Good morning, ladies and gentlemen.
Let me first begin by thanking you for taking the time to attend this breakfast meeting. I would also like to express my appreciation to the ASEAN New Zealand Combined Business Council for extending the invitation, and for organising this fine opportunity, to meet with members of New Zealand's business community.
I would also like to thank the government and people of New Zealand for the wonderful hospitality I have received in Auckland.
This morning I would like to talk about 3 things:
First, I'd like to give you some background on APEC.
Second, I will talk about the recently concluded ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA).
And third, I want to highlight how APEC's and ASEAN's agendas are complementary not competing, and how our activities translate to greater growth and prosperity in New Zealand and in the region.
I come from an ASEAN country. I grew up in a small village in the east coast of Peninsular Malaysia. In the village, as I recall, there was a small sundry shop selling goods like bread, rice and anchovies. I frequently visited that shop when I was growing up. One day I asked the shopkeeper, "Why don't you sell more things and make your business bigger?" He replied, "My customers are just these villagers, so I can't expand my business." The shop served the villagers well, but the shopkeeper only managed to make ends meet. From this real-life story and analogy, you can see that if we just sell to our domestic markets, it will be difficult to prosper. But, if we begin looking outward at international markets, chances are, we will prosper.
Background on APEC
This same thinking - looking outward beyond our own shores - characterises both APEC and ASEAN. APEC and ASEAN are the most trade integrated regional groupings in the world.1 For example, recent research by APEC's Policy Support Unit finds that APEC members are three times more likely to export to a fellow member than to non-members; and that intra-regional exports and imports among APEC economies are even greater than in the EU or NAFTA zones.
However, APEC and ASEAN are also economically very open to the rest of the world, and they have not generated the trade diversion found in other regional blocs.2
Indeed 14 of APEC's 21 members rank among the top 40 exporting economies in the world, and since APEC was established, members' total trade with the world has grown six fold.3
APEC is younger than ASEAN and it has a narrower mandate. It was established in 1989 with the objective of achieving prosperity for the region - through the promotion of trade and investment liberalisation and facilitation, and economic and technical cooperation.
7 of ASEAN's 10 members are also members of APEC. Comprising 21 members in total, APEC represents 40 percent of the world's population, 43 percent of global trade and 55 percent of world GDP.
Thanks in part to APEC's work on liberalisation, average barriers to trade in the region are currently around 6.6 percent, compared to 17 percent when APEC was first established. APEC also works to reduce business transaction costs. A 5 percent reduction was achieved between 2002 and 2006; and a further 5 percent reduction is targeted for the end of this year.
In addition to being a forum for trade on a regional level, APEC has helped advance the Uruguay and Doha Rounds of world trade negotiations, and has been a crucible for many bilateral FTAs. There are now over 40 FTAs between APEC members.
APEC's tagline is "Advancing Free Trade for Asia-Pacific Prosperity". What, then, are the linkages between APEC's trade liberalisation efforts and economic prosperity? How has the region done in the "prosperity" test?
Since APEC was established GDP per capita in the APEC region has almost tripled, whereas GDP per capita in the rest of the world has less than doubled. What is also interesting is that the employed labour force in the region has increased by 8.4 percent between 1996 and 2007; and that unemployment has steadily declined since 2003.
About the AANZFTA
An important step towards the region's future integration and growth was made with the recent conclusion of the ASEAN-Australia-New Zealand Free Trade Agreement. I would like to congratulate New Zealand and all the other countries involved for realising this landmark agreement.
In the past many FTAs in the region have been considered low quality - they have not facilitated improved trade flows and other economic linkages. This trend, however, has thankfully reversed in recent years.
This is well-illustrated by the ASEAN-Australia-New Zealand Agreement, which is both high quality and comprehensive, and which sets a new standard for ASEAN. It marks the first time ASEAN has negotiated an agreement as part of a "single undertaking". This means that the Agreement simultaneously spans goods, services and investment, and covers other areas that are prerequisites for a modern FTA, such as intellectual property and competition policy. It also establishes innovative rules of origin that are area-wide.
