National Center for APEC

THE VOICE OF U.S. BUSINESS IN THE ASIA PACIFIC

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Giving U.S. Business a Voice in the Asia-Pacific

Giving U.S. Business a Voice in the Asia-Pacific

The National Center for APEC is dedicated to the proposition that business must have a voice in the development of policies that impact the economies of the Asia-Pacific region. NCAPEC is the only U.S. business association focused exclusively on facilitating American private sector input into Asia-Pacific Economic Cooperation (APEC) process.


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From April 25-28, ABAC met in Port Moresby, Papua New Guinea (PNG) for its second meeting of the year.  PNG is already gearing up for hosting APEC in 2018 and the meetings were held in Port Moresby’s newly constructed convention center.  The ABAC meeting was preceded by an E-Commerce and SME Summit which attracted more than 700 participants from the Papua New Guinea MSME sector as well as an APEC Executive Forum: Growth in the APEC Region through the Extractive Industries.

The major deliverable for each second ABAC meeting is the finalization of ABAC recommendations to the Ministers Responsible for Trade (MRT). ABAC notes that expanding trade and investment liberalization and undertaking structural reform are the keys to achieving a more stable growth trajectory for the economies in the Asia-Pacific region.

A full copy of the ABAC Letter to Ministers Responsible for Trade can be found here.

You can view photos from ABAC II on the NCAPEC photo blog, found here.

Digital Economy

ABAC USA presented the second theme based educational presentation of the year, following the 2016 work plan presented by ABAC USA Member Peggy Johnson at ABAC I. The ABAC II presentation focused on small and medium enterprises and e-commerce. ABAC USA worked with ABAC Papua New Guinea to identify a small business that could discuss ways they utilized tools of the digital economy such as e-commerce.

Mea Ravu, a PNG entrepreneur who has founded four companies throughout PNG and Australia highlighted the digital atmosphere for a PNG small-business, and showcased how businesses utilize e-commerce for two primary reasons; scalability and efficiency.

He explained how PNG has mainly explored the use of the internet for communication, media, social media, etc., and how the next step is to start systematically training and encouraging merchants to engage with e-commerce tools to further monetize and expand their business.

Key messages on the digital economy, including support of digital trade policies were included in the ABAC Letter and Annex to Ministers Responsible for Trade.

At the Senior Officials Meeting, US efforts to have Digital Trade named as a next generation trade and investment issue was met with stiff resistance from China alone who indicated a desire to see a clearer definition of digital trade before moving forward. To that end, the US will be organizing a second Trade Policy Dialogue on Digital Trade during SOM III in Lima this August.

Services

Services was another primary topic of conversation for ABAC at the PNG meetings. ABAC Singapore presented proposed high level business inputs into the strategic and long-term APEC Services Competitiveness Roadmap (ASCR) that will be developed in 2016, as well as upcoming public-private dialogues (PPDs) on Services in May and June of this year.

ABAC agreed to continue the PPDs on Services to support the development of the Roadmap and to sustain discussion/dialogue between public and private sectors on services with the aim of accelerating progress on principles and initiatives adopted under the APEC Services Cooperation Framework. A PPD was held on the sidelines of SOM II in Arequipa, Peru, on May 13. The Senior Officials Meeting (SOM) also included a discussion on the services sector, primarily focused on the ASCR. Ministers are aiming to complete the Roadmap by the end of 2016. The Roadmap will outline key ways APEC economies can boost regional competitiveness in the services sector, and develop targets to improve the APEC services sector by 2025. The United States is pushing for the Roadmap to contain provisions similar to those in US FTAs.

Financial Services

ABAC USA Alternate Member Monica Whaley presented remarks at the Finance and Economics Working Group on behalf of ABAC USA Member Richard Cantor of Moody’s. Whaley highlighted some key areas Cantor would like to focus on during his ABAC tenure, including:

  • Reduction of barriers to the flow of capital; and
  • Ways to reduce barriers to both domestic and cross-border investment, including capital controls and restrictions on foreign participation in domestic capital markets where feasible and safe to do so. 

ABAC Japan discussed the successful APFF Roundtable on Financial Innovation held at NCAPEC Member Company PayPal HQ during ABAC I. The second Roundtable on Financial Innovation will be held on July 15 in Hong Kong. ABAC Japan also updated the group on specific work streams within the APFF and ABAC and their related events, including:

  • MSME finance and financial inclusion
  • Capital market development
  • Financial market infrastructure and cross-border practices
  • Infrastructure,insurance, pensions and disaster risk financing
  • Improving valuation practices in APEC

Food Security

In addition to discussing preparations for the Policy Partnership for Food Security (PPFS), ABAC discussed the USC Marshall School of Business’ 2016 research project on identifying non-tariff barriers (NTBs) in food trade.  ABAC Japan reported on the launch of a web-based APEC Cold Chains Forum on April 1 of this year. The creation of the forum was led by the Japanese government in cooperation with APEC and the Global Cold Chain Alliance (GCCA). The Forum provides an opportunity to discuss issues regarding cold chains, including policy, technology, and new products. It is open for participation for all those who are interested in cold chains from the public or private sector as well as from academia.

