Professor Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide and Vice-Chair of AUSPECC

Republished from the East Asia Forum

The weather was awful outside the WTO Ministerial Conference in Geneva last week, but there was some sunshine within the convention centre.

Russia acceded as a member, along with Samoa, Montenegro and Vanuatu (the club still attracts new members, and as one minister said: ‘as far as I know, nobody has asked to leave’).

The Plurilateral Government Procurement Agreement was revised — after 10 years of negotiations — further opening up procurement markets to give foreign economies better access. China is also en route to joining, having agreed to do so on its accession to the WTO, after further negotiations took place.

But there were some strange decisions, like giving countries the option to waive most favoured nation (MFN) provisions, so as to allow least-developed countries preferential access to services markets. It is not yet clear how this will happen or how it would help resolve constraints in developing countries, which hinder reforms in their own service sectors. There were some non-decisions as well. No conclusion was reached on a set of principles for food security, for example, although the WTO’s Director-General rebutted a protectionist report from a UN official.

Why the lack of progress at this year’s Ministerial Conference? Here are five suggestions.

One factor is that ‘development’ has been mixed with trade. On the face of it, having a ‘development round’ seems positive, but lumping these two areas together complicates the process, and introduces new items for debate. The WTO should remain focused on the resource allocation gains from international business.

Another reason for the lack of progress is that the WTO cannot deal with the barriers that have now become relatively more important to business. This includes the rules and processes affecting international business which are not managed at the border. These barriers create significant rents — and those who currently gain from the arrangements resist their removal. Analytical work on these barriers is more and more important.

The third factor involves the uncertainties faced by policy makers when removing such barriers. Some were put in place for genuine public policy purposes, and policy makers are not confident about the likely consequences of their removal. Capacity building programs focused on this issue could help address the problem, and the EU and APEC, in particular, could work well together on this.

Fourth, the use of preferential agreements does not make the process any easier. Rents are created for local business, which are then shared with a state’s ‘favourite partners’ when preferential trade agreements find a way of allowing market access. In this way, the grand bargain once represented by the WTO has been diminished.

The US is the fifth reason why progress has stalled, although the US would likely say that other leading members were the problem. The US wants to create more domestic jobs — and good ones — which it associates with more market access, especially in countries like India, China and Brazil. These economies are not offering enough, and the US is therefore pursuing other options like the Trans-Pacific Partnership, or negotiations with the EU, to flush out some response from recalcitrant members. Meanwhile, this tactic promotes the use of FTAs and depreciates the political capital available to the WTO.

What will happen now?

Within the WTO, fundamental principles including MFN provisions and the ‘single undertaking’ will be challenged in the name of pursuing more-achievable — or less-ambitious — goals. Australian Minister for Trade Craig Emerson said the situation ‘argues for breaking the round into its component parts … instead of waiting for some grand bargain, magically, like a bolt from the blue, to strike us from the sky’.

Tension will be regarded as a plus, and created by excluding trading partners from special deals. Plurilaterals will proliferate, both within and without the WTO. We will move to a world in which there are clubs within clubs, and in which they all overlap. There is also the possibility of great tension in the Asia Pacific as ‘a line is drawn down the middle of the Pacific’.

It is not clear what the circuit breakers will be in this situation. Whatever happens, small group negotiations within the WTO could be okay if guided by the right principles. Some will call for new leadership at the top, in order to consolidate and multilateralise small groups outside the WTO. Others hope that the situation will be resolved from below, via competition; some clubs will exit (in effect, if not in name) or amalgamate, and what remains will be (hopefully) efficient.

Our best chance is to build confidence in reform led from within economies. This requires transparency and benchmarking (via strong trade-policy reviews in the WTO, good peer reviews in APEC and clones of Australia’s Productivity Commission). It will also require us to demonstrate the real linkages between policy and performance, and the ability to translate that work into compelling public commentary. We then have to think through where world trade policy is at now, and develop a new, more coherent global strategy.

Peter A. Petri, non-resident Senior Fellow with the East-West Center and a Professor of International Finance at Brandeis University

Republished from the East West Center

(This analysis originally appeared in the Honolulu Star-Advertiser on Oct. 16, 2011 as part of a monthly series on regional Asia Pacific issues leading up to the APEC leaders’ meetings in Honolulu in November)

In the last half century, world trade has grown twice as fast as output and helped to lift the majority of the world’s people from poverty—a feat unimaginable a generation ago. When APEC leaders meet in Honolulu next month, they will represent countries that account for half of world trade. Can APEC help to keep the engine humming for another half century?

