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Contributions and challenges of the G20: A view from the OECD

 

Model G20 Initiative Inaugural Event

Keynote address by Angel Gurría,

OECD Secretary-General

Washington, DC, 6 October 2016

(As prepared for delivery)

View the event live

 

Dear Dean Goldgeier, Ladies and Gentlemen:

 

I am delighted to join you at American University’s School of International Service (SIS). For almost 60 years, SIS graduates have served the global community by ‘‘waging peace’’ and building understanding in our world. The G20 was founded in a similar spirit and has evolved into an impressive constellation for inclusive multilateral co‑operation.

 

The annual G20 Leaders’ Summit is informed by the outcomes of dozens of meetings held throughout the year involving leaders, ministers, their sherpas, policy and technical specialists, representatives from the business community (B20), civil society (C20), trade unions (L20), think tanks and academia (T20), gender equality representatives (W20), and youth (Y20). It is a huge undertaking! In 2017, Germany will serve as G20 host, following China in 2016 and Turkey in 2015.

 

Co-ordination between such diverse actors is deeply challenging. But the G20 has consistently demonstrated its effectiveness and value, leveraging what President John F. Kennedy ─ speaking to SIS students in 1963 ─ described as the "reason and spirit’’ of its members to ‘‘solve the seemingly unsolvable’’.

 

From crisis management to laying the foundations for the future

 

The G20’s response to the global financial crisis is an excellent example of its nature, its raison d’être and of its impact. Its actions to keep markets open to trade and investment, co-ordinate macroeconomic policies, develop the largest internationally co-ordinated stimulus package in history, and spearhead new approaches to financial regulation and supervision helped to boost confidence and prevent a financial system meltdown.

 

The G20 has now firmly established itself as an incubator of bold collective policy initiatives. Its focus has shifted from only bolstering macroeconomic stability to diagnosing and understanding the deep, systemic challenges facing our economies and societies, including slowing productivity and rising inequality.

 

As a result, structural reforms have taken centre stage in the G20 agenda. The latest Leaders’ Summit in Hangzhou was not just about repairing the problems of the past, but about laying the foundations for the future ─ a future driven by new ideas and technologies. This is why the Chinese Presidency rightly added digitalisation, innovation and the New Industrial Revolution to the G20 agenda in 2016.

 

The G20-OECD Partnership

 

The OECD has been supporting the G20 from day one.

 

It was actually President Obama who invited the Secretary General of the OECD to sit with the leaders, to contribute to the understanding of common challenges. He also asked us to appoint a Sherpa, which shows how this setting would work, defining the agendas that interest the leaders, and through our representative reaching agreements in many areas.

 

Through our multi‑disciplinary expertise, we have made substantive contributions in several areas, including work on structural reform, human and social dimensions of development, anti‑corruption, corporate governance, responsible business conduct, innovation, trade and investment, fossil fuel subsidy reform and climate finance, development, and reform of the international tax architecture.

 

In 2009, we provided the analytical evidence of the gains G20 countries would make from eliminating fossil fuel subsidies, which helped the US Presidency advance the G20 commitment to eliminate fossil fuel subsidies. We are particularly fond of this contribution not only because of its merits, but because it was the first contribution of the OECD at the G20 leaders’ level, and our first intervention at the sherpa level.

 

We have also worked through the G20 to fight tax evasion and tax erosion, through the establishment of the Global Forum on Tax Transparency, moving to Automatic Exchange of Information. More recently, we delivered the game-changing OECD-G20 Base Erosion and Profit Shifting (BEPS) project, which provides an international tax architecture fit for the 21st century. The project closes loopholes and mismatches in international tax rules to combat tax evasion and tax avoidance, estimated to represent annual losses of up to 240 billion US dollars. We are continuing to work on an inclusive framework for BEPS, to support consistent global implementation. It’s little wonder that President Obama has declared that “the work on tax is the G20 at its best”!

