Trade & investment
The Future of Global Trade Symposium
Speech by ICC Secretary General John Danilovich
Speech by ICC Secretary General John Danilovich
Ladies and gentlemen,
It is a great pleasure to be with you today in this beautiful city of Copenhagen and to participate in the important discussion on the “Future of global trade”. Copenhagen is such an important business hub and home to a number of international companies, including Mærsk one of our most important members.
I’d like to thank Mærsk for so generously hosting this week’s conference. Coincidentally, Copenhagen is also twinned with Paris, the city I moved to in July to take up my position as Secretary General of the International Chamber of Commerce.
ICC, headquartered in Paris, is the largest most representative business organization in the world. Its global nework comprises over 6 million companies, chambers of commerce and business associations in more than 130 countries, with interests spanning every sector of private enterprise.
The mission and mandate of ICC is to promote international trade and investment through a rules-based multilateral system.
This has been the mission of our world business organization since a handful of entrepreneurs created ICC over 90 years ago. Today, we remain the steadfast voice of business in an increasingly globalized world.
Importance of trade
International trade contributes to global prosperity and for participating countries is a powerful force for peace. In today’s global economy, the transformation of trade through global value chains is bringing far reaching change to companies and economies worldwide. With a global need for jobs and growth, it is imperative to bring down barriers to international trade and investment and to increase cross-border trade and investment flows.
From SMEs to large transnational corporations, businesses produce the goods and services that are traded on a daily basis throughout the world.
Every day, advances in technology and Internet communication are making it possible for businesses to join the global marketplace.
Global value chains have become a dominant feature of today’s integrated economy, and as a result there is growing evidence and recognition that the nature of trade is changing.
Traditional measures of cross-border flows of goods and services do not reflect the extensive value that is created by the international process.
While 80% of global trade occurs in global value chains coordinated by transnational corporations, almost 50% of added value is contributed by local SME suppliers within these chains.
This tells us that any discussions on the future of international trade must take into account the considerable contributions of such upstream domestic industries to international trade, even if they have little direct international exposure.
The participation of SMEs in global value chains is especially important in the developing world, where smaller firms can represent as much as 80%-90% of total employment.
For example, the Association of South-East Asian Nations estimates that the share of SMEs participating in global value chains varies between 6% and 46%, depending on the country.
The increasing importance of global value chains is changing the nature of world trade and has considerable implications for the policy choices and global rules that will allow governments and businesses to leverage trade and investment in the most effective way, to contribute to economic growth and job creation.
One of the challenges for business in an increasingly integrated global economy is the absence or inadequacy of global rules in many crucial areas.
As the only international organization dealing with the global rules of trade between nations, the World Trade Organization has a fundamental role to play in expanding and modernizing multilateral rules for trade and investment – and in promoting implementation of and compliance with those rules – in order to create an effective 21st century rules-based multilateral system.
In December of 2011, in a bid to move beyond and over a 10-year stalemate in multilateral trade negotiations, WTO ministers acknowledged that progress could not to be expected on all items of the Doha Development Agenda at the same time, and committed to advancing negotiations where progress might bepossible.
In support of this new approach, ICC launched its World Trade Agenda initiative in March 2011, tapping into business expertise worldwide to come up with priority areas for agreement at the Bali Ministerial of 2013.
These recommendations were:
- To conclude a trade facilitation agreement
- To implement duty-free and quota-free market access for exports from least-developed countries
- To phase out agricultural export subsidies
- To renounce food export restrictions; and
- To expand trade in IT products and encourage the growth of e-commerce worldwide
Finally, in December last year, 159 WTO members adopted an Agreement on Trade Facilitation as part of a wider “Bali Package”.
ICC had played a significant role since the first ministerial conference of the WTO in 1996 in Singapore, to put trade on the WTO agenda and then to negotiate a multilateral agreement on trade facilitation.
There was much to celebrate with this first major multilateral agreement to have been reached since the creation of the WTO.
The agreement has the potential to bring about trade facilitation reforms that will enable many companies to trade internationally for the first time, particularly as the Internet opens up new market opportunities for small- and medium-sized enterprises to connect with customers across borders.
