We and APEC are a community of economies at the heart of which is the Pacific Ocean.
-Pete Buttigieg, US Secretary of Transportation
Together, APEC economies represent almost 3 billion people, 60% of global GDP, and 50% of global trade.
This week, headlines from the APEC Summit in San Francisco dominated the news cycle. Every handshake, nod, and expression was analyzed for hints or insinuation. And it isn’t a surprise why. As tensions in the world have grown, this meeting of the leaders in the Asia Pacific region includes some of the most consequential global economies.
Of course, a meeting of nations joined by a common ocean is, by definition, analogous to ocean economy issues. Whether overtly stated or implied, the talks at the APEC summit were consequential for the future of our oceans.
“...being here (California Academy of Sciences) is a powerful reminder: not only of the ocean that connects our economies and makes us APEC members but also of the important work we are doing through APEC.”
-Janet Yellen, APEC Finance Ministers Gala
What is APEC?
Source: Researchgate
APEC is the Asia-Pacific Economic Cooperation group.
According to their website, APEC seeks to:
“ensure that the Asia-Pacific remains the world’s most dynamic and interconnected regional economy, we acknowledge the importance of, and will continue to work together to deliver, a free, open, fair, non-discriminatory, transparent and predictable trade and investment environment.”
The first APEC meeting was held in 1993 and included 12 members.
Since then, membership has grown to 21 including Australia, Brunei Darussalam, Canada, Chile, People’s Republic of China, Hong Kong, China, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, The Philippines, The Russian Federation, Singapore, Chinese Taipei, Thailand, United States, and Viet Nam.
Together, APEC economies represent almost 3 billion people, 60% of global GDP, and 50% of global trade.
APEC Bilateral Trade
The US-APEC relationship is one of bilateral trade and investment. The U.S. represents the largest source of foreign direct investment into APEC nations, with over $50 billion invested just in 2023. Still, it isn’t just a one-way street.
“APEC Economies are investing in America. President Biden’s economic policies, combined with deep economic ties with Asia-Pacific countries, are driving historic investments into the United States across key sectors. Companies based in the Asia-Pacific have announced almost $200 billion of investments into the United States since the start of the Biden-Harris Administration.”
+APEC Factsheet: President Biden Welcomes Asia-Pacific Leaders To San Francisco - WhiteHouse.gov
+APEC Factsheet: $50B+ of U.S. Private Sector Investments into APEC Economies - WhiteHouse.gov
And, of course, it isn’t just the U.S. looking to take advantage of the opportunity to sit down and strengthen ties with important trade partners.
“Peru has 22 free trade agreements and in the last two days here in San Francisco, we have been working to sign new ones with Thailand, Indonesia, India and Hong Kong. Even though it is not a forum for trade negotiations, this annual meeting makes the talks easier.“
+US, China need to engage more with developing APEC economies - SCMP
The APEC Leaders’ Golden Gate Declaration
Ocean economy issues were well represented in news that trickled out during the summit.
The final APEC Leaders’ Golden Gate Declaration released at the conclusion of the summit referenced some core blue economy issues including:
Achievement of the 2030 Agenda for Sustainable Development and the goals of the Paris Agreement.
Reinforce commitment to the Bangkok Goals on the Bio-Circular-Green Economy (2022)
Phasing out harmful fossil fuel subsidies
Addressing illegal, unreported, and unregulated (IUU) fishing
+APEC Leaders’ Golden Gate Declaration - WhiteHouse.gov:
I had never heard of the Bangkok Goals on the Bio-Circular-Green Economy. Some ocean-related portions of that agreement include expanded text on the points referenced above:
Contributing practical, ambitious and concrete initiatives to transition to a climate-resilient future global economy which align with global efforts, such as the achievement of the 2030 Agenda for Sustainable Development and the goals of the Paris Agreement.
Recalling our commitment to rationalise and phase out inefficient fossil fuel subsidies that encourage wasteful consumption while recognising the importance of providing those in need with essential energy services, and, to reach this goal, continuing efforts in an accelerated manner.
Enhancing conservation and sustainable use and management of coastal and marine resources and ecosystems as well as sustainable fisheries and aquaculture, including preventing, combatting, and working towards ending illegal, unreported, and unregulated (IUU) fishing and implementing the APEC Roadmap on Combatting IUU Fishing.
Continuing work to prevent and reduce marine debris and plastic pollution, including through the implementation of the APEC Roadmap on Marine Debris.
+Bangkok Goals on the Bio-Circular-Green Economy - APEC
Shipping and Ports
Considering the stated goals of the APEC to foster trade and the member’s physical position around the edges of the Pacific Ocean, it isn’t surprising that port infrastructure and investment grabbed some prominent headlines.
The future of port investment represents a shift towards greener infrastructure but also highlights the geopolitical tension that will arise when global rivals make strategic infrastructure investments.
Ports are critical to the decarbonization of the shipping industry, and this requires the coordination of both local and global efforts. It was interesting to learn how states contribute to this effort individually and make their own forays into the global economy.
Of course, not every state is California, which would be the world’s 5th largest economy if it were a stand-alone nation. Its ports are the critical link to American markets for Asian exporters. Additionally, from electric car mandates to the greening of our ports, California is a global leader in pushing decarbonization forward.
“California ports have inked nine different agreements with ports throughout the Asia-Pacific region to establish green shipping corridors. Notably, last month, the Port of Los Angeles signed a memorandum of understanding with the Port of Guangzhou to partner on sustainability initiatives on the same day Governor Newsom visited the Chinese city.”
+CA ports highlight green shipping corridors and trade partnerships at APEC - AJOT
+APEC Launches Green Maritime Initiative (2023) - APEC
+US Green Shipping Corridors Framework - State.gov
Strategic for Trade or Military Readiness?
