[SCMP Column] Tough Year for APEC

February 01, 2016

You may be planning for Chinese New Year, but I am planning for San Francisco and the start of a new APEC year, and praying that the Year of the Fire Monkey does not play mischievous tricks.

After the past eight years working inside APEC on behalf of Hong Kong business, along with our APEC Business Advisory Council representatives, I confess that I fear 2016 is going to be one of the more challenging.

That is not the fault of Peru, the 2016 chair of the 21-economy APEC grouping around the Pacific. On the contrary, tiny Peru (its US$200 bn GDP makes it the fifth smallest economy in APEC) is among the liberalizing inspirations of the Asia-Pacific region. Since it joined APEC in 1998, this will be the second time it has volunteered to chair – a commitment far beyond the call of duty, and a huge imposition on a tiny economy.

But the backdrop is challenging. First and worst is the tremulous state of the global economy: stock market crashes, falling oil prices, anxieties about China’s restructuring process, across-the-board falls in global commodity prices, and dramatically weakening currencies for many economies. Peru’s first priority – to encourage the process of regional economic integration, and facilitate liberalization – will be so much more difficult against this awful economic backdrop. Protectionists and xenophobes are more confidently vocal today than at any point in the past 20 years.

Second, the counterproductive forces of protectionism and xenophobia are being fanned by an unusually busy year for elections. Of the 21 APEC economies, 8 have national or presidential elections this year. Even Peru, the year’s chair, has the awkward challenge of electing a successor to President Ollanta Humala in the middle of the year. With half a dozen APEC ministerial meetings to host in the second half of the year, the relevant Peruvian ministers are unlikely to come into office until June.

Third is the simple terrible tyranny of distance and language. Peru may be a committed APEC member and an enthusiastic liberalizer, but it is a very long way away for most Asian members of APEC, and so few there comfortably speak English. While people like me are dreading the 30+ hour economy-class journeys to Lima, and are floundering with by belated efforts to learn Spanish, the Singapore-based APEC secretariat and many of the region’s governments are in a quiet sweat over the budgetary implications of flying so many officials for so many weeks to such a distant country. Of course, no-one has a right to complain – officials from Peru and Chile uncomplainingly make those giant, expensive journeys 100 days a year – but the simple reality is that meetings will be more sparsely attended. In a consensus organization like APEC, that is not unimportant.

Of help to Peru’s officials is the fact that both China (chair in 2014) and the Philippines (last year) succeeded in developing and sustaining a strong programme of initiatives that will sustain momentum through the coming year. Foremost is the work being led jointly by China and the US on a Free Trade Area of the Asia Pacific (FTAAP) – the vision of a massive regional free trade area by around 2025. A lot of commentators have suggested that the US and China are at loggerheads on regional economic integration since the completion of the US-led Trans-Pacific Partnership (TPP) late last year. This could not be further from the truth. In reality, the FTAAP is a natural and ambitious next step from the more limited 12-member TPP, and economies like the US would have found it difficult to move onto examination of an FTAAP without a TPP in place. One of Peru’s significant “deliverables” should be completion of a two year study led by China and the US on what an FTAAP – and the path towards it – might look like.

Peru is also keen to introduce us all formally to the Pacific Alliance, the new and significant trade block that includes Mexico, Colombia, Chile and Peru. For me, in a continent populated by “bad guys” like Venezuela, Brazil and Argentina, these are the “good guys” – committed liberalisers keen to build stronger links across the Pacific. While the Pacific Alliance is (sensitively) dominated by Mexico, which accounts for almost two thirds of its GDP, the Pacific Alliance as an integrated region of over 200m people would make the world’s 8th largest economy. China’s President Xi Jinping may not have included them in his “One Belt, One Road” vision (with 64 other economies embraced by One Belt One Road, I puzzle why not), but they deserve keen attention from our part of the world. And what Peru is kick-starting in 2016, Chile will continue in 2019 – when it in turn becomes chair of APEC.

Apart from the regional integration imperative, Peru has identified three other critical priorities for 2016: building better food markets (important for a country that is among the world’s most important suppliers of marine products); modernizing small companies; and building the region’s human capital. This last aims to improve region-wide recognition of skills and qualifications – a worthy objective that is sure to attract passionate opposition from professional cartels across the region. I wonder how passionately our Hong Kong government will champion this cause?

For Hong Kong, other critically important initiatives will continue to be pressed. Services liberalization remains our single highest priority, along with structural reform that will make regulations simpler, more transparent, and more easily comparable across boundaries.
But perhaps most important of all will be efforts to build common standards and shared regulations for our explosively-growing “digital” world. As digital developments begin to cut deeply into every aspect of personal and business lives, no priority can be higher. Controversies are set to explode: on data security and hacking, on common rules for using “big data”, on personal privacy; on managing national tax policies; on e-finance; on setting global rules for the internet.

As we are tasked to represent Hong Kong in APEC discussions, we expect to be vocal on all this – so your views count. Please don’t hesitate to badger me. Note my email: david.dodwell@hk-apec.com.hk.
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