Remarks by Angel Gurría
Washington, USA, 21 April 2017
(As prepared for delivery)
Dear Mr. Johnston, Ladies and Gentlemen:
I am delighted to have the opportunity to meet with members of the US business community, at such a critical moment for the world economy. Many thanks to USCIB for inviting me, and to Citi Group for hosting us.
The global economic context remains challenging. While a modest upswing is underway ─ we project global GDP growth of 3.3% in 2017 and 3.6% in 2018 ─ the global economy remains stuck in a low growth trap, facing many risks, vulnerabilities, and policy uncertainties. Weak investment and trade continue to weigh on the core drivers of consumption, such as productivity and wage growth.
But the US economy is strengthening. GDP growth is expected to accelerate to 2.4% this year and 2.8% in 2018, supported by higher domestic demand and an anticipated fiscal expansion. Unemployment has fallen to 4.7%, and business confidence is improving. The US economic outlook will be shaped by future policy choices, many of which remain uncertain. Decisions on fiscal spending, taxation, regulation, trade and immigration will determine US growth prospects. Continued efforts to promote investment, foster innovation and support business dynamism will be essential for supporting US jobs and enhancing the well-being of all US citizens.
These policy choices are being made at a time of growing disappointment in and distrust of globalisation. High profile corruption and tax evasion and avoidance scandals have eroded trust in governments, parliaments, corporations, banks, and international organisations.
In many OECD countries, much of the population feels left behind, as the gains concentrate on a happy few. And, if we look at the numbers, they have a point! In OECD countries, the richest 10% earn almost 10 times the income of the poorest 10%, compared to 7 times in the 1980s. In the US, it is almost 19 times. And the top 10% of wealthiest households in OECD countries own about 50% of total household wealth, while the bottom 60% own 13%.
And, of course, while the US economy is starting to grow more steadily, some advanced economies, in Europe in particular, are still suffering from the legacies of the crisis: low growth, weak investment, high unemployment, growing inequalities and an erosion of trust. It is no wonder that we are seeing rising anxiety over immigration and widespread populism.
For business, there is the added concern that some emerging economies may not always beplaying by global rules.
In short, something has gone wrong with globalisation. We need to fix it!
But how do we fix it? We need to act domestically, putting people’s well-being at the centre of our policies. We need to act at the national and local levels, through policies and reforms to level the playing field and empower people to reap the benefits of trade liberalisation, regional integration, and globalisation. And we also need to act globally, through more effective and inclusive multilateral co-operation, enhancing our collaboration with other international organisations and fora like the G20, G7 and APEC to promote free and fair trade, support long-term, sustainable investment and make global standards count.
Let me highlight a few examples.
At the national level, we should empower people with 21st century skills, so when they see an opportunity, they can seize it! Currently, over half of adults (56%) in OECD countries lack the necessary skills to succeed in a technology rich environment. The OECD is identifying policies to ensure that globalisation and digitalisation improve citizen well-being through education and skills policies, migrant integration, and better social safety nets, informed by our New Approaches to Economic Challenges (NAEC) and Inclusive Growth Initiatives, a new horizontal project on digitalisation, and our work on the Productivity Inclusiveness Nexus.
We also need to transform our fiscal systems into tools for inclusion, and improve budgeting and public spending. We must strengthen competition and make public procurement, which accounts for 29% of government expenditure in OECD member countries, a driver of inclusiveness.
And we need to close gender gaps. In the OECD, women still earn on average 15% less than men (17% in the US) and remain underrepresented in the public and private sectors. Two recent OECD Recommendations have been adopted by the US: the Recommendation on Gender Equality in Education, Employment and Entrepreneurship and the Recommendation on Gender Equality in Public Life. There are many other powerful tools, like the PISA Survey and the ABC of Gender Equality in Education, as well as new projects on gender stereotyping in the media.
At the international level, we must make the global tax system more transparent. The OECD is working hard to do this through the G20-OECD Base Erosion and Profit Shifting (BEPS) Project and our Common Reporting Standard. Countries have identified almost USD 80 billion in additional revenues through voluntary disclosure programmes and other initiatives ─ of which so far, almost USD 10 billion has been collected in the US!
We need to improve corporate governance and fight bribery and illicit trade. The G20/OECD Principles of Corporate Governance and the OECD Guidelines for Multinational Enterprises provide globally recognised standards on transparency, accountability and business integrity. Our Anti-Bribery Convention has been a game-changer for combating cross-border bribery, with 300 ongoing investigations.
We must also tackle excess capacity and address market distortions caused by subsidies and other undue state interventions. The OECD is leading the charge on these fronts, and is delivering results for the US. For example, at the request of G20 members, we are facilitating the Global Forum on Steel Excess Capacity, which will benefit the US as the world’s fourth largest steel producer. And our Export Credit Agreement, which prevents countries from distorting international markets through subsidised export credits or tied aid, is saving American taxpayers over USD 800 million annually.
And we should help countries make their trade and investment policies more inclusive, providing new tools to understand, measure and promote international trade flows better, like the OECD’s updated Policy Framework for Investment and our work on inclusive global value chains, Trade in Value Added (TiVA) and Services Trade Restrictiveness Index (STRI). The OECD is also working with the G20 on tools including the G20 Guiding Principles for Global Investment Policymaking, agreed last year.
These are a few examples of how to create more inclusive globalisation. But our efforts will only bear the best fruit if we partner with the private sector. We need to fix this together!
First, in resisting trade and investment protectionism. Trade is integral to the success of the US economy. And the US business sector is one of the most open and international in the OECD. The impact of protectionist measures like higher tariffs or border taxes hurt firms through imports and exports. When you start tinkering with the links in the global value chains, the whole chain breaks. Many US imports have significant value added produced in the US. For example, our TiVA data shows that out of every dollar of Mexican exports to the US, 40 cents are American value-added content! We need to continue working together to address impediments and distortions to cross border investment, guided by the data and evidence in the OECD’s Trade Facilitation Indicators and Services Trade Restrictiveness Index.
Second, we count on the US business community to ensure the benefits of trade and investment are more widely and equally distributed. This requires diverse structural policies, from social protection and active labour market policies, to responsible business conduct and addressing investor-state dispute settlement concerns.
Third, we count on the US business community to keep fighting the dark side of globalisation and restore trust. More than $1 trillion in bribes are paid worldwide each year, which some experts estimate to be equivalent to a 20% tax on foreign investment by US and other countries’ firms. The tools, the Principles, the Guidelines, the Conventions are there, but implementation is key!
Dear Friends, Ladies and Gentlemen:
We must listen to the messages we are receiving from citizens. We have to respond to their concerns. We have to put people, well-being and inclusiveness at the heart of our policies. Because growth is not an end in itself, it’s a tool for better lives.
I know you have many other ideas and proposals on how you can help to build a more inclusive, transparent and responsible global economy. Count on our support to make them happen.
OECD work on inclusive growth