English Summary drafted by NZIIA
Asia-Pacific Forum 2020
Navigating Disruption : Rethinking Economic Development in a
COVID Era
Welcome Remarks from Ms. Melanie Thornton, Executive Director of the New ZealandInstitute of International Affairs (NZIIA):
Greetings to everyone, kia hora, konnichiwa, namaste, selamat, nihao and greetings in
all the other languages present in this Forum. My name is Melanie Thornton and I’m
the Executive Director of the New Zealand Institute of International Affairs. We’redelighted to host the 2020 iteration of the Asia Pacific Forum in collaboration with theJapan Economic Foundation (JEF) and the Asia New Zealand Foundation. We lookforward to bringing together this excellent and diverse group of speakers from across the
Asia Pacific Region and hope that you the audience get huge value from this Forum.
In a year that’s seen unprecedented change across the globe due to COVID-19, the valueof a forum such as this is tremendous. As countries grapple with the economic and healthimpacts resulting from the pandemic, exchanges of perspectives and experiences canhelp countries navigate new approaches towards policies and solutions to deal with theeconomic and social impacts from this pandemic.
Welcome Remarks from Mr. Kazumasa KUSAKA, Chairman and CEO of the Japan
Economic Foundation (JEF):
The Asia Pacific Forum has grown to its 19th round this year. The last Forum was heldin October 2019 in Kuala Lumpur, Malaysia, when we celebrated CPTPP entering into
force. We talked about the ways to better globalize our region inclusively, despite
witnessing the radical divisions over income disparities worldwide. This year RCEP has
finally been agreed to. After long negotiations which began in 2013, on November 15 we
saw this as a positive message for all the participating countries in this Asia Pacific
Forum. But not all is good news. We need to check that our social lives and economic
activities can co-exist with the coronavirus.
In America where globalization has progressed with technological innovation, we areseeing a phenomenon of citizens being left behind, without their consent, and unable tokeep up with the speed or the content over the changes which created the disparities.
The pandemic has made these issues more prominent. And more bad news is theaccelerated social divide caused by the contestation of results following the US
presidential election.
RCEP has the DNA of integrating countries’ commitment to development all over East
Asia, and it also plays a very important role in bringing them into one community
through the perspectives of supply and value chains. On the other hand, CPTPP is aimed
at high levels of globalisation and rule-making that matches the reality and the needs ofthe economies. RCEP and CPTPP are not mutually exclusive, but complement each otherin addressing challenges and solutions as our common agenda.
In today's globalized world where our economies mutually rely on each other, betterglobalization is crucial, especially in Asia. We are countries that are dynamically growing.
Our region has always grown by that dynamism. I'm looking forward to the discussions
and the hearing the expert views over the next two days and to learn from each other.
Welcome Remarks from Rt Hon Sir Anand Satyanand, President of the NZIIA:
Thank you Melanie - and it's a great pleasure to follow you, Mr Kusaka in this importantexchange between colleagues here in New Zealand in Japan, in China, and in India at atime where the world's ability to exchange ideas has been severely limited because of the
COVID pandemic. But in a way, the modern technology available to us by Zoom has
worked in our favour - because this afternoon, New Zealand time and tomorrow, we will
have the benefit of listening to a number of experts in their fields speaking about thepresent and future architecture of how we are going to deal with each other as countries
and economies.
The New Zealand Institute of International Affairs, of which I am the current president,
has been in operation in New Zealand since 1934. And its essential purpose remains thesame - to encourage interest in international relations on the part of ordinary civil society.
So at one end sits the people who are engaged with international relations andgovernments, which do business with each other at one level. Diplomats and trade
officials do their business with each other at different levels. And then beyond - at theuniversities and other organizations who have an interest in making the sameconnections between countries evolve and improve.
The Institute of International Affairs regards itself as a catalyst in helping make thishappen. And therefore, it is great that we can hold hands this afternoon with theJapanese Economic Foundation, with whom we have worked before - and all of the otherpeople, so that we can gain knowledge and insight about the present and the immediate
future.
Guest Speaker: Mr. Vangelis Vitalis, Deputy Secretary for Trade and Economic Divisionof the New Zealand Ministry of Foreign Affairs and Trade
I like to think that the free trade agreements we do are, of course, a win-win for all ofour partners. I wanted to speak in three inter-related parts. My overriding theme that I
want to leave people with, is that the golden weather - as it was for trade policy - hasreally ended now; and COVID has essentially hastened or accelerated the end of that
golden weather.
But I also do believe that our region - the Asia Pacific - is actually a better place thanmost, and to find a way and navigate its way through this; in particular through thearchitectural structures that are now evolving very rapidly - and most recently throughthe Regional Comprehensive Economic Partnership (RCEP), which I think is anextremely important initiative, and one of the two pillars that are going to structure therules and trade around our region alongside CPTPP.
But first let me say by way of a contextual remark, the broad sense that I have of thegolden weather - the ending of the golden weather for me was from 1995 until 2019. 1995,
because that's the year the World Trade Organization (WTO) was established; we hadfor the first time a set of legally enforceable rules. This was very important to a small
country like New Zealand, and indeed many economies around this region - because it
meant that we had some protections against the behaviour of major powers. When theywanted to challenge the rules, we had a mechanism which would allow us to bring thoseeconomies into compliance.
Unfortunately, that has now ended with the essentially frozen nature of the appellate
body structure at the WTO and the various developments that have occurred since then.
And at the moment, it doesn't have a Director General either. So I think what we'reseeing is that we're entering an era of some disorder and some uncertainty. And I sayuncertainty essentially for six reasons:First of all, there is the COVID health crisis - we see that all around the world. We see
what's happening across the European continent, the Americas and even our own region
as well - and we don't know the direction that that is going to go; where the people aregoing to be in and out of lockdown; and where, when and how the vaccines will be rolled
out. So lots of profound health questions we need to think about.
The second element is the increase of uncertainty around the global economic shock that
we're facing - how and how wide that is going to be. It's not yet clear. What is clear,though, is it having profound consequences for the way in which we think about trade
policy, but also economic policy more broadly - driven in part because this is a global
economic shock that has a demand side and a supply side element to it. And then, ofcourse, makes it very different to the previous kind of financial shocks that the region
has suffered.
The third kind of element that I would identify as creating that uncertainty is risingprotectionism - not just in our region, but internationally as well. And that is a very
troubling indication that people are resorting to the kinds of instruments that we haven't
seen for many years. They are well and truly back - and it's a reminder of how fragile
the consensus was around trade policy and the benefits of trade.
So the health crisis, the economic crisis, protectionism, the fragmentation of the rulesbased system and actually public scepticism, as well as the fifth area. I wanted to identify
that people are sceptical about trade. They were sceptical before COVID. They're
becoming even more sceptical now, because they worry that the products that they
consume - the products that they use, are they COVID-free? Are they COVID-safe? Is
this high quality food? How has it been handled along the way that it reached me?
So we're getting increasing signs from economies around the region that they're going toinstall testing of products that come into the country for COVID, even though there isno scientific evidence that there is a risk. Nevertheless, there is an understandable
consumer perception to which governments are wanting to respond. And the sixth
element is something of an unknown: how the US-China relationship will play out in our
region, and all of the uncertainty that continues to generate for us.

I think that our region is actually well-placed to manage this emerging disorder anduncertainty - even though I think the golden weather has actually ended. I think what
our region is looking to do is showing its resilience. And also, if I may say so, thecontinued understanding across all of the economies in the region that the rules-based
system still matters. CPTPP is one example of that. But most recently is another very
important signal to the wider world that rules matter. That countries and people can get
together, even if that seems very challenging. And RCEP was a seven-year negotiation,
which at many points looked like it wasn't going to come together - and it did. I thinkthat is a key-turner in many capitals around the world - not just in our own region, but
in places like Brussels, in Washington and elsewhere.
Something very important happened a couple of weeks ago. I was fortunate enough toobserve the signing (of RCEP). I think there are some other very interesting elementsthat are happening in New Zealand. We talked about our trade policy approachcombining something that we call “concerted open plurilateralism”. This is where wework with other like-minded economies to set up high quality comprehensive rules andinteresting areas that we then hope will be a reference point or a vehicle for the region
to build these agreements out further.
For example, the Digital Economy Partnership Agreement (DEPA) was ratified mostrecently by Singapore, Chile and New Zealand - the first as far as we're aware; the firstinternational trade treaty that was concluded entirely and signed digitally. So that’s an
example of what can be done creatively. That that will be a reference point we believe forthe region, as they think about some of the big challenges that we face in the digital
economy sphere.
Another example is the agreement on climate change and trading sustainability that
New Zealand's Prime Minister launched last year. It was a very importantdemonstration of the way in which trade can help us deal with some of the climatechange challenges that we face. So we're working with a small group of small like-mindedeconomies to try to drive change by the removal of tariffs on environment of goods andservices. New disciplines on fossil fuel subsidies and guidelines on eco-labelling are alldesigned squarely to help us mitigate those environmental challenges we face; but inparticular, to send a signal that trade needs to be part of the solution.
That brings me to my final observation, which is a point I've talked about already: thehard rules in the region. As all of the colleagues on this call are aware, it's the institutionthat provides the ecosystem that constructs the norms and understandings thateventually then get translated into the hard rules that we use in the ASEAN, Australia,
New Zealand Free Trade Agreement (AANZFTA). As with CPTPP and RCEP, our work
together in the institution has been a crucial facilitator and enabler of our ability for themove into the hard rules sphere. Having established those norms in APEC, we can thenmove them into the hard rule sphere. And I think it is very important not to lose sight ofthat. New Zealand feels very strongly about that responsibility. Next year, as we are thehosts, we will be looking for APEC to be a driver of the confidence-building measuresthat we need in this region to re-establish and re-invigorate the regional economic andtrade architecture.
So let me conclude there by observing that our region is evolving fast; it has adaptedvery effectively to the end of what I call the golden weather; and it is constructing its
own architecture to manage and mitigate as far as possible. Those uncertainties that I
described at the start around the health crisis, the economic crisis, protectionism andfragmentation of the rules-based system. Encouraging our citizens to believe again in
the power of trade policy, and of course, to help us think about in a structured andcoherent way the way in which we work together with some of the major powers in our
region. So for all of those reasons I'm actually very optimistic indeed - that our region
above all, has found a way and has agency to drive prosperity, wealth and health for ourpeople in our region.
Q&A Session with Mr. Vangelis Vitalis - Moderated by Josie PAGANI, Director, Council
for International Development:

You talk about the end of the golden weather and certainly it's looking a lot cloudier with
COVID. Just to list some of the human consequences under this global recession: whenlooking at 400 million people who have lost jobs; there's a decline in tourism by about
65%; trade flows have dropped by about 15%; foreign investment has dropped 45%, which
is huge. So I'm glad you feel positive. But is there some sunshine on the horizon in termsof our populations’ support for global trade and globalization, given that COVID has beena global problem looking for a global solution?
What gives me a more optimistic way of thinking about it is, that the prediction forinternational trade flows to collapse was in the order of up to 30-40%. In fact, we arebelow that - and all the signs are that international trade will revive. And there is anunderstanding that without international trade we wouldn't have access to the PPE
equipment we need, to the medicines that we need, and of course food. So one of the big
challenges I think we faced in the early part of the crisis (February, March, April) was aconcern around where would we get the equipment from? And I think international trade
has been a really important part and function of that.
And I like to think that in a crisis like this, the region has responded very effectively.
The last time that it was a global financial crisis, we got the AANZFTA, and there was areal push in the region. We need to send a signal that this region understands that in aninternational crisis, what you need is more international cooperation, not less.
It is a sincere regret of mine that India is not part of RCEP. We would welcome India to
re-join us; we see it as a crucial part of the region, and there is a fast track pathway for
India to re-join. But to me, it sends a signal - a really profoundly important one - about
our response here in this region to the crisis is more international cooperation. We've alldepended on our own governments for a COVID response or not; and in some cases, I get
the sense that actually, we wouldn't get the same anti-globalization sentiment and tradedemonstrations that we were seeing a number of years ago. I think you're right - thatpeople have seen the positive sides of a global problem requiring a global solution.

