Advancing Regional Economic Cooperation: Developments and perceptions in APEC

APEC Perception Survey 2023 and APEC’s perception in Japan

The APEC Perception Survey 2023 covers 19 out of 21 APEC economies. In total, around 7,000 respondents shared their perceptions of APEC. The survey brought interesting findings to light which provide important lessons, especially for policymakers, and show in which areas further efforts to raise awareness about APEC’s initiatives among the general public are needed. For Japan, the results of Japanese respondents and the average of respondents in all surveyed economies are shared.

It is apparent that there is significant awareness of APEC among the APEC member economies. In Japan, 50% of respondents said they were “a little bit” aware of APEC, which indicated that there is still work to be done to increase awareness. However, only 12% replied that they were completely unaware of APEC which is a positive result compared to the result of 17% for the average of all respondents. Regarding top associations with APEC, in Japan 51% of respondents associate APEC with “free, open, and fair trade, and international investment” compared to the average result of 53%. This clearly shows that in general there is a strong perception of APEC as being about trade and international investment. While “interconnectedness” also ranks fairly high overall, a “fair and just energy transition” is placed fairly low for the APEC average result at 9%, while the Japanese result is better at 13%. Awareness of “supply chain resilience” in Japan is an area where work to raise awareness is needed, as only 7% of respondents associated this topic with APEC compared to 20% for the average result.

Concerning the understanding of multilateralism, 35% of Japanese respondents answered that they were not familiar with the concept. Nevertheless, respondents acknowledged that knowledge-sharing and economic integration are essential to addressing global challenges in an effective way. Regarding the perceived effectiveness of APEC in promoting multilateralism in the Asia-Pacific region, more than 60% of Japanese respondents rated the effectiveness as average or ineffective, which is significantly higher than the APEC average.

Perception of digital transformation and APEC

Digital transformation is a topic that is intensely discussed in APEC in recent years and the utilization of digital transformation at the local level to help transition enterprises from the informal sector to the formal sector is one of the focus areas at the APEC 2024 meetings in Peru. In the context of where Japan stands on the question of the impact of digital transformation on the local economy, there is a noticeable variation between the Japanese result and the APEC average, with a significantly lower percentage of respondents replying that they thought there was a positive impact. Despite this result, a portion of Japanese respondents recognizes that digital transformation has a positive impact as it facilitates economic growth, enables enhancement of products and services, fosters innovation, creates jobs, enables cost reduction, expands opportunities, and contributes to social development. This is particularly of interest when considering challenges surrounding Japan’s aging population. While respondents had a fairly high awareness of its effect in terms of e-commerce in their own local economy, the gig economy appears to be less prevalent in Japan than in other APEC member economies. Aspects such as digital trade and management of data and information are expected to come to the forefront in all economies going forward.

The survey results also show that beyond the trade of goods and services, the public expects trade agreements to foster best practices across economies. This includes responsible business conduct, standardization and regulation of products and services, fostering innovation, the green and digital corridor, and the protection and enforcement of intellectual property rights. While traditional free trade agreements tend to focus on market access, more recent trade agreements—such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and, to some extent, the Regional Comprehensive Economic Partnership (RCEP)—tend to bring the aspect of intellectual property enforcement to the forefront.

Whereas the Bogor Goals primarily focused on market access, the Putrajaya Vision 2040 also addresses the importance of inclusive and sustainable growth. The public’s priorities regarding this area include job creation, ensuring food security and safety, bolstering healthcare and health access, fighting corruption, support for MSMEs and startup companies, revitalization of damaged industries post-COVID, and gender equality as well as equality for those in marginalized communities. Given these priorities of the public, the topic of inclusiveness and sustainability has been designated as a focus area of APEC 2024 hosted by Peru.

Outcomes of APEC 2022 Thailand and APEC 2023 United States

APEC 2022 in Thailand was held just after the COVID-19 pandemic and tackled questions about green growth and the importance of sustainable development. This is a key part of the Putrajaya Vision 2040 which includes APEC’s key elements of trade and investment, digitalization and innovation, and sustainability and inclusiveness. Much was learned regarding the movement of people and the Bio-Circular Green Economy, making it a pivotal year for the APEC economies.

APEC 2023 in the United States had a strong focus on inclusivity, while also addressing sustainability of trade and investment. Much of the discussion centered on how to put the slogan of “ensuring that no one is left behind” into action. There was a lot of stakeholder engagement to make sure that policymakers were aware of the impact of their decisions on the average person. During the APEC Multistakeholder Forum in San Francisco diverse voices—including those of people with disabilities, indigenous people, women, and youths—were represented, resulting in highly valuable and enlightening input for policymakers. The focus on small and medium enterprises was another important point which added value and contributed to APEC’s overall work and having SME representative meet with the ministers and then having trade ministers meet with ministers responsible for SMEs was valuable.

APEC 2024 Peru

Peru’s host year is encapsulated in the theme “Empower, Include, Grow,” with the three priorities of the Putrajaya Vision 2040 outlined as “trade and investment for inclusive and interconnected growth,” “innovation and digitalization to promote the transition to the formal and global economy,” and “sustainable growth for resilient development.”

