Sustainable, Inclusive Growth Through Trade

Every year, the Asia-Pacific Economic Cooperation (APEC) forum is hosted by one of the different 21 APEC member economies and they each drive a shared agenda for that year. Since 2020, APEC as a regional economic forum has been committed to the shared Putrajaya Vision, which calls for an open, dynamic, resilient, and peaceful Asia-Pacific community by 2040.

Preceding this vision, APEC’s Bogor Goals, set in 1994, had been mainly focused on market access, investment, and trade facilitation. But the world has changed much since then. While trade facilitation and market access are still important, other aspects have become equally important, including innovation and digital transformation, as well as socio-economic considerations such as inclusion and sustainability.

In the same vein, APEC Thailand 2022 highlighted the Bio-Circular-Green economy, while APEC U.S. 2023 focused on greater engagement and connecting more stakeholders such as workers, indigenous peoples, and small and medium enterprises. In this year’s APEC Peru 2024 meetings, with the overarching theme of “Empower, Include, Grow”, we continued our story of inclusion, sustainability, and resilience with more emphasis on the social dimension of economic growth and development—one that empowers the most vulnerable, harnesses digital opportunities, and gives a new impetus to economic growth.

APEC works by providing capacity building and technical cooperation to support our shared vision. While APEC is not itself a negotiating body, a lot of our traditional work has been around helping our members build capacity to negotiate their free trade agreements and achieve good outcomes.

For instance, a Free Trade Area for the Asia-Pacific has been mooted since 2004: we are now working hard with all our working groups to help realise this agenda, which could do with much stronger commitments to inclusivity, and provisions in the digital sphere. But to do this well, economies need to seek inputs from different affected stakeholders and communities, and not just rely on one committee focusing on trade or investment. They could benefit from discussions with other groups within the APEC framework that look at micro, small, and medium enterprises (MSMEs), at the role of women in the economy, and so on. Governmental and related organisations tend to be quite rigidly structured, so this broader, freer conversation can help to surface less heard views relevant to our shared goals of engendering more inclusive growth.

Broader, freer conversation can help to surface less heard views relevant to our shared goals of engendering more inclusive growth.

Making the Informal Sector Count

APEC comprises economies at various stages of development—we have highly developed economies, and developing economies. Many APEC economies do not have a fully functioning formal sector. Hence, APEC has a new drive to move people from the informal sector to the formal and global sector so that the benefits of trade and investment can flow to all.

This calls for policies that encourage and incentivise those in the informal sector to move into the formal sector. Many of them ask, “Why should I? I’m quite happy in the informal sector. You just want me to pay taxes.” But there are good reasons for this move. Workers in the informal sector lack access to finance and other benefits that registered companies enjoy. Bringing informal actors into the formal sector means they will be better able to tap into the global value chain, to bridge the digital divide, and unlock value for their countries’ economies, as well as for themselves. Informal actors also lack social protections. We saw during the COVID-19 pandemic that many of those in the informal sector suffered a huge loss of income. Those in the informal sector also tend to overwhelmingly be women. So, this is an issue not just of trade and investment, but also of social inclusion and women’s empowerment, which governments need to pay more attention to.

If a country’s formal sector is not working efficiently, especially for MSMEs, then there is little incentive to formalise.Governments must therefore first get their formal sector in order.

Prior to this year’s APEC meetings in Peru, we had not had this important conversation on the informal sector. This is why it is significant that earlier in May, ministers in charge of women’s economic empowerment held joint meetings with trade ministers. Such discussions and guidelines are helping to move the needle for domestic policy reform and for spurring greater action, for example in the World Trade Organization (WTO).

The joint ministers’ meeting also made clear that if an economy’s formal sector is not working efficiently, especially for MSMEs, then there is little incentive to formalise. Governments must therefore first get their formal sector in order with structural and regulatory reforms, good regulatory practices, efficient border and customs systems, and access to finance.

In my experience, when bringing these issues to the attention of both policymakers and the public, it can help to focus on the benefits: on the carrots, instead of the sticks.

