Trade and Investment for Global Growth

By M. Isi Eromosele

As the global economy recovers from the worst crisis in many years, trade and investment are central to    regenerating strong, sustainable and balanced growth in the world.

The global economy is open for business, open for trade and open for investment. Just as importantly, the government of every country should be committed to doing everything possible to ensure that the world is open to business, open to trade and open to investment.

This is because the evidence is clear that open trade and investment, underpinned by an effective framework of rules, delivers the best results for both developed and developing countries. It is good economics.

The fastest growing emerging economies are now creating new opportunities for all to benefit further from trade and investment. Despite these benefits, there is an urgent need to restate the case for open markets because the insecurity that is a legacy of the economic crisis fosters a mood of protectionism.

So far, the world’s nations have largely resisted the temptation to put up trade and investment barriers. But nations must remain vigilant and reinforce the global system of rules that keep markets open for all.

It cannot be taken for granted that markets will remain open to world businesses, or that businesses will always be able to take full advantage of the opportunities that exist.

Governments can help. The role of Governments is to provide the conditions for private sector growth and investment, to use all the levers they have to break down barriers faced by industry both at home and abroad and to promote a strong and credible global trading system.

This is the trade and investment challenge. Every government should have a strategy to meet that challenge. They should set out an ambitious framework for building trade and investment based on the results of government consultations conducted with business, academics and NGOs.

Government Ministers and officials across government should aim to create the best possible environment in their respective countries for trade and inward investment and to deliver the practical support businesses need to trade and invest on a global basis.

Business people across the world should endeavor to seize the opportunities presented by trade and international investment to innovate and to build their businesses.

Internationally, governments must work more intensively with regional trade organizations and through bilateral relationships with countries all around the world to shape an international environment that supports open trade and investment.

Governments can collaborate to manage new global challenges such as climate change, food security, natural resource pressures and the impact of new technologies. Even as the world is becoming more multilateral with a growing number of more powerful players, bilateral relations between countries remain as important as ever.

As countries work to rebuild their own economies, they must redouble their efforts to enable developing countries to build their own paths to growth through trade and investment, and to help them develop the capacity to do so, especially in Africa. This is the right thing to do both on moral grounds and for the world’s interest.

The Case for Open Markets

Trade and investment will be crucial to achieving strong, sustainable and balanced growth. Open markets and globalization are key to global growth. But some countries remain marginalized.

The financial and economic crises that started in 2008 affected trade and investment hard. Global trade fell by 23 percent but has bounced back. Inward investment fell during the crisis and has still not recovered.

The human cost of the crisis fell disproportionately on the poorest countries who are also likely to bear the brunt of ongoing protectionism and the limited availability of trade finance.

The world is facing new challenges. Although there has not been a wholesale surge in traditional protectionism, governments have persisted with non-tariff based crisis measures that are protectionist in nature. Trade finance has been significantly affected.

Multilateral trade negotiations have become increasingly complex and harder to bring to a conclusion. Additionally, there are interactions between trade, investment and national security.

Opportunities for Trade and Investment Growth

The potential for global growth in trade and investment over the next decade and beyond is promisimg, if protectionist pressures can be avoided and other challenges addressed. Bilaterally and multilaterally, countries need to work to improve businesses’ access to global opportunities.

The approach should be wholesomely global and need to include markets where the economy is already strong, together with the fast-growing emerging markets that play an increasingly large role in global trade and investment.

But most new trade growth will come from the new emerging economies. The eight largest emerging markets now have a combined GDP roughly equal to that of the US. Europe will be a relatively slow growth region unless there is major further progress in reforming its financial system and deepening the Single Market.

UK-US trade relations are exceptionally close and deep. The UK is the largest foreign investor in the United States and the US is the UK’s top export destination after the rest of the EU.

But UK businesses face difficulties from the complexity of the US regulatory environment and from litigation risks. Big economic gains are possible from simplifying this and the EU-US Transatlantic Economic Council can help get things moving in that direction.

There is evidence that Commonwealth countries trade more with each other than would be expected from other factors, because of the legal, political, cultural and linguistic bonds which link them. There is much scope to develop this further.

Sub-Saharan Africa has strong growth prospects, but remains poorly integrated into the global economy. The region needs broader and deeper market integration, including infrastructure for power, transport and communications that will at the same time strengthen their ties with global markets.

Despite its consistent growth record, South Asia still has a high concentration of poverty. Intra-regional trade is low compared to their potential. Improved trade facilitation and logistics could cut the cost of trading by up to 70 percent within five years, helping create jobs, boost growth and improve the lives of poor people.

In the Caribbean, significant pockets of poverty remain and the region is vulnerable to shocks. The region needs a more resilient economic base. Support needs to be provided that would help to implement trade agreements, improve the environment for business and lower the costs and time needed to import and export.

Trade and investment are crucial to achieving stronger and more sustainable global growth. Countries need to do all they can to reduce barriers and improve access to global markets.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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