People, Business, Prosperity – ABAC Annual Report to APEC Economic Leaders – Jan 2025

Building the Free Trade Area of the Asia-Pacific. The Free Trade Area of the Asia-Pacific (FTAAP) is the best way to unlock the full potential of the region, by countering fragmentation and creating new opportunities for all. ABAC calls on APEC to build FTAAP from the top down through high-quality trade agreements and innovative recent sectoral initiatives on digital trade, sustainability and inclusion. In parallel, APEC should

build FTAAP incrementally from the bottom up through specific deliverables that would benefit businesses and communities in the shorter term, including region-wide adoption of paperless trade, a New Services Agenda to boost trade in digitally-deliverable services, a Greener Trade Framework, policies for resilient supply chains and improved access to venture capital for women.

APEC should show leadership in strengthening and updating the World Trade Organization (WTO), including through the reinstatement of a fully functioning dispute settlement system this year, and outcomes identified in ABAC’s 2024 Statement

on the WTO, including a permanent WTO E-Commerce Moratorium and championing plurilateral initiatives. ABAC urges APEC to welcome the new E-Commerce Agreement, and support its ratification, integration into the WTO rulebook, and expansion.

Women entrepreneurs face substantial disadvantage in accessing venture capital for their businesses, but more equitable access would reap substantial economic benefits for the region. ABAC urges APEC economies to establish programs that

support women-led enterprises’ access to venture capital financing and foster an environment conducive to women’s engagement in trade and entrepreneurship, addressing in-built biases in lending practices, and leveraging women’s untapped economic potential through the creation of a level playing field for all.

Maintaining the openness, and enhancing the depth, efficiency, stability, connectivity, and resilience of supply chains, are crucial for promoting trade and investment in the Asia-Pacific region. ABAC encourages APEC economies to seek to examine, and where

necessary, establish principles governing supply chain measures so that they have the least trade and investment-distorting impact. Business can offer important insights into this work and should be engaged in any relevant policy discussions.

ABAC calls on APEC to pursue interoperability in digital trade policies, regulations and standards, and through trade agreements, giving priority to the areas of the greatest importance to business, including trusted and secure data flows, e-payments and

digital trade facilitation. APEC should also establish a “New Services Agenda” that would seek to remove barriers to trade in digitally-delivered services, pursue regulatory coherence and facilitation in such trade, and build capacity, particularly for groups with untapped economic potential, including micro-small and medium-sized enterprises (MSMEs), women and Indigenous entrepreneurs.

The world is currently grappling with the need to establish appropriate governance guardrails around the responsible and inclusive development and use of artificial intelligence (AI) which encourages development and innovation of all economies, while mitigating the possibilities for misuse. This requires effective, collaborative, cross-border

governance solutions, including voluntary international cooperation initiatives and domestic models, and with existing and new trade and digital economy agreements also playing a pivotal role. There is a need to build an appropriate and coherent regulatory environment and to find a regulatory balance between protection and potential, with the participation of the private sector.

Global trade of physical goods remains largely paper-based and process intensive, with up to 4 billion paper documents circulating at any one time. Fewer than 1%

of trade documents are fully digitalized. Despite its clear benefits, there has been slow uptake of digital trade solutions, particularly by MSMEs. ABAC calls on APEC to prioritize universal adoption of paperless trade, including through the legal recognition of documents in line with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferable Records (MLETR), promotion of

broader industry adoption with accessible digital infrastructure, and the development of enabling digital ecosystems (including with fiscal incentives and capacity building, where needed).

End-to-end digitalization of trade financing has great potential to enable MSMEs to gain access to working capital and benefit from global trade. ABAC highlights the importance of prioritizing the standardization of trade documents, coordination of regulatory and legal frameworks to ensure interoperability across jurisdictions, and strong participation

from key stakeholders to pave the way for wider adoption. It is also important to develop the digital infrastructure for deep-tier supply chain finance to enable the benefits from end-to-end digitalization of trade to cascade down the layers of domestic supply chains to micro- and smaller suppliers.

Investment facilitation is crucial amid rising barriers. To foster a transparent, efficient and investment-friendly business climate, it will be essential to prioritize the implementation of investment facilitation measures and support the integration of the WTO’s Investment Facilitation for Development Agreement. APEC should develop a comprehensive roadmap for a renewed Investment Facilitation agenda in response to the evolving

global environment. Additionally, APEC should address key challenges faced by APEC Business Travel Card (ABTC) cardholders and improve the ABTC scheme, which serves as a tangible tool for facilitating business mobility and investment across the APEC region.

As virtual transactions rise, tax administrations face revenue collection challenges. Implementing international mechanisms, like the Organization for Economic Cooperation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) initiative, pose compliance and data management difficulties for multinational enterprises (MNEs). APEC economies should develop consistent compliance and reporting requirements that align with a common approach to digital

tax administration without overburdening enterprises. Additionally, economies should follow a collaborative approach, focus on strengthening data security and privacy within their tax systems, and adhere to global best practices to foster tax transparency and cooperative compliance.

Pension funds manage large amounts of capital that can be mobilized to finance growth. However, enabling them to expand and diversify investment in private markets (including real estate, infrastructure, private equity and private debt) and small- and mid-cap companies will require addressing obstacles arising from various supply- and demand-side factors. APEC economies should consider implementing policy reforms, capacity building measures and innovative approaches to enable pension funds to invest in a wider range of assets and enterprises.

There are significant economic and social benefits to health data sharing rather than maintaining siloed health data. Health data sharing, however, raises important

policy issues, including data quality, privacy, inconsistent standards, overly restrictive or non-harmonized regulations, lack of ethical considerations, and insufficient governance and financing for implementation of change. ABAC urges APEC economies to form official health data sharing offices, right-size health data sharing investments in domestic strategies, harmonize governance of opt out models, align on a common technical standard for data formats and aim higher for centralized, accessible, and usable repositories.

