Drawing Up Guidelines for Business in RCEP

KYOTO--The 16 countries involved in the Regional Comprehensive Economic Partnership (RCEP) are currently gathered in Kyoto.  The 8th round runs all week long, as officials try to meet an announced deadline at the end of this year.

RCEP is an unusual animal in the free trade agreement (FTA) zoo.  Under RCEP, the 10 countries of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) are trying to knit together their existing FTAs into one comprehensive agreement.

This requires getting ASEAN to work together with the six dialogue partners that have existing FTAs with ASEAN (Australia, China, India, Japan, New Zealand, and South Korea).  In RCEP, the ASEAN members often meet to caucus first, followed by the remaining six (in RCEP lingo—the AFPs or ASEAN Foreign Partners).  Once both groups have held caucus sessions, they gather together as 16 parties for negotiations.

Like in most FTAs, the RCEP party negotiators are split into specific chapters.  RCEP negotiations are under way for goods; rules of origin; customs procedures and trade facilitation; sanitary and phytosanitary (SPS) rules for agricultural products; services; investment; intellectual property rights; competition policy; economic and technical cooperation; and legal issues. 

The original intention of RCEP was to sort out the problems created by having five different agreements (called ASEAN+) with sometimes differing commitments between them.  The issues that need addressing can be seen clearly by businesses trying to ship goods between ASEAN and the AFPs. 

For example, many goods have tariff reductions that are different across the five existing agreements.  In some, tariffs may have fallen all the way to zero allowing a firm’s products to enter duty free.  In other deals, the tariffs that matter to the firm have not been touched at all.

Equally (or even more) problematic for businesses, the rules of origin (ROOs) used across the five existing deals are different.  Depending the product, firms may be forced to have entirely different sourcing patterns for different markets with raw materials or components from alternate suppliers to get final products to qualify for benefits under the ASEAN+ FTAs. 

For some products, the ROO might be 40 percent regional value content (RVC).  Put crudely, this means that a firm needs to sufficient transformation of the raw materials and components to take place inside the ASEAN member states and the dialogue partner to count for at least 40 percent of the final the value of the good. 

But other ASEAN+ agreements may require a change in tariff heading instead, where the creation of a final product results in a different classification for the product relative to the raw materials or components used.  Worse still, some agreements require some products to use multiple ROOs simultaneously to qualify for preferences.

In short, these sorts of rules make it difficult for firms to actually take advantage of the benefits on offer from some of the existing agreements. 

RCEP could try to sort out most of these challenges that firms face in operating across the 16 member countries.  However, because RCEP is not a voluntary organization, participating countries are approaching the tasks of harmonizing across agreements with different degrees of enthusiasm.  In RCEP, unlike some FTAs, the parties are essentially drafted to participate by dint of having an existing deal. 

Having an agreement with ASEAN, however, does not automatically mean that members are eager to extend their existing trade arrangements to other members.  This is true both for ASEAN countries as well as many of the AFPs.  Hence, around the table in RCEP, some members are downright hostile to further market opening while others remain relatively enthusiastic. 

One area of potential scope for new efforts can be found in e-commerce.  Previous FTAs did not cover this topic, which means that the members do not have to worry overly much about existing commitments.  In addition, all 16 parties in RCEP have some level of interest in creating new rules to govern this space.

This is particularly true if RCEP countries approach e-commerce from the perspective of smaller firms.  Small and medium sized enterprises are very active and constitute the largest share of the economy in all member states. 

More important, seizing the opportunity means letting smaller firms join a larger marketplace for their goods and services.  They can attach themselves to some of the biggest global enterprises in ways that were previously not possible.  The e-commerce marketplace includes buying and selling to other businesses as well as consumers. 

But this is an unfamiliar place for government officials in charge of trade negotiations.  In many economies, the domestic rules and regulations for managing e-commerce are either undeveloped or underdeveloped.  This makes it more challenging to create appropriate rules for governing e-commerce at the RCEP level.