In regard to trade and investment, conversations on the free trade area of the Asia-Pacific region are taking place. The nature of trade and investment has evolved and therefore it has become necessary to revisit this important conversation. How do we make sense of the many trade agreements that are in place? The APEC Policy Support Unit is conducting work on this question and will be sharing the findings later this year. In addition to looking at market access, there is also the need to measure and analyze indicators for inclusive growth.

When it comes to the progress of digitalization to promote the transition to the formal and global economy, there is a wide range of progress in APEC economies. Some economies have only a rather low percentage of people in the informal sector. Meanwhile, in countries such as Peru, more than 70% of the people are working in the informal sector. Why is that the case and how can inclusiveness be achieved given this situation? People working in the informal sector do not have access to funds or safety nets. During the global COVID-19 pandemic, those who were affected the most were those in the informal sector—for example women in the informal sector or informal tourist guides. What makes these people stay in the informal sector and reluctant to move to the formal sector? APEC aims to have a better framework to facilitate these important conversations in order to assess how policymakers can contribute to making a change. One issue that was highlighted repeatedly during related discussions were complex regulations as well as licenses that are necessary before a business could enter the formal sector. Therefore, it is clear that structural reform is needed before talking about moving people to the formal sector.

Finally, discussions about sustainability are also crucial in this day and age. Thailand’s concept of a Bio-Circular-Green Economy (BCG) will continue to be influential going forward. Last year, SMEs were involved in discussions on trade to ensure inclusive growth, and this year, women's economic empowerment is one key aspect that is focused on. Several meetings have already taken place in Peru, while others are coming up in August and September. APEC Economic Leaders’ Week will take place in November. On another note, each year the respective host economy has the privilege of highlighting important parts of their agenda, which Peru has done by highlighting the mining sector.

Upcoming potential APEC deliverables

APEC is preparing upcoming deliverables such as a Roadmap to Promote Transition to the Formal and Global Economy,, and “A New Look on the Free Trade Area of the Asia-Pacific.” Meanwhile, Peru has been carrying forward domestic engagement through work in schools and universities. The APEC Perception Survey also contributes to bringing APEC closer to the people by engaging with different parts of society. Peru managed to achieve a good balance between cultural events and informal policy discussions and thereby made this year a very interesting one for APEC so far.

Comment

HACHIYAMA Koji:
For a long time, APEC has undertaken various efforts for an Asia-Pacific region with free and open trade and investment to achieve the Bogor Goals of 1994. Now, the Putrajaya Vision 2040 aims for an open, dynamic, resilient, and peaceful Asia-Pacific community by the 2040s. Returning to Japan after working for ERIA in Indonesia, I felt that Japan seems to be blocked up and lacks international connectivity. ASEAN, on the other hand, uses connectivity as the engine for their development. Japan needs to connect more with the growing Asia-Pacific region and step up in terms of digitalization, which is rapidly progressing worldwide. Digital transformation in local areas must be implemented to revitalize the local communities by connecting them to the world and address challenges such as the aging population and resulting depopulation. One concrete example is public transportation—autonomous vehicles, which are closely intertwined with digital transformation, could be an alternative to existing means of public transport which are facing various challenges, including labor shortages. Pilot projects are already being conducted and as public implementation progresses, new problems are being discovered and solved. Japan is often too wary of problems in the beginning, stunting growth.

Market size is another important point. The Asia-Pacific region has grown by creating large markets through the liberalization of trade and investment. A large digital single market is key for further development and Data Free Flow with Trust (DFFT) is essential. ASEAN is working on the Digital Economy Framework Agreement (DEFA) negotiations which can contribute to accelerate digital transformation in the Asia-Pacific region. The business sector will be the driving force behind digital communities, and startups are expected to play a core role. Therefore, creating ecosystems where startups can thrive is an important task for all economies in the region. In ASEAN, the U.S.-China conflict has an increasingly significant impact and is affecting policymaking, making decisions on how to cooperate with global economies more difficult. From the global perspective, creating consensus is becoming more difficult as the conflict intensifies. Therefore, APEC, which has created a direction for the economy of the Asia-Pacific region based on a non-binding voluntary approach, is now attracting attention. It is now time for APEC to play an even greater role as an engine driving the region, especially when it comes to specific issues where opinions differ, such as SDGs. Hopefully APEC will create a new and significant movement and momentum in the Asia-Pacific region this year.

Rebecca Fatima STA MARIA:
In response to the question about ABAC (APEC Business Advisory Council), ABAC members engage directly with the ministers and leaders of the member economies. The APEC Secretariat tracks all recommendations ABAC brings to the table and reports back on the progress. Businesses have their own expectations of policymakers and policymakers tend to respond slowly as there are numerous processes involved. Having the business community's voice present in APEC’s fora through ABAC is very important. What is the role of Japan? Japan has its representatives at ABAC. They collect the views of the different business associations 　and channel them to policymakers. It is a give-and-take process. Policymakers need to understand why the initiatives that are proposed are important and the rationale must be clear. ABAC makes sure that there is consistent engagement with policymakers. Without the input provided by the business community, it would just be an echo chamber of policymakers complimenting each other’s policies.

