Ippei Yamazawa
Professor Emeritus, Hitotsubashi University, Japan

Negotiations for three economies’ accession to the TPP have started toward its final stage. While Canada and Mexico will clear additional hurdles of liberalization easily thanks to their membership of NAFTA, Japan is reported to face strong requests by the U.S. and Australia on her liberalization of agricultural products. Nevertheless, all existing members of the TPP negotiation welcome the three economies’ accession in principle since it will increase the scale economy merit of TPP. However, it will never be easy to successfully conclude the TPP negotiation. It is not only in Japan alone that vested-interest groups resist to moves to open economic regime. Requests for exclusion are made in many economies including the U.S. How can we stress them to minimum and achieve a high level of trade and investment liberalization principle. In future we need to incorporate China, Indonesia, and other Asian economies which carry the high growth of the Asia Pacific region.

Dynamics of competitive liberalization has urged these Asian economies to accelerate their FTA moves. In the week following APEC Honolulu, ASEAN Summit in Bali proposed Regional Comprehensive Economic Partnership (RCEP), accelerating ASEAN plus FTAs under ASEAN initiative (ASEAN Summit, 2011). In December China-Japan-Korea FTA Study group completed its report proposing an early start of negotiation on the trilateral FTA among their governments.

On the way home from APEC Honolulu, Prime Minister Noda expressed his wish to promote both TPP and ASEAN plus FTAs in parallel. However, how can we connect TPP excluding China with ASEAN plus excluding the U.S? He should clarify his strategy for Japan’s initiative. Neither TPP nor ASEAN- plus is conducted within APEC, the sole inter-governmental network for Asia Pacific cooperation. APEC has continued liberalization and facilitation as its core activities for the past fifteen years. Media has not paid much attention to its proper activities, leaving public audience as well as young scholars unaware of them. I would suggest that we should make better use of APEC including both China and the U.S. Japan can claim it on the basis of her hosting and having achieved APEC Yokohama in 2010. [i]

Mid-term Assessment at APEC 2010 Yokohama

Throughout last year APEC undertook a detailed examination of individual economies’ achievement toward the Bogor Goals (APEC, 2010a). Only the group assessment was published of its thirteen economies, five industrialized economies designated to achieve the free and open trade by 2010 plus eight volunteered economies. It said that APEC economies have achieved a high growth for the past fifteen years and drug the world economy thanks to the members’ efforts to achieve the Bogor Goals. However, it also indicated that impediments still remained in six sectors of tariffs, non-tariff measures, services, investment, intellectual property rights, and government purchase and stressed that all APEC economies should continue their efforts of eliminating them for the remaining ten years until 2020.

This is a fair assessment of APEC’s achievement, considering the severe constraints that the WTO/DDA negotiation has got stumbled recently and the Bogor process has been implemented under the modality of non-binding liberalization. APEC’s TILF process will continue for all APEC economies, including the 13 economies summarized as above.

New IAP Peer Review Process

Leaders committed in Yokohama to continue the TILF process toward the final Bogor Goals in 2020. SOM2 in Montana in May 2011 adopted ‘the new IAP peer review process’ for all 21 members to remove remaining barriers toward 2020 (APEC/CTI 2011).

- New IAP should cover all 14 areas of Osaka Action Agenda plus those added afterwards (transparency, RTAs/FTAs, and other voluntary reporting areas). 2010 economies (13 economies which were assessed in 2010) might give emphasis to those areas where shortcomings were highlighted by Leaders, cited above).

- Economies should describe, in brief points only significant new developments under each chapter heading.

- Economies would report in 2012, 2014, 2016, and 2018. The final assessment would be undertaken in 2020.

- Policy Support Unit support SOM in this new IAP peer review process. It will prepare a short one-two page report with key highlights on members’ main achievements and remaining areas for improvements in the year of review. PSU reports will be discussed at SOMs and finally made public.

