The place: Lima, Peru. The month: November 2008.

As they stood on the precipice of what looked to be the world’s worst recession in 60 years, the leaders of 21 Asia-Pacific countries and territories swore solemnly not to resort to trade protectionism to prop up their capsizing economies.

After all, they belonged to the Asia-Pacific Economic Cooperation (Apec) grouping, one of the world’s leading proponents of free trade and dedicated to the cause of making it even freer.

But barely three months after their declarations in Lima last year, the search for protectionist loopholes began—driven by quarter after quarter of steep economic contractions and fears of massive job losses across the globe.

Some countries directly raised tariffs on imports, but limited them to specific categories so as not to draw excessive ire. Others rummaged around in grey areas that were less obviously anti-trade, such as “buy local” exhortations or steps to help their domestic car industries.

To be sure, most economies stopped short of completely reneging on their free trade promises, preventing the crisis from worsening further. Not that Apec, which operates on a voluntary and non-binding basis, could have meted out punishment anyway.

In many ways, the way the situation played out was quintessentially Apec. It showed its strengths: the ability to get some of the world’s most powerful leaders to commit, with the best intentions, to an ambitious goal and to ensure that free trade continues largely unhampered.

But the recent crisis also highlighted the main weaknesses of the Asia-Pacific’s foremost economic forum. It lacks teeth; its disparate members are at different stages of development and hold different priorities; and its loose structure, while allowing it to adapt to the rapidly changing circumstances over the last 20 years, is not so suited for regulation.

Now, a year after the Lima promises, Apec celebrates its 20th birthday in Singapore this month, at what Singapore’s Second Minister for Foreign Affairs Raymond Lim calls a “challenging time”.

In a speech recently, he said this year “will mark a critical milestone in how Apec positions itself for the future”, as the world adjusts to a fundamentally different political and economic situation resulting from the global recession.

This year’s Apec meetings are also charged with extra excitement for reasons other than the financial crisis.

US President Barack Obama is using them as the pivot for his first official trip to Asia, as well as the impetus to finally hold the first US-Asean summit.

He and his Chinese counterpart, President Hu Jintao, will also get a chance to raise and address concerns about the post-crisis world order, in which the “G-2” of China and the US are emerging as counterbalances to each other.

Recently, Japan and Australia each mooted a new Asian grouping along the lines of the European Union, and further discussions—along with the concomitant behind-the-scenes power play—are likely to take place at Apec.

With so much in store, can Apec live up to the hype?

The common view of the grouping is that it has floundered over the last decade. Critics have castigated Apec both for not doing enough - for instance, to help Asia during the Asian financial crisis in 1997-1998 —and for trying to do too much, with climate change and terrorism added to the recent agendas.

Now that the teenage years are over, some Apec watchers say the crisis is presenting Apec with a golden opportunity to stop defending its relevance and start proving it. Otherwise, they say the grouping risks languishing in what is increasingly being seen as a state of stagnation.

Adrift in Asian alphabet soup

Apec was established in 1989, after the end of the Cold War stoked fears that the world would break up into three major trading blocs revolving around the US dollar, the German mark and the Japanese yen.

By including countries on the other side of the Pacific from Asia—in particular the US—Apec hoped to promote “open regionalism” and global free trade rather than discriminatory trading within blocs, thus bringing about sustainable economic growth.

In 1994, it adopted the ambitious Bogor goals of achieving free and open trade and investment among the Asia-Pacific’s developed economies by 2010 and among developing ones by 2020. Success at meeting the first deadline will be evaluated next year at the Apec meetings in Japan.

By many measures, Apec’s achievements so far have been considerable. It has slashed average tariffs among member nations from 17 per cent in 1989 to 5.5 per cent in 2004.

With freer trade and investment flows, the region has grown strongly. Apec nations now account for half the world’s gross domestic product and global trade, 40 per cent of its population, and 70 per cent of its economic growth.

But detractors argue that most of the grouping’s accomplishments took place in the first decade or so of its existence.

The easy part of opening up trade - lowering tariffs - has been done, they say. The next step is to make doing business across borders easier by reducing business red tape and boosting linkages between economies. They say this will be more difficult to perform and track, which is one reason that Apec’s achievements appear to have slowed.

Another reason, critics say, is the non-binding, consensus-driven nature of the group’s agreements. Apec’s main enforcement mechanism is peer pressure, which, while often more effective than expected, is not the most reliable weapon.

This has given rise to the old joke that Apec is nothing more than A Pleasant Excuse for a Chat—or worse, A Pointless Expensive Crock.

That Apec has lost its way is a common refrain among observers such as Dr C. Fred Bergsten, director of the Peterson Institute for International Economies in the US and chairman of the Apec Eminent Persons Group from 1993 to 1995.

He is blunt in his assessment that ever since Apec fell short in tackling the 1997-1998 Asian financial crisis, it has failed to adopt leadership positions on any regional or global key issues and has been marginalised over the last decade.

This was partly due to its members deciding to prioritise economic cooperation within East Asia itself, despite Apec’s original design as an Asia-Pacific institution to avoid a split down the middle of the Pacific, he argues. It does not help that in recent years, Apec’s to-do list has been diluted with numerous “issues of the day”, including terrorism, epidemics and the environment, says Dr Hikari Ishido, associate professor of international economics at Japan’s Chiba University.

