APEC BUSINESS ADVISORY COUNCIL
SECOND MEETING, SEOUL, 26-29 APRIL 2017
REPORT TO NEW ZEALAND BUSINESS
The second meeting of the APEC Business Advisory Council for this year took place in Seoul from 26-29 April. New Zealand was represented by Katherine Rich, Phil O’Reilly and Tenby Powell. ABAC members drawn from the 21-economy APEC region used the discussions to finalise their annual letter and report to APEC Ministers Responsible for Trade, due to meet in May, with recommendations about business priorities for the region.
The discussions traversed a wide range of topics across the regional economic integration, finance and economics, sustainable development, connectivity and small business agendas. Globalisation was a major focus: members stressed the importance of “staying the course” on trade liberalisation, while also recognising that globalisation needed to be complemented by sound domestic policies so that the benefits of open markets could be more widely shared. Members discussed the trade negotiations agenda including TPP, RCEP, the eventual Free Trade Area of the Asia-Pacific and the future vision for the APEC region, along with prospects for the WTO Ministerial Meeting at the end of the year. ABAC’s interest in the digital economy remains strong, with discussions around how best to foster digital trade-enabling environments (for example, through the CBET Network, designed to enhance the participation of small business in e-Commerce). Discussions also continued on how to empower micro-, small and medium enterprises to participate more fully in global markets, covered issues relating to FinTech and financial architecture, and institutional and physical connectivity (including supply-chain connectivity through global data standards). There was strong endorsement for work led by ABAC New Zealand on non-tariff barriers to trade. ABAC New Zealand also took forward its interest in food trade issues, focusing at this meeting on food-related services trade issues.
ABAC New Zealand’s Katherine Rich, joined by recently-appointed ABAC New Zealand colleagues Phil O’Reilly and Tenby Powell, attended ABAC’s second meeting for 2017 in Seoul from 26 to 29 April. Phil and Tenby also took part in the Asia-Pacific Financial Forum held on 25-26 April. Staffer Stephanie Honey attended in support.
Discussions took place in Plenary sessions and in five more detailed themed Working Groups: Regional Economic Integration (co-chaired by Katherine); Sustainable Development; Connectivity; Micro-, Small and Medium Enterprises (MSMEs), and Finance and Economics. The meeting provided the Council with the opportunity to finalise its annual letter and report to APEC Ministers Responsible for Trade, due to meet in May, by setting out the business community’s priorities for the region and for the APEC agenda.
Globalisation and trade liberalisation: staying the course
Globalisation and the prospects for further trade liberalisation was a key theme. Emphasising the imperative for the peace and prosperity of the APEC region of “staying the course” on trade liberalisation, ABAC members discussed the rise of protectionism and ongoing public debates over globalisation, agreeing about the critical importance of sound domestic policies to complement trade liberalisation, so that the benefits of open markets could be more widely shared. Domestic policy-settings needed to be revisited to ensure that trade was inclusive and sustainable; adjustment programmes such as structural reform, education and skills training, along with social safety nets, would be particularly important. This was a major theme throughout ABAC’s letter to Trade Ministers. ABAC New Zealand members, and especially Phil (bringing also his OECD Business and Industry Advisory Committee and B20 insights to the discussions) were active on these topics. For a copy of the ABAC press release, please click here.
These overarching themes around trade liberalisation and complementary policies were compellingly summarized by the Korean Vice Minister for Foreign Affairs in his speech at the opening event of the ABAC meeting. For a copy of the Vice Minister’s statement (which was subsequently released by ABAC), please follow this link.
Along with expressing support for this approach, ABAC members reflected on the fact that governments and business (albeit each with their own unique roles) needed to do much better at explaining the substantial benefits of more open markets and investment flows. Members accordingly welcomed an update on a major research project that ABAC has commissioned from the University of Southern California’s Marshall School of Business, due for completion by November. The project will look at harnessing globalization and technological progress for social inclusion and growth. It will entail interviews with a wide range of stakeholders from around the region to gain a deeper understanding of these important issues. It will also explore possible future approaches to ensuring that trade liberalization and economic growth are inclusive.
