REPORT TO NEW ZEALAND BUSINESS – APEC Business Advisory Council, November

APEC Business Advisory Council – Fourth Meeting, Lima, 13 – 16 November 2016

Report to New Zealand Business

SUMMARY

ABAC’s final meeting for 2016 was held in Lima and culminated in ABAC’s annual Dialogue with APEC Economic Leaders where ABAC’s key recommendations for improving the business environment in the region were presented. These meetings took place against the background of President-elect Donald Trump’s surprising victory in the US election and the uncertainties his policies might pose for international trade. The meeting wrapped up its 2016 work programme and adopted the priorities for 2017 under ABAC Viet Nam’s chairmanship. Among the key deliverables from the ABAC meeting was the presentation of a major research report on non-tariff barriers in the food sector initiated by ABAC New Zealand and undertaken by the USC Marshall School of Business. The Marshall School report presents some valuable findings on the impact of NTBs. ABAC New Zealand also presented more generally on NTBs, the ratification process for the WTO Trade Facilitation Agreement, the use of global data standards for supply chain connectivity, APEC’s food security and structural economic reform agendas.

REPORT

 ABAC New Zealand members Tony Nowell and Katherine Rich, along with Stephen Jacobi (Alternate Member), attended ABAC’s final meeting for 2016 hosted by ABAC Peru in Lima. As is customary, a number of APEC meetings were held at this time including APEC senior officials, Ministers, Trans Pacific Partnership (TPP) Leaders, an APEC SME Summit and the APEC CEO Summit, the latter attended by a small New Zealand delegation. This note focuses on the key outcomes of interest to New Zealand business.

ABAC’s annual report to APEC Economic Leaders adopted the same theme as Peru’s hosting year – “Quality Growth and Human Development”. The report focused on the need to address public disquiet about globalisation; to press ahead with further trade liberalisation including through the proposed Free Trade Area of the Asia Pacific (FTAAP) and coupled with structural economic reform; to resist protectionism; to address the vitality of services industries and medium, small and medium sized enterprises (MSMEs); to promote food security, infrastructure development, connectivity and the rule of law.

Liberalising trade and investment

 In Lima, discussions on trade and investment were overshadowed by the forthcoming Trump Presidency in the United States which gave rise to considerable doubt and uncertainty for a number of key initiatives such as TPP and FTAAP. American colleagues agreed that it was unlikely that TPP could be taken up in the “lame duck” session of Congress but they felt there was still a significant constituency for trade given that Congress had earlier passed the Trade Promotion Authority (TPA). There was a need to “go back to basics” to educate the new Administration about trade but this would take time. ABAC New Zealand announced that the New Zealand Parliament had passed the TPP implementing legislation and encouraged other economies to do so as a sign of commitment to free trade principles. Other ABAC members including New Zealand spoke forcefully about the need to consider other alternatives. This theme was taken up by several APEC Leaders at the APEC CEO Summit including the President of Mexico and the Prime Ministers of New Zealand and Singapore, who encouraged the business community not to give up on trade liberalisation or TPP (possibly as an agreement among 11 participants if the US could not ratify or as a revised agreement under a new name). In a powerful and reassuring speech President Xi Jinping of China spoke about the need to build an inclusive model of trade based on FTAAP which opened doors rather than closed them.

APEC’s guiding document for FTAAP – the Collective Strategic Study – was also finalised by senior officials and Ministers in Lima. ABAC had earlier submitted a number of recommendations on this document. It sets out goals, principles and concrete new initiatives to make progress towards greater regional economic integration in FTAAP. (New Zealand had contributed a chapter on non-tariff measures/barriers, with some input from ABAC New Zealand). Officials are now tasked with developing various work programmes to move the FTAAP preparations ahead. Of particular interest to New Zealand on NTMs/NTBs it is proposed that the work programme prioritise collaboration with ABAC.

In their declaration from Lima APEC Leaders reaffirmed their support for FTAAP, and that it should be high quality and comprehensive, and incorporate and address ‘next generation’ trade and investment issues. A more ambitious approach advocated by China, and supported by ABAC – initiating a timetable for the launch of negotiations – was not agreed. The Leaders’ Declaration simply refers to instructing officials to “consider next steps that can be taken towards the eventual realisation of an FTAAP”. Leaders did affirm the role of “pathway” agreements, including TPP and the ASEAN-led Regional Comprehensive Economic Partnership (RCEP), and their contribution to the realisation of FTAAP. Given TPP’s dismal prospects, that affirmation serves to enhance the level of interest and potentially pressure for higher ambition in RCEP.

At the ABAC meeting Katherine Rich delivered a further presentation on the need for governments to address NTMNs/NTBs. Katherine proposed and ABAC adopted a set of guiding principles to ensure that legitimate non-tariff measures do not become trade-distorting non-tariff barriers. These principles (copy available on request) will form the basis of on-going work on NTMs/NTBs, drawing also on the valuable work on food NTBs undertaken by the USC Marshall School (see further below). Katherine has been appointed Co-Chair of ABAC’s Regional Economic Integration Working Group (REIWG) for 2017 and will lead this work focusing initially on the experience of non-food sectors.

The services sector (and structural and trade reform in services) are widely recognised as playing a key role in economic prosperity, particularly in the new world of global value chains and disruptive new technologies.   In Lima, with encouragement from ABAC, APEC Leaders approved a new strategic plan to enhance the services sector – the “APEC Services Competitiveness Roadmap”. The Roadmap sets out concrete actions and targets for 2025 to enhance the competitiveness of services in the region, including by improving the environment for services trade and cross-border investment. It sets targets to reduce restrictions to services trade and investment, increase the share in global exports of services exports from APEC economies, raise the rate of growth of trade in services from the APEC region above the current global average, and increase the share of value-added of the services sector in the total GDP of the APEC region.

