Pacific Currents

Peter F. Cowhey (University of California, San Diego), 
Jonathan D. Aronson (University of Southern California)

Digital technologies are becoming critical to every facet of the world economy. These digital technologies are the “digital DNA” that unleashes dazzling changes in the information, communication, and production capabilities that are transforming how the world works. We call this the information and production disruption. The IPD is rapidly altering the dynamics of firms, how markets perform, and the potential for stronger economic growth and social prosperity. Government policy makers with an eye to the future are searching for policies to leverage the best potential of these disruptions, but have yet to determine how to reconcile seemingly contradictory policy challenges. We offer recommendations for global economic governance that provide a new foundation for problem solving to cope with messy problems that inevitably accompany large-scale change. Despite the current political headwinds we show how trade policy can be the key platform for enabling an extensive complementary set of regulatory and nongovernmental actions to govern the IPD productively.

Scholars, government officials, and corporate executives have acknowledged to us that the disruption is occurring but that it is difficult to grasp because it is so multifaceted. This diffuseness makes it hard to distill the first priorities necessary for governance reform. We respond to this challenge by clarifying the fundamentals on how the IPD is altering national and global patterns of innovation. We choose this leverage point because economists agree that innovation—which we define as the commercialization of new knowledge—is central to global growth and prosperity.

Hugh Stephens, Vice-chair, CANCPEC
Distinguished Fellow, Asia Pacific Foundation of Canada /Executive Fellow, School of Public Policy, University of Calgary

When U.S. President Donald Trump pulled the plug on U.S. participation in the Trans-Pacific Partnership in January, it was a bad day for Canadian supporters of the TPP.

But now it seems the TPP may still live under another guise, often referred to as the TPP 11. New studies have shown that even without U.S. participation, a transpacific agreement based on the new rules negotiated in the original TPP will still bring gains to all the partners. More important, moving ahead with the TPP 11 would constitute a global signal that trade liberalization is still vital for economic growth, and that preservation of open markets through multilateral agreements is the way of the future, rather than Mr. Trump’s protectionism or preference for zero-sum bilateral deals.

Hugh Stephens, Vice-chair, CANCPEC / Distinguished Fellow, Asia Pacific Foundation of Canada /Executive Fellow, School of Public Policy, University of Calgary

The Trump administration’s arrival has scrambled the cards in the trade policy world. Not only will the North American Free Trade Agreement (NAFTA) be reopened with uncertain results, but President Donald Trump has scuttled the Trans-Pacific Partnership (TPP) by announcing the United States’ withdrawal from the agreement. Canada, originally cool toward the TPP, pushed hard to be included in it. The TPP became the centrepiece of Canada’s Asia trade strategy, notwithstanding some public ambivalence on the part of the Trudeau government. With the TPP in its present form now in limbo, Canada still has options in Asia. First, it can keep an open mind with regard to the possible reconstitution of the TPP in another form, such as “TPP Minus One” (i.e., minus the U.S.). It should also push to reopen the bilateral negotiations with Japan that were suspended when that country joined the TPP negotiations. Canada is already exploring the possibility of an economic partnership agreement with China, perhaps on a sectoral basis, and simultaneously, it should actively pursue negotiation of a free trade agreement with the Association of Southeast Asian Nations (ASEAN) community. This could in time provide Canada access to the Regional Comprehensive Economic Partnership Agreement (RCEP) currently being negotiated among 16 countries in the Asia-Pacific region and would position Canada well in the eventuality that a Free Trade Area of Asia-Pacific (FTAAP) emerges. In the meantime, uncertainty regarding NAFTA’s future needs to be addressed. This uncertainty makes it more difficult for Canada to attract Asian investment but it also provides further impetus for Canada to diversify its trading relationships and to explore stronger relationships with Asian economies. 

Direct download of PDF (originally published for Canadian Global Affairs Institute)

Joaquim Tres,
Principal Specialist of the Integration and Trade Sector, Inter-American Development Bank (IADB)

Trade agreements cover 70% of all trade in Latin America and the Caribbean (LAC). Of the 270 free trade agreements (FTAs) currently in effect around the world, more than 70 include LAC countries.

In order to understand the impact of these agreements on the region, the Inter-American Development Bank (IDB) will launch a massive open online course (MOOC) on how they work and what they mean for governments, businesses, and people in LAC.

Steven Beck, Head of Trade Finance, ADB
Alisa DiCaprio, Research Fellow, ADB Institute

Over 31 million consumers in Viet Nam researched or purchased a product online in 2015. Just ten years ago, internet connectivity was only starting to become common. Digitization is changing how people trade. There are even more dramatic changes happening under the hood. The way trade is financed, processed and regulated has entered a period of disruption. We take this opportunity to consider the short and long term implications of digitization of the trade process. They’re not what you’d expect.

Loosening infrastructure constraints

Stephan W. Schill
University of Amsterdam

European and North American capital exporting countries have shaped international investment law for most of its history. They pushed for the customary international minimum standard of protection, forged the classical model of bilateral investment treaties (BITs) and now drive the present recalibration of international investment law. Despite counter-proposals from the ‘South’ over decades, the making of international investment law has been essentially a transatlantic enterprise with the ‘North’ as predominant global rule-maker.

But the past years have witnessed a marked shift in the geography of international investment law. Despite the Transatlantic Trade and Investment Partnership (TTIP) negotiations, there is little doubt that Asian countries, and particularly the economic powerhouses in the Far East, are becoming focal points in rule-making in international investment law.

John West
AUSPECC

Trade and regional integration must become more inclusive in the Asia-Pacific in order to win the support of public opinion, writes John West.

This note is inspired by the excellent press release, "Regional Solutions Needed for Global Challenges", issued by the Pacific Economic Cooperation Council (PECC) following a recent conference in Jakarta which explored the challenges for next phase of regional cooperation and the role of the media in communicating the benefits of trade and regional integration.