Is there anything that you've picked up during this year of COVID about how we cantranslate the benefits of trade economic development to meaning not just the few - which
again helps us build the case for trade?
I think that is one of our really big challenges, and it's not a communication challenge.
It's actually a substance challenge which is “how do you demonstrate the actual benefitsof trade?” I am a believer in the benefits of trade as actually reaching as broad a part ofyour population as possible and indeed, the Trade For All report and the Trade for
Advisory Boards report was a very important contribution - because what it highlighted:
yes, we do need to think hard about what the impact is on women; what the effect is on
small to medium enterprises; and what the impact is on the regions around the country.
In our case - the impact on indigenous population, the Maori population and New
Zealand. What's the impact on sustainable development? So some of the work that I
think we need to do collectively in the region, and I know various institutions in theregion are thinking about this - is creating the data sets that allow us to think about thatas a time series that tells us something thoughtful about the impact of trade on some of

these groups.
We know in New Zealand that COVID and the economic impact has hit women harderthan me. Why is that? What is it that's happened, and how is it that we should think
about that? As we think about policy responses, we also know that the medium size andlarger firms have had credit lines to survive. The smaller medium sized firms and themicro firms? They've really struggled. How do we support them? How is it that trade canbe a driver for growth? And that's part of the government's trade recovery strategy as
well.

I'm interested in what you said about the way a small country like New Zealand - andother countries in the region - have adapted around the dysfunction and fragmentationof the rules-based system internationally. So we've all adapted, and you mentioned
signing these other agreements, such as the digital agreements, the climate change on
trade and sustainability agreement. So what's your view on whether or not trade deals
post-COVID could be widened in scope and take on these global public goods? About theenvironment, about labour rights, about benefits to women, to indigenous populations or should they stick to the knitting, and be quite narrow and leave the public goods toother agreements?
What scares me is that the debate has profoundly changed. If we were talking about thiseven five years ago, the answer would have been: “well no, try to stick to it, and no you
shouldn't really be getting into these other areas.” I don't think that's credible anymore
in the view of the general public. I think the public does want to know - what is theagreement doing on the environment? Can you re-assure me that there's going to bebenefits for the indigenous population.
To give you a practical example of what we're trying to do in New Zealand, Canada andChile - in the margins of the signing of CPTPP, we put out a declaration that we would
assess CPTPP against some new matrix, and that included what it was doing for women.
What was it doing for the small and medium enterprises? What was it doing for ourindigenous populations? What was it doing for our regions? The regions in Canada? Theregions in Chile? What was it doing for sustainable development?
We have acknowledged that to take a five year review, that may not tell us very much indata terms. Thinking as an economist, you need to have more than just a five year data

set. But we were clearly thinking back then, and our ministers who put out thedeclaration – we were thinking in 10 and 15 years we will know something very
interesting about this; we will be able to think about how we devise these trade
agreements - which of course get reviewed regularly. And we'll be able to review them inlight of actual concrete evidence, and where the impact is negative. Or where it hasn't
been as good as we expected. We hope that we can adjust the agreement to try to makethat change.

In your view, does something like the Paris Agreement on climate change do more or lessto protect climate change than enforceable trade deals like CPTPP, which has
enforceable mechanisms on environmental protection?
Yes clearly. Trade agreements cannot address the climate challenge on their own. And I
think my point is more what can a trade agreement do to enable and facilitate a positive
outcome on climate change? So, for example, I think the agreement on climate change
trading sustainability is a really good example of what is possible. We know about thefossil fuel subsidies, which are in the order of 400 to 600 billion, depending on what you
calculate them on. We know that if we could eliminate all of those, that will be theequivalent of about 100-200 economies stopping all their emissions and going to zero
tomorrow. That's the contribution that the elimination of fossil fuel subsidies would benow.
We tried to eliminate and reform agricultural subsidies using trade disciplines in the
1995 Uruguay Round. What we're trying to do is say, well actually, we could use those
trade rules and those trade disciplines to drive actual reform in subsidies - the classicaltrade problem, but in fossil fuel subsidies - and if we could do that, that would reallymake a contribution. But we're not going to pretend that trade is going to solve climatechange by itself. What trade can do is compliment the policies that have emerged out of
the Paris Agreement, and I do see very powerful synergies between what we're trying to
do in the Agreement on Climate Change, Trade and Sustainability in fossil fuels policy
reform, and what the Paris Agreement says on that. And by the way, the sustainable
development goals are very specific about fossil fuel subsidy reform.
The question I am always curious about is, the G-20 since 2008 has been saying we want
to reform fossil fuel subsidies; lots of your subsidies have actually gone up. So how are
they going to reform that? Well this group of small economies is showing how if you areserious about reforming subsidies to fossil fuels, here's the trade disciplines that would
actually do that. And by the way, those are legally enforceable, and you know that has acertain power in itself. That would actually make a meaningful contribution - but it's acompliment to, it's not instead of.

Let's just talk briefly about RCEP - and many of the countries represented here, aremembers of RCEP. Some have said it's not a very ambitious deal; not as ambitious as the
CPTPP. But the platform creates an ongoing mechanism where we can keep having these
discussions and keep holdig each other accountable on.
What is the biggest benefit for economic development post-COVID in the RCEP
agreement, in your opinion?
I've heard the criticisms of that, and they often come from outside the region, which I've
always thought was rather interesting. I’ve heard people say, “oh, well, it doesn't do thison digital; and it doesn't do that on intellectual property rights.” I think the real question
is, “where is this agreement going to be in five years and 10 years time?” And the powerof this agreement is that we have a single rule of law that brings together economies thatwere never able to agree before. We have Japan, Korea and China together in a free trade
agreement. And that I think is a profound non-trivial change. It tells us that, in this timeof crisis, people can work together.
I want to pay particular appreciation to the ASEAN colleagues who had the vision morethan seven years ago to launch this process - because it's very easy for those outside theregion to say, “oh, It's being dominated by a particular major economy.” Actually, that isfundamentally wrong, and it suggests that they do not understand our region. It's
ASEAN that drove this agreement; it's ASEAN’s vision and commitment that pulled usalong. I'd like to say that New Zealand made its own modest contribution to try and bringthat together with Australia. They should be given the credit and the power by which
they brought that together. And then persistence during some pretty dark moments tobring that agreement together is a real tribute to that organization, and the way thatgroup of economies and the way they think of themselves within the region. It is very,
very significant, I think, that you've got ASEAN, Japan, China, Korea, New Zealand,
Australia, and the pathway for our crucial partner that we all miss and regret is notthere - India.

RCEP provides a potential economic bubble of about 2 billion people. So it's a big bubble
where it's not just on a COVID level, but because all of these countries - pretty much all

of them - have done really well on COVID. So you could look at the RCEP community as
an economic tourism/trading body that really gets ahead of the rest of the world. Do you
think there's some potential to accelerate?
There's no reason that RCEP isn’t going to have a profound influence on the developmentof the architecture and the region. I think it's important not to forget that there's also
CPTPP up there as well. And I think it's also really important not to forget that in APEC
we've had this vision of a free trade area of the Asia Pacific. And I do see these two
important architectural developments to being the building blocks for a vision that we've
had in APEC for many years - for a free trade area of the Asia Pacific. What you need isfor these things to come together and agglomerated, and that will take a little bit of time.
But the vision has to be for our region to have a free trade area in the Asia Pacific.
I think the really important thing about the incoming US administration is that we cantogether in our region, build some confidence. I think in the way in which trade can drive
growth opportunity, inclusion and help us all build back better greener and more
inclusively. I really am hopeful that APEC will be seen as a really important institutionthat can help build confidence and rebuild all about confidence in the value of the rulesbased system. I'm very hopeful that it's going to be possible. And I think it's too early to
say where they might land on when it comes to joining particular agreements or not. And
I think the important thing is that in this first year, that we have some very positive
signals being sent about the confidence that they want to rebuild in the region. So there
is some sunlight.
Session 1: A Sustainable and Inclusive Economy - Moderated by Josie PAGANIAs they say with any crisis and COVID is no exception, never waste a good crisis. It's anopportunity for us to rethink the way that we work in the way that we can spread thebenefits of economic development to the most people. And so it's an opportunity for us torevisit our priorities post-COVID, so I'm very much looking forward to hearing from ourpanellists.
Panellist A:
I will talk about China's economic development - is the policy of how to solve economic
disparity in line with that of economic growth? Yes, the Chinese economy has a highgrowth rate, yet China has experienced two disparities. One is that rural and urban
sectors have so much disparity; and another one that is the regional disparity of people

flows into the coastal cities and moving to the southern parts of China. This is a very
interesting fact for the future, because for a long time, China's politics, power and wealthhas been in the north, but now it's more towards the south.
So, this disparity of wealth distribution, employment and economic centre really createsa big challenge to China. Fortunately, the Chinese government has started very early toconsider this issue and adopted a so-called Western development strategy. And most of
the promises are actually in the middle and Western areas, with a long list of special
support measures (such as re-allocating resources and investment, special tax policy
benefits and also a special policy for FDI) to support Western development.
The second policy is to launch the nationwide poverty reduction agenda /r. By the end of
2020, China announced that the anti-poverty strategy achieved great success, that there
is no absolute poverty in China. But of course, there is a worry whether absolute poverty
will come back again. However, this is a priority agenda, addressed in many ways including special assistance for investment and talent. It's about supporting rural areasand capacity building to train people, to find jobs in other areas. And along withliberalized policy tools for encouraging people to re-locate to cities - with the exception of
Beijing, Shanghai and Guangzhou - all the other cities are open for any people to relocate,to live there as normal citizens.
The COVID pandemic has created great challenges to the social-economic life. The
economic activities have either stopped or slowed, that caused more problems for people.
You may recall post -1930s crisis due to the vulnerability of human life, the social
security system have been gradually established. Now, in facing the new situation-the
COVID pandemic, we have to rethink and consider a new type of security protection. In
China, the government has emphasized development security - not in the traditional
sense (high level of social security system), but security in sustainable growth,
employment and social safety issues.
Panellist B:
Asia and Europe are two of the three main poles in the world economy. The third being
the US. All the three poles are distinct. But they are fulfilling similar objectives ofglobalization. Globalization makes for soft international borders, but social connectivity
is rather influenced by what happens inside the national borders, as in the case of Asia.
For example, East Asia, Southeast Asia, South Asia all have individual identities, but
are deeply interconnected from an economic perspective.

