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Vladimir Putin took part in the APEC business summit plenary session

September 7, 2012, Vladivostok

The President addressed the APEC business summit plenary session.

The APEC business summit, attended by APEC economies’ leaders and more than 700 business community leaders from throughout the Asia-Pacific region, is taking place in Vladivostok.

* * *

President of Russia Vladimir Putin: Colleagues,

As I was preparing for this meeting and for the bilateral talks that have already begun on the summit’s sidelines, I followed your discussions on television and saw the finesse with which the moderator has been leading the discussion. I want to thank you for this work. The subjects you are discussing are important, interesting, and relevant. Really, it is in order to discuss these issues that we have all come here today.

It has become an almost universal tradition now for summits such as these to bring together not only state leaders, but also the business community, business and industry leaders. This is certainly true of the APEC summits. This creates an excellent symbiosis between people involved in politics and the economy at the practical level. It gives us the chance to listen to each other, meet and talk about the issues that face countries and business. I hope that the discussions today and afterwards will help us to find effective development solutions and proposals that will have a real impact on global economic development, especially in the region in which we live and work. 

As I said, the business summit is an integral part of the APEC forum. To repeat a few well-known figures, the APEC economies account for about 55 percent of the world’s GDP, almost half of global trade, and around 45 percent of accumulated direct foreign investment. But even more important than any of this is that, despite the difficulties in the global economy, the Asia-Pacific macro-region has posted the fastest growth rates over these last two decades, building up its financial, investment, scientific and technology potential. This economic leadership places common responsibility upon us all, all the more so in today’s climate of global economic instability. We are aware of course that there are some worrying trends in the Asia-Pacific region too, with growth rates slowing in some of the region’s leading economies. A slowdown in growth is one thing, but we should concentrate not so much on the slowdown, as on maintaining the growth we have.

The growth rates in the Asia-Pacific region remain ahead of growth rates in other developed economies. Problems do exist however. Instability in the banking sector and financial markets has dampened global economic growth, as you know. The same is true, unfortunately, of rising unemployment in the developed economies. We have felt the effects here in Russia, as have most other countries. Sharp fluctuations on financial and currency markets and stagnating export demand are challenges for absolutely all economies in the world. The root causes of this situation, meanwhile, have still to be resolved, and this means that the current situation could become protracted in nature.

But there are also things that make us cautiously optimistic. The key economic actors are trying to keep within a set of rules and not take irresponsible and unilateral action that would have unpredictable consequences. Forums such as APEC are a big help in this respect. Of course, these issues are discussed at the G8 and G20 also, and we discuss them here too, and the progress made is the result of our joint efforts.

At the height of the crisis we managed to prevent a drift towards the dead-end road of protectionism and fierce trade wars, and instead sat down together to draw up a set of common anti-crisis measures and continue the long-term agenda of reforming the financial regulation system. The tasks before us now are perhaps even more complex than the issues we tackled at the crisis’ previous stages, for what we need now are new approaches and new economic development models.

The global economic landscape is changing before our very eyes. Over the next two decades, growth rates in the developing markets will far outstrip growth in the established developed economies. This is a clear fact now. This will in turn transform trade and financial flows, and this is only one aspect of the global transformation process. These changes will clearly have a deep-reaching effect.

”Over the next two decades, growth rates in the developing markets will far outstrip growth in the established developed economies. This is a clear fact now.“

The world is entering a new economic, technological, and geopolitical era. This change will be lengthy, complicated, and painful for some. Many familiar approaches will be reconsidered. Instead of declarations, what we need in life today are pragmatism and practical action. I think it is therefore no coincidence that regional economic integration projects gathered such impetus during the trials of the crisis. This is certainly a positive development that opens up promising opportunities, especially when set against the objective difficulties within the World Trade Organisation and the stalling in the Doha round. ”Over the next two decades, growth rates in the developing markets will far outstrip growth in the established developed economies. This is a clear fact now. ‘

