Research Outcomes. Summary of Research Projects Policy Support Unit

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Research Outcomes Summary of Research Projects 2015 Policy Support Unit A Asia-Pacific Economic Cooperation (APEC) was established in The 21 Member Economies are Australia; Brunei Darussalam; Canada;
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Research Outcomes Summary of Research Projects 2015 Policy Support Unit A Asia-Pacific Economic Cooperation (APEC) was established in The 21 Member Economies are Australia; Brunei Darussalam; Canada; Chile; China; Hong Kong, China; Indonesia; Japan; Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Philippines; Russia; Singapore; Chinese Taipei; Thailand; United States; and Viet Nam. APEC Policy Support Unit (PSU) is the policy research and analysis arm of APEC, comprising openly recruited professionals working together with APEC Senior Officials, committees and fora, in improving the quality of their deliberations and decisions and promoting policies that support the achievement of APEC s goals, by providing objective and high quality research, analytical capacity and policy support capability. Research Outcomes is an annual publication of the PSU which provides a summary of research projects that the PSU has undertaken in a year. For past years publications, please visit Policy-Support-Unit/. If you have any feedback or comments, please write to us at org. B Contents Trade and Investment Liberalization and Facilitation APEC s Bogor Goals Dashboard 2015 Report on APEC Work on Services and Baseline Indicators Services in Global Value Chains: Manufacturing-Related Services Services, Manufacturing and Productivity Promoting Products Contributing to Sustainable and Inclusive Growth through Rural Development and Poverty Alleviation Trends and Developments in Provisions and Outcomes of RTA/FTAs Implemented in 2014 by APEC Economies IFAP Implementation in Facilitating Investment for the Asia Pacific Region: 2014 Update Structural Reform Regulatory Reform - Case Studies on Improving the Business Environment for SMEs Structural Reform for Resilient and Inclusive Growth Assessing the APEC New Strategy for Structural Reform (ANSSR) and Advancing the APEC Structural Reform Agenda Beyond 2015 APEC s Ease of Doing Business: Interim Assessment Connectivity including Supply Chain Connectivity & Global Supply Chains Value Chain Resilience in the Asia Pacific: A Synthesis Report Economic and Financial Analysis Assessment of the APEC Leaders Growth Strategy APEC Economic Trends Analysis Key Trends and Developments Relating to Trade and Investment Measures and Their Impact on the APEC Region Guidebook on Trade and Supply Chain Finance Sustainable Economic Development The APEC Women and The Economy Dashboard 2015 SME Internationalization and Measurement SMEs, Competition Law and Economic Growth Download full reports at: 1 Trade & Investment Liberalization & Facilitation APEC s Bogor Goals Dashboard 2015 Publication Number: APEC#215-SE Published Date: October 2015 Full Report: 35 pages The Bogor Goals Dashboard aims to provide easy-to-understand figures to track advances in areas critical to promoting greater regional economic integration. It displays a set of harmonized indicators laying out the evolution across time certain aspects of trade and investment liberalization and facilitation in quantitative terms. This report provides updated figures on the indicators included in the APEC s Bogor Goals Dashboard. Please refer to the report for the APEC Dashboard and those for each APEC member economy. Findings The Dashboard shows that more efforts are needed in the APEC region to advance towards the Bogor Goals of open and free trade and investment. In terms of trade, average tariffs increased slightly from 5.7 to 5.8% between 2012 and 2013, mostly explained by the increase of agricultural goods tariffs which went up from 12.0 to 12.2%. The cost to export and import also increased in recent years. As for services, the Dashboard shows a rising number of trade agreements including clauses with commitments on liberalizing bilateral services trade in several sectors. On investments, the perception of rules affecting negatively the arrival of FDI and the prevalence of foreign ownership since the Global Financial Crisis has not changed. Report on APEC Work on Services and Baseline Indicators Publication Number: APEC#215-SE Published Date: November 2015 Full Report:123 pages This report evaluates APEC s work on services and proposes baseline measures and relevant indicators for services trade in the region. The first part of the report assesses services-related projects and programs across relevant APEC committees and working groups and reflects on how to improve the governance of services work in APEC; the second part proposes various services trade indicators and divides them into two groups those that provide measurement of services trade in APEC and those that pertain to regulatory conditions that facilitate services trade; and the last part provides some recommendations relating to the governance structure of services in APEC and towards improving services trade indicators so as to facilitate the future review of services. 2 Findings & Recommendations Evaluation of APEC Work on Services Assessment of database of projects in the APEC website shows that for APEC as a whole, 53% of the projects are relevant to the services sector. Of these, 33% are carried out by the Committee on Trade and Investment (CTI) & related groups; 8% by the Economic Committee (EC) & related groups; while the remaining 59% by the SOM Steering Committee on Economic and Technical Cooperation (SCE) & related groups. Categorizing projects by individual working group shows that some of the working groups undertake more services-related projects than the Group on Services (GOS) despite it being regarded as the group responsible for services. Some of these groups are Energy Working Group (which takes 23% of total services-related projects); Human Resources Development Working Group (10%); Investment Experts Group (8%); and Transportation Working Group (8%). In contrast, GOS projects only made up a modest 5%. Besides projects, APEC also has numerous non-project achievements related to services. These achievements are in the form of agreements, action plans, work plans, principles and model measures. They include APEC Business Travel Card, APEC Blueprint for Action on Electronic Commerce and APEC Work Plan on Promoting Cross-Border Education Cooperation, APEC Privacy Framework, and others. Implication on Services Governance The multi-sectoral issues involved in the service sector, together with the currently scattered organization of sectoral groups within APEC, means