Remarks to APEC dialogue on information sharing on RTAs/FTAs in the Asia Pacific region. Qingdao, 8 May 2014 Stephen Jacobi, alternate member, APEC Business Advisory Council

Thank you for the opportunity to share some thoughts in today’s dialogue on behalf of the APEC Business Advisory Council.

ABAC has been meeting in Santiago this week but I am pleased on behalf of colleagues to able to congratulate you all on the initiative to hold this event.

Earlier this week I participated in a capacity building seminar organized by New Zealand, which sought to share best practice for preparing for FTAs.

I showed this slide and said we’d asked a committee to come up with the best model for achieving regional economic integration and this was the best they could do.

The slide is a bit fuzzy but it’s meant to be like that!

Against this background I’d like this afternoon to attempt an answer to two related questions.

Firstly, what does business want from the new generation of FTAs which are currently under negotiation and, secondly, what does ABAC want from governments at this point.

What does business want?

Given the rather confusing situation we find ourselves in today, it is surprising to recall that it was ten years ago that with the help of Rob Scollay and his colleagues at PECC that ABAC started to talk about a need for a more rational and comprehensive framework for trade and investment.

In the ten years’ interval ABAC’s interest in FTAAP has not diminished – we have referred to it in every annual report to Leaders – but the way business has been done has changed significantly.

I’m not sure that in 2004 we quite imagined the extent to which trade would be dominated by intermediate goods or by products, which could be described as “made in the world”.

I’m not sure we foresaw that services would be embodied in the production and distribution of goods in quite the way they are today.

And I doubt we knew much about the future development and impact of the digital economy.

All this underscores an important point:  business and the market do not stand still and the longer trade negotiations take to be concluded simply dilutes their effectiveness as a means of expanding trade.

I was gratified in the workshop held here on Tuesday to hear an official say “if we are not clear that FTAs are meant to lead to more trade and more business, then we are wasting our time”.

That seems to me to be the key concern of business today, in the post GFC environment, as we approach a new generation of FTAs – how can they create more business being done and to it being done more quickly and with less cost.

Today as ever, business wants quite simply a better environment for doing business.

That means more predictability, better rules, clearer pathways to market, less cost associated with getting products to consumers.

This is not achieved when in the region we face a number of overlapping and sometimes contradictory FTAs, which we generally describe as the noodle bowl.

The noodle bowl can be addressed by speedier elimination of tariffs to zero, more plurilateral and fewer if any bilateral schedules in regional agreements like TPP, RCEP and the Pacific Alliance, and flexible, cumulative rules of origin which allow goods made in various economies to qualify as local content.

Many of these issues can hardly be described as next generation – they are less 21st century issues than 20th (or even 19th) century ones – the point is we need to finish this old agenda even as we start a new one.

Next generation issues can be new approaches to old issues as much as new issues not previously thought of.

Next generation issues are rather more likely to be found behind the border than at the border.

And so more than ever before we need to devise robust processes to address non-tariff barriers and other “behind the border” issues.

We need to develop greater coherence in rule making around the region and co-ordinate – to the greatest extent possible our approach to issues like investment, innovation and competition.

We need to develop a stronger focus on services trade issues recognizing the by growing share of services trade in global commerce.

We need to continue to work on the digital economy and try to incorporate new disciplines relevant to the way business is being done today, including permanent duty free access for digital products.

Trade liberalisation outcomes should also be accompanied by practical trade facilitation measures to promote more effective supply chain connectivity.

For example, ABAC has been advocating the adoption of global data standards, which would hasten the movement of goods through regional supply chains.

What does ABAC want?

At present APEC members are involved in a number of complementary initiatives, which are broadly seen as pathways to FTAAP.

Business in the region has the greatest interest in seeing the maximum transparency between these pathways and achieving outcomes, which are broadly aligned.

These pathways involve 12 economies in the case of TPP, 16 in the case of RCEP, 4 plus two aspirants and some 30 observers from within and outside APEC in the case of the Pacific Alliance.

Clearly for the Asia Pacific region to become a seamless economic space, where goods and services, capital and people can move freely, we need all 21 members of APEC to aspire to and achieve something bigger.

This is the ultimate prize of FTAAP.

In recent days ABAC has been discussing how to move closer to this goal and I’d like to share some of that discussion with you.

Firstly ABAC has reached agreement on language for presentation to Ministers Responsible for Trade meeting here next week.

Without wanting to blow the whistle completely on our advice I can tell you that ABAC is heartened to see that the Ministers are making concrete steps towards the realization of an FTAAP.

ABAC sees a need for more “top down” direction in the FTAAP process.  This should comprise further articulation of the overall vision, robust economic analysis of the possible gains and a dialogue aimed both at increasing transparency and identifying business needs.

Secondly, ABAC places emphasis on the earliest possible completion of the negotiating pathways.

ABAC is emphasizing the need for the broadest possible membership of the pathways, the need for quality, ambition and comprehensiveness, for new momentum in TPP and a faster pace in RCEP.

Thirdly, ABAC has initiated discussion about the possible architecture of FTAAP, which is a critical step in achieving regional economic integration.

To achieve REI, we need Bogor, to achieve Bogor, we need FTAAP and to achieve FTAAP, we need to complete the negotiating pathways including TPP, RCEP and the Pacific Alliance.

ABAC certainly welcomes the proposals from the APEC Chair about a timeframe and a feasibility study and looks forward to discussing these further.

On the timeframe ABAC believes that the dates for the achievement of FTAAP and the Bogor goals need to be aligned: that means we should be targeting 2020 for completion of FTAAP.

We are conscious that a large number of studies have been commissioned around FTAAP over the last ten years including economic analysis and model FTA provisions.

These certainly require updating and extending to the new commercial and economic circumstances of today – a stocktake would be helpful.

Lastly ABAC has thought further about how to organize its own advocacy of FTAAP and resolved to establish an informal “ABAC for FTAAP” ginger group that will work alongside established groups to take forward ABAC’s contribution to this new reflection on FTAAP.

You will be hearing from this group at future gatherings of this kind.

Conclusion

APEC over the years has been very strong on vision, which is a good thing.

FTAAP, like the Bogor Goals, has been a vision towards which much of APEC’s work programme has been directed.

Now however is the time for delivery.

After ten years it is time to put flesh on the bones of FTAAP.

We need to accelerate the completion of the pathways and put in place a process by which, through FTAAP, they can be applied to the wider membership of APEC.

We need to incorporate the next generation of trade issues especially those behind the border to ensure that our rule making remains relevant to business needs.

ABAC will be a keen participant in this work and looks forward to the results it will deliver for trade, for business and for the growth and development of our region.