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

APEC BUSINESS ADVISORY COUNCIL

FIRST MEETING, BANGKOK, 20-23 FEBRUARY 2017

SUMMARY

The first meeting of the APEC Business Advisory Council, or ABAC, for this year took place in Bangkok in late February. ABAC New Zealand member Katherine Rich attended and played an active role. The discussions traversed a wide range of topics, spanning regional economic integration, finance and economics, sustainable development, connectivity and micro-, small and medium enterprises (MSMEs).

Issues of keen interest to New Zealand included free trade agreements in the Asia-Pacific (and in particular the future of TPP); globalisation and its impacts (ABAC will undertake two research projects on these topics this year); non-tariff barriers to trade; food issues; trade facilitation and the digital economy (including a session on the CBET Network designed to enhance the participation of MSMEs in e-commerce, in which NZ Post is a participant). Katherine made well-received presentations on non-tariff barriers (setting out a work programme to look at a variety of different sectors including forest products and manufacturing), global data standards (highlighting its potential to lower costs for exporters), the importance of food trade for food security, and the WTO Trade Facilitation Agreement (which finally reached the threshold for entry into force during the ABAC meeting). There was also a Dialogue with APEC Senior Officials (including New Zealand’s Senior Official Alison Mann) which focused on regional trade architecture and globalisation.   The ABAC meeting was preceded by an Executive Roundtable in Singapore organised by the US National Center for APEC which Katherine also attended and which offered an opportunity to discuss many of these issues with a broader Asia-Pacific business community.

REPORT

ABAC New Zealand member Katherine Rich (supported by staffer Stephanie Honey) attended ABAC’s first meeting for 2017 in Bangkok from 19 to 23 February. There were the usual wide-ranging discussions in each of the five themed working groups: Finance and Economics; Regional Economic Integration (co-chaired by Katherine); Sustainable Development; Connectivity and Micro-, Small and Medium Enterprises.The meeting also encompassed the annual Dialogue with APEC Senior Officials, at which New Zealand was represented by Senior Official Alison Mann. Katherine and Stephanie also attended an Executive Roundtable in Singapore organised by the US National Center for APEC immediately prior to the ABAC meeting, and met with New Zealand diplomatic representatives in Singapore and Bangkok.

Globalisation and trade liberalisation: Changing the narrative 

How to respond to rising public disquiet over globalisation and trade liberalisation was a key theme through the week’s meetings. ABAC members observed that frequently these concerns were misplaced and often a proxy for others’ local concerns: trade, and the economic development it generated, had lifted millions from poverty, created jobs and raised living standards. But this story had not been told persuasively or sufficiently by business voices; trade had been unjustly vilified as the sole cause of job losses and economic displacement, when in fact technological change such as automation and the aftermath of the Global Financial Crisis had had a far bigger impact.   Policies needed to be revisited to ensure that trade was inclusive and sustainable, and that the benefits could be more widely shared. Just as importantly, governments and business also needed to do a much better job of explaining the benefits of open trade and investment to the public. In the separate Dialogue with Senior Officials, comments from both sides affirmed that governments and business needed to “renew the social licence” for trade liberalisation. This was a major theme of the press release issued at the conclusion of the meeting – for a copy, please click this link.

ABAC members agreed to undertake two research projects in this area this year to assist this effort. The first was an economics-focused piece led by ABAC USA which would look at some of the data on the impacts of globalisation and trade liberalisation.   The second was a more major research exercise, due for completion by November, which ABAC had commissioned from the University of Southern California’s Marshall School of Business. (Readers may recall that last year’s ABAC/Marshall School research project was on non-tariff barriers in the food sector, and had been initiated by ABAC New Zealand, with input from many New Zealand business representatives.)   The Marshall School work would look at “Harnessing Globalisation and Technological Progress for Social Inclusion and Growth”. It would entail interviews with a wide range of stakeholders from around the region (including New Zealand) – business, academics, NGOs, unions, trade experts and others – to gain a deeper understanding of these important issues and possible future approaches.