The website can be found here. 

The PPFS met on the margins of SOM II where participants developed  the 2016 work plan for the group.  The work plan details ongoing food security objectives, 2016 workshops and identified lead economies for specific issue areas.

 A copy of the draft work plan can be found here

Climate smart agriculture is a new work stream for the PPFS this year that is being led by the U.S. government.  Experts from the public and private sector are collaborating to address climate challenges ranging from increases in yield variation, weather disasters including droughts and flooding,  agricultural diseases, and the environmental impacts on aquaculture.  

The PPFS will meet again in Lima during the APEC Food Security week September 19-25. APEC Food Ministers will meet September 26-27.

Women and the Economy

The ABAC Women’s Forum Luncheon featured a panel which included Susil Nelson-Kongoi of Exxon Mobil PNG; Sisa Kini of Exxon Mobil PNG; Leonora Morgen of Business Coalition for Women; and Beatrice Mahuru Seddon of PNG Digicel.  Panelists shared their experiences and insights in establishing programs aimed at boosting gender parity in PNG extractive industries and their surrounding communities.

ABAC and other private sector members interested in sharing or learning how to bolster companies, organizations, and economies ability to take action to improve women’s economic participation by improving women’s health are invited to participate in the Healthy Women, Healthy Economies Implementation Workshop scheduled to be held in Lima, Peru, August 17-18.

APEC’s Policy Partnership on Women and the Economy (PPWE) will meet June 27-30 in Lima, Peru.  This year’s theme is breaking down barriers to economic integration of women in the global market.

The Second Senior Officials and Related Meetings (SOM) II took place in Arequipa, Peru from May 14 to May 15, 2016. Along with the SOMs, more than 50 APEC meetings were held between May 2 and May 18. SOM II was followed immediately by the Ministers Responsible for Trade (MRT) Meetings on May 17 and 18, where ministers reviewed the key deliverables from the weeks’ events. Several industry representatives also attended the meetings in Arequipa and contributed expertise in private sector dialogues focused on mining, services, and other sectoral issues.

In Arequipa, ministers continued their work on major APEC initiatives and proposed deliverables for 2016, including the Free Trade Area of the Asia Pacific (FTAAP) study. SOM officials are aiming to conclude that study by the November leaders’ meeting; the study will include a chapter on recommended next steps for considering the FTAAP.  Other top issues discussed at SOM II included trade in services, small and medium-sized enterprises, and trade in digital and environmental goods. On trade in services, officials have set a goal of completing the Services Competitiveness Roadmap by the end of 2016. That roadmap will set out steps to increase services competitiveness in the Asia-Pacific, and include specific steps to improve the regional environment for services trade.

One issue of importance to NCAPEC Members – mining – also was a key focus in Arequipa. APEC’s Mining Task Force (MTF) met on May 10; that meeting was followed by the Mining Executive Dialogue (MED). At the MTF, members developed a strategic action plan to guide its work from 2016-2018, which was approved by senior officials. That plan includes channels to incorporate private sector views into the formal dialogue. The MED offered NCAPEC Members an important channel to relate their views to officials, while underscoring the important principles and trends affecting the mining industry. NCAPEC Members Flour, Freeport-McMoRan, and Rio Tinto were active participants in the mining sessions.

NCAPEC also worked closely with Peruvian colleagues to coordinate the Trade Executive Dialogue, which builds on the recommendations included in the ABAC Letter to Ministers Responsible for Trade. That dialogue was a key means for companies to unite to discuss practical examples of the impacts of Ministers’ work on trade liberalization, regulatory quality, SMEs, trade facilitation, the digital economy and other issues of top concern to US companies. NCAPEC Member companies Freeport-McMoran, Walmart, and Philip Morris International participated in the event.  

After the closest Presidential election in Peru in five decades, the votes are in. Former World Bank economist Pedro Pablo Kuczynski claimed victory on June 5 over Keiko Fujimori, the daughter of imprisoned former President Alberto Fujimori. Kuczynski will officially take the helm of Peru’s government starting next month in one of the country’s most high-profile years as the host of the Asia-Pacific Economic Cooperation (APEC). Through Peru’s role as host, Kuczynski will have the opportunity to advance two of Peru’s top trade and economic priorities, including food safety and agricultural development. 

Who is Kuczynski?
Kuczynski has extensive experience in international affairs, business, and trade, and has been described as a “pro-business economist.” An Oxford and Princeton alum, Kuczynski held several roles at the World Bank, International Monetary Fund, and Reserve Bank of Peru. Kuczynski also served in the Peruvian government, holding posts including Minister of Energy and Mines (1980-1982), Minister of Economy and Finance (2001-2002, 2004-2005), and Prime Minister (2005-2006). Kuczynski also spent time in the private sector, working with mining and private equity companies.

