Banking & finance

ICC issues positions on global economic crisis

  • 13 March 2009

The global economic crisis does not stem from a failure of the market economy system nor does it call into question the system’s successful record in creating wealth and significantly raising global living standards, ICC said in a position paper on the current emergency.

The statement, which was first issued in November and is updated regularly to reflect developments in the current crisis, said the immediate priority should be to boost demand and credit in order to resume economic growth. ICC added that it is particularly urgent “to boost trade finance on which international trade – forecast to fall this year for the first time since 1982 – so heavily depends.”

“ICC continues to urge official development banks and export credit guarantee agencies to sharply expand their trade finance facilities in these exceptional times,” the statement added.

ICC placed particular emphasis on the need to avoid economic nationalism at all costs.

“Governments must avoid the temptation to seek isolation from the global crisis through protectionist measures to restrict imports and foreign investment,” ICC said. “With the world as economically integrated as it has become over recent decades, any lurch into economic nationalism would dislocate commercial activity even further and risk turning the global crisis into a depression.”

ICC believes that the government stimulus packages being put into place should give priority to projects that will have a rapid impact on demand and jobs and that measures which “unavoidably distort competition and international trade should be kept to a minimum and should be clearly stated to be temporary.”

In addition, the current situation should not allow a “mood of regulatory enthusiasm” to spill into other economic sectors where light-regulation or self-regulation is working well.

ICC stated that any efforts “to put globalization into reverse” must be opposed and called on governments to “finally summon the will to complete the long-stalled Doha Round of multilateral trade negotiations.” It also said that the current crisis should not be an excuse to further delay effective action to combat climate change.

Analyzing the current crisis, ICC stressed that a market economy system can work well only within clearly established rules. It said that the rules governing financial markets “were either inadequate, unsuitable, or simply not enforced.”

In ICC’s view, key actors including governments, central banks, credit rating agencies and bank regulators as well as consumers must share in the responsibility for the crisis.

“What has been astonishing,” ICC concluded, “is the speed at which the crisis has spread around the world and the severity of the impact on the real economy beyond the financial sector.”