The Roadmap also lists a range of specific APEC-wide actions, including – of particular interest to New Zealand services exporters – supporting cross-border mobility for professionals and flexibility for business visitors; greater cooperation in the education sector; promoting digital-friendly regulatory approaches (including enabling data-flows) and principles for the domestic regulation of services.   The Roadmap flags that further work is needed on progressive facilitation of services to improve the regional food system. (The latter was a concept promoted by ABAC New Zealand and will be further addressed through the food agenda – see further below).

 Stephen Jacobi provided ABAC with an update on the ratification process for the World Trade Organisation (WTO) Trade Facilitation Agreement. Of the 110 signatures required to ratify this agreement, which focuses largely on customs co-operation, 98 have been received. Three APEC members (Canada, Indonesia and Papua New Guinea) are still to ratify.

Towards sustainable development and food security

Tony Nowell has continued to lead ABAC’s work on food security issues acting in his capacity as Co-Chair of ABAC’s Sustainable Development Working Group (SDWG), ABAC Vice Chair of the APEC Policy Partnership on Food Security (PPFS), and Chair of the private sector only Asia Pacific Food Industry Forum, (AP-FIF). This agenda was advanced during APEC’s ‘Food Security Week’, held in Piura in September and which included the second PPFS meeting for the year, the APEC Food Security Ministerial Meeting (attended by Hon Nathan Guy) and the APEC food sector CEOs’ Executive Dialogue with Ministers, in which several New Zealand food industry representatives played an active role.

In Lima Tony reported that ABAC was successful in including key messages developed with the help of AP-FIF in the APEC Food Security Ministerial Declaration, building on the references we had secured in the earlier ABAC Letter to Food Security Ministers. These messages reflect key New Zealand concerns in relation to food and agriculture trade.   The next PPFS meeting will take place in February 2017.

 The ABAC meeting saw the presentation of a major report commissioned by ABAC (from the University of Southern California’s Marshall School of Business) on NTBs in food trade[1]. ABAC New Zealand, especially Tony Nowell and Stephanie Honey have assisted directly in the preparation of this report. The Marshall School interviewed over 400 business representatives, experts and officials from around the APEC region (including nearly 40 from New Zealand), to identify the most burdensome food NTBs and to seek to develop practical solutions. The research found that NTMs/ NTBs, were increasing in prominence and complexity in the region and that business perceived the trading environment for food and agriculture products to continue to be highly restrictive.   The interviews revealed that NTBs could undermine the whole food supply chain and were particularly harmful for small businesses. The study concluded that greater transparency, clearer timeframes and better processes for food trade were needed before, at, and behind borders. Measures should be designed in the least-trade-restrictive manner possible; there was also potential value in greater mutual recognition or harmonisation of standards (both technical/labelling and food safety). The report also emphasised the potential for digital channels to facilitate trade flows.

The Marshall School report is a major piece of research which is already attracting wide interest in APEC and will feed into the ongoing work programme in 2017.

 Promoting Infrastructure investment and Connectivity.

Katherine Rich has served as Co-Chair of ABAC’s Connectivity Working Group (CWG). This has allowed us to focus attention on APEC’s structural reform agenda. In Lima the Chair of APEC’s Economic Policy Committee, Rory McLeod (MBIE), joined us to discuss the conclusions reached in this area. Rory emphasised that structural reform should be at the heart of economies’ growth and development strategies, that reform should progress unilaterally rather than wait for bilateral or multilateral agreement that it should be based on productivity, market dynamics and competition, that it should be accompanied international co-operation on regulation and that there should be more linkage between trade agreements and structural reform.

In CWG Tony Nowell has championed ABAC New Zealand’s global data standards (GDS) initiative, which seeks to enhance supply chain connectivity, security and integrity. A number of pilot projects are underway by APEC economies, showing promising results (including gains of $15million in the case of beef from Australia to USA), and APEC’s Policy Support Unit (PSU) will undertake an evaluation of this process in early 2017.

ABAC Dialogue with Leaders

 At the ABAC Dialogue with Leaders the annual report was presented by ABAC Chair Juan Raffo and subsequent discussion in small groups focused on the public disquiet about globalisation, prospects for FTAAP now TPP’s future is uncertain, infrastructure and SME issues, particularly related to the digital economy and e-commerce. All ABAC NZ members participated – Katherine Rich with Brunei, China, Indonesia and New Zealand, Tony Nowell with Canada, PNG, Russia, and Chinese Taipei; and Stephen Jacobi with Japan, Singapore, Mexico and the Philippines.

 APEC CEO Summit 2016

 The annual CEO Summit gathered around 1000 business leaders, thought leaders and delegates from around the region. New Zealand’s delegation was comprised of the ABAC New Zealand team along with Malcolm Bailey (Fonterra), Kim Campbell (EMA Northern), Pierre van Heerden (Sanitarium) and Nick Williams (Pacific Basin Exports). Several Leaders from APEC economies addressed the CEO Summit, together with business leaders including Facebook’s Mark Zuckerberg. Prime Minister Key’s remarks focused on the importance of continuing trade liberalisation and were well received. The delegation met with the Prime Minister and Trade Minister Todd McClay.

 Next meeting and further information

 Viet Nam will chair APEC and ABAC in 2016 ABAC’s theme for 2016 will be “Creating New Dynamism, Fostering Shared Future”. The first ABAC meeting will be held in Bangkok in 19-23 February 2017. The APEC CEO Summit 2017 will be held 8-10 November 2017 in Da Nang.