Regional trade architecture: TPP, RCEP, FTAAP and next steps
Closely linked to the discussions about globalisation, ABAC members talked extensively about the trade architecture of the region, along with reflecting on the business community’s vision for the Asia-Pacific region post-2020 (after the deadline for the achievement of APEC’s trade-liberalising ‘Bogor Goals’). These discussions were enhanced by the participation of APEC Executive Director Alan Bollard, who was able to offer a broader APEC Secretariat perspective on the issues.
Support in the business community remains strong for pressing ahead with the Free Trade Area of the Asia-Pacific (FTAAP), now more than ever before. However there was also discussion about whether the FTAAP per se should be the goal for APEC’s post-2020 vision, or whether a less specific and detailed target should be pursued which could encompass a trade agreement but also broader goals around economic integration and other social dimensions. It was recognised that the business community had an important contribution to make to these debates in the APEC context, and members agreed to continue to discuss and reflect on the contribution that ABAC could offer. Members also agreed that APEC itself still had a crucial role as an ‘incubator of ideas’ that could eventually be taken up in other settings.
Members talked at length about the “pathways to FTAAP” – that is, the trade agreements intended as building blocks towards a region-wide arrangement, including the TPP and the Regional Economic Comprehensive Partnership, or RCEP. ABAC New Zealand members were active in these broad geostrategic discussions. All Council members agreed on the value of regional trade agreements, although acknowledged that there were some concerning signals from the Trump Administration about future trade agreements. (Some members were also anxious to ensure that economies did not inevitably move back towards bilateral agreements rather than pursuing ‘bigger’ regional arrangements, given the sub-optimal outcomes that this would deliver for global value chains and trade diversion, among others.)
The status of and prospects for TPP were very much top of mind, particularly in light of recent signals that the government of Japan supported the ratification of the agreement by the TPP-11 (that is, the original signatories minus the US). The business community was unified in its view that the substantive commitments of the TPP agreement should be implemented by the TPP-11 and that the high-quality outcomes of the agreement, especially in the new framework of trade rules for the region, should be preserved. (There were some debates over the niceties of the technical/legal approach that should be taken but there was clear agreement that the substantive content of the agreement needed to be made concrete regardless.) There was also discussion about the importance of trying to ensure that RCEP delivered as ambitious and liberalising an outcome as possible.
ABAC members affirmed their ongoing support for the WTO as the foundation for the global trading system, looking ahead to the end-of-year WTO Ministerial Meeting in Buenos Aires. Members expressed the hope that the Buenos Aires Meeting would deliver ambitious outcomes on agriculture subsidies and ‘fish subsidies’ (that is, subsidies that contribute to over-fishing), along with progress on e-commerce and services – reflecting the evolution of the trading environment and priorities since the now-thirty-year-old Uruguay Round outcomes. ABAC Papua New Guinea noted that they would be hosting a WTO trade and development forum in Port Moresby in June, focusing on the mutually-reinforcing nexus between the WTO, the UN Sustainable Development Goals, and APEC.
Liberalising trade and investment: NTBs and services
Building on a series of presentations over the past eighteen months in ABAC on non-tariff barriers, including securing agreement to the (trade-friendly) ‘cross-cutting principles’ on NTMs/NTBs of which ABAC New Zealand had led the development, Katherine gave a well-received presentation on a specific sectoral example to illustrate the cross-cutting principles, looking at barriers to the wood and forest products trade. It is expected that in subsequent meetings, presentations from ABAC New Zealand and others will look at manufactured goods, including for example machinery and electronics. This will enable ABAC to take a comprehensive package to Leaders later this year of the cross-cutting principles, supported by sectoral examples.
Usefully, the ABAC Letter to Trade Ministers once again strongly endorses the cross-cutting principles and the importance of eliminating NTBs, including for food trade, for reasons of overall economic growth, to foster global value chains and for food security. (In the case of food, this builds on last year’s detailed ABAC research report on Food NTBs, to which many New Zealand businesses contributed – see the full report here).
A further significant focus for ABAC work during the week was on the services agenda. ABAC members discussed their priority interests among the 14 listed areas in the 2016 Roadmap for the APEC Services Cooperation Framework (the ASCR), intended to expand the services sector and boost services trade in the region. Katherine, for ABAC New Zealand, signalled a strong interest in developing its thinking on food-related services – see below.
