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News Release

Understanding the Foundations for Shared Higher Productivity Growth in the Asia-Pacific Region

October 17, 2001

Contact:    Catherine L. Mann    (202) 328-9000
    Daniel H. Rosen    (212) 831-2287

Washington, DC—An invited Report endorsed by Ministers.

  • The origin: Catherine Mann and Daniel Rosen of the Institute for International Economics were asked by the United States representative to the Economic Committee of the Asia Pacific Economic Cooperation (APEC) forum to prepare a report to assist senior APEC officials and policymakers in understanding and addressing the challenges of the "New Economy". The report—The New Economy and APEC—provides analytical tools for use in domestic debates over structural policy and to achieve higher productivity growth in the New Economy. The Report was prepared in close consultation with the Economic Committee delegates of APEC and then passed on to Ministers who endorsed it on October 18, 2001, in Shanghai as a framework for considering New Economy challenges.
  • What it means: The New Economy has been misunderstood to mean merely an abundance of computers or information technologies. The Report demonstrates that the New Economy—which is characterized foremost by heightened productivity growth-depends on combining technology with meaningful structural policy reforms. It is these fundamental reforms that allow information technology (IT) to transform economic activities, and it is this transformation that brings the benefits of the New Economy. Without the policy foundations, information technology is less valuable, often of no value, and sometimes only a cost with no return.
  • The outcome: The Report draws bold analytical conclusions about the nature of growth in the world today, the urgency of policy reform to keep economies moving together toward such growth, and the steps any economy hoping to be a leader—instead of a laggard—must undertake. Importantly, the study is meant to frame debate and discussion among and within APEC economies, not settle on a surefire recipe.

The Report, The New Economy and APEC, is of importance and value to Asia-Pacific policymakers, Ministers, and leaders.

  • The APEC region, more than any other, is within reach of the prosperity and development promised by the transformation that comes with the New Economy. To embrace this opportunity, its foundation must be better understood.
  • The global economy is experiencing a slowdown more severe than anticipated when this Report was commenced. Deeper structural reforms to achieve faster growth, previously seen as an option, are now an urgent necessity. No other approach to growth can better lessen the downturn and speed recovery.
  • As an economic forum, we must accept our responsibility to address the nexus of divergent economic development and international violence and conflict. Our readiness to confront the roots of the economic divide is imperative. This Report is valuable for elevating basic structural economic reforms to equal prominence with the work on capacity building, technical assistance, and other agendas, so well known within APEC.

The New Economy and APEC Report draws key conclusions important for understanding the precise nature of the New Economy in our region.

  • The New Economy has been misunderstood to mean merely an abundance of computers or information technologies. The Report demonstrates that the New Economy—which is characterized foremost by heightened productivity growth—depends on combining technology with meaningful structural policy reforms. It is these fundamental reforms that allow information technology to transform economic activities, and it is this transformation that brings the benefits of the New Economy. Without the policy foundations, IT is less valuable, often of no value, and sometimes only a cost with no return.
  • The Report presents a framework of four policy domains-fiscal policy and fiscal activities, banking and financial structure, trade and cross-border investment, competition policy and legal regime. The Report demonstrates that these four policy domains are most critical and essential for obtaining the productivity benefits and growth of the New Economy. Further the Report argues that policymakers need to address these policy domains together because the New Economy tightens the relationships and synergies among the policy domains.
  • The Report clarifies potential macroeconomic benefits of structural reforms and engagement with the New Economy. But more important, the Report projects the consequence of failure to embrace these structural reforms in terms of:
    • relative trade competitiveness among APEC members;
    • specific sectors at risk of diminished international competitiveness within individual APEC economies.
  • The Report is especially useful in clarifying the role of the services sectors in maintaining sectoral and overall competitiveness and enhancing growth in the environment of the New Economy.

The Report offers "tool-boxes" to policymakers to aid the reform process.

  • Each economy must decide for itself whether the benefits of the New Economy are worth the adjustment costs of deeper structural reform. The Report provides valuable tools to better calculate the benefits and costs so that wise policy choices can be made. The three tool-boxes are:

    • A review of research on the macroeconomic benefits of the New Economy and an assessment of how selected economies have achieved these gains.
    • A set of case studies from firms, governments, and nongovernmental organizations in the region, which illustrates how individual APEC members are faring in their efforts to achieve New Economy benefits.
    • A modeling framework for estimating the exposure of individual commercial sectors in APEC economies to changing trade competitiveness resulting from New Economy policy and technological change.

About the Authors

Dr. Catherine L. Mann is a senior fellow at the Institute for International Economics in Washington, DC, and adjunct professor at the Johns Hopkins School of Advanced International Studies. In 2000, the Institute published her book, Global Electronic Commerce: A Policy Primer. Previously, she has served at the Federal Reserve Board of Governors, the President's Council of Economic Advisors, and the World Bank.

Daniel Rosen is a visiting fellow at the Institute for International Economics, and adjunct professor at Columbia University. In 2000, he served as senior advisor for international economic policy at the White House National Economic Council, where his duties included the APEC 2000 preparations and the New Economy initiatives begun at Brunei.

About the Institute

The Institute for International Economics is a private nonprofit research institution for the study and discussion of international economic policy. The Institute, directed by C. Fred Bergsten, provides fresh analyses of key economic, monetary, trade and investment issues and recommends practical policy approaches for strengthening public policy toward these important topics. The Institute receives funding from a large number of private foundations and corporations.