In Uncertain Economic Climate, APEC Trade Ministers Eye Areas for Growth
Trade ministers from 21 Asia-Pacific economies meeting in Arequipa, Peru, last week called for progress in a series of areas, with a view to “regain economic momentum” in light of worrisome growth prospects at both the regional and global levels.
The 17-18 May meeting of the regional alliance, chaired by Peruvian trade and tourism minister Magali Silva Velarde-Álvarez, addressed a broad spectrum of issues, ranging from strengthening regional economic integration and technical cooperation to how to promote the participation of smaller businesses in trade.
“The period of transition unfolding in the world economy and demographics is giving rise to questions about the future of globalisation. The shifting landscape does not undermine globalisation’s enduring relevance but rather speaks to the need to update the approaches we take,” said Dr. Allan Bollard, Executive Director of the APEC Secretariat, in a statement ahead of the meet.
Economic and trade liberalisation and facilitation have been touted as ways to create more jobs and boost living standards in a region with a combined population of approximately 2.8 billion people. The 21 APEC economies make up nearly half of world trade and 57 percent of global GDP.
The group includes as its members Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei, Thailand, the US, and Vietnam.
APEC: Growth constraints worrying
Growth in APEC economies has slowed, and is expected to reach only 2.7 percent in 2016, with a similar forecast for the two coming years. Although this is similar to the 2015 growth rate of 2.7 percent, it is marginally below the global GDP growth estimated for this three-year period and also below the dynamic growth rates achieved historically by the group.
“Economies continue to expand around the world, but at a relatively moderate pace and unevenly,” said trade ministers in a joint statement.
Recent studies have indicated that growth prospects remain worrisome, but could still be improved. “The region’s growth over the coming years will fall short of the high levels of the past based on current trends but there is room for a course correction,” said Dr. Denis Hew, Director of the APEC Policy Support Unit, ahead of the gathering, suggesting that cutting the costs of cross-border business could be one step in this direction.
The APEC economies have particularly prioritised services as a way to support production and supply chains while fostering greater participation of small and medium-sized enterprises (SMEs) in trade. Last November in Manila, APEC leaders adopted the APEC Services Cooperation Framework (ASCF), with a view to raising the profile of regional services work and noting the potential this has for inclusive growth.
Among the ASCF’s objectives is the development of an APEC Services Competitiveness Roadmap that will include an agreed set of both qualitative and quantitative indicators and targets to be met by the year 2025. The Roadmap should be completed for the APEC Leaders’ Meeting this November in Lima, Peru.
A public-private dialogue was also held on the sidelines of the trade ministers’ meet, with a specific focus on regional services competitiveness. Among the speakers was Dr. Sherry Stephenson, ICTSD Senior Fellow, who raised the importance of having less restrictive and more appropriate services regulation as a way to promote competition with both international services suppliers and among domestic services suppliers. [Editor’s note: ICTSD is the publisher of Bridges Weekly]
Working on green growth
Boosting green growth was also on the agenda at the Arequipa gathering, particularly given that the 21 APEC economies include the world’s largest energy producers and consumers. Moreover, the expansion of the middle class in emerging economies in the region has resulted in an increase in energy consumption, with a 35 percent jump expected across APEC economies by 2040.
In this scenario, APEC economies are already working on diversifying their energy mix and improving efficiency standards. The group aims to double the production of renewable energy by 2030 and reduce energy intensity by 45 percent by 2035.
Earlier this year, APEC launched a multi-year Environmental Services Action Plan focused on lowering associated regulatory and trade policy barriers with the objective of unlocking trade and investment in services needed to improve environmental protection.
Part of the initiative involves the previous APEC commitment to slash tariffs to five percent or less by 2015 on environmentally-friendly goods contained under 54 product categories. The group released a series of documents in early 2016 which, they said, demonstrated the progress made to date in meeting this objective. (See Bridges Weekly, 4 February 2016)
“We congratulate those economies that have fulfilled Leaders’ ground-breaking commitment to reduce applied tariffs on the APEC Environmental Goods List to five percent or less, and strongly urge those economies that have yet to fulfil this commitment to do so as soon as possible,” said trade ministers last week.
The group is also looking toward better understanding services regulation and how it affects trade and investment in this sector, considering measures affecting cross-border supply as well as others affecting other modes of supply such as commercial ownership, licensing, movement of people, and regimes under preferential trade agreements.
As a result of this plan, the total market for environmental goods and services could increase up to US$2 trillion within five years, proponents say. APEC experts argue that the gains from such growth could help address the growing incidence of natural disasters in the region, particularly those that may be the result of climate change. Some estimates suggest that natural disasters have led to losses worth US$100 billion per year in the region.
SMEs account for 97 percent of all APEC businesses, with GDP shares ranging from 20 to 50 percent in the majority of these economies. However, analysts warn that there is still a gap in terms of their participation in trade, which makes up less than 35 percent of direct exports.
APEC is focusing its efforts on increasing SME capacity both to boost direct and indirect exports and to facilitate these companies’ participation in GVCs, particularly given that 80 percent of global trade is conducted by multinationals.
“We are modernising trade and economic policy needed to lift the small businesses and labour forces who are the fundamental drivers of prosperity in the region,” said Ambassador Luis Quesada, 2016 Chair of the APEC Senior Officials, following a senior officials’ gathering held ahead of the trade ministers’ meeting.
“Our goal is to level the playing field in our economies and establish conditions that boost employment and social mobility for groups who have benefited less from globalisation in the past,” he explained.
Addressing the digital divide
APEC economies have also focused in recent years on ways to bridge the gap in accessing and using digital technologies to facilitate SMEs’ participation in trade and increase productivity gains.
Earlier this month, Dang Huy Dong, Vietnam’s Vice Minister of Planning and Investment, indicated that the regional alliance is currently focusing on “making it easier and faster to start and develop a business through the application of emerging technologies and data flows.”
Potential policy actions that are being considered in this arena include easing market access and trade restrictions, together with industry regulation based on international best practices, an expansion of the APEC cross-border privacy rules system, secure data flows, and a wider availability of skills training.