These respond to often heard criticism of the previous IAP peer review process and, if implemented faithfully, the new IAP process will be much strengthened. In prior for APEC 2010 Yokohama, I conducted an independent quantitative assessment of all 21 economies’ achievement toward the Bogor Goals in eight are as of Osaka Action Agenda.[ii] I found that the thirteen economies differed greatly in their achievement and remaining eight economies have achieved much less toward the Bogor Goals. They may be treated differently according to their different level of liberalization and facilitation. The six sensitive areas suggested by Leaders above are consistent with my findings. The concise and pinpointing ways of addressing achievements will be closer to ‘negative list formula’ which I suggested earlier.

Here I would like to stress the importance of ‘individual assessment’ and ‘make it public outside APEC rather than peer review within SOM’. While the final report of the mid-term assessment tells us only the group assessment of the thirteen volunteered economies, individual senior officials, both the thirteen economies and the rest of APEC economies, have understood well how far they have achieved toward the Bogor Goals and how much still remain. It is no use of keeping the ‘no name, no shame’ modality, but make them known to outside APEC officials, such as ABAC and PECC experts. APEC may keep its modality of non-binding nature and voluntarism but should open their review process to outside critics.

Alternative processes toward FTAAP

At APEC 2010 Yokohama APEC Leaders declared as ‘FTAAP should be pursued as a comprehensive FTA by developing and building on ongoing regional undertakings such as ASEAN+3, ASEAN+6, and TPP. To this end APEC will make an important meaningful contribution as an incubator of a FTAAP by providing leadership and intellectual input into the process’. (Pathway to FTAAP , APEC/LM 2010b). We, PECC experts, should monitor the progress of individual paths and advise so that they will merge toward FTAAP. Otherwise, TPP and RECP proceed separately so that two blocs be formed dividing Asia, and ‘free trade in Asia Pacific’ will end in dream.

ASEAN+3 and +6 have been examined together by a task force of member governments’ officials, following the suggestions of ASEAN+3 Summit and East Asian Summit. Media made fun of the rivalry between China and Japan, while China pushing East Asia FTA (EAFTA) and Japan pushing Comprehensive Economic Partnership for East Asia (CEPEA). However, as is apparently urged by the TPP negotiations, China and Japan made a compromise proposal at the last ASEAN +6 Economic Ministers’ meeting in Indonesia last August. They proposed ‘ASEAN +α’, not specifying either +3 or +6.

ASEAN Summit’s proposal of RCEP conceded to the China-Japan proposal but maintained the ASEAN initiative for Asia-wide FTA. It will be interacted with the China-Japan-Korea FTA in due course. RCEP will have a narrower coverage of commodity trade, services trade, investment, and ecotech and is likely to remain at a lower level of liberalization than TPP.

APEC more than an incubator

Here I would like to stress that APEC can play a positive role in merging TPP and RCEP. The new IAP Peer Review mentioned above has a comprehensive coverage, including WTO plus areas and is close to the TPP’s high standard, except for its non-binding modality. APEC, with its two decade experience in Ecotech and capacity building, helps developing economies to implement various facilitation programs, thus inviting them to join high level FTAs. Above all APEC is their least common multiple, that is, includes all members of the Asia Pacific. TPP and RCEP pull the Asia Pacific from above, while APEC pushes it up from behind.

As regards the follow-up of the new IAP process, PSU is assigned an important job of organizing this process for effective liberalization and facilitation programs. It should not merely summarizing individual IAPs but helping them publicizing their commitments and achievements. A mapping exercise can be attempted to clarify the differences among the three.[iii] If necessary, PECC experts are willing to provide assistance. This will encourage SOM to get concerned about reducing differences of the three so that their possible convergence will be seen toward 2020. I expect the final assessment of the new IAP process dated in 2020 will announce the converging stage toward FTAAP.

References:

APEC/CTI, 2011 The Individual Action Plan (IAP) and IAP Peer Review, May, presented at the 2^nd APEC/SOM, Big Sky, U.S. May

APEC/LM 2010a. Leaders’ Statement on 2010 Bogor Goals Assessment, Nov. 2010/11/27, 4p

APEC/LM 2010b Pathways to FTAAP, Nov. 2010, 3p

APEC/PSU 2011, The Mutual Usefulness between APEC and TPP, Oct.

ASEAN Summit 2011, ASEAN Framework for Regional Comprehensive Economic Partnership (RCEP), Bali, Nov. 19,.

