Growing pressure on currencies and capital in the post-global financial crisis period has the potential to restrict trade and investment, according to Asia Pacific Economic Cooperation Executive Director, Alan Bollard.
This is prompting APEC member economies to expand their work on addressing tariffs and behind-the-border barriers to include “third generation” issues to ensure resilient growth in the region.
“Major economies around the world have been suffering from very low returns on capital, lower prospects for growth and productivity, and slow recoveries with uncertainties and vulnerabilities,” says Bollard.
“Rebalancing is underway but there continues to be significant imbalances which are leading central banks to put more stress on monetary policy and move from near-zero rates into unorthodox policies such as quantitative easing,” he continued. “This is contributing to depressed exchange rates in major economies and putting pressure on those in smaller, open economies with independent traded currencies.”
Among the implications in the Asia-Pacific has been the expansion of domestically sourced trade finance, infrastructure project financing and funds management. New trade, non-tariff and foreign direct investment barriers have been very limited and in general implemented to stimulate domestic growth.
The average tariff rate in the APEC region was 5.7 percent in 2011, down from around 17 percent when APEC was founded in 1989. APEC members have also reduced or eliminated some non-tariff measures such as import licenses and quotas, while foreign direct investment in the region continues to rise.
But Bollard adds that the orthodox monetary policy that continues to be embraced by some economies could put domestic trade and sectors under strain.
“There is concern that post-crisis financial flows are giving rise to “third generation” issues which have the potential to restrict trade and investment integration,” explains Bollard.
This is being addressed in part by APEC economies’ focus on promoting inclusive growth, infrastructure financing, project finance, trade finance and financial market deepening.
“By moving forward with APEC’s agenda, we are helping to ensure resilient growth and improving living standards in the region through increased trade and investment, business facilitation and capacity building,” notes Bollard. “This is laying the groundwork for more robust global recovery.”