The trade engine is more important than ever, but the rules that govern trade are less certain. Efforts to strengthen global rules—the World Trade Organization’s Doha negotiations—have collapsed. Beset by domestic concerns, the United States and Europe have retreated from leadership on trade. And the new Asian giants have yet to step up. Read more…

Plenary: Asia Pacific Regional Outlook and Concurrent Session: Enabling 21st Century Services in the Asia Pacific

Prepared by Youth delegates Angela Zhang Yiou (HK), Muhan Cheng (CT) and Jihye Seon(KO), 29September2011

The First Plenary session was moderated by Mr. Zou Mingrong. The first speaker Roberto Cardarelli delivered the Overview and Forecast of the IMF on global economy. During his speech, Mr. Roberto highlighted that slower growth was expected around the world. However, Asia will still exhibit relatively good performance with strong domestic demand. He also mentioned “Two Channels”: trade channel and financial channel. Mr. Roberto concluded that Asia still would have solid growth but monetary tightening and economic rebalancing are required. Read more…

Professor Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide and Vice-Chair of AUSPECC
Republished from the East Asia Forum

Commentators on these pages have been pondering the implications of the Fukushima explosion on Japan’s energy policy and its strategy for international purchases. Samuels suggests an extensive re-examination of energy policy in Japan and a possible shift toward renewable energy. Vivoda pointed to a scenario in which the share of nuclear power in Japan’s total electricity consumption could fall. This share previously accounted for 30 per cent of consumption, and even as little as 12 months ago the plan was to raise this to 50 per cent.

An increase in the share of gas and coal in the short to medium term and a switch to renewable energy sources in the longer term is now expected: Peter Drysdale referred to the growth of LNG imports this year and its likely further growth in 2012. That nuclear power is not so cheap when the costs of meeting safety or dealing with incidents are taken into account is the key driver behind these developments, as Len explains. Still, expectations about a switch to gas, at least in the short term, are a source of anxiety in Japan. The main gas suppliers to Northeast Asia are Southeast Asia, the Middle East and Russia — nothing comes from the Pacific. There are also expectations that two major suppliers — Malaysia and Indonesia — will switch to net imports. Consequently, obtaining more gas without paying a higher price is not going to be so straightforward. And there is also the possibility of having to deal with a smaller number of suppliers. Read more…

Global Services Network Update
republished from http://globalservicesnetwork.com/GSNOctober32011.html

Following the Pacific Economic Cooperation Council (PECC) and Asian Development Bank Institute (ADBI) Conference on Trade in Services in Hong Kong earlier this year, the PECC included in their annual survey of opinion leaders across the Asia Pacific the specific question “should APEC members take the lead in promoting a plurilateral agreement on services?”  72% of all respondents responded positively, with only 5% disagreeing.  70% percent of government officials responded positively, as did 76% of business leaders. Read more…

Ganeshan Wignaraja
Principal Economist, Office of Regional Economic Integration, Asian Development Bank

Slow progress in the WTO Doha Round trade talks has seen China and India have focussing on free trade agreements (FTAs) as a vehicle of trade strategy and economic diplomacy. By mid-2011, the two Asian giants were among Asia’s leaders in FTA activity with 11 each in effect in both China and India. The number of FTAs under negotiation and proposed suggested that such activity will rise in the future, as China has another 13 agreements in the pipeline and India another 20. China has FTAs with ASEAN, Hong Kong, Macao, Chinese Taipei, Pakistan, New Zealand, Chile and Peru, among others. Meanwhile India’s agreements include  those with Sri Lanka, South Asia, Korea, ASEAN and Chile.  Such regional and bilateral FTAs aim to provide preferential market access for goods and services as well as lay the foundation for deep integration in the future. Yet concerns have been expressed in some quarters that the Asian giants’ FTAs can have a detrimental impact on exports due to shallow coverage and the problem of the Asian noodle bowl of multiple overlapping FTAs. Recent research has examined trade and FTA policies in China and India and provides insights. Read more…

Professor Tan Teck Meng, former chair of SINCPEC, passed away in the early morning of 7 July 2011 in his sleep. He had been battling cancer for some time.

Prof Tan was the chair of SINCPEC from 1997 to 2008,  he was also a member of the Finance Committee and Trustee of the PECC Special Fund Trust. He will be missed by the PECC community.

We offer our condolences and sympathies fo the family of the late Professor Tan Teck Meng.