Regional trade architecture: TPP, RCEP, FTAAP and next steps

Closely linked to the discussions about globalisation, ABAC members also talked extensively about the trade architecture of the region, particularly in light of current uncertainty over the future of the TPP. This was a key theme of the Senior Officials’ Dialogue too. There remained strong support for pressing ahead with the Free Trade Area of the Asia-Pacific (FTAAP), on which New Zealand Senior Official Alison Mann providing a helpful briefing on this year’s work programme (New Zealand is leading a ‘Friends of the Chair’ process). ABAC members agreed to give serious thought to how effectively to contribute to that process.

As for the so-called “pathways to FTAAP”, including TPP and the Regional Economic Comprehensive Partnership, or RCEP, there were general expressions of commitment to forging ahead with trade liberalisation, and discussions about how to seek to raise the level of ambition in the RCEP negotiations as much as possible (not least with the ultimate FTAAP end-goal in mind).   While there was broad support for salvaging TPP if possible, there were interesting nuances in respect of proceeding with or without the US and/or other potential members. Several commented, however, that the substantive ideas and approaches of TPP would live on (for example, by being taken up in other FTAs), regardless of the fate of the agreement itself.

On the US Administration’s attitude to trade policy, there were strong messages from US business colleagues (both at the ABAC meeting and in the preceding NCAPEC Executive Roundtable in Singapore) about “not giving up on the US”, affirming the ongoing strong support from the US business community for trade and open markets, and counselling patience for a few more months to see where the Administration might end up with regard to trade negotiations, APEC and other international bodies.

Building on a series of presentations over the past year in ABAC on non-tariff barriers, including securing agreement to the (trade-friendly) ‘cross-cutting principles’ on NTMs/NTBs we had developed, Katherine proposed an NTB work programme for this year which would focus on developing additional sectoral examples (beyond last year’s detailed work on food). Katherine proposed that attention turn to sectors such as forest products and manufactured goods, including machinery and electronics. This, she argued, would enable ABAC to take a comprehensive package of the cross-cutting principles, supported by sectoral examples, to APEC Leaders later this year. This was agreed. (Subsequently, on 24 February, Stephanie Honey presented the ABAC approach, along with the recommendations from research done last year by the Marshall School on food NTBs, to an APEC Trade Policy Dialogue for officials and private-sector representatives in Nha Trang, Viet Nam, on non-tariff measures in the food sector.)

Katherine also offered ABAC a brief update on the status of the WTO’s Trade Facilitation Agreement (TFA). She highlighted that the threshold for entry into force (two-thirds of the WTO Membership having ratified the Agreement) would soon be reached; indeed, that goal was surpassed the following day. ABAC members warmly welcomed the development in a press release which emphasised the TFA’s benefits for business, developing countries, MSMEs and consumers, and also welcomed it as an affirmation of the WTO as the cornerstone of the global trading system. (For a copy of the ABAC press release, click here.)   On other matters, ABAC Papua New Guinea gave a very informative update on broader WTO processes, noting that they would be hosting a WTO trade and development forum in Port Moresby in June.

A further significant focus for ABAC work during the week was on the services agenda. APEC Executive Director (and former Governor of the New Zealand Reserve Bank) Alan Bollard had observed during the discussions in both Singapore and Bangkok that economies could easily slip into the “factory fetish”, prioritising manufacturing above all else, but in fact services made up the lion’s share of most economies. However, he had also warned that APEC economies lagged behind other countries in the sophistication of services trade and the sector overall. ABAC members agreed to consider ways to contribute to the implementation of the 2016 Roadmap for the APEC Services Cooperation Framework, intended to boost the services sector and services trade in the region. One possibility would be to organise public-private dialogues on the implementation of the Roadmap.

Towards sustainable development and food security

Katherine gave an update to ABAC members on the “food security” agenda. She noted the upcoming meeting of the APEC Policy Partnership for Food Security, or PPFS, in Viet Nam. She noted, however, that fellow New Zealand member Tony Nowell had now stepped down from ABAC and would not attend PPFS as the ABAC Vice Chair. More broadly, she reported, ABAC New Zealand and New Zealand officials remained concerned about the effectiveness of the PPFS as a productive partnership and dialogue between the private sector and governments, and would be scaling back private-sector engagement (while of course remaining strong advocates and activists for food-trade liberalisation elsewhere).