And Europe is similarly multi-layered. It has the European Union (EU), Russia, theNordic North, the Western Balkans. But the EU in particular is a community bound bylaw, and where connectivity is administered through rules. A large part of Europe ispracticing a rules-based approach to connectivity. There are normative positions on
national and global issues such as climate action or freedom of movement, and in
addition, on digital economy, and a carbon neutral society.
Among the four freedoms, the citizens in the EU cherish the freedom of movement which is to say, social connectivity is given the highest choice and preference. Ironically,
this very freedom has propelled the UK out of EU. So, with more variety of political andsocial structures coming from the new members of the eastern Europe, the EU is now
resembling more like a union of governments, rather than of societies. But to be sure, itscommitment to social connectivity and integration far exceeds the expectations from therest of the world.
Asia also shares similar political and social heterogeneity, like Europe but with an added
layer of colonial past - which can be seen in the multiplicity of education, legal andpolitical systems, and the subtext of economic nationalism. But one can safely say that
Asia’s economic integration is superior to its social connectivity. Japan's investment in
the 70s and 80s created an investment-led growth in Southeast Asia; as did the rise of
Asian Tigers. South Asia was slightly outside this, but now it is coming into the samegroup, with Bangladesh, Sri Lanka, India as the new centers in supply chains.
So Asia has economic integration, and of course China is a huge part of this economic
integration. But compared to its economic integration, social connectivity in Asia ispatchy and administered through high border controls. RCEP was quoted very strongly
in the opening part of today's talks, but in the chapter on the movement of people, it says
temporary movement of people - why are we underlining this emphasis on temporary?
Which brings me to the US position on social connectivity. Unlike Asia and Europe, theUS is a country, not a continent. So we evaluate its social connectivity with the rest of
the world. The US has balanced social and economic connectivity well despite Trump
years in-between. It has high entry barriers, but it also has high exit barriers for people
from outside the US. The US understanding of connectivity has worked well for its own
economy, especially in the digital economy and innovation growth in the US.

Panellist C:
How can the essentially long-run gains of sustainability withstand the pressure of
immediate needs? I approached this in a very straightforward manner by looking at what
are called ‘green fiscal recovery measures’. These are interventions that have been
implemented to mitigate the adverse impact of the COVID pandemic and at the sametime contribute to the reduction of greenhouse gases.
Everyone is aware of the major impact of the pandemic, which is sometimes described asa triple whammy. You have a demand shock, supply shock, and financial shock - and thePhilippines was not spared. There is a silver lining though, and the silver lining is that
we have cleaner air. Unfortunately, this is not expected to continue - but there is hopethat we don't revert to the pre-pandemic state and implying that some of the gains canbe sustained.

In order to lessen the economic hardships from the pandemic,

governments have implemented several fiscal rescue measures. These are analogous todisaster relief measures in their approach.
The initial set of interventions was correct, because this was a public health crisis andnot an economic crisis. But the public health crisis has spawned an economic crisis. In
order to respond to this situation, you have to first implement disaster relief. Then you
reinvigorate the economy, and these (as shown in the slide) are examples of some of themeasures called fiscal recovery measures that follow rescue measures.
Studies have shown there are fiscal recovery measures that at the same time, canpromote sustainability - and these are what are called the green fiscal recovery measures.
You have in clean physical infrastructure, things like solar and wind energy projects andmodernizing grids; retrofitting buildings to encourage or to enhance energy efficiency;
investment in education and training; natural flow investment in parks and mangrove
forests; R&D in clean energy. One important example of a green fiscal measure isretrofitting existing buildings, and you can see from data from the International Energy
Agency that the employment impact is fairly high and this is something that can readily
be implemented. So the main takeaway from the presentation is that there are viablechannels to reinvigorate the economy - and at the same time, promote sustainability.
Panellist D:
I will talk about digital economy and the digital divide in Thailand, which is a reallyimportant issue in our current globalization era, because globalization at the moment isin reverse. During the past 10 years if you look at the ratio of trade to global GDP, it’s
been declining during the past 10 years. The same applies to the level of foreign direct
investment to grow both GDP and also international loans. International travel is also
declining really quickly - and collapsing. The only globalization element that is still going
forward - really fast - is international internet connectivity.
I'm talking about this dichotomy, and with our special focus on the digital divide in
Thailand, and how we address it. First of all, there are many dimensions to the digital
divide. It can be a gender divide; it can be a geographical divide in terms of rural, urban
disparity, and also regional disparity; and, thirdly, it can be related to the huge gap inincome.
Let me start with the case of Thailand for the gender divide in terms of internet anddigital technology usage. We’re very happy to tell you that the gap in terms of genderimbalance is really low. Basically, male and female users are using the internet, andenjoying the benefits of digital economy at roughly the same rate in terms of geographicaldivide. However, we have some disparity in terms of the rural and urban divide; and interms of income - the income gap is a huge gap for the digital divide.
Let me provide you with the overall picture of the digital economy in Thailand. Basically,
Thailand and many other countries, have experienced a rapid increase in the use of IT.
The rate of mobile phone ownership is really high at around 90% of the population that's something really impressive. And if you look at the cell-phone population, it’saround 200% of the actual human population. Many people own many devices at thesame time. If we look at the usage of the internet, the number will be a little bit lower ataround 57%. The internet usage is basically through the use of smartphones. So
smartphones with 4G and 3G connection are widespread in Thailand. But if you look at
the number of ownership of computers in Thailand, that is declining. And I'm sure thisphenomena is reflected in your country as well.
We used to have around 40% of the population having computers in their household five
years ago, but now that’s decreased to only around 28%. The use of computers in
Thailand is really low compared to the use of mobile phones - computers are somehow
being substituted by mobile phone usage. So that's the issue of IT penetration. All in all
though, the picture is quite good.

But if you look at geographical distribution, that is a huge divide in the country. Around
35% of the people in the urban areas get access to all of this technology, but only 20-22%of the people in the rural areas can access that same technology. So this is an issue that
we need to address.
More importantly is the income divide. If you divide the population with the ones thatare under the poverty line (somewhere around $US6600 per year) the number ofhouseholds that connect to the internet and using computers at the same time would bereally low at around 3% of households. But for the rest of the economy, the number ismuch higher at around 20%. So this is a really huge gap.
In terms of COVID during lockdown, it’s a big problem because during that time most of
the activities have to go online - and this can create a lot of problems to people without
computers. For example, before lockdown, university students that did not own
computers could go to an internet cafe or could use university computers to conduct theirstudy. But during the shutdown in Thailand in April, students that did not own
computers had difficulties accessing their classes; and they could not simply use theirsmartphone, because it's really difficult to conduct serious business using smartphones.
So there were some policy measures with some universities handing out computers totheir students. But other universities did not have such policies and needed to have theprivate sector provide devices. But most importantly, I think the government has tochampion these policies as well. And we have calculated that the government would needaround $US100 million for handing out computers for students. So that's the bottom line,
the government has to step in.
Q&A Session:

I recall a quote from a politician in Scotland, who said there has never been a global
crisis where the poor came out better off. And so somehow we have an opportunity now
in forums like this, to work out how we change that pattern - and all of you have spoken
to that. So the topic of this discussion is sustainable and inclusive social development
post-COVID. How important it is that we have active governments that create the rightincentives? So my question to you is, does COVID make it easier to make the case foractive intervention from governments? We've had up to 50% unemployment during
COVID in some countries, and you mentioned in the Philippines how unemployment
makes the case for long term sustainability. But right now, people are really struggling.

They don't want to know about climate change right now.
That's correct. So, it's a matter of political will. The government has a menu of options
to implement in order to reinvigorate the economy, and based on studies, some of those
opinions are actually consistent with promoting sustainability. So if the population seesthat the employment that is generated along with those measures promotes
sustainability, then they will certainly be accepted. I think our government did fairly
well in terms of the fiscal rescue measures - but my sense is that they're struggling a bitwith regards to recovery measures. One would expect, of course, is dealing with a budget
constraint. But then again, the other issue is political will to select the more appropriate
measures that also promote long term growth and sustainability.

In New Zealand, a proxy for poverty and inequality at the moment is housing - the costof housing. What would be the proxies for inequality? Do you think in the Asia Pacificregion, some other proxies that are telling us that this is a problem. There are increasing
signs of inequality in all our countries for us in New Zealand as the cost of housing hasgone up over COVID. Can you comment at all on any proxies for inequality in othercountries, in your experience over this year?
Of course, when you give the New Zealand example, you are indicating what's happening
within the boundaries of the country with the cost of housing. I was basically comparing
economic integration in Asia not keeping pace with social connectivity. So let me equate
inequality within a country to the economic integration in the region. Typically thosecountries which are more integrated economically in the production network and supply
chain in this region have a better income indicator as compared to those which are not.
For example, let's say the Big Five, which are better connected with the traditional
investors like China, Japan, Korea; — these members were better able to pull along theremaining members - that is Cambodia, Myanmar, Vietnam. Of course Viet Nam is astar performer now.
So what we are trying to see here is that economic integration or greater participation is
actually reducing income gaps within the country and in-between the countries. South
Asia is a very good example because India has been traditionally noted for not being
really integrated into the supply chains of East Asia, but now we seeing Bangladesh as
the new rising star, despite all other human development issues in the country. This
proxy of greater economic integration with the rest of the region is a great reducer ofincome inequality, within the country and with other countries in the region.
I know from our own region here, Pacific countries are asking us to prioritize digitalconductivity, because it's the answer to market access for products. It's the answer tokeeping kids in education during lockdown under COVID, and also even getting healthadvice online. Are we capable of re-prioritizing the most effective and important thing
we could do right now, which is increasing digital connectivity across the region?
I think certainly there are opportunities for every country to increase their connectivity
and connect to the digital economy because the price of IT equipment is decreasing reallyquickly, and the spectrum is becoming more efficient, meaning that we can get the same
bandwidth for a lower price. So the challenge would be for every government to get thepolicy right on how to use the market mechanism as well as government interventions
to bridge the digital divide for more people with a reduction in price of equipment as wellas bandwidth.
In the case of middle income countries like Thailand, around 80% of the population would
be okay without any government support. But all in all, after market forces play theirpart, then there'll be the roles of the government to provide connectivity and literacy topeople in the rural areas or those with low incomes. There are many schemes to do so one very popular measure is to use universal service funds collected bytelecommunication license fees and use it in a way that promotes competitively neutral
ways in the market. One option is the provision of universal services to the cheapest
provider. By that way, the government will get the biggest bang for the buck and provide
people access to the digital economy. But as the economy has become more complicated,
providing access alone will not be enough. So we need to provide literacy as well.
Nowadays it has to be e-commerce literacy for small and medium sized enterprises, andeven individuals, to gain access to the digital market.

