Pacific Currents

Juan Navarro
Associate Faculty, Royal Roads University

Global value chains (GVCs) have been at the center of attention in both business and policy spheres around the globe for the past two years. Disruptions created in GVCs as a result of operational inefficiencies were only magnified by the COVID-19 pandemic. The discussions happening worldwide on the relevance of GVCs have allowed us to see how closely the world is interconnected via GVCs and how quickly local events can become a global matter, resulting in thousands of SMEs getting pushed out of business.

Global value chains have a critical role in the world economy and in our daily lives, representing more than two-thirds of global trade, providing essential products and services, and supporting jobs across a diversity of economic sectors ranging from agricultural and natural resources to traditional and high-tech manufacturing and a vast and diverse list of services.

While the ongoing discussions on GVCs have produced worthwhile conversations by creating more awareness and a better understanding of their relevance, we cannot deny that these discussions are not enough to remedy future disruptions that might happen as a consequence of new contingencies. Nor can they support efforts to build more resilient value chains after COVID-19.

Christopher Findlay, Tilak Doshi, and Eduardo Pedrosa 

In this commentary, we report and summarise some key results from the PECC SOTR report with respect to climate change, and we link those results to some of the outcomes in Glasgow from COP26. The latter is not a comprehensive coverage but rather those items highlighted in the SOTR.

The surveys of opinion leaders in the APEC region attached to the SOTR often pick up significant swings in opinion.

This year, one of the big shocks related to climate change.

The perception of climate change as a risk to growth has shot up in 2021, by 20 points (43 percent of respondents said climate change was a serious risk to growth, compared to 24% last year), almost doubling, and after being steady for the previous reports.

There are no greater instances of a shift of this magnitude in the history of the SOTR.

The views of the PECC respondents certainly align with the tenor of reporting of event and the text of the Pact from Glasgow. The latter refers to the urgency of enhancing ambition with respect to a response to rising global temperatures.

Eduardo Pedrosa
Secretary-General, Pacific Economic Cooperation Council (PECC)

Christopher Findlay
Australian Pacific Economic Cooperation Committee (AUSPECC)
Honorary Professor, The Crawford School of Public Policy, Australian National University (ANU)

The signing of the Regional Comprehensive Economic Partnership (RCEP) on Sunday provided a much needed boost to the global trading system. It will create the largest single economic area in the history of the global economy, led by the ten ASEAN members plus its FTA trading partners it will cover a market of over 2.2 billion people, with a combined GDP of around US$26 trillion. Estimates suggest that benefits for RCEP members of around US$174 billion by 2030 according to numbers cited in PECC’s State of the Region Report this year.

The agreement has been 8 years in the making since ASEAN members agreed to the Framework for Regional Comprehensive Economic Partnership in 2012. The agreement will consolidate ASEAN’s existing trade agreements with partners: Australia and New Zealand; China, Korea, and Japan. India which had previously been part of the negotiations left last year.

Eduardo Pedrosa
Secretary-General, Pacific Economic Cooperation Council (PECC)

Christopher Findlay
Vice-chair, Australian Pacific Economic Cooperation Committee (AUSPECC)
Honorary professor, The Crawford School of Public Policy, Australian National University (ANU)

Referred to in the past as “four adjectives in search of a noun”, the Asia Pacific Economic Cooperation forum over nearly three decades has focused on its goal of free and open trade and investment across the region by 2020. This fateful year, which turned out to be marked by the worst global economic crisis for generations, is nearly over, with APEC’s 21 member economies searching for a post-2020 vision. Eduardo Pedrosa, secretary general of the Pacific Economic Cooperation Council, and economist Christopher Findlay, argue that the pandemic and its devastating aftermath have given the grouping that purpose: to lay out a long-term strategic framework that sets a positive direction for reform and growth for regional governments and gives businesses the confidence to plan for the future.

Leo Guzman-Anaya¹
University of Guadalajara, Mexico
Member of PECC Mexico

Background

Mexico’s automotive industry experienced a wave of rapid growth after the 2008 financial crisis. It now ranks as the fourth major exporter and the seventh global producer of automobiles and fifth producer of auto parts. This position was achieved primarily because the industry has been characterized by global production networks with fragmentation of their production processes, where companies have searched for locations that favor cost optimization and manufacturing quality. In this sense, Mexico provided a developed and functional productive infrastructure, human capital endowment, and a growing internal market which stimulated the arrival of automotive Original Equipment Manufacturers (OEM) from north America, Europe, and Asia. Also, the favorable geographical location that provide entry to the north American market and a network of 13 Free Trade Agreements (FTA) with preferential access to 50 economies position Mexico as a preferred location for investment projects as reflected in an inflow of Foreign Direct Investment (FDI) in the automotive industry². Between 2008 and 2019, FDI flows to the industry experienced an annual average growth rate of 11.6% in real terms³.

