Trade, People & Progress: Will APEC Deliver on Promise of Sustainable Growth?
By Diane Brady
This story was originally reported in 2019 in advance of the APEC CEO Summit scheduled to take place last November in Santiago, Chile. It has been updated to reflect new information and statistics where possible.
At a basic level, the health of any economy can be measured in two ways. The first is to follow the money, tallying up the total value of all the goods and services that make up the gross domestic product (GDP) or flow across borders through trade. The second measure is harder to quantify but no less important: the level of hope.
In economies that are rich with hope, citizens invest in their communities and in themselves. They welcome new talent and access to new markets, confident that the opportunities of tomorrow will be better than the realities of today. When the future looks bleaker than the present, people no longer trust that the rules are fair or that their leaders can deliver. They put up barriers, afraid to lose what they have left. Instead of investing in the system, they work outside it. Economies rarely thrive on a foundation of fear.
Over the last several decades, globalization has been a testament to the power of hope. As trade barriers came down, GDP growth and living standards went up. People living in economies big and small put their faith in opening their borders, which proved to be one of the greatest wealth generators in human history. More than one billion people were lifted out of poverty. Cooperation between economies has created a virtuous cycle in which even more people, products and capital can flow freely back and forth.
That is particularly evident in the Asia-Pacific Economic Cooperation (APEC). As the forum reached its 30th year, in 2019, more than $24 trillion USD of services and goods had flowed between the 21 member economies, up from $3.1 trillion USD when APEC was created in 1989. In the same period, GDP per capita among members also doubled to $22,000 USD, while the poverty rate fell to one fifth of what it was at APEC’s launch.
“When you look at the vibrancy of this region, there is no question it’s connected to greater cooperation and trade,” APEC Secretariat Executive Director Dr. Rebecca Fatima Sta Maria said.
So why, then, has the allure of globalization diminished? One reason is that its benefits are less clear to those who feel left behind in a fast-changing global environment. The manufacturing and service economies of the late 20th century enabled a wide swath of players to profit from their comparative advantages in areas like labor costs, infrastructure, resources and regulations. The internet supercharged that evolution by giving people access to information, capital and customers. That equation is now changing as economic growth becomes increasingly driven by data, artificial intelligence and accelerating technological change. Platform companies can cross borders and disrupt entire industries without much added cost.
When riches flow to those who control these new technologies and the data that fuels them, governments start to cry foul and their citizens feel left behind. Faced with the complex challenge of tackling stagnant wages and income disparity, globalization becomes an easy target.
In fact, globalization is likely to be the best solution. Karen Reddington, who was until recently president of FedEx Express Asia-Pacific and now leads the European division of the world’s largest express transportation company, points out that “in the digital economy, even the smallest players can reach a global audience.” Reddington believes that small and medium-sized companies need the kind of network and support that a consortium like APEC can provide.
APEC is an ideal forum to tackle some of the toughest issues affecting the next 30 years of trade. Its consensus-driven approach and ability to engage business leaders through the APEC Business Advisory Council (ABAC) proves critical in a global economy that’s increasingly built on intangibles like data and intellectual property.
Jim Balsillie, the former chairman and co-CEO of Research In Motion, the Canadian firm behind BlackBerry, argues that we need a new global framework around data use to help economies better manage this critical asset.
“I call data the new plutonium because it can be powerful, dangerous, tough to clean up and can have serious consequences if it’s misused,” says Balsillie, who founded and chairs the Centre for International Governance Innovation, a Canadian think tank focused on global governance. “Manage data well and growth is unbounded. If you lose control of it, you’re like a sharecropper on your own land.”
The APEC Secretariat’s Sta Maria agrees that the need for global cooperation — and the opportunities that it can create — has never been greater. Having studied the impact of people’s perceptions as an academic and dealt with changing attitudes as former secretary general of the Malaysian Ministry of International Trade and Investment, she believes the solution starts with looking at who is left out of the conversation. It’s harder to support freer trade if you don’t have access to the opportunities it creates — or a say in how it’s done.
While APEC has been a powerful catalyst in promoting dialogue and shared interests at the highest levels of business and politics, it’s increasingly focused on helping members find more ways to engage women, small business owners, young people and other stakeholders who are critical to the prosperity of their communities. To engage in the system they have to be a part of it. A recent APEC study on financial inclusion found that 556 million adults across the region are “unbanked,” meaning they don’t have a bank account or use formal financial services. That means one in four adults also lack formal access to capital, loans, savings and credit, which may affect their education and job choices, too.
