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

APEC BUSINESS ADVISORY COUNCIL

FIRST MEETING, AUCKLAND, 1-4 FEBRUARY 2018

REPORT TO NEW ZEALAND BUSINESS

 SUMMARY

The first meeting of the APEC Business Advisory Council for this year took place in Auckland from 1 to 4 February, organised by ABAC New Zealand. Members Katherine Rich, Phil O’Reilly and Tenby Powell, and alternate member Stephen Jacobi represented New Zealand and were active in leading discussions on a range of issues. During the meeting, ABAC members agreed their work programme for the year ahead, engaged in substantive discussions on a range of issues and conducted their annual Dialogue with APEC Senior Officials.

The meeting took place with the generous support of the New Zealand Government and business sponsors. The Minister for Trade and Export Growth shared his insights on trade issues at the Opening Plenary, and Under-Secretary for Foreign Affairs Fletcher Tabuteau gave the keynote speech at the Gala Dinner, which was also attended by the Minister for Women and Parliamentary colleagues Michael Wood and Melissa Lee. The Mayor of Auckland spoke at the Opening Reception, and representatives of Ngati Whatua provided a welcome to delegates. The meeting was hosted by Business New Zealand, took place with the generous support of business sponsors including lead sponsor ANZ, ATEED, Douglas Pharmaceuticals, Bank of China, Fonterra and the New Zealand International Business Forum.   The New Zealand Food and Grocery Council also provided support.

On substance, the discussions in Auckland covered regional economic integration, finance and economics, sustainable development, connectivity and small business. The challenges of globalisation and inclusive growth was a major theme: members stressed the importance of pressing ahead with trade liberalisation, including the eventual Free Trade Area of the Asia-Pacific (FTAAP) as well as the “Pathways” such as TPP and RCEP, while also ensuring that small business, women, and communities could engage in and benefit from economic growth.   Members also discussed their collective vision for the APEC region post-2020, a conversation which will become increasingly prominent as the 2020 milestone approaches. (It is particularly germane for New Zealand, which will be hosting APEC in 2021.) ABAC’s interest in the digital economy remains strong, with discussions around how best to foster digital trade-enabling environments. Discussions also continued on how to empower micro-, small and medium enterprises to participate more fully in global markets, led by a presentation from Tenby Powell.   There was strong endorsement for work led by Katherine Rich on non-tariff barriers to trade, and Phil O’Reilly gave a well-received presentation on food-related services.

REPORT

ABAC New Zealand’s Katherine Rich, Phil O’Reilly and Tenby Powell, along with alternate member Stephen Jacobi, welcomed ABAC colleagues to Auckland for ABAC’s first meeting for 2018 from 1-4 February. Staffer Stephanie Honey attended in support.

Discussions took place in Plenary sessions and in five themed Working Groups: Regional Economic Integration (co-chaired by Katherine Rich); Sustainable Development (co-chaired by Phil O’Reilly); Micro-, Small and Medium Enterprises (MSMEs) (co-chaired by Tenby Powell); Digital and Innovation, and Finance and Economics.   The meeting agreed the work programme for the Council for the year ahead and also gave the opportunity for ABAC members to hold their annual Dialogue with APEC senior officials.   The statement issued at the end of the meeting can be found here.

Beyond the formal programme, ABAC members had the opportunity to meet Auckland business leaders and view the business ecosystem during a tour organised by ATEED, and were welcomed to Auckland by Ngati Whatua and Auckland Mayor Phil Goff during the Welcome Reception.   The Minister of Trade and Economic Growth, Hon David Parker, gave the keynote address during the Opening Plenary and Under-Secretary for Foreign Affairs Fletcher Tabuteau spoke at the Gala Dinner, which was also attended by the Minister for Women and Parliamentary colleagues Michael Wood and Melissa Lee. The Prime Minister provided a pre-recorded video with some warmly well-received words for the ABAC Women’s Lunch.

Globalisation and trade liberalisation 

The Minister of Trade and Economic Growth, Hon David Parker, provided his reflections on the current climate for regional economic integration at the Opening Plenary. He emphasised the need to continue to support trade liberalisation and regional economic integration to enhance economic growth and global prosperity, but equally the importance of addressing the rising opposition to globalisation, the need to renew the ‘social licence’ for trade, and the imperative of ensuring that the benefits of economic integration could be more broadly shared. Lead sponsor ANZ’s Richard Yetsenga gave a similarly thoughtful presentation to ABAC members about current economic and trade challenges and the importance of ensuring inclusive growth; ANZ colleague Sharon Zollner noted in a separate briefing on the global economic outlook that growth had been above-trend in 2017 (and a number of the risks that had been expected had not eventuated), and that improved trade growth in Asia had become more entrenched, which all pointed to a broadly positive picture for the region.