This means that as a regional economic grouping, Apec has done less in terms of substance compared to other Asian groups, of which there are many, says Dr Aekapol Chongvilaivan, a fellow at the Institute of Southeast Asian Studies.

Asean now rubs shoulders with the occasional Asean+3 summit adding China, Japan and South Korea to the original mix of 10 Southeast Asian nations. Then there is the East Asia Summit, which involves Asean+3, in addition to India, Australia and New Zealand.

At last month’s Asean and East Asia Summit meetings, two new regional blocs were mooted: Australia’s Asia-Pacific Community, and Japan’s East Asian Community. Both would be styled after the EU and are meant to boost Asia’s global standing. The former lays out a role for the US, while the latter is vaguer on the issue but includes a common currency.

Neither is designed explicitly to replace Apec, but that scenario is not unthinkable. In a remapping of the Asia-Pacific region, where would Apec stand?

Apec adulthood

Despite the scepticism, Apec enters its third decade in a position of unique potential strength, with its influence on the global stage poised to grow further.

Apec members make up half the Group of 20 (G-20), which recently replaced the Group of Eight (G-8) as the primary summit of world leaders. Experts such as Dr Bergsten have argued that forming an “Apec caucus” would enable the grouping’s member economies to dominate the process at the G-20.

Next year, both Apec and the G-20 will meet in November, in Japan and South Korea respectively. If Apec leaders can discuss global issues in advance and provide leadership at the G-20, this would be a major contribution from Apec, says Dr Charles Morrison, president of the US-based East-West Centre and international chair of the Pacific Economic Cooperation Council (Pecc), an Apec observer.

Apec’s importance has also risen as attention swings to Asia as the main driver of global growth over the next few years. Its key appeal is in wielding enough clout to bring together some of the world’s most powerful leaders every year.

Such a high-level informal summit among leaders, where often a translator is the only other person in the room, is rare, particularly for the new so-called “G-2” of the US and China, who have their own bilateral talks but derive value from the context of a multilateral forum.

Even within Asia, Apec is a one-off. It has “member economies” rather than nation-states, giving rise to the uncommon sight of having mainland China, Hong Kong and Taiwan all sitting side by side.

Apec is also “endowed with natural balance” in terms of issues and membership, avoiding the G-20’s too-broad global and topical coverage and the too-narrow focus that a G-2 would have, says Dr Ishido. Then there is the valuable role Apec plays in securing active American involvement in the region, as two-thirds of US trade is with Apec economies.

Despite the increasingly complex mix of political and economic frameworks that have emerged in Asia, Apec remains unique in bringing together both sides of the Pacific, Singapore’s Trade and Industry Minister Lim Hng Kiang has said.

This uniqueness has come to the fore this year as the Obama administration makes its focus on Apec clear. Obama has centred his first official Asian trip on the Apec meetings, putting Singapore on his itinerary along with China, Japan and South Korea. He is also pushing through the inaugural US-Asean summit on the sidelines of the Apec meetings, after two previous tries failed.

Last month, the US’ acting senior official for Apec, Kurt Tong, renewed the commitment of the world’s largest economy to the grouping. He noted the sprouting up of pan-Asian fora, but said regional economic institutions must include members from both sides of the Pacific to be effective.

“On the economic front, we believe Apec provides the best and most established regional mechanism for practical cooperation and action, in no small part because the US is an active and contributing member,” he said.

As the world emerges from recession, Apec’s focus on the economy could prove its greatest strength, giving it authority to set a much-needed economic agenda.

The Singapore talks will look past the short term and discuss sustainable and inclusive growth. They may finally address fundamental economic disparities and problems within Asia, including whether China can maintain its breakneck rate of growth and how to spur domestic demand within the region.

Protectionism will also take centre stage at the meetings: Governments around the world are reported to be planning another 130 protectionist measures, and Apec would be the ideal forum to discuss whether these can be averted.

Already, Apec has made headway in this area, says Ravi Menon, permanent secretary of Singapore’s ministry of trade and industry and this year’s chair of the senior officials’ meeting.

He said Apec’s peer pressure helped to check the surge in protectionist pressures this year. Trade ministers have said that the need for them to account to their peers at fora like Apec gave them leverage to deal with populist pressures back home, he said.

But if Apec really wants to prove its worth, it must take the lead in crucial discussions that will take place in other fora. While Apec meetings may never produce enough concrete results to silence its critics, its real value could be in setting the stage for informal discussions that pave the way for “real” actions elsewhere.

It should start straightaway. Almost all Apec members belong to the World Trade Organisation, and should throw their collective weight behind concluding the Doha Round of trade talks by next year, as they have pledged, say experts.

Even if they do not succeed, a conspicuous collaboration in the right direction would at least show the world that Apec is far from resting on its laurels.

Host-wise, this is the perfect time for Apec to enter a golden age.

After Singapore wraps up the meetings this year, the mantle of Apec host will be taken over by Japan next year and the US in 2011—an unusually strong trio of venues for continuous and consistent policy discussions, says Nanyang Technological University associate professor Tan Khee Giap.

As Apec turns 20 this year, it has arrived at a crossroads. By doing nothing, it will stumble along into a premature, stagnant mid-life crisis.

But if it seizes the chance presented by the downturn to reassert its position as the premier economic regional forum, it may well gain a new lease of life. (By Fiona Chan in Singapore/ The Straits Times/ Asia News Network)