The summit brought attention to a $3.6 billion port project already underway in Chancay, Peru, a small fishing village about 45 minutes north of Lima. The new mega-port will be large enough to handle the biggest container ships in the industry.
The port, a direct link to China’s hungry markets, doesn’t seem to bode well for Peru’s local fishing industry. Already this week, Peru’s canceled anchovy season was featured in the earnings reports of large fishing companies already operating there.
“Miriam Arce, a community leader whose father was a fisherman, has a different concern: that the fishing boats from her childhood will disappear, replaced by freighters amid the intensifying competition between the U.S. and China, the world’s two biggest economies.”
“Both countries are in conflict,” said Arce, a 52-year-old artist. “We are in the middle of this conflict. And Chancay is very small.”
+With Peru port project, China gains a foothold in America’s backyard - NBC
“In the area, there are six fishmeal factories and a fleet of around 70 industrial fishing vessels that are the largest source of work in Chancay,” says Raúl Pérez-Reyes, Peru’s transport minister. “The project allows the possibility of direct shipment abroad.”
+Peru’s megaport aims to reshape region’s maritime traffic - DataMar News
The project is 60% owned by Cosco, the giant Chinese state-owned shipping company (and Ocean50 index member), and 40% owned by Peruvian mining company Vulcan.
The implications of the new port on regional industry and trade are evident. It has also focused attention on other investments Chinese companies are making in the country. Both U.S. and local groups are raising awareness.
“Peru’s National Industries Society has complained that if the Enel sale went through, it “would lead to a concentration of 100 percent of Lima’s electricity distribution market in the hands of the People’s Republic of China.”
According to an anonymous U.S. official,
“On the big geostrategic issues, the Peruvian government is not sufficiently focused on analyzing the benefits and threats to the country,”
+US raises concern with Peru over Chinese control of infrastructure - F.T.
Seafood - Japan and China
In August of this year, Japan announced that it would begin to release wastewater stored due to the Fukushima nuclear plant meltdown. China immediately implemented a ban on all seafood imports from Japan.
This issue naturally spilled over to the APEC conference.
Kishida called for a “calm and scientific” response to the release of treated water from the Fukushima nuclear plant and an immediate lift of the import ban posed on Japanese seafood during the meeting. The two countries agreed to find ways to resolve the issue through dialogues.
+Japanese seafood makes splash at APEC summit amid safety concerns - Nikkei Asia
As the segment on Peru showed, ocean issues can be difficult to place into clean buckets as ports, global trade, fishmeal, and artisanal fisheries all compete for access to the same resources.
Tourism
APEC tourism is still recovering from the pandemic, and the numbers are a reminder of how important this industry is to the global economy.
Tourism sector suffered a 53.7 percent drop from USD 3 trillion in 2019 to USD 1.4 trillion in 2020
The sector accounted for 9.9 percent of the total (APEC) economy in 2019; this decreased to only 4.6 percent in 2020.
The number of jobs also fell from 185.06 million in 2019 to 151.01 million jobs in 2020
+APEC working group on tourism
The industry is important enough to get direct mention from Xi:
“Today, President Biden and I reached an important consensus,” said Xi. “Our two countries will roll out more measures to facilitate travels and promote people-to-people exchanges, including increasing direct passenger flights, holding a high-level dialogue on tourism, and streamlining visa application procedures.”
+China and U.S. to Improve Tourism Ties, Says Xi - Skift
Ocean Data and Security - Not Mentioned, but Implied
The White House press release highlighted some pretty astounding investment in data and communications infrastructure across the Asia Pacific region.
Here are just some of the investments that were mentioned (bullets copied from full press release here):
Nearly $25 billion in additional investments to increase digital connectivity and resilience throughout our region, including new subsea cables—both across the Pacific and within APEC economies—that will result in more than $1 trillion in GDP over the next four years, making our economies more interconnected and secure.
Google and partners will deliver two new trans-Pacific subsea cables, helping increase the reliability and resilience of digital connectivity in the Pacific; these types of investments will drive economic benefits of approximately $627 billion in GDP between 2022 and 2026.
KKR announced a $400 million investment in Optic Marine Services: an offshore telecom infrastructure services provider operating in the Asia–Pacific region, and a $665 million investment in Singtel: one of the largest data center operators in Singapore.
Meta announced it is building and investing in significant new trans-Pacific and intra-Asia Pacific regional subsea cables that have been estimated to contribute over $422 billion in additional regional GDP (in real terms) over four years, and support up to 3.7 million additional jobs.
Microsoft is expanding high-speed internet access and meaningful connectivity through its partnership with satellite internet provider Kacific for the Philippines, Papua New Guinea, Cook Islands, and other countries;
With increased investment comes an increased need for remote monitoring and infrastructure protection. As we saw at the beginning of Russia’s invasion of Ukraine, subsea infrastructure was among the first things to be targeted. While it was energy infrastructure in that case, data and communications infrastructure is just as critical and vulnerable.
Marine monitoring and security is often listed as a critical industry in the growing blue economy, beyond the traditional ones typically discussed.
New technologies combining the power of A.I. with satellite monitoring are changing how ships and fishing vessels are tracked worldwide. These same technologies will be used to bring eyes to areas of our planet that have been impossible to watch in the past.
APEC and the 40 Elections
The conference somehow managed to not just be a forum on issues in the South China Sea. It goes to show that trade can bring countries together and provide a forum for talks. It certainly wasn’t lost on anyone that the overall tone between the U.S. and China was one of deescalation.
But as I highlighted last week, 2024’s busy election calendar kicks of with Taiwan. We’ll see if this tone can last.