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TRADE BARRIERS EVOLVE WITH MOVIE STREAMING TRENDS

streaming

TRADE BARRIERS EVOLVE WITH MOVIE STREAMING TRENDS

We’re All Streaming Now

During our collective stay-at-home period, movie streaming has grown to the point where industry analysts are wondering whether many people will return to movie theaters. Netflix reported 15.8 million new subscribers for the first quarter of the year, more than double their forecast, according to the Wall Street Journal. Some studios are eschewing the traditional theatrical release and going straight to digital. As some indicator of how the trend is taking off, the Motion Picture Academy has said that — just for this year — movies released via streaming would be eligible for the upcoming Oscars.

Streaming movies online has been growing in popularity in recent years, but the coronavirus has accelerated the trend. Unfortunately, where consumer and commercial trends go, trade policy barriers may follow.

The Hollywood Juggernaut

Movies both reflect and shape our national cultures. Hollywood has traditionally dominated among international viewership (a phenomenon that has been shifting over recent years), sometimes to the consternation of “keepers of culture” in other countries. As far back as the 1920s, European countries offered subsidies to domestic film producers and imposed so-called screen quotas to establish a minimum number of screening days for domestic films. The OECD keeps track of restrictions on services trade in OECD member countries, including audiovisual services, the category under which movies fall. According to the OECD, eleven countries still today reserve a quota for local motion pictures shown in theaters or on television.

Other measures to shore up local culture against the tidal wave of cultural influence that is Hollywood include import quotas, tax breaks to domestic film industries, foreign investment restrictions, requirements for local sourcing of cast and crews, and blackout periods during which no new imported films may be released, often during prime movie-going periods or timed to political events.

Film Distribution in Hollywood

Ready, Action…Trade

Such measures discriminate against the film industries of other countries and constitute barriers to trade. Policymakers have sought to address screen quotas in trade agreements such as the WTO’s General Agreement on Tariffs and Trade (GATT) and the original North American Free Trade Agreement (where Mexico agreed to reduce its screen quotas). Provisions to remove barriers to audiovisual services have also been included in many recent bilateral free trade agreements.

In the case of Korea, whose vibrant film industry reached a pinnacle of global recognition with the Academy’s choice of Parasite as Best Picture in 2020, formal restrictions targeting foreign films date back to Korea’s Motion Picture Law of the 1960s. The Korean government abolished its import quota in the late 1980s, and only after the Motion Picture Export Association of America (MPEA) in 1985 filed a complaint (later withdrawn) with the U.S. Trade Representative under section 301, the same tool being used today to try to address China’s technology transfer requirements. In 2006, just prior to the Korea-U.S. (KORUS) free trade agreement negotiations, Korea agreed to reduce by half its screen quota from a minimum of 146 days to the current 73 days per year.

Digital Era Trade Restrictions

While cultural protections for film have traditionally focused on theatrical screenings, screen quotas don’t work in the digital era, where on-demand audiovisual services such as Netflix and Amazon Prime are increasingly capturing viewership. As a result, new forms of trade barriers are popping up.

For example, China has imposed tighter regulatory controls in recent years, limiting foreign content purchased for streaming in the Chinese market, which has over 850 million digital consumers. U.S. streamers must license their content for China under a 30 percent streaming quota. Chinese content, however, can reach global audiences through video streaming platforms with no such numerical limits. In today’s tense political environment – and with China marking the 100th anniversary of the establishment of the Communist Party in 2021 – we could anticipate increased censorship, which would exacerbate the problem of foreign content scarcity while simultaneously elevating the risk of piracy and other illegal distribution of unauthorized content.

In line with a longstanding European Union (EU) focus on protecting the European film industry, the EU passed a law in late 2018 that requires Netflix, Amazon and other online streaming services to dedicate at least 30 percent of their output to films made in Europe, which they must subsidize by either directly commissioning content or contributing to national film funds. Regulation now applies similar rules to similar services, whether online or offline.

U.S. and European trade discussions are now focused on a limited set of issue areas, but in an earlier push for a Transatlantic Trade & Investment Partnership (TTIP) in 2013, the camera zoomed in on issues of culture in trade negotiations. At the time, the European Commission was given a negotiation mandate that expressly excluded opening the European audiovisual sector to competition from U.S. firms.

China has 850 million digital consumers

Competition Makes Most Things Better – Even Movies

Culture clashes aside, there is a strong case that greater competition has been the force behind successful film industries outside of Hollywood. Researchers Jimmyn Parc and Patrick Messelin posit that the success of contemporary Korean cinema is due to “less interventionist public policies over the last two decades,” together with “benchmarking, learning, and innovating among non-subsidized private companies.” They point to data from the decade preceding the industry’s opening in the late 1980s, when the Korean film industry released around 90 films per year with an average revenue of KRW ₩0.9 billion per film (roughly USD $0.7 million at the current exchange rate). From 1989-2005, around 75 films were released per year with an average revenue of KRW ₩2.7 billion per film (roughly USD $2.2 million at the current exchange rate), a signal of the improvement in film quality.

Brian Yecies of the University of Wollongong Australia agrees that Korea’s efforts to liberalize in the 1980s and address censorship enhanced competition. As Hollywood expanded into Asia-Pacific markets, Korean cinema became stronger. The increased distribution and exhibition of U.S. films, Yecies argues, gave birth to a new generation of moviegoers who also increased their consumption of Korean content. Park Moo Jong credits three elements with reviving the Korean film industry: talented young filmmakers, the virtual abolition of government censorship, and remarkable technological developments. In short, he says, “Good films attract fans.”

EU streaming requirements

The Streamed Show Must Go On

In a 2019 submission to the U.S. Trade Representative, the Motion Picture Association pointed out that the industry’s international sales “now depend increasingly on member companies’ ability to capitalize on major distribution windows in the digital market.”

