Indeed, in the three years since the G20 has invited business to contribute views to its annual summits, business has consistently argued that trade and investment should be at the forefront of the summits’ deliberations and commitments. We continue to believe that trade and investment must be the cornerstone of strategies to achieve the G20’s aims of promoting sustainable growth and job creation.
So, why do we think such a focus is necessary? Because against the backdrop of stalled negotiations on multilateral trade and investment issues, there not only looms a growing risk of protectionism, but also the spectre of an unraveling of the global economic order. These issues deserve a continuing, strategic approach, political leadership and policy co-ordination that can only come from the G20.
In fact, trade and investment cut across many of the most urgent and important challenges we face today and in the near future. To name just a few: poverty, where trade and investment will be essential to creating jobs and new economic opportunities; climate change, where trade and investment will be essential to knowledge sharing and implementing new technologies towards a green economy; food security, where trade and investment will be essential to ensuring a balance between supply and demand; and re-balancing the global economy, where trade and investment spur growth and employment where most needed.
Moreover, political will from the G20 is essential for resolving contentious issues where progress has stalled. By making trade and investment a permanent part of its agenda, the G20 will send a strong signal about its focus and commitment, while re-injecting political capital towards commitments that have already been made. Last but not least, protectionist pressures tend to grow in an adverse economic environment. Attention from the G20 – as an additional platform for monitoring and commitment – could generate the political will needed to resist such short-term actions.
There are other reasons why the G20 should provide policy leadership on trade. Certainly, the WTO plays a key role in administering, adjudicating and negotiating global trade rules. However, the advantages and disadvantages of the WTO’s broad membership have been sharply evident in recent efforts to make progress on trade and investment issues.
The WTO’s predecessor, the GATT, was founded in 1948 with 23 member economies. By the time of the WTO’s creation in 1995, membership had mushroomed to 123. Today, there are 157 member economies accounting for 97% of world trade. This growth in membership attests to the benefits of the multilateral trade system, and imparts the WTO with legitimacy in the conduct of its tasks. However, the broad, heterogeneous membership also makes it difficult to make decisions quickly and on contentious issues. The stalled Doha Round negotiations present powerful evidence of this institutional challenge.
We believe there is room for the G20 to play a complementary role to the WTO, by providing strategic and political leadership to support the rules-based multilateral trading system, so that it can more effectively deliver jobs, growth, and prosperity. With a strong G20 mandate behind it and the continuing attention of G20 Trade Ministers as a coordinating body, the WTO can discharge its key tasks of rule-making, monitoring, and dispute resolution to facilitate the smooth flow of goods, services and investment around the world.
If the G20 were to make trade and investment a permanent part of its mandate, its agenda could be built around key actions such as:
- Placing trade and investment at the centre of strategies to foster economic growth, development, and job creation;
- Guarding against protectionism while keeping trade open, for instance by upholding the principles of non-discrimination and national treatment;
- Supporting the use of innovative approaches such as plurilateral approaches to achieve meaningful progress on multilateral trade and investment; and
- Creating a more predictable and stable framework for cross-border investment given its complementarity with trade.
These are some of the recommendations that the B20 Task Force on Trade and Investment, which we co-chair, has put forth to the G20 leaders for the 2012 Summit. In an increasingly complex global environment, and with our economies still struggling to recover from the financial crisis and its aftermath, this message makes more sense than ever. The time is ripe for the G20 to put trade back at the center of its strategies for global growth and development.
Victor K. Fung is Chairman of Li & Fung Group, Hong Kong SAR, China. Martin Senn is Chief Executive Officer of Zurich Insurance Group Ltd, Switzerland. Messrs Fung and Senn are Co-Chairs of the B20 Task Force on Trade and Investment.
This article was originally published in the special annual G20-B20 Summit 2012 edition. Published with permission.