In some of the fastest evolving sectors of the global economy, it is important that officials aim for light touch regulations.  Many of the goods and services that will be provided in 5 or 10 years time cannot even be imagined now.  Hemming in these types of developments could easily prove problematic for companies.  Restraining the growth and participation of smaller companies could leave the markets open for further dominance of the largest global players.

Hence, officials need to think carefully about what sort of rules they want to create for the e-commerce space in RCEP.  Most businesses would prefer a harmonized set of regulations, rather than a patchwork quilt of rules across 16 different countries.  This is certainly better for smaller firms who will struggle to handle different requirements and rules in different RCEP marketplaces.

These rules should put in place specific policy objectives, rather than specify specific types of rules.  The objectives can be met by different governments and businesses in an evolving fashion, rather than be set down in a difficult-to-amend trade agreement. 

For instance, government officials are likely to be concerned about the spread of online gambling or pornography.  RCEP rules could allow governments to regulate these types of activities directly.  Restrictions could also be handled through the use of exceptions clauses allowed elsewhere in all trade agreements that grant governments the right to regulate in the interest of public health, morality, security and so forth.  Or governments could create a policy framework that would highlight types of activities that should be constrained. 

Because policymakers do not know enough, most likely, about e-commerce and its current and future potential, trying to create specific rules about what can and cannot be opened is likely to be deeply problematic.  Instead, government might best support smaller firms in e-commerce by thinking broadly about their needs and crafting the RCEP agreement to better meet the issues of concern to small companies. 

This requires a holistic view of e-commerce and a vision of helping smaller firms buy and sell smaller value goods or supply services of all sorts across the internet.  It means ensuring that information can flow freely and that companies have access to some of the best, safest, and most secure platforms and technologies for managing their e-commerce activities.  Finally, it means helping smaller firms manage cash flow issues by helping open trade financing and e-payments systems so firms can successfully get paid for their goods and services. 

Creating an agreement where few have existed before is never going to be easy.  But the benefits of a true regional platform could perhaps be best expressed in RCEP through bold steps in e-commerce.  This would help unleash the economic potential of the small companies that make up the backbone of the economy in all RCEP members.  It could be the most concrete example of where RCEP negotiations can make a difference to the Asian regional landscape.  ***

On a different note, before closing, I would like to give a shout out to APEC for the APEC Business Travel Card and to the American government for finally allowing U.S. passport holders to participate.  The card saved me at least 2 hours getting into Beijing and a further two hours clearing immigration in Japan.  Thanks!

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore*** 

Battle #2: Getting Trade Promotion Authority (TPA) Through the House

In the ongoing saga of American efforts to show leadership on trade, the battle has moved to the House of Representatives.  The House now needs to give its approval for Trade Promotion Authority (TPA). 

As previous posts have noted, TPA is necessary to conclude any major trade agreement.  TPA delegates authority to the White House to negotiate trade deals on behalf of Congress and subject to ongoing consultations.  At the end, Congress will either pass or reject a trade agreement negotiated under its terms without amendments and with no procedural maneuvering to stop or delay the vote like filibusters or allowing the bill to die in committees. 

TPA is needed most urgently for the Trans-Pacific Partnership (TPP) that is stuck on hold waiting for the Americans to sort out their domestic issues.  It will also be used for ongoing trade talks with the Europeans and with different groups in global trade under the general auspices of the World Trade Organization (WTO). 

TPA narrowly passed the Senate (62-37) on May 22.  [Note that the Senate needed 60 votes in favor to avoid a filibuster that could have blocked consideration of the bill at all.]  The Senate is considered to be the “easier” body for trade agreements, because each Senator represents an entire state with generally more diversified interests. 

Dealing with the House of Representatives

The House is more problematic.  Instead of two members per state like the Senate, representation in the House is based on population.  This means the House is much larger (435 members) and most officials represent narrower slices of the overall electorate.  While seven House members represent entire states (Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont and Wyoming), California is split into 53 different districts.  Population of districts varies quite a bit—from Montana with nearly a million voters to Rhode Island’s 1st district with about half as many.

