Lower Trade Costs, Labor Reform Key to Beating Demand Lull: Report

Sluggish global demand is expected to continue to affect near-term trade and growth for economies in the Pacific Rim but can be mitigated by lower trade costs and improvements in labor productivity, according to a new economic outlook for the region. 

The findings from the latest APEC Regional Trends Analysis, launched ahead of a meeting of Trade Ministers from APEC economies to modernize the sector on Tuesday and Wednesday in Arequipa, provide impetus for greater coordinated efforts in the region to tackle these dual challenges. 

The 21 APEC economies are forecast to grow 2.7 per cent in 2016 and up slightly to 2.8 per cent in 2017 and 2018. This is on par with the region’s 2.7 per cent growth in 2015 though marginally below world GDP growth during this same three-year period and below that historically achieved in APEC as an engine of the world economy. 

“Trade has long been the driver of economies in APEC but is now a source of concern in the region in the near-term due to the slowdown in global demand,” said Dr Denis Hew, Director of the APEC Policy Support Unit, which issued the report. 

“The region’s growth over the coming years will fall short of the high levels of the past based on current trends but there is room for a course correction,” he noted. “Next steps to reduce the cost of doing cross-border business and better equip labor forces to support and benefit from it could do a lot to strengthen economic fundamentals in APEC.” 

Trade facilitating areas in need of attention include transportation and network infrastructure updgrades, improvements in the regulatory environment for services and the building of cross-border production and supply chains that are more resistant to natural disaster risk, the report recommends. 

“APEC has been a leader in reducing administrative bottlenecks to business travel and the movement of goods across borders,” noted Akhmad Bayhaqi, a Senior Analyst with the APEC Policy Support Unit and co-author of the report. “The time now is for the region to harmonize trade facilitating efforts and connectivity which also means securing financial and data flows.” 

“Alongside short-term measures to bolster macroeconomic resilience, the implementation of structural reforms, particularly labor market and product market reform, is imperative,” he added. “Timely progress in these areas could help to put trade and growth back on the right path as well as fortify existing policy buffers to external shocks.” 

Click here to download the latest APEC Regional Trends Analysis 

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For additional information, or to arrange possible media interviews with APEC officials, please contact: 

David Hendrickson (in Arequipa) +65 9137 3886 at [email protected]

Michael Chapnick (in Arequipa) +65 9647 4847 at [email protected]