The US will be coming under a new administration. Given that they can sometimes
renege on promises like those made in recent history, do we trust the Americans? If they
sign up to do something, will they stick to it?
One thing we have learned in the past four years is that there has been precedent for
the US to renege on agreements. Especially on something like the TPP - if you join, thenthere has to be commitment right? It was fairly easy for President Trump to go back

against the Paris Agreement. Then there was the Iran nuclear agreement. All creating
an atmosphere of distrust. So it could be difficult to correct now.
The Trump administration has not left itself in any sort of glory and there is a lot ofsoothing that needs to be done by the new administration both nationally andinternationally. But there is something happening at the ground level which is not going
unnoticed - reminding us of the US commitment, time and again - this is the kind ofnarrative. I find in Asia the question is “where is US leadership?” The fact of the matteris that between 2013 and 2019, the US has increased its presence in terms of trade. In
terms of investment, the scenario is even more breath-taking: the US is now the thirdlargest investor. So at the ground level the US is making penetration in the region. I
think the commentary on its commitment into the region is disproportionate to what the
US is actually doing in terms of trade and investment in Southeast Asia.
The Chinese government announced openly that China considered joining the CPTPP in
negotiation, and I think even if the US joined CPTPP, China probably also might consider
it too. So this is a very positive sign that China wants to open it further. I think it's very
important domestically that China has now adopted a dual circulation strategy, which ismade for the domestic market while being highly integrated with regional economic
development.
For the case of Thailand. I think we would welcome the US to join the CPTPP; it will
give a big boost to the COVID trade and stability and reduce the fear of protectionism.
Unfortunately, Thailand is not a member of CPTPP yet. Without the US joining,
Thailand would be in a disadvantaged position compared to Vietnam - which from time
to time has also considered to be a competitor to Thailand. So it's a big plus and a small
minus for a country like Thailand.
On India re-joining RCEP, suffice to say for now that the COVID emergency has actually
given a reason for India to stay out even longer than it had to - before it can start toconsider re-starting the process. We may have to wait longer than member countries
would expect.

What would it take to have an economic bubble in our region, whether it be through
RCEP in addition to those countries that aren't in RCEP. Do you see that as a possibility?
We’ve talked a lot about travel bubbles between countries - and every time the bubble

has burst - like what happened with Hong Kong and Singapore. So first of all, change
the word - not the “bubble” but something else more positive.
We could change it to “club”. But then, that sounds like the OECD – a rich countries club.
So yes, we'll try and find a new word by the end of the two days. A question to you all is,
if you could prioritize one policy intervention or one action post-COVID to increase
economic development in an inclusive way, what would it be?
Can I start by responding to the issue of populism - populism and inequality. One way toframe the issue of climate change is to put it as humans versus nature; so how about
populism versus science? What happened with the pandemic is that nature gained a
victory - it humbled humans and in a sense it reined in populism. So, if there's any
positive takeaway from the COVID pandemic, is that it has pushed science to theforefront. And this will help our policies that are science-based, and these generally
benefit the majority of people. So that's my main takeaway from the COVID experience,and it will really give a boost to the green fiscal recovery measures.
One of the panellists has made a very valid point and I just take this analogy a little
further from an economic perspective. The hallowed days of international trade arebehind us. Asia, which actually grew on the back of international trade, that trade
induced growth is not coming back, at least in terms of merchandise trade. So preparing
for the digital and tech economy is here to stay. The tendency to conflate e-commercewith digital economy is very common in Asia. But the two are very different things - andpreparing the human capital, preparing technology literacy, preparing for international
cooperation for investment in digital economy – those are the things I think that otherparts of the world are slightly ahead of Asia. So this technology led economy will besomething that we will have to watch out for and make some very quick and nimble
preparations for that.
We have moved forward with transforming our economy into an online economy from ahome economy. So there'll be a huge impact on that, and I really agree with the previous
panellist that we need to invest in that. Another important dimension, though, is thatgovernment needs to also accommodate the transformation into the digital economy.
There are so many processes in the government that are so cumbersome and paper-basedin Thailand, and in Japan - and I think everywhere, in every country. In Japan, forexample, the use of paper is still really popular, but not efficient. We have so many lawsout there that we need to make more digital economy compatible. And I think we need

to invest in reforming bureaucracy, and also adopting and investing in technology, in AI.

A lot of the initiatives cost a bit of money. So an interventionist government that'sintervening is a good thing, but it costs money. So the government debt that will
inevitably increase during our post-COVID era. is this a problem for sustainability?
It could be a problem, but not necessarily rising in every country. The most important
indicator would be the debt to GDP ratio - because if you have growth, even though you
have higher debt the debt to GDP ratio would be sustainable. In the case of Thailand, we
started with a corporate crisis, with only 40% of debt to GDP ratio, which is reallysustainable. And the worst-case scenario is by the end of COVID, it would be around 60%
debt to GDP ratio. So what we need to realize is that we need to sustain growth. I think
Japan is a really good example. Japan has been stagnant economically and people now
really worry about having low growth. Abe, in the previous administration, used
Abenomics - fiscal policy, monetary policy, and also restructuring of money. And I thinkto sustain growth in the long run, certainly fiscal policy and monetary policy will not beenough. It can help us avoid deflation in the short run. But to have growth andsustainable debt to GDP in the long run, we have to have productivity and that's why
digital transformation is so important.
In the short run, there won't be a problem. But maybe in the next three years because
many countries in the region have very low interest rates, we have a situation that isakin to a liquidity trap. So fiscal policy has to be relatively effective, or highly effectivein that kind of situation. If you look at the formula for sustainability of debt, apart fromthe debt to GDP ratio, you can also consider interest rates.
From a corporate perspective, it is important to spend now rather than later - because
in terms of emergency spending, spending earlier is better than spending later. And theother thing is that many of the economies in this region (such as Australia and Japan)
are sitting on huge reserves and with very little idea of how to get along with investments.
So digital economy points to that. More integration is required - rather than less.
Evidence shows that in terms of supply chains, there is a greater vertical integration
happening in Asia as one is more vertically integrated. Now China is more verticallyintegrated, except for small pockets in Singapore and Vietnam. Europe is creating its
own kind of vertical integration for technology of the future – such as electric carbatteries, because they have promised to themselves to become a carbon neutral society

by 2030. With all cars going carbon neutral by 2030, we are witnessing more and morevertical integration, rather than cross integration in this region and outside also. So
perhaps now, achieving greater trust rather than actual integration is more important.

What would you advise our governments and in each of our countries if you really dohave to look after people initially in order to make the case for long term sustainability
measures, whatever they may be?
We need not only greater integration, but greater cooperation, right? Especially in termsof the vaccine. We look forward to developed countries, including China, to help
developing countries in this area. The short-term builds to the long term, and you haveto get the short-term right – it’s the initial conditions that matter.
In each of our countries we have communities that have not necessarily benefited from
economic growth and globalization, or feel that they haven't. And if we talk of the call for
women's participation, it's a no brainer. If you want to increase productivity and haveyour population involved in the workforce, and involved in entrepreneurship, how well
are we doing across the region in terms of woman's participation and economic
development?
What is the main role of government in bringing on board a moral agenda? Raising the
productivity levels begins with creating the conditions to encourage participation of
women in the mainstream economy; and those conditions must be provided throughessential social, economic and legal structures. My worry is that much of the policy
debate either gets hijacked or gets side-lined by issues which do not necessarily ensure
structural changes or greater participation. Governments need to always keep focusedon providing the structural requirements.

Our Maori indigenous community is potentially creating some of the big corporations of
the future. So there's a lot of reason to be very hopeful that what New Zealand will offer
others in terms of trade will come from our Maori population. I wonder if any of you inyour own countries have some thoughts on how you might encourage indigenous
participation in the economy post-COVID?
I think one area is using the digital economy platform. In the case of Thailand, we haveseen some studies that there are people in Europe who used to have difficulties joining

the global market. But now with an e-commerce platform, not necessarily an indigenous
platform. Platforms in the region like Alibaba. They can join the global economy byputting goods and services online, and allow for a greater market access. So that's one
way of doing things.

Teleworking is important so that husbands and wives can work from home. Now this is
an issue that has emerged in the Pacific region. For communities that may begeographically far away, teleworking may well be the way that we deal with issues likerobotics and AI taking jobs away from traditional workplaces. Do you think teleworking
is something that should be far more at the forefront of our discussions?
In Thailand, teleworking or remote working is changing the workplace drastically. There
are many large companies that are already returning or terminating their rentalbuilding contracts even ahead of time to allow for smaller and more compact spaces; andit will also change the way we live in the city. For example, in the case of the US, there
is a trend that people are moving from the city centre to suburban areas - not necessarily
to the rural areas yet, but they are certainly moving into suburban areas. Just look at
the data in New York City, or in Austin, Texas – it’s been happening in many cities. But
there are frictions in the workplace, and people don't meet as often as they used to. And
having husband and wife, working together, staying together all day - it's not really agood idea. I have seen cases that people are getting divorced, because they’re seeing too
much of each other - so be careful what you wish for.

If I could ask each of you to talk about the one priority that you would ask thegovernments of this region to prioritize right now, as we go into the rebuild phase postCOVID, what would be one priority for sustainable economic development?
I would advocate to cooperate more closely because regional problems, global problems
need regional and global cooperation.
In my case it would be healthcare.
My view is that the temptation to go back to ‘business as usual’ mode should be hugely
avoided. That is to say, a much more realistic assessment of where we are heading should
be taken and that calls for greater cooperation with the international community.

