The Asia-Pacific Economic Cooperation helps ease trade across borders. But the global flow of commerce is not immune from disruption. Rebecca Sta Maria, the executive director of the APEC Secretariat, and Carlos Kuriyama, director of APEC’s Policy Support Unit, discuss how APEC functions—and what external factors affect its work. [Transcript | Video]
5 takeaways:
➀ APEC: Bringing China, Russia and U.S. to the same table.
APEC follows the One China policy, meaning Hong Kong and Chinese Taipei are distinct entities. “We are not binding, so we do not negotiate agreements, but we build on it,” Sta Maria said. APEC is one of the few international bodies that can bring China, the U.S., Russia and Chinese Taipei to the table where they can engage in economic discussions despite their political tensions. APEC’s non-binding structure means economies cannot prevent one another from raising concerns. “What’s important is that because we are non-binding, we are less constrained in that sense,” Sta Maria said.
➁ New business models prompt questions.
“One of the things that we are noticing is that… companies are switching their business model from a just-in-time model to a just-in-case model,” Kuriyama said. Under the previous system, companies sourced parts and services from all over the world to produce goods as quickly as possible. Now, companies are “building redundancies,” holding precautionary stocks and sourcing parts and services from a diverse set of suppliers, Kuriyama said. Building this resilience is costly, though. “It’s very hard to tell at this point if this is going to be sustainable or not,” Kuriyama said.
➂ Global economic slowdown is affecting trade.
“The global slowdown means a reduced external demand,” Kuriyama said. Imbalances between supply and demand lead to increasing interest rates. “Higher interest rates mean basically that the cost of credit is more expensive and so it’s going to be more expensive for consumption and for investment,” Kuriyama said. “This could therefore affect in some way the economic recovery for this year and the next few years.”
➃ The pandemic increased inequality.
“We can see that the poorest are getting worse off and the richest are getting better off,” Kuriyama said, referring to income and accumulated personal wealth. This growing inequality could cause political and socioeconomic instability, including transportation and labor disruptions that could delay work and interrupt trade.
➄ Economic health is linked to weather, too.
Heavy storms like El Niño cause fishing production to plummet. Floods and other natural disasters also destroy agricultural products. The El Niño phenomenon highlights the notion that governments hit hard by El Niño also experience more social conflict. The extreme heat in Singapore leads Kuriyama to believe the El Niño weather pattern will be a severe one, which would cause a lot of losses. He estimates economic losses will clock in around $3 trillion USD. “It’s a lot of money and resources,” he said.
*This fellowship is part of an ongoing program of journalism training and awards for trade coverage sponsored by the Hinrich Foundation. The National Press Foundation is solely responsible for the content. All programs are on the record and resources and transcripts from this and previous fellowships are published.
