APEC’s focus will be on the services trade and the digital economy, Alan Bollard, Executive Director of the APEC Secretariat, told the Australia Papua New Guinea Business Forum and Trade Expo in Brisbane last week. He said the APEC region now represents about half the world economy.

APEC’s Alan Bollard. Source: APEC

Since APEC’s formation, 28 years ago, half a billion people have been lifted out of poverty and into the middle class, Bollard said.

‘It is a huge trade bloc. It is the biggest of its sort in the world. If you ever want to hear what economics and trade and regional economic integration can do, that is the biggest thing that has ever happened in human history—and we still have some way to go.

Voluntary

Bollard said APEC, unlike bodies like the World Trade Organisation (WTO), operates by consensus only.

‘We only have voluntary relationships in place. At this time, when some of those international legally-binding organisations are actually under attack, APEC is more important than ever because it is a place where we can try new things out and innovate new ideas.’

‘The nature of trade is changing.’

Bollard said for the first 25 years, APEC was principally focused on commodity trade and merchandise trade—‘stuff in bulk carriers or the stuff in supply chains, in containers, in ships going through the region.’

He said tariffs have fallen from an average of 18 per cent when APEC began to an average of six per cent now.

The focus now is beginning to move beyond tariffs.

‘More and more we are starting to focus on behind-the-border liberalisation.

‘Because you can open up customs tariffs, non-tariffs and borders but still find it very hard to get all the benefits of regional economic integration if you have different regulations—and structural rigidities and so on—inside economies.’

Services

Bollard said the nature of trade is changing. ‘More and more economic growth is not actually happening in commodity and merchandise trade in APEC, it is happening in services trade.

‘What used to be poor rural populations in the region are now largely middle class urban populations.’

‘By that we mean tourism services, transport services, banking services, data movements—a range of new things. Even in the traditional extractive industries, more and more of the value-add is [in] the services.

‘When you get services people in the room compared with traditional trade people they don’t talk so much about tariffs, they don’t talk so much about customs, they complain about telecommunications, they complain about road charges.

‘They are more worried about data privacy and data movements. It is a different sort of world.’

Demographics

Bollard said the increasing incidence of regional or bilateral trade agreements has meant that trade is becoming ‘very messy and it is going to get messier’.

The demographics of the region are also changing. ‘What used to be poor rural populations in the region are now largely middle class urban populations. It is driving the way we are looking at developments.’

Bollard said there is now a greater focus on ‘domestic, demand-driven growth’ as well as trade.

‘Over the last quarter of a century, we have had something like an increase of a quarter of a billion people in the working age population.’

‘These economies consume differently, they save differently, they transact in a different way, they are demanding different things from their governments and they are communicating quite differently.

‘As a consequence, we are putting in place a lot of initiatives around connectivity, infrastructure and urbanisation.’

The region is also ageing, Bollard noted. ‘Over the last quarter of a century, we have had something like an increase of a quarter of a billion people in the working age population.

‘Over the next 10 years, we are going to have a decline of something like 50 million. We are now realising those demographics are an important reason why we have had such very strong growth through much of this period.’

He added that it is important to harmonise the digital platforms between the different countries. ‘Are we going to have US platforms? Chinese platforms? Russian views? Japanese views?

‘Our challenge is to make sure that it all works for medium, small and micro enterprises in the region, to give them a chance to get into the big regional growth drivers.

‘We think there are about 100 million micro and small businesses in the region. We think five million are involved in exporting and importing, maybe another five million indirectly.

‘If we can get that up to another 20–30 per cent there is going to be a huge revolution in terms of involvement in regional economic growth.

‘Papua New Guinea will be right in the middle of that.’