Pacific Currents

Camilo Pérez-Restrepo
Professor in Asia-Pacific Studies / Deputy Coordinator of the Asia-Pacific Studies Center at Universidad EAFIT, Colombia

The Asia Pacific Economic Cooperation (APEC) is back in Latin America for the first time since 2008, when Peru hosted the forum amid the global economic crisis. At that time there were concerns about raising protectionism across the region and increasing demands to reform the global financial system. In 2016, APEC takes place again in Peru, in a new context of economic growth in most of its member economies, but also during a moment when important structural reforms are taking place to secure better quality growth and better conditions for human development.

This article provides Canadian policy makers and businesses with a fresh perspective on APEC, its priorities in 2016, and the role and influence of Latin American economies. After a brief overview of APEC, the article provides context for Latin America-Asia relations, a matter of importance in view of Peru’s chairing of APEC in 2016. Peru’s dual chairing of APEC and the Pacific Alliance will potentially see Peru capitalize on opportunities for convergence between the organizations. The article then explains the APEC 2016 agenda with reference to the Latin American context, and concludes with a discussion of implications for Canada.

Chien-Fu Lin
President, Taiwan Institute of Economic Research/ Chair, Chinese Taipei committee for PECC

In recent years, free trade agreements (FTAs) have proliferated in the Asia-Pacific region. Most importantly, the mega FTAs consisting of the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) have come into existence and will certainly transform the trading environment, since their gross domestic product (GDP) shares are 38% and 29% of the world, respectively. At the same time, the Asia-Pacific Economic Cooperation (APEC) is developing the Free Trade Area of the Asia-Pacific (FTAAP) which will arise in the form of a mega FTA in the future. According to a study by APEC (APEC 2015), if the FTAAP is in place by 2025, it would bring a 4%-5% increase of GDP in the whole region from 2015 and 2% of world total GDP. In order to continue the dynamism that is taking place in Asia-Pacific regional economic integration (REI), it will be necessary to address the most important challenges, that is, the inclusiveness issue. The main purpose of this article is to examine the issue of inclusiveness in the mega FTAs from two dimensions. The first dimension is about inclusiveness through open membership of the mega FTAs while the second dimension focuses on the importance of assisting small and medium-sized enterprises (SMEs) to benefit from the mega FTAs.

Linking APEC FTAAP with TPP and RCEP
During the 2010 APEC Economic Leaders' Meeting, leaders made a significant point in the Yokohama Declaration that they will seek to realize the FTAAP. Particularly, the FTAAP will serve to enhance the advancement of APEC's regional economic integration. Moreover, the FTAAP will be pursued in the form of a comprehensive FTA through building on ASEAN+3, ASEAN+6, and the TPP (APEC 2010). With this important announcement, APEC has embarked actively on the quest for attaining the FTAAP that includes the linkage with regional mega FTAs.

Shujiro Urata
Faculty Fellow, Research Institute of Economy, Trade, and Industry (RIETI), Japan

After five and a half years of negotiations, the Trans-Pacific Partnership (TPP) agreement was reached on October 5, 2015. Yet it is too early to celebrate as the agreement must be ratified by the participating countries including those where anti-TPP protestors have significant political influence. The TPP is a free trade agreement (FTA) among 12 Asia-Pacific countries, which together account for approximately 40% of the world's gross domestic product (GDP). Not only is it extremely ambitious in the level of liberalization in trade in goods, investment, and services, but also comprehensive in its coverage, setting rules for such areas as electronic commerce, government procurement, intellectual property, labor, and the environment. The TPP has high potential to promote economic growth and improve people's living standards by facilitating the free cross-border movement of key factors of economic activity, such as goods, people, money, and information. Failure to bring the TPP into force would be a great loss to not only the TPP countries such as Japan and the United States but also the global economy.

TPP and the revitalization of the Japanese economy
Following the collapse of its economic bubble, Japan plunged into a prolonged period of stagnation which now has come to be referred to as the "lost two decades." Thanks to the expansionary monetary and fiscal policies under the leadership of Prime Minister Shinzo Abe and his second Cabinet formed in December 2012, the Japanese economy was boosted in 2013. But the effect was short-lived and the economy has been sluggish since 2014. The stagnation of the Japanese economy can be partly attributable to external factors such as a slowdown in the global economy. However, internal factors—i.e., a shrinking and aging population, massive government debts, and slow responses to structural problems such as the closed nature of the market—are more serious. In revitalizing the Japanese economy, which is currently in such a dire predicament, the TPP will be playing an important role.

