Remarks by the OECD Secretary-General
(As prepared for delivery)
Sydney, Australia, 17 July 2014
Ministers, ladies and gentlemen,
It’s a real pleasure for me to join Minister Robb and to share with you our latest research on Global Value Chains and their implications for trade, growth, jobs and development.
A little over a year ago OECD and WTO launched the first ever database on trade in value added, or TiVA. The evidence that we unlocked quickly began to revolutionise our understanding of what is happening in global trade, investment and production.
Global value chains, or GVCs, are today a dominant feature of the global economy. A good produced in the European Union and exported to the United States may include raw materials from China, Australia, and Malaysia, and it may use services from Japan, Canada, and India. Goods and services are no longer produced in one country and sold to consumers in a second country; production is fragmented around the world and components are traded across borders multiple times.
Why does this matter for G20 Trade Ministers meeting here in Sydney?
First, inefficient customs and other border procedures impose unnecessary costs on traders every time an import or an export crosses a border – OECD estimates that a 1% reduction in these trade costs would generate benefits of about 40 billion USD. The WTO Trade Facilitation Agreement offers an immediate opportunity to reduce unnecessary costs; G20 Trade Ministers can demonstrate leadership and realize these benefits through speedy implementation of this Agreement.
Second, our work on TiVA-GVCs shows very clearly how much firms rely on access to world class inputs in order to increase their productivity growth – in other words, they import in order to export successfully. It is important to continue to avoid introducing new forms of protectionism, but it is time now to do more, to begin to wind back restrictive measures that prevent firms from importing and exporting. Doing so can stimulate business activity and lead to higher growth and jobs.
Third, our analysis also shows that services sectors play a vital role in well-functioning GVCs. Services are not just important contributors to economic growth and jobs in their own right, they also provide essential contributors to competitive manufacturing sectors. The new OECD Services Trade Restrictiveness Indices allow the world’s major services suppliers to benchmark their performance and to identify opportunities to perform better.
Fourth, participation in GVCs is not automatic and some less developed countries and smaller firms are at risk of being left behind. Even in more developed economies widespread and inclusive growth is not automatic. Effective flanking policies to accompany trade and investment opening are essential. The nature of these policies varies by country, its stage of development, its resource endowments, and so on. But there is at least one common element: investments in people, in education and skills, in active labour market policies that match labour supply with demand, and in adequate social safety nets for those facing difficulties in adjusting.
Ladies and gentlemen, the importance of well-designed complementary polices is often over-looked. Trade opening creates potential opportunities, but wider structural policy reforms help to turn potential into reality. This is why OECD so strongly supports the Australian G20 Presidency efforts to better reflect trade and investment as essential elements of a strong, balanced and sustainable framework for growth, jobs, and development.
It is our great hope that the report we are launching today supports concrete actions at the national and G-20 level. The OECD is continuing its analysis on these important policy issues and stands ready to continue to work with partner organisation in support of on-going and future G-20 efforts to stimulate the global economy.