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

APEC BUSINESS ADVISORY COUNCIL

FOURTH MEETING, PORT MORESBY, 13-17 NOVEMBER 2018

REPORT TO NEW ZEALAND BUSINESS

Summary 

1. Against a backdrop of geo-political tension and amidst tight security, ABAC met for the last time under PNG’s chairing in Port Moresby 13-17 November. The meeting culminated in the annual Dialogue with APEC Economic Leaders where three themes were stressed – the need to resist protectionism and safeguard the multilateral trading system; the need to develop a more inclusive approach to globalisation, one which takes better account of MSMEs and women; and the need to address the challenges of the digital economy. At the earlier meeting ABAC NZ pursued a number of key interests. A major study of MSME and women’s involvement in global trade was presented by the USC Marshall School of Business – this study was championed by Tenby Powell and Stephanie Honey and involved over 600 interviews with business people around the region. Another study by the University of Adelaide and championed by Phil O’Reilly focusing on deepening understanding of the benefits of trade for firms was also released. The bulk of ABAC’s meeting followed a different pattern this year and was given over to a retreat session, facilitated by Tenby Powell, and aimed re-thinking ABAC’s purpose and objectives and how to make our advocacy to Leaders more effective. The results of the discussion including tighter governance, more prioritisation of key issues and allowing more time for discussion will be taken forward by ABAC Chile in 2019. At the APEC Ministerial meeting, it had been expected that Ministers would adopt a set of principles to ensure non-tariff measures do not become non-tariff barriers, but it appears this has fallen subject to on-going bickering about other aspects of the Ministerial statement. This is a deep disappointment since these principles originated in ABAC and were championed by Katherine Rich. Geo-politics and the growing conflict between China and the United States over-shadowed other aspects of the APEC CEO Summit. President Xi’s speech focused largely on openness and inclusion while Vice President Pence, at times conciliatory, at times combative, targeted China directly in his comments. As the ABAC team left Port Moresby we received the disappointing news that there would be no Leaders’ statement issued from the meeting due ostensibly to disagreements over language on the WTO. This is an extraordinary and disappointing development and one which will doubtless reverberate through the APEC system.

Report

2. ABAC IV met in Port Moresby 13-17 November and was attended by Phil O’Reilly, Tenby Powell and Stephen Jacobi (as Alternate). Katherine Rich and Stephanie Honey were not available for this meeting. We were warmly welcomed by our PNG hosts and Meeting arrangements and logistics all proceeded smoothly. The ABAC meeting was also attended by Brian Lynch, Chairman, PECC NZ. The ABAC team met the Minister for Trade and Export Growth, Hon David Parker, over breakfast and all delegates including the APEC Young Voices of the Future were invited to a reception at the NZ Residence with Deputy Prime Minister Winston Peters. The ABAC team met with the Prime Minister, Rt Hon Jacinda Ardern, in Auckland, just prior to departure.

ABAC Dialogue with Leaders

3. ABAC’s Dialogue with Leaders is the highlight of the year and marks the end point of the annual work programme. Tenby Powell, Phil O’Reilly and Stephen Jacobi all participated in different discussion groups – Tenby with DPM Peters and Leaders from Brunei, Canada, and Russia; Phil with Leaders from Australia, Chinese Taipei, Indonesia and Viet Nam; and Stephen with Leaders from Japan, Malaysia, Mexico and Singapore. Discussion revolved around the themes of ABAC’s 2018 Report to Leaders:

• the need to continue to support the integrity and purpose of the international trading system
• the need to spend more effort in explaining the benefits of open trade and investment and to ensure that these benefits can be more widely and inclusively shared (especially with MSMEs and women)
• the need to address the challenges of the digital economy including investing in infrastructure that provides reliable, affordable, efficient and least-cost access to high quality wireless internet and broadband.

Members made statements and asked questions of Leaders around all these themes. From the perspective of ABAC NZ Members, there was good engagement from Leaders around these topics.

