Promoting supply chain connectivity – can APEC deliver? Address by Stephen Jacobi to Customs Brokers and Freight Forwarders Conference, Auckland 10 May 2012 NZIBF – 10 May 2012

It’s good to be with you today and thank you for the invitation to address your conference on the relevance of the APEC supply chain agenda to your work.

As many will know, APEC stands for Asia Pacific Economic Co-operation and is the region’s pre-eminent body charged with finding practical solutions to facilitate regional trade and investment and thereby promote jobs and growth.

ABAC, which is the organisation I am representing today, is the APEC Business Advisory Council.

ABAC exists to advise APEC’s Economic Leaders on their agenda for economic integration and co-operation in the region.

The role of ABAC is to ensure this agenda is grounded in commercial reality and makes business sense.

ABAC is made up of three business leaders for each of APEC’s 21 economies appointed by our respective Heads of Government. I serve as an Alternate member and the NZ International Business Forum provides policy advice to our three members who are Tony Nowell, Maxine Simmons and Wayne Boyd.

I am conscious I am speaking to a room full of supply chain management professionals.

My remarks might suggest that the APEC system has only recently “discovered” the supply chain whereas in fact APEC has been involved for a number of years now in trying to reduce the costs of doing business and to speed up the time in which products flow around the region.

In recent years ABAC has sought to put this work in a more coherent framework and it is about this APEC supply chain agenda, and ABAC’s contribution to it, that I’d like to talk today.

APEC is a voluntary association and its decisions are non-binding.

APEC’s work is however influencing the agenda of the Trans Pacific Partnership (TPP) negotiations which can if successful bring a more binding framework for enhancing supply chain connectivity in the region.

APEC’s supply chain agenda

APEC is home to best-in-the-world supply chains; both within firms and at the economy-level.

It is well known that a one day delay in exports can lead to a loss in export value of 1%.

The World Bank has identified that improving trade-related transparency in the region could increase trade by 7.5 percent or $148 billion.

Successive declarations by the leaders of APEC’s 21 economies have therefore emphasised the need to enhance competitiveness in the region by making it easier, cheaper and faster to conduct trade in goods and services across borders.

Back in 2001 APEC reaffirmed the key importance of trade facilitation in achieving the goal of free and open trade and investment in the Asia-Pacific by 2020.

Unfortunately it appears that inefficiencies are built into every part of the supply chain.

Through two consecutive Trade Facilitation Action Plans (TFAPs) in 2002 and 2006, APEC initially sought to reduce transaction costs by 5 percent across the APEC region over two five-year timeframes.

The focus was largely on customs and other administrative procedures that hinder, delay or increase the cost of moving goods across international borders.

In 2009 APEC decided to go one step further and address logistical issues such as transport, communication and related regulatory barriers which impact on behind the border costs.

At the APEC Summit in Singapore in 2009, APEC launched a Supply Chain Connectivity Initiative.

The APEC Supply Chain Connectivity Framework Action Plan aims to achieve an APEC-wide target of a ten percent improvement in supply chain performance by 2015.

The Framework identified a number of chokepoints (so called trade-impeding bottlenecks) preventing the smooth flow of goods, services and business travellers throughout the APEC region

An Action Plan was created that identified a range of actions that could be taken to address these various chokepoints ? the first phase of the SC Framework will cover the period 2010-2013.

In 2007 it was decided to implement a Single Window concept across APEC.

After three years of work, APEC endorsed the Single Window Implementation Guide in August 2009.

Its purpose is to assist economies in the design, building and implementation of a single window system.

In 2010 the SCCP conducted a review of the extent of implementation of single window initiatives in each member economy.

This review revealed that 13 of 21 APEC economies had developed single window systems and 5 economies had single windows systems currently under development.

And last year under the leadership of the United States APEC began to work to identify a number of “next generation” trade issues that should be tackled in future free trade arrangements.

One of the three selected for APEC attention last year was “facilitating global supply chains”.

This theme continues to be pursued by APEC in 2012.

In Kazan in Russia next month there will be a workshop on facilitating global supply chains at which ABAC NZ Member Tony Nowell will speak about the role of services in global supply chains.

From Trade Facilitation Action Plan, to Supply Chain Action Plan, to Single Window concept to next generation trade issues – there continues to be a lot of interest within APEC about how to optimize and further enhance the logistical elements of global supply chains, and we expect to see more APEC initiatives in this area over the next 12 months.

Role of ABAC

As the voice of business in APEC, ABAC has been directly involved in these initiatives.

ABAC strongly supports the goal of regional economic integration as the key to unleashing the growth potential of the Asia-Pacific region.

That’s why ABAC has welcomed APEC’s various efforts to promote supply chain connectivity – ABAC’s job is to keep APEC’s feet to the fire and monitor delivery against promises.