The need to remove barriers to stream internationally and enable competition holds true for online streaming as it has for many years for screening in theaters. As streaming gains momentum, trade agreements will continue to tackle the array of barriers the U.S. film industry faces abroad, from intellectual property challenges to subsidies to foreign investment restrictions. Likewise, negotiators will work to advance market access for creative content as it flows through both traditional and new distribution platforms. After Parasite’s surprise Best Picture Oscar win, who knows if 2021 may bring our first direct-to-digital winner? Put your feet up and get the popcorn ready.

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Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.

This article originally appeared on TradeVistas.org. Republished with permission.
trade protectionism

Trade Protectionism Won’t Help Fight COVID-19

Countries around the world are limiting international trade and turning inward, seeking to produce nearly everything — especially medical supplies — themselves.

The Trump administration, for instance, is considering a “Buy American” executive order that would require federal agencies to purchase domestically made masks, ventilators, and medicines. And over two dozen countries — including France, Germany, South Korea, and Taiwan — have banned domestic companies from exporting medical supplies.

The scramble for self-sufficiency in medical supplies and medicines needed to fight the coronavirus is make-believe. It is neither feasible nor desirable, and will only deepen the pain felt amidst this pandemic.

Governments around the world have responded to COVID-19 by imposing export restrictions on things like ventilators and masks. In mid-April, Syria became the 76th country to follow suit. The import side of things isn’t much better. The World Trade Organization (WTO) reports that tariffs remain stubbornly high on protective medical gear, averaging 11.5 percent across the 164 members of the Geneva-based institution, and peaking at just under 30 percent.

This is no way to fight a pandemic.

It’s not that COVID-19 caused this bout of trade protectionism. It’s just that COVID-19 offers up a useful narrative to promote trade protectionism.

The Trump administration, for instance, has been touting its “Buy American” executive order as a move to spur local manufacturing. Canada has also considered going it alone in ventilators and masks, but recently acknowledged it can’t possibly achieve self-sufficiency in medicines. No one can.

The way many governments see it, the only thing standing in the way of greater self-reliance in medical equipment and medicines is the will to pay for it. The story is that ventilators might be more expensive if made domestically, but that’s the cost of going it alone. It’s only a matter of getting Bauer and Brooks Brothers, for example, to make personal protective equipment, rather than hockey gear and clothing.

But there’s a reason Bauer makes skates instead of surgical masks. It’s better at it, and skates are a much more lucrative business. Bauer didn’t misread the market. It’s heartwarming to hear that Bauer is stepping in to help out, but the company knows that making surgical masks in the US is five times more expensive than making them in China. That’s why 95 percent of the surgical masks in the US are imported.

The absurdity of self-sufficiency in medicines is even more glaring. The US is a major exporter of medicines, but the raw chemicals used to make them are imported. Nearly three-quarters of the facilities that manufacture America’s “active pharmaceutical ingredients” are overseas. To reorient supply chains to produce these ingredients domestically would take up to 10 years and cost $2 billion for each new facility.  Consumers would pay at least 30 percent more at the pharmacy.

The last plug for self-sufficiency in medical equipment and medicines is that it’s not a good idea to depend on adversaries to keep us healthy. We don’t. What’s striking about medicines, medical equipment, and personal protective products is that market share is highly concentrated among allies. For example, Germany, the US, and Switzerland supply 35 percent of medical products sold worldwide. True, China leads the top ten list of personal protective products, at 17 percent market share, but the other nine, including the US at number three, are all longstanding allies. To be sure, the untold story of China is that it depends on Germany and the United States for nearly 40 percent of its medical products.

This past week, the WTO and the International Monetary Fund (IMF) called for an end to the folly of trade restrictions during this pandemic. The communique should have — but obviously couldn’t — call out governments around the world for maintaining, on average, a 17 percent tariff on soap. That tariffs on face masks average nearly 10 percent is baffling. That 20 countries in the WTO have no legal ceiling on the tariffs they impose on medicines is unforgivable.

Self-sufficiency in medical supplies and medicines is a political sop. It’s a narrative that can’t deliver anything but misery. If governments want to fight COVID-19, they should spend more time looking at how they’re denying themselves access to medical necessities, and less time on how to deny others the tools to save lives.

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Marc L. Busch is the Karl F. Landegger professor of international business diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University and a nonresident senior fellow in the Atlantic Council.

irish

FIDDLING WITH IRISH MUSIC ROYALTIES IN THE WTO

The wee organization that took on the U.S. copyright system

Black Velvet BandMolly Malone, ,The Fields of AthenryWild Mountain Thyme and Danny Boy are among Ireland’s most famous exports. Irish bouzoukis, Uilleann pipes and Celtic harps render traditional Irish music as unmistakable as it is beloved – a cultural connection for millions of Americans to their roots.

Over ten percent of the population, or 32.6 million Americans, claimed Irish ancestry in a 2017 U.S. Census Bureau survey. That affinity (along with Irish beers and whiskeys) explains the popularity of Irish pubs throughout the United States.

The Irish music playlist broadcast in thousands of pubs and restaurants is why a small outfit called the Irish Music Rights Organization (IMRO) twenty years ago convinced the European Commission to sue the United States in the World Trade Organization (WTO). At issue is an exception in U.S. copyright law that enables U.S. businesses to play music without paying royalties to the creators. The United States lost the WTO case known as “Irish Music,” but has yet to restore rights to Irish performers.

American Irish

Pay to Play

Generally speaking, when copyrighted music is played in a small boutique, while getting a filling at the dentist, or to motivate your workout at the gym, the creators of the music are owed a royalty. It would be cumbersome for many such businesses to pay that directly, so performance rights organizations (PROs) collect licensing fees that they pass on to registered singers, songwriters and music publishers. In the United States, the two largest PROs are The American Society of Composers, Authors and Publishers and Broadcast Music, Inc.

