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Update for APEC Senior Officials
First Senior Officials Meeting (SOM1)
Ningbo, China
27-28 February 2014
Tang Guoqiang, Chair, China National Committee for Pacific Economic Cooperation
On behalf of PECC Co-chairs, Jusuf Wanandi and Donald Campbell
 

On behalf of the members of the Pacific Economic Cooperation Council (PECC) we thank you for this opportunity to share our views from the second track.  We welcome the overall theme for this year’s work “Shaping the Future through Asia-Pacific Partnership” as well as the sub-themes: Advancing Regional Economic Integration; Promoting Innovative Development, Economic Reform and Growth; and Strengthening Comprehensive Connectivity and Infrastructure Development.

We thank APEC officials for the opportunity we had during ISOM to contribute significantly to the planning for this year. Since then, we held a conference in Singapore to further debate and discuss our recommendations to you. This update is based on those discussions as well as our ongoing work.

Shaping the Future through Asia-Pacific Partnership

The recovery from the global economic crisis is expected to continue this year with some important developments. Emerging economies in Asia are forecast to continue to grow strongly albeit at a moderated pace while growth in advanced economies is expected to accelerate. Demand from advanced economies is critical to supporting further growth in emerging markets especially as the tapering of quantitative easing reduces capital inflows.

Beyond the immediate turbulence in financial markets caused by policy shifts, the world economy is ‘normalizing’ but this is a ‘new normal’. This new normal will be very different from the pre-Global Financial Crisis economy. The characteristics of growth in the major economies of the region are changing: imbalances are shrinking indicative of major structural shifts and not just business cycles. Critically, many emerging markets are now growing at or near their potential level of growth. The region as a whole needs to understand these changes and respond to them.

Our discussions drew attention to concerns about the ability of the region’s markets to recycle savings in an efficient manner. The lack of depth and development of regional financial markets leaves the financial sector exposed to the double mismatch in currencies and maturity and impairs the ability to make investments in productive activities especially infrastructure.  There is a need therefore for this region to take up financial policy coordination and cooperation in a much more serious manner. While APEC has led the way on trade policy we have not done so on finance.

We hope that this year, and in successive APEC years much more will be done to think through the types of initiatives that can be done to make financial policy issues more central to APEC’s work.

Advancing Regional Economic Integration;

As we celebrate 25 years of APEC, we recall that regional economic integration has been the core of APEC’s work. While the FTAAP is an idea that has gained increasingly wide acceptance it remains an idea without any concrete substance. The TPP and RCEP are held up as possible pathways to an FTAAP but the question is ‘how’?

Much progress has been made in the various pathways; the suggestion is that their best, most forward-looking aspects be the foundations of the FTAAP. In order to understand what these are and ultimately the mechanics of bringing all regional economies into the same trading system, there is much work that needs to be done. PECC will be establishing an expert group to look into these issues and consider the principles which would form the foundation of the FTAAP.

We hope that you will be open to our suggestions and incorporate them into your own thinking as APEC has done with the Non-Binding Investment Principles, Competition Principles and RTAs/FTAs to cite just a few.

Promoting Innovative Development, Economic Reform and Growth

We welcome APEC focus on innovative development, economic reform and growth. As mentioned earlier many emerging economies in the region are growing at or near to their potential. There is therefore an urgent need to look at ways to increase growth potential – many of which are issues that APEC looks at through the structural reform agenda.

APEC has a headstart looking at these issues, particularly the excellent work done by the PSU on the benefits of structural reform that was presented at the SOM-ABAC-PECC dialogue on services. Indeed, to promote innovative development, economic reform and growth, we believe that service sector reform is a pre-requisite. While services were not formally on the agenda for our recent conference, their critical role as a driver of comparative advantage permeated all of our discussions.

Strengthening Comprehensive Connectivity and Infrastructure Development

We would like to emphasize the importance of connectivity to APEC’s goals of promoting inclusive growth as well as its importance in addressing market failures. While regional economic integration has the potential to promote accelerated growth, this potential can only be realized if the infrastructure – both soft and hard is there to facilitate broader participation in the economy.