 

We have also worked together to deliver real outcomes for people. During the Australian Presidency, we provided analytical and political support to achieve a target to reduce the gender gap on labour force participation by 25% in 2025. Cecilia Nahon, who actually is the brain behind this Model G20 Initiative, was key to this achievement. This was in line also with the inclusive growth angle that was developed during the Turkish Presidency.


In the area of trade and investment, besides being one of the organisations that monitor the anti protectionism pledge that has been in place since 2008, we have been feeding the group with detailed analysis of global value chains, to explain how the patterns of production and exchanges operate, and to try to advance a more meaningful discussion in this field.


Just recently, we were also called to establish a Global Forum on Steel, where major producers can sit together and discuss issues of overcapacity. A difficult, but urgent, topic by all means.

 

And these are just some examples of our collaboration! Other highlights include the OECD-G20 Principles of Corporate Governance, the OECD-G20 High-Level Principles on SME Financing, the Skills Strategy, and the Blueprint for Innovative Growth.

 

Let me conclude by highlighting two challenges that we consider crucial to making the G20 more effective and relevant.

 

Challenges facing the G20

 

First, strengthening implementation. The ambitious commitments of the G20 are impressive, yet there is often an implementation gap. There are two areas in particular where G20 countries “talk the talk” but now need to ‘‘walk the walk’’.

 

The G20 has come up short on the structural reforms needed to promote competition, strengthen skills, facilitate labour mobility, and improve financial market robustness to boost productivity and promote inclusive growth. Despite a 2014 G20 Brisbane commitment ─ monitored by the OECD and IMF ─ to raise global GDP by an additional 2% by 2018, measures implemented so far will only add around 1%. Countries must do better to have any hope of escaping the low-growth trap!

 

And despite repeated commitments by G20 leaders to resist protectionism, trade‑distorting measures remain. Of the 1,583 trade-restrictive measures recorded for G20 economies since 2008, only 387 have been removed. 1,196 restrictive measures are still in place!

 

Second, ensuring that the global economy delivers for all, and that we can recalibrate very uneven outcomes to build an agenda for inclusive growth. 

 

Globalisation is in stormy waters ─ economically, but also, and perhaps more worryingly, politically and intellectually. We are all wrestling with growing scepticism, concern, even anger, about the impact of globalisation on workers and inequality. But globalisation is just a means to an end, and not an end in itself. The outcomes are being questioned. The richest 10% of the population in OECD countries now earn almost 10 times the income of the poorest 10%; this ratio is up from 7:1 in the 1980s. We also know that inequality harms growth, as people are prevented from investing in skills, locking them in low productivity, precarious jobs, or in the informal sector. To put it bluntly: we are risking a backlash from those who have lost out from globalisation. In fact, we are already seeing its impact: weak or thin mandates, fragile coalitions, the sudden appearance of fringe political parties (both of the right and of the left), and increasingly xenophobic and anti-globalisation agendas. Some statements by one of the US Presidential candidates, Brexit, and the migration crisis in Europe are clear examples.

 

The time has come for the G20 to make a bold stand to ensure that the benefits of open markets support inclusive and sustainable growth. Trade and investment openness must be accompanied by appropriate domestic policies. Policies that support labour markets, that create modernised and growth-friendly social protection systems and effective social safety nets; and policies that deliver ambitious innovation programmes and public investment in infrastructure. We also need strong skills development and training programmes to equip workers to compete and thrive in the labour markets of the future. In the OECD, we have developed the concept of the “nexus” between productivity and inclusiveness, because we need policies that address them in a joint manner.

 

Ladies and Gentlemen: The G20 has helped make the world a better place. And as President Obama optimistically, and pragmatically, concluded in his final remarks at Hangzhou ─ “Better is always good. It may not be everything that needs to get done, but if it's better than before we started, we'll take it”! And this is where you come in, as the next generation of leaders, policymakers, and diplomats. You will take the reins, to move us forward. As another US President, Franklin D. Roosevelt, once said “we cannot always build the future for our youth, but we can build our youth for the future”.

 

I wish you all the best for a successful Model G20 Initiative.

 

Thank you.