In general, the House tends to be more partisan on both sides with more Republicans that lean further right and more Democrats that lean further left than the Senate.  An electoral system that often pushes Senate candidates towards the center does not do the same in narrower House districts. 

In the Senate, TPA largely passed with Republican support and a small number of Democrats.  The House, by contrast, has a set of Republican members that have already said they will not support TPA (either because they dislike TPA or because they do not want to hand any victory to this president).  The number of House Democrats that have come out in support of TPA is quite small. 

The next week will involve furious lobbying by both sides with some extremely unlikely bedfellows developing.

The bill also faces some stiff procedural complications.  If the House does not vote on the same bill that was approved by the Senate, the final versions of both bills have to go to a conference committee.  Afterwards, members of both the Senate and the House will need to vote on the final, combined bill one more time.  Given the fraught nature of trade deals, no one is particularly keen to vote twice on a trade bill at this time.

Contentious Issues

Many of the same issues are being raised in the House that nearly derailed TPA in the Senate, including issues over currency and concerns over a possible rise in drug prices post-TPP.  The last concern seems particularly strange coming from the United States.  After the TPP is implemented, it is very likely that the United States will have to make no changes at all (or quite modest increases) in the length of protection provided to pharmaceutical products. 

In spite of strenuous negotiations, the Americans are unlikely to succeed in getting the other 11 member states to reach the farthest timelines under discussion.  Hence, the differences inside the United States around patent length and the timeline needed for generic medicines to appear in the market is likely to be modest.  The impact on domestic drug pricing is likely to be minimal and could, potentially, be positive as manufacturers have access to new markets overseas.  [Concerns over new, longer protections could be more pressing for other members who currently have shorter timelines for intellectual property protections.]

Just like the battle in the Senate, in the House opponents are bringing in additional issues and trying to tie them to the passage of TPA legislation.  Two key issues are extension of Trade Adjustment Assistance (TAA) for displaced workers and the renewal of the Ex-Im Bank.

Trade-Adjustment Assistance (TAA)

In any trade agreement, there are likely to be winners and losers.  TAA is intended to help retrain workers that experience job losses directly tied to trade.  Unfortunately, it is difficult to sort out whether a worker lost a job due to a trade deal or to globalization more broadly or to shifting technology or to some completely unrelated factor.  Only the first type of job loss is eligible for worker training assistance under TAA funding.

In the new economy characterized by global value chains and shifting patterns of production and consumption worldwide, individuals are likely to hold many different jobs over the course of a career.  These jobs may or may not even be in the same sector.  As a result, to stay competitive, workers are likely to need a lifetime of training and retraining options.  Training can provide people with new skills necessary for success in the future. 

This type of training is likely to be necessary with or without any new trade agreements.  After all, even if the United States never signs another trade deal, workers will still be faced with competition from overseas and still need upgraded skills to work with different types of technology.  Jobs of the future are likely to be quite different from many today and no person—white or blue collar, well educated or not—is likely to succeed without a lifetime of increasing investment in new skills and knowledge.

Thus a battle over the appropriate levels of support for working training is one worth having, although it need not be tied to a trade agreement.   Connecting the two unnecessarily burdens the latter while not giving sufficient scope to the former.

Ex-Im Bank Renewal

The other area of interest in both the House and the Senate is also tangentially connected to a trade agreement.  The fight has shifted to discussions of conditions needed for renewal of the Export-Import Bank.  The Bank has to be reauthorized every five years and the deadline is approaching at the end of June.

The purpose of the Bank is to provide money to firms that want to export more by either giving trade financing (especially to smaller firms) or providing a government loan guarantee (key for larger firms).   It also provides insurance for overseas firms that want to buy American products.  Commercial banks are often more expensive or loath to take on what they view as excessive risks (particularly in emerging or frontier markets). 