Section 110(5) of the 1976 U.S. Copyright Act included a “homestyle exemption” to this rule that allowed small commercial establishments to avoid the royalty payment. A business could qualify for the exemption if it broadcasts through a single radio or audiovisual device that is of the type commonly used in one’s home. The Senate report accompanying the Act characterized such use as “for the incidental entertainment of patrons in small businesses and other establishments, such as taverns, lunch counters, hairdressers, dry cleaners, doctors’ offices, etc.” The provision became known as the Aiken exemption after the Supreme Court victory of George Aiken who played his radio for customers in his fast-food chicken restaurant.

Over the years, application of the law was repeatedly litigated due to its ambiguity. Rather than clarifying a narrow interpretation, Congress expanded the exemption through the 1998 Fairness in Music Licensing Act to allow all establishments under a certain square footage to play licensed music for their customers regardless of the type of sound system employed. Going a step further, Congress created the “business exemption” which allows businesses of any size to play licensed music if the number and location of loudspeakers is limited, if the establishment does not charge to see or hear the music transmitted, and if the broadcast is not transmitted beyond that establishment.

Broadcasting from both sides of our mouths

Article 9 of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) requires WTO members to comply with Articles 1 through 21 of the Berne Convention for the Protection of Literary and Artistic Works that guarantee the rights of copyright owners. Any limitations or exceptions should be confined to certain special cases and should not “unreasonably prejudice the legitimate interests of the right holder.”

In 2000, a WTO dispute settlement panel agreed with the European Communities’ contention that section 110(5) of the U.S. Copyright Act violates the United States’ TRIPS obligations. The “homestyle exemption” as provided in section 110(5)(A) was deemed sufficiently narrow as to not prejudice the rights of copyright owners. Some 13 to 18 percent of U.S. business establishments would be covered. The “business exemption” in section 110(5)(B) however, expanded covered establishments to more than 70 percent of bars and restaurants (and 45 percent of retail), causing unreasonable prejudice to the legitimate interests of copyrights holders.

In other words, if the majority of food and drink establishments could avoid paying royalties to copyright holders of Irish music, the exception had become the rule.

70 percent exempted

An Irish goodbye

The United States accepted the panel findings and agreed to binding arbitration to determine a deadline for compliance and to determine the damages (known in WTO parlance as the level of “nullified or impaired benefits”) to the European Communities, which was set at 1,219,900 euros or about $1.1 million annually. Europe extended a December 31, 2001 deadline to provide time for the U.S. administration to work with Congress on an amendment to the copyright law.

The White House could not secure Congress’ approval so Europe agreed to negotiate a settlement. In June 2003, the United States and European Communities notified the WTO Dispute Settlement Body that the parties had reached a “mutually satisfactory temporary arrangement.”

The United States would make a one-time, lump-sum payment of $3.3 million covering a three-year period paid into a fund set up by European performing rights societies “for the provision of general assistance to their members and the promotion of authors’ rights.” The parties further agreed that, if the dispute has not been resolved three years on, they would enter into consultations to reach a durable resolution, foreshadowing what would become a never-ending exchange of letters.

In a November 2004 document labeled WT/DS160/24, the United States pledged to “work closely with the U.S. Congress and will continue to confer with the European Union in order to reach a mutually satisfactory resolution of this matter.” Every time Europe raises the outstanding item in WTO meetings, it is met with the exact same addendum to WT/DS160/24, restating the U.S. administration’s commitment (whether it be President George W. Bush, Barack Obama or Donald Trump) to work with Congress. As of February 2020, the United States had issued 179 such addendums.

US noncompliance

Unlucky

The WTO’s dispute settlement mechanism was designed to encourage members to resolve disputes through consultation. Consultations can sometimes avert use of formal dispute settlement procedures or avoid the imposition of retaliatory measures once a dispute settlement panel renders a decision.

The intent of consultations is to bring WTO-inconsistent measures into conformance with a member’s obligations. In the “Irish Music” case, the United States provided compensation rather than fix the offending measure (and Europe agreed as a temporary solution). But the WTO’s Dispute Settlement Understanding itself states that compensation should be resorted to “only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement.”

In this case, the United States stretched “temporary” into twenty years of non-compliance, to the detriment of the rights of European music creators and the rights of other WTO members. The outcome also undercuts the very intellectual property rights the United States fought to include in TRIPS on behalf of American copyright holders.

Modern musical arrangements

In the meanwhile, sound systems and methods of “transmission” have evolved rapidly. Streaming delivers 75 percent of the music industry’s global revenues today. At this point, it seems pretty unlikely that your local Irish pub is using a radio on a shelf to play music.

The Recording Industry Association of American (RIAA) says charges for licensing account for 16 percent of total U.S. services exports. RIAA is working to ensure global copyright protections for sound recordings as digital products. Copyright enforcement in the digital realm requires measures to control access to content such as encryption and password protections, clarification of responsibilities by Internet service providers that may play host to copyright-infringing websites, and enforcement actions against so-called “stream-ripping” sites that allow free downloads of copyright-protected recordings. This may require new provisions in trade agreements, even as the United States remains out of compliance with some of its old commitments regarding “Irish Music” copyright protections.

We’re all Irish on St. Paddy’s Day

In its 1995 appeal to the EC to bring the Irish Music case, the Irish Music Rights Organization argued that the Chieftains, The Pogues, and other European creators lose as much as 28 million euros each year, not to mention hundreds of millions for American creators whose royalties also go unpaid.

