2013 Bali media briefing SOTR 2State of the Region 2013-2014 report was released on the 3rd October 2013 during the PECC-Boao Forum for Asia joint seminar on "Connectivity and Inclusive Growth in the Asia-Pacific." The panel discussion consisted of presentations by: Mr. Eduardo Pedrosa, Secretary General of PECC and Coordinator of the Report; Dr. Chen Bo, Associate Department Chair, Shanghai University of Finance and Economics; Dr. Kenichi Kawasaki, Adjust Fellow, Japan Institute of International Affairs; Dr. Federico Macaranas, Professor, Asian Institute of Management. The sessionw as moderated by PECC Co-Chair, Ambassador Don Campbell. 

The State of the Region report is the flagship annual publication of PECC. It includes a survey of opinion-leaders on the priorities for Asia-Pacific cooperation and this year, a special chapter was dedicated to recommendations for enhancing the region's work on economic and technical cooperation. 

The report was also released to the media separately at the international media center, Bali Nusa Dua Convention Center, on 4th October.

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[photo: Media briefing on State of the Region 2013-2014


SOTR 2013-2014 coverExecutive Summary

The global economy continues to grow at a moderate pace in spite of the uncertainties about economic prospects in a number of large emerging and developed economies. The Asia-Pacific region is forecast to grow at 3.5 percent this year and 3.9 percent in 2014. Emerging markets continue to drive growth in the region accounting for 2.6 and 2.7 percentage points of the region’s growth in 2013 and 2014 respectively.

Emerging market currencies are now depreciating against the US dollar, reflecting expectations of a narrowing of interest rate differentials. There are critical questions ahead on whether the depreciations will lead to policy actions that will increase interest rates in emerging markets and act as a break on already fragile growth.

For the global recovery to be robust and sustainable, governments need to implement policy initiatives to remove the uncertainty holding back private sector investment in both productive capacity and employment. There are efforts under way that could provide impetus to policy initiatives, notably the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP). If finalized, approved, and implemented, these agreements, and their eventual merger into an FTAAP, can be a growth driver for years to come. If deadlines continue to be missed, or if these agreements are so watered down that they do not meet the needs of the 21st century economy, the business communities will lose interest and the economic momentum of more efficient resource and capital use will be lost. Estimates suggest that the completion of these agreements could add as much US$2 trillion to global economic output by 2025.

The results of PECC’s annual survey of opinion-leaders are broadly in line with the consensus of economic forecasts that growth will in 2014 be much the same as this year. The survey also shows concerns about the major emerging market economies of the Asia-Pacific: China and India.

The survey results highlight a desire for policy actions on several fronts. The top 5 issues that respondents thought APEC leaders should address were:
• Regional economic integration
• The APEC growth strategy
• Corruption
• Attaining the Bogor Goals of free and open trade and investment
• Reducing the income inequality in the region

The survey results show continued strong support for APEC’s work on trade and investment liberalization with close to 75 percent of respondents agreeing that it has had positive effects on growth for their economy. At the same time, there was broad support for the assertion that stronger domestic institutions are required to ensure that the benefits of the integration process flow to the less well-off in society.

Opinion-leaders ranked education and vocational training as the most important way of promoting inclusive growth followed by structural reforms and then trade-related infrastructure.

Over 50 percent of respondents agreed that APEC needed to have a set of aspirational development goals to make its work on economic and technical cooperation more effective. The provision of affordable education to provide workers with the skills to compete in the global market place was ranked as the most important developmental goal for the region followed by physical connectivity and the provision of basic services.

Of all of these agreements, regional opinion-leaders were only positive about the likely conclusion of the ASEAN Economic Community (AEC) and the TPP by 2015. They were by far the least optimistic about reaching a conclusion for the WTO DDA with 59 percent stating it was not likely and only 8 percent stating likely.

