Curb Protectionism!

Markus Kerber © Christian Kruppa

The B20 Presidency offers German industry a major opportunity to help determine the main planks of global economic policy, BDI Director-General Markus Kerber argues. Kerber stresses that action is needed, particularly in the sphere of trade. The G20 must resolutely take measures against protectionist trends.

Germany benefits from global trade more than almost any other country. Every fourth job in Germany – and every second job in German industry – depends on exports. We buy from abroad many of the goods that satisfy our daily needs. The high productivity of our industry could not be achieved without the many products that our companies source from other countries. We are at home on global markets.

Two trends in the global economy are particularly disturbing: first, the sluggish development of the global economy. For almost ten years, the global economy has been growing at a disappointingly slow rate. Second, a growing number of countries are questioning the benefits of trade and globalization.

Progress in negotiations on free trade agreements is similarly slow – take TTIP, for example. Treaties that are largely ready to be signed are torpedoed – as happened, most recently, with the free trade agreement between the EU and Canada (CETA). The new government being formed in the United States has announced to withdraw from the Trans-Pacific Partnership (TPP), which is awaiting ratification, and to renegotiate NAFTA. And at the World Trade Organization (WTO), multilateral negotiations on improved market access and the further development of trade rules have been stalled for years.

The G20 is a powerful player in globalization

If we want to break this trend, we need global cooperation. The G20 accounts for some two-thirds of global gross domestic product and more than three-quarters of global exports of goods and services. As one of the central fora for international cooperation on economic issues, it can have a strong impact on trade policy.

There are many examples of its influence. That the G20 member states did not resort to protectionism in the wake of the financial and economic crisis, as was the case during the economic crisis of the 1930s, is thanks, not least, to the G20 – at the 2008 summit, the member states committed themselves to open markets. And the WTO Trade Facilitation Agreement, to which the WTO member states gave green light in 2013, would not have been possible without the efforts of the G20.

Those guilty of protectionism must be named

While the G20 is important, it must still do more. Despite the Standstill Agreement on protectionism, the number of obstructions to trade has constantly risen since the financial and economic crisis. Thus, this issue needs to feature prominently on the agenda of Germany’s G20 Presidency.

The G20 member countries should mandate the WTO to monitor more closely the trade policies of the G20 states and to be more rigorous about naming those guilty of protectionism. Trade barriers should be more precisely classified in order to highlight structural problems. And the WTO should determine what impact new barriers have on trade.

Agenda for the 11th Ministerial Conference of the WTO

The 11th WTO Ministerial Conference (MC11) will take place in Argentina in mid-December 2017. Germany’s G20 Presidency will have the important task of providing an impulse for the agenda of MC11. Not only must the issues of the Doha round – including improved market access for industrial goods and services as well as doing away with agricultural subsidies – be dealt with once and for all; the WTO must also tackle new topics, above all digital trade. To this day, the WTO remains the most important guardian of global trade. Its regulations are indispensable for a fair global trade regime. However, the WTO rules are significantly lagging the latest developments on the ground. That must change if the WTO is to play an important role also in the future.

The role of the B20

The B20 represents with one voice the business community of the G20 countries. Its recommendations to the G20 carry weight. In recent years, they have regularly been incorporated into official statements by the G20 countries. Only with the support of the B20, the G20 can set the agenda to drive prosperity and growth. And it is only in this way that globalization can be fair, rules-based and inclusive.

Markus Kerber is Director-General of the BDI.