We discussed in Singapore the proposal to establish an Asian Infrastructure Investment Bank (AIIB). Such a bank could help ensure the successful implementation of APEC’s Connectivity Framework. Our discussions indicate both a need for such an institution as well as some operating principles for its effective use.

As you work through the Blueprint on APEC Connectivity we urge you to take advantage of your broad footprint to review efforts at the bilateral and sub-regional level to promote connectivity and infrastructure. For example, efforts in the Mekong or South American such as the Corporation Andina de Formento could provide important learning experiences. Similarly, APEC’s membership is involved in a multiplicity of processes and institutions a pan-regional forum on infrastructure could help to coordinate and integrate existing bilateral, sub-regional and initiatives as well as the expertise from the ADB, IADB, World Bank, ASEAN, UNESCAP, and so on.

We will submit these ideas in detail as we finalize our own work.

PECC’s Work Program

Our work is conducted at a number of levels, you will be most familiar with the outputs of the international task forces that we establish to address concerns we believe that a track 2 perspective could help resolve. Our committees also collaborate on a variety of interests to build greater understanding around a particular issue such as social resilience, our member committees are also very active undertaking activities targeted at domestic audiences.

As part of the reforms to PECC we agreed on last year, we will be re-engaging the tripartite networks of experts we have established over the past 30 years to further strengthen our ability to support regional cooperation on a range of issues.

Services as a Driver of Comparative Advantage

We welcomed the opportunity to engage in a dialogue with ABAC and Senior Officials on services last year and look forward to co-organizing the dialogue again this year. We are in the process of finalizing our work program on services, some of the key issues we have discussed is: progress on reforms to the governance of services trade (through TISA, TPP, and RCEP); the role of services in global value chains; and the domestic political economy of service sector reform and stakeholder engagement.

Our understanding of the role that services play as a driver of competitiveness and comparative advantage remains limited. There is much more work that needs to be done, in terms of their impact on competitiveness in manufacturing and supply chains and agriculture. We draw your attention to the case study by NZPECC on global value chains in the dairy industry as an example of the new literature on this topic. This paper is found on PECC website.

We welcome your views and inputs on what kind of work you would find of most value. We hope that through the SOM dialogue progress can be made on defining the key elements of an APEC-wide services initiative.

State of the Region

We hope that you are all familiar with our annual State of the Region report. An innovative part of this report is our annual survey of regional opinion-leaders. Our objective with the survey is to provide a baseline of views and feedback on the work done to promote Asia-Pacific economic cooperation. We welcome your views and inputs on topics we should address.

Competition and Cooperation in the Extractive Industries

At our Singapore Conference, one key risk for the global economy was the impact of a prolonged period of low-energy prices as a result of the new supply of shale gas to the global market especially for commodity dependent economies. We have been looking at this issue from a number of perspectives, firstly on the potential for transpacific energy trade but also the wider developments in the extractive industries from both the demand and supply side.

There is a wide range of new issues that need to be addressed to minimize systemic risks to the global economy resulting from developments in this critical sector.

Energy Transition

Another project we have under way is a study on the ways in which Asia-Pacific economies could transition from being carbon-high producers and consumers to becoming economically sensible and environmentally friendly energy producers and consumers facilitated by sound policy measures.

Global EPAs Research Consortium

A new international project was approved at our last Standing Committee Meeting to look at the state of bilateral and multi-regional economic partnership agreements. The research will cover: China-Japan-Korea FTA negotiations, TPP, RCEP as well others. The proposed Consortium aims to contribute to improving the estimation of changes in economic welfare, production, trade, investment and job creation by looking at tariff concessions, non-tariff barriers, and ways of improving computable general equilibrium (CGE) models.

Future Meetings of PECC

Our next Standing Committee meeting and General Meeting will be held in Beijing in September hosted by our China member committee, CNCPEC. Held two month ahead of the APEC Leaders’ Week, PECC looks forward to addressing some of the issues that we deem important for our ministers and leaders to consider at their upcoming meeting. We will be able to include a summary of the discussions and recommendations from this meeting in our PECC Update to the CSOM and in our PECC Statement to the Ministers. We welcome your advice and input as we work to develop the agenda for this year’s PECC General Meeting.