“Our future growth will come not just from trade, but from how we invest in innovation and people,” said Sta Maria. That means building on APEC’s longstanding commitment to free and open trade and investment across borders to help members expand access to capital, technology, networks and expertise within their own markets. Empowering more people to compete at the global level can also stimulate consumption and creativity at home, which leads to stable growth and more resilient societies.
AN UNEVEN LANDSCAPE
Concerns over globalization have less to do with the economic benefits of trade than with how those gains have been distributed. While the prosperity generated by trade has transformed the lives of the poor, especially in rapidly developing markets like China, it has enriched the lives of the wealthy even more. The resulting gap can be stark. Oxfam calculated that in 2019 the world’s 2,153 billionaires had more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Inequality particularly affects women. The 22 richest men in the world have more wealth than all women in Africa.
In mature economies like the United States, the globalization of supply chains has also come at a cost to local manufacturing jobs, even as it has expanded the demand for high-value services and American brands abroad. Such countervailing forces have contributed to a regional divide that pits Americans dealing with diminished opportunities and incomes in the heartland against those who have found fortune in tech hubs and expanding cities along the coast. It’s a pattern that has become familiar in many parts of the world, and that in 2020 has been aggravated by the COVID-19 pandemic.
The pattern is less an indictment of globalization than an acknowledgment that the challenges and opportunities it creates are complex.
“We used to take for granted that the benefits of free and open trade would eventually reach everyone,” said Timothy Ong, a longtime strategic advisor to APEC and the Brunei Darussalam-based chairman of the Asia Inc Forum, a facilitator of business and public policy dialogue in the Association of Southeast Asian Nations (ASEAN). “I still believe that, but the world today is very different. The consensus we had about the value of globalization is being questioned and we need to provide better answers.”
Across APEC, public attitudes toward trade often reflect the policies and practices in each economy. In a small, export-dependent economy like Brunei Darussalam, global trade is seen as mission critical. In other markets, enthusiasm for globalization is tied to factors like geography or natural resources.
Where leaders invest in infrastructure, skills training, innovation, sustainability and the health of their citizens, globalization tends to be viewed as a win-win. But where the gains from trade flow to a few and come at a cost to the environment or vulnerable groups, it has become a source of political division and strife.
Where the private sector is welcomed as a partner in creating prosperity, globalization can create a surplus of opportunity. Where business is treated as the enemy, opportunities are harder to recognize, much less pursue. Indeed, the power of global trade is increasingly linked to the number of people engaged in making it happen.
For Jean-Paul Luksic, chairman of last year’s APEC CEO Summit in Chile which end up being cancelled because of political unrest, working together to create better lives in the digital age is so critical. “We are facing global challenges that we need to address together, and APEC gives us the opportunity to work together to find the most creative solutions,” Luksic said. As chairman of the Chilean mining company Antofagasta Minerals, Luksic understands the challenges and opportunities of globalization first-hand. While the copper that his company mines is a critical component of renewable energy systems to generate power from solar, hydro, thermal and wind energy, mining it in a way that protects the environment and helps local communities is imperative.
Without Chile’s robust public institutions and open economy, Luksic said, neither his company nor his nation would have access to the new markets, technologies and partners they need to compete. What makes those wins sustainable, he added, are partnerships with the communities and customers that Antofagasta serves. To Luksic, that means spreading not just the prosperity of increased trade, but also the practices, to a new generation of businesses.
EVERYTHING IS CONNECTED
The most powerful factor that’s shifting the discussion around globalism is a recognition that challenges like digital disruption simply cannot be tackled alone. Within APEC, the accelerating pace and impact of digitization is a topic that’s become a top priority for members and is likely to dominate the agenda for years to come. In the digital era, even the smallest player can access tools, training and customers anywhere on the planet. At the same time, new technologies also bring new types of risks, from misinformation to rogue players who don’t follow rules.
Many APEC economies have been leaders in the digital revolution, developing not only cutting-edge technologies but also deploying them to transform everything from education and healthcare to the core infrastructure of their cities. But even those on the front-lines of the digital revolution also struggle to deal with the power of these technologies to automate jobs, destroy privacy, spread misinformation, paralyze critical systems and alter the very future of work itself.
The giants of the digital age operate with a very different business model than the multinational companies that came before them. Instead of building out supply chains and factories through years of painstaking partnerships and capital investments, they can technically enter new markets with the click of a button. Once there, the speed with which they can hollow out incumbent industries or be hijacked to spread disinformation is head-spinning. The only thing that’s clear is that there’s no easy fix.