While the region has made tremendous progress in promoting regional economic integration, it is challenged by growing income inequalities as well as a perception that some segments of society are unable to benefit from the integration process. Work on economic and technical cooperation is supposed to help bridge those gaps but thus far the results have been limited. There is a need to revisit how economic-technical cooperation (ecotech) is conceptualized and communicated to meet expectations on the delivery of outputs and outcomes benefiting stakeholders. Given the diversity of work undertaken, APEC should take a value chain approach to its work which requires a mapping exercise to connect activities to each other in a business production logic.

Regional aid for trade is particularly relevant to the many challenges faced by ecotech. The trade agenda of developing economies in general and Asian developing economies in particular is increasingly being pursued through regional economic integration and cooperation efforts. In many developing regions, fragmented markets inhibit trade and competitiveness. Regional cooperation is
one way in which these markets can be enlarged, specialization can emerge, and risks can be shared. As reviewed extensively in OECD-WTO (2011, 2013), aid for trade has hitherto made considerable progress in mobilizing resources to overcome supply-side constraints and infrastructural bottlenecks that inhibit participation in the international marketplace.

Regional aid for trade can help developing economies benefit from existing and emerging trade opportunities via its ability to enhance the effects of regional cooperation. A regional approach to removing trade-related binding constraints, supported by national, multi-economy and regional strategies, can greatly augment the impact of trade flows. In fact, many competitiveness challenges are regional in nature. For instance, the trade performance of landlocked economies depends on the quality of the infrastructure in their neighbors.

The challenges facing policy-makers and the stakeholders they represent are constantly changing. While the region has benefited enormously from the integration process led by the removal of border barriers, many behind-the-border issues continue to constrain growth and development. The pace and magnitude of the changes that take place in economies, especially developing ones, means that economic and technical cooperation programs need to be more both more responsive and show tangible outcomes for those they are intended to impact. Without these capacity building programs the risk is that specific groups potentially affected by change attempt to resist the integration process. At a time when growth is volatile and protectionism is on the rise, outcome-oriented cooperation can play a crucial role in ensuring that the integration process continues and that stakeholders are ready to benefit from the process.

The process of economic integration of the Asia-Pacific region has resumed since the slowdown from the global economic crisis, according to the latest update to the PECC index of regional economic integration. The updates show that almost all Asia-Pacific economies are more integrated or dependent on Asia-Pacific markets. Noticeably, Singapore and Hong Kong are still the most integrated economies. As the freest business harbors, Hong Kong and Singapore benefit the most from economic recovery in trade, investment, and tourists.


2013 Bali seminarIn 2013, Indonesia has made equitable growth a key priority looking at a Connectivity Framework to ensure that the benefits of regional economic integration are more equitably shared. On 3rd October 2013, during the APEC Leaders' Week, PECC and the Boao Forum for Asia co-organized a seminar on connectivity and inclusive growth in Bali, Indonesia.

Connectivity is a critical to ensuring inclusive growth. It will:
• make it faster, cheaper, and easier for people and goods to move across borders within the region;
• help reduce poverty by improving poor people’s access to economic opportunities,
• lowering the cost of the goods and services that they consume, and providing better access to essential infrastructure services such as electricity;
• help narrow the development gap among Asian economies by providing small, poor, landlocked, and remote areas with better access to wider regional (and global) markets and production networks, thereby stimulating investment, trade, and economic growth in those areas

The objective of the seminar was to formulate a unifying framework that promotes better physical, institutional and people-to-people linkage in the Asia-Pacific region. While APEC’s work over its past two decades has been on removing barriers, the next stage is to build connections among regional communities.

Session 1: Connecting the Region: Vision, Feasibility & Roadmap
The first session was divided into the 3 elements of the proposed Framework for Connectivity being devised this year: institutional connectivity; people to people connectivity; and physical connectivity.

Panel A: Institutional Connectivity
A key element of connectivity is the soft infrastructure to facilitate the movement of goods and services throughout the region. The work ahead includes trade facilitation, regulatory coherence and cooperation, streamlining customs procedures and promoting cross-border financial cooperation. As tariffs and at the border barriers have come down, the reduction of behind-the-border issues have become more important to promote connectivity.

