That’s going to take a change in mindset — on the part of both public sector officials and private sector leaders. Right now, the G20 has largely played the role of a fire code inspector, on the lookout for the next financial structure to go up in flames. That’s necessary, entirely understandable — but not sufficient. Our new focus must be not the next country that’s going under, but how our countries are going to grow. But in the midst of crisis, that’s a little like asking a fireman to take up a second career as an architect. The skills needed to put out a fire aren’t the same as the ones needed to reconstruct the building. As it’s business’s business to know how to grow — we’ve got to step up.
So how will we know if the G20, with the help of the leading business organizations and their members — the B20 — is on the right path? Here are three leading economic policy indicators to watch for:
1. A cease-fire in the “Main Street vs. Wall Street” rhetorical wars. The phrasing varies from nation to nation, but across the G20, all too many officials have fallen into this Manichean trap, as if the health of a nation’s financial infrastructure could be severed from the economic fortunes of its people. A scapegoating, blame-laying approach is punitive for everyone and productive for no one. The financial services sector pumps blood into the economy, and as any physician would tell you: if you constrict the patient’s blood vessels, the body won’t recover.
We’ve got to see that a growing, jobs-generating economy is a two-way street — where policies enabling finance, investment and capital allocation are essential to the individual’s kitchen-table economic experience of ample jobs, affordable housing, and opportunity for advancement.
2. Developing new ways to finance growth in a high-debt environment. Creative policymakers may find ways to bend the debt curve downward, but the impact will be at the margins: high debt-levels in the mature economies of the G20 won’t be going away anytime soon. We need to formulate new financial mechanisms to spark innovation-based growth in mature economies that have accumulated substantial debt.
That’s going to require more creativity in our approach to finance, developing new markets and new instruments. What does that mean? Take a demographic trend that we don’t currently connect to macro-economic policies: people in developed nations are living longer, and saving longer — can we mobilize trillions of dollars in private savings in some better way to fuel growth?
3. Moving beyond the classical trade agenda. Half a century of progress toward the elimination of tariffs and quotas around the globe has helped generate prosperity in the United States and abroad. However, an array of regulatory practices—some inadvertent, and some intentionally designed as discriminatory industrial policies that favor national champions—are undermining the promise of liberalized trade.
Further, competition policy and enforcement have never been effectively married with trade disciplines. Given the recent proliferation in the number of competition authorities in the world and the rise of state-led capitalism, the need to effectively address the intersection between competition and trade has never been greater. This is why the Chamber’s Center for Global Regulatory Cooperation is working to align trade, regulatory, and competition policy in support of open and competitive markets.
None of these new developments will be possible unless the private sector steps up, and joins the macro-policy debate on how we put the mature economies on a sustained and sustainable growth path. In the session now about to start at Los Cabos, the B20 is critical to the G20’s goal of sustained and shared growth.
On the Issues
How is your department working towards leveling the playing field for trade?
Myron Brilliant: With 95 percent of the world’s consumers living outside our borders, the United States needs to do everything possible to ensure our exporters can reach them. Unfortunately, while the U.S. market is largely open, many other countries — particularly booming emerging markets — maintain tariffs on American goods that soar into the double digits. An array of “behind the border” barriers also shut out U.S. goods and services. The Chamber has championed initiatives such as trade agreements and investment treaties that open foreign markets and ensure fair play for American workers, farmers, and companies. The global economy is a reality, and American companies of all sizes can find opportunities for growth through trade. This is why we have supported the Trans-Pacific Partnership, Transatlantic Economic and Trade Pact, and supported other mechanisms to deepen our commercial ties to the major economies around the world.
What are the key issues that medium and large size companies should be aware of when it comes to investment abroad?
MB: Investing abroad is often the only way to tap some markets where exporting isn’t feasible. But it’s critical to go in with your eyes wide open. Ask yourself: What is the tax and regulatory environment like? It’s one thing to make my inbound investment, but will I be able to get my earnings out of the country? Is there a risk of dramatic swings in the exchange rate? Will my intellectual property be safe, and how will I defend it? Will I be able to get the labor and inputs I’ll need? The rewards of investing abroad can be considerable, but only with proper due diligence and management of the risks.
Regulation and compliance are the top concerns for businesses across a spectrum of sectors. What is your position on this issue?
