APEC targets transparency in trade

Transparency provides certainty, which economic operators place as the greatest importance.

Before investors enter the market, they want to know clearly what the rules are. After they enter the market, they want assurances that the rules – government policies, regulations and laws – will stay the same or will only be changed in a transparent and participatory manner.

Investors look for markets that provide a sense of predictability, transparency and accountability, explains Monica Contreras, Chair of APEC’s Committee on Trade and Investment.

“Transparency provides certainty, which economic operators place as the greatest importance,” says Ms Contreras, adding that certainty reduces risks and therefore costs for businesses.

APEC has long worked hard to improve the transparency of the trading environment in the Asia-Pacific, distinctly aware of the importance of removing “hidden” barriers to free trade and investment in the region, to boost economic growth and prosperity.

Model Chapter

This year, APEC, hosted by Russia, focused on updating its model chapter on transparency for free trade agreements. Written in plain, non-jargon language, the chapter serves as a guide or useful reference for economies wanting to include transparency in their free trade agreements or regional trade agreements under negotiation.

The chapter focuses on the transparent and due process of making trade policies. It says, for example, that government agencies publish upcoming laws, decisions and regulations as clearly and as early as possible so that exporters, business people and others are informed in advance about changes to their trading environment.

“The aim of this chapter is to foster a conducive environment that facilitates the trading environment for economic operators such as companies and workers, and to promote economic growth,” says Ms Contreras.

Convergence

Not only does the chapter aim to make doing business easier, cheaper and faster across the region, an APEC priority, it encourages economies to adopt transparency chapters in their free trade agreements that are clear and consistent.

In other words, the chapter promotes convergence of how transparency issues should be addressed in agreements. APEC Leaders, meeting in Vladivostok, Russia in September, said this convergence advances APEC’s key agenda of further economic integration of the region, which helps boost free trade and investment. Endorsing the chapter, Leaders said in their 2012 Declaration that these efforts are also concrete steps towards APEC’s ultimate goal of a Free Trade Area of the Asia-Pacific (FTAAP).

Outlining the importance of the chapter, Russian President Vladimir Putin told business leaders: “We believe that preferential trade agreements, arrangements must be as transparent as possible.”

“This would help everyone see advantages and drawbacks of effective free trade agreements and those that are yet being drafted and in the future create an optimal integration model,” Mr Putin told the APEC CEO Summit in Vladivostok.

The chapter promotes high-quality and comprehensive agreements in the region, explains Russian APEC official Vladimir Tkachenko, who played a key role in its development. The chapter comes after Leaders in 2010 tasked APEC with defining and addressing “next generation” trade and investment issues – such as transparency – that should be included in future, high-quality free trade agreements – including any eventual FTAAP.

“The text of this model chapter is based on APEC member economies’ existing FTA, WTO rules and best practices in order to follow the convergence on FTAs and to establish WTO rules as the minimum standard for transparency provisions,” says Mr Tkachenko, Deputy Director of the Department for Trade Negotiations at Russia’s Ministry of Economic Development.

The prevalence of trade agreements in the region makes APEC’s work on convergence – of transparency and a range of other issues – even more relevant. APEC members have signed 129 FTA/RTAs and implemented 117 of them, according to APEC’s research arm, the Policy Support Unit (PSU).^[1]

Ms Contreras explains that trade agreements with converging chapters save companies time and money when it comes to understanding and benefiting from them.

“A company can have one worker dealing with international trade operations given it is the same framework, instead of two, three or even more workers dealing with different rules systems. In this case, the company makes more efficient use of both human and financial resources.”  

Predictable and Simple

All businesses want the predictability that comes with a clear understanding of transparent trade policies and practices that are being applied. And they want a simple trading environment, such as a small number of documents required for imports and exports, making it easier and cheaper to identify, assess and comply with regulations. But this is especially true for small and medium-sized enterprises (SME), says Robert Lai, Chair of the APEC Small and Medium Enterprises Working Group.

“Like large multi-national companies, SMEs need to assess the risk factors of moving their products into a new market,” Dr Lai says.

“But unlike large companies, they do not have the human or financial resources to undertake comprehensive assessments that will guarantee their goods and services will move efficiently and in the most cost effective manner across borders,” he says.

“Transparent rules assure SMEs that their products will receive fair and equal treatment in a competitive global marketplace and dramatically reduce the risk for small companies.”

APEC’s many working groups and committees, including the SME Working Group, are targeting these issues with a range of initiatives. To address the issue of corruption, for example, APEC has been working with industry associations and companies from three sectors to develop a voluntary code of ethics across the region.

Research and the way forward

Research shows that APEC economies are reporting higher levels of transparency. Many, for example, promptly publish all laws and regulations on their websites, research by the PSU says. And some economies are consulting interested parties, including through public notices and hearings, as part of the process of making new laws and regulations and reviewing existing ones – a provision in the model chapter.

The research is contained in “APEC’s Bogor Goals Progress Report”, an assessment of member economies’ progress towards the shared goal of free trade and investment for industrialized economies in 2010 and 2020 for developing ones.

While progress has been made, the report also notes that more work needs to be done. Indeed World Bank research^[2] showed APEC economies stood to add a collective USD 148 billion to their trade performance if they continued to improve transparency – namely by making the trading environment more simple and predictable.

In Vladivostok, APEC Leaders stated their commitment to forging ahead with such reform. “Transparency is one of the basic principles underlying trade liberalization and facilitation, important to our businesses and workers, and to eliminating and addressing barriers to trade,” their declaration says.

[1] Figures as at June 2012

[2] World Bank (2007) Transparency & Trade Facilitation in the Asia Pacific: Estimating the Gains from Reform