APEC has undertaken a number of initiatives to promote institutional connectivity including two Trade Facilitation Action Plans, an Investment Facilitation Action Plan, a Supply-Chain Connectivity Framework Action Plan as well as numerous initiatives to promote regulatory coherence and cooperation under its work on Structural Reform.

Panel B: People to People Connectivity
The flows of people whether tourists, technical experts or business people are a critical element of building an Asia-Pacific community. This panel will discuss what the vision of Asia-Pacific community means in practical terms, the obstacles to its realization and recommend elements of a roadmap as well as its resource implications.

As revealed in numerous PECC and other surveys, the lack of skills is highlighted as a key concern for the business community. There are large gaps in perceptions between governments and the business community on the skills issue, thirty percent of business respondents cite lack of skills as a risk to growth compared to just 15 percent of those from government.

Panel C: Physical Connectivity
This panel will address what can be done to promote and facilitate physical connectivity in the Asia-Pacific region. The physical infrastructure needs are enormous, the OECD estimates that around US$120 billion is needed in airport infrastructure; US$40 billion for ports; US$270 for railway and US$155 billion for oil and gas transportation and distribution. Large disparities exist between regional economies in terms of key infrastructure metrics.

Session 2: “Connecting the Region: The Financing Challenge”
The Asian Development Bank estimates that Asia alone needs to invest US$8 trillion in infrastructure to avoid bottlenecks to growth. This session focused on both the financial aspects of promoting connectivity in the region.

Session 3: Release of State of the Region 2013-2014 report


Press release: Connectivity is the Key to Inclusive Growth

3 October 2013 (Bali, Indonesia) – Strengthening regional connectivity – physical, institutional and people-to-people links – will ensure sustainable, balanced and inclusive growth in Asia-Pacific economies which are still recovering from the global crisis, said business, government, academic and media leaders in a seminar jointly organized by the Pacific Economic Cooperation Council (PECC) and the Boao Forum for Asia. This is especially important at a time of uncertainty when economies are still recovering from the global crisis and must focus on the quality of growth and not just GDP figures, they stressed.

“People-to-people connectivity has to do with immigration, customs, security, transportation and tourism issues,” Dr. Mari Pangestu, Indonesian Minister of Tourism and Creative Economy, told participants in one session. “It is about fast and secure travel through visa and travel facilitation, improving logistics and information-sharing, smart use of technology and cutting red tape while not compromising security. This is complex and needs coordination across borders.”

Connectivity is a key theme for the Asia-Pacific Economic Cooperation (APEC) forum this year. At the APEC Economic Leaders’ Meeting that is scheduled to start on 7 October, leaders are to adopt a Connectivity Framework to enhance integration across member economies. The one-day PECC-Boao Forum for Asia seminar brought experts and thought leaders together to discuss ways to deepen connectivity in the region and the opportunities that greater connectivity will create.

“We need to reduce poverty by providing better opportunities for people to benefit from globalization,” PECC Co-Chair Mr. Jusuf Wanandi explained. “This means better education and the ability to access the global market.” Mr. Zhou Wenzhong, Secretary General of the Boao Forum for Asia, agreed. “Many APEC economies are faced with the dilemma of growth and structural reform. But without painstaking reforms, growth will not be sustainable.” He added: “Strengthening infrastructure in the region can spur growth, generate jobs, and lay the foundations needed for structural reforms. While financing is available, the platforms to share information about projects do not yet exist.”

Since Indonesia last chaired APEC in 1994, the region has cut tariffs, eased cross-border business and doubled incomes. Yet the development gap within and among member economies has widened, according to PECC’s State of the Region 2013-2014 report, which was released at the seminar. While over the past two decades APEC has focused on removing barriers, the next stage is to build and strengthen connectivity domestically and regionally to ensure higher-quality inclusive growth.

