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2013/SOM3/CTI/026

Agenda Item: 6.1

Report and Recommendation from Workshop on Attaining the Bogor Goals

Purpose: Consideration

Submitted by: Indonesia

/ Third Committee on Trade and Investment Meeting
Medan, Indonesia
2-3 July 2013

APEC-CTI WORKSHOP ON

“ATTAINING THE BOGOR GOALS THAT ENSURE EQUITABLE BENEFITS OF LIBERALIZATION”

Medan, 30 June 2013

INTRODUCTION

  1. The CTI workshop on “Attaining the Bogor Goals that Ensure Equitable Benefits of Liberalization” was held at the Aryaduta Hotel, Medan—Indonesia on 30 June 2013. The workshop was attended by the representatives of all APEC economies.
  1. In his opening remarks,Mr. John Larkin, the Chair of CTI, underlined thatthe Bogor Goals of free and open trade and investment between APEC economies had been central to APEC’s contribution to regional growth and prosperity and to the CTI’s work program. Almost all of the CTI’s work is related to the Bogor Goals, including on supply chain connectivity, non-tariff measures, standards, regulatory cooperation, market access, investment and services trade. Mr. Larkin also referred to the Bogor Goals IAP progress reporting process and the PSU’s dashboard of indicators, which provided the basis for a collective assessment. Mr. Larkin thanked Indonesia for its initiative in organizing the workshop and said the CTI looked forward to its report.
  1. In providing an overview of the workshop, the Director-General of International Trade Cooperation of the Ministry of Trade of Indonesia, Mr. ImanPambagyo, suggested that the objective of the workshop was to respond to APEC Leaders’ statements in 2010 and 2012 that APEC needs to “bridge the development gaps and assist developing economies to achieve the Bogor Goals by 2020,” and that “more work needs to be done since progress has been uneven across areas and sectors.” The overarching question the workshop needed to address was whether it is because progress is uneven across areas that APEC continues to confront the issues of development gaps.

