Prime Minister announces Plan to Improve Business Mobility

This commentary is a follow up to Mr. Edwards’ Op-ed on APEC and the outlook for the Bali Summit which was circulated in our Bulletin of October 4.

As expected, there were no big surprises coming out of this week’s leaders’ summit of the Asia Pacific Economic Cooperation grouping (APEC), held in Bali, Indonesia, October 7-8. There was an emphasis on the trade agenda with a positive side meeting among leaders involved in the Trans-Pacific Partnership. The economic messages were suitably cautious and “steady as she goes”. A new initiative on “connectivity” in the region was announced including a strong emphasis on infrastructure development.

One outcome of particular interest to Canada’s business community was Prime Minister Harper’s announcement that Canada would be putting in place its own “pilot” of APEC’s Business Travel Card (ABTC) system. This will allow Canadian business travellers who are NEXUS members to acquire the ABTC, which will give them access to the faster designated APEC border clearance lines in other participating APEC economies. It is not clear if Canada will provide the same access to non-Canadian ABTC holders at Canadian border points.

The Prime Minister used the Summit to have a productive meeting with President Park of Korea to push for the conclusion of our stalled FTA negotiations with Korea. Following that meeting, the Korean Foreign Minister indicated they were upgrading the level of their negotiator with a view to completing negotiations this year. This is good news. Harper also held his first meeting with new Australian Prime Minister Abbott.

APEC comprises 21 member “economies”, 15 from Asia (including China and Japan but not India), five from North American members (Canada, U.S., Mexico, Chile and Peru), and Russia. The region comprises more than 3 billion people, over half of the world’s GDP and 45% of global trade.

APEC summits have seldom been the stuff of front-page news outside Asia, and coverage of the Bali Summit followed the norm. Media coverage in Canada was largely limited to the side meeting on the Trans-Pacific Partnership, and the unrelated announcement by the Prime Minister that he will not be attending the Commonwealth Summit this year in Sri Lanka.

In terms of geo-politics, this APEC summit generated some media coverage around President Obama’s decision to stay in Washington to deal with government funding crisis. Commentators viewed this as another sign of diminishing U.S. presence in the region, creating more room for China’s new leader to be the center of attention and underlining the growth of China’s influence and role. As if to drive home the point, President Xi used a bilateral visit to Indonesia on the eve of the summit to announce China’s creation of a $50 billion bank to fund infrastructure development in the region.

The Bali Declaration contains items of interest in three areas.

The Trade Agenda Dominates

APEC is not a negotiating forum, but leaders did use the meeting to make some commitments and drive home several important trade messages that should be of interest to Canadian business. Leaders did the following:

  • Agreed to extend their standstill commitment until 2016 not to introduce any new trade and investment barriers and “reaffirmed our pledge to roll back [existing] protectionist and trade distorting measures”. This parallels a similar pledge out of September’s G20 summit in St. Petersburg
  • Underlined their continued support for what has been called a “Free Trade area of the Asia-Pacific” to be pursued through various means and negotiations outside APEC, particularly the TPP
  • Emphasized APEC’s traditional role in providing leadership and opportunities among members for developing deeper understandings of trade policy issues, information sharing, and capacity building for those who need it to participate in negotiations
  • Reiterated their agreement in 2012 to reduce tariffs on a list of Environmental Goods to 5% or less by the end of 2015, and called on the WTO to adopt the initiative on a global basis
  • Urged WTO Trade Ministers at their December WTO Ministerial to launch negotiations on Trade Facilitation accompanied by some measures (sought by developing countries as a quid pro quo) in the agriculture and other areas.
  • Called for the WTO to expand product coverage of its current Information Technology Agreement for approval at the December meeting and to expand membership

Quite separate from the APEC Summit, there was a side meeting of the 12 leaders whose countries are participating in the Trans Pacific Partnership.

Although details were scarce, it seems that chief negotiators present in Bali made some progress in the days prior to the meeting. Japan’s late arrival at the negotiating table in August has not held up progress as much as expected. Indeed, signs are that Prime Minister Abe is pushing his negotiators in order to be able to use the results to force reform in Japan before the next election. Mike Froman, U.S. Trade Representative, has said that Washington’s ambitious end-of-year target for a deal still exists, although things will probably slip into early 2014. Generally, the mood was upbeat although the tough end-negotiations still lie ahead.

Enhancing the “Economic Cooperation” in APEC’s Name

Leaders continued their practice of committing to further progress in the pursuit of a range of programs and projects directed to strengthening economic linkages among APEC members.

In this respect, the Bali Declaration highlights “Promoting Connectivity” as this year’s signature initiative for cooperation. Leaders said they “aspire to achieve a seamlessly and comprehensively connected and integrated Asia Pacific” and made a long-term commitment to “accelerate our physical, institutional and people-to-people connectivity.”

Under physical connectivity, Canadian business will be interested in the emphasis on infrastructure development and investment, focusing particularly on improving the performance of supply chains among APEC countries. Leaders agreed to establish a pilot Public Private Partnership (PPP) Centre in Indonesia. Prime Minister Harper announced a $5 million Canadian contribution to the start up of the Centre.

The “connectivity” agenda also singles out the education sector, calling for greater mobility among researchers and education providers and setting a target of one million intra-APEC exchange students at university-level per year by 2020, although without indicating what current levels might be. Canada’s universities should be challenged to take up this opportunity. Tourism and youth engagement are also stressed.

Regional Economy is Given Positive but Realistic Treatment

Predictably, leaders gave some attention to the state of the global economy. The Declaration notes that “global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired.”

As for the regional economy, the theme of this Summit (Resilient Asia-Pacific, Engine of Global Growth) suggests an upbeat tone, and in the Declaration, leaders sounded bullish about the future and said they were committed to the region’s playing a leading role in the global economic recovery.

At the same time, they recognized the risks in pledging to follow “prudent and responsible macroeconomic policies” and to “maintain economic and financial stability in the region.” There is also a reference to “avoiding spillover effects,” code words for capital flight from emerging economies in Asia and sudden drops in currency values in countries such as Indonesia as a result of fears of a rapid exit by the U.S. from the Federal Reserve’s quantitative easing policies.

Over the longer term, leaders soberly underlined the work needed to “change the region’s growth model and to advance economic restructuring,” citing urbanization, innovation and food security as particular challenges.

Since the APEC membership contains a cross section of developing and developed countries, many of APEC’s work programs have focused on ways to close the development gap. For example, the Bali Declaration highlights the need support the roles of small- and medium-sized firms and to expand participation of women in national economies.

In conclusion, the APEC Bali Summit conformed to the norm for these annual get-togethers where hard outcomes are rare but leadership is needed to drive the softer cooperation agenda. The results on trade stand out nicely as the kind of product to which leaders can directly contribute.

Next year’s APEC summit will be held in China.