Christopher Findlay, Honorary Professor of Economics at the Crawford School of Public Policy, the College of Asia and the Pacific, The Australian National University; Vice-Chair, Australian National Committee for Pacific Economic Cooperation

Fukunari Kimura, Chief Economist of the Economic Research Institute for ASEAN and East Asia (ERIA) and Professor of Economics at Keio University.

Shandre Thangavelu, Vice President of the Jeffrey Cheah Institute on Southeast Asia at Sunway University and Regional Director Southeast Asia at the Institute for International Trade, University of Adelaide.

COVID-19 has sent shock waves running up and down global value chains (GVCs). Social distancing and high levels of uncertainty have caused a significant drop in demand for goods, with GVCs carrying the economic shock through supplier economies. 

Recovery from the shock is anticipated once COVID-19 cases fall below a certain level, but financial fragility are likely to linger from the large negative wealth effects caused by the pandemic. Several stages of fiscal and monetary policy stimulus are likely to be introduced over the coming months across many economies.

Pascal Lamy
President of the Paris Peace Forum of the French Committee of the PECC
Former Director General of the WTO
&
Eduardo Pedrosa
Secretary-General, Pacific Economic Cooperation Council*

Even as some economies begin to relax their lockdowns, it is too early and too much is unknown to realistically assess the economic impact. The consequences of this crisis have been and will be felt across every aspect of human life. Although many uncertainties remain, whether sanitary, economic, social or political, we must make our best efforts to figure out what a post-crisis life might look like and prepare for it.

Diego Solis Rodriguez
Mexican Council on Foreign Relations, Young Associate.
Consejo Mexicano de Asuntos Internacionales
a Next Generation Delegate to the XXII PECC General Meeting.

The coronavirus has prompted an unintended global experiment. The pandemic has turned international affairs into a vast laboratory. Today, we can identify some of its experiments: the global response to the pandemic; multilateralism and international cooperation; American leadership; the influence of China; the "purpose" of the European Union; climate change and the urgency of "green transition"; digital trade; and the return of the state towards democracy and freedom, to name a few.

To say that the virus is a failure of globalization is a simplistic statement. Globalization is a rather complex phenomenon for which it cannot be entirely blamed. In short, it is a multi-sectorial process that can be shaped in different ways.

Scott Young
Former director of ideas and insights at the Institute for Canadian Citizenship
Next Generation Delegate to the XX PECC General Meeting.

Scott Young: Sweden's unorthodox strategy has been rightly criticized, but it's too early to condemn an approach that's focused on the long game and public trust

Submitted by Jane Drake-Brockman, Christopher Findlay, Yose Rizal Damuri and Sherry Stephenson

From 3D printing (3DP) and artificial intelligence (AI), to cloud computing, 5G, and the Internet-of-Things (IoT), digital technologies are prompting radical new business models offered through digital platforms, that promise unparalled productivity gains and global increases in standard-of-living.

Adoption of new technologies is also impacting traditional demand and employment patterns in highly disruptive ways and radically altering the nature of consumer and business transactions. The changes underway raise major questions for traditional domestic regulatory settings and for trade, investment, innovation and industry policies for the digital age. They point to an urgent need for reform of international trade governance especially at multilateral level. Digitally-enabled trade - lets call it e-commerce - is the big global trade growth story. We are on the cusp of a structural revolution, which ushers in the digital age. The trading system needs to get ready fast.

Services are integral to the industry transformations underway and their cross-border tradability is growing as a result. Recent estimates suggest 50% of traded services are already digitally-enabled compared with 15% of traded goods. Just as services are critical inputs into production of both manufactures and services, trade in digitally-enabled services (digitised services or e-services) is dependent on and underpinned by cross-border data flows. These are growing exponentially, now contributing more to global GDP than traded goods flows¹.

Hugh Stephens
Vice Chair, Canadian National Committee on Pacific Economic Cooperation (CANCPEC)
Distinguished Fellow, Asia Pacific Foundation of Canada
Executive Fellow, School of Public Policy at the University of Calgary

The onset of the global COVID-19 pandemic has brought into question many long-held assumptions about how we interact socially, conduct business and deal with marginalized segments of our society. Policy makers have faced a series of challenges from first trying to ensure the health and safety of citizens to then dealing with the economic fallout of the social distancing and self-isolation measures that have been widely imposed to fight the pandemic. There has been much speculation on how COVID-19 will impact our policy settings as the world emerges from total lockdown and moves into what may the first of several post-COVID phases. While much of the focus has been on economic measures, in Canada the sudden arrival of COVID-19 has exposed holes that already existed in our social safety net. Governments in Canada¹ have moved to deal with these gaps out of necessity as part of the requirement to contain the epidemic, but the real question will be the extent to which these interim response measures will remain in place once the threat of COVID-19 subsides.

