The APEC forum has been traditionally associated with free trade and investment. But the forum's work extends to many facets of economic cooperation, and its general direction has been evolving over time, as can be seen in the way APEC has been branded and utilized by its hosts and members over recent years.
A pattern developed over the last half-decade. The Philippines, as APEC chair in 2015, decided on the theme "Building Inclusive Economies, Building a Better World." With a focus on micro, small and medium-sized enterprises (MSMEs), developing human capital, women, elderly, youth and rural communities as well as disadvantaged or vulnerable groups, Peru themed its host year as "Quality Growth and Human Development." In 2017, a key product of APEC Leaders during their meeting in Viet Nam was the Action Agenda on Advancing Economic, Financial and Social Inclusion. The theme of APEC Papua New Guinea 2018 was "Harnessing Inclusive Opportunities, Embracing the Digital Future." One of Chile's priority areas in 2019 was "Women, SMES and Inclusive Growth." Malaysia, as if predicting the effects of COVID-19 on the economy and the way work has evolved, set "Inclusive Economic Participation through Digital Economy and Technology" as one of the APEC 2020 priorities.
This year, after witnessing the pandemic devastate economies and societies all over the world for months, New Zealand has made "Increasing inclusion and sustainability for recovery" one of its hosting priorities.
This word, inclusion, is not new, but it is getting more prominent and frequent in declarations and policy commitments. This is no surprise because as the world's economy grows, and it has, so does the chasm between haves and have-nots. The danger of this imbalance of resources and opportunity was starkly exposed by the ongoing global pandemic, severely afflicting the poorest among us and making entire economies vulnerable to a downturn.
We are slowly but surely realizing this as true: economies need to be inclusive. But before the term becomes a buzzword devoid of all meaning, we need to understand what it is and how it must be implemented to make lives better.
Is inclusion a new topic for APEC?
No. Even in APEC's infancy, Ministers were already talking about the need to raise living standards and reduce economic disparity around the region. When Leaders first met on Blake Island in 1993, they envisioned an APEC community where "people share the benefits of economic growth through higher incomes, high skilled and high paying jobs and increased mobility." In the 1994 Bogor Declaration, Leaders predicated all of APEC's activities toward enhancing "accelerated, balanced and equitable economic growth." In fact, this line appears in the first sentence of the Bogor Goals, before any mention of free trade and investment.
Inclusion reducing disparities and improving well-being has been an APEC topic from the start. In fact, one can argue that it was the objective all along, with free trade and investment being the means toward that end.
What is inclusion anyway? At least in the APEC context?
Inclusion is about enabling all people to contribute to, and benefit from, economic growth. It means ensuring that everyone can develop their capabilities to contribute to economic growth by being healthy, skilled, and innovative. It is about ensuring that the expanding opportunities for employment and entrepreneurship brought about by economic growth are open to all people.
Inclusion is also about removing the structural barriers that prevent people from developing their capabilities and having access to economic opportunities. It means thinking about access to healthcare, education, and finance, so that everyone can develop their capabilities regardless of family income, gender, race or location. It also means looking into the structural reforms needed to ensure that everyone who wants to contribute to the economy by going to work or putting up a business is able to do so, and there are no inequitable institutions, laws, or practices along the way. Bottom line, inclusion is about ensuring that your economic destiny has less to do with your circumstances of birth and more to do with what you do.
Is inclusion the same as reducing income or wealth inequality?
Not exactly, but they're related. While inclusion is about capabilities and opportunities, income and wealth are about economic outcomes. Even in an imaginary world where all people have equal capabilities and access to opportunities, we can still have income inequality because people will have different levels of effort, skill or plain luck.
However, lack of inclusion will invariably result in income and wealth inequality with clear patterns along the structural barriers discussed above. Income or wealth inequality that is inter-generational and segregates along lines of socioeconomic class, gender, race or indigeneity, location, or other background attributes is a clear indication of lack of inclusion. Inclusion will not ensure that everyone's incomes and wealth levels are equal, but it will ensure that any inequality will be the result of effort, skill and luck rather than the circumstances of one's birth.
Is inclusion redistributive?
In a way, yes, but this does not mean the government playing the role of Robin Hood. Economic policy decisions even those on trade and investment have redistributive impacts.
For example, reducing tariffs on steel imports results in lower prices for steel consumers but also lower profits for steelmakers and so less income for steel workers. Steel trade liberalization is therefore a redistribution of economic benefits from steel producers to steel consumers such as manufacturers of automobiles and appliances and their end-buyers. Conversely, raising tariffs on steel imports results in a redistribution from steel consumers to producers. In the same way, a policy to spend public funds on universal access to healthcare or quality education for poorer students is a redistribution toward the beneficiaries of such policies. And if this spending is supported by progressive taxes, then it is a redistribution from the rich (through taxation) to the poor (through better access to services).
Ultimately, inclusive policies aim to redistribute opportunities from more privileged groups to the more marginalized groups, hopefully resulting in a more equitable and efficient economy.
A more efficient economy? Isn't inclusion going to make economies less efficient?
No, it won't. Inclusion is about ensuring that those that have the potential to contribute to economic growth have the capabilities and opportunities to do so. Inclusion is about not letting structural barriers due to socioeconomic class, gender, race or indigeneity, location, or other background attributes hinder one's ability to contribute to the economy. This means more people can contribute their ability and creativity into economic production and innovation. It means every person is equipped with the health and skills to be a productive worker, entrepreneur or innovator.
It can require substantial investments in human capital development, but evidence has shown that ensuring access to healthcare, education and other basic services are sound investments with profitable social and economic returns.
How can APEC contribute to inclusion?
APEC is a forum for regional cooperation. It is a venue where important regional issues are discussed, consensus is formed and commitments are made. Like trade liberalization, inclusion is an important regional issue, too, and could stand to gain from APEC's way of regional cooperation. APEC Leaders since 1993 have called on the forum to work on this issue, and APEC can contribute by operationalizing its mandates on inclusion, facilitating cross-fora collaboration, and mainstreaming inclusion in APEC projects and discussions.
Singapore, 15 March 2021
By Emmanuel A. San Andres