REPORT: APEC BUSINESS ADVISORY COUNCIL FIRST MEETING, ATLANTA, 1-4 MARCH 2019 REPORT TO NEW ZEALAND BUSINESS

SUMMARY

The first meeting of the APEC Business Advisory Council for this year took place in Atlanta, Georgia (USA) from 1 to 4 March 2019.  ABAC New Zealand members Katherine Rich, Phil O’Reilly, Tenby Powell attended, with staffer Stephanie Honey in support.  

During the meeting, ABAC held its annual dialogue with APEC Senior Officials, including New Zealand’s representative Mark Talbot.  That discussion, along with subsequent deeper dives into specific elements during the thematic Working Groups, focused on: the importance of sustaining and strengthening the WTO (a workstream led by Phil); on how to move towards an eventual Free Trade Area of the Asia-Pacific (FTAAP), and on further developing the collective “Vision” for the region post-2020, in which FTAAP would be a central element (a workstream also led by Phil).   In other areas, Katherine briefed the meeting on the success of ABAC on non-tariff barriers (in a workstream she had led), where APEC Ministers and Leaders had agreed late last year a set of Cross-Cutting Principles for Non-Tariff Measures closely based on ABAC’s original ideas. 

ABAC’s interest in the digital economy remains strong, with discussions taking place around how to enhance the benefits of the digital economy for the region.  In particular, Tenby set out a work programme building on last year’s Marshall School report on enabling micro-, small and medium-sized enterprises (MSMEs) in trade, about how most effectively to leverage the digital economy for greater MSME success.   Phil also secured ABAC agreement to commission the University of Southern California’s Marshall School of Business to undertake a research project on the impact of digital NTBs on trade and inclusive growth this year. 

REPORT

ABAC New Zealand’s Phil O’Reilly, Tenby Powell and Katherine Rich played an active role in ABAC’s first meeting for 2019 from 1-4 March in Atlanta.  Policy advisor Stephanie Honey attended in support.    Discussions took place in Plenary sessions and in five themed Working Groups: Regional Economic Integration (Phil O’Reilly has taken over from Katherine Rich as co-Chair); Digital and Innovation (Tenby Powell serves as co-chair); Sustainable Development; MSMEs and Entrepreneurship, and Finance and Economics.

The early focus of the meeting, however, was on the ABAC’s annual Dialogue with APEC Senior Officials.   Mark Talbot represented New Zealand.   The Executive Director of APEC, Tan Sri Datuk Dr Rebecca Fatima Sta Maria, also participated in the meeting.  The Dialogue, along with the discussion throughout the ABAC meeting in the Plenary and Working Groups, focused on ABAC’s deep concern about the risks to the global rules-based trading system in the WTO, as well as broader strategic issues about the ‘Vision’ for the region post-2020; the importance of fully leveraging the digital economy was also widely discussed.  The statement issued at the end of the meeting, which highlighted these points, entitled “The digital economy can deliver massive gains – if we get policies right”, can be found here.

The global and regional trading system: the WTO, FTAAP and the Vision for APEC

Trade liberalisation, globalisation and inclusive growth were once again a major theme for the week’s discussions – with a strong focus on the WTO this time around.   WTO reform and the potential future role of APEC economies and business were explored in both the ABAC-SOM Dialogue and in discussions in the Regional Economic Integration Working Group. 

In the SOM Dialogue, business and policymakers shared the view that the WTO urgently needed support – all had a vested interest in its preservation, not least business, and the significant benefits of the WTO were unarguable.  There was broad agreement that, at the same time, WTO reforms and modernisation were needed (with some noting the need for attention also to be given to resolving the “unfinished business” of the Doha Round, including trade reform on agriculture and services).  ABAC stressed that the WTO system, including the Appellate Body, should not be paralysed while these elements were addressed.  It was universally agreed that business input to this process would be very valuable.  APEC economies could and should play a leading role as champions of WTO reform this year, many also felt – and, ABAC, as the business voice of APEC, should push to maintain momentum for reform and reinforce longstanding messages about the value of the WTO. 

Subsequently in the Regional Economic Integration Working Group, Phil gave a presentation on the significant benefits of the WTO for business, and the importance of shoring up the WTO system.   He proposed that ABAC develop a statement of support for the WTO, an initiative that was widely welcomed and is underway.  

