Sir Mark, dear Panellists,
I am honoured to join you for this first meeting of the G7 Economic Resilience Panel. I am delighted, Sir Mark, that you have called on the OECD to support your work. This report, Fostering Economic Resilience in a World of Open and Integrated Markets: Risks, Vulnerabilities and Areas for Policy Action, can provide a substantive springboard, an evidence-base, to inform and launch your timely discussions on economic resilience.
In 2020, the world witnessed what happens when risks become reality; and when resilience is put to the test. Confirmed cases of COVID-19 worldwide have now topped 110 million as mutations multiply, with almost 2.5 million deaths. This underlines the cost of unpreparedness - had we strengthened the resilience of health systems and invested more in pandemic preparedness, we may have better mitigated the impact of the pandemic. As it stands, the global economy has seen the largest annual fall in output since the Second World War. Whole sectors have been put on ‘hold’; despite effective retention schemes in many countries, the impact on employment has been sizeable; and tragically, global poverty and extreme poverty started growing again, after 20 years of continued progress. On 9 March, the OECD will release our Interim Economic Outlook, with the very latest analysis of the impacts and the directions for the recovery.
As we continue to live with the virus, our collective rebuilding efforts must focus on a strong, green, inclusive and resilient recovery, in other words “build back better” – a phrase that Prime Minister Johnson has put at the heart of the UK’s Presidency. Let me highlight some key priorities:
First, we need common understandings, approaches and frameworks to risk and resilience, in order to take coordinated, domestic and international actions to:
The OECD as an institution has worked to develop a systemic understanding of resilience. This ‘holy trinity’ of prevention, absorption and recovery is the approach advocated by the OECD in this report, which Laurence and Nicolas will set out in depth next.
Second, we need to pinpoint the key policy areas where urgent actions are needed to help address vulnerabilities and avoid tipping points. Two critical priorities are: a) tackling climate change and b) addressing inequalities:
Third, strengthening multilateral co-operation is critical to address systemic challenges and improve the resilience of our economies. Global integration has brought great benefits but has also created systemic weaknesses, characterised by nested, interdependent systems, which increase the risk of failures cascading from one part of the global economy to another, as seen during the GFC and the COVID-19 crisis.
The digital transformation has created opportunities but also risks for an integrated world. Industry studies estimate that global losses from cybercrime now total over 1 trillion US dollars. Covid crisis has exposed how digital divides are also exacerbating existing inequalities, between citizens, regions and firms. Managing cross-border data flows are essential for resilience, but they are a thorny area being discussed in both the G7 and the G20, as is digital taxation and regulation.
In response, we need a robust multilateral architecture that ensures co-operation on key cross-border issues like climate change and the digital transformation. We also need to strengthen the international rulebook which makes openness and market integration a fair and orderly process, i.e. a source of resilience, innovation, inclusion and sustainability, recognising the importance of strong institutions like WTO, WHO, but also the OECD as a standard setter. Here, the report focusses in particular on strengthening global supply chains for essential goods; levelling the global playing field through global rules and standards and harnessing the digital transformation for good. Of course, in all this, we need also to work closely with the private sector and other stakeholders, such as civil society to define the way forward, together. I know that this Panel is undertaking wide range of engagement.
The G7 has shown its capacity as an incubator for high-impact multilateral initiatives, and now has the chance to lead by example on resilience-building. I hope this report will be a useful guide as you shape this agenda for the Leaders. I will now pass the floor to the G20 Sherpa, Nicolas Pinaud, and OECD’s Chief Economist, Laurence Boone, to share the detailed findings of the report.