Video message by Angel Gurría,
Paris, 21 October 2020
Ladies and Gentlemen,
It is an honour to take part in this event organised by the CRE100DO (“Creciendo”) Foundation on “The Future of Globalisation: International Markets and World Economic Recovery”.
COVID 19 has had a devastating impact on trade and the world economy. Our latest Economic Outlook estimates a drop of 4.5% in global GDP this year, with a return to growth in 2021, which we calculate at an average rate of around 5%. However, many countries will not return to their pre-crisis production levels until 2022.
During the first months of the crisis, international trade contracted very sharply, with an 18% drop compared with the same period of last year. From June onwards, we started to see a recovery. But, in the context of the major uncertainty that we are currently going through, it is not clear whether this positive trend will continue.
The pandemic has also exacerbated pre-existing commercial tensions and challenged the resilience of supply chains worldwide. At the start of the health crisis, for instance, we saw strong tensions caused by the exponential increase in the demand for certain goods and the disruption of transport and logistical services. Indeed, production and international trade in protective masks increased more than tenfold in response to the growth in demand.
Small and medium-sized enterprises, and particularly the middle-market segment that you represent, perform an essential role in supply chains. The OECD Trade in Value Added database shows that SMEs are strongly integrated into world supply chains through indirect channels. SMEs need inputs from abroad at competitive prices and, in turn, are suppliers of other inputs for exporters. For many companies, this indirect internationalisation is the first step towards becoming exporters and importers and making a qualitative leap in productivity and innovation.
At present, SMEs are responsible for around half of Spain’s exports, which is above the OECD average rate. In the OECD, we therefore welcome the efforts that Spain is making to support small and medium-sized enterprises in the context of the current crisis. I am thinking, for example, of the recent internationalisation strategy, which includes both short-term financial support and structural measures.
Of course, much still remains to be done. Such as in the digital economy, where SMEs are still finding it difficult to integrate. In 2019, only 21% of medium-sized Spanish companies took orders online, despite the increasing importance and significance of e business. It is also a matter of importance to promote responsible corporate behaviour among companies as a whole, where, as you know, the OECD Guidelines for Multinational Enterprises are the international reference standard.
Governments and companies need to learn and apply the lessons of this crisis.
Companies are faced with the challenge of improving their capacity for anticipation, reaction and recovery in unforeseen circumstances. Perhaps this is the time to consider changes in supply chain management philosophy, replacing “just in time” with “just in case” and diversifying the supplier portfolio.
States also have a major role to play. Starting from a commitment to rules-based international trade, they must continue to pursue transparent and predictable trade policies that foster certainty, and avoid harmful protectionist temptations.
The OECD is working on a range of tools to identify policies and measures for improving the resilience of international trade, including the use of digital technologies to facilitate cross-border trade, more agile Customs procedures and reduced restrictions on trade in services. And governments should work in concert with companies, other governments and international institutions to share information on supplies, avoiding bottlenecks and developing “stress tests” like the ones that are used on the financial markets.
And there are many other areas where co operation between the government and the private sector needs improvement to foster a more resilient, more inclusive and more sustainable recovery.
Ladies and Gentlemen,
This crisis has highlighted the weaknesses in our systems. Before us lies the opportunity to modernise and boost international trade, repair and improve supply chains and build a more resilient commercial and business ecosystem. We must take ownership and act decisively to find our way out of this crisis and rebuild our systems, our economies and our business models. The current watchword is: Build Back Better.
There can be no return to the past. “Business as usual” is dead. It is now time to reinvent, improve and innovate.
You can count on the OECD to help you through this.
Thank you very much.