In his keynote speech at the seminar, Dr. Taleb Rifai, Secretary General of the World Tourism Organization, acknowledged the substantial growth of the middle class in the Asia-Pacific, but underscored the importance of increasing investment in education, skills training, transport and the mobility of people. “Air transport market liberalization is a critical issue,” he asserted. “We need to have people freely moving around the world.” Asked what one measure should be the top priority for boosting connectivity in the region, Dr. Rifai replied: “Eliminate visas.”

While many barriers have come down, there are significant problems that prevent businesses, especially small and medium-size enterprises (SMEs), from benefitting from regional integration, seminar participants concluded. APEC must focus on trade facilitation, regulatory coherence and cooperation, streamlining customs procedures and promoting financial cooperation. The cost of trading across borders is estimated at US$2 trillion. A global trade facilitation agreement would streamline customs and border procedures, leading to benefits of around US$1 trillion.

“We welcome the participation in our efforts of non-APEC ASEAN members, as well as experts from India and Bangladesh,” said Ambassador Don Campbell, Co-Chair of PECC. “True to the meaning of open regionalism, we need to make sure that, as we improve connectivity, no one is left out. It is definitely the right direction to take to ensure that all economies benefit from deeper integration.”

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CanAsia1The Pacific Economic Cooperation Council issued its 'Vancouver Statement' at the conclusion of the 21st General Meeting of PECC held in Vancouver during June 4-5, 2013. The Council’s Standing Committee has been reviewing the changes in the geopolitical and economic landscape noting the larger variety of regional cooperation processes and the implications this had for Track 2 engagement.

The Statement reaffirms PECC’s commitment to open regionalism in the Asia-Pacific. The Council’s members highlighted the role that open regionalism has played in the rapid growth of the region and the continued role that it should play in further strengthening the integration of the region. The Statement highlights the need for APEC economies and our leaders to reaffirm their commitment to open regionalism, regional integration, and structural reforms as means to increase efficiency and growth.  As PECC has urged in the past, such growth should be balanced, inclusive, and sustainable.

Since APEC economies now play a leading role in the global economy, we also strongly support APEC leadership for reinvigorating the World Trade Organization and the Group of 20.  The Statement also underscores the importance of involving next generation leaders in the setting of priorities for regional cooperation and creating solutions to the challenges facing the world.

PECC has played a vital role in serving as a progenitor and catalyst to many other institutions and initiatives existing today including the APEC and has worked towards achieving open regionalism through different approaches. With the Doha Round negotiations at an impasse, economies are now pursuing regional trading blocs – from the TPP (Trans-Pacific Partnership) and RCEP (Regional Comprehensive Economic Partnership) to the newly emerging Pacific Alliance initiative. These agreements keep the trade agenda moving but there is a danger they could become exclusive blocs unless designed from the outside to welcome new members willing to undertake the same obligations.  Another important consideration is that increased income inequality among and within economies jeopardizes support for the liberalization of trade and investment.

“More than three decades on, PECC is constantly changing and staying a step ahead of other regional institutions. PECC’s success is measured not just in numbers and percentages but by the influence we have on shaping policies, by the quality of dialogues generated, and by our sense of what is essentially an Asia-Pacific community,” said Ambassador Don Campbell, Co-Chair of PECC and Chair of the Canadian committee for PECC. “We recognize that the global circumstances have changed enormously in the last few years and through this Vancouver Statement, we are demonstrating our commitment to deepening the regional cooperation for more equitable and inclusive growth across the region,” added Mr. Jusuf Wanandi, Co-Chair of PECC. “We have become much more open to the idea of engaging non-PECC or non-APEC members such as India and Myanmar, we are keen to invest more in involving the next generation leaders in our substantive research programs, and we will be looking for ways to diversify our research products with the aim of widening our appeal and outreach towards a broader audience,” said Mr. Wanandi.