Sanchita Basu Das
Yusof Ishak Institute of Southeast Asian Studies

At the last Asia Pacific Economic Cooperation (APEC) Summit in November 2015, the United States and China advanced their own set of interests with respect to trade agreements in the Asia-Pacific region. While the United States celebrated the conclusion of its Trans-Pacific Partnership (TPP) deal in early October 2015, China stressed the potential of a Free Trade Area of Asia-Pacific (FTAAP).

In his speech, President Xi Jinping promised to work to ‘finish at an early date negotiations for the Regional Comprehensive Economic Partnership (RCEP), while accelerating talks on a China–Japan–South Korea FTA.’

Jeffrey J. Schott
Senior Fellow, Peterson Institute for International Economics

Trade ministers from the 12 countries participating in the Trans-Pacific Partnership (TPP) trade negotiations concluded talks on October 5, 2015. Negotiations are done but there is much left to do before this mega-regional trade accord is ratified and implemented.

If Congress and the president work closely, a TPP vote could be taken by Congress by mid-2016. However, differences over the drafting of implementing legislation could delay a vote for an extensive period (as occurred with the Korea-US Free Trade Agreement).

Ed Brzytwa
Information Technology Industry Council

At the Asia-Pacific Economic Cooperation (APEC) forum in the Philippines, government officials, industry representatives (including ITI), academics, and other stakeholders have been discussing how to advance regional economic cooperation and break down barriers to trade and investment in the Asia-Pacific region. During the forum’s three weeks of meetings and sessions, these experts have been communicating with their constituents at home as well as with each other primarily through digital means. Their communications burst through the Internet all over the world at the speed of light in the form of digitized data crossing borders many times over. That amazing connectedness acts as a metaphor for the larger transformations to our world. ITI last week raised awareness of the threat that data localization requirements in the region and around the world pose to that connectedness, economic growth, trade, investment, and job creation.

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]

Malcolm Cook
Senior Fellow, Institute of Southeast Asian Studies

APEC leaders’ tightening embrace of the Free Trade Area of the Asia Pacific proposal first floated by the APEC Business Advisory Council in 2004 offers APEC a unique opportunity for renewal and strengthening through expansion.

In 2010, APEC leaders ordered APEC to become “an incubator of an FTAAP by providing leadership and intellectual input into the process of its development” with the guiding principle that FTAAP should build on existing regional trade liberalization processes involving APEC members. (http://www.apec.org/Meeting-Papers/Leaders-Declarations/2010/2010_aelm.aspx ). These are the so-called pathways to an FTAAP. In 2014, FTAAP became the centrepiece of an APEC leaders meeting for the first time with leaders committing to “launch a collective strategic study on issues related to the realization of the FTAAP” that is scheduled for leaders consideration at APEC 2016. (http://www.apec.org/Meeting-Papers/Leaders-Declarations/2014/2014_aelm.aspx ).

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

There is strong evidence that businesses are doing things differently.  Production processes are being organized into a series of value adding steps in different locations, organized in what is being referred to as Global Value Chains. These chains offer new opportunities for developing economies to enter global markets, and provide options for adjustment to economies at later stages of developing undergoing structural change. They offer finer options for capturing the benefits of differences in competitiveness in production process and better growth prospects as a result.

Data from the ADB shows over the period 1995 to 2008 that, while the rate varies a lot, the participation in GVCs in nearly every Asian economy increased¹. An exception was Hong Kong, whose position remained stable, having already developed a sophisticated system of production and distribution.  Participation measures here refer to the extent to which imported inputs are used in local production and to which outputs are inputs into production elsewhere.  The phenomenon is relevant to goods production but also applies in services.

Narongchai Akrasanee
Minister of Energy, Thailand
Chair, Thailand National Committee of Pacific Economic Cooperation (TNCPEC)

Asia-Pacific Economic Cooperation (APEC) is 25 years old this week and the leaders of its 21 member economies, the world’s largest regional economic group, will be hosted by China’s President Xi Jinping in Beijing to celebrate.

Although officially APEC is 25 years old, the so-called APEC attempt, or attempt at economic cooperation among the Asia-Pacific economies (countries) began more than 40 years ago.

The first group of people who saw the benefits of economic cooperation in Asia-Pacific was businesspeople. They saw the opportunity for trade and investment, or the opportunity to make money. This is not unlike the Arab/Indian merchants who sought trade cooperation with Southeast Asia more than 1,000 years ago or the merchants along the famous Asian Silk Road. Another route of development that eventually reached to APEC was through academia, through the development of public-policy thought.

