Asia-Pacific economies must recognize and address the change toward greater cross-border movement and subsequent increase in intra-regional trade that is occurring in the region, according to Alan Bollard, executive director of the Asia-Pacific Economic Cooperation’s secretariat.
“We are now seeing a shift toward domestic demand-driven growth and an increase in services trade as opposed to predominantly trade-driven growth that focused on manufactured and processed goods that occurred in region over the last three decades,” explained Bollard in his recent keynote speech in Hong Kong.
These changing growth patterns, coupled with the increasingly complex way goods and services move across borders, from e-commerce to value-added supply chains, are impacting the economic environment and the way APEC addresses cross-border trade.
“Most production used to be ‘made-here/sold-there’ and was vertically integrated within large firms,” said Bollard. “Rules of origin and value-added were simple concepts.”
“But today, we are seeing an increase in intermediate goods, intra-industry trade and supply chains, which use border transactions more aggressively and help SMEs to globalize,” he continued. “As a result, rules of origin and value added are much more complex.”
He cited the Apple iPhone supply chain as an example of the complicated web of cross-border movement that extends throughout the Asia-Pacific region. With research, development and design in the United States to chip manufacturing in Malaysia, fingerprint sensors fabricated in Taipei and inductor coils made in Japan, the Apple iPhone eventually ends up in China for final assembly.
To address these cross-border changes and subsequent rise in intra-APEC trade, the association should focus supply chain connectivity initiatives toward streamlining border regulations so supplier components can seamlessly move across regional boundaries, he added.
“Today, efficient borders are recognized as a source of competitive advantage. APEC members are working toward reducing the red tape and heavy policing that slows down goods getting across borders. Increasingly border regulation in APEC member-economies is being streamlined through single window, harmonized, contracted operations.”
He continued, “We will always have international borders, but we can ensure they are configured to promote trade and regional prosperity.”