The opening plenary session, 'Key Trends Shaping the Asia-Pacific" examined the latest economic, political, and social trends in the Asia-Pacific, identifying the emerging opportunities and uncertainties in the region. The plenary session was followed by concurrent breakout sessions which covered diverse topics including: infrastructure deficit in the Asia-Pacific, creativity and innovation in Asia, promoting inclusive growth and resilient societies in Asia, green growth, and risks to growth in the Asia-Pacific. Next day plenary sessions addressed Canada's Asia strategy and how economies are responding to the rise of Asia. Thereafter, breakout sessions focused on Canada's contribution to sustainable growth in the Asia-Pacific, and preparation of Canada's next generation to compete in an international environment increasingly influenced by developments in Asia.

PECC General Meetings are open to the wider public and attended also by youth delegates who have been selected by their respective PECC member committees. Thirty graduate and post-graduate students from across the Asia-Pacific and Canada participated in the 21st PECC General Meeting. 

For more information about the event, please visit:

Photo: His Excellency the Right Honourable David Johnston, Governor General of Canada (center), poses with Canada-Asia 2013 hosts and PECC Co-Chairs. From left to right: Yuen Pau Woo (President and CEO of APF Canada), Dean Connor (CEO, Sun Life Financial), David Emerson (former Minister of Foreign Affairs and International Trade of Canada), David Johnston, Jusuf Wanandi (Co-Chair of PECC), Don Campbell (Co-Chair of PECC), and Jill Price (APF Canada Vice-President, Development and Corporate Affairs). Photo courtesy of Canada-Asia 2013.

Victoria 070Taking into consideration global needs for new sources of energy to meet the growing industrial and household demands in the midst of rising energy costs and diminishing fossil fuels, it is one of top priorities for Asia-Pacific economies to explore the most efficient ways of ensuring smooth transitions from fossil fuels to non-traditional and renewable energies. Lessons can be learnt and inspirations generated by sharing how urban centers and remote communities are adopting eco-friendly and energy-efficient practices by making behavioral changes and applying new economic models.

(Read more about the two-year PECC international project on energy transition.)

The first seminar held in Victoria, BC, Canada on November 7-8, 2013, covered the commercial development and viability of new energy sources and technology. The participating experts discussed how these new sources of energy are likely to provide for longer-term solutions to mitigate the adverse effects of climate change and the increase in price of depleting fossil fuels. The seminar also addressed the prospects of renewable energies in respect to the rapid development of non-traditional energy fuels such as shale gas and oil that are being touted as improved options in comparison to the expensive and environmentally unsound conventional fossil fuels. The contents of seminar included:

- discussions and recommendations in favor of commercial development of renewable and non-traditional energies;
- identification of various possibilities that renewable energies could offer in meeting the two important challenges: a) predictability, and b) storage or linkage to the existing power grids; and
- discussions on the need to bring new types of energies to market competitiveness by focusing on: a) advancing the technical knowledge from the drawing board to the market, and b) enhancing the capability of industrial enterprises to reform their business models with the aims to facilitate energy transition in the PECC economies.

Download the program agenda

Download the inividual powerpoint presentations (in PDF format)

2013_SINCPEC_Conf_Min_Lim_Amb_TangThe Asia-Pacific region continues to face an uncertain economic environment with major economies undertaking stimulus measures to bolster growth. This environment points to an urgent need for the region to find new engines for growth. These new engines should make ensure that people benefit from the integration process. “The region has benefitted from the integration process but we need to move beyond this to ensure sustainable and inclusive growth as we transition into the next phase of the region’s development.’” said Mr. Jusuf Wanandi, Co-chair of the Pacific Economic Cooperation Council (PECC). Mr. Hatta Rajasa, the Coordinating Minister for Economic Affairs of Indonesia, said in his keynote speech, “The economic crisis is not yet over and there is much that needs to be done to put the global economy on a sustainable growth path and create opportunities for the persistent high level of unemployment in several advanced economies.”

Capacity building needed
There is a need to renew focus on the importance of capacity building not as a second thought but as an integral component of all initiatives to ensure that economic growth is more equitable and inclusive. “Further, capacity building should be looked at not just in terms of providing technology transfer from the more advanced to the less developed but also in terms of fostering a sense of shared future and strengthening cooperation in various areas”, said Professor Zhang Yunling, Director of International Studies at the Chinese Academy of Social Sciences.