Jeffrey Reeves
Vice-President of Research for the Asia Pacific Foundation of Canada

Zodov Dolgor has been in self-quarantine since January.

Jeffrey Reeves
Vice-President of Research for the Asia Pacific Foundation of Canada

On April 8th, more than 50 physicians, logisticians, and head administration officials from Vancouver Coastal Health and from across British Columbia had a conference call with doctors and nurses from Central Hospital in Wuhan, China – arguably the first responders on the front line of the global war against COVID-19.

Jeffrey Reeves
Vice-President of Research for the Asia Pacific Foundation of Canada

On March 26, more than 25 physicians from Vancouver Coastal Health had a conference call with doctors and nurses in Wuhan, China – arguably the first responders on the frontline of the global war against COVID-19. The call was the first of several designed for Vancouver health-care professionals to learn from China’s experience around pandemic response and mitigation. Over the course of 45 minutes, China’s doctors and nurses spoke about the challenges, best practices, and experiences they have had in dealing with the coronavirus outbreak.

Rebecca Fatima Sta Maria
Executive Director, APEC Secretariat

Last month, G20 leaders released a statement advocating for a spirit of solidarity in the global response against COVID-19. In these dire times, it is a call that should be heeded well beyond their membership.

Sungbae An
Senior Research Fellow
Department of International Macroeconomics and Finance
Korea Institute for International Economic Policy (KIEP)

The rapidly evolving risks posed by the coronavirus outbreak are likely to reactivate cross-border coordination on macroeconomic policies.

Jorge Heine
Research Professor, Pardee School of Global Studies, Boston University
Non-resident senior research fellow at the Center for China and Globalization in Beijing

The current COVID-19 is the worst global pandemic to hit the world in a century, only surpassed by the 1918 influenza virus that killed 50 million people. As of this writing, the virus has been found in 175 economies and regions, with 471,000 cases and 21,000 deaths worldwide. The World Health Organization (WHO) reports that the epidemic is still accelerating. And it will not abate any time soon. While some specialists speak of a time horizon of three to four months, others predict waves of cases that may last for two years.

Vaccines may take anywhere from a year to 18 months to develop and be ready to go to market. Even relatively remote and isolated places like Puerto Williams in Chile, the world's southern most human settlement, and Nantucket Island, off the coast of Massachusetts, have reported cases of coronavirus. You can run, but you can't hide.

Simon J. Evenett
Economics Professor at the University of St. Gallen, Switzerland and Global Trade Alert¹

There is growing interest in the positive contribution trade policy could make in tackling the COVID-19 pandemic. In part, this reflects the well-founded concern that the effectiveness of health policy responses is being diminished by existing trade barriers and new curbs on the export of medical supplies.

Well-founded—given the resort to trade restrictions on medical supplies and soap summarised here. As of 27 March 2020, 64 export curbs on medical supplies have been introduced by 60 governments since the beginning of the year. Forty-nine of those export curbs have been announced since the beginning of this month, an indication of just how quickly new trade limits are spreading across the globe.

Charles E. Morrison
Adjunct Fellow and Former President of the East-West Center 
&
Former Co-Chair, PECC

Despite the current media and political glare, coronavirus is a silent killer. Since one neither sees the virus nor knows who may be spreading it unaware, perhaps even oneself, life appears normal on the surface. For many, it is hard to accept the preventive measures that would be draconian in normal times, and easy to believe that government, the media and businesses are overreacting when, in fact, these measures are typically too little, too late.

The key preventive concepts are to “flatten the curve,” through “social distancing,” that is, strategies to try to spread out the rate of infection over a longer period. This reduces the peak burden on overstretched medical institutions, saves lives, and buys time to produce vital medical equipment and develop vaccines.

Roy Santana
Expert on tariffs and customs issues at the WTO; occasional lecturer
(the views expressed in this article are those of the author in his personal capacity and should not be attributed to the WTO or its members)

Like many of you, I am currently in full "lockdown mode" and impatiently waiting for the COVID-19 crisis to get under control. And, like half of Europe's population, I am working from home while trying to convince my kids that they have to keep studying!

But, being a #tradenerd, every piece of news that I read or meme that I receive sparks a trade-related question, and the list is getting longer by the minute. I imagine that some of you may have similar questions so, during the weekend and over the past few nights, I have put my anxiety to good use and prepared this post with the 4 things you probably don't know about #internationaltrade and the coronavirus. The usual caveats apply: these are my own personal opinions and they do not reflect in any way the views of the #WTO Secretariat or its Members.