As an endnote, we would like to congratulate APEC for its 25th anniversary. In a quarter of a century, the region has gone through a whirlwind of changes and APEC has achieved many milestones in efforts to improve the quality of life for the Asia-Pacific community in both quantifiable and unquantifiable terms. We would like to reiterate our commitment to continue our work in parallel to the numerous ongoing APEC work programs while proactively identifying areas of importance for the region.

DSC 3841On Dec. 9, 2013, the APEC 2014 Symposium was held at the China National Convention Center in Beijing. The Symposium was themed "APEC 2014: Opportunities and Priorities" and was organized by the China National Committee for Pacific Economic Cooperation (CNCPEC). Over 200 participants, including academic experts, APEC Senior Officials, and representatives from the business community and government departments attended the Symposium chaired by Ambassador Tang Guoqiang, Chair of the the CNCPEC, and exchanged views and thoughts on the objectives and priorities of cooperation for APEC 2014.

Mr. Zhang Jun, Director General of the Department of the International Economic Affairs, Chinese Foreign Ministry, addressed the opening session, during which he shared perspectives on the new environment, opportunities, and challenges for the Asia-Pacific regional cooperation. Zhang stressed that APEC should continue to focus on developing a long-term vision and framework for the Asia-Pacific economic cooperation, tap deep into the growth potential of the region, establish new areas of growth, and facilitate concrete results in practical cooperation.

The APEC 2014 Symposium was held as a supporting event of the APEC Informal Senior Officials' Meeting (December 10, 2013) with the objective of providing intellectual support and policy recommendations for China's chairmanship of APEC in 2014.

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[Photo: Amb. Tang Guoqiang, Chair of CNCPEC. Courtesy of the Ministry of Foreign Affairs of China]

tug of warThe 28th Pacific Economic Community Seminar: “TPP and RCEP: Emerging Dual-Track Pathways towards FTAAP” was held on November 13-14, 2013 in Taipei. (For the list of speakers and program agenda, click on the link)

The most recent crisis had serious impacts on the world economy through the channel of trade. We believe that economic integration with freer trade would help create a healthier business environment by eliminating protectionism in many possible ways. After all, REI is able to provide the much needed recovery momentum. However, there still exist many political and economic challenges limiting the progress of REI. 

Protectionism in many forms seems revived at bad times, and transaction costs hindering the development of healthy business environment increased. The regional economic integration (REI) aiming at reducing or eliminating unnecessary economic barriers has been proposed, such as the initiative of FTAAP and initiatives in progress such as the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). Are these two tracks in competition or are they complementary? How can the potential gains from TPP and RCEP be maximized? What effect do these two tracks have on non-members as well as the participating members? These were some of the questions addressed at the seminar. International experts from Australia, Chile, China, Indonesia, Japan, Korea, New Zealand, Singapore, and Thailand shared their views and exchanged ideas with Chinese Taipei counterparts. 

 2013 CTPECC REI seminar Group

2013 CTPECC REI seminar   2013 CTPECC REI seminar2

 

 

 

2014 Singapore conference Lim Hng Kiang Jusuf WanandiThe regional and global economies are undergoing a structural transformation, partially a response to the upheaval caused by the Global Financial Crisis but also due to rapidly evolving changes in regional economies. Policy-makers are experimenting with various instruments to manage these changes. 

The 2014 PECC Singapore conference was co-organized by the Singapore National Committee for Pacific Economic Cooperation (SINCPEC) and the China National Committee for Pacific Economic Cooperation (CNCPEC) to provide a venue for stakeholders from different parts of the region to share their views and expertise on various ways in which APEC can play a role in managing the changes. The Conference consisted of four sessions with opening remarks delivered by Lim Hng Kiang, Minister for Trade and Industry of Singapore. For more information, please contact: This email address is being protected from spambots. You need JavaScript enabled to view it.

