Asian Trade Centre

The Final ATC Talking Trade

The Final ATC Talking Trade

It was an exciting time to be in the region.  Governments were enthusiastically signing up to a wide variety of trade agreements.  For example, Laos completed accession procedures to become the 158th member of the World Trade Organization (WTO).  We were in Bhutan for two workshops to support a renewed consideration of joining the WTO.  We also had several training activities in Timor Leste with members of Parliament and across the government to support accession to the WTO in conjunction with plans to become part of ASEAN.  Mongolia, the last WTO member to not have a free trade agreement (FTA), asked for training to complete an FTA with Japan. ASEAN itself was rapidly pursuing greater internal integration, with plans for the ASEAN Economic Community (AEC) pushed forward from 2020 to 2015.  It was also working on a range of agreements called ASEAN+1s with major powers in the region including Australia, China, India, Japan, New Zealand, and South Korea.  There was also a lot of activity to integrate Asia more closely to the rest of the world.  The first meeting in what would become the Trans-Pacific Partnership (TPP) took place in Singapore on the sidelines of APEC.  The TPP, as regular Talking Trade readers will recall, rapidly expanded and finally concluded in 2014.  The European Union was actively involved in working with members of ASEAN to create an eventual bloc-to-bloc agreement, starting with a bilateral FTA with Singapore.

Managing Disputes Over Trade: Part I

Managing Disputes Over Trade: Part I

Trade policy, like many other arenas, has developed a complicated language that can be impenetrable or, at best, opaque to outsiders.  Some aspects, especially those touching on law, have extra layers of jargon. While trade dispute settlement systems can be quite important and have been frequently in the news over the past few years, it can be hard to follow the arguments.  Talking Trade will be running a multi-part set of blog posts to help unravel the situation and make it easier for you to follow evolving developments.  Let’s dive in with some background to help set the context…The international trading system has had to overcome multiple challenges to function and remain effective.  Governments have strong incentives to cheat or, as they would put it, to strongly prioritize their own economy and companies over the affairs of others.  But if everyone is busy protecting their own, the net result is much worse for everyone. This basic tension between keeping markets open despite individual incentives for closure has been a key element of the system for decades.  Now, the long-standing the consensus in favor of freer trade has started to fray with far more serious trade disputes ahead.

Digital Trade Supports Economic Development

Digital Trade Supports Economic Development

Perceiving the digital sphere as winner-takes-all leads to an incorrect assessment of the market forces shaping the digital economy and suboptimal policy responses. In particular, the suggestion that developing countries should enact technology transfer, data localization, and internet filtering requirements, or force the breakup of large e-commerce firms, ignores both the benefits of these platforms to development and the potential consequences of pushing platforms out of small markets. Instead, governments should focus on creating an enabling environment for MSMEs to pursue digitalization, enacting regulation that encourages firms to leverage digital tools for growth and development. For MSMEs, there are several key reasons participating in digital platforms can beneficial. Firstly, digital platforms increase visibility for participating MSMEs, as large platforms are accessed by large numbers of customers. Participation in digital platforms contributes to lowering operational costs, as economies of scale and their marketing abilities reduce the burden of logistics, payment methods, and marketing on individual firms participating in the platform. For example, a small firm may struggle to navigate customs rules when engaging in cross-border trade, adding risk and increasing costs. E-commerce platforms with sufficient scale and expertise can easily navigate the complexities of cross-border trade, reducing costs for participating MSMEs. This has enabled the emergence a growing number of ‘micro-multinationals’ in the Asia-Pacific region, wherein small business engages in cross-border e-commerce. A further benefit in participating in platforms for MSMEs is access to their analytics capabilities and optimization programs. Using data analytics to collect information about customer preferences, MSMEs can leverage the platform’s data to optimize offerings to customers. Digital platforms, like any other business, are profit-seeking. But this does not mean that this profit-seeking behavior functions to stifle MSME growth or development. Instead, the opposite is true. Platforms tend to push capacity-building efforts to enable MSMEs to participate in their platforms, unlocking new growth opportunities. For example, Meta, Amazon, Gojek, and Flipkart offer training, advisory services, and more to MSMEs to boost capacities to participate in their platforms. From this arrangement, the companies benefit from an increased number of suppliers, and MSMEs unlock new growth opportunities, increasing access customer pools and addressing key barriers to growth.