The Agreement covers 99 percent of New Zealand's exports to the ASEAN region. ASEAN is New Zealand's third largest export market for merchandise goods and ASEAN is the economy's third largest trading partner. It creates a free trade area of 566 million people which at present represents more than US$1.4 trillion in global trade.
And in fact, it is also in line with APEC's goal of greater regional economic integration.
APEC's REI Activities
Currently, at the working level, APEC like ASEAN is undertaking many initiatives aimed at accelerating regional economic integration by reducing at-the-border, behind-the-border and across-the-border barriers to trade.
APEC's Pathfinder for Self-certification of Origin is an example of an initiative designed to tackle at-the-border barriers. This Pathfinder seeks to reduce the administrative burdens and costs involved in navigating complex and divergent rules of origin when utilising Free Trade Agreements. This is particularly relevant for New Zealand which is already participating, along with Australia, Brunei Darussalam, Canada, Japan, Korea, Malaysia, Singapore and the United States.
In terms of at-the-border barriers for business people themselves, I would like to highlight an already successful APEC initiative - namely the APEC Business Travel Card. Thanks to this card New Zealand business people can enjoy visa-less travel and fast track entry through the 20 APEC members that participate in the scheme.4
This improves business mobility by saving business travellers both valuable time and money.
To make supply chains more efficient across-the-border, APEC recently adopted a new Supply-Chain Connectivity (SC) Framework that will tackle eight priority chokepoints that impede the smooth flow of goods and services. The chokepoints include lack of transparency, lack of capacity, and lack of coordination among different government agencies. Among other things, APEC aims to enhance customs clearance efficiency and improve coordination among border agencies. Ultimately, this framework seeks to promote seamless and efficient logistics connectivity in the region.
APEC is also working hard to make it easier to do business by reducing behind-the-border barriers experienced by business. Last year APEC launched an Ease of Doing Business Action Plan to make doing business in the region 25 percent cheaper, faster and easier by 2015, with an interim target of a 5 percent improvement by 2011. APEC's focus is on five priority areas: starting a business, getting credit, enforcing contracts, trading across borders, and dealing with permits. To help APEC economies meet the target, several Champion Economies have stepped forward to build capacity in these five areas. Again, I am pleased to say that New Zealand is involved - and together with the United States - is leading practical work to help other APEC members in improving procedures for Starting a Business.
But perhaps most significantly, the recent ASEAN-Australia-New Zealand Agreement will contribute to APEC's vision of a Free Trade Area of the Asia-Pacific. Currently work is being done to investigate the levels of convergence and divergence in existing trade agreements between members, and whether these can be used as building blocks towards a more extensive regional trade area. Given that the Agreement is high quality, includes modern provisions and involves many of APEC's members - it will help this process of convergence. APEC Leaders have asked officials to report back on possible pathways to an FTAAP by the end of the year, so this will be an area to watch.
APEC and ASEAN are complementary: Secretariat to Secretariat collaboration
For all these reasons and more, as Executive Director of APEC, I don't see APEC and ASEAN as competing processes. Rather I see them as complementary efforts to help businesses run smoothly and to achieve regional prosperity.
ASEAN's goal to establish the ASEAN Economic Community and its objectives of achieving higher levels of economic dynamism, sustained prosperity, inclusive growth and integrated development are very much in line with APEC's agenda.
This year, taking on board the lessons of the recent economic crisis, APEC is similarly developing a new growth strategy for the region that incorporates inclusive growth, sustainable growth, balanced growth and knowledge-based growth. This is to ensure that the benefits of trade and globalisation will be more widely spread and that growth can be maintained in the future.
On a practical level, since 2006 there has also been Secretariat-to-Secretariat cooperation. In fact last June, delegates from the APEC Secretariat in Singapore visited the ASEAN Secretariat in Jakarta to find areas of convergence and possible collaboration, as well as to share best practices. In particular issues relating to Human Security, such as dealing with health pandemics and emergency preparedness, are natural areas for cooperation.
The Asia-Pacific remains the fastest growing region in the world and its citizens have experienced massive improvements in standards of living. This is no doubt in part attributable to both the efforts of ASEAN and APEC, and I look forward to the positive contribution that both will make in future.