Program agenda (pdf, 240KB) 

Press release (pdf, 24KB)

News clippings

2013 Bali AMM

PECC Statement, 25th APEC Ministerial Meeting, Nusa Dua, Bali
4-5 October, 2013
Jusuf Wanandi and Donald Campbell, Co-Chairs of PECC

On behalf of the members of the Pacific Economic Cooperation Council (PECC) we thank you for this opportunity to share our views from the second track. We have had a busy year starting with a symposium we co-organized in Jakarta almost 12 months ago; to a follow up meeting in Singapore addressing the key themes of this year’s APEC meetings; our General Meeting in Vancouver; and finally we co-organized with the Boao Forum for Asia a symposium on connectivity held here in Bali just before this meeting.

We provided a similar set of suggestions at the Concluding Senior Officials Meeting, we highlight just 5 key points arising from our work.

· We call on APEC Ministers to recognize the current challenges presented by the current economic environment to the region but especially emerging economies and to send out a clear message that this region is ready to implement the reforms needed through the new growth strategy to continue to be the engine of global growth.

· We welcome the work on connectivity and look forward to seeing the results of this year’s efforts. We hope that this emphasis on supply side constraints will better enable economies to benefit from integration and facilitate the process of structural change that will take place. We held a seminar here in Bali just before this meeting, we will highlight a few key points from those discussions separately.

· While we welcome the progress made on the TPP, RCEP and other regional trade agreements, not enough is being done to facilitate their convergence. The economic rationale is clear – the benefits of an FTAAP far outweigh those of the single tracks, a TPP around $223 billion and the RCEP $644 billion but an FTAAP around US$1.9 trillion globally. While the TPP and RCEP have their own rationale, stakeholders are concerned that each excludes key regional economies. We urge APEC Ministers to instruct officials to undertake regular dialogues on how specific trade issues are being addressed in various trade agreements with outside experts from other regional and global institutions as well as the business community.

· If such an approach is adopted, we hope that APEC will use the opportunity to respond to the recommendation of the Panel on “Defining the Future of Trade” and include a discussion on how the principles and rules adopted in FTA/RTAs can be brought into the global system.

· Our discussions throughout the year and our survey results indicate a need to rethink economic and technical cooperation in APEC. Our survey results show strong support for the idea that setting specific development targets would help to drive ecotech work. A focus on education is critical as part of drive to ensure that the benefits of economic integration are open to all. Such an approach would ensure that the work on connectivity delivers tangible benefits to stakeholders. This is critical if the Bogor Goals are to be met and all economies are ready to participate and gain the benefits from an eventual FTAAP.

Economic Context

While the global economy continues its recovery from the worst crisis since the Great Depression, the balance of concerns is shifting from advanced to emerging economies. The risk is that given this volatility, unforeseen events or policy actions have a greater potential to induce disorderly adjustments which force governments to take actions that might temporarily restore confidence but ultimately detract from the medium to long-term actions needed to boost growth.

Given this situation, we hope that through this series of meetings in Bali, APEC will demonstrate its ability to take on difficult issues and lead through example. APEC has already articulated a strategy for inclusive, balanced, sustainable, innovative, and secure growth. Making progress on all of the elements of the growth strategy is the best way to ensure continued confidence in the region’s markets. While the last few years have been hard for many, they would have been much worse if not for the concerted actions taken by governments, especially in this region. Given the volatility we have seen affecting a number of regional economies, concerted actions are also needed in exiting from stimulus. We hope that through these meetings as well as the G20 process there will be some common agreement that a disorderly adjustment is something that must be avoided.

Need to move on Growth Strategy

Despite the current volatility affecting the region, the medium to long-term prospects for the region are very positive. However, this growth is contingent on the ability of regional economies to adapt to the changing global environment in which we operate. As we discuss in our annual State of the Region report, the pattern of aggregate demand is changing in the region, but it is not significant enough to drive growth at the same pace prior to the crisis. While investment has been increasing, some of this is due to the very cheap cost of capital during this extraordinary period. As long-term interest rates return to normal, more needs to be done to improve the investment climates in our respective economies.