Yamazawa, Ippei 2011a. ‘New IAP Peer Review Process toward FTAAP’, posted in APEC Study Center Consortium Conference 2011, Key Findings and Policy Recommendations: Green Growth, Trade Integration and Regulatory Convergence, Nov.

Yamazawa, Ippei 2011b, Asia Pacific Economic Cooperation: Its New Agenda for the Third Decade, Institute of Southeast Asia Studies, Singapore

Professor Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide and Vice-Chair of AUSPECC

Republished from the East Asia Forum

The weather was awful outside the WTO Ministerial Conference in Geneva last week, but there was some sunshine within the convention centre.

Russia acceded as a member, along with Samoa, Montenegro and Vanuatu (the club still attracts new members, and as one minister said: ‘as far as I know, nobody has asked to leave’).

The Plurilateral Government Procurement Agreement was revised — after 10 years of negotiations — further opening up procurement markets to give foreign economies better access. China is also en route to joining, having agreed to do so on its accession to the WTO, after further negotiations took place.

But there were some strange decisions, like giving countries the option to waive most favoured nation (MFN) provisions, so as to allow least-developed countries preferential access to services markets. It is not yet clear how this will happen or how it would help resolve constraints in developing countries, which hinder reforms in their own service sectors. There were some non-decisions as well. No conclusion was reached on a set of principles for food security, for example, although the WTO’s Director-General rebutted a protectionist report from a UN official.

Why the lack of progress at this year’s Ministerial Conference? Here are five suggestions.

One factor is that ‘development’ has been mixed with trade. On the face of it, having a ‘development round’ seems positive, but lumping these two areas together complicates the process, and introduces new items for debate. The WTO should remain focused on the resource allocation gains from international business.

Another reason for the lack of progress is that the WTO cannot deal with the barriers that have now become relatively more important to business. This includes the rules and processes affecting international business which are not managed at the border. These barriers create significant rents — and those who currently gain from the arrangements resist their removal. Analytical work on these barriers is more and more important.

The third factor involves the uncertainties faced by policy makers when removing such barriers. Some were put in place for genuine public policy purposes, and policy makers are not confident about the likely consequences of their removal. Capacity building programs focused on this issue could help address the problem, and the EU and APEC, in particular, could work well together on this.

Fourth, the use of preferential agreements does not make the process any easier. Rents are created for local business, which are then shared with a state’s ‘favourite partners’ when preferential trade agreements find a way of allowing market access. In this way, the grand bargain once represented by the WTO has been diminished.

The US is the fifth reason why progress has stalled, although the US would likely say that other leading members were the problem. The US wants to create more domestic jobs — and good ones — which it associates with more market access, especially in countries like India, China and Brazil. These economies are not offering enough, and the US is therefore pursuing other options like the Trans-Pacific Partnership, or negotiations with the EU, to flush out some response from recalcitrant members. Meanwhile, this tactic promotes the use of FTAs and depreciates the political capital available to the WTO.

What will happen now?

Within the WTO, fundamental principles including MFN provisions and the ‘single undertaking’ will be challenged in the name of pursuing more-achievable — or less-ambitious — goals. Australian Minister for Trade Craig Emerson said the situation ‘argues for breaking the round into its component parts … instead of waiting for some grand bargain, magically, like a bolt from the blue, to strike us from the sky’.

Tension will be regarded as a plus, and created by excluding trading partners from special deals. Plurilaterals will proliferate, both within and without the WTO. We will move to a world in which there are clubs within clubs, and in which they all overlap. There is also the possibility of great tension in the Asia Pacific as ‘a line is drawn down the middle of the Pacific’.

It is not clear what the circuit breakers will be in this situation. Whatever happens, small group negotiations within the WTO could be okay if guided by the right principles. Some will call for new leadership at the top, in order to consolidate and multilateralise small groups outside the WTO. Others hope that the situation will be resolved from below, via competition; some clubs will exit (in effect, if not in name) or amalgamate, and what remains will be (hopefully) efficient.

