APEC CEO Summit is the biggest event of the business community of the region.

What the APEC Summit Means:
Since the Doha talks have foundered, the U.S. thought that APEC members such as Australia, Japan, China and Russia would be interested in a Pacific area free trade agreement.

However, the re-commitment to Doha pledged by members at APEC indicates these countries’ reluctance to let the U.S. into their growth markets without the inclusion of the EU. This is because the APEC countries need the U.S. to pressure the EU countries to relinquish their agricultural subsidies, which is one of the things that stymied Doha in the first place.

In addition, Japan wants a 16-nation free trade group in East Asia comprising Southeast Asia, China, Japan, South Korea, India, Australia and New Zealand. Furthermore, China wants a free trade agreement with the Association of Southeast Asian Nations (ASEAN), led by Indonesia, Malaysia, Singapore, Thailand and the Philippines.

The APEC meeting was buoyed by the recent U.S. support of Russia’s admittance into the WTO. However, the summit had its awkward moments, since the U.S. Congress postponed establishment of Permanent Normal Trade Relations with Vietnam until December, thereby postponing the benefits of WTO membership.

Action Steps:
Maintain your allocation of emerging markets funds. Although the APEC Summit did not achieve all that the U.S. had hoped for, it shows continued growth and free trade among the Southeast Asian countries---most of which are emerging markets.

Source: APEC web site, English People’s Daily