Remarks by Angel Gurría, OECD Secretary-General
Saint Petersburg, 20 June 2013
Chair, dear Mr. Mordashov,
Director-General Lamy, cher Pascal,
Ladies and Gentlemen,
I am delighted to be with you at the B20 today and to introduce our discusions on trade. Let me make four observations to that end:
First remark, on the Economic Outlook:
• After a marked slowdown in late 2012, the global economy is on the mend: Our latest OECD Economic Outlook issued last month forecast a 3.1 percent growth in world GDP for this year before accelerating to 4 percent in 2014.
• Yet, the outlook for global growth remains both exceptionally weak at such an advanced stage in the recovery, and also uneven across countries and regions. In addition, a broad recovery in world trade and investment is yet to take hold.
• World trade growth fell to 2% in 2012 — down from 5% in 2011, and is expected to remain sluggish in 2013 at around 3%. Global foreign direct investment (FDI) flows are still some 23 per cent below their 2007 peak.
• In this context, we need a new policy impetus to strengthen the on-going recovery. How can we achieve this when our fiscal and monetary fire-power is nearly exhausted? Part of the answer lies in new sources of growth like innovation, green and skills, and a large part lies on the promotion of more open trade and investment environment and the exploration of Global Value Chains.
Second remark, on ongoing regional and bilateral trade negotiations:
• The launch, just a couple of days ago at the G8, of formal negotiations between the US and the EU of the TTIP - the Transatlantic Trade and Investment Partnership - is very good news and a very timely development.
- If successfully concluded, TTIP would be the most significant bilateral Free Trade Agreement to date - covering 50% of global GDP, almost 30% of world merchandise trade, and 20% of global FDI.
- This agreement is much less about classic trade barriers at the border – that are at fairly low level between the US and the EU - than about the myriad of regulatory measures and standards that increase costs and place unnecessary obstacles in the way of business between the US and the EU. In this regard, very large benefits would be expected from the agreement - in the range of 3% of GDP.
- This would undoubtedly offer a boost of confidence to economic operators and a much-needed fiscally free stimulus to the global economy. So, yes, definitely, let’s get it done, let’s go for it! By the same token, we at the OECD very much welcome the negotiations of the TPP.
Third remark, on reaping the full potential of Global Value Chains:
• We have been working closely with others, especially the WTO, to better understand the dynamics of Global Value Chains and their trade policy implications. With their active support, we released on the occasion of this year’s OECD Ministerial meeting an update and expansion of the OECD-WTO Trade in Value Added database, as well as a policy report on how to draw the benefits of global value chains.
• This Trade in Value Added initiative (TiVA) shows the value added by a country in the production of any good or service that is then exported, and offers a fuller picture of commercial relations between nations. It also develops a broader approach to competitiveness, highlighting that success in international markets depends as much on the capacity to import high-quality inputs as on the capacity to export, with over 50% of goods and 70% of services trade in intermediate inputs.
• This work also hints to the high degree of market integration that exists today and highlights that further market opening would provide a debt-free stimulus to the global economy at a time when economic prospects are uncertain.
• In this context, protection measures against imports of intermediate products, as well as lengthy procedures for exports and imports at the borders, increase costs of production, reduce a country’s ability to compete in export markets and has a detrimental impact on a country’s position in regional and global supply chains.
• Overall, the rapid expansion of global value chains, as documented by OECD – WTO analysis – is magnifying the cost of protectionism, making the case even stronger for multilateral liberalisation.
Fourth remark: we need to reinforce our commitment against protectionism:
• But I am afraid some countries are taking another route: the pressure for governments to resort to protectionist measures is resurfacing. Our latest WTO-OECD-UNCTAD monitoring report of G20 trade and investment measures, which we issued earlier this week shows that during the last six months more than 100 trade restrictions were introduced, covering around 0.5% of G20 merchandise imports.
• These numbers may appear small, but the new restrictions are adding to the stock of measures that have been put in place before and since the onset of the crisis. Equally alarming is the fact that the most recent trade restrictions no longer seem to be aimed at combating the temporary effects of the global crisis, but rather at trying to stimulate domestic recovery through industrial planning, which is an altogether longer-term affair. They equally include more subtle discriminatory measures such as local content requirements and a battery of technical and regulatory measures.
• It is imperative that governments, and in particular G20 governments, reinforce their commitment to resist protectionism in all forms, and roll back potentially anti-competitive measures in a timely manner. The voice and advocacy role of the B20 is pivotal is this regard.
• But governments should not only stand still on new protectionist measures. They should engage in further market opening initiatives, such as the promotion of seamless border procedures – a critical requirement as goods and services are now crossing borders many times.
Fifth remark: going forward with the trade negotiations and an ambitious services agenda:
• An opportunity exists to reach agreement on a trade facilitation deal at the next WTO Ministerial Conference in Bali this coming December. This would be a significant step forward. OECD research suggests that the comprehensive implementation of all trade facilitation measures currently being negotiated in the Doha Development Round could reduce total trade costs by 10% in advanced economies and by up to 16% in developing countries.
• Last but not least, trade reforms should be part and parcel of each government’s structural reform agenda and a strong catalyst for ambitious structural transformations.
• Consider for instance trade in services: our TiVA initiative reveals that services are responsible for about half of OECD exports in value-added terms, a far more significant share than suggested by gross trade statistics. Indeed over 30% of the value of manufactured goods alone reflects services. In this context, reforming services trade, by allowing for more efficient and higher quality services, would enhance the competitiveness of firms throughout the economy and facilitate global value chains.
• We need to work more on the growing importance of services and accompanying policies to ensure inclusive growth. Efficient services regulations are a key for increasing productivity not just in the services sectors themselves, but also in the manufacturing sectors. The OECD stands ready to support the B20 with any initiative that it may wish to pursue in these areas.