The U.S. taxpayer is on the hook only when the loan recipient defaults.  The record of Ex-Im since the 1930s shows that its loans contain very low risk and, in fact, the program overall puts money back into the U.S. government coffers. 

A focus on shutting down the Export-Import Bank looks extremely strange viewed from Asia.  The total U.S. funding for Ex-Im amounts to roughly $20 billion or 0.6 percent of the total U.S. budget.  What is so odd is that the scale of this assistance is, frankly, close to microscopic.  Governments in this region grasp the need for exports.  Without fetishizing exports at the expense of imports, it is clear that exports create jobs at home.  Exports have contributed strongly to the economic miracles in Asia that have lead to rapidly rising incomes and living standards across the region.

To continue to foster this kind of growth, Asian governments promote exports considerably more than America.  In fact, it could be fairly easily argued that American companies are at a strong competitive disadvantage given the lack of trade financing and loan guarantees available relative to their competitors.  Even the relatively small scale program in Ex-Im is meaningful for participating firms.

Just to take one example, Singapore has three different agencies tasked with building up and encouraging economic growth and development by getting smaller firms to scale up, helping firms find a niche in overseas markets and encouraging inward investment by some of the largest and most competitive global firms.  The government gives grants, loans and tax credits to companies large and small, foreign and domestic. 

Canada, Japan and China all have substantially larger entities that do many of the same things.  Each dwarfs the size of the American programs.  In fact, every country in the OECD (a collection of rich countries) has at least one export credit agency. 

Like the fight over TAA, it might be worthwhile to engage in a sustained discussion about supporting industry—the ideal level of support, the effectiveness of programs, the best methods for doing so, etc.  But the TPA ought not be torpedoed over Ex-Im Bank reauthorization.

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

The Pacific Alliance Turns 3

I was asked to speak this morning at an event from the Latin American Chamber of Commerce in Singapore about the Pacific Alliance (PA) and ASEAN.  There are several striking things about the Pacific Alliance that makes the topic worthy of another blog post this week.

 The Pacific Alliance has brought together four economies in Latin America:  Mexico, Columbia, Peru and Chile. 

The first interesting point to make about the Pacific Alliance is that it is a relative newcomer.   The first week of June, in fact, marks the 3 year anniversary of the launch of the Framework Agreement.  This agreement will be fully in force in early 2016, as domestic procedures to bring it online remain to be sorted.

Second, despite its relative youth, the Alliance has been attracting a surprising amount of attention.  More than 30 other countries have flocked to become observers.   The Alliance has also attracted the attention of its own neighbors, with membership in the cards for several. Costa Rica, for example, has already completed the accession process and is awaiting confirmation of membership from their Parliament.  Panama is in the queue.

To understand the reasons for such intense interest in the PA, it is necessary to look at the sweeping ambition in the organization.  The guiding principles are a commitment to democracy and free trade.  In order to join, members must have in place existing free trade agreements (FTAs) with other members. 

The 8th summit in February 2014 saw members agreeing to drop tariffs to zero just over 90% of products, with the remainder to be phased out over time.  Many of the tariffs between PA members are already low or zero as a result of existing FTAs.

But the PA does not stop at tariff reductions.  It includes interesting and innovative rules of origin (ROOs) that make it relatively easy for firms to use the trade protocol as well as trade and investment promotion efforts.  Regional agreements are easier to use and more beneficial for businesses than bilateral trade arrangements.

Members are also moving towards the free movement of goods, services, capital and people.

In many ways, the sweeping goals of the PA mirror those of ASEAN.  Under the ASEAN Economic Community (AEC), leaders in Southeast Asia have promised free movement of goods, services, investment, skilled labor and freer movement of capital.  The AEC is meant to come into force later this year after more than 20 years of steady progress towards the goal of deeper economic engagement between member states.

To be clear, neither the PA nor the AEC will actually achieve these grand ambitions in the near term.  To reach free movement of goods and services requires a host of complementary policies beyond just dropping tariffs.  At the moment, neither ASEAN nor the PA have implemented many of these supplementary policies. 