It will be critical that APEC economies develop strategies to harness the positive impact of AI for industries and economies, while addressing potential risks for workers. AI promises long term productivity gains; however, there is uncertainty about whether AI will help address or exacerbate the digital divide. The transition could involve significant job displacement and income distribution changes, making it essential that policy responses promote the equitable and ethical integration of AI, train the next generation of workers, and protect and retrain those currently at risk. The policy responses should be comprehensive, including basic education, to ensure that students and teachers are properly equipped for the future.

As the Asia-Pacific region faces whole of economy shifts across industries to create an ambitious new green economy and to meet Paris Agreement commitments, there is also a green shift in the labor force. Women’s significant underrepresentation in essential green, digital and science, technology, engineering and mathematics (STEM) education and careers will substantially impact their ability to access opportunities and contribute to the transition. ABAC urges APEC economies to seize the opportunity and take action to address structural barriers and ensure women’s access to careers in the green economy.

APEC economies should focus on reinforcing a supportive and conducive policy environment with respect to enhancing trust and confidence in the digital economy.

Raising the competencies of the workforce is essential to develop a skilled digital trust workforce. This is an area in which APEC governments must work with industry to help them attract, recruit, train and develop a workforce that meets the needs and demands of an increasingly complex digital landscape. Transitioning the informal sector to the formal economy, including through digitalization and access to finance. The informal sector represents a significant share of economic activity and total employment in many APEC economies. The sector represents an unreached, untapped, unregulated and unprotected portion of the economy with huge potential benefits if formalized. Fostering greater digital trust can play a crucial role in promoting the formalization of economies by fostering economic integration, enhancing economic representation, and driving economic growth and resilience. APEC economies must reduce the barriers to accessing and using digital tools. Continued efforts are also required to put in place key

enablers, such as the digital and data infrastructure and legal and regulatory frameworks, that promote inclusive digital financial services.

To close existing gaps in the food system and ensure greater resiliency throughout the APEC region, ABAC urges APEC economies to: establish coherent standards for agri-food technology to foster sustainable innovation; eliminate distorting agriculture and fisheries subsidies, expand market access and facilitate trade and supply chains for greater food security; and revitalize public-private partnerships, including through ensuring that the private sector has a meaningful voice in the APEC Policy Partnership for Food Security.

Water consumption and pollution are among the most pressing environmental issues of the textile and apparel industry. Circular solutions, through the adoption of water-saving technologies and methods, enhancing water recycling rates and minimizing waste generation throughout the process, are currently being used to help mitigate

the problem. However, to establish a viable circular water economy, various obstacles must be addressed, including regulatory, institutional, behavioral, and technical barriers. Reducing costs is imperative to make these solutions economically feasible.

APEC should accelerate efforts toward a low carbon future by reducing emissions, including through the elimination of inefficient fossil fuel subsidies, promoting trade and investment in renewable energy, and encouraging green investment and related

infrastructure development. To meet ambitious climate goals amid rising electricity demand, APEC needs to deploy advanced clean technologies such as hydrogen, ammonia, carbon capture utilization and storage, carbon recycling, biomass, nuclear and energy-saving technologies, as a complement to the transition to renewable energy sources. A realistic energy transition can be achieved by utilizing advanced

technologies to increase low-carbon investments and expanding transition finance options, including measures to address currency risk, supported by international cooperation and the development of low carbon roadmaps. APEC should promote reforms to enable the use of a wider range of assets, including intellectual property, to finance sustainable innovations, and explore feasible ways of developing an AsiaPacific

Promoting convergence of sustainability disclosure requirements in APEC. Recognizing the rapid acceleration of implementation of mandatory sustainability disclosure requirements in APEC economies, enhanced cooperation is needed to harmonize these disclosure requirements across jurisdictions in the region. Currently, there are inconsistencies between the entities that are required to report, the timelines for

reporting, and the topics required for disclosure. This fragmentation in reporting requirements undermines the integrity and comparability of reporting across jurisdictions – creating potential opportunities for corruption and greenwashing. ABAC encourages APEC economies considering mandatory disclosure to support policy trends to promote the continued convergence of requirements in the region.

APEC should establish a Greener Trade Framework, based on WTO-consistent principles, to effectively leverage trade in addressing the climate challenge. Such a regionwide, principles-based framework would support the transition to low-carbon, nature-positive and inclusive economies. The framework should reflect ABAC’s Climate Leadership Principles of Reduction, Adaptation, and Just Transition, expand the work on the liberalization of environmental goods and services, and should aim to avoid all forms of green protectionism.

APEC should ensure fair trade conditions and reduce trade frictions through the elimination of tariffs, non-tariff barriers and other discriminatory trade

policies to facilitate the seamless movement of goods and services related to the production of electric vehicles (EVs), fostering growth in this critical sector. Supporting the development of international standards will simplify compliance and reduce costs. Promoting investment in EV infrastructure and critical mineral supply chains, and encouraging sustainable mining practices, are also essential, as is a rapid transition

to a cleaner energy supply for EVs.

The Asia-Pacific region is the world’s most exposed region to disasters and climate risks. ABAC urges APEC economies to promote innovative solutions such as disaster risk insurance, especially in developing economies, and to facilitate

knowledge exchange between best-prepared economies and those most at risk. Addressing climate risk requires not only an all-of-APEC but all-of-society approach, including businesses, especially those drawn from vulnerable groups. Public-private partnership is critically important.

Full report here