Our best chance is to build confidence in reform led from within economies. This requires transparency and benchmarking (via strong trade-policy reviews in the WTO, good peer reviews in APEC and clones of Australia’s Productivity Commission). It will also require us to demonstrate the real linkages between policy and performance, and the ability to translate that work into compelling public commentary. We then have to think through where world trade policy is at now, and develop a new, more coherent global strategy.

Peter A. Petri, non-resident Senior Fellow with the East-West Center and a Professor of International Finance at Brandeis University

Republished from the East West Center

(This analysis originally appeared in the Honolulu Star-Advertiser on Oct. 16, 2011 as part of a monthly series on regional Asia Pacific issues leading up to the APEC leaders’ meetings in Honolulu in November)

In the last half century, world trade has grown twice as fast as output and helped to lift the majority of the world’s people from poverty—a feat unimaginable a generation ago. When APEC leaders meet in Honolulu next month, they will represent countries that account for half of world trade. Can APEC help to keep the engine humming for another half century?

The trade engine is more important than ever, but the rules that govern trade are less certain. Efforts to strengthen global rules—the World Trade Organization’s Doha negotiations—have collapsed. Beset by domestic concerns, the United States and Europe have retreated from leadership on trade. And the new Asian giants have yet to step up. Read more…

Plenary: Asia Pacific Regional Outlook and Concurrent Session: Enabling 21st Century Services in the Asia Pacific

Prepared by Youth delegates Angela Zhang Yiou (HK), Muhan Cheng (CT) and Jihye Seon(KO), 29September2011

The First Plenary session was moderated by Mr. Zou Mingrong. The first speaker Roberto Cardarelli delivered the Overview and Forecast of the IMF on global economy. During his speech, Mr. Roberto highlighted that slower growth was expected around the world. However, Asia will still exhibit relatively good performance with strong domestic demand. He also mentioned “Two Channels”: trade channel and financial channel. Mr. Roberto concluded that Asia still would have solid growth but monetary tightening and economic rebalancing are required. Read more…

Professor Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide and Vice-Chair of AUSPECC
Republished from the East Asia Forum

Commentators on these pages have been pondering the implications of the Fukushima explosion on Japan’s energy policy and its strategy for international purchases. Samuels suggests an extensive re-examination of energy policy in Japan and a possible shift toward renewable energy. Vivoda pointed to a scenario in which the share of nuclear power in Japan’s total electricity consumption could fall. This share previously accounted for 30 per cent of consumption, and even as little as 12 months ago the plan was to raise this to 50 per cent.

An increase in the share of gas and coal in the short to medium term and a switch to renewable energy sources in the longer term is now expected: Peter Drysdale referred to the growth of LNG imports this year and its likely further growth in 2012. That nuclear power is not so cheap when the costs of meeting safety or dealing with incidents are taken into account is the key driver behind these developments, as Len explains. Still, expectations about a switch to gas, at least in the short term, are a source of anxiety in Japan. The main gas suppliers to Northeast Asia are Southeast Asia, the Middle East and Russia — nothing comes from the Pacific. There are also expectations that two major suppliers — Malaysia and Indonesia — will switch to net imports. Consequently, obtaining more gas without paying a higher price is not going to be so straightforward. And there is also the possibility of having to deal with a smaller number of suppliers. Read more…

Global Services Network Update
republished from http://globalservicesnetwork.com/GSNOctober32011.html

Following the Pacific Economic Cooperation Council (PECC) and Asian Development Bank Institute (ADBI) Conference on Trade in Services in Hong Kong earlier this year, the PECC included in their annual survey of opinion leaders across the Asia Pacific the specific question “should APEC members take the lead in promoting a plurilateral agreement on services?”  72% of all respondents responded positively, with only 5% disagreeing.  70% percent of government officials responded positively, as did 76% of business leaders. Read more…

Ganeshan Wignaraja
Principal Economist, Office of Regional Economic Integration, Asian Development Bank

