Intervention by James Bacchus, Chair of the Commission on Trade and Investment Policy of the International Chamber of Commerce, at the ECOSOC Forum on Financing for Development at the United Nations on April 19, 2016.
Mr Chair, Mr Moderator, and all assembled here for this important forum.
My name is James Bacchus. I speak here today in my role as the Chair of the global Commission on Trade and Investment Policy of the International Chamber of Commerce. The more than six and one half million companies in the 130 national chapters of ICC support investment financing “in all its forms” as envisaged by the Addis Ababa Action Agenda and by the 2030 Agenda for Sustainable Development.
In particular, we wish to draw the attention of all here to the new ICC guidelines for foreign direct investment, which are strongly supportive in all respects of the goals of the new Paris climate agreement and of the overall Sustainable Development Goals for 2030 adopted by the United Nations. These guidelines donot propose that we have no regulation of foreign direct investment. These guidelines propose the right kind of regulation as part of a non-discriminatory regulatory framework that can increase and enhance FDI to help confront climate change and help achieve overall sustainable development.
The vast majority of our member companies around the world are small- and medium-sized enterprises. These millions of small companies in ICC work closely alongside larger multinational companies in the worldwide work of ICC. So we are concerned when we hear – as we have heard here today – needlessly divisive stereotypes suggesting that large companies are somehow always and everywhere injurious to small ones. The evidence of recent experience clearly shows that small companies all over the world are climbing onto the global value chains of large companies to connect and contribute to the opportunities and the prosperity of the global economy.
We at ICC are likewise concerned to hear – as we have heard from the podium here today – unfortunate references to some supposed need to rely on “industrial policy” in limiting FDI, and on “blending domestic development ambitions” into possibly discriminatory national requirements for FDI. These tired phrases are the familiar code words for protectionism, and protectionism is surely not the path to sustainable development.
The right path – as some have rightly said here today – is to put in place nationally and internationally an “enabling policy framework.”
We at ICC are in no way arguing for the utter absence of regulation. Laissez faireis a “straw man” that simply does not exist in the contemporary global economy. What we seek in the international business community is instead the “enabling policy framework” that most here today have said they also seek. We seek a supportive framework for cooperative and innovative bottom-up solutions that emerge from – and that work in – the global marketplace.
I have read the new book by Cohen and DeLong – ConcreteEconomics – that one of our speakers cited earlier in this session as evidence of the supposed virtues of restricting trade and investment by protecting “infant industries.” Their book is not a call for protectionism. It is a call for an active government that helps construct an enabling economic atmosphere in which creative economic growth can flourish.
It is certainly true that the United States of America had high protective tariffs during the early days of our republic. It is also true that copyrights and other intellectual property rights were not always respected in the United States during much of the 19th century. These are, indeed, historical facts.
But the United States of America did not succeed economically because it had high tariffs on manufactured goods or because American publishers pirated the novels of Charles Dickens. As Cohen and DeLong point out in their book, other countries that have relied on protectionism of “infant industries” to spur early economic growth have not succeeded.
The temptation always and everywhere is to privilege “infant industries” with protection from foreign competition through tariffs, subsidies, or some other form of government support. But which industries should be protected, for how long, and at what opportunity costs because of misplaced government spending and the misallocation of scarce capital?
The United States of America grew and it succeeded despite its early reliance on high tariffs, not because of it. America grew and America succeeded because the American people enjoyed the blessings of both individual and economic freedom in a bountiful land within the enabling framework of the rule of law in a market economy in a democratic republic.
And, through the years, America has maximized its growth by maximizing the gains from international trade and investment. America has grown to the extent it has grown by opening up to the wider world. And America is far from alone. The simple fact is, no country has ever grown economically andsustained its growth over time without opening and remaining open to the wider world.
Sustainable development must be bottom up; it cannot be top down. The sustainable development we seek will result only from cooperative, innovative, and improvisational human action; it will not result from a directed design, however well intended. The future cannot be designed because the future cannot be foreseen. The future must be shaped along the way by seizing the unforeseen opportunities that arise from the freedom and from the sheer serendipity of individual and cooperative human endeavor within an enabling framework.
Central to this creative action from the bottom up for sustainable development must be the cooperative networks of the private sector and the marketplace. Especially in financing for development, the private sector and the market are indispensable. The trillions of dollars we need to fill our investment gap will simply not all come from government. The vast majority of those dollars will have to come from the private sector. A way must be found now to engage the private sector fully and affirmatively – and from the bottom up – in fulfilling the promise of the Paris climate agreement and in implementing the overall Sustainable Development Goals.