DISCUSSIONS

  1. The first session tried to respond to the question “How APEC can Strengthen and Deepen Regional Economic Integration through Attaining the Bogor Goals.” Mr. Andrew Elek of Australian National University conveyed his key points that (a) APEC has made a lot of progress toward free and open trade and investment although most people think APEC is an ineffective “talking shop”; (b) to regain confidence and credibility, APEC needs to set realistic and measurable targets for 2020, then beyond; (c) APEC should leave liberalization to trade negotiators and focus instead on better connectivity as the potential gains are far higher than from liberalization and better connectivity is an effective way of narrowing the development gaps; and (d) setting realistic and measurable targets and focusing more on better connectivity may entail some implications for APEC structure.Mr. Elek also underscored that having measurable targets is imperative as the Bogor Goals of free and open trade and investment is an ideal which can be approached but never reached.
  1. Prof. IppeiYamazawa of Hitotsubashi University suggested that to effectively monitor the attainment of the Bogor Goals, the current IAP mechanism should be improved by providing concise summaries rather than repeating the past reports with only limited updates. Prof. Yamazawa also suggested that there should be a quantitative assessment by economies and by areas to accurately measure progress of individual economies toward the Bogor Goals. To this end, Prof. Yamazawa introduced a five-grade score measurement by which he examined how individual economies performed in the areas of tariff, Non Tariff Measures (NTMs), services, investment, standard and conformance, customs procedures, Intellectual Property Rights (IPR), business mobility, competition policy/deregulation, and Rules of Origin (ROO) before coming up with an APEC’s average five-grade assessment by areas.
  1. The second session was dedicated to discussions on “How the Global Trade Expansion and Changing Trade Patterns Contribute to Increasing Standards of Living.” Ms. Daria Taglioni of World Bank offered her observations that favorable trade patterns in East Asia and Pacific have led the region to become a main trade pole. Ms. Taglioni went on to suggest that trade policy in APEC acknowledges the key role of global value chains in international trade and this has been supported by better logistics performance indicator in East Asia and the Pacific compared to some other regions. It is observed that while large economies tend to be more domestically oriented that the rest of the region, East Asia and the Pacific have become the most active participants in value chains worldwide. Ms.Taglioni further presented some evidence that trade expansion in this region does improve the standards of living, that—on average—reform, especially trade reform, has a positive and significant impact on wages, employment and labor force participation, and that much of the increase in employment is from the informal labor force. In addition, Ms.Taglioni then cited a study suggesting that protectionism lowers the standards of living in Sub-Saharan Africa.
  1. Mr. Arianto A. Patunru of Australian National University did support the above findings. He suggested that there is a clear link between trade and productivity, and the key to this has been the reallocation of market shares and resources within industries due to changing relative productivity; i.e., from intensive margin (existing trade flows) to extensive margin (new trade flows). In looking at the relations between trade and welfare, he suggested to focus on firm-level observations and related policies. To Indonesia, the direct implication is the need to improve infrastructure and logistics to help cut the fixed and sunk costs for firms.
  1. The third session endeavored to address the question “How APEC can Bridge the Development Gap through Trade Liberalization and Facilitation”. First, Mr. Carlos Kuriyama of the APEC Policy Support Unit suggested that the Bogor Goals has served as a tool to bridge the development gaps in APEC by (a) strengthening the open multilateral trading system; (b) enhancing trade and investment liberalization; and (c) intensifying development cooperation. A study by APEC PSU found that there is a positive correlation between growth rates of GDP and trade. Mr. Kuriyama went on to argue that APEC has performed well in terms of reducing average MFN tariffs, but in services, the region appeared to have more restrictions than the rest of the world especially in some modes of supply and sectors. Furthermore, Mr. Kurayama notes that RTAs/FTAs are contributing to the achievement of the Bogor Goals. The percentage of trade by APEC members with their corresponding FTAs/RTAs trade partners has increased in most cases. Some APEC members did not have a single FTA/RTA in 1996. Now all of them have at least one FTA/RTA. It is also noted that being APEC member is helping APEC economy to established bilateral FTAs. And FTAs have helped economies in implementing domestic reforms i.e customs, IPR, and et cetera. On trade facilitation, his finding has been mixed that while it is getting faster; it is also getting more expensive to trade across borders. While presenting the facts that APEC’s social indexes have in general improved over time, Mr. Kuriyamaargued that open trade and investment is necessary but not sufficient to achieve sustainable growth and equitable development:there should be structural reform in key areas such as education, health, and public services. The best pro-poor policy is open economy as it creates chances to improve living standards without depending on direct government transfers. Mr. Kuriyama further proposed that APEC considers establishing social targets as one of its goals.
  1. The second presentation under the third session was made by Mr. Eduardo Pedrosa of the PECC. He proposed that APEC’s work toward the Bogor Goals has resulted in among others increased intra-regional trade and tourist flows, while flows of FDI tend to be declining between 1990 and 2009. Rather than seeing from the region-wide perspective, Mr. Pedrosa delved into economy-level findings of recent survey which bring to some conclusions: (a) average incomes in the region have doubled but income inequality amongst and within economies raises a concern; (b) reductions of barriers at-the-border have been critical to allow APEC to perform relatively well in some areas, but there is a need to address behind-the-border issues; (c) technological and business developments are keys to engage more people in the high growth story; and (d) global value chain presents opportunities especially for SMEs but there are barriers to their engagement; that is, lack of connectivity and knowledge, and disproportionate impacts of red-tape on SMEs. While Mr. Carlos proposed to adopt social targets as one of APEC goals, Mr. Pedrosa proposed to adopt aspirational targets to better drive this forward.
  1. The fourth, last session discussed “What Capacity Building Efforts and Policy Actions can APEC Take to Attain Bogor Goals that Bridge the Development Gap.” Ms. Trudy Witbreuk of OECD presented her views that APEC should open markets further as studies suggest that trade restrictions stifle productivity and growth and lead to job losses in the long term. Ms. Witbreuk argued that trade can play a powerful role in contributing to raising income and creating jobs. However, market opening alone is not sufficient to address the development gap. APEC should invest more on education, skill development, physical infrastructure, and improve the business and investment climate. It was also proposed that APEC implements active labor market policies and robust social safety nets to equip workers to exploit new opportunities and to assist in the adjustment process.
  1. The other speaker, Mr. Edward Brzytwa from the Office of USTR referred to the 2010 Bogor Goals assessment which calls all APEC economies to maintain their commitments to further liberalize and facilitate trade and investment as a way of bridging the development gap. Mr. Brzytwa further suggested that APEC gives special focus on NTMs, services, investment, Regional Trade Agreements/Arrangements (RTAs) and Free Trade Areas (FTAs), tariff reduction on environmental goods, and Information Technology Agreement (ITA) expansion negotiations. Free and open trade and investment in itself will bridge the development gap, supported by capacity building. However, the third, last speaker, Ambassador DatukSupperamaniam from Malaysia argued that progress on economic and technical cooperation or ECOTECH—the third pillar of APEC broad agenda—has been less than satisfactory. There is a need for a paradigm shift to make ECOTECH more result-oriented than process-oriented. Work on ECOTECH should also be measured to ensure that all the capacity building programs in APEC do add up to something that is tangible in building economies’ capacity to fairly and equally benefit from APEC’s work to attain the Bogor Goals.