The Chair of the Sustainable Development Working Group offered a warm acknowledgement of Tony’s excellent efforts on food security and food trade (and many other issues) over more than a decade at ABAC. (Similarly the Chair of ABAC for 2017, Mr Hoang Van Dung of ABAC Viet Nam, had opened the ABAC meeting in Bangkok with words of sincere appreciate for Tony’s dedicated service over many years.)   The Chair commented that ABAC continued to support the work of the PPFS, but that an immediate replacement for Tony (to serve as ABAC Vice Chair of PPFS) had not yet been forthcoming, although the search continued. He expressed the hope that ABAC New Zealand could stay involved in PPFS in the future.

Katherine also proposed an ABAC response to the Marshall School Report on Food NTBs. She proposed that that ABAC urge APEC economies to consider how to implement the various recommendations in the Report’s “Action Agenda” and intensify existing workstreams which could serve to enhance food trade and food security, such as the pilot projects on global data standards, the ongoing work on ‘good regulatory practice’, and the broader determination to press ahead with the Free Trade Area of the Asia-Pacific. This was agreed. (As noted above, this position was subsequently conveyed to the APEC Trade Policy Dialogue in Viet Nam on non-tariff measures in the food sector.)

There were also two very interesting reports from ABAC Thailand on food loss and waste and sustainable food production.   Other topics covered under the ‘sustainable development’ heading included various reports and projects on energy security and efficiency, and the use of water in the mining industry.

Promoting connectivity in the region

Members discussed connectivity in its various guises, including agreeing to consider how ABAC could most usefully contribute to the ongoing workstream in APEC on structural reform. ABAC Australia noted that they were intending to look specifically at structural reforms that would assist infrastructure development, and would in turn survey each economy to identify one area of structural reform that could assist its own economic development. ABAC Australia commented that this work would tie in well with the broader projects on globalisation and trade reform. The Chair of the Connectivity Working Group noted that a champion was needed for this workstream on structural reform, now that Katherine Rich had stepped down from her role as Co-Chair of CWG to take up the Co-Chair role in the Regional Economic Integration Working Group.

Katherine provided an update on the global data standards (GDS) initiative (which is about supply-chain optimisation through digitisation and traceability). She reported that pilot projects had been undertaken in several economies and that an assessment of the benefits, challenges and lessons learned was close to being finalised by the APEC Policy Support Unit and GS1. (We expect to be able to report in greater detail on this initiative following the next ABAC meeting in late April.) There was broad consensus that this was an important project and APEC economies should be encouraged to progress it further.

Greater connectivity through the digital economy was a recurrent theme throughout the week’s meetings. Of particular interest, Katherine attended a session organised by ABAC China member Diane Wang (of DHgate) about the ‘CBET Network’ (Cross-Border e-Commerce Training). This initiative is designed to open up opportunities for SMEs through cross-border e-commerce – which of course make up the lion’s share of New Zealand’s economy as well as many others’.   (New Zealand Post is a founding member of CBET.) Diane made the insightful observation that in five years we probably would not be talking about “e-commerce” or the “digital economy” any more – they will simply be the norm.

Separately, in the Connectivity Working Group, ABAC China indicated that they were going to commission research on a “Digital Trade Index” – a big data-based diagnostic to quantitatively assess the level of digital trading readiness and potential across global value chains, and propose areas for improvement.

Enhancing MSME development

ABAC members explored ideas about how to ensure that micro-, small and medium enterprises (MSMEs) could participate more fully in the economy.   Of particular interest was an ABAC Canada initiative, ‘Growing Business Partnerships’, which will fund research studies, surveys, workshops and training for MSMEs, focused on business entrepreneurship skills, market access and technological innovation.   ABAC members have been invited to nominate up to three national start-ups to take part in this MSME special programme which will take place in the margins of ABAC III in Toronto in July.

Other topics discussed included the ‘APEC MSME Marketplace’ (an online portal which acts as an interactive repository of APEC activities and member economies’ individual efforts to promote cooperation and linkages); various case studies on successful MSMEs and useful business models for them, and new initiatives relating to strengthen participation of women in the economy.

Next meeting and further information

ABAC II will be held in Seoul, South Korea, from 26 to 29 April.

Further information is available at www.nzibf.co.nz and www.abaconline.org. Copies of reports and studies mentioned in this report are available on request from Stephanie Honey, stephanie@honeyconsulting.co.nz.