Singapore Minister for Trade and Industry, Mr. Lim Hng Kiang emphasized that “Improvements in cross-border flows of capital, goods, and people will make it easier for economies to adapt to changing patterns of comparative advantage, and allow for technology transfers across borders.” “Economies will therefore be able to compete globally, with their companies adapting and moving up production value chains more quickly,” he added.

Financial cooperation and inclusive growth
While Asia-Pacific cooperation processes have focused on trade integration, there is an urgent need to strengthen the financial cooperation pillar. While the Asian economies have been left relatively unscathed from the effects of banking crises in Europe and the US there are short and long term challenges. The first is that the deleveraging process in the banking sector in Europe means that there is a risk of bank lending could be curtailed especially in developing Asia. Over the longer term, the regional financial system is in urgent need of upgrading to ensure that the savings of the region are used for more productive processes.

The development of the financial sector is critical to ensuring that future growth is more sustainable and equitable. 

Infrastructure investments
One example of this is that the region needs to invest over US$750 billion a year in infrastructure to bring the benefits of integration to more people. Given limited government budgets, private sector funding needs to be leveraged. To do so requires substantial cooperation among various stakeholders in the project including local government, consumers, service providers as well as multilateral institutions. “While times are difficult, we must not lose sight of the opportunity to improve domestic and cross-border connectivity,” said Dr. Masahiro Kawai, President of the Asian Development Bank Institute (ADBI). “Public-private sector partnership is the way to go. Infrastructure investment funds in many parts of the region would be desirable; respective governments should understand the risks involved and determine how much risk they can afford to take,” he added.
A new environment for world trade
Since the Bogor Goals were set in 1994, tariffs have gone down from 17% to 5.5% on average. The challenges today are more behind the border. However, the global trading system is stuck. The WTO DDA negotiations have gone nowhere. The WTO Ministerial Meeting in Bali shortly after the APEC leaders’ meeting presents an opportunity for the region to take leadership and responsibility for the trading system. The success of the WTO Ministerial would be greatly strengthened by the region and others getting behind a conclusion to the trade facilitation agreement. While a trade facilitation agreement is not enough in itself, success in this area can be built on. 

Beyond the immediate concern of giving momentum to the WTO, the whole system is challenged by new trends in regional trading blocs – from the TPP (Transpacific Partnership) and RCEP (Regional Comprehensive Economic Partnership) to the newly announced US-EU FTA. These agreements keep the trade agenda moving. However, one challenge is to ensure that no economy is excluded from the processes; another is that the support for trade is threatened by increased income inequality. The emergence of global value chains opens up opportunities for more to participate but supply side constraints need to be addressed. While the FTAs are often touted as WTO-plus the problem is without progress in the multilateral system there is no lowest common denominator. 

“Export-oriented trade liberalization is not an end in itself but a means and process,” said Ambassador Don Campbell, Co-Chair of PECC. “We recognize that there are many ways in which governments can make a difference to ultimately enhancing the quality of living and equitably distributing the benefits among the people and economies; APEC can facilitate this aim and provide a fresh impetus by going beyond the Bogor goals which were set back in 1994 when circumstances were very different.” 

About 250 regional thought-leaders from the government, research and business sectors gathered in Singapore during 22-23 February 2013 for a PECC conference, “Asia-Pacific Economic Integration and Connectivity: Pathways for Resilient and Inclusive Growth,” co-organized by SINCPEC (Singapore committee for PECC) and INCPEC (Indonesian committee for PECC). “The purpose of this conference was to provide a unique opportunity to hear policy recommendations from regional opinion-leaders on what it can do to improve its resilience and be an engine for growth as Indonesia hosts APEC 2013 culminating in the Leaders’ Meeting in Bali in November,” said Associate Professor Tan Khee Giap, Chair of SINCPEC. 

Program agenda for download (pdf, 67KB) 

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