The roles and missions of the WTO and APEC are complementary. Both organizations advocate free and open trade within a non-discriminatory, rule-based framework as a tool to effectively contribute to economic growth, development and poverty reduction.
APEC has asserted itself as a premier forum for championing open talks on some of the most recent, pressing and often controversial challenges facing the multilateral trading system. This has made it a forerunner in many areas of interest to the broader WTO membership. These areas include the following …
Global value chains
The expansion of global value chains has changed the face of trade and how businesses and policy-makers measure it and understand it. A better understanding of the dimension of this phenomenon can contribute to the design of appropriate policies to regulate its effects and reap its benefits. Calculating trade flows on an added-value basis would be an important first step to help explain the complexity of international transactions and move trade policies — and trade politics — in the right direction.
The value addition that occurs along international value chains has a number of implications for businesses. A company’s competitiveness depends not only on its own productivity but also on the competitiveness of its suppliers, access to services, efficient infrastructure and measures that facilitate the cross-border exchange of goods and services.
In this scenario, policy-makers have to make a few considerations. First, imports matter as much as exports and protectionist measures have the potential to do serious harm to a country’s competitiveness. Second, there is an enhanced complementarity between goods and services; therefore, promoting the competitiveness of infrastructure and support services — especially in the area of transport, logistics, communication and business services — can have positive impacts on production costs and overall industry competitiveness. Third, a proliferation of non-tariff measures can constitute serious impediments to trade, as the recent WTO World Trade Report dedicated to this issue has shown. APEC work in this area can be complementary to that undertaken at the WTO.
Fourth, harmonised trade facilitation measures that ensure smooth and speedy customs procedures are of great systemic value for the well-functioning of regional and global value chains. In this area, multilateral co-operation is important. In the context of the Doha Development Agenda (DDA), WTO members are negotiating a trade facilitation agreement, which could guarantee freer and more efficient trade flows at the global level. Trade facilitation has long been identified as a possible short-term deliverable, despite some diverging views amongst members on how to deliver it. In light of APEC’s work in this area and its track record in reducing the cost of business transactions across the region, APEC can support the WTO membership in translating this regional success into a multilateral one.
Food security is another area that can contribute to economic growth, development and poverty reduction and that can be addressed through open and predictable international trade.
The issue has come to the forefront since the 2007-08 food crisis, when governments’ unilateral and uncoordinated responses often accentuated global food price increases, especially through the imposition of export restrictions. These restrictions had a domino, market-closing and price-spiking effect, with one restriction bringing about another, as the world started to anticipate a global food shortage.
Food prices are expected to spike again this year, following the drought that has hit a number of large grain producers. Although the present situation cannot be labelled as a crisis, it is important that governments undertake transparent and multilateral responses and seek to address the negative consequences of food price increases on net-food importing developing countries and on the poorest in our societies. In this sense, it is crucial to keep trade flows open and allow market forces to fulfil their role. This is the time to avoid making things worse. This is the time to avoid making export restrictions. By working as a transmission belt between supply and demand, international trade can serve as a mechanism to shift supplies from surplus to deficit areas.
APEC economies have given much attention to this issue by promoting productivity and growth in agriculture, encouraging the development and adoption of new agricultural technologies and supporting regional food. At the multilateral level, the DDA agriculture negotiations can benefit greatly from APEC’s experience and the lessons learnt in this area. Addressing the trade distortions that continue to exist in agriculture, whether through subsidies or through tariffs, must be a priority if we want trade to work for food security.
Doha Development Agenda
At the latest General Council meeting in July, the WTO Director-General called on members to fully operationalize the guidelines on the DDA provided by Ministers at the Eighth Ministerial Conference (MC8) last December. Six months later, it is necessary to change gears and to explore specific steps to move forward.
Indeed, Ministers at MC8 recognized that not all elements of the DDA can be concluded simultaneously in the near future. The suggested way forward includes a gradual and pragmatic approach that would advance those areas where progress can be made in the short-term, while engaging in more serious and creative thinking about how to bridge gaps in other areas where convergence appears elusive.
Here as well, APEC can make a contribution to fast-forwarding the negotiations. As a forerunner on many trade-related issues at the regional level, such as on environmental goods and services, APEC members — all of which are now also WTO members — can make a valuable contribution to exploring different negotiating approaches and innovative ways forward by bringing their regional experience to the multilateral level.
The current deteriorating economic situation creates an urgent need to reinforce international co-operation. The root-causes of the global economic crisis as well as the new issues on the global agenda — such as food security, energy, climate change, trade and exchange rates — are global challenges whose impacts are not limited to a country’s territorial jurisdiction but are felt across borders. Unilateral action is not sufficient — and at times it might be counterproductive. Collective action is needed to strengthen multilateral co-operation and find global solutions to avoid further tensions.
The multilateral trading system is an example of how international cooperation on trade matters has guaranteed a certain level of stability and predictability, especially in times of crisis, by preventing excessive recourse to protectionism. Multilateral liberalization has proven more efficient than unilateral trade liberalization. Regional liberalization of the sort pursued by APEC demonstrates an appetite for trade opening and can act as the forerunner for further liberalization at the multilateral level.
Trade and development — Aid for Trade
The multilateral trade opening fostered by the WTO also aims at ensuring that the benefits of open trade are distributed more broadly, while catering for the needs and interests of the poorest. The Aid for Trade initiative is an important complement to trade opening. By addressing supply-side constraints, it allows poorer countries to take advantage of market access opportunities. Recognizing the need to support integration of developing country suppliers into regional and global value chains, the Fourth Global Review of Aid for Trade, which is scheduled for 2013, will focus on global value chains and private sector development.
Indeed, economic growth per se cannot be the sole objective of trade opening. As APEC members themselves know too well, there cannot be development if the benefits of economic growth are not sustainable and fail to create opportunities for the poorest. Trade, by fostering employment and higher incomes, can provide, directly and indirectly, those sorts of opportunities for the poorest in our societies.
The accession of the Russian Federation to the WTO, after 18 years of negotiations, is a concrete sign of confidence in the Organization and the multilateral trading system. With Russia’s formal accession on 22 August, the WTO now covers around 97 per cent of world trade and is closer to universal membership. The accession of Russia to the WTO is a win-win deal, which opens new trade opportunities and cements the integration of the Russian Federation into the global economy through ensuring greater certainty and stability to business operators and trading partners.
As APEC host economy this year, given its weight in international trade and as a new WTO member, Russia can play a vital role in addressing new challenges surrounding the multilateral trading system.