The Trans-Pacific Partnership agreement would be the largest single trade agreement concluded worldwide for more than a decade. It would transform world trade governance in ways that are hard to predict. This column discusses the machinations inside the US Congress that gave US negotiators the green light to wrap up the TPP talks. If all goes well, the deal may happen just prior to the APEC Summit in the Philippines in November 2015.

Gary Clyde Hufbauer
Reginald Jones Senior Fellow, Peterson Institute for International Economics

President Barack Obama and Senate Majority Leader Mitch McConnell (R-KY) scored a dramatic victory on 23 June 2015, persuading 60 senators to head off a filibuster against Trade Promotion Authority (TPA), the minimum number needed. TPA will be enacted by the Senate this week, as the bill itself requires just 51 affirmative votes. At the same time, Trade Adjustment Assistance (TAA) will be packaged with the African Growth and Opportunity Act (AGOA) and a mildly protectionist anti-dumping provision, to get another 60-vote filibuster-proof majority before being enacted.

The Trans-Pacific Partnership (TPP) will have multiple impacts on India and South Asia, ranging from a short-term effect, such as the loss of preferential access for exports, to the longer-term impact of having to comply with higher quality-standards. The most significant impact, however, can be the gradual isolation of South Asia from a significant part of global trade governed by new rules.

Amitendu Palit
Senior Research Fellow and Research Lead (Trade and Economic Policy), Institute of South Asian Studies (ISAS), National University of Singapore (NUS)

As Thailand’s former Commerce Minister, an economic advisor to several of its Prime Ministers and an architect of APEC, Dr Narongchai Akrasanee helped to facilitate the Asia-Pacific’s rise over the last quarter century. Now, after time in the private sector, including as Chairman of the Import-Export Bank of Thailand, the PhD economist and Chair of the Thai committee for PECC has taken on a new role intent on boosting economic sustainability: as Thailand’s Energy Minister.

In his interview with the APEC Secretariat, Dr Narongchai shared his perspectives on growth, the emergence of a new middle class in the Asia-Pacific and energy security as lifestyles, consumption habits and technology change in the world’s most populous region. He also described his views on oil prices as well as the outlook for regional trade and economic ties, energy priorities and opportunities for greater cooperation within the sector heading towards the APEC Energy Ministerial Meeting on 12-14 October in Cebu, the Philippines.

[See video: Minister Narongchai—Asia-Pacific Economies Need 21st Century Energy Solutions]

Andrew Elek
Australian National University (ANU)

Some of the foundations of APEC were laid more than 40 years ago.  By 1989, the careful consensus building, based on the achievements of ASEAN and PECC made it possible to consider an inter-governmental forum.  In September of that year, I saw Asia Pacific Economic Cooperation spelled out on a hotel events sign for the very first time as I walked into the room to chair the inaugural meeting of APEC Senior Officials.

Thanks to excellent cooperation from the representatives of 12 economies, we were able to negotiate an annotated agenda at the dizzying speed (I calculated later) of only 3 minutes per word.  The road to the first ministerial-level meeting in Canberra was clear and APEC was launched.

PECC, a tripartite pre-cursor to APEC, had set out a rich agenda of issues to be considered by Asia Pacific governments, especially the region's strong shared interest in an open non-discriminatory international trading system.  Indeed, the first 25 years of the APEC process have been dominated by trade policy to attain the Bogor goal of free and open trade and investment.

Gary Hawke
Member of the Board, NZPECC

“Any discussion today of international trade and investment policy that fails to acknowledge the centrality of global value chains (GVCs) would be considered outmoded and of questionable relevance.”¹ In this way, the editors, Deborah K. Elms and Patrick Low, introduce a valuable recent study of the most prominent feature of the modern international economy. The OECD, WTO and UNCTAD said something similar in a submission to the G20 last year: “Trade agreements have to cope with the new reality of business.”²

Federico Macaranas
Professor, Asian Institute of Management, Manila, the Philippines

The BALI airport temporarily closed for commercial flights for security reasons, even as a new $300-million terminal has just been constructed (the cost of a one-day shutdown to the US government); dug up tarmac redesigned without chemicals, engineering works rushed from underpasses to a new $215-million oversea toll roads with dedicated motorcycle lanes crossing the main island across the waters to Nusa Dua; relocated monuments repainted, flag poles fitted with LED lights

John West
AUSPECC/ Asian Century Institute

The East Asian economy is at a critical crossroads, according to the Pacific Economic Cooperation Council's State of the Region report. This PECC report reviews and analyzes the forecasts of major inter-governmental organizations, the Standard Chartered Bank and Oxford Economics. It makes an important contribution by virtue of its synthesis of business, academic and official perspectives, as well as the results of a survey of regional opinion leaders from all three groups.

Nam Duck-woo, a founding member of PECC and first chair of KOPEC (Korea committee for Pacific Economic Cooperation) passed away on May 18th, 2013 in Seoul at the age of 89. Dr. Nam earned a doctorate in economics at Oklahoma State University and was teaching at Sogang University when in 1969 he was recruited by then President Park Chung-hee to serve as the finance minister. He remained in the position till 1974 and from 1974 to 1978, he served as the deputy prime minister in charge of economic policies at the height of Korea’s industrial development. Under the next president, Chun Doo-hwan, he served as the prime minister from 1980 to 1982.

Barry Desker
Dean of the S. Rajaratnam School of International Studies (RSIS),
Nanyang Technological University, Singapore

Synopsis
The WTO Doha Round of negotiations is deadlocked and adrift amid increasing global protectionism. The profusion of bilateral and plurilateral free trade agreements is adding to the confusion. A global solution is necessary for global problems.

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.