REPORT TO NEW ZEALAND BUSINESS – APEC Business Advisory Council, July

APEC BUSINESS ADVISORY COUNCIL

THIRD MEETING, KUALA LUMPUR, 23-26 JULY 2018

REPORT TO NEW ZEALAND BUSINESS

 SUMMARY

The third meeting of the APEC Business Advisory Council for this year took place in Kuala Lumpur from 23 to 26 July. ABAC New Zealand members Phil O’Reilly, Tenby Powell and Alternate Member Stephen Jacobi attended, with staffer Stephanie Honey in support. During the meeting, ABAC members finalised their Letter to APEC Economic Leaders along with letters to Ministers for Micro-, Small and Medium-sized enterprises (MSMEs), women, finance, energy and health. The Letter to Leaders emphasises ABAC’s deep concern about the risks to sustained prosperity from the current turbulence in trade around the world; the need to press ahead with trade liberalisation while also ensuring that the opportunities and benefits can be more widely shared, and the importance of fully leveraging the digital economy. Major topics of discussion during the meeting included how to move towards an eventual Free Trade Area of the Asia-Pacific (FTAAP), ideas for the collective “Vision” for the region post-2020 (a workstream led by Phil) and how to ensure and communicate ideas around “inclusive growth”, including through research projects led by Phil and Tenby respectively on benefits of trade at the firm level, and how to help MSMEs, including women-led MSMEs, participate more successfully in trade.   Stephen progressed New Zealand leadership on non-tariff barriers (NTBs) with further exploration of the ABAC Cross-Cutting Principles for Non-Tariff Measures (NTMs)/NTBs.   In other areas, ABAC’s interest in the digital economy remains very strong, with discussions around how to enhance e-commerce and the digital economy.

REPORT

ABAC New Zealand’s Phil O’Reilly, Tenby Powell and Stephen Jacobi played an active role in ABAC’s second meeting for 2018 from 23-26 July in Kuala Lumpur. (Colleague Katherine Rich was not able to attend on this occasion.) Policy advisor Stephanie Honey attended in support.

Discussions took place in Plenary sessions and in five themed Working Groups: Regional Economic Integration (Katherine Rich serves as co-Chair); Sustainable Development (Phil O’Reilly serves as co-Chair); MSMEs and Entrepreneurship (Tenby Powell serves as co-chair); Digital and Innovation, and Finance and Economics.

The major focus of the meeting was on the finalisation of ABAC’s annual Letter to APEC Leaders, along with Letters to APEC Ministers for MSMEs, women, energy, finance and health.  (Those Letters will be conveyed to Leaders/Ministers at meetings over the next few months.)   The Letter to Leaders focused on three major themes: ABAC’s deep concern about the risks to sustained prosperity from the current turbulence in trade around the world; support for the WTO and a strong call to press ahead with trade liberalisation, while also ensuring that the opportunities and benefits can be more widely shared; and the importance of fully leveraging the digital economy. The statement issued at the end of the meeting, entitled “Building a Sustainable and Inclusive Future in Turbulent Times”, can be found here.

Trade liberalisation and globalisation

Trade liberalisation, globalisation and inclusive growth were once again a major theme for the week’s discussions.  ABAC gave further consideration about how to make progress towards the Free Trade Area of the Asia-Pacific (FTAAP), drawing on a now-completed update to an earlier report, the FTAAP Opportunity, prepared by ABAC for a group of senior academics from around the region.  A new research project will also be undertaken looking at ‘next generation issues’. There was also encouragement for early ratification and implementation of Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP), one of the “pathways to FTAAP”, as well as for ambitious and timely progress in two other pathways, the Regional Comprehensive Economic Partnership (the ASEAN-led regional FTA also involving New Zealand) and the Pacific Alliance association member negotiations (again, involving New Zealand negotiating with four Latin American partners).

ABAC members have begun to deepen their thinking on the vision for the Asia-Pacific region post-2020 – the latter date being the deadline for the achievement of APEC’s trade-liberalising ‘Bogor Goals’. Under Phil’s leadership of this workstream, Members agreed that the Vision needed to be ambitious, that FTAAP needed to be central and that the Vision should be grounded in practical, commercial business realities, but also incorporating broader objectives for inclusive and sustainable growth. Some of the characteristics of a future Vision that members discussed included the concepts of a seamless, dynamic, resilient and sustainable region, where all could enjoy the opportunities and benefits of regional economic integration.   Phil has been mandated to take ABAC’s ideas to the upcoming ‘Multi-Stakeholder Dialogue’ on the Vision taking place in Papua New Guinea on 15 August.