But part of what makes the PA worthy of note is how quickly members are moving towards their goals.  For example, the members have dropped visa requirements already, allowing citizens to flow freely as tourists and conduct short-term business visits between PA countries.  The goal is even more ambitious—to allow outside tourists and investors to get one Pacific Alliance visa to cover all members (like the Schengen agreement in Europe) as well as to increase the length of time granted for visa entry to businesses. 

Another notable achievement is the pooling of activities designed to reflect deep integration across members.  The opening of the Latin American Market (MILA) is especially striking, as it brings together stock markets.  Over time, MILA is likely to move towards joint stock listings.  In Singapore and elsewhere, even embassies are joining up—one facility to host multiple members.  

Again, to be clear, ASEAN has no plans underway to either integrate its stock markets or to pool sovereignty to the extent of sharing embassies overseas.  While ASEAN has visa-free tourist travel, it does not intend to create a joint visa or to scrap domestic immigration rules that govern long-term employment entry.

So why have the PA members taken such bold steps towards integration?  Largely because leaders have recognized the structure of the global economy today.  In a world increasingly connected by global value chains or supply chains, it is becoming ever more critical to countries to meaningfully lower barriers to integration.   Current PA members have signed multiple free trade agreements already as part of a process of joining value chains to help spur economic development and growth in the region. 

PA members have had to contend with low levels of integration across Latin America.  Problematic infrastructure, challenging geography, and historical legacies have limited the connections between countries in the region.  The low level of integration with neighbors has made it hard for businesses to plug into value chains. 

Hence from the beginning, PA members have had two objectives—to increase connectivity within PA countries and to attract investment, especially from Asia.  This will allow PA companies to increasingly plug into value chains already active in Asia and to develop new linkages across the region.

Currently, neither ASEAN nor the PA actually trade very much with their own members.  The figures for inter-Latin American trade are extremely low.  Trade levels between PA countries are equally small—in the single digits.  After more than 20 years of integration, the figures for inter-ASEAN trade remain stubbornly stuck at less than 25%. 

On the bright side, the opportunities for improvement in inter-regional trade and investment are significant.  Limited levels of integration should also reduce the pressure on governments from businesses and the market.  ASEAN shows that even with extensive discussions about regional integration and repeated efforts to open markets to one another, the level of direct competition between members may remain relatively muted. 

For the PA, this trend is likely to continue.  The relative lack of infrastructure to connect the markets of members and the sheer geographical distances involved suggest that even completely open markets may not lead to extensive inter-PA trade.  Instead, the objective has to remain building strong linkages with other partners in Asia and to encourage the creation of value chains between Latin American members as well as those that span the Pacific.

This is likely to be hard to do given the current, weak institutional structure of the PA.  Now, leaders largely direct the Alliance from the top.  But it is hard to get serious about implementation without an institution of some sort to pay attention to the nitty gritty details that are critical to real success.  Working groups (19 technical groups already exist) and the use of committees with members and with observers can rapidly get unwieldy. 

However, a focus on meeting the objectives of the PA is likely to be sustained and reinforced by activities elsewhere.  In particular, member commitments to openness and integration are reinforced by promises made in the Trans-Pacific Partnership (TPP).  So far, three PA members (Mexico, Peru and Chile) are also involved in TPP negotiations with four ASEAN countries (Brunei, Vietnam, Malaysia and Singapore).  Between the PA and the TPP, member governments are likely to have a laser-like focus on implementing the kinds of rules and regulatory changes needed to foster the development of value chains for goods and services across the region.

Hence, as the Pacific Alliance heads towards its third anniversary, the future looks bright.  The level of commitment to the goals of freer trade has been enthusiastically embraced by the highest levels of government.  Sustained interest by outside partners suggests that the hunger for improved economic growth and opportunities will continue into the future.

Where Does Trade Fit on Corporate Organization Charts?