Slow progress in the WTO Doha Round trade talks has seen China and India have focussing on free trade agreements (FTAs) as a vehicle of trade strategy and economic diplomacy. By mid-2011, the two Asian giants were among Asia’s leaders in FTA activity with 11 each in effect in both China and India. The number of FTAs under negotiation and proposed suggested that such activity will rise in the future, as China has another 13 agreements in the pipeline and India another 20. China has FTAs with ASEAN, Hong Kong, Macao, Chinese Taipei, Pakistan, New Zealand, Chile and Peru, among others. Meanwhile India’s agreements include  those with Sri Lanka, South Asia, Korea, ASEAN and Chile.  Such regional and bilateral FTAs aim to provide preferential market access for goods and services as well as lay the foundation for deep integration in the future. Yet concerns have been expressed in some quarters that the Asian giants’ FTAs can have a detrimental impact on exports due to shallow coverage and the problem of the Asian noodle bowl of multiple overlapping FTAs. Recent research has examined trade and FTA policies in China and India and provides insights. Read more…

Professor Tan Teck Meng, former chair of SINCPEC, passed away in the early morning of 7 July 2011 in his sleep. He had been battling cancer for some time.

Prof Tan was the chair of SINCPEC from 1997 to 2008,  he was also a member of the Finance Committee and Trustee of the PECC Special Fund Trust. He will be missed by the PECC community.

We offer our condolences and sympathies fo the family of the late Professor Tan Teck Meng.

Don Gunasekera, Senior Economist, CSIRO, Canberra

The 2004 Asian tsunami illustrated the disproportionate impact that natural disasters have on poorer communities. More recent natural disasters in New Zealand, Japan, Australia and the US have shown that even well-to-do communities can be significantly hard hit by the impact of catastrophic and severe weather events. Preparing for natural disasters has many facets. They can range from adaptive response measures to the use of modern technologies to provide early warnings. A measure which is often talked about and seldom practiced is disaster risk management. In this regard, the recent mid-term review by the UNISDR of the Hyogo Framework for Action to substantially reduce disaster losses by 2015 is timely. A key message emerging from the UNISDR mid-term review is the need for economies to undertake proper disaster risk assessments that could help them to draw up better risk management plans which can be implemented by effective institutions with adequate resources in a well coordinated manner.

Read more…

Masahiro Kawai
Dean and CEO, Asian Development Bank Institute

and

Ganeshan Wignaraja
Principal Economist, Office of Regional Economic Integration, Asian Development Bank

The inability to conclude the World Trade Organization (WTO) Doha Development Round has spawned a proliferation of bilateral and plurilateral free trade  agreements (FTAs) across the globe. While East Asia is a relative newcomer to FTAs, the region has seen a dramatic increase in the number of such agreements  in recent years. The explosion of FTAs in East Asia, led by the large economies of Northeast Asia—the People’s Republic of China (PRC), Japan, and the Republic of Korea (ROK)—is tied to the need to support sophisticated production networks through continued trade and investment liberalization, while also serving as a defensive response to the spread of FTAs elsewhere in the world.

A lively debate over the impact of FTAs on business in the region has resulted from their proliferation (see Baldwin 2006, Chia 2010). Data from East Asian  exporters on FTA utilization were lacking prior to an Asian Development Bank (ADB) firm-level multi-country survey conducted in 2007/08. The survey results  suggest that FTAs are indeed bolstering trade among firms, despite some concerns expressed over restrictive rules of origin (ROOs), particularly as economic recovery takes hold in the wake of declining trade volumes and nascent protectionism triggered by the recent global economic crisis. Governments can  facilitate the increased use of FTAs by actively disseminating information to firms on existing FTAs and adopting best practices in designing future FTAs, including ROOs.

East Asian economies are using FTAs to aggressively pursue their individual and collective trade strategies, leading to the expansion of advanced production networks across the region with hubs in Japan and the PRC. Rather than complicating efforts toward a Doha Round agreement, a region-wide FTA can contribute  to laying the foundation for such an agreement.

This brief is set out as follows. It begins by discussing East Asia’s emergence as a global factory and the spread of FTAs. It then examines varieties of national FTA strategies in Northeast and Southeast Asia. The brief goes on to analyze information on FTA use, impediments, and ROOs based on the ADB multi-country survey. Finally, it explores a possible way forward, highlighting short-term measures as well as a region-wide FTA for the medium term. Read more…