International trade and sustainable development in a changing world (en)

4 noviembre 2019
ITC Noticias
Speech delivered by ITC Executive Director Arancha González at the 2019 China International Import Forum, East China University of Science and Technology
Shanghai, China

We are living in a world of rapid transformation. Last year when I spoke from this same podium I focused on China’s incredible development and growth through trade. I highlighted that we needed to ensure that trade worked for all and supported our shared commitment to meet the United Nations 2030 Global Goals. My views on this have not changed. But the sky has darkened.

You have all seen the downward revisions on trade growth, foreign investment and business confidence. Global growth in 2019 is at its slowest pace since the 2008 financial crisis, foreign direct investment fell by 13 per cent last year to the lowest level since the 2008-2009 financial crisis and the WTO has downgraded trade growth for 2019 and 2020.

And trade restrictions are rising. The WTO confirms that from October 2018 to May 2019 over 400 billion dollars’ worth of trade was hit by import-restrictive measures -- the second-highest figure on record. And the assessment is that if the current US-China conflict continues and tariffs remain unabated we could see a reduction in global economic output by close to 1% in 2020.

If trade is to pick up, we must dial down trade tensions and lift trade-restrictive measures. Trade has played a key role in the “structural transformation” process that is at the heart of economic development. This was at the centre of the rise of China and many of its neighbours by shifting people and resources out of subsistence activities and into work that is more productive and which pays more and better. For trade to continue to play this role we must address the current geopolitical rivalry between the US and China that now threatens the rules-based trading system.

Unilateralism has created uncertainty. And uncertainty is slowing down the global economy. If we continue down this path, a recession could follow. And our ability to withstand a new crisis is weakened by a system still struggling to recover from the last one in 2008.

Despite the headwinds facing the global economy, many governments are pushing forward with trade opening -- including China.

Today, China is the world’s second largest economy and the largest trading nation. More than 800 million people have been lifted out of poverty, per capita GDP has risen from $180 to nearly $9,000, and a broad spectrum of industries have been developed.
The rise of China provides great opportunities for companies from around the world to benefit from China’s economic development as it provides Chinese consumers with more choices and better products.

The story of China is that of many developing countries who now play an increasingly important role in world trade including in trade with other developing economies -- more than half of developing country merchandise exports were with other developing countries in 2018.

However, Least Developed Countries still represent less than 1% of world exports. It is highly likely that the goals set for LDC growth in the UN Global Goals will not be met unless we turbo boost our support in building the competitiveness of these economies. Here, China’s policy of investing in sub-Saharan Africa and LDCs in general shows what can be done. This is where the Belt and Road Initiative matters.

The improved infrastructure and connectivity that we expect to see as Belt and Road investments roll out will generate more business opportunities for the private sector. We already see this from the trade figures: trade between China and Belt and Road countries reached $1.3 trillion in 2018, accounting for almost 30% of China’s total trade. We also see imports from Belt and Road countries into China are growing twice as fast as Chinese exports to them. And investments keep growing which is why WTO’s work on investment facilitation matters.

The most important message that China can send to these countries is that China will continue to keep its markets open; that it will continue to reform its economy, including ensuring the competitive neutrality of its state owned sector; and that it will continue to invest in reforming WTO rules.

Business-to-business ties between China and the world continue to play an important role in making trade happen. This is what we are witnessing here in Shanghai. At the first China International Import Expo last year, ITC supported 100 micro, small and medium-sized enterprises from Africa, Latin America and the Caribbean and Asia, to come to the CIIE. We trained them, we partnered with them and we connected them to prospective deals worth $116 million with Chinese importers, for goods ranging from Zambian pork to slippers from Tajikistan, Bangladeshi cosmetics, Nepalese services and Bolivian quinoa. Many of these leads have already matured into deals. Many of the companies managed to establish new business relationships and open a new door for their exports.

This year we are again supporting an additional 100 companies to participate in the CIIE and I hope many of you will expand their business with China.

But I also want to speak to another story: that of climate change. Anxiety over the prospect of increasing economic insecurity is compounded today by the global ecological crisis that we are experiencing. I was just thinking as I came up to the podium that if the world continues on its current trajectory, there is a good chance that a few decades from now I may be speaking to you from under water. As you know Shanghai is one of the biggest cities threatened by rising sea-levels and floods caused by climate change.

Climate scientists say if temperatures warm by 1.5 °C we can expect the oceans to rise up to 77 centimetres by 2100. That’s enough to seriously damage a city like Shanghai and the millions of people living here. And it’s not just Shanghai or the dozens of cities by the sea in China. In fact, 10% of the world’s population live in low-lying coastal cities threatened by rising sea-levels and increasing catastrophic weather events like typhoons. And it is not just climate change. It is about the sustainability of the planet, including biodiversity. Which is why I welcome China hosting the next Conference of the Parties of the UN Convention on Biodiversity next year, a moment which could celebrate the conclusion of the on-going WTO negotiations to curb subsidies to overfishing.

The Chinese authorities are awake to the danger. They’ve responded with ambitious engineering, environmental and social strategies, like the famous “sponge cities” initiative designed to lessen the dangers of floods and storms to coastal cities. There is much that China is doing that must be shared with its partners. But our core objective should be to reduce carbon emissions in a cooperative manner. Governments must step the game. Investors and businesses must step up their game. Consumers must step up their game.

Trade must also be part of the solution. Going forward, productive economic activity must be calibrated to protect our environment rather than harm it while also maintaining its role as a route out of poverty and to prosperity. Climate change demands that we use the economic system to stimulate sustainable development – not undermine it. Climate change demands that we lower trade barriers for green technology – not erect them.
Climate change demands that we discourage economic activity that over-pollutes.

Sustainability demands that we preserve fish stocks by cutting subsidies to overfishing.
ITC works directly with MSMEs to build their competitiveness. Competitiveness goes hand in hand with sustainability and building resilience to climate change. MSMEs can create innovative climate solutions and improve resource efficiency, When appropriate incentives and financing are in place, MSMEs readily adopt green technologies that reduce their greenhouse gas emissions, boost their productivity, and reduce costs.

In fact there are vast opportunities for MSMEs in developing countries to export into green markets. The Environmental Goods and Services sector is expected to be worth US$1.9 trillion by 2020, with buyers looking to import services in the waste, energy and water management sectors. In the growing certified agri-food, fisheries and forestry markets, developing countries enjoy competitive advantages in tropical and counter-seasonal products. In reality what we need is a ‘fair green transition’, with fairness within countries, with fairness across countries and with intergenerational fairness.
This transition will require cooperative international approaches- like the Paris Agreement-; good domestic policies; skills building; financing and innovation.

I believe that China has a role to play in supporting these kinds of initiatives both at home, as well as in other developing countries. Through a greener Belt and Road initiative, a greener China International Import Expo and through collaboration with international organisations such as ITC, China can step up its footprint for a more sustainable trade.

I look forward to ITC being China’s partner as it assumes greater leadership role in this space.
Thank you for your attention.