In a previous post I highlighted how a European company could take advantage of the benefits of trade agreements like the Trans-Pacific Partnership (TPP).   As long as products are substantially transformed in TPP member markets for shipment to TPP markets, a company can most likely use this trade agreement.  The ownership structure or location of the headquarters for a firm is not relevant. 

I explained this to a company staff member in my office.  The person nodded and said, “Very interesting.  But I don’t know who I should even tell about this.  I don’t think we have anyone inside our company that pays attention to trade.”

This is a very disheartening statement.  I mentioned it later when meeting with an industry association.  They promptly leapt up and said, “We agree.  Let us show you the organizational chart of our typical member companies in this region.” 

On the conference room white board, the association drew a chart that highlighted the following types of corporate functions underneath the regional CEO:  manufacturing, procurement, human resources, supply chain/logistics, public relations/corporate communications, government relations/regulatory affairs, marketing/sales, legal, and finance. 

I’m sure this is not the whole chart, but the primary point was that trade does not figure in the typical organizational structure.  It is not really government relations or regulatory affairs.  (An earlier post highlighted that many firms in the region also do not have either position—to the detriments of both firms and governments.) 

The supply chain/logistics or procurement departments might be sensible places for paying attention to trade agreements and tracking the benefits offered by one agreement over another.  But this does not seem to quite happen in these positions either.  Nor are many of the line staff in these departments often in a position to advocate changes for the firm as a whole to take better advantage of trade agreements. 

Trade could, of course, be handled by someone back at headquarters.  It might be possible to keep up with events from some other location in the world.  However, I sit in Asia and focus on trade full-time.  I often struggle to keep up to date on what is happening.  It’s so complicated that we cannot even agree on how many trade agreements exist that include members from Asia—150?  200? How many more are under negotiation?

I cannot imagine that someone not even in the region would be able to do the job particularly well.  Or that someone charged with managing trade across a global company could pay sufficient attention to the fluid nature of trade in Asia as well as other regions.

So, at the end of the day, who in any given company is supposed to pay attention to trade?  The answer seems to be no one in particular even at the very largest and most globally competitive firms.

This may not have been a problem as recently as 10 years ago.  At that time, alternate trade agreements were limited in number and in scope.  Nearly all trade arrangements were global—tariff levels, for example, were set through multilateral trade negotiations and applied to every member of the GATT/WTO.  If countries opted to unilaterally adjust tariff rates or to alter applied rates, these changes also applied to every GATT/WTO member. 

Hence it was not strictly necessary to have anyone paying attention to trade policy.  Whatever policies were announced by governments would apply to your own firm and all potential competitors.  Firms could still try to influence future policies, particularly at the domestic and regulatory levels, but ignoring trade negotiations and agreements would not have had significant negative consequences.

However, as trade agreements have proliferated and then became deeper and more complicated, leaving people with trade expertise off the organizational charts of major companies is an increasingly poor idea.  The potential economic gains for a firm from using trade agreements well should more than offset the addition of extra headcount.

Savvy firms are reaching out to consultant companies to help them structure supply chains to take advantage of specific trade arrangements.  With all due respect to consulting colleagues, most are likely to charge a lot of money and may deliver modest benefits to the firm.  This is not because these individuals are not smart, capable people with useful backgrounds, but mostly because they will not have a deep grasp of the firm or the industry sector.  Or, the consultants may not have sufficient knowledge of different trade agreements.  Technology might be a useful asset, but it also does not negate the need for someone with expertise on staff.

To get the most out of proliferating trade agreements that offer different sets of benefits to firms, companies have to think carefully about all elements of their supply chains and about current and future destinations for goods and services.  Factories should be placed, for example, not just in specific locations because they can service the local market but because this location provides additional useful benefits. 

