A G20 Summit with New Challenges Ahead

By Christoph Leitl, President of EUROCHAMBRES
As with every year,

the 20 most influential; global leaders are poised to meet and discuss pressing international issues that will require coordinated global solutions in order to be effectively addressed. The 2019 G20 Summit in Osaka (Japan) is by no means an exception – in fact, this year calls for more international action than ever before. However, among the series of rising global challenges that our communities are facing, how should the G20 Leaders best cope with the tasks ahead?

While many different elements deserve to be highlighted, the G20 meeting in Osaka, is good a platform to take stock of what has worked in the G20 and what hasn’t, and to refocus action on key priorities that most affect the global community. For EUROCHAMBRES, the following points deserve to be emphasized.

First, remains crucial for G20 leaders to promote growth, in a climate where trade tensions heighten and risk escalating further. Equally a rising climate of protectionist practices around the world and especially in the G20 are further threatening growth prospects despite previous G20 pledges to reduce them. The World Trade Organization found in its November 2018 Annual Report on the G20 that approximately 40 new trade restrictive measures were applied by the G20 in 2018 alone, – a record high since 2012, and 6 times higher than the value recorded in the previous period by the WTO. This situation takes a toll on growth. In that respect, the International Monetary Fund and the Asian Development Bank have issued warnings to the international community in their recent annual reports that world economic growth is projected to drop from 3.6% to 3.3% if the current protectionist climate persists.

We should hear these warnings and take them very seriously if we don’t want the global economy to lose steam. In fact, G20 Leaders should reverse that course by focusing their attention on enhancing the predictability in international trade for business, through a strengthening of the multilateral trading system and by committing to a credible path for ts reform.

Today the international trading system is coming under pronounced scrutiny that risks undoing the existing framework and the underlying trust of businesses in the effectiveness of the system. All G20 economies should have a keen interest to preserve the global trading system. And none should have an interest in having the rule of strongest triumph over the common rules on which all of our businesses currently rely on.

In this regard, there should be a renewed sense of urgency and realization among the G20 that challenges to the global economy are best addressed at the global level. For the World Trade Organization, the primary focus should be on resolving the deadlock at the Appellate Body as soon as possible in order to ensure its continued functioning, without enforcement of global rules there can be no predictability in international trade, and no sustained long-term growth. Yet, the Appellate Body is only one of the issues plaguing the WTO in properly addressing 21 century issues. There are a series of long-standing systemic concerns that need to be addressed such as eliminating state-related competitive distortions, as well as improving the efficiency in the decision-making procedures and governance structures at the WTO. These need to be addressed with just as much urgency to ensure a successful overhaul of the current system.

Some of the other elements that should be highlighted and deserve increased focus in the context of a WTO reform address different angles of the ongoing debate. For instance, the extensive periods of time needed for any proceeding to be completed have raised criticisms. That is why the global community should strive to reduce the timeframes for proceedings and consultation procedures in order to deliver results quicker. If the WTO cannot deliver results in an appropriate and timely manner, the reliability of the institution will come under question, and critical members may choose to try to resort to other instruments to solve their disputes.

Regarding the WTO arbitration rulings, more work needs to be done to restore confidence in its bodies to counter any claims of an alleged bias. To that end, it should be a priority to ensure the impartiality of arbitrators and Appellate Body members and improve compliance with its rulings. This also comes in conjunction with the need for significantly improved transparency and compliance with notification requirements by all WTO members – an element that is especially vital to small and medium sized enterprises engaged in cross border trade

Moreover when the decision-making process at the WTO starts to become an inhibitive obstacle, rather than a legitimizing mechanism to advance issues of core interest to the global business community, it may well signal that we should start considering a qualified majority mechanism for decision making procedures at the WTO, in areas where consensus continuously fails to deliver. Qualified majority voting may be a next major step forward for the institution towards become more efficient and more flexible. In the EU, we have already seen that policy areas where decisions were originally made by consensus have gradually been replaced by qualified majority voting, which was done to ensure effective and timely decision making – so why should it not work for the WTO?

The governance issues are important, as our businesses need a negotiation agenda at the global level that can match today’s business realities. This should include adapting global trade rules to the digital age and facilitating e-commerce, boosting service liberalization and achieve a much greater inclusion of SMEs (Small and Medium sized Enterprises) in global trade. In short, for the WTO remain a driver of progressive trade policies, it needs to be brought to the 21st century with efficient and prompt deliverables.

