Reclaiming the global trade narrative
September 2016 | SPOTLIGHT | GLOBAL TRADE
Financier Worldwide Magazine
At a time of significant economic and geopolitical uncertainty, it is important to consider the role of trade and cross-border investment in creating jobs, investment and growth.
In these uncertain times, trade matters more today than ever before; it plays a significant role in driving up living standards – bringing in capital, technology and skills, and even maintaining peace. Unfortunately, however, many of the global headlines focus on the negative side of trade, stating that trade can have a damaging effect on global and national communities. Clearly, we need to refocus attention on the positive aspects of international trade.
An anti-trade sentiment
In recent years we have witnessed a backlash against trade. There has been an emergence of anti-trade rhetoric across the world. During the US Presidential election campaign, we have seen Chinese imports, the Trans-Pacific Partnership (TPP) and NAFTA criticised. Over 130,000 complaints were lodged to the EU in the wake of the European Commission’s consultation on the Transatlantic Trade and Investment Partnership (TTIP). The proliferation of such rhetoric has helped to give rise to populism and protectionism.
According to the Global Trade Alert Initiative, last year saw the biggest rise in protectionism since the onset of the financial crisis – with an estimated 40 percent increase in trade barriers. At the same time, the value of global trade has fallen 13 percent. The impact on trade is serious – world trade is expected to grow by only 2.8 percent in volume this year, the fifth consecutive year of growth below 3 percent.
Trade is an easy target for those seeking to explain uneven prosperity, stagnant wages and job losses, yet much of this is a myth.
It is more likely that jobs are affected as a result of the transformation of business models driven by new technologies, rather than due to trade. However, as some jobs can be impacted by trade, it is even more important that we provide proactive and holistic support to those regions whose economies may be affected and encourage policy solutions designed to mitigate such impact. We must also focus on proactively supporting those businesses that are best placed to grow local economies through their links with international trade.
Another misconception is that trade agreements only serve big business. This is simply untrue. The reality is that most trade benefits small to medium-sized enterprises (SMEs). In fact, out of approximately 200,000 internationally-trading companies in the UK, 90 percent of UK trade with the EU is from SMEs, not large corporates. Clearly, SMEs feel the benefits of removing trade barriers – such as red tape and costs – far more than any other type of company. Removing these barriers is a key objective of the WTO’s Trade Facilitation Agreement, which will come into force once ratified by two-thirds of its members.
Finally, trade is not just exports. It is imports, exports and investment – much of which comes from overseas, either directly, or from taxes paid by foreign companies. In fact, there will be few shops in the UK that are not reliant on importing, in some shape or form, from overseas. What’s more, foreign direct investment (FDI) also creates jobs. In 2015, the UK was the largest recipient of FDI in Europe, creating an estimated 42,000 jobs.
SMEs are the backbone of the global economy, comprising 95 percent of enterprises and representing 60 percent of all private sector jobs. They drive global growth, create jobs and play a fundamental role in global value chains. Indeed, fast-growth SMEs account for a disproportionately large share of job creation. It is therefore key that we identify those businesses that are likely to see the highest levels of growth through overseas expansion, and that we provide them with support across all stages of international trade; through creating, executing and managing trade.
Why trade matters
Business leaders must reclaim the narrative on the benefits of trade; it is time to set out the case for why trade matters. We must ensure that trade plays a significant role in policy decision-making processes, as it is trade and investment that drive the economy and pay for the infrastructure and public services that communities need.
Open markets and increased trade flows are good for global communities and sustainable development. Studies have shown a strong link between trade, economic growth and poverty reduction. Trade openness brings an array of benefits to communities and households across the world, including lower prices, increased productivity, higher living standards, and stronger institutions and infrastructure. International trade also makes businesses more resilient, as they are not solely reliant on the economy of one country.
In a time of fragile global security, promoting peace and stability should be at the top of every government’s agenda. Trade plays a critical role in foreign policy – fostering peaceful relations between nations. Furthermore, trade agreements have played a key role in establishing peaceful international relations following the Second World War, particularly in Europe.
Governments must focus on policies that enhance trade and investment worldwide. The right policy environment will allow businesses to invest, grow and create jobs – all of which enable communities to be prosperous and secure. The International Chamber of Commerce’s (ICC) ‘Trade Matters’ campaign is designed to start reclaiming the narrative and remind everyone that trade is important.
In an era of slow growth and global uncertainty, open trade will help communities break down barriers and generate opportunities. This should be why trade matters to us all.
John Carroll is the Head of the UK Trade and Investment Policy Programme at the International Chamber of Commerce. He can be contacted on +44 (0) 20 7756 4189 or by email: email@example.com.
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