For the company that started this chain of thought, it already has factories in Malaysia and Vietnam.  Both of these facilities should be planning ahead for potential benefits that could come from exporting out of these locations and into other TPP members once the TPP comes into force.  For the factories currently located in Thailand and Indonesia, if the firm chose to push, much of the production in these facilities might be shipped to customers across 16 countries in Asia after the Regional Comprehensive Economic Partnership (RCEP) is concluded.

But—and this is a key point—in the absence of anyone paying attention to trade at the firm, the company is not actively engaged with officials negotiating RCEP.  Hence the final agreement may not be as useful for the firm as it might have been.  After all, the government officials negotiating in RCEP may not even recognize the importance of opening this sector or know about the specific barriers the company faces.

Although the firm is a large multinational, the factories in all four ASEAN countries source nearly all of their supplies from local producers.  Most of these producers are small enterprises or family businesses.  Many of the retailers of the company’s final products in the region are also small enterprises.  Hence, a trade agreement that smoothes barriers to entry and exit for the firm’s products should bring about substantial benefits to the small firms that depend on the multinational company as a buyer or supplier. 

These smaller firms and family businesses will not be explaining benefits of better trade facilitation or connectivity to governments.  It falls largely to big companies to make their case.  But without anyone in even the larger firms to pay attention to current and future trade issues, many potential benefits will likely be lost.

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

When Business Sits at the Table in APEC

Boracay, Philippines—One complaint frequently expressed by business is that governments keep making trade policy decisions without sufficient input from companies.  Government officials often remark that businesses are not providing sufficient feedback into the policy process.

Asia Pacific Economic Cooperation (APEC) is supposed to help sort out these issues by deliberately providing seats at the table for both business and government.  APEC does this in multiple ways.  Two prominent examples are the use of the APEC Business Advisory Council (ABAC) and providing opportunities for companies to participate in the myriad meetings and sideline events attached to different APEC officials meetings.

ABAC meets four times per year in shifting locations around the world and provides its’ own recommendations to the leaders of the 21 APEC member economies at the end of each year.  APEC officials gather in the host country for three rounds of senior officials meetings, plus the final jamboree of leaders and trade ministers towards the end of the year. 

I have now attended several different meetings of these sorts and I can clearly see the difficulties that both sides have in communicating with one another.  I believe I have gone to enough events and spoken to sufficient numbers of people about their own experiences to draw some preliminary conclusions about the process, but not so many that I have become an insider.  

APEC is an extraordinarily complex animal.  There is not, as far as I know, an organizational chart that maps out the various working groups, committees, consultative mechanisms, and projects that are underway at any given time.  If there were such a chart, it would be so jammed up with lines and boxes that it may not make sense. 

The institution comes with its own jargon.  This is a terribly complex mix of trade terms, language drawn from business, and a set of acronyms that would make any military proud.  It can be so complicated that even long-time participants in the system cannot recall the meaning of all the abbreviations without looking them up.

Of course, lots of different organizations use specific jargon.  Yet the closest equivalent body I can think of—the World Trade Organization (WTO)—doesn’t seem to have quite the same level of jargon plus acronyms plus often detailed technical content under discussion.  I sometimes found the WTO to be impenetrable, until I sat in on these APEC meetings.  Now I feel particular fondness for conversations in Geneva at the WTO.

If I am struggling with managing the information and APEC-speak, I can only guess at the challenges that face the business leader that pitches up an APEC meeting.  With no one to put things into context and what appears to be an inability to translate some of the worst acronyms into normal language, I suspect that many extremely capable business leaders are mostly lost.  Everything is in English, which does not help.  Even most of the slides that were presented at the events I attended were not helpful—too small to read, whipping by at too fast a speed to comprehend, and without hard copies (or downloadable files) always available. 

The next set of barriers to communication could be put down to meeting formats.  Business leaders expect (or at least hope to achieve) clear and crisp meetings with specific action items identified.  This format does not exactly appear compatible with APEC (or maybe government meetings in general?).  In any case, the objectives of meetings are not always clear.  The deliverables may not be spelled out.  Or, they might be obvious to someone who has attended multiple meetings and understands the unspoken subtext of the meeting.  But I could certainly imagine frustration by some businesses about the loss of a whole day or more in a meandering, apparently pointless set of meetings.

