The Case for Strengthening PECC

Christopher Findlay 
Vice-Chair, Australian National Committee for Pacific Economic Cooperation and
Honorary Professor, Crawford School of Public Policy, Australian National University
^[1]

Background & Objectives

PECC is a unique not-for-profit multi-stakeholder partnership of thought-leaders from business, industry, government, academia, and civil society from 24 economies.

PECC’s origins can be traced to a seminar in Canberra in 1980 co-hosted by Australia & Japan. PECC emerged as a trusted, independent & a-political source of expert advice & support for Pacific Rim Nations seeking to accelerate economic growth by greater integration into a Rules-based Global trading system.  In addition to funding & disseminating independent research, the PECC and APEC secretariats are co-located in Singapore & maintain close links, while PECC works closely with APEC leaders.

As a Tri-partite NGO PECC’s members from both Public, Private and Academic sectors all serve in their private capacities and are therefore able to discuss freely the current and practical policy issues of the Asia Pacific region.  Participants are all dedicated to the cause of openness and integration and as one of the founders, Hadi Soesastro, used to say: ‘They are members of a movement.…’

The effort by PECC participants in their individual capacities complements the official processes which drive policy change and, given this situation and its linkages to the official systems, PECC is often referred to as a ‘Track 2’ organisation.

As the architecture of regional cooperation continues to evolve, questions are often asked about what is the continuing role of PECC, what contribution it can make and how might it develop and evolve?   This paper is designed to contribute to the case for strengthening PECC and is prepared for consideration by member committees and the governing body.  

Our starting hypothesis is that the rules-based order which contributed to the APAC region’s unprecedented growth, development and stability – the so-called ‘Asian Miracle’  -  is under threat from many sides, that trust in the Track 1 or government to government process is at a low ebb, and therefore that PECC is ‘more important than ever’. 

This paper is therefore designed to mobilise support for the organisation, from both current sponsors and from new participants. The paper outlines some key features of the PECC structure and its processes and illustrates the value of its contribution, actual and potential, with respect to a range of current issues in the Asia-Pacific.

Value of a Multi-stakeholder Constitution

A widening range of participants

The multi-stakeholder nature of PECC at its inception in 1980 was intended to lead to deeper and more effective cooperation at multiple levels throughout the fragmented and complex Asia-Pacific. At its origin, the composition was therefore tripartite - business, government and academe.  The original motivations for that construction remains just as relevant today.

• Business at the table would help identify topical issues and provide context for their significance.
  • Business had the incentive to participate for the value of the endorsement of their policy positions, and the level of access available

• Policy makers at the table had access to informal channels, the opportunity to meet each other ‘off-line’ and to gain insights from the other participants.
  • Incentives to participate came from facilitating progress on current issues and the testing of new ideas.

• The research community’s contribution included the ability to mobilise data and research capacity but also to champion good public policy
  • Incentives to participate included the value offered to the relevance and content of their research agendas and their teaching capacity, as well as the impact of their work.

In 2006, the PECC charter was amended to widen the constituency in recognition of the value of engaging a broader set of stakeholders in the development of international policy, specifically, civil society, parliamentarians and the media. These associations continue to add value to the original tripartite structure.

The engagement of the media has been a strategic priority for PECC to better communicate the implications of globalization and integration for domestic stakeholders. In recent years we have held joint conference with, for example, the Jakarta Post, briefings with Foreign Correspondents Associations and the inclusion of media people in PECC meetings as experts in their own right.   

Mobilising Academic Resources

A feature of the PECC structure is the capacity to mobilise the resources of the research community. 

The research undertaken for PECC projects is not contracted – it is generally not organised by a consulting arrangement nor paid for by grants.  PECC is able to leverage its own resources by having access to the academic work already being done, or the capacity which is available.  As noted, the researchers contribute in this way because of their belief in the purpose of the network and their own connection with that goal.

Mobilising a Business Voice

Officials regularly seek to better understand business views and interests, and the PECC network offers that access.

• One means for doing so is direct contact, through participation in events. In addition, increasingly important and recognised for its contribution is participation in the Annual State of the Region (SOTR) Survey/Report.  A unique value-proposition of this product is that it is able to juxtapose business views versus government and non-government views identifying priority areas for dialogue.
  
  
  • An example of this channel is the message that business sent in 2018 about the value of the WTO, from its perspective. Data for the 2019 report confirms the heightened levels of concern among the business community on the risks to the WTO.  For example, in the 2019 survey 55 percent of business respondents selected “The future of the WTO and multilateral trading system” as a top 5 priority for APEC Leaders’ discussions – a similar if slightly higher percentage than government respondents (52 percent) and non-government respondents (53 percent).
    