Our forum is Asia Pacific Forum, so Asia Pacific has been divided, and it's a big problem.
APEC has lost momentum, so the concept of Asia Pacific integration is a problem. How
to get back to cooperation and integration across the Asia Pacific? That’s very urgent;
that's where we started.
Session 2: The International Economic Framework Moderated by Charles FINNY,
Partner
Saunders Unsworth:
The topic of this session is the International Economic Framework. Is there a new global
order emerging? Changing trading systems and rules, what will the impact of the US
election be? What about US-China trade relations for us in New Zealand? This is very,
very relevant.
Not a day goes by without my having to engage on this subject. We recently had the
RCEP agreement signed; we have CPTPP looking as though it's about to expand with atleast the United Kingdom joining – interestingly. China is expressing interest. We havethe role of hosting a big APEC event this year coming up. So that's going to be putting
New Zealand in the spotlight. We're watching very closely what the new Biden
administration is going to mean for world trade. We’re very concerned about what's been
happening to the WTO over the last few years under the Trump administration, andwe're very keen to see the whole issue of WTO reform debated. Closer to home, there's
some interesting developments in the trading relationship between Australia and China- which pretty much every New Zealand businessperson is watching with enormousinterest.
Panellist A:
I was asked to look at whether developing economies will ever graduate or not. Since weare discussing about international economic frameworks and multilateral trading
systems, let me take the liberty to see it from a trading system perspective. The
developing status we’re talking about here is the developing status in the WTO. And in
the context of WTO, let me look at this from two aspects: the first one is from theperspective of the economic situation of developing countries - whether those countries
grow substantially to the next level of development and then being graduated. And thesecond one is mostly related to developing economic status in the WTO, where we talkabout the willingness of those countries to give up their developing country status in themultilateral rating systems – and to note that the status in the WTO is basically a selfdeclared status.
I would like to focus on looking at the second aspect and discuss about the willingness ofdeveloping economies to give up their developing country status in the multilateral
trading system. The advantages of having those developing countries status in the WTO
comes from at least three aspects. Firstly, it allows developing countries to get some kindof special treatment from developed countries. The second is to be eligible for technicalassistance; the third is special flexibility on the implementation of agreements andtrading rules.
I am proposing an argument that the first and second aspect are less important
nowadays. The third one, however, remains to be an important incentive for thosecountries to keep their status as developing economies – such as countervailing measuresor to provide subsidies in agriculture. This reason alone will make countries with
developing status unwilling to graduate or unwilling to give up their developing status.
Unless rules, criteria or agreements change, only a few countries would want to graduate- so there is a need for new rules and criteria to be discussed in the WTO, or for a newkind of a developing country status.
Those kinds of criteria and rules need to take in consideration the interest of developing
economies, as well as the interests of those less-developed ones by also giving them achance to keep their developing status and to get special treatment - hopefully they canhave a criteria that would not be just taking away that kind of special and differential
treatment from those who really need it.
Panellist B:
On the topic of joint writing of international norms and rules post–COVID for trading
systems in Asia-Pacific - the trade landscape in Asia-Pacific post-Covid is likely to be
shaped by four major factors:
1) when and how the Covid pandemic is fully controlled,
2) when the recently concluded RCEP becomes effective and how many new members
will enter the expanded CPTPP,
3) how the ongoing trade conflict between the U.S.-China will unfold under the Biden
administration,4) whether action-oriented collective leadership to safeguard a liberal trade order can beestablished.
Against this backdrop, writing norms and rules for intra-regional trade and investment
post-COVID could be approached with a top-down institutional arrangement, such as
regional FTAs, or bottom-up, local-to-local, private-to-private interaction architecture.
Whatever the norms and rules for post-Covid regional trade, they need to adhere to thefundamental principles of the GATT/WTO – the most favored clause among nations fornon-discriminatory trade policies and national treatments for imported goods andservices with respect to internal taxation or other government regulations beyond
borders.
Henry Kissinger has said that Covid-19 will alter the world order forever. The pandemic
does not recognize national borders. Any exit strategy can be fully effective only throughconcerted multilateral efforts for disease prevention and vaccine development.
Cross-country behavioral norms in Asia-Pacific economies must be shared and respectedto salvage the worst regional economic setbacks since the Great Depression. For thispurpose, all regional economies should commit to global COVAX facilities as regional
norms. These facilities are a G20 initiative that was later joined by the WHO, UN, andEuropean Union to engage in global collaborations to accelerate the development of,production of, and equitable access to Covid-19 diagnostics, therapeutics, and vaccines.
The financial burdens must be equitably shared by the regional economies. This
underlying spirit of a concerted joint effort is likely to pave the way for the UN and WHO
and could be more effective to manage a global health crisis.
As for the responsibility of rule writing, ideally it should belong to the WTO, but thegroup can no longer rely on a traditional consensus-based method due to the distrust
between the China, U.S., and EU. However, in the Asia-Pacific, it is fortunate that RCEP
has been concluded with 15 signatory members, with the door open for India. In addition,
the CPTTP has been partially effective. More good news is that the Biden administration,although it might take time to renegotiate, is likely to return to multilateralism and the
TPP. Thus, most Asia-Pacific economies have an agreed-upon basic frame for a liberal
regional order but need additional inclusions and refinements suitable for controlling
the pandemic and embracing digital technology in trade.
Although the quality of RCEP is lower than CPTTP, most conceivable rules and norms
are already contained in the two mega deals. The question is how we can enhance RCEP
provisions to effectively accommodate newly emerging post-Covid issues, including

digital trade and data movements, toembrace the higher standards of TPP. Another challenge is combining RCEP and the
CPTTP for the integration of Asia-Pacific economies in the long run.
As an immediate action agenda, we need to first extinguish the pandemic wildfire. Then,
to revive well-embedded regional supply chains, qualified business travel and tourism
need to be allowed, provided that the international traveler carries a mutually
recognized health certificate.
These urgently needed rules could be addressed at the APEC or G20. It might take time
to reach a consensus-based agreement even at a sub-regional level. If so, some of thosesuccessful at controlling the pandemic may take a pathfinder approach, as adopted in
the APEC process.
In the post-COVID era, one of the best ways to foster growth will be to expedite digitaltrade throughe-commerce

anddigitalconnectivity,

starting

withelectronic

authentication. For this, we need to enforce a stricter policy against internet hacking
and counterfeit goods and services. Consensus must also be reached regarding newly
emerging digital tax and data protection issues.
Finally, amid the ongoing U.S.-China strategic rivalry, especially with respect to 5G
technology, and to avoid any geopolitical risks in which other Asia-Pacific economies
would have to choose between the U.S. and China, regional constructive powers shouldbe able to make persuasive rules in such a way that a level playing field could be
developed free from the hegemonic competition.
In conclusion, the post-pandemic regional trade order will need not only stability of rules
and processes, but a mechanism to help build consensus on how to set new rules. Uniform
regulations by likeminded countries must be made clearly, simply, and as transparently
and online as possible.
Panellist C:
I was asked to address the question of whether open regionalism is the same as open
plurilateralism. Both describe variations on “regionalism”. In the conventional North
American and European literature of political science and international relations,“regionalism” originated with reference to the formation of exclusive alliances within ageographic setting. The language evoked thoughts of exclusive trading arrangements aswere common in the 1930s. The more immediate reference was likely to be to thedevelopment of the European Economic Community in the 1950s. The classic example
was the EEC Common Agricultural Policy which sought free trade in agricultural
products within the EEC while raising high and even prohibitive tariffs against nonmembers seeking to access European markets.
“Open regionalism” was Asian thinking about an alternative to the EEC model. It was
especially associated with the track 2 Pacific Economic Cooperation Council and thenwith the inter-governmental Asia Pacific Economic Cooperation. The core idea was thatthose engaged in “open regionalism” lowered barriers to trade and investment flows
among themselves without increasing barriers against others. There is something
paradoxical about the notion. Lowering barriers among participants in open regionalism
inevitably raises relative barriers against others. But there is still point to the absenceof any increase in absolute barriers; the underlying idea was that as the benefits ofincreased interdependence amongst members of an open region became apparent, there
was more likelihood that barriers against outsiders would also be reduced. “Openregionalism” was an instrument to promote the economist’s ideal of international trade
free from tariffs (and other barriers).
“Open plurilateralism” builds on this thinking. First, it establishes freedom from theusual idea of a “region” although in practice the meaning of “region” could be stretched
to encompass any grouping of economies. More importantly, it hints at the possibility ofan economy joining an established “open plurilateral” of its own volition. Criteria formembership are announced and membership is open to any economy willing to satisfy
those criteria.
In practice, things are not so simple. Economies differ in many ways and the criteria foradherence to any grouping can seldom be stated unambiguously and with finality. It is
usually necessary to consider how a general condition relates to the particular
circumstances and institutions of a specific economy. “Open plurilateralism” is therefore
best understood as an expression of intention to consider the claims of applicants toadhere to an established grouping with a liberality of spirit.
That still leaves adherence to an “open plurilateral” dependent on all existing members
making the same judgement about the claims of an applicant to satisfy the existing
conditions for membership. Any existing member can veto an applicant – although inpractice some members are more influential than others. The claim of a plurilateral tobe “open” is still dependent on the intent of members to avoid being exclusive, even forapplicants with whom their relations are less than entirely cordial.
“Open plurilaterals” would have a stronger claim to be supportive of a genuinely
collaborative international community if members surrendered in advance their ability
to exclude an applicant. The judgment about claims by applicants to adapt their
particular institutions and processes so as to accord with the criteria for the plurilateral
could be delegated to an impartial authority charged to judge whether the applicant’s
claim is at least as good as those of the most comparable existing member. The impartial
authority could be some kind of WTO Panel, or a research organisation like OECD or
ERIA.
“Open regionalism” and “open plurilaterals” are not the same. They are both mechanisms
intended to promote international collaboration and preclude protectionism. “Openplurilaterals” are an improvement on “open regionalism” but could be further improved.
This is more than a comment on how preferential trade agreements may develop.
Plurilaterals are how the international trade system is most likely to be maintained andimproved. We are a long way from the world of the late 1940s when delegates from 23
countries could assemble and, remote from national capitals, agree on the content of theGeneral Agreement on Tariffs and Trade. GATT evolved over nearly 50 years andmorphed into the World Trade Organization which now has nearly 200 members andwhere delegates to its meetings are subject to instantaneous and virtually continuous
communication with their home capitals and the pressures of political processes and civilsociety organizations which dominate there. Negotiating rounds (Geneva 1947, Annecy
1949 Torquay 1951, Geneva 1956, Dillon Round 1960-1, Kennedy Round 1964-67, Tokyo
Round 1973-79, Uruguay 1986-94, Doha 1995-?) got steadily longer and more complex.
Techniques like entrusting specific topics to subgroups with major traders and those withspecial interest in a topic – Iceland in fishing, New Zealand in agriculture – ceased to betrusted to take account of minority interests.
Some economies were always more equal than others but the “rounds” of earlier years
are unlikely to be revived. There is no shortage of issues challenging existing rules, andinternational rules can be maintained and developed only by agreement. But we arelikely to see rules formulated and experimented with in groups smaller than the WTO
as a whole. When they are shown to be practical and successful, they are more likely to
be multilateralised. The essential task of the WTO will probably be to monitor

plurilateral agreements to ensure that they remain compatible with the multilateralsystem while they experiment with additions. In such a system, having thesubcomponents as open plurilaterals is important.
Panellist D:

I've been asked today to speak about the digital economy. There's often much talkabout the terms that come with technology, the corporate competition, as well as
applications that citizens can enjoy in their real lives. I think another set of
discussions is probably more germane to today's discussion, about the existing rules
and the ones that need to be developed.
In many ways the pandemic is very much an accelerator of some of the trends that
impact the terms of the technology - clearly the digitalization with the Internet ofThings. All these things and the transformation of the work processes and workplace
had really started to happen before, and given the lockdowns or limitations, thesehave increased the pressure on the opportunities for digital, as well as demand andsupply chains to become accelerated.
We are now debating issues - not as officials and in Geneva - but in the full blown
atmosphere and spotlight of domestic concerns of citizens and consumer groups. Thisapplies very much to the area of technology, and what it will do to the livelihoods ofpeople on the geopolitical side as well. I think clearly, reference to Sino-Americancompetition and the pressure on supply chains to decouple is severe.
Let me talk about the prospect of efficiency of innovation, which is critical to supply
chains. It's really been complicated by the geopolitics as much as by the possibilitiesof the new technology and utilization. There is a question mark about rules,
standards, and marketplaces pressures. they are all coming into question, together
with various concerns on security, sustainability and resiliency. So, we're reallyseeing that the making of rules is much more than a technical issue, but really frontand centre confronted by both the local politics as well as these geopolitics - and I
think this is really creating a very difficult situation and a fast moving one.
I'm hoping that the Biden administration in time - not too soon I think sadly - will
come to a realization that multilateralism is essential. Of course, there will always
be new areas. And there will be contestation in these areas about making new rules.