In their internal discussions, ABAC members explored these issues further, including the findings of last year’s major research project by the University of Southern California’s Marshall School of Business, which had looked at harnessing globalization and technological progress for social inclusion and growth. (A copy of the report can be found here.)  The research had included interviews with a large range and number of stakeholders from around the region; the final report had concluded that economic integration and trade were clearly vital for growth, but that there also needed to be domestic programmes and policies that did not just offer social safety-nets to those displaced by competitors and technological change, but that could also serve as a springboard to enable wider participation in economic activity and trade.

Picking up on some of those themes, PECC Executive Director Eduardo Pedrosa shared a report on the most recent PECC State of the Region survey. He noted that unless there was broad support for ongoing trade liberalisation, it would be challenging to achieve it. Members agreed that there was an imperative to ensure that growth was more inclusive and that they would draw on the Marshall School findings to send some practical recommendations to APEC Economic Leaders in the annual ABAC Letter and Report to Leaders later in the year.

Phil O’Reilly provided an update on a related new research project he is championing on the impacts and benefits of trade liberalisation at the firm and household level, which is being undertaken by Professor Christopher Findlay of the University of Adelaide. Phil commented that business needed to support a national and regional conversation on the benefits of trade, and that the current research would help to illustrate not just the challenges but also positive stories of globalisation for individuals. The traditional approach of talking in terms of broad-brush impacts on GDP were not particularly meaningful benchmarks for stakeholders or the public.

On a related note, ABAC members began 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’). Discussions took place in both the Dialogue with APEC Senior Officials and in a small group chaired by ABAC New Zealand’s Phil O’Reilly and comprising the ABAC Chair and representatives for each of the host economies for 2018, 2019 and 2020 (i.e. PNG, Chile and Malaysia) along with last year’s host, Viet Nam.   The group will undertake a broader discussion for all ABAC members at ABAC II in mid-April, and will look to prepare a multi-year work plan for ABAC on the articulation of the post-2020 vision. ABAC members agreed that they would seek business representation on the APEC Eminent Persons’ Group that was to be formed to take the Post-2020 Vision discussions forward in APEC.)

The group also agreed to work closely with the Pacific Economic Cooperation Council (PECC), which is developing its own contribution to the post-2020 Vision led by PECC New Zealand and PECC Malaysia. (PECC New Zealand’s Brian Lynch and PECC Malaysia’s Tan Sri Mohammed Rastam briefed the group on PECC’s current work in this area including a survey of business that they were currently undertaking.)

ABAC also talked about the prospects for the Free Trade Area of the Asia-Pacific (FTAAP). It was agreed that the Council needed to step up its efforts on developing practical steps towards FTAAP including by commissioning an update to an earlier report, the FTAAP Opportunity, as proposed by ABAC Japan. ABAC New Zealand foreshadowed that it intended to develop a detailed business-lead and business-oriented work programme to prepare for future substantive FTAAP discussions. ABAC Japan warmly supported this idea, noting that FTAAP remained a central priority for all APEC business communities.  There was also warm acknowledgement of the conclusion of one of the “pathways to FTAAP” in the form of the Comprehensive and Progressive Trans Pacific Partnership Agreement (CPTPP).

New Zealand official Justin Allen, who chairs APEC’s Committee on Trade and Investment, gave a briefing on APEC’s work on the post-2020 vision and also on regional economic integration more broadly. He noted that FTAAP remained a major focus and that areas of work included tariffs, non-tariff barriers, investment and a number of other topics.   E-commerce and digital trade would also be a major area of focus for the year ahead, as would how to help small businesses to internationalise and take part in global value chains. (ABAC New Zealand’s Tenby Powell noted that this would likewise be a focus for ABAC, and that work should be complementary not duplicative.) Other areas of work included environmental services, supply-chain connectivity and a range of other topics.

In a separate session, the Bank of China hosted a discussion about the implications for China’s Belt and Road Initiative for regional economic integration, which was very well attended, including by the New Zealand business community. Speakers explored possible opportunities for New Zealand to participate in Belt and Road and the potential for this to generate greater growth in the region as well as stronger trade flows.

Liberalising trade and investment: NTBs and food-related services

Katherine Rich continued her in-depth exploration on non-tariff barriers, looking at the importance of eliminating NTBs to enhance the functioning of global value chains.  Katherine foreshadowed that in remaining ABAC meetings this year she would look in greater detail at some of the horizontal issues thrown up in ABAC’s cross-cutting principles (see the link here) which New Zealand developed and which ABAC has now urged APEC Economic Leaders to adopt.   This was widely supported.