    
• Another means for doing so is via business participation in and contribution to PECC research.
  
  
  • The research work on the Benefits of Trade is an example. In conjunction with ABAC^[2], the project involved a series of focus groups with business people in APEC economies.  That process produced rich insights and is building the foundation of an approach to trade policy discussions and to negotiations on trade related matters.   A further round of meetings is to be scheduled over the next 3 months for an updated report in 2020.
    

Feedback Loops

While the emphasis has been on the importance of engaging stakeholders in the formulation of policy recommendations, the structures of committees in member economies also provides an important feedback loop into the broader community.

Only a limited number of people can engage in international meetings, and member committees play a role in disseminating information and feedback. Some of this is done through the PECC International Secretariat’s newsletter but also through committee activities. A variety of models exist among PECC member committees for this purpose.  For instance, the US Asia Pacific Council (USAPC) published a regular newsletter on Asia-Pacific affairs and held annual meetings. The China National Committee for Pacific Economic Cooperation (CNCPEC) holds an annual general meeting which includes participation from its APEC Officials as well various provincial level committees.  The Indonesia committee holds an annual conference. 

Another feature of the member committees is their degree of proximity to official systems in their home economies.  Some are closer than others (via the locations of secretariats, the appointment of members, the extent of funding, and so on) than others.  There is no one model in these structures.  Also, while overall PECC might be referred to as ‘Track 2’, in some cases and on some issues the organisation comes close to informal engagement much closer to ‘Track 1’

The Special Relationship with APEC

PECC has always had a special relationship with APEC.  First, it preceded APEC in historical terms and the PECC leadership played a vital role in the conception and development of the institution.  This is laid out in the PECC report on the first 25 years of its history.^[3]

Operationally, PECC is deeply involved in APEC matters.  It has the capacity to participate as an observer in meetings up to Ministerial level.  It issues regular statements to APEC Senior Officials and Ministers on the progress of its work.  It is regarded as an important resource and source of advice to officials.

One interesting further evolution is the relationship between PECC member committees and APEC related bodies. In the case of CNCPEC, the Director of the APEC Study Center is a Vice-Chair of its committee, while for AUSPECC, the RMIT APEC Study Center acts as the Secretariat for AUSPECC and for ABAC. Likewise, the National Center for APEC in the United States acts as the Secretariat for both ABAC and PECC. These relationships held to provide some synergies between business and academic networks linked to APEC.

An important point about PECC participants is that generally they are not solely engaged in work related to APEC.  They might have a focus on ASEAN, on other regions or on global level bodies such as the WTO, they might be more closely linked to bodies with interests in strategic issues or they might be involving in supporting business networks in the region.   This experience brings to the discussion are greater sense of global and regional awareness and of the strategic context of PECC’s work.

Changing Shape of the Region

While PECC has a clear value to policy-makers through its official observer role at APEC, its ‘Track 2’ status gives it more leeway to discuss significant initiatives that APEC is currently constrained to do. For example, in 2016 PECC organized an international symposium on Connecting the Connectivities, which was able to discuss a broad set of connectivity initiatives including the BRI. Interestingly, Connecting the Connectivities was also the title of the 2019 ASEAN Plus Three Leaders’ Statement.

In 2018, Indonesia’s Foreign Minister elected to use the annual PECC-CSIS Global Dialogue to outline Indonesia’s views on the Indo-Pacific. Many of the views expressed there were incorporated into the ASEAN Outlook on the Indo-Pacific.

While APEC membership has remained static since the membership moratorium was put in place in 1997, as noted, PECC’s membership has since expanded and the wider network has a set of observations on issues from economies at different stages and development and histories.  11 economies attended the first PECC seminar in Canberra in 1980, and economy membership has now expanded to 24.^[4] PECC provides a valuable platform for widening Track 2 engagement.

An example of this contribution is PECC’s annual report on the State of the Region (SoTR) which in 2012 included a section on economic reforms in Myanmar and in 2014 another on India.  While the State of the Region report is PECC’s flagship report, the geographic footprint that it covers is not limited to PECC membership for several reasons:

1. Not all APEC members are PECC members and conversely not all PECC members are APEC members;
   
   
2. Some significant regional initiatives that have been features of debate in the broader Asia-Pacific include non-APEC and PECC members – notably RCEP includes CLM economies and potentially India.

To resolve these inconsistencies, the geographic footprint of the report includes all PECC members; all APEC members, and all members of the East Asia Summit.  This is part of the set of PECC’s strategic objectives, as adopted by the PECC Standing Committee in 2013.