We might be in for a bit of a boxing match but boxing or sumo also has roots, whereassome of the brawls we have seen in the last few years remind me of drunken ballroom
brawls, or about men fighting over something that matters to them.
And really, we as people are interested in global order. We've been dissatisfied. Now,
what can the smaller countries like mine, or New Zealand or others do? ASEAN hastaken some steps. I'm proud to say that we’ve put some of the first rules in place.
We've talked about personal data protection and Digital Economic Partnerships.
There are serious limits to how much small countries can do. But working in a groupor bilaterally like Singapore and New Zealand have on digital economy, I think theessential first responses have come from the less powerful countries.
I do believe that, in a sense, this Forum is privileged. I've learned so much from people
in this group that really understand some of the fundamentals of governing the WTO.
There is still, I think a lot of hope that these fundamental rules can be adjusted. To these
new areas of digital competition and policy space, I must tell you that other people nothere on this call may not agree with us - that there's no turning back the clock to the oldways. This is very real in my mind. The only question then is, what is the new worldorder? And in fact, at the moment, I see simply a time out - and in that space, rather alack of order.
Panellist E:
Vietnam very much relies on the comparative advantage it enjoys with tradeliberalisation and technology progress. But over the last five to seven years, when supply
has been changing more and driven by politics - and not so much efficiency. In that
context, many say Vietnam can benefit from the shift in global supply chains, especiallyfrom China.
We see in the danger, a lot of opportunities. Why has Vietnam continued to restructure
its economy? From the start-ups and SMEs in promoting innovation, how will we utilize
the fourth industrial revolution? How will we continue to deepen our integration, notjust economic integration, but now a more comprehensive integration?
In terms of its international engagement, Vietnam has a “four no's” policy, including: no
military alliance, no affiliation with one country to counteract the other, no foreign
military base in the Vietnamese territory to act against other countries, and no force orthreatening to use force in international relations. Vietnam is “Firm in Principles, (but)Flexible in Response to the Multi-unexpected Changes”.

Q&A Session:

On WTO reform, how might the issue of special and differential treatment be best
handled? Obviously, we're going to have to somehow resolve issues around the disputesettlement mechanism, the role of the appellate body and its mandate, and we’re clearly
going to have to be doing something around state-owned enterprises as well. But in termsof the willingness of developing countries to negotiate on special and differential
treatment, do you think that is realistic?
And do you think it's something that would be best to address in the WTO, or in our
region first?
I think we should look at two aspects here. The first one is the importance of the roles ofthe WTO, and the second one is how the special and differential treatments actually play
important roles. I think on the first one, we already know that during the last couple ofdecades, especially because of regional agreements, it's also related to the willingness ofreforms in the WTO if the multilateral rating systems need to be, or wants to berevitalized; and whether the country or the developing countries are willing to accept
reform. To accept the reform depends also on how the reforms would be implemented.
I've been studying about the WTO for the last couple of years. And I saw most of the
proposals were actually a bit sensitive to developing countries’ interests. So maybe weshould also need to hear from developing countries, because they are the future of themultilateral trading system; and that really depends on the WTO reforms. In my opinion,
it has to be done outside of the WTO, because it needs the political support. So G20
perhaps can be used as a political support at the higher level; and when it comes down
to detail, we need to do that in the WTO.
I noted that you seem to be reasonably optimistic about the United States - maybe reengaging with CPTPP at some stage; I'd be interested in any further comments from you
about why you are so optimistic? Also, I'd be very interested in your views on when Korea
might put its hand up to become a member of CPTPP? Certainly those of us in New
Zealand would be very supportive.
I think that President-elect Biden carries on the legacy he inherited from the Obamaadministration - which worked very hard to organize TTP. I think the United States,after seeing RCEP finally concluded, and will be ratified pretty soon, should engage in
East Asian or Asian development as they emphasized by their “Pivot to Asia” policy
during the Obama administration. So it may take time because the United States wishes
to include an investor state dispute clause and environmental label standards, as wellas upgrading the intellectual property rights - the extension of the IPR has been excludedin the current CPTTP - so it will take time.
But I think the big issue is how we can negotiate with China and how we negotiate theJapan-China-Korea economic relationship. We have already piloted an FTA, so the big
issues are like how we can settle political negotiation between Japan and Korea. On
CPTPP, we hope we should join the expanded CPTPP, so that we can carry on our broader
trade and economic orientation.
I'm not quite desperate. I do, in the long term, hope that America sees itself very muchas part of our broader region no matter what name we give it. But I would be a little bit
more cautious about wanting the Americans back so quickly. While Biden has announced
a number of key names in his team, when we look at trade relations, neither the trade
rep or commerce secretary have been named. Until we get a sense of them, we might beinviting the gorilla back into the room.
The second thing I think is that, Trump did lose. But so many people voted for him that
the Republicans would not necessarily want to give up some of the Trumpian points
about ‘America First.’ So that policy attitude hasn't gone away.
And the third point I’d like to make is how the US might behave in multilateral settings- like the WHO and the WTO - before we really invite them back. We should be focusing
on what we can do ourselves first before we think about dealing with a very difficult
America and a very big America at this time.

In our data driven society we need to have a well-balanced set of rules on trade andsecurity, would RCEP or CPTPP provide a good template for this rulemaking? Or do you
think the private sector should be involved in this rulemaking process as they are morewell informed about sensitive technologies?
The private sector has to be involved. I think that's a matter of the way in which that
happens will be a natural question for each economy; but does it have to be involved,
simply because in many cases it's the best-informed component? I think, however, it's amistake to think that you can let the private sector resolve all the questions policy
developments in something which requires some professional expertise. And an ability

to mediate between competing interests – noting those competing interests tend to be in
the private sector as well as in the public sector. So yes, the private sector must be
involved, but it's not something that can be linked to the private sector.
Yes, on the digital issues we have to involve the private sector - but not because theyknow more or they know innovations - nobody knows where the innovations will go.
Anyway, I think the most important thing by having the private sector involved isbecause they are the ones where they can provide data. The data is currently in private
sector hands, and nobody has access to that data, especially big data – it’s still very
limited. So, the rules basically need to look at what the current trends are, and thecurrent trends can only be looked at and analysed using the big data currently in thehands of the private sector.
On the private sector, the standards and the market size of these companies will also
have a big influence. And so, there are still very strong and different values in the morewestern American technology companies, the Europeans and the Chinese. So, I think thespace is really going to get more contested in the next few years; and there will be a mixof both the private sector of rules and logics as well as the more public ones. And thequestion about security is exactly that - security is perennially written into all tables.
The exception is how one defines security - as the Trump administration has shown, it
can really differ.
There are multiple traditional views of that. And there is a sense that I don't want people
to compete. With me on technology, it's a security threat if they can produce better chips
than I can. I think that's a very disturbing trend in the US of over-burdening around theword ‘security’.
On China and the CPTPP, I'm open to that because China actually will be a huge engine
for our region in the post-pandemic era. I was envying the trends of the Vietnamese
economy. But China will double that probably, given its internal size and the dual
circulation idea. But there are things we can do. I think that one of the key pathways tohelp Japan do this, is to help bring some of the Asian countries that are thinking about
CPTPP into the fold. Thailand is an obvious candidate. It's been on the minds of thepolicymakers and they need a nudge to make this bold step at this difficult time.
Thank you very much for those comments on the issue of the use of the term security
and security threats. We in New Zealand are both alarmed - but hugely amused - todiscover that our steel and aluminum industries are security threats to the United States
and therefore have safeguards applied to them. Here we've got two very small plants,
and the volumes are extremely small. And if we're a threat to the US industry, the US
has got enormous problems.
A number of my friends in China are telling me that this is a mixture of posturing within
the regions and trying to show some leadership vis a vis a United States that is currently
unable to show leadership. A number of people around the world are looking at thatchapter in CPTPP as perhaps the solution to the WTO issue. So, if China can somehow
be on top of that issue and in control of it, it might help with the multilateral process. So,
it's going to be fascinating to watch and see how that that develops. The CPTPP has thepotential to expand with the UK, which is working very seriously to join it. And I would
anticipate that will stimulate some other potential members as well. How do you see
CPTPP perhaps expanding and influencing the multilateral system?
If people see the CPTTP as an appropriate way of organizing things, the rules of the
CPTPP can be multilateralised. And it's not something where you want to see regional
agreement as a final goal; rather, it's a step towards greater interdependence on agreed
terms. So, I would welcome interest.
I think there would be enormous difficulties that are emerging in an attempt to form
trade agreements between New Zealand and the UK, and New Zealand in the EU. I
think we can generalize that you will see similar problems in the UK or the EU andproposing any sort of membership of CPTPP. We have talked a good deal about therules. What we want are clear understandings of appropriate behaviour. And that's whata rule is. But we should also recognize that the notion of a rule can be seen in several
ways. It's a constraint on the one hand; on the other hand, it is also a statement ofobjective of where we want to get to.
One can take a very positive approach to rules - not as something to bang people overthe head with - but as things to be discussed and to be used as a basis for finding a way
forward. And that's about changing an attitude. The approach in APEC of finding anagreed objective and then discussing different ways of reaching it. That is the way inwhich I would prefer to think of rules, rather than the way lawyers can tend to think
about it. I think a political approach is the key that we should be focusing on.
Session 3: Regional Economic Integration - Moderated by Suzannah JESSEP, Director
Engagement and Research, Asia New Zealand Foundation:

In this session, our third and final, we examine the matter of regional economic
integration. And I couldn’t think of a more important time to be looking at an issue likethis. With borders closed and most international travel suspended due to the pandemic,
countries of the Asia-Pacific have had to explore the formation of new partnerships andprocesses for keeping their economies active and societies safe. Technology, in its various
forms, has played a key role in this. But so too has the negotiation of arrangements thathave kept physical trade routes and supply lines open, to facilitate the flow of essential
goods. For others, services have become the most critical component of their economy.
Let’s begin:
Panellist A:
Do ASEAN and the Quad have a common conception of the Indo Pacific? I would say both“Yes” and “No”. First, some background…. The “Indo Pacific” is hardly a new term,
especially in the context of maritime issues, but its increasingly wider use as ageopolitical concept or description of a group of countries is a recent and evolving
phenomenon.
By 2020, there is now widespread and common usage of the term, but what it means as
a concept to any one country, or to any one of the various regional groupings, or subgroups, can easily be different in substance, emphasis and nuance.