ABAC discussed the services trade liberalisation agenda Including the 2016 Roadmap for the APEC Services Cooperation Roadmap (ASCR), intended to expand the services sector and boost services trade in the region. ABAC Singapore noted that global progress on liberalising services trade was very slow, a concern given the important role of services in generating sustained economic growth.    ABAC Singapore also noted that APEC was developing its own ‘Services Trade Restrictiveness Index’, based on OECD and World Bank work in this area. Phil O’Reilly gave a presentation on food-related services – one of the identified priority areas in the ASCR – noting that while some services were clearly closely linked to food/agriculture production and trade (such as technical testing or production-related services), others that were essential to smooth-flowing food trade were in fact more broadly found across global value chains in all sectors – examples included digital logistics, transport, legal and financial services.  ABAC is to reflect further on its main priority areas under the ASCR.

The digital economy

Reflecting the growing prominence of the digital economy and innovation, the Auckland meeting saw the formation of a new ‘Digital and Innovation’ working group. (This replaces the old ‘Connectivity’ working group.)   Inclusive growth through the advantages offered by the digital economy was a theme of many of the presentations, which spanned the regulation of the digital economy, public e-services, the Internet of Things, a work plan on 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.   Ahead of the ABAC meetings, ATEED had also organised a City and Business Ecosystem Tour, showcasing some of Auckland’s cutting edge digital innovation, which was very well received by ABAC members

At ABAC New Zealand’s invitation, GS1 New Zealand’s Nick Allison gave a report on progress with Global Data Standards (GDS) in the APEC region, concluding with a plea for ABAC to continue to support the adoption of GDS region-wide, particularly in light of the increasing importance of GDS in facilitating e-commerce.

Enhancing MSME and women’s integration in global markets

ABAC members explored 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 Powell gave a well-received presentation on how to help micro-, small and medium enterprises (MSMEs) to participate across borders via trade agreements, building on the SME LEAP Summit that he had organised the day prior to the ABAC meeting (and at which ABAC Chair David Toua of PNG had spoken).   Tenby also foreshadowed that ABAC New Zealand had proposed that the USC Marshall School undertake a research project this year on enhancing the ability of MSMEs and women to engage across borders and access markets, including through global value chains.  There was general support for this including from ABAC Australia and ABAC Malaysia.

ABAC Papua New Guinea noted that it would be holding an MSME Symposium in September 2018 which would focus on entrepreneurship, digital innovation, financing and capacity-building among other topics.

At ABAC New Zealand’s invitation, Patrick McVeigh of Auckland Tourism, Events and Economic Development gave a presentation on the importance of supporting tradeable and advanced industries for stronger economic growth, looking at Auckland as a case study and in particular ATEED’s work with the high-tech, digital, services, creative and advanced manufacturing – especially SMEs in those sectors.

ABAC China noted that it was developing further thinking on enhancing opportunities for women entrepreneurs. Separately, Fonterra hosted the ABAC Women’s Lunch. ABAC New Zealand’s Stephanie Honey moderated a panel discussion including Katherine Rich, Komal Mistry of Fonterra and Vic Crone of Callaghan Innovation, which traversed the challenges for women entrepreneurs in the digital economy.   The Prime Minister provided warmly-received remarks via video to encourage ABAC to explore how to empower women and help young girls to realise their dreams.

New frontiers for finance and economics 

In the finance and economics working group, New Zealand speaker Leigh Flounders (Chair of FinTech NZ) gave an excellent presentation on the future of finance and the fintech ecosphere, looking in detail at issues relating to crypto-currencies. John Samy of the Asian Infrastructure and Investment Bank gave a briefing on infrastructure investment and sustainable societies.

Business views in the region

Mark Averill of PwC New Zealand shared the findings of the PwC survey relating to global and regional issues confronting business in the region. Despite record levels of short-term optimism in the global economy, CEOs worldwide were reporting heightened levels of anxiety regarding the business, economic, and particularly, the societal threats confronting their organizations. The CEO agenda for the year ahead included the changing political landscape, regulation, leveraging the strong economy but also preparing for a potential downturn; working with other stakeholders to create prosperity and solve the most important problems; and developing talent, embracing technology and new ways of working whilst managing costs.

Eduardo Pedrosa, Secretary General of PECC, reported on the findings of the PECC State of the Region Survey. The survey findings showed that perceptions on the economic outlook for 2018 were generally positive but that there were also concerns about protectionism and the failure to implement needed structural reform. At the same time the survey suggested that there was optimism about concluding mega-regional deals. The business community also identified technological change as a major concern (including in relation to the impact on jobs and issues such as data protection, privacy and digital infrastructure). 

ABAC Singapore also reported on the APEC Voices of the Future Programme, a self-sustaining youth leadership and educational diplomacy programme (in which New Zealand participates).

Support from the New Zealand Government and business community

The meeting took place with the support of the New Zealand Government along with business sponsors. The meeting was hosted by Business New Zealand, took place with the generous support of lead sponsor ANZ, ATEED, Douglas Pharmaceuticals, Bank of China, Fonterra and the New Zealand International Business Forum.   The New Zealand Food and Grocery Council also provided support

Next meeting

The next meeting, ABAC II, will be held in Tokyo from 16 to 19 April.