WAY FORWARD – SOME SUGGESTED ACTIONS FROM PARTICIPANTS

  1. There is a need for a paradigm shift in APEC by better defining the Bogor Goals with clear, realistic and measurable targets. Strengthening the existing IAP mechanism through such tools as “negative list” IAP reporting, comparative scorecards, benchmarking economy measures in a services sector against “model measures” or expanding the PSU dashboard to cover progress in adopting, say, the customs “single window”, could be one way of moving in this direction. However, a more fundamental approach could be developing an APEC blueprint with a clear set of prioritized measures, quantitative targets and timeframes to complete the measures by 2020.
  1. APEC should address services and investment restrictions, where progress towards free and open trade has generally been slower than for tariffs. APEC’s work on other ‘behind the border’ barriers, including on standards, cross-border regulatory convergence in industry sectors,customs procedures and minimizingadverse trade impacts of non-tariff measures through transparency and good regulatory practices could also be reinforced and given greater recognitionpublicly. APEC could also further strengthen its role as an “incubator” for FTAs so that APEC economies take on standard obligations in FTAs they are negotiating.
  1. APEC should continue with its liberalization and facilitation agenda. However, to ensure that liberalization and facilitation also support equitable development as mandated by the Bogor Goals, specific policies should be adopted to give special emphasis on key areas of particular relevance to narrowing the development gap between developed and developing APEC economies, gaps between regions of individual economies, as well as gaps between large and smaller businesses. By the same token, enhancement is also needed to redirect APEC’s ECOTECH agenda to better address the issue.
  1. In order to achieve accelerated, balanced and equitable growth in the Asia-Pacific region, Leaders should re-commit to provide our people capabilities to bridge the development gap. It may include—but not limited to—investment in human capital especially in education, vocational training and skill, financial inclusion, and certain areas of servicesthat could provide the much needed “grease” to the development of other services sectors as well as manufacturing sectors.All areas above including structural reforms needed of each area. The commitment is needed to encourage capability of our people to effectively participate and enjoy the benefits of deeper integration through blueprint to attain the Bogor Goals by 2020
  1. Basic physical infrastructures are needed by SMEs in order to join the global value chain connectivity; however, there is infrastructure gap between and within economies. To address the problem of underinvestment in infrastructure, better general investment environment and the Public Private Participation (PPP) could be utilized to reduce infrastructure gap in APEC and within each economy.In broader perspectives, toward a better connectivity, APEC could draw a Blueprint on connectivity and APEC Leaders should commit themselves to big investments and capacity buildings related to the connectivity.
  1. All recommendations above are devoted to supply side of APEC economy. To address the demand side, good macroeconomic management among APEC and within each economy should be maintained for macroeconomic stability in APEC. Because the poor people is very vulnerable to the macroeconomic shock.
  1. Another dimension that could be addressed is political economy of protectionism. One of the important messages in all presentation is export is good and import is good. Several presentations show that to increase export is associated by increasing import. And the more connected economy the more increasing opportunity to increase export and in the same time will also increase import. However, the domestic politics sometimes disagree to the idea of both export and import is good. To address this problem, APEC should promote free trade idea and showing the evidence that both export and import are improving standard of living of our people in each economy.