No time to go

through this in any detail but such differences arise from a range of factors including
geographic location, broader strategic considerations and particular economic interests
and relationships. It means that what is understood by the term Indo Pacific varies andis a developing story.
Let me provide a couple of examples. For Australia and Indonesia, as maritime countries
sitting in the middle of, or in between the Indian Ocean and the Pacific Ocean, the term
Indo Pacific is a natural and inclusive one to use embracing the many countries
bordering or within the area covered by these two oceans. For such countries use of theterm “Indo Pacific” does not necessarily mean, or imply alignment with a United Statesview, or against a Chinese view or for that matter any other view. Another more specificexample relates to India - the Indo Pacific in its wider use as a geopolitical description,
has been aimed particularly (at least in part) to be more inclusive of India than terms
such as East Asia or perhaps even Asia Pacific do.
How do the Quad and ASEAN’s respective conceptions of Indo Pacific stack up? Twomembers of the Quad, Japan and Australia had been increasingly using the term Indo
Pacific since 2011, but by 2017, when the Quadrilateral Security Dialogue wasresurrected after a hiatus of ten years, usage of the term “Indo Pacific” had alreadyevolved to become accepted parlance (albeit with differing nuances) amongst all four of
the Quad countries namely: Japan, Australia, India and the United States.
The Quad’s aim announced at the 2017 meeting was to support a “free, open, prosperous
and inclusive Indo Pacific region” - with an unstated but implied objective of responding
to rising Chinese influence in the Indo Pacific region. • While Japan, Australia andIndia have been somewhat more nuanced, the US has publicly stated its focus on China
most directly in its national strategic reviews since 2017. The other three countries, havebeen more nuanced in public, reflecting a debate over whether it is an objective
geopolitical statement, or a more loaded political term used to signal support for the US
over China.
At the first Quad Foreign Ministers’ meeting in 2019, more specific and broad-ranging
areas of potential cooperation beyond generalised statements were identified. • These
included maritime security, quality infrastructure and connectivity based on preserving
and promoting rules-based order in the region, together with cooperative initiatives on
CT, cyber security and regional disasters.
Importantly, the Quad also affirmed its strong support for ASEAN centrality and
ASEAN-led architecture and in a meeting later in 2019 welcomed the ASEAN Outlook
on the Asia Pacific’ (AOIP).
These sentiments are now common in all subsequent statements issued at Quad-related
meetings including the most recent October 2020 Quad Foreign Ministers’ meeting. That
meeting spelled out the importance of solidifying the Indo Pacific vision. It also discussed
cooperation on the challenges posed by COVID, regional issues “including North Korea,
and the East and South China Seas” and for the first time also “welcomed proactive
efforts by other countries including Europe towards a free and open Indo Pacific.”
As ASEAN participants well know, in mid-2019, after extended debate, ASEAN issued
its “ASEAN Outlook on the Indo Pacific” (AOIP) defining the Asia Pacific and Indian
Ocean regions as a single interconnected region, namely, the “Indo Pacific” with ASEAN
playing a central and strategic role, noting that its member states are situated in thecentre of two dynamic regions.

This formulation is consistent with Indonesia’s view of itself as a maritime fulcrum,
indeed agreement on the AOIP’s was driven significantly by Indonesia. Even though
there are subtle differences between the AOIP and the Quad especially in use of language
describing the Indo Pacific (“free”, inclusive etc.), the Quad countries welcomed the AOIP.
Moreover, while some dislike the Indo Pacific term, the AOIP’s statement effectively
means that at least for now, the “Indo Pacific” is the geographic term shared in common
by most if not all countries in the broad region. As such this is a significant development.
Despite this broad acceptance of “Indo Pacific” as appropriate nomenclature, ASEAN has
made it clear this should not be misinterpreted as saying that ASEAN’s Indo Pacificconcept is either directed at China or that it is choosing the United States’ stated position.
Rather, the AOIP is directed at the whole region embraced by the geographic term “IndoPacific” in “an attempt to reclaim the geopolitical narrative amid the strategic rivalry
between the United States and China.”
The ASEAN Leaders summit in November 2020 “reaffirmed the importance of the AOIP
as a guide for ASEAN’s engagement in the wider Asia-Pacific and Indian Ocean regions,encouraging external partners to cooperate with ASEAN, on the four key areas ofmaritime cooperation, connectivity, Sustainable Development Goals (SDGs) andeconomic and other possible areas of cooperation….”.
In other words, the AOIP is consistent with ASEAN’s comprehensive security approachand existing ASEAN norms and mechanisms.
When one matches up the statements that were made at the Quad’s Foreign Ministers
meeting in October 2020 and this ASEAN Leaders’ statement there is much in common.
So, in quick summary - where there are differences in conception these are often
differences of degree only. They relate to several areas: How to regard and refer toChina’s BRI and other maritime activities. Unlike the Quad’s use of “free, open,
prosperous and inclusive IP”, AOIP avoids use of “free”, albeit that it refers to “freedomof navigation” Whether the concept is viewed mainly as enhancing existing mechanismsof cooperation (AOIP) or whether it takes a more overt military-strategic orientation(Quad).

Panellist B:
I would rather reflect on India's idea of addressing the creation of self-reliance in the

service and manufacturing sectors that are giving a new opportunities with Industry 4.0,
and the very idea of sustainability that we require in the manufacturing sector - but I
think given the size of the Indian market and reliance on the services sector, there is aneed for course correction and more focus on manufacturing than being realized - thanks
to India's partnership with Japan.
India and Japan are working extremely closely in terms of bringing in “Make In India”
a reality, with more than 700 Japanese firms already present in India, and investing not
only for India's domestic market, but also multiplying energies for India – such as theJapan-Africa Partnership, as part of the larger connection into the region - and that's
where the larger question of Make In India is being addressed.
There is also a debate unfolding in India on the nature of globalization - that we requirepost-pandemic; the whole question of shifting away from economic-led or centralized
globalization to more human-centric globalization - something that Japan raised in the
Osaka G20 Summit. We had some reverberations of that and hoped for continuation in
the G20 process.
When it comes to India's process of self-reliance, the idea is not just to address the tradeissues alone. But also to focus on India's domestic reforms that are needed - and thesedomestic reforms are tough. These would also help prepare India for CPTPP or our global
trade agreements that we would see in future. So basically, the idea is to bring in reforms
and bring in regulatory frameworks along with the connections and knowledge.
There are five pillars of India self-reliance, a programme that has been unleashed byPrime Minister Modi. The first is, of course, to focus on the nature of economic reforms
that we need. And I think that's where the whole fulcrum on the balance is in terms ofidentifying the quantum jump. That is, the major factors that would give the quantum
jump to India to catch up with the neighbouring countries. The second is very muchabout improving the infrastructure that would be a sort of identity for modern India. The
third component is in terms of systemic reforms that are needed for the ease of doing
business; and also other legal frameworks that require changes. The fourth is thedemography and the huge young population that we have – essentially the vibrancy ofgeography that is required and for a self-reliant India. And the fifth pillar is about
demand that is there in the Indian economy, an issue for the central bank of India andthe financing institutions to really address.

Out of these five pillars, the broad objective is in terms of preparing India for the toughcompetition and also trying to see how China has created a huge challenge for Indian
manufacturing for local jobs and industries. Unlike our experience with Japan, which
has invested in India and has created jobs, China has largely been interested in taking
over the local firms and also only in the exports to India - and that's where the disconnect
is emerging. This include parts and components on which India's import dependence ishuge on China: automobile components, medical devices, pharmaceuticals and energy
storage. And the technologies that are needed for that.
So, from this perspective, a self-reliant India is not automatic in nature. It is very muchpart of the global production networks and the intent is that we become part of it but
becoming part of it when we do the economic reforms, together with the sequencing thatis required along with domestic preparedness.
Panellist C:
I have been asked to make a presentation on Just-In-Time manufacturing and tradingtasks versus the resilience of supply chains. I will focus on one issue: that is the impactof the COVID pandemic on supply chains. And I'd like to talk about how companies have
responded to this, and how governments have responded.
Firstly, looking at how the COVID pandemic has hit Japanese automotive production it dropped substantially in April and May this year. Mainly because of the disruption of
supply chains which stopped inflow of parts and components from China. This is a caseof one industry and there are of course other industries which had a similar experience.
How did companies respond to this disruption of supply chains? I interviewed somecompanies and I looked at some of the survey results.
Responses from firms fall into two categories: one is the immediate to short-term
response, and the other is the medium to long-term responses. Let me start with theimmediate to short-term responses. Companies responded by running down inventories
first and by building up inventories late. They shifted from the so-called Just-In-Timeproduction system to Just-In-Case production system. Many companies had to reduce
their production because of the shortage of parts and components.
Many large companies, particularly those procuring parts and components turned toalternative sources within existing supply chains. In a survey, I found one auto company

shifted the procurement source of parts and components from their affiliates in China toaffiliates in Mexico.
In formulating medium to long-term responses, companies consider some possible risks
in the future including natural disasters, new infectious diseases, climate change and soon – as well as a rising China, which has been discussed already. In terms of technologicalprogress, digital transformation is very important. These are the kind of assumptions
that companies are making when formulating their medium to long term responses.
Given these assumptions, many companies are trying to apply measures such as
diversifying supply chains and reducing dependence on China. Another problem in
China is raising wages. Despite these problems, many companies try to remain in
operation in China because China is a big, very attractive market. Many companies haveshortened their supply chains, and some companies may eventually move theirproduction to the place of consumption, in order to avoid a negative impact of risk,
resulting in disappearance of international supply chains.
Some companies are introducing labour saving technology because the pandemic has
made it very difficult for people to move. So, they use less people; turning to robots
instead. Some companies are shifting from custom made parts to general use parts, tominimize the disruption of parts and components supply. One interesting development
is a shift from trading products to trading services. Although very few companies haveapplied this strategy yet, but I think this will be a trend in the future. Instead of trading
physical goods such as parts and components, they export blueprints to the importing
country or company, which then uses 3D printing to produce components. Physical trade
is replaced or substituted by digital trade.
How did governments respond to this pandemic? Some countries have turned to securing
supplies of essential goods by restricting exports and promoting domestic production.
Restricting exports is not a good economic policy. Some governments provided firms withassistance for adjustment. For example, the Japanese government provided subsidies toJapanese firms for reshoring and diversifying supply chains. Having noted this, thegovernment should avoid excessive intervention. It should try to achieve inclusive
growth by avoiding protectionism - the key to do is to develop human resources and also
to promote technological progress, particularly in ITC. In order to reduce risks faced bycompanies, the government should establish an open and transparent rules-based
trading system. Examples are free trade agreements such as the CPTPP