that no single committee, let alone GOS, can coordinate the crosssectoral work that relates to services. APEC Senior Officials, therefore, need to explore options to make APEC s work on services better coordinated and more coherent. One option for APEC to address the currently dispersed work on services would be to elevate the role of GOS and give it coordinating power over the different service sector working groups. Another option would be to maintain the status quo but improve SOM s coordinating role of services-related work by putting a comprehensive review of services as a standing agenda item in its regular meetings. The report discusses the advantages and disadvantages of each of these options; notes that a holistic view on services is helpful to eliminate sometimes conflicting priorities, improve information flow, and avoid duplication of efforts and resources; and acknowledges the complex and heterogeneous nature of services where sector-specific approach is sometimes appropriate. Analysis of past and ongoing services work in APEC shows that future services roadmap, if agreed, will not be an entirely new task for member economies. Among the things that the roadmap can do would be to consolidate and link the many activities, plans and initiatives that working groups and committees are already undertaking. The roadmap can enhance and supplement the implementation of the APEC Connectivity Blueprint, provide platforms for more cross-fora dialogues and regulatory cooperation. Baseline Measures and indicators The report identifies 11 baseline indicators that measure trade in services across various modes of supply and 9 indicators for the regulatory condition. It details what each particular indicator can measure, the source, and the current situation based on the indicator s most current data. The report also details the limitations and data gaps that make the current (and future) assessment of services challenging. These include incomplete years of information or few 3 economies that compile and report specific statistics. In order to facilitate the future assessment of APEC s work on services, the report proposes the following targets for the consideration of member economies by 2020: - To increase the number of economies with services trade restrictiveness index and FDI regulatory restrictiveness index; - To see a reduced number of visa requirements especially for business travel for APEC economies citizens and an increased number of economies accepting online applications and improvements in information regarding entry visas; - To see a complete coverage of APEC economies in all the regulatory indicators; - For all APEC economies to show no data gap in trade in services in the balance of payments from this year forward, and report trade in services by sector; - For all APEC economies to report bilateral trade in services, especially with other APEC economies, to get a better assessment of progress and growth of trade in services in the region; and - To have multi-year capacity building activities for statistical agencies on how to compile and harmonize FATS data statistics. Services in Global Value Chains: Manufacturing- Related Services Publication Number: APEC#215-SE Published Date: November 2015 Full Report: 510 pages This report contains an analysis of the role of services in manufacturing value chain activities as well as policy issues that affect the supply of these services. The approach is to undertake case studies of the value chains of firms in order to understand how services enter production, trade and consumption, and what functions they performed. The project compiled case studies involving 22 firms based in different APEC economies, 14 from Asia and 8 from North America and Chile. Findings & Recommendations Through face-to-face interviews, the study collected various experiences relating to services in different value chain configurations, as well as some policy restrictions that affect these services and the companies businesses in general. It finds that value chains use a wide range of services, numbering from as few as 37 and as many as 74. Moreover, approximately 38% to 90% of services are outsourced to third parties, usually depending on cost considerations and on whether they form part of the core activity of the firm. Policy issues discussed with firms include restrictions on investment and labor mobility, policies relating to skills development, a range of other regulatory issues, customs facilitation, and security related threats. For the most part, the policy issues are not merely about services, but also highly relevant to manufacturing operations. This attests to the need to think about policies in terms of their overall impact on economies in a world where manufacturing and the supply of services are increasingly co-dependent. The paper discusses the nature of restrictions in different economies, the costs they impose on firms and customers, and their general economic effects. 4 The policy discussions are also relevant to institutional and infrastructural development. Examples of positive experiences of economies that have liberalized port management and modernized ports and transport facilities show how this has minimized the distance disadvantage of some economies from their markets and fostered competitiveness. The paper also brings out the need for effective intellectual property protection. Importantly, it highlights the effects of the policy incoherence inherent in opening up manufacturing for investments but maintaining restrictions on services. Although perhaps a distant objective at the moment, providing visa waivers for more economies, facilitating labor mobility, and relaxing foreign labor quotas can lead to large benefits for the receiving economy (Kommerskollegium, 2015). Such policies are a strong complement to foreign investment openness and can support the transfer of technology and technical know-how. Helping SMEs with international standards accreditation would boost their ability to participate in GVCs. Standards and high conformity assessment costs, along with other institutional disadvantages, such as a lack of access to finance, are among the other hurdles confronting SMEs as they seek to reap the benefits of being part of GVCs. In order to improve government services and to avoid creating negative impact on trade, it is also imperative to build and maintain constructive stakeholder relationships. This may include providing opportunities for public consultation in the regulatory process and constantly reviewing the regulations with stakeholder involvement. Such measures can contribute to enhancing transparency, predictability and consistency in the business environment and minimize the costs described in the various case