ABAC also discussed once again how best to advance its longstanding goal of eventually realising the Free Trade Area of the Asia-Pacific (FTAAP).  These issues were explored with APEC Senior Officials in the Dialogue.  ABAC members stressed that business remains committed to an ambitious FTAAP, with a broad and deep agenda, but also incorporating capacity-building for developing and emerging APEC economies.    It was past time for concrete progress, ABAC stressed.  SOMs noted the challenging political dimensions of these discussions in APEC settings.   In the Working Group discussion, the findings of a research project on ‘next generation issues’ in trade agreements were presented; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was identified as an ambitious model on which to build for any future rules in this area.  ABAC affirmed its interest in seeing 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 (also in negotiation with New Zealand).  

Phil briefed ABAC members on the state of play on the vision for the Asia-Pacific region post-2020.  He recalled that ABAC had agreed that the Vision needed to be ambitious, that FTAAP needed to be central and that it should be grounded in practical, commercial business realities, but also incorporating broader objectives for inclusive and sustainable growth.  This pointed to the concept of a “seamless, dynamic, resilient, inclusive and sustainable region”, where all could enjoy the opportunities and benefits of deeper regional economic integration.   Phil reported that the APEC Vision Group (AVG) was making only slow progress in refining its own ideas, although ABAC’s input had been well received to date.  The AVG was meeting concurrently with ABAC so Phil was not able to take part in the latest discussions, but it had been agreed that he should stay closely in touch with the AVG, which is due to report on the Vision to Leaders in November.   ABAC members agreed to brief policymakers in their own economies on the detail of ABAC’s inputs.   A copy of the one-page summary is attached to this report.

Liberalising trade and investment: NTBs, investment

Katherine wrapped up the longstanding workstream led by ABAC New Zealand on non-tariff barriers (NTBs).  She briefed the Council on the success of ABAC’s thought-leadership in this area, noting that APEC Ministers (subsequently endorsed by ABAC Leaders) had agreed their own set of cross-cutting principles on non-tariff measures, which drew from and were closely modelled on ABAC’s original principles.  This demonstrated the value of business articulating and promoting its concerns and ideas on how to address barriers to trade, in partnership with policymakers.

Phil sought and gained ABAC’s agreement to commission the University of Southern California’s Marshall School of Business to undertake its annual ABAC research project this year on digital NTBs.   This research would seek to identify major impediments to digital trade from the business perspective, particularly those which were an unwarranted or excessively costly barrier to trade, were discriminatory, and/or were more restrictive than needed to meet a legitimate objective.  Examples of such measures could include restrictions on cross-border data flows, which made exports of digitally-provided services and even e-commerce more costly and difficult for businesses, especially small business. 

ABAC also discussed how to modernise FDI rules and policy for the digital economy – research on this point will be presented at the next meeting – along with a planned project on blockchain and international trade.  Updates were also provided on liberalisation and facilitation of trade in services, which are priority issues for ABAC.

The digital economy

ABAC members explored a range of digital issues, including regulation of the digital economy for privacy and cybersecurity; how consumer trust in digital could be improved; and how digital channels could drive seamless trade. 

Tenby Powell gave a presentation providing an overview of the conclusions of last year’s report from the USC Marshall School of Business on enabling MSMEs in trade.  The report had highlighted the potential for the digital economy to help MSMEs to participate more successfully in trade, but had also noted that supportive digital ecosystem, and mitigation of digital trade barriers, were both crucial.   On digital ecosystems, the report identified the most important enabling policy settings and infrastructure as including competitive e-commerce platforms and marketplaces, business-friendly cross-border e-payments systems, a strong e-government environment, accessible broadband infrastructure and the right skills/technical proficiency among businesses and officials.   Digital challenges that needed to be addressed included improving “business readiness” and liberalising the trade environment, including eliminating local presence requirements and restrictions on foreign investment, improving access to finance and e-payments, and tackling digital trade restrictions including on cross-border data flows and tariffs on digital goods.  Tenby foreshadowed that he would look in greater detail at these elements in the next three ABAC meetings.

The US National Center for APEC held its annual ‘Executive Roundtable’ ahead of the ABAC meeting proper.  This was likewise focused on the digital economy.  Speakers from the business and academic/thinktank community explored how to regulate the digital economy domestically and across borders in a way that met broader social concerns around privacy and cybersecurity while also being ‘business-friendly’; how to use e-commerce to deliver more inclusive growth; and the evolution of digitally-delivered services.