Kuczynski’s campaign priorities included fostering “[greater] economic growth to finance social investments,” lowering the small business tax rate, developing new domestic infrastructure projects, reducing the national sales tax, simplifying incorporation procedures, raising teachers’ salaries, improving access to drinking water, boosting spending on health, and improving relations with Chile. 

Economic Headwinds Pose Growing Challenge for Peru
In recent years, Peru’s economy has faced headwinds. Falling metal prices have negatively impacted Peru’s metal and mineral exports. Peru relies heavily on those exports, which account for nearly 60% of the country’s total exports. Peru’s annual GDP growth also declined to 2.4% in 2014 from a high of 8.5% in 2010, according to the IMF. Though the country saw an improvement in GDP growth in 2015 – 3.3% - it may continue to face headwinds as the global economy faces sluggish growth prospects.

Amidst these economic challenges, Peru has sought to strengthen its economy by reinforcing bi- and multilateral trade and investment ties with APEC members. In 2009, the U.S. and Peru concluded a trade promotion agreement, which eliminated goods tariffs and reduced services barriers for U.S. and Peruvian investors. Peru also joined the 12-member Trans-Pacific Partnership negotiations, as well as the Pacific Alliance with Chile, Colombia, and Mexico.  Beyond those initiatives, Peru has forged bilateral FTAs with APEC countries including Canada, Chile, China, Japan, South Korea, Mexico, Singapore, and Thailand.

Peru in APEC: Goals and Priorities
APEC host countries typically seek to emphasize a key trade issue or industry of importance domestically, and this year is no different. As the 2016 APEC host, Peru has emphasized modernizing food systems and addressing “behind the border” restrictions that affect countries’ agriculture sectors, such as sanitary and phytosanitary (SPS) barriers. Agriculture is a key industry for Peru, employing nearly 26% of the country’s labor force and contributing 7% of its GDP.

Beyond agriculture, Peru is also prioritizing the regional economic integration agenda. Peru is seeking to strengthen its regional ties to Asia, and will look to APEC as a key mechanism to do that. Peru’s Ambassador to APEC Luis Quesada has said  that one of Peru’s objectives in APEC is to position the country as the “leading production and logistics hub between Asia and Latin America.”

As a part of the integration agenda, Peruvian officials are working with member economies to finalize a study on negotiating a Free Trade Area of the Asia Pacific (FTAAP), which will include a chapter on recommended next steps for considering the FTAAP. Officials are aiming to complete that study and deliver it to leaders in November.

Other key issues under discussion will include digital trade – including topics such as ecommerce and data privacy – trade facilitation, and the services agenda. On the latter, officials have set a goal of completing the Services Competitiveness Roadmap by the end of 2016. That roadmap will set out steps to increase services competitiveness in the Asia-Pacific, and include specific steps to improve the environment for services trade.

Peru’s new president is also seeking to strengthen ties with regional partners in APEC at the bilateral level. Kuczynski has said he’ll prioritize a trip to China before the Leaders’ meeting in Lima in November to help reinforce economic and business ties with President Xi Jinping. While it remains to be seen what specific impact Kuczynski’s Administration will have on APEC, the new leader’s business ties and international business background appear to bode well for Peru’s host year.

Peru’s 2016 agenda offers numerous opportunities for engagement on a range of issues critical to the growth of the Asia-Pacific region. Those companies interested in learning more may contact NCAPEC staff at shenry@ncapec.org to discuss opportunities.

This is a re-post from the Asian Trade Centre’s Talking Trade blog.


Much has been discussed about how Free Trade Agreements (FTAs) can give rise to global value chains (GVC) with more opportunities for countries to join international production networks. However, not all FTAs can make significant impacts on GVCs.  How exactly this might happen is still questionable for most people. This policy brief will use the hypothetical example of ketchup to show how an FTA like TPP can transform a GVC and its implications.

When TPP comes into force, the tariff rates imposed on TPP-made ketchup imported to 12 TPP countries will reduce to zero immediately or within a scheduled period. This creates enormous advantages for TPP-made ketchup to have better market access at lower cost, which at the same time means more challenges for non-TPP ketchup trying to export to TPP markets.

This blog post, through visualizations and charts, shows how the TPP might shift a ketchup supply chain. Ketchup made in Thailand will be subject to a tariff of 21.3% when imported to Japan (See chart 1 is below).

However, under the TPP, tariffs on ketchup made in Singapore using the same inputs as Thailand-made ketchup will be reduced to zero (within 11 years) when exported to Japan (*Chart 2). This suggests potential relocations of ketchup factories from Thailand to Singapore because there is now an obvious benefit to such a change.

*To read the full blog post, and to view Chart 2 and see how the TPP would impact ketchup supply chains, click here.

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