Remarks by Angel Gurría
7 November 2018 - AmCham France, Paris
(As prepared for delivery)
Dear Mr. Gallon, Ladies and Gentlemen,
I am delighted to join you at the American Chamber of Commerce in France. As the oldest US business association overseas (founded in 1894), cross-border co-operation is the foundational value and the core mission of AmCham France. Also for the OECD. That’s why I’m here.
As you know, these are deeply challenging times for the global economy and for multilateral co-operation. Geopolitical tensions are running high and we are already seeing the effects of widespread political uncertainty and an escalating trade confrontation. In September’s Interim Economic Outlook, the OECD revised its growth projections downwards. Global GDP growth is projected to settle at 3.7% this year and in 2019. This is around ¼ percentage point weaker than previously projected. In the first half of 2018 trade volume growth eased to around 3%, from 5% in 2017.
The rising tide of protectionist measures, which we are witnessing, is harmful and costly. Recent OECD data has estimated that each dollar of new tariffs costs global households 40 cents, while each dollar of tariff reduction adds 90 cents to global household incomes.
The causes of current protectionist trends are complex but they are certainly linked to failures of the global economic system to provide a global level playing field for all and to promote inclusive growth and help effectively those displaced by globalisation and technological change.
The benefits of economic growth have not trickled down sufficiently. Recent studies have found that the world’s richest 1% now accumulate around 50% of the world’s wealth; and more than 60% of the world’s employed work informally. In the OECD, labour market insecurity remains higher than before the crisis and poverty has grown amongst the working-age population. This is not just about the crisis. Rising inequalities pre-date the crisis - the income gap between the top and the bottom deciles has risen from 7 times in the 1980s to almost 10 times.
This disconnect between people and politics is why we are getting these results: 9 months to form a government in the Czech Republic, 7 months in the Netherlands, 5 months in Germany and 2 months and counting in Sweden. We had the Brexit vote and major changes to the political landscape in Italy, Spain, Austria, the United States, Mexico, now Brazil. So many people are voting for change, because they are not satisfied with the status quo, and there are many others who have given up on Democracy, like the 60% of the UK youth whose future was at stake in Brexit and who didn’t vote. In the OECD, only one in three people feel that they have any influence over what their government does.
Important economies are turning their backs on multilateralism, just when it is most needed. This is dangerous, because international co-operation is not only the best solution to address the challenges of our interconnected and interdependent world, it is the only solution. Climate change, the digital revolution, migration – these require collective and co-ordinated global solutions.
Multilateralism, in spite of its imperfections and challenges, has delivered and continues to deliver important progress: think of the Sustainable Development Goals (SDGs) and the Paris Agreement endorsed by the UN membership in 2015; or the OECD’s ground-breaking international agreements on Automatic Exchange of Information for tax purposes (AEOI) and on tackling Base Erosion and Profit Shifting (BEPS). Initiatives like the Global Forum on Steel Excess Capacity, mandated by the G20 and facilitated by the OECD, is now on the frontline in addressing current trade tensions.
However, to restore the trust of the people in multilateralism and in the global economic system, we have to ensure the benefits of globalisation are distributed more widely and that everybody has the skills and opportunities to succeed.
At the OECD we have acknowledged that it is high time to rethink and reform globalisation and multilateralism. Last year our 2017 Ministerial Council Meeting (MCM) focused on making globalisation work for all. This year, in May, our 2018 MCM chaired by France and opened by President Macron focused on making multilateralism more responsible, effective and inclusive. It was a compelling discussion and in spite of the difficulties, we distilled very strong mandates and messages. Let me share some of them with you.
Firstly, effective multilateralism must deliver an open, level playing field and well-governed markets, which put healthy competition and integrity at their heart. The OECD is on the frontline of this effort. The OECD/G20 Principles of Corporate Governance, the OECD Guidelines for Multinational Enterprises and the OECD Anti-Bribery Convention have been game-changing tools. In May the OECD also launched the Due Diligence Guidance for Responsible Business Conduct to provide practical support in improving social and environmental practices across supply chains and sectors. We count on you, as esteemed representatives of the private sector, in promoting these global standards and their effective implementation.
We also need to ensure everyone pays their fair share of tax. I have already mentioned BEPS and Automatic Exchange of Information for tax purposes (AEOI), which have been milestones in tax co-operation and transparency, but we need to look in depth at the challenges of taxing the rapidly-changing digital economy. The OECD/G20 BEPS Project just delivered its interim report Tax Challenges Arising from Digitalisation, which is a key step in developing a durable, long-term solution.
Fair taxation should come hand in hand with policies to address market-distorting practices both by the public and private sectors. For instance, we are seeing greater market concentration in a range of sectors, driven in part by digitalisation and network effects. We need to promote market access and entrepreneurship, with particular attention to the needs of SMEs. We also need to continue to tackle the “dark side” of global flows, from bribery and corruption, to cyber insecurity, counterfeiting and piracy. Launched earlier this year, the OECD’s new Strategic Approach to Combatting Corruption and Promoting Integrity is taking this fight to a new level, building on long-standing instruments like the OECD Anti-Bribery Convention.
However, levelling the playing field through well-governed markets and the promotion of integrity is only half the battle.
We also have to strengthen our efforts to put people at the centre of growth. The OECD’s new Framework for Policy Action on Inclusive Growth, a major outcome from our MCM, provides 24 indicators to help empower the people and places that have been left behind.
This requires more effective social safety nets, affordable quality healthcare and housing and better education and skills provision. Skills need to be fostered at all stages of life, from early childhood education and in-work training to supporting older workers or displaced workers to manage the digital transition. This is all the more important when you consider that around 14% of jobs in OECD countries are at high risk of automation, and a further 32% of jobs could face substantial disruption, with the low-skilled most at risk.
This is why we also need new approaches to skills for the 21st century job market, as promoted by the updated OECD Jobs Strategy and our Going Digital Project. Success in fostering inclusive growth will depend on the active engagement of the private sector, in their role in delivering lifelong learning opportunities, in upgrading skills and upholding labour rights. This is why the OECD is launching the Business for Inclusive Growth Platform. I invite you to join this initiative.
Finally, we must also strengthen our efforts to transition to sustainable economic models. At a time when we are still not on course to reduce warming to well-below 2 degrees, last year’s OECD Investing in Climate, Investing in Growth report showed that climate-compatible policy packages can be engines of inclusive, sustainable growth. This requires mainstreaming climate solutions across all areas of public policy through green budgeting and investment.
We also need to wake up to new environmental emergencies, like plastic in our oceans. It is shocking to discover that by the middle of the century, the sea could have more plastic than fish by weight! Working closely with the G7, the OECD is moving into this critical area. Earlier this year we launched a new report on Improving Markets for Recycled Plastics: Trends, Prospects and Policy Responses, and this is just the beginning.
Ladies and Gentlemen,
The great French political scientist, and theorist of the United States, Alexis de Tocqueville, acknowledged that “in politics, it is often what is happening before our very eyes, which is the hardest to perceive and understand.”
We are living in times of great complexity, rapid change and rising uncertainty. More than ever we need to work together to chart a common path. Multilateral organisations like the OECD need the input of companies, academia, civil society and citizen groups to help us improve our work, our reach and our relevance, but also to improve globalisation to make it work for all. This is why these meetings are so valuable. Today I want to hear your views, your ideas, your reactions. I look forward to a frank and open discussion. Thank you.