For this reason, we welcome the focus Indonesia has placed on connectivity, especially on the physical infrastructure needs of the region. We believe this focus can provide greater coherence and impetus to the existing work of APEC on structural and regulatory reforms.

Regional Economic Integration

Much progress is being made on the two major regional integration initiatives, the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership. As we stated at the APEC MRT earlier this year as well as on other occasions, the economic logic of an FTAAP is compelling; the TPP and RCEP would result in increases to global GDP by US$223 billion and US$644 billion respectively. The importance of these initiatives should not be understated. Economic growth is weak, and emerging economies are under pressure. These agreements have the potential to put regional economies, especially the emerging ones, onto a higher growth trajectory – not only through improving the efficiency of allocation of resources in our economies but the rules within them can provide the certainty and clarity of policy that businesses need to make long-term investments.

While each track has the potential to boost growth, by far the biggest gains would come from a convergence of the tracks into an FTAAP – at US$1.9 trillion. This convergence will not happen on its own. It will require political support at the highest level. We urge Ministers to instruct Senior Officials to engage in a genuine dialogue on specific aspects of the various agreements. This could build on previous work such as the study on convergences and divergences in FTA/RTAs.

Rethinking Capacity Building in APEC

We welcome progress made to consider future steps to attain the Bogor Goals, noting that while a specific target was set for free and open trade and investment, the goals are best understood as a means to an end. That end is “equitable economic growth not only in the Asia-Pacific region, but throughout the world as well.” This is one area where this region has not done well. While APEC has long recognized the need for capacity building that would facilitate the rapid integration of emerging economies into the regional economy, there is a perception that APEC’s work on economic and technical cooperation has not been as effective as it needs to be.

We are deeply concerned about the rising levels of inequality both within and among APEC economies. This trend threatens to undermine the success of the past few decades, unless specific actions are taken to address the problems. While there are many projects under the ecotech, as indicated in various reviews, there is a lot that can be done to improve coherence among projects and in identifying beneficiaries of projects. More than this, our survey indicates strong support for the idea that APEC should set some specific developmental goals to make its work on ecotech more effective.

The most important areas for such targets are: education; physical connectivity; and basic services including water, sanitation and electricity. All of these areas are covered by the connectivity agenda. While recognizing that APEC is not a development organization, the specific targets on the TILF agenda have kept APEC’s work on trade liberalization focused - the same cannot be said for its ecotech track. We hope that as you consider future work especially on connectivity that you will set specific targets to drive progress on these critical issues.

The Global System

We welcome efforts made this year to better align and coordinate work that takes place at the global level through the G20 and work at the regional level through APEC and other processes. This is a theme that has been high on the second track agenda for many years. One example of an area where APEC can make a positive contribution to the global system is in trade rules. Numerous calls from APEC and others to bring a swift conclusion to the WTO Doha Round have fallen on deaf ears. It is time for a real conversation and discussion on this.

The panel on “Defining the Future of Trade” established by then WTO Director General, Pascal Lamy called for ‘ WTO members [to] engage explicitly in an exploration of ways in which preferential trade agreements and the principles underlying them could increasingly converge with the multilateral system, perhaps starting with the elaboration of best practices.” In this regard, APEC can demonstrate by taking up this call and contributing its own thinking on these issues developed over the past decade. Such a discourse might also prove useful in ensuring that the regional economic integration tracks including the TPP and RCEP ultimately lead to a Free Trade Area of the Asia-Pacific. We call on APEC Ministers to instruct officials to initiate such a dialogue and to report to them on their findings on an annual basis.

Future Meetings

We thank the Indonesian host committee and APEC officials for their openness to our ideas as well as their support for the numerous events we have held throughout the year, especially the recently concluded seminar on connectivity held here in Bali.

Our next Standing Committee and General Meeting will be hosted by our China National Committee for Pacific Economic Cooperation. We will inform you of the topics we will be addressing as we develop our agenda, and in the meantime we welcome your suggestions and inputs on topics where a second track perspective would be useful.

We will also hold a conference in Singapore in early 2014 to consider our inputs into next year’s APEC process.

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