We think that regional integration built on common understanding and mutual consideration of each other’s interests and the interests of our partners, including our geographically close partners, can and must play a key role in defending the basic principles of open markets and free trade, and give impetus to dynamic development throughout the global economy. Furthermore, the dialogue between big regional organisations such as APEC, NAFTA, the European Union, and also the Common Economic Space that was recently established here in the post-Soviet area is a good base for improving global trade and investment rules and regulations. It is important to stimulate the global negotiating process and initiate it from below, from the regions, build expanded integration areas and dialogue mechanisms between regional and sub-regional organisations. With Russia’s active participation, this is the approach that we are taking in developing Eurasian integration and building a free trade area in the CIS.

We recently signed an agreement on a free trade zone in the CIS, and almost all of the countries have ratified it now. We also established the Customs Union and the Common Economic Space, which I mentioned just before, and which bring together three post-Soviet countries: Russia, Kazakhstan, and Belarus. These steps are not just our common response to the challenges the crisis has brought, but they also open up new opportunities for common projects with the APEC economies.

”I want to stress just how important it is now to build bridges between the different parts of the world. In this respect I think that one of our priority tasks is to keep global and regional markets open.“

We are in talks on a free trade agreement between the Customs Union and New Zealand. A joint report has been drafted on beginning a similar process with Vietnam. Further talks of this kind are possible. Dozens of countries from the Asia-Pacific region have already expressed their interest in establishing special trade and economic relations with the Customs Union and the Common Economic Space formed by the three countries I just mentioned.““

By the way, our country’s position here at the Vladivostok summit is in fact the consolidated position of the three integration partners – Russia, Belarus, and Kazakhstan. We are not standing still. We are already at work with our partners on establishing the Eurasian Economic Union, which is a higher stage of integration involving more supranational functions and a coordinated macroeconomic, technology, and financial policy. Our aim is to build a powerful centre of regional development. The future Eurasian Economic Union could also become a link between Europe and the Asia-Pacific region. 

I want to stress just how important it is now to build bridges between the different parts of the world. In this respect I think that one of our priority tasks is to keep global and regional markets open. We end up paying a high price for the illusion of simple solutions. The tempting medicine of protectionism eases the pain for a time, it is true, but it stops us from curing the economy as a whole and limits our trade and investment opportunities. 

Let me remind you that global trade shrank by 12 percent at the peak of the crisis in 2009. This was the biggest contraction in global trade since the end of World War II in 1945. Of course, this was above all a direct consequence of the financial markets’ collapse, but it was also the price we paid for the upsurge in protectionist measures, and in the end, we all had to pay.

No one denies governments’ right to protect their own countries’ markets and national business. Of course they have a duty to support particular companies or economic sectors. I know about this from experience and can tell you about how these decisions are made, for Russia has also taken such steps. In 2009, for example, when I was Prime Minister, I visited a company in southern Russia that produces agricultural machinery. When I arrived at the site I saw that finished goods were everywhere, but there was nowhere to take them. The company was at a standstill, people were without work, and no one was buying the goods. But this was a company employing hundreds of thousands of people. The goods were stockpiled everywhere, even on the railway platforms, and made it almost impossible to move. In a situation like this, of course you start to ask yourself what can be done. Of course various solutions such as limits on imports and ensuring domestic industry’s interests start to come to mind. And indeed, we did take some measures in this sense. We had not yet joined the WTO at that point and had the right to take these measures.

The European Union also took such approach to protect a number of its own companies, especially in the automotive industry. In some circumstances this is even justified, because otherwise not just national economies would suffer, but the global economy would too.

The real issue lies elsewhere, and namely, in the fact that we need clear and comprehensible rules for these kinds of actions. It is not good when we put one thing formally on paper and then do something quite different in practice, although I do understand that in some situations there is not really any choice.

”We need to dot the ‘I’s and agree on an acceptable level of protective measures for protecting jobs during crisis periods. Most important of all is to establish mutual trust and clarity in this area.“

But, as I said, we need clear and transparent rules for decision-making here. In other words, we need to dot the ‘I’s and agree on an acceptable level of protective measures for protecting jobs during crisis periods.