Instead, it’s American bar crawlers who unknowingly benefit. Now that you know, this St. Paddy’s Day, you may as well hoist a Guinness to toast the U.S. copyright law exception that enables you to belt out a rendition of Molly Malone as it plays on the sound system – for free – at your local Irish pub.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

world trade

Simon Paris, Chair of the World Trade Board & CEO of Finastra, Provides a Snapshot of this year’s World Trade Symposium

Protecting world trade from the current vicious cycle of trade tensions makes it imperative that those in a position to effect change – public and private sectors – work together; quickly and cohesively. Chairman of the World Trade Board and CEO of Finastra, Simon Paris, discusses three ways in which committed organizations can bring about a new pro-trade paradigm, even against the backdrop of today’s protectionist narrative, to lift people out of poverty globally and enable long-term growth and prosperity for all.

Across the globe, protectionist rhetoric and policy initiatives have become increasingly normalized. Tensions and tariffs continue to escalate with the World Trade Organization estimating that $339.5bn1 in trade is now at risk from import restrictions – the second highest level ever recorded. Amidst this trend, we as business leaders, policy makers, and engaged thinkers must deepen our commitment to free and open trade benefiting communities and workers.

The path to open trade and ensuing economic growth is under shadow. The global economic uncertainty2 risk index hit an all-time high this year. Ongoing friction between the United States and China has not only caused a tangible 12% drop in US imports from China, but triggered aftershocks across other Asian economies as a result of closely integrated supply chains3. Japan and Korea have made headlines with their own trade war that risks their trade relationship worth about $85 billion a year4 and the future economic relationship between the United Kingdom and the European Union amidst Brexit is uncertain.

In response free traders should commit to three acts of solidarity, with the aim of reversing – or as an absolute minimum, reducing – the pervasive change that continues to threaten trade as we know it.

Three commitments that will drive change

Firstly, we must be persistent in our reinforcement of the pro-trade narrative; uniting to protect and promote open trade as the unequivocal foundation for global prosperity and economic inclusion. Secondly, we must continue to investigate ways in which we can reduce the SME funding gap, currently estimated at $1.5 trillion5, which is precluding both innovation and financial independence on a global scale. It is imperative that we seek out new ways to free up finance or neutralize the perceived risk of lending to small firms. At a time where the least developed countries represent less than 1% of world exports6, we must find solutions that unlock the latent value within SMEs to stimulate competition, innovation and economic growth, and reduce the disparity of wealth in a sustainable way.

Finally, we must examine how open technology can act as the enabler for inclusive, sustainable trade. As global supply chains become increasingly complex, our goal should not be measured on a binary figure of turnover or profit, but on the ethical and sustainable impact of our technological innovation; our technological social responsibility (TSR). How can we use technology, collectively, to ascertain the provenance of materials, improve the health and wellbeing of workers in remote locations, reduce the cause and effects on environment pollution of long-distance transportation or minimize the impact of waste and disposal? How can we use open finance technologies – and by this, I include open systems, open software, open APIs, open standards and open partner networks – to transform supply chains and encourage the formulation of more relevant and inclusive trade models, in support of ethical trade?

Protecting against threats, known and unknown

A global marketplace helps ensure a sustainable model of financial inclusion that protects future generations against wealth disparity and isolation. I believe that it is only through a powerful combination of forward-thinking policies, collaborative mindsets and funding, underpinned by open finance technology, that we can deliver the change so desperately required, that promotes equality and opportunity, and reverses the trend of poverty and protectionism. It is time to find solutions to today’s threats to open trade and together protect against further polarization and the unseen threats of tomorrow.

Simon Paris will be opening the third World Trade Symposium, held in the Grand Hyatt, New York on 6-7 November. The event brings together policy-makers, trade finance luminaries and thought leaders to openly collaborate and effect change. Register Today!


1. https://www.wto.org/english/news_e/news19_e/trdev_22jul19_e.htm

2. http://policyuncertainty.com/

3. https://www.oecd.org/newsroom/international-trade-statistics-trends-in-first-quarter-2019.htm

4. https://www.nytimes.com/2019/08/28/business/japan-south-korea-trade.html

5. https://www.wto.org/english/news_e/spra_e/spra241_e.htm

6. https://www.wto.org/english/res_e/statis_e/wts2019_e/wts2019_e.pdf

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Simon takes responsibility for Finastra’s strategic direction and growth. His leadership steers the company as it realizes its open platform vision, encouraging industry-wide collaboration to spark innovation and transform the next generation of financial services.

A firm believer in the principles of doing well by doing good, Simon chairs the World Trade Board and is passionate about how technology and open trade can drive financial inclusion and improve people’s lives.

An inspiring and trusted Fintech thought leader, Simon speaks regularly at large-scale events including the annual World Trade Symposium, Paris FinTech Forum and The Milken Asia Summit. He is a strong advocate for diversity and inclusion, with refreshing and candid views on equality in the workplace. He was also named in Bank Innovation’s ‘Innovators to Watch’ list for 2018.

Simon joined Finastra (formerly Misys) as President in 2015, was appointed Deputy Chief Executive Officer in 2017 and became Chief Executive Officer in June 2018. He brings more than 20 years of sales, management and global leadership expertise to the company, having previously held the role of President, Industry Cloud, at SAP. Prior to that he was a senior consultant with McKinsey & Company.

He holds a degree in Business Administration (MBA) from the INSEAD Business School in France and a Bachelor’s degree in Business & European languages from the European Business School.

APEC: TRADE ACCELERATOR IN THE ASIA-PACIFIC & BEYOND

Menu of Options to Grow Trade

Countries utilize multiple platforms to open markets, set standards or other rules of trade, and resolve disputes. Progress in reducing barriers to trade and facilitating the flows of goods and services may be an outcome of negotiated free trade agreements between two or more countries or result from legally binding instruments agreed to in multilateral fora like the World Trade Organization (WTO).