So ABAC has called on all APEC economies to accelerate its work plan in order for the private sector to benefit fully from the various initiatives.

ABAC has called for a regular assessment of progress towards the various goals – such as the target reductions in transaction costs- to ensure that efforts deliver in tangible benefits for businesses.

ABAC has also contributed its own input to APEC’s consideration of supply chain issues.

Recognising that some of the business basics around supply chains were not well understood in official circles, in 2011 ABAC, at the initiative of ABAC New Zealand, developed and promoted an integrated supply chain and value chain framework for goods, services and investment.

ABAC member Tony Nowell deserves recognition for the leadership he has shown on championing a more systemic approach to addressing supply chain issues in ABAC.

Tony has been particularly keen to build understanding of the complex and integrated nature of global and regional supply chains and help pinpoint the costly chokepoints that can arise.

Over the last couple of years ABAC has encouraged APEC to reinvigorate the Single Window Initiative.

What has to happen is that economies which have not implemented single window systems need to do so as soon as possible.

Priority also needs to be given to enhancing the interoperability between systems to enable the easier sharing of documents such as certificates of origin.

ABAC has also recommended that APEC enhance the Single Window Initiative by utilising new information technologies such as cloud computing and the creation of an APEC Single Window Cloud.

This idea is being further developed within ABAC this year, led by ABAC Chinese Taipei with input from ABAC NZ and Peter Stevens from GS1 New Zealand.

An APEC Single Window Cloud presents a number of advantages – ease of access: any time, any place, through any device; flexibility in scale and deployment; availability irrespective of the degree of digital readiness; and lower cost of ICT infrastructure and software implementation.

The details for how this might work are being worked through and should be ready to be presented to ABAC and APEC Leaders later this year.

Finally last year ABAC commissioned the University of Southern California’s Marshall Business School MBA researchers to undertake an in depth study of chokepoints in regional supply chains.

The researchers confirmed that improving supply chains across borders requires collective coordinated action, and made a number of specific recommendations for APEC.

The study found that APEC could expand its role in a number of ways:

? coordinating the sharing of supply chain best practice information
? improving the collection of data
? working to accelerate harmonization efforts in customs requirements and procedures across APEC
? providing leadership, governance, and oversight of standardization initiatives within supply chains
? developing APEC wide systems for ICT based systems for sharing information
? continuing to work to eliminate non-tariff barriers.

The Marshall School study provides a wealth of information on supply chains within APEC and I encourage you to read it more closely.

What is clear is that improving supply chain connectivity requires co-operation between governments and within government agencies and the strong input of business.

It is never easy to get this co-operation going ? what ABAC can provide is a strong voice, leadership and applied pressure to get the wheels moving.

Supply chains and TPP

Before closing I’d like to talk about the Trans Pacific Partnership (TPP) negotiations among nine partners in APEC including New Zealand and the United States.

TPP has been underway since 2008 and provides a means to take the work from a voluntary, non-binding forum like APEC into a rules-bound framework of a free trade agreement.

TPP is being promoted as a 21st century agreement which addresses both market access and market integration or behind the border issues, and is high quality, ambitious and comprehensive in scope and coverage.

The broad outlines of TPP released in Honolulu last November specifically mention that the agreement aims “to facilitate the development of production and supply chains among TPP members”.

It is expected that the final agreement once concluded will include a range of disciplines and commitments relevant to supply chains including technical barriers to trade, regulatory cooperation, trade facilitation, transparency, and other issues, as well as proposals that have been tabled covering specific sectors.

TPP remains a work in progress: the aim is to conclude negotiations this year, to overcome the “noodle bowl” of conflicting and sometimes contradictory agreements and to build a pathway to the wider goal of a Free Trade Area of the Asia Pacific (FTAAP).

Whether this ambitious agenda can be achieved remains to be seen, but TPP is likely to stimulate further thinking on how to make the region’s supply chains work faster and better.

Conclusion

I’ve tried this morning to outline APEC’s agenda and the role played by ABAC in that progress.

Can APEC deliver?

I am tempted to say that APEC is already delivering improvements in supply chain efficiency but you are better placed than I to judge.

What is quite clear is that APEC’s agenda will only be successful if it is informed and actively supported by business.

I urge you to take up opportunities either individually or through your association to engage with officials in the Ministry of Foreign Affairs and Trade, the Ministry of Economic Development and Customs ? ABAC New Zealand is happy to assist in this process.

Ultimately too APEC’s agenda needs to be carried over into next generation free trade agreements like TPP if the region’s supply chains are able to deliver all they can to boost trade and create the conditions for growth and jobs in New Zealand and elsewhere in the region.

Link to associated Powerpoint.