2016 CTI REPORT TO MINISTERS APPENDIX 6 Collective Strategic Study on Issues Related to the Realization of the FTAAP November 2016 i TABLE OF CONTENTS Table of contents ii List of tables iv List of figures v List of boxes vi Abbreviations vii 1. Overview 1 1.1 Introduction .................................................................................................. 1 1.2 Objectives of the study ................................................................................. 3 1.3 Structure and content of this report .............................................................. 3 2. Review of the APEC Region’s Economy ......................................................................................... 6 2.1 Introduction .................................................................................................. 6 2.2 Economic characteristics .............................................................................. 6 2.3 Foreign investment ..................................................................................... 15 2.4 Specialization and competitiveness ............................................................ 20 2.5 Has trade reached a peak? .......................................................................... 28 2.6 Conclusion ................................................................................................. 34 3. Next Generation Trade and Investment Issues ................................................................................ 36 3.1 Introduction ................................................................................................ 36 3.2 APEC-endorsed NGeTI .............................................................................. 37 3.3 Potential NGeTI (APEC member submissions) ......................................... 41 3.4 Conclusion ................................................................................................. 50 4. Measures Affecting Trade and Investment ..................................................................................... 51 4.1 Introduction ................................................................................................ 51 4.2 Tariff analysis............................................................................................. 53 4.3 Non-tariff measures analysis ...................................................................... 62 4.4 Services trade analysis ............................................................................... 73 4.5 Investment analysis .................................................................................... 86 4.6 Cross-cutting structural issues .................................................................. 100 4.7 Conclusion ............................................................................................... 105 5. Stocktake of Existing RTAs/FTAs in the Asia-Pacific ................................................................. 107 5.1 Introduction .............................................................................................. 107 5.2 Advancing trade liberalization and regional integration .......................... 107 5.3 Addressing the spaghetti bowl effect ....................................................... 120 5.4 Conclusions .............................................................................................. 124 6. Stocktake of APEC Initiatives and Outcomes Relevant to an FTAAP ......................................... 125 ii 6.1 Introduction .............................................................................................. 125 6.2 The Bogor Goals ...................................................................................... 125 6.3 Promoting trade facilitation cooperation .................................................. 127 6.4 Best practices and model measures for RTAs/FTAs ................................ 128 6.5 APEC List of Environmental Goods ........................................................ 129 6.6 Modernization of origin certification procedures ..................................... 129 6.7 APEC Principles for Cross-Border Trade in Services .............................. 130 6.8 APEC Non-Binding Investment Principles .............................................. 132 6.9 Capacity building and other activities in pursuit of the FTAAP .............. 133 6.10 Conclusion.............................................................................................. 135 7. Update of Other Analytical Work ................................................................................................. 136 7.1 Introduction .............................................................................................. 136 7.2 Update: Further analytical study on the likely economic impact of an FTAAP ....................................................................................................... 137 7.3 Update: Identifying convergences and divergences in APEC RTAs/FTAs141 7.4 Conclusion ............................................................................................... 155 8. Ongoing Regional Undertakings ................................................................................................... 156 8.1 Introduction .............................................................................................. 156 8.2 Possible pathways to the FTAAP ............................................................. 157 8.3 Other regional or subregional undertakings ............................................. 170 8.4 APEC’S contribution to recent WTO agreements .................................... 174 8.5 Conclusion ............................................................................................... 175 9. Opportunities and Challenges ....................................................................................................... 177 9.1 Introduction .............................................................................................. 177 9.2 Summary of the Collective Strategic Study ............................................. 178 9.3 Opportunities and challenges ................................................................... 179 Mechanism of the Study................................................................................................. 182 APEC Trade Relationships ............................................................................................. 183 APEC Foreign Investment .............................................................................................. 189 The Flying Geese Model in the APEC Region .............................................................. 192 Competitiveness Rankings ............................................................................................. 196 Relationship between Trade and Income Elasticities...................................................... 197 Summary of the NZIER AVE Analysis ......................................................................... 198 Legal Regimes Governing FDI in the APEC Economies .............................................. 199 Statistics and General Features of Trade Agreements by APEC Economies .................. 204 Literature on Trade Agreements in the Asia-Pacific ...................................................... 209 Methodology................................................................................................................... 216 Statistical Updates of the Further Analytical Study on the Likely Economic Impact of an FTAAP 219 Initiatives under the Pacific Alliance ............................................................................. 225 iii LIST OF TABLES Table 3.1 List of NGeTI endorsed by APEC Ministers ........................................................................................ 37 Table 4.1 Most favoured nation (MFN) rate trends in the APEC region, 2008–2012 .......................................... 56 Table 4.2 Average applied most-favoured nation (MFN) rates in APEC region, by product category ................. 57 Table 4.3 Average percentage of duty-free tariff lines in the APEC region, by product category ........................ 58 Table 4.4 Services exports in APEC: strong sectoral performers 2005–2014....................................................... 77 Table 4.5 Concluded IIAs in the APEC region ..................................................................................................... 89 Table 5.1 Intra-APEC trade agreements concluded since 2008 .......................................................................... 108 Table 5.2 Spaghetti bowl effects of restrictive ROO in general .......................................................................... 122 Table 5.3 Effect of the FTAAP on intra-APEC trade by cumulation schemes: ratio (%) to bilateral ................. 123 Table 7.1 Model aggregation .............................................................................................................................. 137 Table 7.2 Convergence and divergence in rules of origin and related procedures .............................................. 142 Table 7.3 Convergence and divergence in customs procedures .......................................................................... 143 Table 7.4 Convergence and divergence in sanitary and phytosanitary standards (SPS) provisions .................... 144 Table 7.5 Convergence and divergence in Technical barriers to trade (TBT) provisions ..................................