Don Gunasekera, Senior Economist, CSIRO, Canberra

The 2004 Asian tsunami illustrated the disproportionate impact that natural disasters have on poorer communities. More recent natural disasters in New Zealand, Japan, Australia and the US have shown that even well-to-do communities can be significantly hard hit by the impact of catastrophic and severe weather events. Preparing for natural disasters has many facets. They can range from adaptive response measures to the use of modern technologies to provide early warnings. A measure which is often talked about and seldom practiced is disaster risk management. In this regard, the recent mid-term review by the UNISDR of the Hyogo Framework for Action to substantially reduce disaster losses by 2015 is timely. A key message emerging from the UNISDR mid-term review is the need for economies to undertake proper disaster risk assessments that could help them to draw up better risk management plans which can be implemented by effective institutions with adequate resources in a well coordinated manner.

Read more…

Masahiro Kawai
Dean and CEO, Asian Development Bank Institute

and

Ganeshan Wignaraja
Principal Economist, Office of Regional Economic Integration, Asian Development Bank

The inability to conclude the World Trade Organization (WTO) Doha Development Round has spawned a proliferation of bilateral and plurilateral free trade  agreements (FTAs) across the globe. While East Asia is a relative newcomer to FTAs, the region has seen a dramatic increase in the number of such agreements  in recent years. The explosion of FTAs in East Asia, led by the large economies of Northeast Asia—the People’s Republic of China (PRC), Japan, and the Republic of Korea (ROK)—is tied to the need to support sophisticated production networks through continued trade and investment liberalization, while also serving as a defensive response to the spread of FTAs elsewhere in the world.

A lively debate over the impact of FTAs on business in the region has resulted from their proliferation (see Baldwin 2006, Chia 2010). Data from East Asian  exporters on FTA utilization were lacking prior to an Asian Development Bank (ADB) firm-level multi-country survey conducted in 2007/08. The survey results  suggest that FTAs are indeed bolstering trade among firms, despite some concerns expressed over restrictive rules of origin (ROOs), particularly as economic recovery takes hold in the wake of declining trade volumes and nascent protectionism triggered by the recent global economic crisis. Governments can  facilitate the increased use of FTAs by actively disseminating information to firms on existing FTAs and adopting best practices in designing future FTAs, including ROOs.

East Asian economies are using FTAs to aggressively pursue their individual and collective trade strategies, leading to the expansion of advanced production networks across the region with hubs in Japan and the PRC. Rather than complicating efforts toward a Doha Round agreement, a region-wide FTA can contribute  to laying the foundation for such an agreement.

This brief is set out as follows. It begins by discussing East Asia’s emergence as a global factory and the spread of FTAs. It then examines varieties of national FTA strategies in Northeast and Southeast Asia. The brief goes on to analyze information on FTA use, impediments, and ROOs based on the ADB multi-country survey. Finally, it explores a possible way forward, highlighting short-term measures as well as a region-wide FTA for the medium term. Read more…

Julius Caesar Parrenas, PhD
Senior Advisory Fellow, Institute for International Monetary Affairs (IIMA)1
posted from: http://www.iima.or.jp/pdf/newsletter2010/NLNo_37_e.pdf

The recent G20 and APEC meetings in Seoul and Yokohama underscored the importance of structural reforms. While G20 leaders struggled over the way forward to achieve sustained global economic recovery, APEC leaders went ahead to launch work toward a Free Trade Area of the Asia-Pacific (FTAAP), possibly through the expansion of the Trans-Pacific Partnership (TPP). Embedded in the G20 and APEC leaders’ statements are references to a key issue that will influence the success of current efforts to sustain global recovery and advance free trade.

Annexed to the G20 statement is a document entitled the “Seoul Development Consensus for Shared Growth,” which laid out the framework for future work on “infrastructure, private investment and job creation, human resource development, trade, financial inclusion, growth with resilience, food security, domestic resource mobilization and knowledge-sharing.” The APEC statement referred to a strategy for achieving high-quality growth that is balanced, inclusive, sustainable, innovative and secure, described in detail in a separate document entitled “The APEC Leaders’ Growth Strategy.”

At the heart of this growth strategy is a renewed push for greater balance between domestic and external demand within economies, which is in turn key to addressing huge trade imbalances that have significantly contributed both to the current malaise afflicting the global economy and growing frictions over trade-related issues. This growth strategy hinges on structural reforms to address deep-seated problems that have emerged in the course of one of the longest periods of strong economic performance the world has ever seen. Read more…