In contrast, decisions in the Asia-Pacific Economic Cooperation (APEC) forum, a grouping of 21 economies that border the Pacific Ocean, are reached by consensus but undertaken on a voluntary basis. This format is credited with enabling members to “incubate” content for new trade negotiations and to work collaboratively on pragmatic regulatory and policy approaches to common challenges.

The APEC forum culminates each fall in a meeting of the 21 leaders, a gathering many associate with the annual “silly shirts” photo of top officials genially wearing the national garb of the host economy, rather than their typical business suit. However, the work of APEC goes on for many months before this fashion summitry takes center stage to solidify each member’s commitments.

This article introduces this cooperative, regional forum; highlights the priority focus areas set out by this year’s APEC host, Chile; and shines a spotlight on one such area – digital trade – as a case study into how APEC serves as a building block in the iterative process of co-creating norms for trade.

Spotlight on APEC

The 21 members of APEC, which includes economies as diverse as the United States and Papua New Guinea (last year’s APEC host), are home to almost three billion people and represent close to half of world trade.

When the organization formed in 1989, APEC had Australia, Brunei Darussalam, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and the United States as founding members. China; Hong Kong, China; and Chinese Taipei joined in 1991. Mexico and Papua New Guinea acceded in 1993, and Chile joined in 1994. In 1998, the addition of Peru, Russia, and Vietnam brought the organization to its current membership level.

APEC Members

Every year one of the 21 APEC member economies serves as the APEC Chair. Over the course of a year and typically in multiple cities, the Chair hosts a series of senior officials’ meetings, ministerial meetings, and a Leaders meeting. Ministerial meetings include gatherings of Trade and Foreign Ministers from each of the economies, as well as sectoral ministers overseeing other key areas, including energy, finance, and education. The host economy also welcomes the APEC Business Advisory Council (ABAC), up to three senior business leaders per economy, appointed by their governments, who provide private sector input into the APEC process.

Between 1989-1992, APEC dialogues were held at the senior official and minister level. In 1993, former U.S. President Bill Clinton began the practice of an annual leader meeting when he hosted an APEC meeting in Seattle. The following year, APEC leaders made a commitment to jointly work toward free and open trade in the Asia-Pacific by 2020. This commitment is known as the Bogor Goals for the Indonesian city where APEC leaders met in 1994.

A defining feature of APEC is that members voluntarily take actions to reduce barriers to trade and investment without a requirement to make legally binding obligations. Beyond a core focus on trade and investment liberalization, APEC also promotes business facilitation, with the goal of taking time, cost, and uncertainty out of doing business across the region, as well as technical cooperation, to boost the technical capacity of APEC’s less developed members to drive secure and sustainable economic growth.

From Idea to Fruition

Notable accomplishments within APEC include its work on environmental goods, where members have undertaken tariff reductions on a list of 54 environmentally friendly goods. This tariff-cutting effort laid the groundwork for ongoing negotiations at the WTO on an Environmental Goods Agreement with expanded product coverage.

Another key APEC deliverable has been the APEC Privacy Framework, which established principles and implementation guidelines for privacy protection, and which underpins the APEC Cross-Border Privacy Rules (CBPR) system. Currently, eight APEC members—Australia, Canada, Chinese Taipei, Japan, Korea, Mexico, Singapore and the United States—participate in the CBPR system.

APEC also delighted many travelers on the APEC circuit with the creation of the APEC Business Travel Card, which allows cardholders visa-free access to APEC economies for up to 90 days and special APEC fast lanes in the major airports of APEC members. According to the 2018 report of the APEC Committee on Trade and Investment to Ministers, as of the end of June 2018, over 278,000 cards had been issued.

Onward to Santiago

Like a Chilean fine wine, the business travel card is something nice to have in hand given the over 200 working group meetings, workshops, ministerial, academic, and business meetings taking place over Chile’s APEC year. Chile’s host year will culminate in the summit of the 21 APEC leaders in November in Santiago. As the host economy, Chile has identified four priority areas on which it seeks concrete deliverables:

Digital Society, an initiative encompassing efforts to develop cross-border digital trade standards and make needed changes to education and labor systems;

Integration 4.0, which seeks to tackle some of the newer sources of trade frictions and enhance connectivity through customs coordination and border automation;

Women, Small and Medium Enterprises and Inclusive Growth, an agenda designed to increase women’s participation in the economy and to enhance the ability of small and medium-sized business to realize the benefits of trade in the region, including in the area of digital trade; and

Sustainable Growth, which includes initiatives to protect the marine ecosystem and promote cooperation on both energy and smart cities.

Division of Labor on Digital Trade Rules

Chile’s focus on the digital economy reflects the priority that APEC leaders have increasingly placed on promoting sound policies to govern digital trade in the Asia-Pacific region. The spotlight on digital policy is also a good case study in the iterative way global trade norms are shaped and how an organization like APEC both influences and is influenced by parallel policymaking efforts.

APEC prides itself on its role as an incubator of ideas and driver of initiatives in emerging areas of trade that matter not only to the Asia-Pacific region, but also globally.

Dating back to its 1998 APEC Blueprint for Action on Electronic Commerce, which defined principles for the development of e-commerce in the region, APEC members have recognized that without a framework to govern the surge in digitally enabled trade, the full potential of digital technologies may not be realized. They also understood the challenges associated with designing regulatory frameworks that encourage growth while protecting privacy and security, particularly given differing domestic regulatory approaches on key issues like treatment of data. In its work on the various building blocks for digital trade – from cross-border privacy rules to trade facilitation and services liberalization – APEC has engaged multiple outside organizations, including the International Chamber of Commerce, the Organization for Economic Cooperation and Development (OECD), and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFAT), facilitating mutually beneficial idea exchange.

