Duterte, other APEC leaders meet amid trade tensions, economic uncertainties

MANILA, Philippines — President Rodrigo Duterte and 20 other leaders and representatives of Asia Pacific Economic Cooperation (APEC) economies will meet in Papua New Guinea this weekend as the region is facing challenges posed by a high inflation, trade tensions and market uncertainties. 

Duterte, who will be coming from Singapore, where he attended the Association of Southeast Asian Nations summit, is expected to express support for multilateral trade and micro, small, and medium enterprises, a sector that accounts for the bulk of the employment in the Philippines.

The APEC Leaders' Meeting on Nov. 18 will also be an opportunity to discuss ways to enhance trade in the region, which is experiencing a trade slowdown that has been attributed to a trade spat between the United States and China. 

Duterte's spokesman Salvador Panelo expressed hope that the Philippines' trade ties with fellow APEC economies would be strengthened despite the security threats they are facing. 

"We hope that trade relations really improve vastly with respect to other countries and specially the security concerns. The problems of this region are, one, terrorism; and then we have the piracy on the seas; and the radicalism that seems to seep in into other countries of this region," Panelo said in an interview with ABS-CBN News Channel on Thursday.

Slower trade growth

More than 5.7 million Filipinos live in the APEC region and account for 57 percent of remittances, which has been keeping the Philippine economy afloat. The Philippines' trade with APEC economies constitutes 84 percent of the its total trade worldwide, with 82 percent of the country's merchandise exports destined for the APEC region. A huge bulk or about 85 percent of all imports in the Philippines come from its APEC partners. 

Despite the momentum in global demand, merchandise trade growth in APEC has slowed down in terms of both value and volume, reflecting the combined impact of tradetensions and policy uncertainty, according to an APEC regional trend analysis released this week. 

According to the report, merchandise trade growth in APEC lagged behind the rest of the world in terms of value, with exports expanding 11.1 percent and imports 12.7 percent in the first half of 2018 compared to 14.8 percent and 15.8 percent, respectively, for the rest of the world.

"The relatively sluggish performance of APEC merchandise trade suggests that trade tensions and policy uncertainties during the first half of 2018 have started to take a toll in the region. An escalation of trade tensions could result in further weakening of trade performance, with important implications for incomes and jobs," the report entitled "APEC Regional Trends Analysis: The Digital Productivity Paradox" read. 

US President Donald Trump, whose protectionist policies are worrying free trade advocates, is planning to impose billions of dollars worth of additional tariffs on Chinese goods as he accused China of cheating on trade rules. China has retaliated by also unveiling billions worth of tariffs on American goods. Last month, Asia Pacific finance ministers who met in the Papua New Guinean capital of Port Moresby said risks to the global economy have increased because of "heightened trade and geopolitical tensions."

The report cited the need for alternative sources of growth, claiming that trade is no longer the reliable driver of APEC economic growth it once was. 

"When the responsiveness of economic growth to trade started to slow down,it was replaced by domestic consumption as the stable and strong source of growth among APEC economies," it said.  

"The recent escalation in trade tensions, not only in terms of tariff impositions but also difficulties in trade cooperation, has made finding alternative sources of growth more urgent," it added. 

Global uncertainties

While the rest of the world doubled its trade growth in the first compared to the same period in 2017, trade growth in the APEC region rose by less than half a
percentage point during the same period.

The volume of merchandise exports and imports grew at 4.6 percent and 5.5 percent, respectively in the first six months of the year, slowing down from 5.7 percent and 7.9 percent during the same period last year.

While trade in APEC continued to expand in the first half in terms of both value and volume, the region’s performance contrasted markedly from the significant turnaround seen in the first half of 2017 and was significantly below the performance of the rest of the world, the report said. 

The APEC region grew by 4.2 percent in the first half of 2018, faster than the 3.9 percent growth posted in the same period last year.  But the rate of expansion of APEC as a whole has "moderated" as it inched up by only 0.1 percentage point in the first half of 2018 to 4.2 percent from 4.1 percent in July to December 2017. 

"This slower increase in growth could be attributed to elevated uncertainty in the global economy," the report said. 

Inflation has also picked up in the region, averaging 2.5 percent in September 2018 from 2.2 percent in September 2017, mainly because of higher energy prices.

"Growth is expected to be further weighed down by policy uncertainty, higher inflation, exchange rate pressures, and episodes of financial market volatility. Against these downside risks is the upside potential for growth that could come from continued pick-up in global economic activity which should translate into sustained strength in domestic consumption," the report said. 

Denis Hew, director of the APEC Policy Support Unit, said there is much potential for growth in the Asia-Pacific region that could come from continued pick-up in global economic activity.

“To ensure that growth is balanced, sustainable and inclusive, APEC needs to boost reliable sources of growth, such as the services sector, and encourage more private investment,” Hew said in a statement. 

“We also have to harness future drivers of growth like the digital economy and green technology, as well as implement productivity enhancing reforms.”