There has been active discussion in PECC about engagement with India, and the SOTR results indicate the value of further efforts to engage with India.  India’s failure to sign on to RCEP at the time of the 2019 East Asia Summit, and the evidence of the value of its participation, will lead in PECC to further discussion about its India strategy.  PECC, given is structure and track record, has the scope to play a more important role in the region’s engagement with India.

With respect to membership, some committees have also taken advantage of the network to engage in stronger cooperation with others. This often occurs in the management of PECC projects, which are usually led by a sub-group of members, while retaining the scope for all members to participate at some stage of the work.  But also, members have engaged in direct interaction with each other, for examples, in the form of a visit by a delegation from another member. The scope for this form of interaction is especially valuable in the context of recent developments in the region, as explained below.   Recent events have also caused a number of members to reconsider the value of the network and the opportunities it creates for new channels of dialogue and of the ‘doors’ which it can open. 

Track Record

PECC has led a series of projects whose results were relevant and realistic.   These include work ranging from investment principles, education markets, financial markets, social resilience, the blue economy, services trade and investment, connectivity and the design of regional architecture.   PECC Products in 2020 include the following:

• State of the Region Report 2020

The report is an annual statement on the major developments affecting the Asia-Pacific. While its current version has been published since 2006, it is an evolution of the Pacific Economic Outlook project that was initiated in 1989. The project team is an editorial committee which steers the direction of the report and gives suggestion on broad topics for the report to address. The macroeconomic analysis draws on publicly available data as well as PECC’s annual survey. Since 2006, the panellists for the survey has grown to over 3,500. On average around 600 respond to the survey each year.

• PECC-CSIS Global Dialogue

Established in 2018, the objective of the PECC CSIS Global Dialogue is to provide a platform for increasing awareness and understanding on topical issues and building momentum for policy cooperation among the Asia Pacific economies on these subjects. The themes of the two dialogues have been “Global Disorder: The Need for New Regional Architecture and Business Model” and “Harnessing Frontier Technologies Redesigning National, Regional, and Global Architecture. A series of policy briefs from the 2019 dialogue will be published in 2020.

• Asia-Pacific Connectivity Index

The PECC Connectivity Index is intended to contribute to policy-makers ability to assess and track progress of the region towards fulfilling the connectivity vision set out in the APEC Connectivity Blueprint. The first iteration of the index was included in the 2019 PECC State of the Region report, discussions are ongoing on an update to the index.

• New Roads for Trade: Is Multilateralism in Danger?

This project on Asia-Pacific Leadership for the International Trade System led by former WTO Director General Pascal Lamy will publish reports based on two seminars: one held in Vancouver The State of International Trading System and Opportunities Offered by the Digital Economy and Artificial Intelligence on 28-30 October and another to be held in Auckland in April.                                                      

• Ways of Asia-Pacific Regional Integration for the Post 2020 Era

A summary of the seminar organized by CNCPEC held on 17-19 October 2019 will be published in 2020.

Challenges

In very few cases are there any full-time people dedicated to working on regional issues.   PECC’s strength is that its participants are actively connected to various institutions & networks within their economies. While of great value, this situation also creates a challenge for management of the organisation, given the constraints on the resources that participants may apply to PECC tasks. 

PECC has a fine track record, despite its challenges in resourcing, but by no means is the ‘job done’.  Indeed, a number of factors have combined to make an organisation with this constitution even more valuable in the 2020s. A series of developments in the world economy have created new opportunities for PECC to make a significant contribution to regional integration.

The next Section identifies six areas on which PECC might focus in the next cycle of its work program.  These are subject to discussion within the PECC governance structure, but they are presented here to prompt that discussion, and, in the process, to contribute to the response of the question of this paper – why PECC?

A PECC Work Program for 2020 onwards

1.      The Modernisation of Global Institutions

Related to the reticence of some to support further trade liberalisation are challenges to the global institutions which have managed the regimes in which it has occurred.   There is credibility in some of the criticism, and there is a substantial case for reform.  As noted, business now shows a strong interest in this.  But where to go?  What to do first? What changes can be made to modernise these bodies? There are epic questions for institutions which have served the global community for decade.  A community like PECC, which has tripartite strengths and a fundamental commitment to openness, is well-placed to imagine, offer and test options. 

Many of the new issues in trade about which an institutional reform program would have to engage are those operating ‘behind the border’.   Tackling them could involve some particular challenges to sovereignty and if not well-designed lead to resistance to participation. 