In 2016, 12 APEC economies signed the Trans-Pacific Partnership Agreement or TPP (the United States later withdrew). The TPP’s e-commerce chapter covered a range of traditional and emerging issues, including customs duties, electronic authorization and signatures, cross-border data flows, source code, cybersecurity, and privacy protections. Initiatives like the APEC Privacy Framework inspired certain TPP provisions but, unlike the APEC framework, what is now known as the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) is a binding agreement with enforcement provisions. The reforms required by the agreement, including prohibitions on data localization and protections for the movement of data, will set a new bar as CPTPP potentially expands to new members and as new trade agreements are forged.

For example, in mid-May, on the sidelines of this year’s APEC meeting of Ministers Responsible for Trade, Chile’s Minister of Foreign Affairs, Singapore’s Minister of Trade and Industry, and New Zealand’s Minister for Trade and Export Growth announced the start of negotiations towards a Digital Economy Partnership Agreement. The officials announced an intent to build on the CPTPP e-commerce chapter, but also look at emerging areas like digital identity and artificial intelligence. Any agreement reached between Chile, New Zealand and Singapore will be open for accession by other WTO members who can meet the high-quality standards to be established in the agreement.

Underscoring the iterative nature of trade policy building, the three APEC and CPTPP members indicated that their work would build on the work underway within APEC, the OECD, and other international forums; generate ideas for use by countries negotiating free trade agreements; and complement current WTO negotiations on e-commerce. In the latter talks, 76 WTO members (including all APEC members except Indonesia, Philippines, Papua New Guinea, and Vietnam) are working to create multilateral rules governing electronic transactions.

Family Photos APEC

Culture and Consensus

APEC members leverage their APEC host year to drive progress on their national trade priorities in the spirit of collaboration and consensus. The various APEC meetings throughout the year also provide an opportunity to showcase the member’s unique achievements before large audiences of distinguished visitors, while also showing off the cities where the meetings take place. This year, for example, Chile will welcome more than 15,000 representatives of member economies, APEC observers, business leaders, and international press in Viña del Mar, Puerto Varas, and Santiago.

Shining a spotlight on the unique cultural offerings of a host economy – such as the Royal Barge Procession for APEC leaders on the Chao Phraya River in Bangkok in 2003 or China’s grand 2014 APEC welcome ceremony with light shows, singing, and dancing – is also a time-honored tradition. Unfortunately, the infamous “silly-shirted” photos tradition may be wavering. The last time the United States hosted APEC in 2011 in Hawaii, President Obama found APEC-like consensus agreement to nix the collective donning of aloha shirts and grass skirts, quipping, “I didn’t hear a lot of complaints about us breaking precedent on that one. I thought this may be a tradition that we might want to break.”

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Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.

This article originally appeared on TradeVistas.org. Used with permission.

How Modern Networks are Supporting Humanitarian Aid and Disaster Recovery

Ensuring how lifesaving medicines and supplies are distributed is challenging, especially when it involves moving supplies in a hurry. Whether overseeing how disaster relief services are distributed in a time of crisis or to secure the medical supply chain to help eliminate counterfeit drugs, locking lock down the global supply chain and achieving transparency has never been more critical.

Traditionally, many U.S. based nonprofits have been penalized by potential donors for having high administrative costs. Thanks, in part, to this increased spending scrutiny, investments in technologies that could be transformational in the fight against poverty and disease have been shelved to keep spending at bay and to avoid doling out the high price tag the technology could cost. Dan Pallotta’s Ted Talk called out the double standard that drives our broken relationship to charities when he urged companies to start rewarding charities for their big goals and big accomplishments even if that comes with big expense. Having worked with hundreds of nonprofit organizations, I have witnessed their Herculean efforts to get the right aid, to the right people, at the right time despite the fact they were saddled with antiquated technology.  Nonprofit organizations, especially those delivering lifesaving aid, need world-class tools as much, if not more, than for-profit organizations.

Coping with Supply Chain Management Challenges

The sheer number of constituents involved in the aid ecosystem – nonprofits, first responders, governments, funders, suppliers, logistics providers, warehouses, food banks, clinics, etc. – each rely on different systems, applications, and formats that make custom integrations necessary for them to collaborate.

For instance, many non-government organizations (NGOs) are working to end AIDS, tuberculosis, and malaria in Africa. However, they all face a number of logistical challenges as they deal with naturally occurring data silos that are scattered across various geographic locations. Also, the scale of these programs is massive. In Ethiopia alone there are more than 435,000 square miles with more than 30M people living in poverty.

In the humanitarian arena, challenges are also amplified by poor infrastructure. When it comes to internet speed, most of Africa ranks at the bottom of the list with Ethiopia coming in at 139 out of 196 countries worldwide. And as one could imagine, the internet access declines the further one  travels into more rural areas.

While distributing international aid is challenging, managing a supply chain moving pharmaceuticals is especially difficult. First, there’s a lot of product to deal with and pharmaceuticals require a hyper focus on expiration dates, medical oversight and, for some products including vaccines, a temperature-controlled supply chain.

Then, there is the growing epidemic of fraudulent and counterfeit products that are entering the supply chain. According to a World Health Organization (WHO) report, substandard and counterfeit drugs cause improper dosing, compromise the effectiveness of medicines and can even lead to overdose and death. The WHO says that one in ten medicines are counterfeit, and 100,000 people in Africa die every year due to counterfeit medicines.

As if the above challenges aren’t bad enough, a disaster can make them exponentially more difficult. Communication problems are magnified, internet access can be lost in affected communities, and new players are introduced. Consequently, needs are changing even more rapidly and time is of the essence.