Most important of all is to establish mutual trust and clarity in this area. This is what we should work towards. This is the approach that Russia will take in the World Trade Organisation. As a full-fledged member of this organisation we will play an active part in drawing up fair rules for international trade. We think it essential in this respect to set the special norms that will enable countries to support particular economic sectors that are most vulnerable and sensitive to global instability. These measures will help us to rectify the shortcomings in the WTO’s own rules and regulations and will strengthen the organisation as a global body able to effectively resolve international trade issues and respond to new challenges.

I stress that Russia supports intensifying the APEC forum’s integration agenda too, in the interests of further liberalising trade and investment in line with the Bogor Goals. This is not just a declaration. We are confidently expanding our economic presence in the region.

In joining the World Trade Organisation, Russia has taken on obligations to lower tariff and non-tariff barriers, and we will fulfil these commitments. We believe that preferential trade agreements should be as transparent as possible. This will allow us to see clearly the pluses and minuses of existing and pending free trade agreements and work towards an optimum integration model.

Of course, trade is the not the only issue at the centre of our attention. Issues such as energy security, the environment, and innovation are increasingly high on APEC’s agenda. There is an active dialogue underway on protecting intellectual property rights. Developing the Asia-Pacific region’s transport contours is also an indisputable priority. In accordance with the APEC Business Advisory Council’s recommendations on further diversification of trade routes, we and our partners in the Common Economic Space are ready to offer use of Russia, Belarus and Kazakhstan’s geographical infrastructure opportunities. A glance at these three countries’ territory is enough to see that there is much to offer here. We have established a common economic space free of internal customs and other formalities, and, for Asia-Pacific region business, this opens up a direct route not only to our countries’ economies but provides optimum infrastructure and transport links for cooperation with the European Union.

I mentioned the establishment of the Customs Union and Common Economic Space, and I want to stress the particularly important point that both organisations were established and function on the basis of WTO principles. I am sure that this will help our economic partners, including from the Asia-Pacific region, to work confidently in these three countries’ markets.

Building effective and reliable logistics chains requires us to make more active use of modern technology, including space technology. Russia has something to offer its partners in this area too, the possibility of equipping transport hubs and corridors with the GLONASS global navigation satellite system, for example. We built this system in quite rapid time and it is already global in scope now. We have placed in orbit a full-fledged satellite cluster of 28 satellites, two of which are backup satellites, and the system is now operating very effectively.

Strengthening food security is another of APEC’s priorities under the Russian presidency this year. Food security is not just an economic and social problem, but is an issue for the future of millions of people. Earlier in the discussions today, either the moderator or one of the participants said that 150 million people have encountered food supply problems last year alone, and some experts put the figure at 200 million. More than a billion people around the world are going hungry. Of course we cannot ignore a social and economic problem of this scale.

”We will play an active part in drawing up fair rules for international trade. We think it essential in this respect to set the special norms that will enable countries to support particular economic sectors that are most vulnerable and sensitive to global instability.“

As I have said, Russia will continue its substantial contribution to stable food supplies, including on the Asia-Pacific markets. Our grain export capability is currently around 15 to 20 million tons per annum. Some specialists forecast that Russia will be producing 120 to 125 million tons of grain each year by 2020, which will take our export capability up around 30 to 35 million or even 40 million tons.

Of course, we will not concentrate solely on food exports. It is in our common interest to encourage reciprocal investment in agriculture, expand the amount of stable cultivated land, and carry out other agriculture sector projects based on advanced technology. This includes close cooperation in biological resource use, and in this respect the use of the Pacific Ocean’s biological resources is very important. All of our countries border this ocean, and it is thus our common task to ensure continued replenishment of its bio-resources.

We have always paid a lot of attention to regional energy cooperation and ensuring a sustainable energy balance in the region. Russia is a leading and — I stress — reliable energy supplier, and as such has a key part to play. We have carried out several milestone projects in the region over these last years, such as the Sakhalin oil production projects. This is something we discussed yesterday with some of those present now, with our American partners. We thank you for your assessment of our work together.