Q&A

Q:
Is APEC influenced by American political parties? For example, is there a difference between how APEC approached Democratic or Republican administrations?

Rebecca Fatima STA MARIA:
Within APEC, the U.S.A. are just one party out of 21. Every member has an equal voice, can freely share their opinion, and has the right to be heard. Even when the U.S. took on the role of the chair in 2023, they would not have been able to decide the agenda without the agreement of the other 20 member economies. There is a constant conversation and since APEC is non-binding, there is less posturing and guarding.

Q:
APEC includes large economies, such as the U.S. and China, and important economies, such as Taiwan and Russia. Is the influence of APEC in world affairs increasing or decreasing, and why?

Rebecca Fatima STA MARIA:
As captured in the Putrajaya Vision 2040, APEC aims for a peaceful Asia-Pacific for the benefit of all participating economies, despite different ideologies. A key part of APEC is its capacity building function for policymakers to foster the competence that is needed to craft policies to address grand ideas such as sustainability and a just energy transition. While APEC is impacted by the global scenario, such as the Red Sea crisis, talking about issues to bringing key points to the surface remains important. APEC provides a platform to have difficult conversations without the need for agreement. Tensions between countries make these conversations more difficult, but nevertheless APEC provides policymakers with varied, diverse views and voices that are then reflected in the decisions made for the benefit of each economy.

Q:
APEC is a regional framework in the Asia-Pacific region. Is there a possibility to extend this relationship to outside members, such as the EU, as part of multilateralism?

Rebecca Fatima STA MARIA:
APEC is not an exclusive club. It is in fact very inclusive. The OECD and different international organizations have a seat at the table as observers or guests. The policy dialogues are not limited to APEC members. It could be open to other particular regions, for example the Pacific Alliance. This year, there is more engagement with Brazil as a neighbor to Pacific economies in Latin America. Traditionally, the IMF, the World Bank, and the WTO are part of APEC’s conversations. Also, in 2022, France’s President Macron was a guest at the APEC Leaders’ Summit, bringing the voice of the EU to the discussion. APEC fosters close working relationships with many international organizations.

Q:
Mr. Hachiyama mentioned some points related to the revitalization of Japan’s economy, such as utilization of AI technologies in rural areas and startups. Could you elaborate on the discussions within APEC concerning startups?

Rebecca Fatima STA MARIA:
Startups are part of the conversation, for example as part of the innovation and digitalization work of the Digital Economy Steering Group. This group discusses how to engage startups to make sure the necessary environment for them to grow and flourish is provided. There are also discussions at the SME Working Group on how up-and-coming businesses can be supported. Another stream of work is through the Policy Partnership on Women and the Economy. While there is no specific work stream on startups, they are discussed in different fora and a lot of information is shared on how different economies nurture their startups.

Q:
What are specific achievements of APEC so far?

Rebecca Fatima STA MARIA:
One important achievement is the WTO’s Trade Facilitation Agreement, which had its genesis at APEC. The conversation about the Environmental Goods List also started at APEC. APEC had the list but could not conclude an agreement as a non-negotiating body, so it was passed on to the WTO. Likewise, in 2023 APEC created a Reference List of Environmental Services. APEC members in the WTO have been very active in pushing for this discussion.

Q:
Given the U.S.-China conflict, how are discussions at APEC affected by economies whose relationship is not on friendly terms?

Rebecca Fatima STA MARIA:
While there is no need to agree on everything, APEC finds middle ground when decisions must be made. At the end of the day, APEC is a collective effort. Last year, there were some concerns about the APEC meeting being chaired by the U.S. and the ways in which this would affect negotiations, statements, and initiatives. However, consensus was found, even though it was not always easy. By investing time and energy into engaging with each other, the APEC economies managed to look past their differences and focus on what unites them. While this statement may sound like a cliché, it is true. That is what actually happens in the room when APEC is drafting statements and declarations. Eventually, APEC focuses on what matters to the Asia-Pacific region as a collective.

Q:
This year APEC focuses on the theme of gender. What kind of discussions on gender are planned? Considering that Japan consistently ranks low in the gender gap surveys and indexes, this is of particular interest.

Rebecca Fatima STA MARIA:
The theme is actually not exclusively on gender, but on sustainability and inclusion. Gender is one aspect of this theme under the overarching message “Empower. Include. Grow.” APEC has long been working on the topic of women and economic empowerment. In 2011, the Policy Partnership on Women and the Economy was established. The APEC Policy Support Unit measures the status of initiatives on this topic and reports on the indicators. I personally believe that what gets measured, gets done. Five specific indicators are tracked using the “APEC Women and the Economy Dashboard.” The tracking of indicators is not intended for “naming and shaming,” but to clearly show where APEC stands on issues of gender. While achievements were made in some areas, such as women in STEM, there is need for improvement in other areas, such as access to finance, in particular. For example, there are 12 economies in APEC where discrimination against women in regard to access to capital is not illegal. APEC has come a long way, but there are still some economies where women are denied access to finance merely based on their gender.