studies. Finally, the case studies illustrate how policies carrying unnecessary costs merit careful consideration in each economy s political and economic calculus as it crafts its vision and plans for generating growth, jobs and development. Services, Manufacturing and Productivity Series: Issues Paper No. 9 Publication Number: APEC#215-SE-01.3 Published Date: January 2015 Full Report: 39 pages This issues paper tries to tease out more detailed information from the WTO-OECD Trade in Value Added (TiVA) database to understand how important services is in APEC economies by analyzing quantitatively the various aspects through which services could contribute to their economies exports such as via direct exports as well as indirectly via manufacturing or other services sectors exports. Specifically on services role in manufacturing, the paper attempts to explore the link between services and manufacturing productivity. Business services, it appears, is a dominant services input in manufacturing and is discussed in the paper in greater length, where regulations that are likely to affect the provision of these services negatively are identified. The paper concludes with implications for trade policy. 5 Findings & Recommendations Services has an important role in the manufacturing sector. While they were economically unrecognized and considered non-tradable previously, the trend towards outsourcing of originally in-house activities has uncovered a whole host of service activities and their economic value. Business strategies employed by firms in manufacturing sector have also increasingly evolved towards more services offering as a way to differentiate and add value to their goods, besides helping to build brand loyalty and product dependence. Measurement of exports in terms of value added indeed paints a very different picture of services share vis-à-vis that of primary products and most importantly manufacturing when compared to their relative exports in gross terms; while services only made up 23% of total world exports in gross terms, its share almost doubled to 45% when measured in value added terms. The OECD TiVA database shows that typically a third of the value of global goods exports are composed of services that are either embedded in the product or formed part of the sale package of the product. For APEC as a whole, services value added share in manufacturing export rose from 25.5% to 27.5% between 1995 and By sector, services value added share rose between 1995 and 2009 across all manufacturing sectors except one. While foreign services value added share has increased across all manufacturing sectors in 2009 relative to 1995, both as a percentage of gross exports and of total services value added, domestic services value added share in 2009 remains significant at 65% for APEC as a whole. Figure: Share of services value added in manufacturing exports (1995 and 2009) Source: APEC Policy Support Unit computation based on OECD-WTO Trade in Value Added (TiVA) database. 6 Figure: Domestic and foreign share of services value added in manufacturing exports in 2009 Source: APEC Policy Support Unit computation based on OECD-WTO TiVA database. The importance of services is further complemented by backward linkage analysis of I-O tables obtained from the OECD Structural Analysis (STAN) database. Looking at how growth in manufacturing sector leads to growth of services sector that supply it, one billion US dollars increase in a manufacturing output is shown to increase output of services sector by between 382 and 606 million depending on the manufacturing sector. Not all services sectors are equal. Business services appears to be the sector that matters the most for manufacturing as it has the highest value added share among the various services sector. The role played by business services is further enhanced if its direct export as well as indirect export through other services are taken into consideration. Among the motivation leading to manufacturing firms decision to servicify is the role of services in improving manufacturing productivity. Correlation studies using various variables to represent services input, productivity and manufacturing output, by and large, show the positive correlations between them and support this idea. Numerous literature has attempted to answer the question on how services, in particular business services contribute to enhancing manufacturing productivity. Hypotheses and examples can be divided into two broad groups. Those that impact labor productivity directly usually have to do with process improvements through the incorporation of new hardware modules and tweaking of existing steps for instance. Those that impact labor productivity indirectly do so by increasing the demand for firms product and hence production by the existing pool of labor. An example is data analytics or data services that help production of products that are targeted to specific revealed preferences, thus helping to minimize unsold inventories. Of the business services, other business activities and research and development are the most used activities. This has important implications for trade policy since other business activities according to the classification are mostly made up of professional services where plenty of restrictions can be found. In fact, correlation plots between various OECD index of restrictiveness in professional services and manufacturing exports per capita show the negative relationships between these variables. 7 Analysis of sectoral services trade restrictions index (STRI) for APEC shows variations in at least three dimensions: 1) across services sectors in general, 2) between services sectors that belong to the same group, and 3) within each services sector. These indicate that any efforts in reducing the variations among APEC economies should be carried out across the three fronts. Specifically for business services (accounting and auditing, computer, engineering, and legal), the main contributor to the scores appear to be restrictions on the movement of people, followed by restrictions on foreign ownership and other market entry conditions. The top restrictions on movement of people are usually policies which limit the ability of professionals to stay beyond a certain period of time and those that require professionals to meet certain requirements before they could qualify for full membership of the profession. Among the top restrictions on foreign ownership are policies restricting equity ownership and those requiring managers and/or directors to be nationals, residents and/or locallylicensed professionals. The complex and often cross-sectoral restrictions imply that efforts to support the ongoi
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