Professor Christopher Findlay of the University of Adelaide (and PECC Australia) provided an update on a research project (championed by Phil) on the impacts and benefits of trade liberalisation at the firm and household level. The project draws on business dialogues exploring the impacts of internationalisation and cross-border trade on individual firms. (New Zealand held its own dialogue, with the generous support of Export New Zealand, on 4 May.) The final report is scheduled for completion by ABAC IV in November, but preliminary findings included a clear mutually-reinforcing relationship between trade, innovation and human capital development (as well as a valuable problem-solving/idea-generating role); while financing, non-tariff barriers, data flows and people movement were identified as ongoing significant challenges for exporters.

The Chief Economist of CIMB Bank of Malaysia, briefed members on the global economic outlook. He described the outlook as “deliberately cloudy”, noting that the global economy was likely to continue to expand in 2018, but that major downside risks included slowing in China’s growth, and the ‘trade war’ and political instability (with consequential impacts on confidence and market assets, as well as risks of contamination into monetary policy).

Liberalising trade and investment: NTBs

Stephen continued New Zealand leadership on non-tariff barriers, taking a deeper dive into the 2017 ABAC Cross-Cutting Principles and looking in particular at the implications of the terms “least trade-restrictive” and “equivalent outcomes” in relation to NTMs. It was agreed that members should continue to look at the details of the Principles and how NTBs could be addressed effectively in trade agreements going forward.

Stephen also introduced a presentation from GS1 on global data standards, updating members on progress with adoption of global data standards around the region and the significant potential for this technology not only to enhance supply-chain integrity but also to facilitate e-commerce.

Enhancing MSME and women’s integration in global markets

ABAC members continued to explore ideas about how to enable micro-, small and medium enterprises (MSMEs) to participate more fully in the regional economy and in global value chains.   Tenby is leading a major ABAC project in this area, with the research being conducted by the University of Southern California’s Marshall School of Business. The project is looking at how best to enhance the ability of MSMEs (including women-led MSMEs) to engage more successfully across borders and in global value chains. (A large number of New Zealand MSMEs and other stakeholders have generously provided interviews to the researchers on this topic; a major online survey is due to take place in August for which further New Zealand input will be sought – please contact Stephanie Honey if you would like to take part.) The final report will be presented at ABAC IV in November and is expected to contain recommendations on a range of practical steps that economies and business could take to help MSMEs to succeed in trade.

On related matters, ABAC New Zealand invited a speaker from McKinsey & Company, Singapore Partner Cheryl Lim, to present a report produced by the McKinsey Global Institute, the ‘Power of Parity’, looking at gender equality in the Asia-Pacific, which estimates that $4.5 trillion could be added to the region’s GDP in 2025 if gender equality were advanced (see https://www.mckinsey.com/featured-insights/gender-equality/the-power-of-parity-advancing-womens-equality-in-asia-pacific.)

ABAC Papua New Guinea is to hold an MSME Symposium in September 2018 which would focus on entrepreneurship, digital innovation, financing and capacity-building among other topics; several New Zealand speakers are scheduled to take part. ABAC China is looking at how to enhance opportunities for women entrepreneurs, including with a forum in China in October for a group of women entrepreneurs.

The digital economy

Reflecting the growing prominence of the digital economy and innovation, members explored a range of issues including regulation of the digital economy, public e-services, the Internet of Things, the APEC Internet and Digital Economy Roadmap, barriers affecting cross-border e-commerce and research on digital challenges for human resource development, skills and training needs.   Of particular interest was a report that looked at structural adjustment and the digital economy (this has now been finalised and will be sent to the APEC Economic Committee for consideration). Members also heard from a Panel on digital trade issues, and were able to participate in a site tour to the Malaysian Digital Economy Corporation, which focuses particularly on MSMEs. ABAC Chinese Taipei and ABAC PNG also held a ‘Digital Innovation Forum’ the week prior to the ABAC meeting.

Next meeting

The next meeting, ABAC IV, will be held in Port Moresby from 13 to 15 November 2018, including ABAC’s annual Dialogue with APEC Economic Leaders.

The APEC CEO Summit will also take place that week.