But business enthusiasm over the trade facilitation agreement turned to dismay this summer when India – over concerns for its national food security programme and supported by a handful of other countries – refused to ratify the implementation protocol of the agreement before a 31 July deadline.
Before that deadline, ICC organized an advocacy campaign by mobilizing its global business network.
This campaign included a letter to over a hundred trade ministers forewarning them that failure to meet the July deadline would stall the momentum for multilateral trade liberalization, and prevent developing and developed countries alike from reaping the benefits of the deal.
Nevertheless, India refused to budge, creating an impasse for the future of the post-Bali Agenda. At the moment negotiations continue in Geneva, and although ICC efforts continue, the mood is discouraging.
Why TFA needs to get back on track
Having pledged to adopt economic policies that will reduce poverty and inflation and create an “India that works”, Narendra Modi’s historic victory in India’s elections in May this year, was welcomed by international business, in the knowledge that TFA implementation would give Indian companies a more level playing field in the global marketplace.
We find it difficult to understand the benefits of delaying implementation of a deal, that along with other elements of the Bali Accords, could add a possible 1 trillion US Dollars to global GDP and generate millions of jobs – particularly in developing economies.
We at ICC hope that Prime Minister Modi will adhere to India’s commitment to the December 2013 Bali agreement, return to the negotiating table and sign the implementation protocol of the TFA.
What is ICC doing?
While July’s missed deadline came as a huge disappointment to the global business community, ICC hasn’t given up hope of progress.
WTO negotiators are back at the table in Geneva and ICC is continuing its efforts to urge WTO member countries to find a way forward and ratify the implementation protocol of the TFA, as per the implementation process agreed at the WTO Bali Ministerial Conference of December 2013.
While ICC acknowledges the very tangible domestic implications of food security issues for India and other developing countries, business must draw attention to the broader economic benefits India will lose out on without the TFA.
When shipping garments to the US for example, Indian companies currently suffer a 30% cost disadvantage compared to Chinese firms due to port and customs inefficiencies.
Business should raise awareness of the fact that legal adoption of the TFA would provide a conducive environment within the WTO to conclude a workable agreement on food security issues.
Equally as important, it would allow moving forward discussions on other aspects of the post-Bali trade agenda.
How business can help
Given the state of international trade discussions today, we, as leaders representing businesses worldwide, must do more to communicate the benefits of global trade. Our message has to be that trade generates growth and growth generates jobs. We ask you to join us in advocating the global benefits of global trade and related business priorities.
ICC business leaders and our national committee representatives in over 90 countries have been taking forward these messages in their discussions with government decision-makers.
Our global network has rallied to the cause and we ask you to join it in conveying the benefits of trade to your respective governments and in contributing to the public debate on the benefits of the WTO rules-based multilateral system.
You can also join our “save the TFA” social media campaign that to date has reached more than 1.6 million people with just over 800 posts.
And we encourage you to write letters and opinion articles explaining the benefits of globalization to bridge the information gap.
Despite the TFA procedural impasse, we are still seeing many WTO member countries pressing ahead with plans to implement the agreement.
This progress should not be forgotten and should drive momentum to make progress at the WTO in the coming weeks.
Next week, in fact, Terry McGraw ICC Chairman and I will be in Geneva and meet with WTO Director General Roberto Azevedo and others to add to that momentum.
In addition, ICC has a longstanding strategic relationship with the World Customs Organization. Because business and customs have much to gain from seamless supply chains, ICC is working closely with the WCO to support Customs and to ensure the voice of the private sector is heard in the implementation process.
ICC believes strongly in the primacy of a strong, rules-based multilateral trading system embodied by the World Trade Organization.
We must keep in mind that a “setback” is not synonymous with “failure”.
Following the Bali experience, we should consider the lessons learned to begin addressing some of the challenges which made the deal so hard to reach.
We acknowledge that the time has come for the WTO to consider alternative negotiating approaches including plurilateral approaches with the ultimate aim of achieving multilateral results. Such approaches may be better suited to an organization of now 160 members, operating in a 21st Century economy.
We at ICC remain dedicated to ensuring that global business plays an active and constructive role in working with WTO members to help strengthen WTO rules and to adapt them to the current needs of global trade.