With regards to the latter, EUROCHAMBRES and the Global Chamber Platform (GCP) – an informal global business network launched by EUROCHAMBRES more than a decade ago – have been urging G20 Leaders to build on the progress made at MC11 in Buenos Aires with regards to a dedicated work plan for MSMEs at the WTO, and table a set of guidelines for an ambitious SME agenda at the global level so as to make the system more inclusive. The well-established “think small first principle” in Europe can help guide the future global work on good regulatory practice, transparency burden reduction, or in better tailoring the trade policy review to the needs of SMEs. It is crucial to remember that SMEs are the backbone of global economy and critical towards achieving more inclusive growth. As they are coincidentally the businesses most likely to lack necessary financial or legal resources, it must thus in the interest of global economic growth and stability to make policy more inclusive, targeted, and simple to use and this is a message G20 Leaders in Osaka should deliver on.

Importantly and in the interest of the global business community, we much hope for the G20 meeting to be a meaningful platform for the de-escalation of trade conflicts among the G20, that are threatening to jeopardize the global economic upswing for all involved.

Progress also needs to be made regarding a more sustainable use of resources by the G20 economies and in effectively addressing climate change. In this sense EUROCHAMBRES would like to underscore the role of Circular Economy for competitive industries in a resource efficient economy and the importance to our societies as a whole. Successfully implementing circular economy in regions across the globe significantly contributes to the achievement of the UN SDGs, in particular number 12 and number 15, which deal with sustainable consumption and production, and the protection of ecosystems respectively. At the current rate of progress, this concept may be a key solution towards making significant progress towards a successful completion of two sustainable development goals. Beyond that, its applicability will reach even further: Circular Economy is an essential component in reaching the Climate objectives of the Paris Agreement. Putting the implementation of such a system on the agenda would enable the G20 to further promote practical and effective political economic solutions that have a direct positive impact on existing and negotiated agreements in place.

The governance issues are important, as our businesses need a negotiation agenda at the global level that can match today’s business realities.

For Europe, studies indicate that the EU’s industrial emissions could be more than halved by 2050 if the entire circular potential was to be exploited. European businesses have already undergone huge developments in order to become more circular. After all, resource efficiency makes perfect economic sense in times of trade constraints and volatile primary raw material prices. In order to further promote the Circular Economy worldwide and to boost innovative business models and technologies, three points should be encouraged actively with partners to discuss best practices for implementation.

For one, the G20 should work resolutely towards quality control standards for secondary raw materials, which will also contribute to enhancing their usage by both businesses and consumers.

Secondly, the G20 should remove key barriers, such as contradictory definitions in chemical, waste and product legislation as well as non-harmonized end-of-waste criteria as fast as possible, given its potential to facilitate cross-border trade in secondary raw materials. Contradictory definitions inhibit the free and effective cooperation between companies and industries of neighbouring countries or regions, which then may divert to other, less resource-efficient alternatives. When these key barriers are removed, and uncertainties about the legal environment have been clarified, this will be conducive to logical cooperation with potential partners nearby.

Finally, the concept of circularity shall be included in training curricula and public awareness raising campaigns. The awareness, knowledge and skills needed by the current and future labor force will thereby be greatly enhanced. Communicating the right skill set to our future workforce is a globally recognized necessity. As such, combining the commitment of transitioning towards a sustainable and circular economy with the pledge to increase employability of future generations could deliver a highly advantageous synergy between economic interests and environmental responsibility.

The G20 is a unique and powerful platform whose outcomes have the potential to significantly affect the global community. In a time of looming crises and rising challenges, we need the G20 to deliver actionable and practicable recommendations for future policies.

The G20 members have the necessary resources to lead the way in their regions towards a more sustainable and inclusive economic model where all can profit. They should equally make headway to solve the deadlock at the WTO and lay the path for a credible reform that with sensible and transposable recommendations that will ensure the functionality of the system. This is essential if we want to uphold the predictability of rules-based trade to our companies.

Without those policies, we risk losing a big opportunity for more concerted global action to simulate growth, and smoother transition towards a more sustainable and inclusive future for our businesses and citizens.