Humanitarian Aid Reaches a Tipping Point

Nonprofits and the partners they rely on are realizing that the flawed architecture of single enterprise-centric solutions cannot support the highly dynamic and interconnected business environment that is required to deliver aid. Just as cloud-based social networks such as LinkedIn and Facebook have created new approaches to how we manage our personal and business relationships, new network platforms and the resulting communities are changing how business is conducted between the end consumer and all the companies on the network.

Similar to when you change your status or job, your entire network has access to this information in real time, and supply chain networks work the same way. With you and all of your partners on the same page at the same time brings unprecedented value to the humanitarian aid ecosystem.

In a network model, costs are reduced for all parties as the network grows, because they are shared by the members. In addition, these networks operate using a monthly subscription fee versus the traditional large up-front costs. This lowers the barrier to entry, provides a predictable ongoing run rate, and enables all parties to leverage the same platform and infrastructure.

In the network model, the technology is by the community for the community. The community defines best practices and as new features are added, they are shared across the network. The technology is evergreen versus stagnant; constituents stay on the leading edge, rather than having to invest in expensive upgrades.

How Networks are Supporting Universal Visibility and Transparency

Sophisticated permissions technology is also enabling new found visibility, as advanced networks can partition data and provide the right information to the right person. Now, logistic providers know the exact location of their trucks, program managers can see who received aid, and funders will see their impact quantified.

Networks also provide a single version of truth to all the constituents so the entire humanitarian ecosystem can be on the same page and focus on the recipients changing needs. This is especially important in a disaster, when every moment counts.

The network can also be used to fight the counterfeit problem as the technology can store a library of authentic products by dosage form all the way down to the molecule. At any point in the supply chain products can be validated to ensure they are legitimate using sophisticated scanners. If a counterfeit product is detected, networks provide the ability to track and trace through serialization which greatly helps in the event of recalls and the removal of counterfeit products.

As more organizations join the network, the value of being a participant increases. New companies will find that many of their business partners are already on the network, which reduces time for on-boarding. This enables the humanitarian response to be agile and expand as required, which is especially important in disaster response because you never know when or where the next disaster will strike. Even with no internet access, some sophisticated network providers offer the ability to work offline and then synch up when an internet connection becomes available. In a disaster response scenario or working in developing countries, this is a game changer. Today, nonprofits have the opportunity to leap frog some traditional challenges and investments. For example, they can skip ERP and go straight to a network platform.

Whether working domestically or internationally, networks give humanitarian organizations transformational abilities that can magnify bottom of pyramid impact. By allowing the supply chain to bypass ERP solutions, participants have the ability to create bi-directional supply chains versus the traditional push model. This enables them to better understand what is needed and ultimately help relieve the suffering for those inflicted.

About the Author:

Melis Jones, Global Marketing Director at One Network Enterprises., a provider of the blockchain-and AI-enabled network platform, The Real Time Value Network.  To learn more, visit https://www.onenetwork.com/ or follow them at@onenetwork

America First: Is U.S. Trade Policy Too Rough, or Too Fast?

With just a few months left until the end of the year, enforcement of the current U.S. Administration’s trade policy agenda remains in full swing. From the renegotiation of NAFTA, to the imposition of two rounds of massive tariffs on China and others, few in the international trade community can point to a period in recent memory when the U.S. has been more active on the global trade stage.

Even the Chair of the World Trade Organization (WTO) dispute settlement appellate body has signaled an unprecedented challenge in managing its caseload given the “high number and complexity of appeals” currently before the body. The United States has logged no less than 123 disputes as complainant before the dispute settlement panel, even as the U.S. President threatens to pull out of the WTO for perceived “unfair treatment”.

In order to keep open the trade doors of foreign markets, the U.S. must leverage its size as the world’s largest economy. To do so, the Office of the U.S. Trade Representative (USTR) must maintain incentives that go beyond size, and sharpen trade policy attention through five priority areas established by the U.S. President on:

(1) integrating national security in policy decisions; (2) encouraging use of taxes and deregulation to strengthen the U.S. economy; (3) revising or terminating trade agreements that don’t meet current objectives, while creating new ones that do; (4) enforcing U.S. trade laws ranging from invoking a Section 301 investigation under the U.S. Trade Act of 1974 ( for the first time since 2001), to ensuring the Federal Trade Commission reviews labels to prevent unfair export competition; and (5) reforming the multilateral trading system. On the latter, it remains to be seen, what actions the U.S. will take, and how other WTO members will respond.

The American private sector, for its part, depends on USTR’s leadership, to lift barriers to cross-border trade so that it can focus on manufacturing competitive products, managing global value chains with its many foreign partners, and continuing to provide innovative services to consumers. In fact, with the United States being by far the largest exporter of services in the world (to the tune of US$760 billion in 2016), the U.S. service sector, from banking, energy, and courier services, to insurance and information technology, among others, depend on friendly business opportunities overseas to keep their huge profits.

But leadership must be accompanied by diplomacy. Renegotiating trade deals, or implementing new trade policies, only has value when the private sector gains access to better trade opportunities, and economic activity is buoyed in both the affected export and import markets.  According to the U.S. association of “Women in International Trade”,  the only way for the U.S. to have a win-win with its international trade policy, is for the current Administration to demonstrate “…firm, but fair behavior” in its trade dealings. There, the private sector has an important role to play.

If the latest round of U.S. trade policy changes is to have the desired effect, the American private sector, with international supply chains spanning the globe, must take a more active role as a diplomatic buffer, using its huge cross- border, “soft diplomacy” influence to hold open the doors of riled foreign markets that sustain millions of jobs riding on “made in America” exports.

