Asia-Pacific governments are calling for vigilance against protectionism as economic growth slows in parts of the region and completion of a 12-nation trade accord looks set to be delayed further.
Leaders from the Asia-Pacific Economic Cooperation member countries are meeting in Bali this week to discuss ways to boost their economies as an uneven global recovery and volatility in financial markets constrain growth.
At stake at the summit is progress on the Trans-Pacific Partnership trade deal, as Malaysian Prime Minister Najib Razak said the year-end deadline for completion may not be met and warned some areas of the talks are cause for “great concern” for his country. The accord, which involves countries such as the U.S., Australia, Japan, Malaysia and Vietnam, would link an area with about $28 trillion in annual economic output.
“Protectionism is a problem because it stifles opportunity, because it narrows the market, because it crushes the energy of the marketplace where new solutions are created through that energy,” U.S. Secretary of State John Kerry said in a speech in Bali today. “History has proven again and again that a freer market creates more opportunity, more growth, more dynamism, more innovation.”
Countries should be on guard against requests from companies to protect certain industries, Singapore Prime Minister Lee Hsien Loong said.
“Some are witnessing protectionism in some economies,” Indonesia Trade Minister Gita Wirjawan told Bloomberg Television in Bali today. “The spirit of fighting against protectionism is highly up there in the past couple of days. That’s basically one of the biggest variables of success for the spirit of multilateral trading system going forward.”
Economic nationalism is a big challenge for APEC, said Tony Fernandes, group chief executive officer of AirAsia Bhd. (AIRA), Asia’s biggest budget carrier.
“Everyone benefits by opening up,” Fernandes said in a panel discussion in Bali. “Infrastructure is going to be a key issue going forward.”
Global growth will probably be slower and less balanced than desired, as the world economy is too weak and “risks remain tilted to the downside,” trade and foreign ministers from the 21-member grouping said in a statement Oct. 5.
A slowdown in China and India is reverberating across the region with the Asian Development Bank forecasting expansion at a four-year low in 2013, putting pressure on policy makers to bolster their economies. The Group of 20 countries repeated their concern last month that stimulus pullback in developed nations may prove damaging to global markets.
Since the start of the global financial crisis, governments have been pressured to support exporters, said Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore. The number of trade actions seen at the World Trade Organization is evidence of tensions, he said.
“It’s a function of the difficult external environment and competition is on the rise,” Varathan said. “But at the same time, we are seeing more trade agreements being negotiated. Policy makers realize that more trade agreements result in a bigger pie to share.”
TPP governments are seeking momentum during the Bali meetings on the agreement as concessions sought by countries hinder progress in completing negotiations.
Japan became the latest nation to join the talks when it formally entered discussions in July. Prime Minister Shinzo Abe is seeking to end 15 years of deflation in the world’s third-largest economy through fiscal and monetary stimulus policies and regulatory reform known as Abenomics.
“Prime Minister Abe is absolutely right, it’s a huge opportunity for Japan to get itself out of this spiral of deflation and rebuild its economy,” Scott Price, head of Wal-Mart Stores Inc.’s Asia operations, said in Bali today.
Japan took too long to join the TPP negotiations, Hiromasa Yonekura, chairman of Japan’s Keidanren business lobby group, told the APEC CEO summit yesterday.
Since joining, Japan’s negotiators have done “rather a good job,” he said. While a latecomer, Japan can “contribute to progress on the TPP negotiations quite well.”
U.S. Trade Representative Michael Froman said Oct. 5 the “finish line is in sight” and TPP officials are trying very hard to complete the deal this year.
Speaking at APEC today, Najib said the end-year deadline is not set in stone, and “we do have a few areas of great concern” in the talks, particularly the inclusion of issues such as intellectual property and labor.
Once those areas are included “you impinge upon fundamentally the sovereign right of the country to make regulations, to make policies, and that is the tricky part,” Najib said.
While finishing the accord this year may be “ambitious,” it is important to set deadlines and trade agreements should have high standards, U.S. Commerce Secretary Penny Pritzker said in an interview with Bloomberg TV in Bali yesterday.
All the TPP countries are members of APEC, set up in 1989 to advance free trade and investment in an area that accounts for half of the world’s total gross domestic product and 45 percent of global commerce. China, the second-biggest economy among APEC members, isn’t a member of the TPP. Indonesia is still evaluating whether to join, Wirjawan said.
“TPP is an open architecture,” Pritzker said. It is trying to set a standard and once that’s in place, “other economies and countries are welcome to become a partner,” she said.
APEC ministers said Oct. 5 they will recommend their leaders extend through the end of 2016 a commitment to combat protectionist measures and roll back such policies that exist.
“We reaffirmed our commitment to keep markets open and to refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing WTO-inconsistent measures in all areas, including those that stimulate exports,” the ministers said.
Sixty-eight percent of chief executive officers in the Asia-Pacific region plan to increase investments next year, with China, the U.S. and Australia among top destinations over the next three to five years, a PricewaterhouseCoopers report released at APEC showed.
Countries must improve infrastructure to spur trade and investment, Indonesian President Susilo Bambang Yudhoyono said in a speech in Bali yesterday to about 1,000 business executives.
“We need to develop more and better infrastructure as an essential element for our connectivity,” Yudhoyono said. “This will of course help not only to facilitate trade and investment, but also boost job creation. APEC needs to tackle inefficiency in the supply chain. We have to make it easier, cheaper, and faster to conduct trade in goods and services across borders.”
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