Jusuf Wanandi
Co-Chair Pacific Economic Cooperation Council

The Asia-Pacific Economic Cooperation (APEC) forum celebrates its 25th anniversary this year. This milestone presents a chance for reflection on achievements as well as the future. Although most think of APEC in terms of the Bogor Goals of free trade and investment, these were the chosen means to an end — that end being “accelerated, balanced and equitable economic growth not only in the Asia-Pacific region, but throughout the world as well”.

Since 1989, the average income in the region has tripled from around US$5,000 to above $15,000. Asia- Pacific is now the world’s strongest growth center. The non-OECD economies of Asia-Pacific, notably China, have evolved into great traders. Asia-Pacific has also caught up very fast in the origination and hosting of the cross-border flows of capital and people. More importantly, the number of people living on less than $2 a day in the region has dropped from close to 1.2 billion to 412 million.

Andrew Elek
Australian National University (ANU)

As APEC celebrates its 25th anniversary in Beijing, we are publishing an abridged version of the chapter on the founding of APEC that was part of PECC’s own 25th anniversary publication in 2005. The chapter was written by Dr Andrew Elek, the chair of APEC’s first Senior Officials Meeting.

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.

Malcolm Cook
Senior Fellow, Institute of Southeast Asian Studies

If Indian Prime Minister Modi accepts Chinese President Xi’s surprise (to the other members of APEC and to India) invitation to attend the APEC Leaders Meeting in Beijing in November, it will bring India closer to its twenty-year goal of becoming an APEC member economy. In 2005, I supported the  continued thwarting of this Indian aspiration for what I thought were sound, APEC-based reasons. (http://www.lowyinstitute.org/publications/how-save-apec)

Nine years on, the regional trade diplomacy picture has fundamentally changed while APEC has not. The Doha Round’s continuing comatose state has underpinned a continuing proliferation of bilateral preferential trade deals and an attempt at an Asia-Pacific regional trade deal (the Trans-Pacific Partnership) and an ASEAN-based, East Asian one (The Regional Comprehensive Economic Partnership).

Amitendu Palit
Head (Partnerships & Programmes) and Senior Research Fellow
The Institute of South Asian Studies (ISAS)

India is not a member of the APEC notwithstanding its long history of cultural and commercial exchanges with several APEC members. While this might seem odd, the absence is not difficult to explain.

India was hardly a blip on the region’s radar when the ‘flying geese’ began fanning their wings after the 2nd World War, drawing struggling economies with colonial pasts into a well-knitted architecture of explosive export growth combining cheap labour, embodied technology and disciplined organization practices. India’s inward-looking defensive trade policy, coupled with commitment to non-alignment and ideological discomfort with laissez faire and open trade policies, ensured its distance from the APEC remained far and unbridgeable.

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

Kenichi Kawasaki
Consulting Fellow, Research Institute of Economy, Trade and Industry (RIETI)
Senior Fellow, National Graduate Institute for Policy Studies (GRIPS)
Adjunct Fellow, Japan Institute of International Affairs (JIIA)

Summary
Quantitative studies using an economic model show the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) complement each other rather than be competitors toward the establishment of the Free Trade Area of the Asia-Pacific (FTAAP).  Breaking down the sources of those macroeconomic benefits by the policy measures of Asia-Pacific Economic Cooperation (APEC) member economies showed that the contribution by China would be the largest.  Nonetheless, in many countries of Association of South‐East Asian Nations (ASEAN) and outside this region, contributions by a country’s own initiatives will be much larger than those by its trade partners, including China.  Meanwhile, larger economic benefits are expected from NTMs reductions in addition to tariff removals.  It is thus suggested that domestic reforms are essential in order to enjoy the macroeconomic benefits of international Economic Partnership Agreements (EPAs). 

Hugh Stephens, Vice-Chair, CANCPEC

Don Campbell, Co-Chair of PECC and Chair, CANCPEC

Published: December 12, 2013 in Canada-Asia Agenda

Abstract:

On October 18, Canada and the EU announced an agreement on the provisions of a Canada-EU Trade Agreement (CETA). The concessions that Canada was willing to make for the CETA may indicate a path forward in terms of finding the balance necessary to achieve a winning outcome with Asia Pacific countries, especially through Trans- Pacific Partnership (TPP) Agreement.