The Asia Pacific has a clear philosophy and outstanding trade record on how to approach these issues. PECC’s historical contribution has been to refine the articulation of that approach.   Asia-Pacific economic cooperation is far less brittle and more sustainable than that of more institutionalised regimes.   The recent Report of the PECC Task Force on APEC Beyond 2020 makes this clear.^[5]

On specific questions, involving the alignment of institutions, the PECC structure is well set to develop solutions.  Indeed, its multi-stakeholder structure mirrors the principles of what leading academics in the field have proposed for ‘information platforms’ in which regulators, business and policy makers seek to make consistent the application of regulatory policy differences in which would otherwise impede trade.   

Progress in these respects is vital for the progress of services trade, where the indicators are that the region is lagging compared to the rest of the world.   Services trade growth supports the evolution of value chains, including in services themselves, and offers new sources of productivity growth, acceleration of which is well-recognised by more and more as the challenge of the 2020s.

2.      Maximising Synergy Among Regional and Global Initiatives

The international trading system has become increasing complex with multiple layers.  There are far more participants, and they operate are various stages of development.  The relative size of economies has also changed, partly a success story with respect to integration.  But that also creates new challenges in the management of relationships.

One specific consequence of these developments is that the rules of the trading system are under challenge, including with respect to new digital technologies, the role of state-owned enterprises and the treatment of intellectual property.   Furthermore, the significance of value chains highlights the importance of investment policy, which generally is not well treated in the global system of trade rules.  Finally, the concern about the distribution of the benefits of trade has led to more focus on the inclusion of small and medium enterprises.

In some cases, these issues are the focus of bilateral discussion, particularly between the US and China.  In others, a number of plurilateral initiatives are under way to figure out how to update trade rules:

• Ecommerce
• Investment Facilitation for Development
• Micro and Small and Medium Enterprises

APEC has developed a great deal of multilateral understanding on these topics over the past few years. However, there is a risk that the work APEC has done will not be taken into account unless positive actions are taken at both the domestic and international level:

• Domestically, APEC’s work may inform an individual economy’s position in Geneva as long as there are clear lines of communication between the divisions involved
  
  
• Internationally, APEC’s work should inform potential areas of consensus for the WTO given, however that requires the chair of the committee and the WTO Secretariat be aware of APEC’s work

In both instances there is a potential role for Track 2, specifically PECC to play a role in bridging the gaps that can emerge in information flows but that requires a relatively strong institutional memory on the part of the member committee that may be missing giving the rotational nature of government agencies.

3.      Conflict Among Trade Partners and a Framework for Tackling Security Issues

Another driver of the value of an organisation of PECC’s constitution is the emergence of new areas of conflict among trading partners, especially in the Asia Pacific.   To some extent, the success of integration and the ‘catch up’ that followed meant that relationships would change and new issues would emerge, related to the contest between and influence of leaders, new and old, in the region. 

A consequence has been a different way of thinking among some people about the connections of integration and security, in particular. Traditionally the focus of economic policy researchers was on the link from integration to security, which was expected to be positive.  Economic instruments were to be applied to the purpose of integration and security was a secondary benefit.

However, that connection is now more complex, and economic instruments are being used, at some cost, for security goals. The national security exemption in the WTO has become a talking point but the interest in security targets in the application of policy is more widespread than that matter alone.

This is a new – and potentially dangerous – environment. PECC has accepted the challenge to respond and to provide an examination of the consequences of the new approach and better alternatives to it. Indeed, many PECC members sit at the interface of security or strategic issues and economic policy: there is often, for example, an overlap that exists between Council for Security Cooperation in the Asia Pacific (CSCAP) and PECC in some of the institutions that host member committees.

PECC’s unique value is the community’s ‘trust’ in PECC’s capabilities and independence – and it has the network, capacity and methodology to make a material contribution.   One original motivation for the creation of PECC was to provide a track of conversation linked to official systems but running alongside them. This would allow participants including officials to rehearse and ‘test’ discussions on issues in an environment which would be less strategic, more open and less binding.  Given the complexity of current issues, that dialogue is now especially valuable.  

4.      Responding to the Application of Digital Technology

Nowhere are these new issues linked to strategic questions more evident that in the application of digital technology and the development of 5G in particular.  PECC has built successfully an extensive network of expertise on digital issues, which it will apply to this topic.  

