[SCMP Column] Testing times for Apec

February 13, 2017

As I prepare to fly off to Vietnam and Thailand for the first of the year’s APEC meetings, it is already clear that this is not going to be like any other year in the trade and investment liberalizing organisation’s 28 year life.

For the APEC Business Advisory Council (ABAC), this is even more starkly true. As the region’s businesses face an unprecedented assault from an “America First” President flirting with trade war, so their mettle will be tested on  how clearly and persuasively they can challenge the chilling localist and protectionist winds that have been strongly stirred in the US.

The first test, as senior officials gather in Nha Trang in southern Vietnam for two weeks of work on the year’s agenda and priorities, will be to gauge how the changes wrought by Trump will affect the meetings. Will senior US officials arrive and sit like Easter Island statues because their scripts have yet to be written, or will US seats be filled by officials too junior to contribute meaningfully? Will US seats be left vacant?

I am sure many officials from other parts of the APEC region will want to plunge into the year’s work programme as if nothing has happened. Those dismayed by US withdrawal from the Trans-Pacific Partnership (TPP) will be exploring whether and how the remaining 11 can “go it alone”.

Those willfully excluded from the TPP, in particular China, are likely to be pressing for progress on other regional integration initiatives, like the ambitious Free Trade Area of the Asia Pacific (FTAAP). Those that are most vulnerable to the pecadillos of an “America First” administration – clearly Mexico and Canada – may be rolling up their sleeves to build stronger links to other parts of the Asia-Pacific region.  

The most profound uncertainty must be over whether the US will simply disengage from the strongly multilateral processes embedded in APEC. Trump has made it clear that he plans to exploit the US’s unique size and strength to prioritise bilateral negotiations where US corporate and economic interests can be most effectively exerted. If this remains true, then the traditional leadership role US officials have played in pursuing region-wide liberalization might quickly collapse – not just in APEC, but also in groupings like the G20.

There are other economies in the region committed to championing meaningful integration, including in the politically sensitive and difficult areas of regulatory change and structural reform behind borders, but whether they have the heft of the US is another matter.

For the business leaders in ABAC, the uncertainties of 2017 are particularly acute. First, two of the US’s three ABAC members are new, and it is anyone’s guess what mandate they will arrive with. Many US companies have warmed strongly to Trump, whatever the eccentricities of his personality, fired by the prospect of big tax cuts, simplification of regulations, and big infrastructure spending.

No matter how powerfully US companies have benefitted from the trade and investment liberalization of the past five decades, some may see little downside in a president who is fighting to keep foreigners out of the US market, and using the US’s market might to cudgel better bilateral deals out of the region’s weaker trading partners. While the long term harm of such tactics might be large, in particular strengthening the regional standing of a slowly liberalizing China, the short term gains might be too mouth-watering for corporate America to resist. No wonder the US stock market is at record high levels.

A second major challenge for ABAC this year will be in style and format. In past years the pattern of engagement in providing advice to APEC leaders has been carefully and diplomatically structured. At the year’s first ABAC meeting – that is in Bangkok next week – the year’s priorities and work plan are laid out and the year’s deliverables agreed. At ABAC2 in April, members report back on progress, and at ABAC3 in July, finished reports are tabled, and the content of a neatly bound Report to Leaders will be agreed. At the year’s final meeting, ABAC members meet directly with leaders, and leave behind their neatly bound report. Questions are carefully prepared and scripted and assigned to different ABAC members. It is all diplomatically civil, polite and formulaic.

What do you think a President Trump (assuming he attends the meeting) would make of such a carefully scripted engagement? For that matter, what would the Philippines’ Duterte make of it? In short, ABAC members need to plan for an unstructured roller-coaster ride of a discussion. From my point of view, this feels like a potentially good move, but the challenge of delivering the business community’s key messages clearly and forcefully will be formidable in the face of Trump’s scatological Twitterisms.

For a template, we may do well to learn from Trump’s new Strategic and Policy Forum, composed of some of America’s top business leaders, which met for the first time with him just over a week ago. Their responsibility is to provide views “in a frank, non-bureaucratic and non-partisan manner” on how government policy impacts economic growth, job creation and productivity.

So far, even though Uber’s Travis Kalanick has already resigned in protest over Trump’s attempt at an Islamic travel ban, the response has been positive. Even Boeing’s Dennis Mullenburg, hit by a presidential tweet on the high cost of a new Airforce One, has praised Trump for tweeting, saying he appreciated the “direct engagement”. Lockheed Martin, tweet-slapped for the cost of its F-35 fighter jets, also seems to be enjoying the close contact. As one analyst noted: “When was the last time that Lockheed Martin had three meetings in two months with a president?”

At president Vietnam’s ABAC chair has rolled out 2017 themes and priorities around “Creating New Dynamism, Fostering shared future”, built on integration, “sustainable, innovative and inclusive growth”, encouraging SMEs, enhancing food security and promoting climate smart agriculture. Yawn. I wonder what Trump would tweet to that?

For ABAC and APEC the year ahead looks likely to be a rollercoaster. If we aim to retain influence, then messaging on behalf of business is going to need to be sharper and more pertinent to the current very challenging business environment. That might even involve tweeting, heaven forefend.
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