How Governments Should Communicate the Benefits of Trade

In many circles, when people hear about trade, they unfortunately link it to job losses. Let me share a simple example. I was in the Malaysian civil service when Malaysia was negotiating joining the Trans-Pacific Partnership (TPP). The trade numbers at the time showed that imports were going up. When we analysed what was being imported we saw that it was being driven by finished goods, and in particular, clothes. This would normally ring alarm bells because importing finished goods can mean that the receiving country is not benefiting from the added value of processing goods at home. But we realised these imports were being driven by the opening of new stores of a regional clothing brand in Malaysia. Diving deeper, we found that these new stores were in fact growing the economy through not only the real estate sector, but also other parts of the services value chain. We were then able to explain that not all increases in imports are bad for the economy.

Such stories show how governments need to communicate better that trade is not a simple zero-sum game. We need a more holistic perspective that looks at how trade can affect investments, job creation, and domestic value chains.

One way that policymakers can better understand and communicate the benefits of trade is by inviting a more balanced representation of stakeholders to share their experiences, so that it is not only big business driving the conversation. They need to hear the voices of those who do indeed benefit from international trade, but should also listen to local MSMEs, other government departments, civil society, youth, and different underrepresented groups who may have not benefited in the same way. Many of these may even be critics and sceptics. Trade ministry officials should not have one end of the spectrum in the room to the exclusion of the other. Otherwise, they run the risk of becoming stuck in their own policy bubbles and echo chambers. The wider impact of trade must consider human rights, labour rights, environmental impact, and social impact. All this can be challenging for governmental practitioners. As public officials, you must be prepared to be confronted with very different views on what trade means, from people who may not like you. But you must listen to them to get the whole picture.

How these conversations take place is therefore important. Even how you set up the room matters. For instance, at APEC we do on occasion use casual sofas and comfortable chairs, instead of formal boardroom setups, to facilitate free-flowing discussions and open, easy conversations.

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The Tradecraft of Negotiation: Principles and Good Practices

As a negotiator, I always ask what we want to get out of an agreement and what we are prepared to give up. It is a question of balancing these trade-offs. It is important to bear in mind that one’s counterparts in other countries will also have their own internal
trade-offs to balance. A practical approach is to clarify what is in it for each party, what each absolutely needs to have, and what they are prepared to give in exchange. In my experience, this can move the negotiations away from being fixed on an initial single issue, to broader terms that allow all parties to move forward together. It is possible to find a middle ground that will benefit both your economy and that of your trading partner. It need not be a zero-sum game.

As public officials, you must be prepared to be confronted with very different views, from people who may not like you. But you must listen to them to get the whole picture.

Geopolitical realities do come into the room, and whether we like it or not, we must navigate these carefully. Part of this is about identifying and emphasising common ground, so that there can be movement forward. In this regard, I must credit the U.S. for how they, as Chair of APEC 2023, were able to get consensus in the 2023 Leaders’ Declaration, focusing on the breadth and depth of the achievements of the year, while providing flexibility for member economies to issue their own statements on their individual geopolitical stances.

For government practitioners, fora such as APEC and the WTO are excellent for building competencies in negotiation. They provide a good understanding of the intricacies of international trade agreements, including what the many technical terms mean, and the legal consequences of signing up to and implementing these terms and conditions.

A good individual negotiator is open-minded enough to listen to all the different voices in the room, from the many stakeholders, without necessarily agreeing with them. The negotiator needs to be able to understand different perspectives domestically, and also spend time with their foreign partners to build rapport. You are cultivating a partnership: coming at it as adversaries is a waste of time and energy. At the end of the day, it is a human being, not a faceless institution, who negotiates.

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My experience in the Ministry of Investment, Trade and Industry prepared me well for my role in APEC. It was a good transition from the domestic perspective of international trade to a large and diverse international forum, where I now manage the many different perspectives of our 21 member economies. Coming from a very vocal multicultural, multiracial, and multireligious country such as Malaysia has helped a lot.

You are cultivating a partnership: coming at it as adversaries is a waste of time and energy.