Panellist D:
How do regional economic initiatives and agreements spur domestic policy reforms? I
will be speaking more in the context of Malaysia and share our experience of how
regional initiatives have provided the required momentum for Malaysia to implement
some of its domestic reforms. As you are fully aware, domestic policy reforms are noteasy. They are very complex in nature and dismantling domestic policies or instituting
domestic economic reforms definitely pose a major challenge - particularly when there ispolitical interference or political opposition to instituting domestic reforms.
We find that domestic regulatory reform has remained a major priority for thegovernment - not just to inject greater efficiency into the economy, but to ensure that we
remain attractive to foreign direct investments. We definitely recognize that this isbehind the border measures that need to be addressed. We need to be aligned with theinterests of business - while investors need to ensure transparency and consistency, sothat we reduce the business transaction costs.
Now let me give you a few examples of how Malaysia has signed 16 free trade agreements
and seven bilateral agreements. I'm very confident that it's a matter of time before
Malaysia moves to join and ratify the CPTPP. What is important is how to amend the 18
laws and regulations in order to bring it in conformity with the requirements of CPTPP.
Now that we have already taken the first steps (we have already amended five of theselaws and regulations), some others are being attended to, and I'm sure within the
shortest possible time. There are also another five laws that need to be amended,particularly the IPR. I see a complimentary approach that the government is taking interms of what amendments are required in the CPTPP. Now for Malaysia to move
forward in being globally integrated and to be part of the value chain, joining CPTPP
will be very, very important - because we are also looking at trying to negotiate an FTA
with the EU. So, the ratification of CPTPP will definitely provide that additional
momentum for us to start restarting negotiations with the EU.
Now all new regulations and rules have to go through a special task force before it isenforced. So, in a way, I see that CPTPP, RCEP, or being part of any initiative has forced
more public consultation as a platform for companies and businesses to move forward.
In many ways for Malaysia, as a small developing country or a small market, we find theregional economic initiatives have provided the required momentum for us to annotatedomestic policy reforms. In the case of CPTPP there is now an active conversation goingon - people who initially were not in favour of ratification are now seeing the CPTPP in
a completely different light, given the impact of COVID on the Malaysian economy.
Panellist E :I was asked to address the issue of how interruption to travel might affect cross-strait
investment. Let me begin by outlining three business uncertainties: firstly Cross-Strait
Policies, whereby there is mutual governmental distrust between Beijing and Taipei.
There is a lack of support in Taipei for the “92-Consensus” as an anchor to bilateralrelations. The stalled Cross-Strait Services Trade Agreement since the Sunflower
Movement has not helped either, Nor have the National Security Information Protection
Law and Anti-Infiltration Law – both of which have generated uncertainty and in thecase of the latter, more ambiguity. Secondly, the geo-political landscape in terms of USChina competition. We have seen high-ranking US government officials’ visit Taiwan,
and US demand for “supply chain restructuring” add more tension to the cross-strait
relations. Finally, the COVID pandemic has restricted personal travel (for example,
quarantine has inconvenienced business travel) and wider use of video conferences arein place to maintain people-to-people exchanges.
Taiwan’s Investment in Mainland China has not dropped. During January-August of2020, the Investment Commission approved outbound foreign investment totalling 682
cases with the value of US$10.2 billion. This is an increase of 49.5% year on year. The
accumulated outbound investment to China since 1991 has a value of US$190.4 billion,
which is 56.1% of Taiwan’s total foreign investment. During January-August 2020,
China’s investment into Taiwan totalled 71 cases with the amount of US$118.3
million. The accumulated total was 1,442 cases with the amount of US$2.4 billion from
June 2009 to August 2020. In short, there is no sign of meaningful de-coupling from the
supply chain with China. Taiwan’s investment to China has not been curbed by businessuncertainties of the pandemic, nor by man-made political and trade tensions. Just asother FDI interests in China remain high, Taiwanese business sectors continue theirinvestment in China, and sustain their contribution to the supply chain.
Q&A Session:

The question we have is really on the pace of change in an area where we're all dealing
with COVID - and with the culture that is emerging. We're going to see slow andincremental growth, when in fact the time calls for a faster pace and more direct andspeedy stimulus growth - so how do governments, how do commentators and experts
such as yourselves help address that?
The pace of globalization, the pace of building supply chains - it's going to slow downbecause of COVID and other possible risks, such as natural disasters. My personal viewis that the government is very much concerned about the deepening of US-China rivalry,and how to respond to China's rise. Companies have to adjust their policies -to deal withuncertainties they are faced with. Companies have to slow down. It takes time for themto make decisions, and if they have to take precautionary measures, they cannot put
100% on building one very efficient supply chain. They try to reduce risk by diversifying
supply chains. Instead of continuing a very efficient Just-In-Time production system,companies are adopting so called Just-In-Case production system, which is not as
efficient as Just-In-Time system.

As an Australian cousin, we've seen the challenges of a carrot and stick approach to trade- most recently with Australia and China. I wonder if you might like to comment on how
destabilizing the situation is in the medium term, and how much that might drive
Australia's wish to Australian private sectors wishing to diversify - or is the economic
pull of China too strong?
Well, obviously this is a big subject here in Australia at the moment. I think thegovernment is very clear that there should be a real commitment to a re-engagement ofcommunication at the most senior levels to talk over the issues that have been attributed
as the cause of the trade disruption that has been initiated by China. Notionally, each ofthese actions by China has been related to certain trade rules like anti-dumping andwhat-not. But it is clear they also have a political motivation.
From the perspective of the Australian business community, they're obviously very
committed to the China market. 38% of Australia's exports go to China. But interestingly,
there's not been a significant drop – in fact there’s been an increase in Australia's overall
exports over this past six months - partly due to the fact that the price of iron ore, which
China is consuming at an amazingly fast rate at the moment, is at its highest in sevenyears. Also, barley has found markets in the Middle East and other areas. So Australianbarley producers have been able to adjust. So, a lot of this means adjustments are being
made. And it's not a “zero-sum” issue.
We very much hope that there can be a dialogue so that we can sort these things out. But

certainly, it has meant that the businesspeople and companies in Australia have had tobe very much more agile than they normally are in looking for other markets.

Looking at India's trade policy and how India might look as it's working through its
domestic reforms and furthering bilateral FTA arrangements, I know I've seen throughmedia reporting that the EU and the UK are markets that India will be interested in rather than big regional blocks. Might it be possible to marry together these bilateralarrangements, and make a sort of quadrilateral trade arrangement? What's your feelingon your international trade, so that you've got the reform process? What's the tradestance given people could misconstrue the RCEP signal - as India had, in the end, moved
to self-reliance despite being so close on trade?
India is trying to put its house in order. It’s more open for competition - preferring tohave parts and components industry as a priority area for trade; and bringing in tradein tasks as part of the whole policy stance. India has also been very clear in terms of thecommitment for free trade, and also has been thinking about the bilateral trade
agreements with Japan, Singapore and South Korea.
With China's presence in RCEP, we were having a lot of reservations in terms of how thenegotiations were going, but I think with other countries (which have commitment for
rules-based trading order) India would be in favour of having trade agreements withthem - Japan, being one. And as I mentioned ASEAN and also, South Korea, Singapore- they are very much part of that, and similar dialogues are now being renewed with the
UK and also with the US. Definitely, New Zealand's insistence on agriculture products
was an issue.

We haven't mentioned the Belt and Road Initiative (BRI), and I believe the Blue Dot
Network hasn't really been mentioned today - but I wonder how is Malaysia looking atthese big regional development opportunities and these big infrastructural programs? Is
it possible to subscribe to both, or are the two opposing, and do they have different
strategic objectives? How has a country like Malaysia been grappling with those two
initiatives?
We have been very much a part of the BRI initiative, and we have been supportive of
BRI both bilaterally, as well as through the regional process. So, I don't see a conflict. I
think Malaysia will continue to be part of these regional initiatives. I am personally notconcerned too much on what the government is thinking right now, to go back to theearlier question. Because of the pandemic, the general view of the public is that growth
has to come now from domestic investments. While we continue to attract FDI, I think
we need to promote domestic investment. There is a general public reaction now thatthey feel that state-owned enterprises have been very much involved in businessactivities. I think they are now calling for a total revamp of the role of state-owned
enterprises - which is very much in line with what we have signed on with the CPTPP.
So that's a very important part for the Malaysian government now, because of the public
support for the revamp of the issue. So, that will make it easier for the government to
ratify and make the amendments.
If you want us to sign onto the FTA with the EU, I think the first step is to ratify the
CPTPP, because that will then set the threshold for negotiations with the EU and also
will be making it much easier for the negotiators to begin negotiations, because I don't
think the EU is in any way going to lower their ambition in negotiations with Malaysia.
Trade agreements can drive reforms and then connect us into the region, but also risksa dirty recovery - that while countries turn inward, they risk forgoing regional priorities
such as combating climate change in favour of domestic trade objectives or domestic
stimulus. What's your view on the possibility that we face a dirty recovery? Are wider
objectives (such as climate mitigation and equity and inclusiveness) featuring in
Taiwan’s trade interests?
Due to its lack of international participation, Taiwan has been always trying to keep on
the top of the agenda of global concerns, including the issue of climate change. We Taiwan
heavily depend on trade due to limited resources. We are also exploring new energy
resources and keeping in line with international standards despite of the fact that weare not formally a member of any other regional integration scheme.
It would be interesting to know if the change of leadership in the US might have an
impact on the regional trading order.
I would make a couple of points, and that it is notable that when Biden rang three orfour of the leaders in this region - including Prime Minister Morrison, President Moon of
Korea, Prime Minister Modi, and Prime Minister Suga - he did not use the term “freeand open and prosperous Indo-Pacific” - he used “secure and prosperous.”Now that perhaps is a very interesting hint that he is wishing to broaden the level of
support for the Indo-Pacific concept. I think there's no doubt that under Biden, the IndoPacific will continue to be used, but it might have an evolving formulation which will
have to be more compatible, perhaps with the ASEAN Outlook on the Indo-Pacific.
On Quad-plus coming together, and who their ‘plus’ might be, there is a broad interestin the Quad.
There have been a number of countries, including some in Southeast Asia, as well asSouth Korea, that would be obvious candidates to potentially join in some of the Quaddiscussions. But I think it's pretty early days still yet. We'll have to wait and see how the
new US administration manages its approach to the Quad. They are, I think, likely to
try to revamp their approach to Asia, and to make it more inclusive rather than exclusive
in any way. That's a big, big factor to look at.
We should not forget that in the Indian Ocean, the Pacific has been our focus. But Africa
is very much part of this conversation too, and we need to see agreement that is coming
up. And also the wider linkages of the region with our countries here. And that's where
I think Australia and New Zealand both would have to bring the focus within the IndoPacific.
Closing Remarks from Mr. Naoyuki HARAOKA, Executive Managing Director of theJapan Economic Foundation (JEF):
I truly enjoyed our discussion yesterday and today. It's always fun to listen to thisForum's discussion. It's very enlightening and insightful and productive, of course. And
first I noted the word “uncertainty.” Uncertainty is not only provided by COVID, but also
provided by some other things. One is disparity caused by inequality - income inequality
or regional inequality, who are digital divided. And another thing might be geopoliticalcrisis or geopolitical risk - that is the possible disruption with US-China relations.
And also a lack of certainty about the US trade policy, the new US administration's trade
policy. So in uncertain situations “pre-cautionism” is now expanding. That's what mostpeople agreed upon.
But fortunately, on the other hand, we have some efforts to achieve rule-making
processes, such as RCEP and CPTPP. Those efforts and also a possible WTO reform
would lead to a rules-based international trade regime that would be perhaps beinstrumental in decreasing uncertainty.
Those efforts could be a good promoter for domestic policy reform in particular. I would
say CPTPP should be a good template for domestic policy reform because it would include
the same regulatory reforms for the domestic economy.
However, it's easy to say, but it's not easy to be done. And as I said, we would need aholistic approach. Because geopolitical risks, economic risks and domestic economic risks
or risks intertwined - are all closely related to each other. So, we would need to discuss
that. Not in isolation, but at the same time. So, we will need a sort of interdisciplinary
approach and holistic approach to the issue. And secondly, we need diversity. In essence,in uncertain situations we need diversified views. Those that are different, and not single
and unified views.
We see rising populism and though the US Administration has changed, it's not thatdifficult in my personal thinking, to imagine the US with a nationalistic or antiglobalization policy. Therefore, in order to counter populism, which is sometimes
motivated by emotional thinking, we would need some data and a clearly objective
approach. I recently read an excellent book titled "Good Economics for Hard Times"
written by an Indian economist, Abhijit Banerjee who won the Nobel Prize of economics
in 2019. It’s recommending evidence-based approaches to get our objective.