APEC’s Trade Fix

"Even under voluntary principles, APEC can do a lot. If you really maximize and push the spirit of cooperation, you’re able to come up with some very good initiatives."

Sluggish trade growth and rising scrutiny of globalization have cast these forces into uncertainty. On the eve of the 2016 APEC Economic Leaders’ Week in Lima, APEC Committee on Trade and Investment Chair Marie Sherylyn Aquia discussed the implications for the Asia-Pacific. She went on to describe APEC member economies’ agenda for improving inclusiveness and sustainability across the world’s largest trading group, accounting for half of trade and 60 per cent of GDP globally. 

Watch: APEC Targeting Next Generation Trade and Growth for All

APEC: What is your view of the state of trade and its impact on the Asia-Pacific? 

Aquia: Trade is slow but APEC economies are doing better than the rest of the world. This is because most APEC economies are very open already and remain a champion for free and open trade. In a way, that has helped them maintain an open regional economy and continue to benefit from it. 

APEC: There are a growing number of trade agreements in the region. How do you see these playing out and what is APEC doing to facilitate the regional economic integration process more broadly? 

Aquia: Most of the APEC economies are prolific negotiators of free trade agreements. Right now in APEC, we’re looking into probably more than a hundred free trade agreements going on. It has also made us realize that we are creating a noodle bowl of trade agreements. 

We are actually discussing one free trade agreement which we hope will put sense into this proliferation of free trade agreements and that is the Free Trade Area of the Asia-Pacific or FTAAP. 

We are going to come up with a collective strategic study to deliver to the region’s Leaders by the time they meet in November. We hope to come up with recommendations on how to pursue an FTAAP which is actually just a vision at the moment. 

APEC: How does rising scrutiny of globalization and trade that is spilling over into some areas of the Asia-Pacific compare with their demonstrated benefits? 

Aquia: Most APEC economies are already experiencing the benefits of open trade. If this pushback continues, that would be a worrying trend. All the things that we are enjoying now like smartphones, travelling across the world, more information at hand—we stand to lose some of them if we persist with this protectionist mode. 

There might be some groups who are very much against trade right now but the reality is the people are benefiting from trade. We need to hear more about this. We hope that those who are benefiting from globalization, especially the business sector, would help to build greater awareness of the advantages of free and open trade. 

APEC: What are your views on the direction of globalization and trade for economies of different levels of development which of course is a defining feature of APEC’s membership? 

Aquia: In the past, it was only the big economies who were very active in trade. Now, we see a lot of middle and small economies benefiting from it. You could say that globalization has democratized trade. 

APEC: There may be greater parity in trade between economies of different sizes but critics still point to free trade as favoring big business. What is your take on this perspective and how is APEC trying to open it up more to smaller firms that account for most businesses and employment in the region’s economies? 

Aquia: Micro, small and medium size enterprises form an important part of our economies but we have seen in some studies that they are not very active participants of international trade. On the other hand, these businesses are very important actors in global values chains that underpin it. 

Look at aviation. In some of the industries that support it, for example, design, engineering and delivery services, most of the players are small and medium enterprises. They are actually very much involved, not directly but indirectly, in supplying services. Of course, if you look at big companies generally, their suppliers in many cases are also small companies. 

Last year in APEC we adopted the Boracay Action Agenda to globalize micro, small and medium enterprises. This year, we have some new initiatives on services industries where small businesses are already a key participant.  We are also continuing work to make trading easier for small and medium enterprises. 

APEC: To what extent is APEC embracing advances in digital technology as a means of widening participation in cross-border trade and supply chains? 

Aquia: We have embarked upon new measures to facilitate electronic commerce and we’re also discussing how digital trade can promote inclusive growth, especially for small businesses. We want to know the barriers are, what the constraints to trade are within the sector. 

The internet economy provides a lot of opportunities for economies and for small and medium enterprises in particular to participate. But why are they not taking advantage of it? Is an enabling environment needed to boost participation in the digital and internet economy? We are aggressively looking into these areas for solutions. 

