G20 countries fail to lead in trade openness, ICC Index indicates

  • 22 December 2011
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The support for open trade pledged by G20 countries at the end of the Summit in Cannes was not matched by their recent performance, according to the findings of the ICC Open Markets Index – released today by the International Chamber of Commerce (ICC).

The most open of the G20 countries is Germany, followed by the United Kingdom, Saudi Arabia, France and Australia,according to the ICC Open Market Index, which was conducted for the first time this year by the ICC Research Foundation. G20 countries onlyranked average out of 75 countries for their openness to trade.
The United States ranked roughly in the middle of the sample at number 39, followed closely by Japan at number 43. Brazil ranked last out of the G20 countries. The five other G20 countries with “below average openness”, according to the Index, were China, Mexico, Russia, Argentina and India.

The Index’s results amplify, on the occasion of the World Trade Organization (WTO) Ministerial Conference, the urgent need to get beyond the Doha Round stalemate and define a more flexible approach for achieving a Doha Agreement. But this will require greater leadership from the world’s largest economies, which need to set an example in terms of trade openness.

“The threat of increased protectionism coming from the world’s major economies is troubling. We need to be opening markets rather than erecting barriers to trade to spur global economic and job growth,” said ICC Chairman Gerard Worms.

Countries selected in the Index – which covers 95% of world imports of goods and services in 2009 – provide broad coverage, including 35 developed countries, 37 developing economies and three successor states of the former USSR (Russian Federation, Ukraine and Kazakhstan).

The aim of ICC’s Index, which is set to be issued yearly, is to monitor openness to trade and investment, and to provide a business benchmark for policymakers.

“It is the only index to measure the impact of government policies on market openness,” said ICC Secretary General Jean-Guy Carrier. “We hope it can shed some useful light on the relative performance of countries.”

The aggregate rank of the selected countries was achieved by analyzing data according to four indicators: trade openness, trade policy regime, international capital inflows and infrastructure for trade. Final scores were grouped according to performance categories “most open, excellent”, “above average openness”, “average openness”, “below average openness”, and “very weak”.

Only two economies, Hong Kong and Singapore, received a score of “excellent” in terms of their openness to trade. Twenty-three countries, mainly European, were found to have “above average” openness. The European countries in this group in general have a relatively small population size (below 15 million), with the exception of Germany, which ranked number 19 overall, and the highest among G20 countries.

ICC today also launched the World Trade Agenda, an initiative proposing that business works together with governments to drive more effective trade talks, answering the call from G20 leaders at the recent Summit in Cannes for new approaches to trade negotiations.
“Companies are committed to making investments and increasing trade flows, and urge G20 leaders to implement policies that will support these actions,” Mr Carrier said. “In order to have the confidence it needs to trade and invest, business needs clear signs that governments will not resort to protectionism and that political leaders are truly committed to opening trade.”
ICC – which will begin mobilizing global business with its World Trade Agenda – is urging governments attending the WTO Ministerial Conference to begin the process of reaching one or more Doha agreements using new approaches.

ICC, in a letter to G20 leaders this week, urged that trade ministers conclude global trade agreements on a plurilateral basis – that is to say, starting with a core group of WTO member countries – an option already provided for under WTO rules.

The Doha Round of negotiations, despite failing to reach a final agreement, has made valuable progress on a range of subjects – from “trade facilitation” measures that would reduce costs and delays at borders, to a package of measures encouraging the integration of least-developed countries into the global economy. Some of these potential gains could be harvested under more flexible rules.

“This approach would restore confidence, bring down the cost of doing business around the world, and give the global economy and job creation a major uplift, all without resorting to more stimulus initiatives and increased debt,” Mr Worms, ICC Vice-Chairman Harold McGraw III and ICC Honorary Chairman Victor K. Fung wrote in their letter to G20 heads of state.

ICC is inviting business leaders to a two-day symposium in Geneva in March 2012 to elaborate the main elements of the business World Trade Agenda. ICC will then feed these proposals into the G20 policy process ahead of the 2012 Los Cabos Summit, with the aim of strengthening the trade policy component of the G20 agenda.

Research for the ICC Open Market Index was carried out by leading trade economist Michael Finger, who developed the report for the ICC Research Foundation.