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| Trade and guarding against protectionism are key to building a sustainable recovery, says outgoing ICC Chairman Dr Victor Fung |
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More than 400 business leaders from around the world took part in this year’s ICC World Business Summit. Organised by the International Chamber of Commerce (ICC) and the Hong Kong Trade Development Council, the 30 June event at the Hong Kong Convention and Exhibition Centre attracted some of the leading lights in international business and economics. Speakers included Martin Wolf, Associate Editor and Chief Economics Commentator of the Financial Times; David Sokol, Chairman of MidAmerican Energy Holdings Company, a subsidiary of Warren Buffet’s investment conglomerate Berkshire Hathaway; as well as Chen Yuan, Chairman of the China Development Bank.
“Following the financial crisis and economic downturn of 2008-2009, ICC felt it was important to talk about how the future global economy has been shaped by these events and what we can do to help ensure its stability and growth,” said outgoing ICC Chairman Dr Victor Fung. “Certainly, the spectre of global unemployment, the delicate balancing act between trade, development and sustainability, and the dangers of trade protectionism are key areas that must be dealt with as we develop growth strategies.”
The summit’s theme “New Global Economic Realities: Asia Pacific Perspectives,” – and the choice of Hong Kong as the venue for the latest summit – highlighted Asia’s increasingly prominent role in the global agenda. Indeed, the region that has seen the strongest recovery is now driving global growth amid continuing uncertainty in mature economies.
Where Free Trade Thrives
It is also in this region where “free trade agreements are most alive,” even as free trade appears to be under threat elsewhere in the world. Summit speakers agreed that continuing fallout from the global economic crisis is threatening to derail the fragile recovery and is giving rise to renewed protectionism.
Experts pointed out that the world is seeing more cases of “micro protectionism” spreading “like poison ivy” in the past year since the financial crisis. Speakers said that given the current trend, free trade proponents would consider it a victory if the world can get through the decade without any rollback in the current level of free trade.
An ICC-commissioned study released by the Washington-based Peterson Institute for International Economics found that Russia, the United States, India, Argentina, Brazil and the Chinese mainland, in that order, were the countries that imposed or are considering the greatest number of protectionist measures since 2008.
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Speakers discuss global
trade prospects at a panel discussion during the ICC World Business Summit
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The study found that in fact, all G20 countries had introduced 172 protectionist measures in the past two years, with hundreds more planned. “If only half the protectionist measures ‘in the pipeline’ in 2009 were implemented in 2010 and 2011, the world economy could face a serious protectionist problem,” warned Gary Hufbauer, Senior Fellow at the Institute.
The Institute gave a set of recommendations, including appointing a group of global trade experts or “trade wisemen” who would monitor and name countries that push new protectionist measures. Another key recommendation involved setting up regular G20 trade ministerial meetings, to ensure trade issues remain top of leaders’ agendas. It also called for the successful conclusion of the Doha Round and the promotion of multilateral trade.
The Job Equation
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Summit speakers Leonardo Ferragamo, CEO, Palazzo Feroni Finanziaria (left) and Rajat K
Gupta, incoming ICC Chairman, exchange ideas at the ICC World Business Summit
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Summit speakers and delegates agreed that besides trade, creating employment and sustainable development were key drivers of economic recovery and future growth. With a full-fledged recovery still a long way off, especially in developed economies, unemployment is the most worrisome issue going forward. Prolonged joblessness, experts said, will increase political pressure to seek protectionist measures. A falling euro, which will make European exports cheaper will only add pressure in places such as the United States.
As one of the few economies that experienced growth amid the economic chaos, experts said China has a crucial role in helping sustain the fragile recovery by maintaining its economic growth and continuing to boost domestic demand. They added that it must also step up its international leadership role.
Climate Change
The role of governments commitment towards sustainable development was another focus area at the summit. “Sustainability is something that is already impacting daily business decision-making, and we can expect this trend to grow in the future,” Dr Fung said. “One aspect where there seemed to be consensus at the summit is that we can expect consumers to continue placing more and more value on green technology, which of course means that companies will have to act accordingly.”
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Joseph Bower, Baker Foundation Professor of Business Administration, Harvard Business School, says “entrepreneurial solutions,” will be key for a sustainable economic recovery
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Speakers said that sustainability presents enormous opportunities to go to the next level of development, but that business needs direction from governments on the way forward by coming up with a framework, timelines and standards.
Business’ Role
The private sector is capable of addressing such issues, as well as global unemployment and migration by introducing “entrepreneurial solutions” that provide opportunities for unskilled labour, according to Joseph Bower, Baker Foundation Professor of Business Administration at Harvard University. “We must avoid failed states,” adding that the right business strategies can “bring the unskilled and unserved into the market system.”
Summit leaders concluded that business leadership is key in this time of uncertainty. “More than ever, business needs to accept its role and be part of the solution. The challenge now is structuring the world economic system to secure another period of strong stable growth.”