The challenges and the opportunities are so big that no individual business or political leader can tackle them alone. Jennifer Scanlon, president and CEO of UL, argues that no economy can fully harness the power of data unless the government and private sector work together.
“APEC stands in a unique position to convene critical stakeholders to address these complex and interrelated challenges,” said Scanlon, whose U.S.-based company is a global leader in safety science, helping companies navigate complex markets while enabling them to safely adopt innovative new products. She views the forum as a valuable “opportunity to discuss, share and advance approaches to reduce complexity and barriers across markets.”
To Monica Whaley, digitization is a realm that especially plays to APEC’s strengths as a nonbinding forum for exchanging ideas. As President of the U.S.-based National Center for APEC (NCAPEC), which for more than two decades has created opportunities for U.S. businesses to engage with APEC and partners throughout the region, Whaley has seen how its value increases during periods of trade tensions and disruption.
“It leaves the lines of communication open,” she said, enabling business leaders and policymakers to come together around tough issues without the pressure of formal negotiations. That’s especially true in newer policy areas such as digitization. “When territory is previously uncharted, regulators put up walls,” Whaley added. “If APEC can address the issues that are raising anxiety and help tackle the challenges that all of the economies have to face, it can help lower those walls to allow innovation to thrive.”
Whaley argues that her members are inspired by the opportunities that innovations like artificial intelligence, 3D printing, blockchain and the Internet of Things can enable in every sector of the economy, provided there is an ecosystem where innovation can flourish.
“This is energizing members in every sector of the economy,” she said, noting that their curiosity spans all aspects of business, from sourcing new types of talent to creating smarter products with sensors. What they need are policies and partnerships in the public sector that make it easier to invest in infrastructure and training required to realize those possibilities.
FOSTERING DIALOGUE
The benefits of cross-border trade and investments are most obvious when business leaders and policymakers are aligned on doing the right thing. For governments, that usually means investing resources and adopting strategies that create jobs, improve communities, boost revenues and inspire hope. For businesses, it’s about building trust and conditions for long-term prosperity.
For Richard Adkerson, chairman and CEO of mining giant Freeport-McMoRan, “it’s not so much whether regulations can create the gold standard, but rather that it is based on the principles of doing what you believe is right and conducting your business in a sustainable and just manner.”
While working with the U.S. Securities and Exchange Commission early in his career, Adkerson had a chance to help draft the Foreign Corrupt Practices Act, which bans American businesses from paying bribes to foreign officials. When he first moved into new markets, he said that often meant making difficult decisions that could come at a cost to his bottom line. With increased trade and investment have come incentives to standardize regulations and crackdown on corruption. That’s the result of dialogue and hard work in groups like APEC’s Sub-Committee on Standards and Conformance (SCSC), not trade wars.
Few forums offer an opportunity for that dialogue like APEC and the APEC CEO Summit, which this year has been reimagined at the virtual APEC CEO Dialogues due to the pandemic.
By providing a platform for honest conversation among leaders of big and small economies, as well as the public and private sectors, APEC established itself early on as a safe place to tackle tough problems and pursue shared goals.
Its open-ended format enabled politicians to bring domestic issues to the table when discussing economic policies, which helped sharpen the focus on promoting inclusive and sustainable growth. Through the APEC Secretariat, members have supported hundreds of regional projects and high-level working groups to promote joint action in areas like data privacy, food security, labor mobility and gender equality.
The APEC Business Advisory Council (ABAC), established in 1995, and the APEC CEO Summit that launched a year later, let business leaders engage directly with presidents, prime ministers and other government officials on a host of issues.
The APEC Climate Center (APCC) in the Republic of Korea now has a solid track record of partnering with scientists on research to help member economies understand and deal with the consequences of climate change.
For business leaders like Alfonso Bustamante, CEO of Peru’s investment firm Corporación Financiera de Inversiones S.A., the level of access to dialogue is incredible.
“No other platform in the world gives us the opportunity to sit with leaders and promote business policies that would enhance growth,” said Bustamante, who also represents Peru on ABAC. “It’s a unique opportunity to be part of policymaking.”
It’s a rare opportunity for business leaders and policymakers alike to engage as human beings.
Timothy Ong recalls former Singapore Prime Minister Goh Chok Tong’s “midnight golf game with [U.S.] President Bill Clinton on a wet and windy evening in Brunei [Darussalam]” at the APEC Summit in 2000, which he believes helped lead to the U.S.-Singapore Free Trade Agreement.
“The chemistry worked, the timing worked,” Ong said.