MB: Yes, tariffs have been slashed around the globe over the past decades, and while that’s welcome progress, “behind the border” barriers and access to skilled labor are now cited as the top impediments to global commerce. This is in part why the Chamber launched its Center for Global Regulatory Cooperation, which seeks to align trade, regulatory, and competition policy in support of open and competitive markets. The goal is to ensure regulatory or antitrust measures aren’t used to unfairly block international commerce. It is also why we want to encourage foreigners to work and study in the U.S. and why we want Americans to take advantage of studying abroad.
What advice do you have for small businesses looking to export?
MB: Over 97 percent of the 275,000 U.S. companies that export are small and mid-sized companies, but when you look at the total number of small businesses in the U.S, that’s just one of every 100 of these firms. If more small companies were able to seize export opportunities, the gains in jobs and revenues could be immense. Many U.S. companies are not aware of the services that are available to help them break into new markets, including the U.S. Department of Commerce Export Assistance Centers (USEACs), the Export-Import Bank and the Small Business Administration for small business loans, the World Trade Centers, the National District Export Council, state economic development offices and commerce departments, and many more. And of course the Chamber is ready to work with member companies to expand export opportunities.
What laws exist to protect intellectual property worldwide? Are they enough?
MB: In addition to national laws, several key international treaties — like the WTO TRIPS Agreement — require governments to implement a minimum standard of protection. Bilateral trade agreements and specialized UN organizations, such as the World Intellectual Property Organization (WIPO), help to update and improve upon those minimum standards. But real IP protection is a matter of both sound laws and strong enforcement: these laws are helping to ensure that intellectual property is protected, but the effectiveness of legal statutes depends greatly on the willingness of countries to enforce them. We are eager to see laws and enforcement efforts continue to adapt to the ever changing challenges which intellectual property owners face. For example, 20 years ago, we could not have imagined the impact that online commerce would have on trade. Today, it is a major vehicle for commerce. We need appropriate bilateral enforcement to protect intellectual property and jobs.
What is the Trans-Pacific Partnership (TPP) and why is the United States so heavily involved in the negotiations?
MB: Asia boasts the fastest growing economies in the world, and if U.S. companies can get a piece of the action, it’ll mean growth and jobs here at home. Our best shot at improving U.S. access to those markets is through the nine-nation TPP trade agreement, which aims to set a high standard for fair and accountable trade. The TPP will also help reassert America’s leadership in the most dynamic region of the world. The current participants — Australia, Brunei, Chile, New Zealand, Peru, Singapore, the United States, and Vietnam — are today deliberating whether Canada, Japan, and Mexico should be invited to join as well. The negotiators are also trying to “build out” TPP as a platform, by creating an agreement that other countries can join further down the road. We hope to see substantial progress this year in the negotiations.
The EU is still one of America’s largest international economic partners. Do you believe in a free trade type of an agreement between the two economic blocs? What are the benefits to eliminating transatlantic tariffs?
MB: The United States and the EU enjoy the world’s largest economic relationship and together generate half of global GDP. Even though tariffs on transatlantic trade are generally low, according to one study, transatlantic commerce is so large that eliminating them would boost our economies by $180 billion over five years. That’s why the Chamber is calling for a Transatlantic Economic and Trade Pact addressing trade in goods and services as well as investment, procurement, and regulatory issues. By addressing non-tariff barriers as well, we hope to see even greater gains. The U.S. and Europe remain a huge engine for the global economy.
What is the relationship between the U.S. Chamber and the WTO?
The Chamber strongly supports the global rules-based trading system over which the WTO presides. Since the 1940s, negotiations under the WTO and its predecessor, the General Agreement on Tariffs and Trade, cut trade barriers dramatically and allowed world trade to rise from $80 billion in 1947 to $18.5 trillion in 2010, allowing incomes to rise in country after country. Even with the WTO Doha round of negotiations at an “impasse”, it is important to recognize that the WTO provides the rules for the global trading system and we are better off with them than without them.
Today, we’d like to see the WTO move forward with new proposals to add to the great gains in freely-traded goods liberalized trade in services, update the landmark Information Technology Agreement, and clinch an agreement on trade facilitation. As just one sign of our seriousness about this relationship, Chamber President Tom Donohue is the sole American invited to serve on a high-level experts group advising the WTO on the future of the world trade agenda.
Myron Brilliantis the Senior Vice President for International Affairs at the U.S. Chamber of Commerce.
This article was originally published in the special annual G20-B20 Summit 2012 edition. Published with permission.