Towards sustainable development and food security
Reflecting New Zealand’s strong interests in food security and food-trade liberalisation, Katherine gave a well-received presentation on food-related services. She noted that much work was needed on definitions (that is, what constitutes a food-related service and how do these differ from services related to manufacturing and other sectors) and also to explore the policy environment, including identifying the trade barriers that might be affecting this sector. Katherine commented that liberalisation of food-related services seemed likely to deliver win-win outcomes, not just for the services exporters concerned, but also for food exporters and importers, for consumers, and for food security in the region overall, reflecting the important contribution made by food trade to food security. She said that ABAC New Zealand looked forward to exploring the issues further, including with the food industry and services providers in New Zealand and around the region. Representatives from ABAC Thailand, PNG and the Philippines voiced support for this work.
Promoting connectivity in the region
Members discussed institutional, physical and digital connectivity in the APEC region. Katherine introduced an update from GS1 on the issue of global data standards (GDS), intended to assist supply-chain optimisation through digitisation and traceability. The GS1 update provided an assessment of a number of GDS pilot projects around the region, looking at the benefits, challenges and lessons learned. There was broad consensus that this was a valuable project and that APEC economies should be encouraged to progress it further. The final report and recommendations are due in June, with an implementation workshop scheduled for for SOM3 in August.
Greater connectivity through the digital economy was a recurrent theme throughout the week’s meetings. All were agreed that the digital economy was central to the future of the region and that its opportunities needed to be embraced and extended. Of particular interest were presentations on FinTech and digital payments, and a session organised by ABAC China member Diane Wang of DHgate and attended by Katherine and Tenby, among others, about the ‘CBET Network’. (This initiative, Cross-Border e-Commerce Training, is designed to open up opportunities for SMEs through cross-border e-commerce. New Zealand Post is a founding member of CBET.)
Separately, in the Connectivity Working Group, ABAC China gave an update on its “Digital Trade Index” – a big data-based diagnostic to quantitatively assess the level of digital trading readiness and potential across global value chains, and propose areas for improvement. This has significant potential to enhance economies’ and businesses’ understanding about the sophistication and reach of the Asia-Pacific markets in the digital space.
Enhancing MSME integration in global markets
ABAC members explored ideas about how to enable micro-, small and medium enterprises (MSMEs) to participate more fully in the regional economy and in global value chains. Tenby played an active role in the discussions, contributing insights from the New Zealand Small Business Network perspective. Of particular interest was an ABAC Canada initiative, ‘Growing Business Partnerships’, which will fund research studies, surveys, workshops and training for MSMEs, focused on business entrepreneurship skills, market access and technological innovation. ABAC members have been invited to nominate up to three start-ups per economy (which would need to fund participation themselves) to take part in this MSME special programme which will take place in the margins of ABAC III in Toronto in late July.
Other topics discussed included ‘B Corp’ (a governance and ecosystem to enhance SME-driven innovation), and ways to strengthen the participation of women in the economy. On the latter topic, ABAC China is leading a project, ‘ABAC Women Connect’, about enhancing the opportunities for women entrepreneurs, especially through digitalisation. The project includes a series of video interviews with ABAC members, female entrepreneurs and others. Katherine took part in the interviews, along with a small number of other leading business figures, and was personally acknowledged by ABAC China’s Diane Wang for the leadership she has shown.
New frontiers for finance and economics
A range of cutting-edge finance and economics topics were discussed through the week, in both the ABAC meeting and the Asia-Pacific Financial Forum which Phil and Tenby attended. A very helpful overview presentation from ABAC US hightlighted that growth in GDP, labour force and productivity had all slowed since the global financial crisis (although trade seemed to be marginally on the increase in the current year). This was of concern given that the drivers of economic growth were labour and productivity. The presentation explored a range of possible policy levers, including structural reforms, that could be deployed to turn these trends around. Other topics discussed included financial transparency, micro-financing, capital markets and a recent Pacific Alliance Finance Ministers’ Meeting.
Next meeting and further information
ABAC III will be held in Toronto, Canada, from 24 to 28 July.