One mechanism for including business has been to invite business leaders to serve as speakers.  This approach also has drawbacks.  Absent clear instructions about what is supposed to be accomplished by the speaker, many firms show up and basically give a short infomercial about their company.  (Before I upset anyone, I should note that this complaint was made frequently about presenters at meetings I did not attend.) 

If feedback is needed on policy documents, the materials have to be circulated sufficiently far in advance.  Then some guidance should be given to help businesses understand the context for the materials as well as specific areas of focus.  An open ended, “Please give us your feedback” is probably not going to solicit helpful remarks.  Asking for reactions to technical briefings from the business community on the spot are also not likely to yield much in the way of truly useful comment.  Firms can provide ample input, but need time and structure to do so effectively.

Public-private partnership models of all sorts seem to be currently in vogue.  However, businesses seem extremely unclear about what sorts of inputs they are expected to provide to these projects and meetings.  Without meaningful solicitation of ideas and a format or structure that aligns with their company interests, firms will simply stop attending.

Attendance problems are compounded when APEC meetings are held in locations that are not easy to reach.  For SOMII (the second Senior Officials Meeting of the year), the Philippine hosts selected Boracay as the venue.  Boracay is a challenge to reach.  Most participants flew into Manila and then changed planes.  The island of Boracay is serviced by two different airports.  One is 2 hours away from the ferry terminal by car.  The other airport is closer, but in both cases, participants had to be loaded onto boats for the short crossing to the island.   From there, participants were sorted into vans.  While Boracay has lots of hotels, none are big enough to host the number of delegates needed.  Participants have been spread across the whole of the island in a variety of venues.  All need to be shuttled between hotels all day long.

Thus a business leader that wanted to attend one meeting would have to give up at least 3 days to do so.  For that kind of commitment, business expects to at least get some clear outcome and see progress being made.  This is, as even many APEC groupies admit, not always obvious.

Smaller companies are unable to attend at all.  Between the time commitment and the costs of getting to places like Boracay, small firms simply give the whole process a miss.   The only way to encourage small and medium sized (SME) firms to participate is to hold carefully structured meetings (with no jargon or APEC-speak allowed) in locations like capital cities where SMEs congregate. 

Getting businesses to sit at the table may not be so difficult.  Firms understand the potential power of APEC to shape the economic environment in a key part of the world.  They want to be engaged.  They are often eager to attend.  The real challenge is getting business leaders to attend more than once.  For meaningful engagement between government and business, APEC has to keep people coming and provide them with all with clear, helpful and constructive roles to play. 

*** Two other points worth noting here related to trade:

The Senate last week voted to start the debate about Trade Promotion Authority (TPA).  This was not, as some people thought, the same thing as approving TPA.  The fight in DC has been over which amendments to the TPA bill will be allowed before the final vote.  Of critical importance is limiting the number of amendments, since the Senate bill was written to match similar legislation in the House of Representatives.  If there are differences between the two bills, these have to be reconciled. 

Again, if the fight were merely about TPA, timing would not matter so much.  But negotiators are sitting in Guam right now trying to iron out the remaining differences in the Trans-Pacific Partnership (TPP) negotiations.  Trade ministers are planning to leave Boracay and join them next week.  Absent TPA, it may prove to be a long, tiring trip for little purpose since most are not willing to put final offers on the table unless and until the Americans are ready.

Second, I am going to add a shameless plug for our work in the Asian Trade Centre.  We have been asked to help demonstrate that businesses and other stakeholders have an interest in greater participation in the parallel trade negotiations in Asia, the Regional Comprehensive Economic Partnership (RCEP).  We are still coordinating our plans, but if there are stakeholders out there that are interested in at seat at the table (or standing in the room) in RCEP, it would be great if you could contact me (elms@asiantradecentre.org).  Thanks!

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***