We may not be able to rely only on trade to drive our economies in the same way that we have benefited from it over the last couple decades.
Asia-Pacific trade is getting a boost from a stronger global economy but views on policies needed to optimize the benefits have taken on new dimensions. Rapid digital development is adding even greater complexity to the mix, with potentially deeper and more enduring implications.
The APEC Bulletin spoke with APEC Committee on Trade and Investment Chair Justin Allen, ahead of a key meeting of APEC Trade Ministers on 25-26 May in Port Moresby, Papua New Guinea, to get his take on the region’s trade transition and what’s next for policy coordination as economies go digital.
APEC Bulletin: Protectionist signals are creating uncertainty despite the strengthening global economy but what about the bigger, long-term trade picture in the APEC region and its position as an engine of growth?
Allen: For a long time trade was the driver of growth and that’s now diminishing in APEC and across the world’s economies. Trade growth was up again last year and continues to improve but that doesn’t necessarily mean it’s a trend.
What that is telling us is that we need to be looking at new drivers of trade growth and new drivers of economic growth. We may not be able to rely only on trade to drive our economies in the same way that we have benefited from it over the last couple decades.
APEC Bulletin: Digital development will be a focus of APEC Trade Ministers in Port Moresby. How big of an impact could greater innovation in this space have on the future of trade in the region?
Allen: Within APEC, we obviously have a range of levels of economic development amongst our members. That is going to have some impact on how economies are able to adjust to digital change. That said, compared with traditional forms of trade, digital trade doesn’t require a critical mass to be developed in the first place and that means all economies can do this.
Anybody, anywhere in the region, can use their mobile phone to sell goods and services to their neighbor, the nearest city or another economy—even another market offshore. You don’t need a wide range of infrastructure around you to do it. That is one of the big opportunities that now exists as a result of the digital transformation.
APEC Bulletin: How ready are people, businesses and governments around the Asia-Pacific for digitally-driven trade opportunities that are emerging?
Allen: One of the challenges we have here is that this transformation is happening at a very fast rate. Collectively, policy and policymakers are playing catch-up.
APEC Bulletin: What kind of progress is being made to open up trade using digital technology?
Allen: Around 90 per cent of the commercial sellers on eBay are exporters. They trade outside of their home market, wherever that might be. By comparison, just 25 per cent of sellers on eBay are traditional businesses. That shows what getting connected digitally can do for people.
In a trade sense, digitalization is opening the door to new products and services too.
We are seeing many interesting apps being developed out of some developing economies to meet the challenges they face such as remoteness in their outlying areas and how you connect people up there with traditional postal services or transportation.
APEC Bulletin: As digital trade and internet economies flourish, how is APEC seeking to integrate small firms that together account for most businesses and growth in the region?
Allen: APEC has focused a lot on the role of small and micro-size businesses, recognizing that the trade opportunities for these businesses are in global value chains in which they add a particular component or service into a larger product.
The obvious example is the iPhone. The intellectual property around that comes out of one APEC economy. The manufacturing of it happens somewhere else. The componentry is developed in a third economy. The raw materials come from somewhere else. That all gets turned into componentry and assembled. There is a distribution element, as well, when an iPhone gets sent out to the customer.
Our goal is to involve more small businesses in those production and supply chains. A key challenge is around knowledge and education. One of the things we are addressing more now in APEC is how to train our next generation of workforce to identify those opportunities and capitalize on them.
APEC Bulletin: What parallel steps are being taken in APEC to drive digital inclusion and trade?
Allen: We have a wide purview. Infrastructure development to support very high speed internet for everybody in APEC economies is a priority. We are also working on the flow of data to ensure consumer privacy is protected and that data is at the same time usable for commercial purposes.
More broadly in APEC, we are stepping up our efforts on issues like training a future workforce and social policies that help people adjust when they find, for example, that their job is being supplanted by technology. How do those people find a new job and get the skills they need to do a new job? We need to look at policies that support those people through the transition.
APEC Bulletin: How do you see the unintended consequences of innovation and regional efforts to mitigate them playing out?
Allen: There are both challenges and opportunities from digital disruption. That’s why we use the term “disruption” because it is changing the world as we know it. There are going to be challenges as people adjust to new types of jobs but I have a lot of faith in our adaptability.
It’s telling how quick children these days learn to use digital tools. They are our future workforce and we can see already what they are going to be capable of. In a policy sense, APEC must continue to adjust to support people through that transition and make sure that we are ready to take full advantage of it.
APEC Bulletin: What are your expectations for digital development and trade in APEC in 2018 and over the next couple years?
There are some really significant paradigm shifts on the horizon for APEC on the economic side and also on the social side with the acceleration of digital innovation.
What will it mean when we no longer manufacture in the way we once have? What new services will come onto the market and change how we do business and trade with each other? What are the implications for people’s livelihoods, health and the environment?
These are some really interesting and big questions. We could say that cooperation in APEC is on a journey in this regard. Ultimately, my interest is seeing some really practical initiatives emerge to help people learn and bring about policies that benefit our businesses and communities everywhere.