This second edition of the ICC Open Markets Index (OMI) comes at a critical juncture for the world economy.
With global growth expected to pick up only modestly in the months to come, the World Trade Organization (WTO) has downgraded its 2013 forecast for global trade to 3.3%, below the long-term annual average of 5.3%, for the last 20 years. This adds to the 18% drop in global foreign direct investment (FDI) flows reported by the United Nations Conference on Trade and Development (UNCTAD) in 2012.
The slowdown of international trade, which has been one of the primary engines of increasing global prosperity for decades, is worrisome but it is not irremediable. A collective push by governments from across the world to open borders and bring down barriers to trade and investment would give a much needed boost to market confidence and global economic growth.
Evidence points, however, to an unremitting trend of protectionism since the outbreak of the global financial crisis in 2008. Despite their repeated pledges to keep markets open, G20 leaders have a mixed record when it comes to keeping protectionism in check:
- Global Trade Alert found that between November 2008 and March 2012, governments worldwide implemented more over 1000 trade policy measures that were discriminatory in nature, with G20 countries responsible for the vast majority of these measures. Their share in the total rose from about 60% in 2009 to 80% in 2012.
- In their latest report to G20 Leaders, the WTO, the Organisation for Economic Co-operation and Development (OECD) and UNCTAD signaled that G20 countries have introduced 71 new trade restrictive measures in the six-month period between May and October 2012. While this represents a slowdown compared to previous periods, the accumulation of protectionist measures remains a concern: the restrictive measures put in place since October 2008 are estimated to cover around 3% of world merchandise trade and around 4% of G20 trade.
- According to the World Bank, most of the increase in these restrictions has affected exports of emerging and developing economies. The largest increase has been in South-South restrictions. Imported products subject to restrictions by G20 emerging economies rose by about 75% between 2007 and 2011, covering more than 3.5% of their total imported products.
These actions undermine policies for economic recovery and long-term job creation, at a time when the world economy remains at risk.
The purpose of the ICC OMI is to generate a balanced and reliable measurement of a country’s openness to trade. It uniquely combines indicators of actual, de facto, openness of markets with those reflecting government measures considered barriers to market entry. Consequently, the results of the OMI serve two purposes:
- The ranking of national market performance on openness to trade from most to least open is an effective way to concentrate attention on the need for improvements and to monitor progress year-on-year.
- The evaluation of a country’s performance across four indicators of openness to trade constitutes a tool for policymakers and authorities to identify deficiencies that deserve greater attention, thereby generating a roadmap of sorts for action and improvement.
Government authorities with better information on how their market performs – on key indicators and relative to other countries – are better able to honour commitments to open trade, implement necessary changes and resist regressive measures to ‘protect’ domestic industries and jobs. We hope governments find the OMI to be a useful guide for concentrating on what needs to be improved as well as gauging their own progress over time.
ICC will continue to press governments, the G20 and the WTO to work collectively to lower barriers to trade and investment and unlock jobs and growth: Through the World Trade Agenda (WTA), ICC will continue to introduce concrete proposals and fresh approaches to boost economic growth and employment based on open trade and investment. Through ICC’s G20 Advisory Group, business leaders will continue to advocate that trade and investment issues remain a top priority for the G20.