Magda Theodate is an international trade attorney, and global trade facilitation consultant. She has more than a decade of experience applying her legal skills in support of international trade reforms, trade policy development, and governance initiatives that enhance economic development in lower and middle income countries. To learn more, please visit : www.globalexecutivetrade.com

USTR: China Must “Allow Market Forces to Operate”

Washington, D.C. – If China is going to deal successfully with its economic challenges at home, “it must allow market forces to operate, which requires altering the role of the state in planning the economy,” according to the latest Report to Congress on China’s WTO Compliance compiled by the Office of the U.S. Trade Representative (USTR).

The country, the report added, likewise “must reform state-owned enterprises, eliminate preferences for domestic national champions and remove market access barriers currently confronting foreign goods and services.”

The report cited a “dramatic expansion in trade and investment” among China and its many trading partners since the country acceded to the WTO in December 2001.

U.S. exports of goods to China totaled $122 billion in 2013, representing an increase of 535 percent since 2001 and positioning China as the U.S.’ largest goods export market outside of North America, while U.S. services exports reached $38 billion in 2013, representing an increase of 603 percent since 2001.

Services supplied through majority U.S.-invested companies in China also have been increasing dramatically, totaling an additional $39 billion in 2012, the latest year for which data is available.

“Despite these results, however, the overall picture currently presented by China’s WTO membership remains complex, largely due to the Chinese government’s interventionist policies and practices and the large role of state-owned enterprises and other national champions in China’s economy,” the report said.

In 2014, as in past years, when trade frictions have arisen, the U.S. “pursued dialogue with China to resolve them,” it said.

But, when dialogue with China “has not led to the resolution of key trade issues, the United States has not hesitated to invoke the WTO’s dispute settlement mechanism.”

Since China’s accession to the WTO, the U.S. has brought 15 WTO cases against China, more than twice as many WTO cases as any other WTO member has brought against China, according to data supplied by the Geneva-headquartered global trade group.

In doing so, “the United States has placed a strong emphasis on the need for China to adhere to WTO rules, holding China fully accountable as a mature participant in, and a major beneficiary of, the WTO’s global trading system,” the USTR report said.

“The United States views economic reform in China as a win-win for the United States and China,” the report concludes “not only because the Chinese government’s interventionist policies and practices and the large role of state-owned enterprises in China’s economy are principal drivers of trade frictions, but also because a sustainable Chinese economy will lead to increased U.S. exports and a more balanced U.S.-China trade and investment relationship will help drive global economic growth.”

12/31/2014

EU Files Boeing 777X Tax Incentive Dispute With WTO

Los Angeles, CA – The European Union (EU) has filed a dispute with the WTO Secretariat in Geneva against the U.S. regarding “conditional tax incentives” offered by the state of Washington to “commercial airplane manufacturers.”

The EU asserts in the dispute – a not-so-veiled slap at Boeing and its new 777X commercial jetliner – that the “vastly expanded tax incentives are conditioned on local content requirements prohibited by the WTO Agreement on Subsidies and Countervailing Measures.”

The request for consultations was made, the European Commission (EC) said, in response to a decision by the state of Washington in November 2013, to extend to 2040 subsidies to Boeing that were originally granted through 2024.

The EC is charging that the broadened subsidies were contrary to the WTO rules, “because they require the beneficiary to use domestic goods rather than imported ones.”

“The subsidies scheme extension is estimated to be worth $8.7 billion and will be the largest subsidy for the civil aerospace industry in U.S. history,” according to a Commission statement.

The 777X is a new version of Boeing’s successful 777 twin-engine wide-body jet. It’s scheduled to go into service in 2020. The company has reportedly received orders amounting to billions of dollars for the aircraft from a number of air carriers.

The EU’s request Friday for consultations is the first step in a dispute within the WTO’s Dispute Settlement System.

WTO rules call for Washington, D.C. to respond to the request within 10 days, but due to the Christmas holidays, the EU has agreed to extend the deadline until January 7.

The consultations will give the U.S. and the EU the opportunity to discuss the dispute and reach a solution without proceeding to litigation. The talks must begin within 30 days and generally cannot last longer than two months.

If both parties fail to reach an agreement, the EU can request that a “panel of experts” be commissioned to study the dispute and reach a verdict.

12/23/2014

WTO: Global Customs Agreement Deal In a Fortnight

Los Angeles, CA – There is a “high probability” that a major deal on streamlining global customs rules will be implemented within two weeks now that the U.S., the European Union and India have reached a compromise agreement on agricultural subsidies.

India said it will sign the Trade Facilitation Agreement (TFA) as the U.S. and the EU have said they will accept India’s demand that it be allowed to stockpile food without observing the usual World Trade Organization rules on government subsidies and that developing countries be provided flexibility in fixing minimum support price for farm products.

India’s stand plunged the WTO into a crisis that effectively paralyzed the global trade group and risked derailing the customs reforms that are seen affecting an estimated $1 trillion to global trade.

“I would say that we have a high probability that the Bali package will be implemented very shortly,” said WTO Director-General Roberto Azevedo. “I’m hopeful that we can do it in a very short period of time, certainly within the next two weeks.”

Implementation of all aspects of the Trade Facilitation Agreement package, he added, “would be a major boost to the WTO, enhancing our ability to deliver beneficial outcomes to all our members.”

Azevedo made his comments ahead of the recent Group of 20 Leaders Summit in Brisbane, Australia.

The compromise U.S./EU/India agricultural subsidy deal included no major revision of the original WTO deal struck last December, which provided for India’s food stockpiling to be shielded from legal challenge by a “peace clause.”

A food security law passed by India’s last government expanded the number of people entitled to receive cheap food grains to 850 million.

India recently disclosed that its state food procurement cost $13.8 billion in 2010-11, part of the total of $56.1 billion it spends on farm support. Wheat stocks, at 30 million tons, are more than double official target levels.

The deal, which needs to be backed by all 160 WTO members, has resurrected hopes that the trade body can now push through those reforms, opening the way up for further negotiations.

11/19/2014