Background Information of APEC
"Asia-Pacific Economic Cooperation (APEC) was established in 1989 in response to the growing interdependence among Asia-Pacific economies. Begun as an informal dialogue group, APEC has since become the primary regional vehicle for promoting open trade and practical economic cooperation. Its goal is to advance Asia-Pacific economic dynamism and sense of community. Today, APEC's 21 member economies had a combined Gross Domestic Product of over US$18 trillion in 1999 and 43.85 percent of global trade."

The chairmanship of APEC rotates annually among APEC members. The Chair is responsible for hosting the annual Ministerial meeting of foreign and economic ministers.

All the APEC activities are open to its member economies. Non-member economies, regional/international organizations as well as others can also participate in some of the activities as guests, subject to approval/agreement of APEC.

The Evolvement of APEC
According to Liu (1997), the evolvement of APEC can be divided into three phases. These phases, together with the most significant events in each of them, are listed as follows:

1. Birth and Childhood (1989-1991):

Advocated by Australia, APEC was established in its first Ministerial meeting in Canberra, Australia 1989. The Seoul APEC Declaration in the Third Ministerial Meeting in 1991 elucidated APEC's objectives (economic growth, liberalization, and multilateralism), scope of activities (including trade and investment etc.), mode of operation, rules for participation and organizational structure (annual Ministerial meeting and work groups).

2. Adolescence (1992-1994):

During this period, members through consultation defined the connotation, purpose and principles of APEC. From the First APEC Leaders Meeting in Seattle in 1993, the Leaders meeting has been held annually. Thus the decision-making mechanism of three layers (Leaders meetinga Ministerial meeting a high-level official meeting) was formed and regulated.

A historic event in this period was the Bogor Declaration of Common Resolve in the second Leaders Meeting, which proclaimed intention to turn APEC into a zone of free trade and investment by 2010/2020 for developed/developing members. Thus a timetable was set for trade and investment liberalization.

3. Proliferation and Accelerated Development (1995-present):

During this period APEC has started to enlarge the areas of economic and technical cooperation. There are two milestones in this period. The first is the 1995 Osaka Action Agenda in the seventh Ministerial meeting, which introduced a blueprint for liberalization and facilitation of trade and investment for carrying out economic and technical cooperation among APEC members. The second is the 1996 Manila Action Plan For APEC in the Eighth Ministerial Meeting, which included both a collective action plan and individual action plans of all 18 members at that time, as well as general guidelines to govern these plans.

What is China's attitude towards APEC?
Together with Taiwan and Hong Kong, China became an APEC member in 1991. APEC is the only regional economic cooperation institution China has participated in. Protesting that economic cooperation should proceed in multiple forms through multiple channels, China views APEC as a building block for global multilateralism and takes an active role in APEC. The 2001 APEC annual summit was held in Shanghai, in recognition of China's new place in the world economic order.

With the largest area in Asia and the biggest population in the world, as well as its rapid economic growth, China represents a large potential market and has strong influence on APEC. China insists the benefits of developing countries from international and regional cooperation and emphasizes on the following two aspects:
First, China urges APEC to take full consideration the divergent conditions of member economies. It confirms that developed countries should contribute more to help developing members catch up and to compensate for the costs of liberalization.

Second, developing and developed countries always have different objectives in their economic cooperation. Developing countries always want to benefit from economic and technical cooperation while developed countries just focus on liberalization to enlarge their markets. China promotes a parallel process of trade and investment liberalization as well as economic and technological cooperation based on equality, equity and mutual benefits (Jiang Zemin, Seattle Meeting).

What are the benefits and costs for China to participate in APEC?
China is motivated in APEC by a lot of benefits, both politically and economically.

First, most major trading partners of China exist in the Asian-Pacific region. Nowadays about 80% of China's external trade and about 90% of its capital inflow come from this region. Trade and investment liberalization within this region will largely benefit China.

Second, through economic and technical cooperation with other countries, China can improve not only its management and technology in production, but also its trade environment and relations with other countries.
Third, in the political aspects, APEC provides chances to engage in bilateral talks or negotiations about issues that China concerns. Furthermore, China hopes to form an untied frontier with other developing countries in APEC, against the criticisms from developed countries on sensitive issues such as the human rights issue.

An important issue was China's accession into WTO. APEC helps readjust China's both internal and external commercial environments for its WTO entry. APEC also raises China's negotiation power for WTO accession. China used its influence of the regional affairs to trade-off U.S. support for early accession to WTO. Besides, according to Hellmann and Pyle (1997), China stated that the bottom line for participation in APEC remains dependent on China's entry into WTO, therefore to some extent APEC members support China's entry into WTO.

