APEC Meets Elvis

November 17, 2014

Last week brought a major summit of global leaders: the Asia-Pacific Economic Cooperation (APEC) Forum in Beijing. Months of painstakingly planned and scripted pomp and circumstance are often central to these events (thus the hubbub prompted by Vladimir Putin slyly offering his coat to Peng Liyuan, the wife of Chinese President Xi Jinping). But these summits aim to advance policy, and in that spirit APEC presented the world with a noteworthy policy contrast: action on trade, words on climate.

First, action on trade. At APEC, the United States and China resolved a long-standing disagreement on how to expand one of the world’s most successful free-trade agreements ever: the Information Technology Agreement.

Concluded in 1996 by 71 countries representing about 97 percent of world trade in IT products, the ITA eliminated, in four stages from 1997 to 2001, all tariffs on hundreds of IT capital goods, intermediate inputs, and final products. Indeed, to this day the ITA remains the only industry to have implemented a comprehensive free-trade agreement in the World Trade Organization. Not autos, or steel, or clean tech: IT. The globalization of IT hardware has helped boost average U.S. living standards. Per the canonical phrase on the back of the iPhone, on which you may be reading this missive—“Designed by Apple in California, Assembled in China”—the ITA has offered a textbook example of the benefits trade liberalization can deliver: a competitive spur to price declines and productivity gains in IT producers benefiting not just those producers but also companies and consumers economy-wide, through lower prices and greater variety.

But the ITA has grown stale because ongoing IT innovation of the past decade-plus has created so many new IT products not covered in the original agreement and thus potentially subject to import tariffs. Thus have countries for years struggled to craft an ITA-II. In particular, China resisted efforts led by the U.S. to broaden the ITA-II product list. To the pleasant surprise of many, last week at APEC the two countries announced agreement on the ITA-II product list. Many expect all ITA-II countries to soon now coalesce around this agreed list to finalize an ITA-II treaty, the implementation of which will cover an estimated $1 trillion in annual IT trade.

In contrast to the tangible action on trade, APEC also brought diaphanous words on climate. Standing side by side, Presidents Obama and Xi pledged that their countries would meet specific goals for reducing carbon-dioxide emissions: that the United States would emit up to 28 percent less carbon dioxide in 2025 than in 2005, and that China’s carbon-dioxide emissions would peak sometime around 2030.

Many found inspiration in these pledges. And we do not dispute that to enact tangible change leaders often must first voice inspiring ideas that frame the case for change. But these pledges came with no tangible policy changes—or even discussion of policy changes—aimed at achieving these goals. Thus did many voice puzzlement, such as the UK climate secretary Ed Davey in commenting, “We don’t have enough information from the Chinese or the Americans to really be clear about the implications of this.”

We, like many, worry about global warming and climate change. But we worry in part because on this topic for far too long world leaders have been long on intangible policy pledges and short on tangible policy actions. How many unmet climate pledges have been made at how many world summits? Leaders and their words come and go. Their policies—especially those enshrined in binding global agreements like the ITA—tend to be much more durable and impactful. “A little less conversation, a little more action please,” crooned Elvis Presley way back in 1968.  Though the King is (probably) gone, policy leaders here in 2014 should still listen up.

Articles © 2014 Matthew Slaughter and Matthew Rees. All rights reserved.
Publication © 2014 Trustees of Dartmouth College. All rights reserved.