ABAC thought leadership 

4. ABAC’s prior meeting, the fourth for the year, saw the release of two major reports that ABAC NZ had championed throughout the year. The USC Marshall School report, which was led and championed by Tenby Powell and Stephanie Honey, focuses on how to ensure MSMEs can be more successful in trade and global value chains. The report is the result of interviews with over 600 business leaders around the APEC region. The research highlights the importance of building basic business readiness as well as trade-related skills; easier access to information about markets and trade requirements; better access to finance, and the value of opening up opportunities through networks and sharing best practice. Addressing the under-representation of women-led MSMEs in global trade through more deliberate strategies is also key.   This research will form the basis for continuing advocacy by ABAC NZ in. 2019 and beyond and will be relevant also to the work of the Small Business Council chaired by Tenby Powell and the Government’s “Trade for All” initiative.
5. A report prepared by Professor Christopher Findlay at the University of Adelaide focused on identifying the benefits of trade at the firm level. The research found four firm level factors inform decisions about participating in trade: information, finance, technology and people. In addition to these firm level factors, there are two core external factors which drive success in international trade: the requirements of compliance and market forces. This research will further inform ABAC’s work in helping businesses to explain the benefits of trade to stakeholders.
6. At the meeting Phil O’Reilly also updated members on ABAC’s contribution to APEC’s reflection about its future vision after the expiry of the Bogor Goals in 2020. The vision is being developed by a Vision Group appointed by Senior Officials and has particular relevance for New Zealand in view of our hosting year in 2021.   The core ideas in the ABAC approach – which has been praised in several quarters – is that:

• We must be ambitious and build on the Bogor Goals
• We want deeper, wider and stronger regional economic integration
• This should be expressed most importantly – but not exclusively – by the Free Trade Area of the Asia Pacific (FTAAP) concept
• FTAAP should be set in the context of a network of supporting ideas, policies and principles, developed collaboratively by all APEC economies, about how to ensure growth is truly inclusive and sustainable.

ABAC’s contribution to the vision setting process will be further developed over the coming year.

Enhancing ABAC’s advocacy

7. ABAC’s meeting is normally divided into a series of smaller working groups in which all Members participate according to their interests. This year the bulk of ABAC’s meeting followed a different pattern. A retreat session, facilitated by Tenby Powell, aimed to stimulate some re-thinking ABAC’s purpose and objectives and how to make our advocacy to Leaders more effective. All Members were able to share their views with some expressing frustration that ABAC’s operating practices more closely resemble government processes rather than business ones with the result that our recommendations sometimes lack focus and impact. The results of the discussion including tighter governance, more prioritisation of key issues and allowing more time for deeper canvassing of views will be taken forward by ABAC Chile in 2019.

NTBs – to be or not to be  

8. Over the last two years Katherine Rich has led a work programme which has drawn attention to the problem of non-tariff barriers (NTBs). These arise when governments apply non-tariff measures (NTMs) at the border which are more trade-restrictive than necessary. ABAC’s work has led to deeper understanding of how NTBs result in impaired trade in specific sectors and can be more difficult than tariffs. This work led to the development of a set of principles to guide governments when applying NTMs. We were delighted that these principles have been taken up by senior officials, led by New Zealand, and a (slightly revised) set was proposed for adoption by Ministers in Port Moresby. Unfortunately, the Ministerial statement fell foul of geo-politics and was not released. We will need to engage with officials to see where to take this useful initiative next.

Geo-politics overshadow APEC CEO Summit

9. The growing conflict between the United States and China and its implications for the international trading system overshadowed all discussions in Port Moresby and was on particular display at the APEC CEO Summit which was addressed by several APEC Leaders as well as business representatives. President Xi Jinping of China focused largely on openness, inclusion and development, listing a number of impressive market opening measures that had been announced by his government. His speech did not mention the United States specifically but said that “no one wins from cold war, hot war or trade war”. Vice President of the United States Mike Pence was at pains to stress US commitment to the “Indo-Pacific” (sic) and to open markets (sic) as well as, “free, fair and reciprocal trade”. While at times he appeared conciliatory towards China (“China has an honoured place in the US vision for the Indo Pacific”) , his speech contained a number of barbs directed at China including   “we will not offer a constricting belt or a one way road”. He was unambiguous that the US would not change the current approach until China “changes its ways”.
10. Geo-politics also overshadowed the Leaders’ meeting with no agreement on a final Declaration, leaving PNG Peter O’Neill to say that a Chair’s statement would be released in coming days. This was a disappointing end to the Port Moresby meetings and to PNG’s chairing, leaving a number of questions about APEC’s future direction.

Next meeting and further information 

11. Chile will chair APEC and ABAC in 2019. ABAC’s theme for 2018 will be “Creating Inclusive, Collaborative Growth”. The first ABAC meeting will be held in Atlanta on 1-4 March 2019. Other meetings will be held in Jakarta (4-7 May), Hangzhou (22-25 July) and Santiago (11-13 November). The APEC CEO Summit 2019 will be held 14-16 November 2019 in Santiago.
12. Further information is available at tradeworks.org.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.

ABAC New Zealand
November 2018