However, to participate in APEC also means challenges to China, both in its production and trade policies. China has to continuously improve to keep its competitiveness. In the long run, the outside competitions would help the internal economic and political reform of China and reinforce its position in the APEC.

What is the relationship between Japan and APEC?
The economies of APEC are of great importance to Japan. A large portion of Japan's exports and foreign direct investments are destined to APEC members. Most of Japan's important political and economical partners are located within this region. Naturally, Japan is interested in the economic development of this region. It has donated 10 billion Yen (US$90 million) to fund programs that help developing members to advance liberalization. In addition, for each of the 10 fields APEC has been working on cooperation (e.g., communication, industrial technology and energy), Japan attaches importance to its participation.

On the other hand, as the only highly industrialized country in Asia Japan takes an important position in APEC. Japan played a behind-the-scenes role in urging the formation of APEC. Characterized by protectionism in its trade policy, Japan initially intended to use APEC as a vehicle to advance regional economic development rather than for the liberalization of trade and investment. In the face of U.S. demands for opening the Asian market, Japan generally sides with developing countries and emphasizes the reality of Asia to U.S.. The Osaca meeting chaired by Japan reached an agreement on how members carry out the "unilateral, non-coercive" formula for trade liberalization.

In recent years, especially after the Asian Financial Crisis, Japan still takes a leading role in APEC. However, there are arguments that the leading role of Japan is diminishing. (Deng, 1997). The major pressures to Japan's active participation in APEC come from domestic protectionists. One piece of evidence for this trend is that no Japanese representatives attended APEC CEO summit in Vancouver in 1997. Furthermore, the decline of Japan's share in global export market adds to this diminishing trend.

What is the relationship between the United States and APEC?
As the most powerful economy in the world, U.S. takes a vital role in APEC. It has largely helped the economic recovery of countries suffering the Asian financial crisis. In the year 2000, the United States imported nearly $700 billion worth of goods and services from other APEC economies.

On the other hand, the Asia-Pacific region is also of great importance to U.S. economy. Taking the year 1999 as an example, U.S. trade in goods with APEC totaled more than $1.132 trillion, which is worth two-thirds of U.S. trade with the world and one-tenth of U.S. GNP. In addition, most major trade partners of U.S. are located in this region. U.S. views APEC as an important vehicle to engage in the Asia-Pacific region and to open this big market. Therefore its main focus of APEC is the trade and investment liberalization and deregulation.

However, Japan, another dominant member of APEC, initially intended to construct APEC as a vehicle to enhance regional economic and technical cooperation rather than trade and investment liberalization. Taking advantage of U.S.'s chairmanship of APEC in 1993, the former U.S. President Bill Cliton invited APEC heads of state to meet and proclaimed the vital interest of U.S. in developing the free trade and democracy among the APEC members. In the next year (i.e., 1994), U.S. engineered the Bogor Declaration in the APEC summit in Indonesia. The declaration set timetables of trade and investment liberalization for developed and developing members respectively. Realizing that binding agreements and rules are not pragmatic for the wide diversity of Asian economies, the declaration decided that each member would fulfill the commitments in 'voluntary and unilateral' actions. (Ishizuka, 1996, pp. 25).

Presently, the strength of U.S. in APEC has being affected by its recessions. The U.S. protectionists are thus putting pressures on its involvement in APEC. Moreover, the rapid economic growth of China and ASEAN countries is challenging the U.S. leadership in APEC.

About the smaller members of APEC
Besides China, Japan and the U. S., there are 3 developed countries and 13 developing countries, 2 regions (Hong Kong and Taiwan) in APEC. A large part of the Asian, North American and Oceanic members joined APEC upon its establishment. While the Latin American members and Russia were attracted to join APEC in a later time by its successful performance.

For those developing countries, the APEC membership brings a lot of benefits. These benefits can be classified into two categories. The first is the trade and investment liberalization, which enlarges international markets for these countries and helps create new jobs. The second kind of benefits is the regional cooperation for development, including the technology transfer, human resources development, technical assistance, environment protection, and many other aspects.

On the other hand, the costs to these developing members in APEC may also be attributed to the trade and investment liberalization through reducing barriers in these fields. The low cost products from highly industrialized countries pose challenge to their domestic industries, which are still in an early development stage.

From this viewpoint, most developing members of APEC support the "Asian approach" of Japan to advance cooperation. The developed members, such as Canada and Australia, are proponents for the "Western approach" of U.S. to open the Asian markets. However, with their economic growth, many developing members have seen the needs for voluntarily reducing the trade and investment barriers. For example, Malaysia and Indonesia are implementing tariff reductions and investment liberalization on a substantial scale without being forced by outside pressures.