Digital Trade in the Asia-Pacific: 8 Issues for 2021 and Beyond

Digital Trade in the Asia-Pacific: 8 Issues for 2021 and Beyond

In the earliest days, the digital economy flourished with extremely limited regulatory oversight. While this might sound like an ideal environment for companies, most prefer to operate within a set of clearly defined basic rules. The alternative can be sudden and unanticipated regulatory and legal changes that can upend business models overnight. As the portions of the economy driven by digital technology have continued to expand and as digital connectivity has increased, governments have increasingly been grappling with the appropriate ways to allow digital trade to grow while restraining harms that might flow to consumers and businesses. Effective management of the regulatory and policy environment to facilitate digital trade will become one of the most important aspects of trade policy in 2021 and beyond. The Covid-19 pandemic and associated lockdowns and trade disruption have up-ended many longstanding business models. Firms are rapidly shifting to develop or expand digital capabilities to manage highly altered supply and demand pressures. The adjustment to digital tools applies to both large and small firms and has increasingly filtered to include citizens around the globe. An online presence can make the difference for companies between survival and extinction. Despite the growing importance of digital trade, the ability of governments to tackle a range of issues of relevance to managing the online environment still lags behind the speed of innovation for firms. Domestic-level regulatory and legal adjustments to better accommodate digital trade can be complicated. Negotiations between governments to ensure greater consistency in policy frameworks are often time-consuming to complete. By the time policy settings adjust, the commercial environment could appear quite different. Headed into 2021 and beyond, there are at least eight topics that are likely to be on the radar for government officials working on digital trade. The Asian Trade Centre, with generous support from the Hinrich Foundation, has launched a series of papers, Asia in the Digital Economy, to more carefully examine new and emerging issues in digital trade in 2021.

RCEP: A First Look at the Texts

RCEP: A First Look at the Texts

The 15 countries in the Regional Comprehensive Economic Partnership (RCEP) held an elegant virtual signing ceremony on November 15, 2020. The Asian Trade Centre will be delving more deeply into the specific details and producing a series of materials to help companies get ready to use the agreement. For now, here are our first quick technical assessments of the agreement. Note that this early look should not be taken as the definitive guide, as an agreement with 20 chapters and thousands of pages of associated schedules will take some time to unravel. To get a sense of the task ahead, the Korean tariff schedules alone run to 2743 pages. Compounding the difficulties of making a quick assessment: governments can be quite creative in burying important details inside of different provisions. Flexibilities and exceptions are going to be tough to note, understand and unravel. RCEP will, of course, have important implications for trade in the region, for economic integration and for the future of trade policy. This post, however, will focus on the details of the agreement itself. The basic structure includes 20 chapters, making RCEP a comprehensive trade agreement that includes commitments in areas like goods, services, investment, intellectual property rights, competition, trade remedies, standards, e-commerce and dispute settlement. Many of these chapters were not included in the underlying ASEAN+1 agreements that formed the original core of RCEP. Getting these negotiated took significant time, which is partly why RCEP has taken 8 years to reach conclusion. Overall, RCEP represents a significant achievement. The 15 countries involved (Australia, Brunei, Cambodia, China, Indonesia, Japan, Lao PDR, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam) are very diverse in nearly every imaginable dimension. Getting an agreement that could successfully navigate the domestic constraints and starting points in all 15 countries is an important accomplishment. RCEP also represents the first time that many members have engaged in this sort of trade arrangements: especially between China, Japan and South Korea. As expected, this created additional friction as officials grappled with managing outcomes.