Bulletin No.3 | Wednesday, February 24, 2021

The panel reflected on how trade is being managed during the Covid-19 crisis as well as the ways companies and countries are preparing for the post-pandemic recovery in the particular context of Japan. The country’s economic growth has rebounded mainly due to growth of its export sector which has extensive exposure to China. For example, China’s heavy infrastructure investments have benefitted Japanese construction companies tremendously. Japan’s exports to China are exceeding the pre-Covid-19 level. That is striking even if short- term.   

With regard to handling of the Covid-19, four characteristics viz. magnitude, nature, unpredictability, drastic change to lifestyles were discussed. The pandemic has decreased the business confidence as it led to a chain of shocks to supply and demand sides while resulting into unpredictable lockdowns and regulations worldwide causing recurrent shocks.

From experience of global financial crisis, earthquakes, trade war and the pandemic, Japan has adopted China plus one strategy.  Similarly with the increased use of technology, all forms of communications and service provisions have changed while catalysing decentralisation at various levels. 

With Regional Comprehensive Economic Partnership (RCEP), businesses tend to concentrate their supply chains within the RCEP countries. It is because RCEP has enabled a single, harmonised, predictable set of regional trade rules that incentivise businesses to locate their supply chains within the region. Similarly, global dependence on China for products such as solar power panels and electric vehicles, masks, vaccines, among others will continue to grow. 

On Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the panel said that China and U.K.  seem willing to join the pact, however it will not be easy for the U.S. to enter it soon as Biden administration’s domestic as well as changing global priorities will make negotiations more complex. 

Speakers included  Sayuri Shirai, Professor of Economics, Keio University, Japan; Nobuhiko Sasaki, Chairman and Chief Executive, Japan External Trade Organisation – JETRO; Klaus Meder, President and Representative Director, Bosch Corporation, Japan; Christopher Clague, Managing Editor, Asia, and Global Editorial Lead, Trade and Globalisation, The Economist Intelligence Unit.

Reduced purchasing power, frantic buying coincided with tendencies of governments to increase taxes to boost revenue during the pandemic have created grey markets for counterfeit and informally traded goods. The discussion reflected upon new patterns of criminal behaviour observed since and underscored the need for policies to incentivise responsible behaviour, and ways for countries in Asia to work together to tackle cross-border illicit trade.

The scale and extent of illicit trade is worse in some than other economies in Asia. For example, the excise department in Thailand identifies liquor, tobacco, and petroleum products as the top three products smuggled in Thailand that too through a proper channel and mostly through custom stations and ships. 

Social and economic repercussions caused by the pandemic have made criminals exploit worsening situations to optimise their procurement and distribution channels in a coordinated manner. It is not only evident through the increased cross-border illicit trade of goods but also through activities such as wildlife and human trafficking.

The solution proposed includes close cooperation between domestic and international agencies as well as public and private players for finding ways for effective cross-border law enforcements. Further, the panel emphasised the importance of educating the public about the consequences of engaging in illicit trade. However, the panel noted that there is a difference between education and awareness. Awareness is commonly used as a government strategy.

An example stated was about Romania, where proactive efforts are being taken to study the factors involved in driving illicit trade followed by measures such as advertisements on television, social media, and related platforms. It is vital to develop and manage effective awareness mechanisms among the public, government and producers and also make the consumers aware of the legitimate and illicit products.

The panel cautioned that criminals are more welcoming of new technologies than governments, which help them rapidly communicate through a range of overlapping channels for quick coordination. To prevent this, digital communication platforms should be monitored and companies who own them should work with governments to prevent such activities.
 
The session was moderated by Christopher Clague, Managing editor, Asia, Global Editorial Lead, Trade and Globalisation, The Economist Intelligence Unit. The speakers included Mark Hosty, Anti-illicit Trade Operations Director – the Asia Pacific and MENEAT regions, JTI; Chris Humphrey, Executive Director, EU-ASEAN Business Council; Nutthakorn Utensute, Principal advisor on Excise Control System Development, Excise Department, Ministry of Finance, Thailand; Shane Britten, Chief executive, Crime Stoppers; Rey Leonardo Guerrero, Commissioner of the Bureau of Customs, Department of Finance, Philippines.

Science contributed to the development of vaccines for Covid-19 and governments across the world administering their first batches are good news for global society. Panellists said that the speeds, at which vaccines are being developed, the resources being pulled together for their roll-out as well as the 90 per cent efficacy of the vaccinations on trial, are highly appreciable.

But cross-border supply, distribution and people’s uptake for vaccination remain a big challenge. This challenge is of unparalleled scale and complexity which requires coordinated international efforts to address it. Multilateral organisations such as the World Health Organisation and the World Trade Organisation have a strong role to play in facilitating vaccine distribution to all countries across the world. 

Also, reducing inequity in immunisation should be an important part of the holistic effort to help communities achieve their full health potential regardless of demographic, social, economic or geographic layers. Health, frontline workers as well aged people have to be given priority in vaccination drives all over the world. Similarly, the primary health systems around the world have to be strengthened for facilitating vaccine distribution to all. It is also equally important for the regulatory bodies to accelerate the approval process in a safe and deliberate way. Training health workers, mobilising resources for vaccination and developing capacity to store and transport vaccines are important at this point of time.

COVAX, as an important initiative to ensure equitable access to vaccines for all requires cooperation from all the countries in the world.  Rich countries have to realise that it is also in their interest to vaccinate the whole world, as it will drive economic growth and help the world focus on addressing other global challenges such as climate change and food scarcity. 

Speakers: Simon Evenett , Professor, International Trade, University of St. Gallen; Jerome H Kim , Director General, International Vaccine Institute; Derrick Sim , Director of Vaccines Demand & Supply and COVAX, GAVI;  Rohit Sahgal , Principal, Global Health (Asia), The Economist Intelligence Unit.

The discussion noted that as trade recovers from its greatest setback in almost a century, it will need, more than ever, an open and stable legal system to ensure goods and services flow smoothly, predictably and freely. The panellists opined that the trade relations between the U.S. and China will be the deciding factor of a new chapter in the U.S.-Asia trade relations. 
 
Panellists expressed disappointment for phase one of the U.S.-China trade deal becoming a failure despite the high expectations from it. There were opinions that if the Trump administration, instead of the havocs and tantrums listed the trade difficulties to the Xi administration and asked for resolution, it could have yielded more results. The panellists opined that RCEP will be important, not only because of its economic potential, but also because of its political implications and geographical significance. But there were opinions that the CPTPP will be more important than the RCEP in political implications, and some expressed hope that the U.S. will join CPTPP during the time of the Biden administration itself. 
 
The panellists highlighted the importance of the World Trade Organisation (WTO) in ensuring rules based and fair trading system around the world. They expressed hope that even though the WTO is currently running in a paralysed form, the new Director General will be able to revive the organisation by ensuring cooperation and building trust among the member countries. The webinar noted that constant engagement and continuous dialogue is the best solution for resolving disputes. 
 
Speakers included Charlene Barshefsky, Senior International Partner, WilmerHale; Wendy Cutler Vice President, Asia Society Policy Institute; Lingling Wei, Senior China correspondent, The Wall Street Journal; Soumaya Keynes, Trade and Globalisation Editor, The Economist.