Finance and economics

The Chief Economist of Mizuho Securities, Steven Ricchiuto, briefed members on the global economic outlook.   He gave a downbeat account.  He noted that at present the world was characterised by an unstable combination of excess supply and excessive debt to GDP ratios.  He cautioned that monetary and structural reforms would be needed to get the growth engine going again – it was clear that the world could not rely on the US for this as it had in the past, and there were even concerns about China, facing (as it did) high debt accumulation, a deteriorating competitive position, and an ageing population among other demographic challenges.

Elsewhere in the Finance and Economics Working Group, topics discussed included using fintech for financial inclusion, and advancing regional financial integration.

Enhancing inclusive and sustainable growth

ABAC members continued to explore ideas about how to enable micro-, small and medium enterprises (MSMEs) to participate more fully in trade and the global economy.   In particular, the MSME and Entrepreneurship Working Group intends to focus on enabling MSMEs in global value chains and global markets this year, especially through e-commerce platforms and marketplaces.  Katherine gave a presentation on advancing the economic empowerment of women (especially women entrepreneurs) through the ‘Women Connect’ programme and in the 2019 APEC Women Leadership Forum in May.  Online dispute resolution was also discussed as an important element of enabling MSME internationalisation.   It was also agreed to work closely with the APEC SME Working Group.

In the Sustainable Development Working Group, topics that were discussed included energy efficiency and climate change, thriving in a low carbon world, green consumption and creating a ‘circular economy’.  Many members, including ABAC New Zealand, emphasised the importance of addressing these issues and taking an ambitious stance.

Valedictory – Katherine Rich

This was the final ABAC meeting for Katherine Rich.  Her contribution since 2014, particularly on NTBs and women’s economic empowerment, was warmly acknowledged by the ABAC Chair and by individual members.

Next meeting

The next ABAC meeting will be held Jakarta from 23-26 April.

Further information

Further information about ABAC and ABAC New Zealand is available at www.abaconline.org and at www.tradeworks.org.nz.   Copies of reports and studies mentioned in this update may be available on request from Stephanie Honey, stephanie@honeyconsulting.co.nz.

Annex: ABAC Contribution to the Post-2020 Vision for the APEC region

As APEC develops its Vision for the post-2020 period, ABAC would like to see economies build on the Bogor Goals to achieve deeper, wider and stronger regional economic integration, to create a more prosperous, inclusive and sustainable ‘APEC Economic Community’, as it could be described.  (Note that the term ‘Community’ does not imply a legal status, but is rather an expression of the continuation of the non-binding, voluntary and consensus-based approaches that have always been the organising principle of APEC.)   The Community should be expressed most importantly (but not exclusively) by an eventual ambitious, high-quality and comprehensive Free Trade Area of the Asia Pacific, and by an interwoven supporting network of policies and principles developed collaboratively by APEC economies.    We should seek to realise the Community by 2030, giving time for necessary preparatory work while providing business with a commercially-meaningful planning horizon.  

In practice, the Community would deliver better opportunities for business, trade and investment, and fair competition, but also the progressive elimination of extreme poverty, rising living standards, enhanced food security and significantly improved sustainability outcomes.  These characteristics must be able to be sustained even in the face of economic volatility, technological change and environmental challenges.  Our communities must enjoy greater access to both the opportunities in and the benefits arising from deeper integration.

ABAC’s “Vision Statement”

“ABAC seeks a dynamic, seamless, resilient and market-oriented Asia-Pacific region, in which an individual or firm can connect, do business and find success with equal ease in any part of the region.  To achieve this, economies must be capable of and committed to improving equity, inclusion and non-discrimination, and supported by structurally-sound, responsive, predictable, business-friendly and innovation-friendly behind-the-border ecosystems.”

A focused, staged work programme by APEC economies to achieve this Vision – with the support of, and in collaboration with, the business community – would take place under four key “pillars”, and would draw on work already in train in the pathways and elsewhere; such a process should be consultative and transparent, and focus on comprehensive and inclusive outcomes.  The four pillars of the Vision are:

1. Dynamic:  digital economy, good regulatory practices, competition policy, intellectual property, innovation, lifelong learning
2. Seamless: rules-based trade, investment and data flows, regulatory coherence, connectivity and infrastructure, financial systems integration, ease of doing business
3. Resilient: structural reform, education, capacity-building, trade adjustment assistance, job mobility, skills, food security, health
4. Inclusive & sustainable: MSMEs, women, remote & rural areas, energy security, low-carbon economy, climate change, education

APEC Business Advisory Council
March 2019