APEC: What is your assessment of the threat of protectionism in the current environment and how it could affect economies in the region? 

Aquia: The thing with protectionism is that you are actually punishing yourself. If you close off some of your sectors, you’re reducing competition and reducing efficiency. I hope that governments would be able to look into that side of it. That when they protect a certain sector at home from international competition, ultimately they really punish themselves. 

APEC: Please describe the progress of APEC’s ambitious efforts to lower tariffs on ‘environmental goods’ and how it is seeking to build on them? 

Aquia: The Committee on Trade and Investment continues to take forward APEC’s breakthrough work on environmental goods. Under the initiative, a majority of APEC economies have provided implementation plans for lowering their tariffs to five per cent or less on a list of 54 of these goods. 

The list was adopted by the region’s Leaders in 2012 and it includes products that address noise pollution, air pollution and support waste and water management, among other things. Windmills and inverters used as materials for photovoltaic cells or solar panels are some examples. 

This is a very good step. It is the first multilateral tariff reducing arrangement that has been done in almost 20 years and supports trade in green technologies that can improve access to them. It is also the basis for the on-going negotiations in Geneva for an Environment Goods Agreement. 

At the same time, we are advancing a new APEC Environmental Services Action Plan under which member economies are looking into some domestic regulations that restrict trade. Hopefully we can start work to address them soon. 

So we have done the goods part with tariffs and we are also doing the services part. This is all for our green growth agenda. 

APEC: Could the success of the APEC environmental goods initiative serve as a model or reference point for new trade boosting arrangements in other product categories or sectors?

Aquia: I think what it really shows is that even under voluntary principles, APEC can do a lot. If you really maximize and push the spirit of cooperation, you’re able to come up with some very good initiatives like the one on environmental goods. The one on services is another which I think we’re quite ready to work on. 

I don’t know if we can duplicate these in other areas but there is a lot to be said about cooperation and really having some high-level commitments. The APEC Leaders’ declaration on environmental goods, that is very high-level, for example. 

APEC: With tariffs having gone down a lot across the board in recent years in APEC economies, what other kinds of trade barriers do they need to go further to address? 

Aquia: Tariffs have gone down but non-tariff measures continue to exist. This is also an area that the Committee of Trade and Investment is looking at. We are looking at it on a sectoral level and we are also looking at it on a per barrier level. For example, recently, in May, we had a very good workshop on imports licensing. Not many people understand how important licensing can actually discriminate against international competition. 

APEC: How is APEC seeking to ease trade bottlenecks at the border? 

Aquia: Right now we are working on a framework for supply chain connectivity. In the past, we wanted to address time, cost and uncertainty but we finished with that particular initiative and we are going to launch a second phase to that but we want to focus on cost. APEC has done a lot but there is still scope to lower the cost for trade. Hopefully we will be able to come up with a second phase of the supply chain framework action plan this year. 

APEC: Trade liberalization and open borders is coming up against escalating concerns about security and terrorism. What is APEC doing to reconcile these priorities? 

Aquia: In order for goods and services and people to move, security is a basic foundation. It has to be there for goods and people to interact. 

APEC has a number of actions underway in this space including under our sub-committee on customs procedures. There is one on AEOs or Authorized Economic Operators, which is basically a framework by the World Customs Organization on secure trade. 

Our goal is to better employ measures like these to establish a secure environment to trade so that everything else can follow after that. 

APEC: What are your expectations for the APEC Economic Leaders’ Meeting in Lima and how it will shape the region’s trade and investment work for the coming year and beyond? 

Aquia: I think and I hope that there will be some high-level instruction on regional economic integration, particularly on the Free Trade Area of the Asia-Pacific. I also hope that it positions us to make greater progress in opening global values chains for small and medium enterprises. We additionally want to launch more work on services and structural reform. These are some of the important areas in which we can do more, not just within the Committee on Trade and Investment but with other bodies in the APEC community too.