Andrey Kostin, president and chairman of Russia’s VTB Bank, notes that the forum can leave a lasting imprint in other ways, too. Kostin describes the APEC Summit in Vladivostok, which he chaired in 2012, as “a remarkable, even pivotal event for the city.” Along with showcasing Russia’s Far Eastern port city, the infrastructure and global recognition has helped it become a magnet for tourists and other international events.
“Actually, the summit reinvented Vladivostok,” Kostin said. While the Russian banking chief praises APEC’s ability to develop what he describes as a “mutually respectful and efficient dialogue,” Kostin believes that its broader goals of advancing regional integration “may become unachievable unless we find a balanced solution to stop the ongoing trade wars.”
For Dr. Vu Tien Loc, chairman of the APEC CEO Summit Viet Nam 2017 and chairman and president of the Vietnam Chamber of Commerce and Industry, the fact that Viet Nam hosted the largest summit in the forum’s history “demonstrated how critical the event was to the region at the time.”
“We all recognized the APEC CEO Summit as a critical venue for reshaping globalization and regional integration into a vision that works for all stakeholders.”
EXPANDING APEC’S REACH
As economies increasingly turn to small and medium-sized businesses for growth, the challenge for APEC is finding new ways to engage a wider audience. That means creating more opportunities to engage Millennials and Gen Z, and leveraging the networks and tools that it has created to help members empower women and underserved groups.
Sta Maria points to initiatives like the APEC App Challenge, which brings together teams from different member economies to create apps that address a specific need in the market.
Last year’s challenge, which took place in Viña del Mar, Chile in May: to connect female entrepreneurs across the region to investment, skills and people. The winning app, from Tingqiao Zhou and Hailong Han of China, was FundShe, which helps female entrepreneurs gain visibility for their projects, attend events, connect with mentors and set up meetings with investors.
It’s a good start. “For an organization like APEC to remain relevant over the next 30 years, its priorities and processes must also continue to evolve with changes in the dynamics of globalization,” said Michaëlle Jean, Canada’s 27th Governor General and former Secretary-General of the Organisation internationale de la Francophonie. “It’s not enough to create a space for young people to be heard. We have to find ways to listen intently to what they are saying and engage them in finding solutions.”
Having worked with multilateral organizations and young people as a university chancellor, Jean has found that globalization may be under scrutiny, but it’s far from dead. As she put it: “Globalization is about more than trade. It’s about being open to the rest of the world, recognizing that we can’t build our economies and solve our problems alone.”
In New York City, Gen Z Magnolia Garcia agrees. Her biggest concern “with globalization is that it’s focused on growth when [her] generation is worried about whether the world will be livable in 50 years,” she said.
The child of Guatemalan immigrants, Garcia is a history and political science major at Pace University who is hardly turning her back on the rest of the world. In fact, she’s participated in several climate protests and aspires to become a politician, perhaps even the U.S. president. Her message to leaders: “What will it take for you to care about not just the next quarter but the next generation?”
It’s a question that leaders in every realm no doubt ask themselves. Faced with a barrage of short-term pressures from shareholders, voters, customers and communities, many of them welcome the opportunity that APEC offers to reflect and strategize about the bigger picture.
As NCAPEC’s Whaley puts it: “I think APEC is most effective in areas where the guard rails aren’t established yet and the forum can act as a sort of test kitchen for exploring ideas and best practices that impact economic growth.”
Whaley cites cross-border data flows and the future of work as examples of topics where discussions about privacy legislation, artificial intelligence and skills training have been of particular value for members. “Everyone is grappling with these issues at different rates,” she said. “Creating opportunities to share lessons that help others leapfrog technologies or harmonize policies is not only good for member economies, but critical for the success of globalization.”
Indeed, ABAC member David Toua of Papua New Guinea believes APEC’s worth will increasingly be measured less by the trade numbers it delivers than the cooperation it promotes across the region. In a small economy like Papua New Guinea, he noted, discussions about inclusion and adapting to digitization can be transformative.
“It allows us to leapfrog and bypass the trials and tribulations others have gone through,” Toua said. In an economy where only 13 percent of the population has access to electricity, leveraging APEC to create a multilateral electrification partnership in 2018 was as valuable as any trade deal. “Free trade should remain an aspiration,” Toua said, “but APEC’s value now extends well beyond that.”
That said, Bob Moritz, chairman of PricewaterhouseCoopers International, believes APEC’s first role remains its most important one.
“In the long term, free movement of goods and services can only be beneficial for economic growth,” Moritz said. “More needs to be done to secure free trade, but also to better explain the benefits of free trade and to share those benefits with a wider group of people.”
