Two-fold strategy required for overseas success
Two is the magic number – because this week I’m calling on UK government to focus on a two-fold strategy of boosting international trade, which will have a knock-on benefit to Wales.
Quite simply, avoiding protectionism while embracing change and making trade more ethical and sustainable needs to be at the top of the government’s agenda. This is needed so that the Welsh Government can, in turn, work at a micro level to ensure success.
We all know why international trade is a sound economical idea. Over the past decades, the growth of the global economy has gone hand in hand with the expansion of international trade. More goods are being sent across the world, more investments are being made around the globe than at any other moment in human history.
Nevertheless, right now, circumstances are not at all positive for international trade. We are going through a economic crisis that is exceptionally broad and deep. And economic crises always tend to provoke protectionist reflexes and inward-looking policies. This may be understandable, but it is certainly ineffective and possibly even dangerous.
Although there is little outright protectionism, politicians are beholden to their national voters and taxpayers. Governments and politicians are right to make improving the national economies the focus of the national stimulus packages.
But it is also part of a politician’s job not to lose sight of the bigger picture. We should avoid taking measures with protectionist effect. Shutting out the rest of the world seldom solves domestic problems – it usually makes them worse.
This is a matter of international solidarity. With markets shrinking everywhere, protecting jobs here through protective trade measures puts extra pressure on jobs in other countries. This is no way to solve unemployment, which is rising across the world.
Our economy today is very diversified. In many different sectors, in the industry and in agriculture, Welsh entrepreneurs and companies are among the world’s very best. One of the secrets of their success lies in the Dutch open-mindedness, flexibility and creativity.
In short, our success depends on our ability to embrace change. Protectionism, on the contrary, inhibits change. Protectionism, by trying to preserve the status quo, in many cases merely postpones the inevitable. What is worse, protectionism kills creativity and stalls innovation.
As a response to the global economic crisis, the G20 had stepped up its role as an important informal gathering of the world’s largest economies, and that so far the emphasis has been placed on tackling the financial aspects of the crisis.
However, this crisis is also an opportunity to address bigger issues, issues that go beyond financial stability.
The current crisis is an opportunity to close the ‘global governance gap’. In the globalised economy, businesses have become global actors, but regulation is still primarily a national affair. Moreover, the benefits of economic growth, trade and open borders come with potential downsides, like environmental degradation and growing differences between rich and poor. Thus the bigger task at hand lies in the broader G20 agenda, to make the global economy more transparent, fairer, and more sustainable.
As a first step in this direction, we should agree on the Charter for Sustainable Economic Activity, as introduced by Angela Merkel. It includes measures against tax evasion, bribery and money laundering. And it also addresses guidelines for corporate social responsibility and transparent corporate governance.
Together with the EU, the UK needs to take a leadership role in creating broad support for these issues. Involvement of emerging economies like China and India is crucial. We have to realise that their participation is largely dependent on the credibility of our commitment, but also our ability to treat them as equal partners in this discussion.
We should therefore improve global governance, by building an international system that enables all countries to harvest the benefits of trade and set us on a sustainable path towards recovery.
We need to continue building the case for open borders and spreading the message of free trade. We must not let protectionist forces prevail. Open markets are our best chance of a sustainable and strong recovery – in rich and in poor countries.