Shaping The Future Of Asia-Pacific Trade: Insights From The Third FTAAP Dialogue

In a world increasingly defined by rapid technological advancements, climate change and evolving economic landscapes, the need for a cohesive, forward-thinking approach to trade in the Asia-Pacific region has never been more urgent. Earlier this week, representatives, stakeholders and experts from APEC member economies gathered in Lima, Peru, for the Third CTI Dialogue on A New Look at the FTAAP, a critical meeting that sought to address these challenges head-on. The dialogue represented a pivotal moment in the ongoing efforts to advance the Free Trade Area of the Asia-Pacific (FTAAP) agenda.

A new way ahead for economic integration

The discussions underscored the urgent need to reinvigorate the FTAAP agenda, especially in light of the growing complexities of the global economy. The dialogue served as a platform to align the diverse interests of participating economies, setting the stage for more cohesive and effective trade policies.

The APEC Business Advisory Council (ABAC) set the tone for the dialogue with a series of proposals that underscore the importance of a multi-faceted approach to trade integration. Their advocacy for a “building blocks” strategy, which combines the integration of existing high-quality agreements with the development of practical short-term deliverables, reflects the need for both immediate and long-term solutions.

Addressing digital transformation and climate change

Advice from the private sector highlighted two critical areas of focus: digital transformation and the climate crisis. The rapid growth of digitally delivered services presents significant opportunities, but also substantial barriers that need to be addressed. ABAC proposed a “New Services Agenda” that would specifically target barriers in digitally delivered services, which are expanding rapidly but still face significant obstacles. The focus on digital trade is particularly timely, as the global economy continues to digitize at an unprecedented pace.

In addressing the climate crisis, ABAC suggested the establishment of a “Greener Trade Framework.” This framework would enhance the role of trade in combating climate change, including the promotion of trade in environmental goods and services and the development of coherent carbon accounting standards. These proposals reflect a growing recognition that trade policies must evolve to address environmental challenges, making sustainability a core component of economic integration.

Short-term initiatives: Women entrepreneurs and paperless trade

Beyond long-term strategies, the dialogue also emphasized the importance of actionable short-term initiatives. ABAC highlighted the need to support women entrepreneurs, who continue to face significant biases and structural barriers in securing venture capital funding. By addressing these inequalities, APEC economies can unlock new opportunities for innovation and growth.

Another practical initiative discussed was the acceleration of paperless trade. This move is aimed at improving efficiency and sustainability by reducing the reliance on physical documents in trade transactions.

Navigating the digital age

The Pacific Economic Cooperation Council (PECC) brought a complementary perspective to the dialogue, focusing on the long-term vision for economic integration in the Asia-Pacific region. PECC's work is informed by three key drivers: digitalization, climate change, and the broader impact of these forces on economic integration.

PECC highlighted the transformative potential of digitalization and artificial intelligence (AI), emphasizing the need for policies and regulations that support the adoption of these technologies while aligning with international standards. Their focus on professional services, particularly the development of Mutual Recognition Agreements (MRAs) across APEC economies, underscores the importance of enabling professionals to operate seamlessly across borders.

In the context of sustainable growth, PECC recognized that digitalization offers significant opportunities to drive sustainability initiatives, which are essential for long-term prosperity. Their work in this area aligns with the broader goals of the FTAAP agenda, emphasizing the need to integrate environmental considerations into economic policies.

Bridging the gaps

The APEC Policy Support Unit (PSU) provided a critical analysis of the current state of convergence among APEC economies. “While there is a high level of convergence on many issues, significant differences remain, particularly in sensitive areas such as professional services and state-owned enterprises,” said Carlos Kuriyama, director of PSU. He emphasized the need for a flexible, step-by-step approach that accommodates the varying levels of development among economies.

In the realm of digital trade, Kuriyama called for advancing beyond current practices, drawing on lessons learned from the pandemic, particularly in areas like medical supplies and food security. He also stressed the importance of addressing issues related to transportation and supply chains to ensure equal opportunities across economies.

“It’s important to do work on new areas that probably have not been addressed or much addressed in FTAs but are relevant for trade such as subsidies, supply chain resilience, digital economy and trade in essential goods. These are relevant for the new times,” he concluded.

A call for convergence

Ambassador Carlos Vasquez, 2024 Chair of APEC Senior Officials’ Meeting, emphasized that while there is broad support for the FTAAP agenda, much work remains to be done.

“A flexible approach, particularly in areas like digital trade and e-commerce, could help move things forward once economies are ready,” Ambassador Vasquez said. “We need to keep in mind the different levels of development among economies when implementing regulations.”

He also underscored the aspirational goals of economic principles, particularly the liberalization of trade and investment, as fundamental to APEC’s mission. These goals, he argued, should guide future efforts to create sustainable trade practices and good regulatory practices that align with the Putrajaya Vision 2040.

Members weigh in on ways forward

Members expressed strong support for the FTAAP agenda as a framework for economic integration and trade facilitation in the region. Some members propose that further work to advance the FTAAP agenda should include the Committee on Trade and Investment and other sub-fora for their expertise in their respective areas. Members highlighted the role that ABAC and PECC play in contributing valuable perspectives and recommendations.

Members also underpin their support for the existing information-sharing mechanisms and capacity building needs initiative that had contributed to bridging capability gaps and consensus building. This includes fostering increased engagement across various sectors, with a particular focus on digital trade, inclusivity and connectivity, which are deemed essential for future development and collaboration.

The dialogue highlighted the importance of making trade more inclusive and addressing gender equality, as well as empowering underrepresented groups. There was a shared view among members to supporting multilateral approaches and engaging international organizations such as the WTO, ASEAN, OECD, UNCTAD, IMF, and the World Bank.

Further, members recognize innovation and adaptability as key factors in tackling emerging trade challenges, and there is a strong push for practical collaboration in high-priority areas like digital trade, climate change and environmental sustainability. Finally, there was a call for a clear and concise approach with specific and practical work streams to address these critical issues effectively.

Looking ahead: A new look at the FTAAP
As the dialogue concluded, it was clear that the discussions had laid the groundwork for significant progress in the coming years. By embracing digital transformation, addressing climate change through trade, and fostering greater economic integration, the FTAAP agenda has the potential to create a more inclusive, sustainable, and prosperous future for all economies in the region. As the region continues to navigate the challenges of a rapidly changing global economy, the insights and proposals from this dialogue offer a path forward that balances immediate needs with long-term strategic goals.

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