Davos: Global Economy Prospects, Risks in Focus at High-Level Meet
The World Economic Forum’s (WEF) Annual Meeting in the Swiss town of Davos drew to a close on Saturday, with the state of the global economy one of the main topics dominating the agenda for the four-day gathering.
Coming at a time of global growth forecasts that are once again gloomy, the 20-23 January meet brought together thousands of people representing international organisations, country governments, civil society groups, academia, the private sector, and media.
The four-day meet had as its official theme the “Fourth Industrial Revolution,” reviewing the question of how technological innovation could boost efficiency and productivity, and what risks there may be for potentially increased inequality and job losses.
However, the state of the global economy – particularly how to address new and ongoing risks – permeated the discussions, including the potential implications of a “Brexit,” in other words, the possibility of an exit of the United Kingdom from the EU. Other potential risks to the global economy were also raised, including lower oil and commodity prices, the continued refugee crisis facing Europe, and the implications of varied monetary policies across key advanced economies.
Just prior to the Davos meet, the International Monetary Fund (IMF) had delivered sobering news in the form of its latest economic projections. The Washington-based institution lowered global growth forecasts for 2016 and 2017 to 3.4 and 3.6 percent respectively, citing among other factors the slowdown being seen in China. (See Bridges Weekly, 21 January 2016)
Regarding Beijing’s prospects, Chinese Vice-President Li Yuanchao told fellow attendees that China is now in a “new normal” with regards to growth, noting that last year China was still able to reach an increase in GDP above US$500 billion. Furthermore, he added, the Asian economic giant is set to continue with its economic reforms and fostering innovation.
The upcoming G-20 summit – this year under his country’s presidency – will highlight “innovating growth models, improving global economic and financial governance, boosting international trade and investment, and promoting inclusive and interconnected development,” Li said.
Trade ministers mull next WTO steps
Along with the plethora of sessions that always fill the agenda for the high-level meet, Davos is also notable for the various bilateral and group meetings among key officials and stakeholders that take place on the sidelines, including on trade.
Among these is the annual gathering of trade ministers hosted by Switzerland on the Davos sidelines, with this year’s meet bringing together over 20 trade ministers or vice ministers. The discussions come just weeks after the WTO’s Tenth Ministerial Conference, which was held in Nairobi, Kenya, in December.
In Nairobi, ministers reached a WTO deal to eliminate agricultural export subsidies, signing off also on a set of other farm trade and development-focused deliverables. However, they also explicitly said that members do not agree on whether to reaffirm the Doha Round mandate and subsequent ministerial declarations and decisions – essentially agreeing to disagree on the matter.
While directing members to “find ways to advance negotiations” and indicating agreement to “prioritise work where results have not yet been achieved,” ministers in Nairobi also confirmed that they disagree over whether “to identify and discuss other issues for negotiation.” Furthermore, they said, a decision to launch talks multilaterally on such issues would require agreement from all WTO members. (See Bridges Daily Update #5, 19 December 2015)
What this will mean in practice has been the source of significant debate in trade and academic circles in the weeks since Nairobi, with many eyeing the annual Davos mini-ministerial for any initial signs of clarity on next steps, particularly ahead of the first WTO General Council of the year, scheduled for 24-25 February.
The Swiss-hosted meeting in Davos on Saturday included ministers or vice-ministers from Argentina, Australia, Brazil, Canada, China, Costa Rica, the EU, Hong Kong, Indonesia, Japan, Kenya, Korea, Lesotho for the African Group, Mexico, Norway, Pakistan, Russia, South Africa, Switzerland, Thailand, Turkey, and the US.
The discussions on Saturday reportedly highlighted a series of points, including the importance of decisions reached at the WTO’s last two ministerial conferences, held in Bali, Indonesia, and Nairobi, Kenya, respectively.
Ministers also discussed the “importance of maintaining the WTO’s negotiating function operational and of delivering further negotiating outcomes in the coming years, with a focus on unfinished business but also allowing for discussions on other issues that members would like to raise,” according to the personal concluding remarks by Switzerland’s State Secretary Marie-Gabrielle Ineichen-Fleisch, the meeting’s chair.
In this context, she noted, ministers discussed the need for “open-minded and pragmatic approaches as well as flexibility in the work ahead,” raising also the need for inclusiveness, strong political engagement, and the centrality of development.
Also present at the Saturday meeting were WTO Director-General Roberto Azevêdo and Mexico Ambassador Fernando De Mateo, current chair of the global trade body’s General Council.
“It is very welcome that members are already talking about how we can keep delivering in the future and I think that some important commonalities emerged from today's conversation,” said Azevêdo at the meeting’s close.
The WTO chief noted both an openness among members for further discussions on remaining Doha issues “and other issues that members want to discuss,” adding that such openness does not prejudice future outcomes. “We will need to see openness and flexibility on both substance and process if we are to make further progress.”
Sources familiar with the Davos discussions note that the US and EU were among those pushing for discussions on new issues, with some sources remarking on China’s suggestions of a possible time-bound, two-track “work programme” – one on remaining issues from the Doha agenda, and the other on newer issues such as investment and e-commerce.
However, some sources noted that while the Davos discussions were productive – with ministers also acknowledging the need for “reflection” on both new approaches to old topics and how to look at new issues – whether this constructive tone will translate into action in the near- to medium-term will likely depend on what happens next in Geneva, along with how India responds, given that it was not at the Davos mini-ministerial.
Prior to Saturday’s meeting, EU Trade Commissioner Cecilia Malmström called upon fellow ministers to use the Davos meet “to reflect on how to revitalise negotiations in the WTO.”
“Certainly, this will take time,” she said in an op-ed published by Politico, warning also against placing too much attention on the “backward looking question that has little practical importance in the real world – the status of the 14-year negotiating process known as the Doha Development Agenda.”
Instead, the EU trade chief called both for continuing work on “outstanding Doha issues,” as well as beginning discussions and later negotiations on non-Doha issues that “are critical for the world economy today.”
TISA ministers eye 2016 deal
During Davos, a group of ministers from the countries negotiating a Trade in Services Agreement (TISA) also met to review the state-of-play in those discussions.
According to a statement released by the US Trade Representative’s office afterward, which was confirmed by sources familiar with the meeting, ministers reaffirmed their goal of clinching a deal this year.
“The negotiations to conclude a Trade in Services Agreement have accelerated over the past several months and I'm pleased we had an opportunity to support further progress today,” said USTR Michael Froman. “All participants are motivated because they recognise the potential of a high-quality services agreement to support jobs.”
Trade sources affirmed that the talks were indeed productive and quite constructive, potentially auguring well for the 2016 goal.
The TISA negotiations involve 23 participants: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the 28-member European Union, Hong Kong, Iceland, Israel, Japan, Korea, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, Switzerland, Turkey, and the US.
ICTSD reporting; “Doha may be dead. Long live free trade,” POLITICO, 21 January 2016.