APEC to Launch Comprehensive Analysis on Value Chain Resilience in the Asia-Pacific Region

1) Emergence of "systemic risks"

As cross-border production and supply networks have deepened recently and economies are more interconnected and interdependent, it is more likely than ever for us to face new type of risks, namely, "systemic risks," which are the risks that a single incident in one company, one sector, or one economy is easily transmitted to other companies, sectors and economies, and subsequently could give rise to disruption of the whole system of value chains.

2) Qualitative change in global risks

Due to the recent stagnant growth of the global economy, the exposure of imbalanced and unsustainable growth in emerging countries (problems of income disparities, environment, etc.), and other relevant factors, global risks surrounding cross-border business activities have been undergoing significant changes especially in quality.

3) Difficulty for individual enterprises or countries to manage such risks

Furthermore, in order to reduce those systemic risks and enhance value chain resilience, the capability of a single company, government or economy is not necessarily sufficient.

1) Trade Ministers' commitment at APEC MRT 2013

In this context, for the purpose of cooperatively addressing such risks in the interconnected and complicated global value chains, the Trade Ministers of APEC economies shared their recognition on the importance to address value chain resilience and agreed that APEC would launch a quantitative analysis on value chain resilience in the Asia-Pacific region, at APEC MRT (Ministers for Responsible Trade) Meeting 2013, held from April 20 to 21 in 2013, the APEC Policy Support Unit (PSU), a policy think tank of APEC, would conduct the research.

The research will plan to make indices in APEC members' value chain resilience (APEC 21 economies and some others), by utilizing credible international statistics and data resources. The results of the research will be utilized in order to deepen understanding the importance of value chain resilience and also for promoting policy cooperation to enhance value chain resilience.

2) Methods to be adopted in APEC's analysis

The following methods will be adopted in APEC's analysis:

1. Defining two elements, i.e., (1) a supply chain (a global distribution and supply network) and (2) a production or business site (business centers, factories, shops, etc.), as an inseparable and integral single element, namely "value chain."
2. Classifying risks on value chains into the following six risk categories:
   a. Natural Disaster Risks
   b. Market Risks
   c. Geopolitical Risks
   d. Infrastructure Risks
   e. Geographical Risks
   f. Regulatory and Policy Risks
3. Collecting data from internationally reliable statistics and analyses related to the six categories, such as those of international organizations, e.g., the United Nations, World Bank, and International Monetary Fund; calculating risks in these categories respectively by weighing the collected data on a certain basis and comprehensively making indices of value chain resilience (calculation of a value chain resilience index)

Prior to launching APEC's research project, the Ministry of Economy, Trade and Industry (METI), and the Japan Research Institute jointly conducted a prior experimental research to sort out the notion and issues of value chain resilience and risks, and analyze quantitatively value chain risks of APEC member economies and other major countries, on the basis of open-sourced, appropriate, reliable international statistics, data, researches, and analyses.

This pilot research was experimentally made in advance of launching APEC's analysis. In light of the results of METI's prior research, it plans to elaborate and develop the results, while further acquiring input and information from experts, research institutes, international organizations, and other entities in various policy areas.
For the results of the pilot research, please see Appendix.(PDF:485KB)

May 9, 2013

APEC Office, Trade Policy Bureau