Nicholas Rosellini: 8th Sino-European Entrepreneurs SummitJun 14, 2017
Panel discussion, 8th Sino-European Entrepreneurs Summit
Ladies and Gentleman,
On behalf of the United Nations Development Programme in China, it is my great pleasure to participate in the 8th Sino-European Entrepreneurs Summit. First and foremost, please allow me to express my gratitude to the Organizing Committee for the warm invitation and efforts in organizing such an important event.
Today we are here to discuss and explore new global economic growth engines. Current thinking on this topic has proliferated given the urgency to address the ailment of global economic growth.
The International Monetary Fund (IMF) expected only 3.1% global growth in 2016. The World Trade Organization (WTO) slashed its forecast for growth in trade of goods from 2.8% in 2016 to just 1.7%, implicitly predicting that trade would grow more slowly than GDP for the first time in 15 years.
Adding to this gloomy outlook is the growing questions: is the world facing another globalization retreat? A series of events that have taken place in varied parts of the world appear to be weakening the consensus that favors open economies. This means, borders will be closed to restrict global flows of goods, people and capital. The consequences could be profound on the world’s economic order. Opportunities to ‘mix and match’ productive factors could change; that is choosing the best combination of where to produce and where to perform services related to production.
The disapproval of a greater economic integration is partly rooted in the fact that countries have become better off, but not every citizen has benefited. Developed economies such as the US have seen great income disparity. By 2015, top 10% of American earners were paid 47% of total income. Wealth, too, is concentrated in fewer hands: the richest 10% own nearly 80% of private wealth in the US. Inequality has also soared in China. While China’s GDP has converged towards America’s since it opened the door and participated in the global value chain, the share of pre-tax income going to the poorest half of Chinese population has reduced dramatically to 15%.
Adding to the discontent is the loss of jobs due to free trade. The US, for instance, lost 6 million manufacturing jobs in net term between 1999 and 2011.
The adverse impact has been felt disproportionally across sectors and segments of the society, with less-skilled labor the biggest victim to this ever-interconnected world.
The strains inflicted by openness has triggered much criticism. Yet, rolling it back will not necessarily be a wise option. The cost of protectionism is projected high. In an average country, without free trade, people on high incomes would lose 28% of their purchasing power, while the number could go up to 63% for the poorest 10% of consumers given the larger share of their expenditure on imported goods. In such a case, the ones who once lost out could been in an even worse situation.
Neither would it help much to boost the world economy if borders were shut to free trade; the GDP growth and trade tends to feed off one another. The concerns about global economic integration are valid: ‘trickle down’ economics does not work. Greater economic integration has benefited certain groups but penalized the others.
Yet, pure focus on the criticism could misguide the attention away from the right solutions. The more pertinent question to address is, how to steer economic integration to be fairer and more effective. That is, how to enable a human-development-centered economic growth model with steadfast commitment to international cooperation.
The emphasis on inclusiveness is much needed in the era of development guided by the Sustainable Development Goals (SDGs).
Income inequality matters for growth and its sustainability through a web of inter-related social-economic and political channels. According to the Nobel laureate Joseph Stiglitz, an increase in the income share of the bottom 20% is associated with higher GDP growth, while the reverse happens if the rich is further on the rise.
To fix the world’s ill in the new development era requires a full-fledged approach that is devised based on a re-think of global efforts. This not only pertains to the government, but is also relevant to the private sector, especially multi-national enterprises that organize fourth-fifths of the supply chains where all trade takes place. They could help implement the SDGs by bringing in targeted investments to generate positive development outcomes. Doing so is not only to fulfill their corporate social responsibility. More importantly, investing in the SDGs makes sense for business.
A recent Business & Sustainable Development Commission report shows that achieving the SDGs can open up $12 trillion in market opportunities in key economic sectors, and will create 380 million new jobs by 2030.
At the global level, changes in policy-making need to be rolled out. Trade assistance can be provided to those whose income goes down when the economy opens further up. Newly-agreed regional or global trade pacts can be tagged on deals that strengthen skills training, which helps laid-off workers re-locate and get them prepared for the age of e-commerce and the wave of innovation they confront with the advent of artificial intelligence and big data.
Domestic policies, too, need to weigh in to take better care of their citizens.
As proposed by UNDP’s 2016 Human Development Report, a lot can be done to pursue inclusive growth, ranging from formulating an employment-led growth strategy, enhancing financial inclusion, to investing in human development priorities such as basic infrastructure, healthcare and education.
To bridge and integrate efforts at all relevant levels to achieve inclusive economic prosperity, the Belt and Road Initiative (BRI) led by China provides timely and unprecedented opportunities. The initiative places a great emphasis on connectivity in trade and investment as potential accelerators of regional integration. As just mentioned, any new trade pacts facilitated by the BRI could contribute to ameliorating the well-being of impacted citizens across countries.
We believe that, the BRI could achieve much more, especially with the participation of the private sector as an active implementer of the SDGs. A two-pronged agenda could be useful. One is on social impact investing that is targeted to ensure adequate social protection and inclusion alongside economic rewards through investments that they could bring about. The other is on sustainable business practices that could dedicate directly to decent job creation.
UNDP has been supportive of the BRI and expressed commitment early on as the first international organization to sign an MoU with the Government of China. During the Belt and Road Forum (BRF) this May, we signed a follow-up action plan with the National Development and Reform Commission (NDRC) to specify next steps to implement the BRI.
We believe that through the BRI, China has put forward a far-reaching and innovative development cooperation framework, under which inclusive economic growth could be widely realized.
Once again, please allow me to thank the organizers for such a wonderful event and I look forward to a stimulating discussion with all of you.
Thank you very much!