Mr Tillerson, president of ExxonMobil, spoke yesterday about the positive way in which the Sakhalin projects are being carried out. I stress the clearly international nature of these projects. We will continue to work in this way, developing our cooperation with our partners and strengthening not only Russia’s energy security but also that of our partner countries and of the entire region.

Access to sufficient, affordable and safe energy resources is a fundamental condition for ensuring stable growth in the Asia-Pacific region and throughout the world.

Strengthening international cooperation in peaceful nuclear energy is another issue. We all know about the Fukushima tragedy, which has been a big lesson for us all. We will continue to meet the highest safety demands in building and operating nuclear power plants. We are currently carrying out a number of projects in this sector in Asia, including building a nuclear power station in China. I was very pleased to hear that our Chinese friends and partners are satisfied with the quality that we offer. I also note the strong international dimension of these nuclear energy sector projects.

We are not chasing big profits and any extra money we can get, but are building relations with global technology leaders, so as to have leaders in their sectors handle each component of these big international projects. These are costly projects, running into the billions – from $2–3 billion to $8–10 billion. In each case, contracts worth around 25–30 percent of the project’s total cost go to subcontractors in the partner country, where the facilities are being built. This is the approach laid out in the bilateral agreements we sign with our traditional partners, and the safety issue is of course the top priority. This is something we discuss, coordinate and agree on with our friends in Japan, the United States, Australia, and other countries too. We will continue to follow these principles.

”In joining the World Trade Organisation, Russia has taken on obligations to lower tariff and non-tariff barriers, and we will fulfil these commitments. We believe that preferential trade agreements should be as transparent as possible.“

Russia supports the creation of a regional system for monitoring natural and manmade disasters. We are ready for the closest cooperation with our APEC partners in this area. In the area of energy, we cannot ignore important issues such as energy saving, rational use of resources, and making our GDP less energy-intensive. The Green Growth model opens the road to new technology developments. I am sure that the APEC forum will help to bring the region’s economies together to solve the key energy issues, and regional business will invest in developing and spreading the technology that will increase the entire region’s energy security.

Innovation, as I have said, is an important integration area in which we count on active cooperation with the business community. Since we are here at the Far East Federal University, I particularly note the importance of cooperation in science and education. It is in our common interests to build up the ties between our universities and research organisations, encourage student exchanges and contacts between scientists, and facilitate development of human capital in general. The APEC agreement on gradually establishing a common education space was a big step in this direction this year.

The APEC economies complement each other very well in terms of their scientific and research base and human resources and education potential. Our prosperity depends in large part on our ability to use these competitive advantages to achieve together a new quality of economic growth in the region. With the Business Advisory Council’s support, APEC established this year the Partnership for Science and Technology Policy and held the first meeting of the Dialogue on Future Technology Issues. The aim in both cases was to get business involved in discussing the conditions for creating a good market-oriented environment for innovation development. I think these are useful and promising initiatives. We must take into account the business community’s views, take into account business demands and needs, and I hope that business will become more active in setting concrete and practical tasks for science.

Colleagues, Russia is an integral part of the Asia-Pacific region. We are investing seriously in developing Siberia and the Far East. The Far East Federal University, our venue today, is one of the areas in which we can work together. This is a big, large-scale project to establish a new scientific, educational, and intellectual centre for Russia’s Far East. We built it in just over three years. We think a large-scale project of this kind is an important beginning on the road to reviving science here and creating a strong new intellectual centre. We will continue developing this project.

This forum’s traditional motto is: APEC means business. The word for business in Russian is ‘delo’, which can also mean ‘cause’, and so I hope that this sense of having a cause and purpose, this boldness and vision will always define our work together. We must set ambitious goals and move forward, and take up the challenges of our time. It is on this that our common success depends. Thank you very much for your attention.

September 7, 2012, Vladivostok