Free Trade Area of the Asia-Pacific

This policy brief by the Policy Support Unit shows that APEC could help economies be more resilient by developing work in a number of areas and encouraging governments to implement a series of measures. APEC could, for example, incorporate new relevant topics in the work program towards a Free Trade Area of the Asia-Pacific (FTAAP) as well as promote initiatives, including capacity-building activities, on areas with growing interest.

Key Findings

The COVID-19 pandemic is accelerating structural changes in the global economy. The magnitude of the trade disruptions has been unprecedented, and governments need to improve resilience and get ready to face similar situations in the future.

Actions need to be taken at the domestic level. However, this is not enough, and international collaboration is needed as well. Any regional integration process involving free trade agreements and customs unions, among others, would be critical to the pursuit of solutions to the various challenges arising from the changes. APEC has an opportunity to tackle these issues and influence the global trade agenda.

The six critical challenges affecting trade are: (1) disruption in accessing essential goods; (2) disruption of trade in services; (3) difficulties in supply chain logistics; (4) digital transformation; (5) transparency; and (6) regulatory bottlenecks affecting trade in essential goods.

To improve resilience in the region to address these challenges, APEC's FTAAP work program could incorporate a number of new topics into the agenda of relevant committees and sub-fora:

Trade in goods

Discussions on the definition of "essential goods", and commitments to ensure the availability of commercial purchases of essential goods, are needed. As are commitments to avoid the implementation of export restrictions and prohibitions affecting essential goods, as well as exempting these goods from import tariffs on a permanent basis, among other initiatives.

Trade in services

Discussions to establish international commitments to keep airports, ports, customs and border facilities operational should be initiated. In addition, it is imperative to create schemes to facilitate cross-border movement of businesspeople and those working in essential activities. The harmonization of criteria to allow travel (for example, in the recognition of vaccine certificates, PCR tests and health passes) is critical to facilitating the flow of people across borders.

Trade facilitation and border management

To tackle supply chain logistics, it is important to discuss initiatives to facilitate cross-border movement of maritime seafarers so that companies could get their crew to their vessels. Accelerating the implementation of the WTO Trade Facilitation Agreement (TFA) to expedite shipments and the release of goods should also be discussed. Governments should be encouraged to go beyond what is established in the TFA and to reflect that in any trade agreement. The use of technology and paperless procedures should also be advanced. Border cooperation and technical assistance must be enhanced for the implementation of all these measures.

Digital issues

To facilitate the digital transformation and allow the expansion of the digital economy, it is important to agree on modern trade rules to foster the digital economy. Rules on data privacy, data localization, cross-border data flows, and electronic commerce (consumer protection, electronic payments and electronic signatures, among others) need to be discussed at international fora like APEC and other regional economic integration arrangements.

Transparency

The role of international organizations and regional economic integration schemes is important in addressing transparency problems. There should be discussions about adding teeth to transparency provisions, in particular to address emergency situations like those related to the pandemic. For instance, binding arrangements should consider the possibility of implementing appropriate sanctions against governments for not duly reporting new regulations or changes to existing regulations.

Standards and conformance

More work on risk assessment is needed to ensure that the proportionality of a measure matches the risk involved. Discussions on addressing harmonization, mutual recognition and equivalence issues are needed to facilitate regulatory approval for essential goods. The discussions should also involve measures to increase the production of medical goods, including expediting inspections, approving factories, and facilitating partnerships and technology transfer.

Intellectual property

Governments should consider supporting the multilateral discussions about a temporary waiver of certain obligations in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in response to COVID-19, with the intention to enable timely and affordable access to vaccines and medicines, and to scale up production of essential medical products.

The COVID-19 pandemic has accelerated structural changes in the economy and is bringing new challenges to trade. In its role as incubator of ideas, APEC is in the position to influence the global trade agenda. In fact, APEC's history shows its usefulness in developing principles and guidelines that are later incorporated in binding regional economic integration arrangements. The APEC Non-binding Investment Principles, the APEC Principles for Cross-Border Trade in Services, the APEC Model Measures for RTA/FTA and the APEC Best Practices for RTA/FTA are some of the APEC initiatives that have resonated, as they have been incorporated later to new free trade agreements and bilateral investment treaties.

APEC could make a positive contribution to regional economic integration and the global trade agenda by leading the development of ideas, taking into account new trends and the lessons from the COVID-19 pandemic.