A key question for the region is how to meaningfully move ahead with its work to implement the APEC Internet and Digital Economy Roadmap. The PECC task force on a post-2020 agenda for APEC suggests that one way forward is to prioritise the development of a unified Asia-Pacific digital market by 2030. PECC’s 2019 SOTR survey found that 64 percent of respondents agreed with this proposition, while only 8 percent disagreed: furthermore, the survey found a high degree of convergence among respondents from the regional policy community on key elements of a forward looking ahead for the digital economy:

• Avoid fragmentation of the digital economy
• Develop common priorities and responses by members on critical issues associated with related technologies such as artificial intelligence (AI), robotics, block-chain, and quantum computing
• Provide a platform to help develop members’ capacity to appropriately regulate emerging technologies
• Build more momentum to ensure the freedom of cross-border data flows
• Develop a common approach for the protection of privacy
• Adopt a coherent approach to taxation in the digital age
• Reduce excessive market power and promote competition in the digital environment

The survey results send the important message about common elements in views on these issues - that there is relatively little variation in responses among a heterogenous group of economies otherwise renowned for a divergence of views. There is therefore space for dialogue and understanding at the technical level, which is a process that APEC is well-suited for. This dialogue will be fundamental to reducing frictions coming from national security concerns and the impression that the technical standards and regulations are being put in place as part of broader containment strategies.  

There is important history to support this approach which demonstrates the capacity of PECC to deliver leadership in regional cooperation.  The Eminent Persons Group report from the 1993 put forward high level concepts such as an APEC Investment Code. A PECC group of experts then formulated an Asia Pacific Investment Code.[6] This was discussed among APEC officials and was eventually adopted by APEC in the form of its Non-Binding Investment Principles.

5.      The Future of Work

The relationship between work, skills, occupations, qualifications and their relationship with technological change in both advanced and emerging economies in the region is a topic of great importance.  New data on these topics are available from the PECC State of the Region 2018 – 2019 report.    The report lays out the significance of the issue and the sectors and occupations most likely affected.

The task now is to build a new human capital development strategy in the region.  Its elements may include education and training, the operation of labour markets and the design of social policy.  Survey respondents reported in SOTR show a low level of confidence that economies in the region are well prepared in any of these elements.

This topic is vital to many businesses, concerned with both filling skill gaps but also about the social consequences of the technology which they deliver.  With support, then, from the business sector, PECC is developing a program of work to consider how to raise the confidence among members in their adaptation to these changes. 

6.      Making the Case for Integration

The regional community could do a better job of telling its story about the gains from economic integration. Indeed, opinion in some economies now challenges the value of economic integration, and policy makers have sought greater engagement with communities on trade policy issues.  The experiences of people in business involved in international exchange is significant and valuable in that context. 

The sort of work that PECC researchers are able to undertake together with business in these focus group formats yields rich material for that purpose.   This output is complemented by reviews on academic research of firm level and household level survey which adds to the depth of the story, one not previously generally told except in terms of macro aggregates like growth and national income.   The PECC structure is able to ‘personalise trade’, which helps develop the feedback loops between the integration process and domestic societies.

Final words – What if there was no PECC?

To close, and to summarise, consider the alternate scenario – what if there was no PECC?  What would we lose? 

We would lose:

• The capacity to mobilise the academic members of a high trust ‘movement’ that supports integration
• Access to a broader section of the business voice
• The ability to present a synthesis of opinion across the region and across sectors on current issues, and on priorities for cooperation
• A number of feedback loops from integration into local communities, and a contribution to making the case for trade
• An important second track network for APEC, which offers to scope to rehearse, refine and advance discussion of and solutions of emerging issues
• A substantial body of considered thought, research output and policy advice, with a demonstrated track record of effectiveness
• The opportunity to develop new channels of communication that are becoming increasingly important as the geometry of the region shifts.

In this scenario of a world without PECC, these would all be important forces for the creation of an organization that fulfilled these functions.   We now have PECC in place, and the immediate challenge is to strengthen it by refining and developing its contribution.

[1] The views expressed here are the author's personal views and do not necessarily reflect those of the institutions he represents. I'm very grateful for the comments from Mr Eduardo Pedrosa, Secretary General of the PECC International Secretariat on earlier drafts of this article.

[2] The APEC Business Advisory Council also offers a business voice with which PECC frequently works. ABAC is extremely effective as it has a direct channel, since they are directly appointed by the leaders, but that high level can  be supplemented and supported with feedback loops back into society

[3] https://www.pecc.org/about/pecc-introduction-and-history

[4] Australia, Brunei Darussalam, Canada, Chile, China, Colombia, Ecuador, Hong Kong, China, Indonesia, Japan, Korea, Malaysia, Mexico, Mongolia, New Zealand, Peru, The Philippines, Singapore, Pacific Islands Forum, Chinese Taipei, Thailand, The United States, Vietnam, Associate Member: France (Pacific Territories)

[5] https://www.pecc.org/resources/publications/regional-cooperation-1/2608-pecc-apec-2020-vision

[6] https://www.pecc.org/resources/trade-and-investment-1/1486-a-draft-asia-pacific-investment-code/file