World Leaders in Davos Call for Cooperation to Tackle Global Challenges
The World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, is now well underway, with various international leaders already taking the stage over the past few days to weigh in on the global economy’s challenges and opportunities. Major topics on the agenda have included women’s economic empowerment, climate change, trade and markets, and the future of globalisation and multilateralism.
The International Monetary Fund (IMF) released an update for its World Economic Outlook, its flagship economic projections publication, on Monday 22 January in Davos, one day before the event’s formal launch.
The IMF found that the pace of global growth last year was slightly faster than originally predicted, reaching 3.7 percent. The Fund also updated past estimates for growth this year and next, suggesting that both years would see 3.9 percent growth instead of the 3.7 percent previously projected.
The international agency warned, however, that in the medium term these growth prospects may not hold, and called upon countries to use the current context as an opportunity to take on structural reforms – particularly those that “boost potential output and [make] growth more inclusive.”
The subject of inclusive growth has taken centre stage in speeches given throughout the week, as government leaders and business officials alike have honed in on the meeting’s theme of “creating a shared future in a fractured world.” This annual meeting comes at a time where concerns over economic inequality, gender imbalances, trade tensions, and the climate challenge have come to the forefront, even as global growth prospects are better than they have been in some time.
“No matter how tempting it is to sit back and enjoy the sunshine, policy can and should move to strengthen this recovery,” said Maury Obstfeld, IMF Economic Counsellor and Director of Research, in presenting the results. “Now is the time to build policy buffers, reinforce defences against financial instability, and invest in structural reforms, productive infrastructure, and people. The next recession may be closer than we think.”
Modi calls for greater collaboration, warns of climate challenge
The high-level gathering was kicked off with a speech by Narendra Modi, the Indian Prime Minister, which focused heavily on the current debate on globalisation and the risks posed by a warming planet.
The Indian leader spoke in Tuesday’s opening plenary session, warning that “globalisation is slowly losing its lustre” and questioning whether the current post-war institutions “reflect the aspirations and dreams of mankind and the reality of today.”
He also warned against governments pursuing isolationist approaches to policymaking, calling instead for collaborative approaches to tackle the world’s challenges. He cited help in deploying renewable energy technologies in developing countries as one area where this cooperation could and should increase.
The Indian prime minister also referred to his country’s own history and goals going forward, including on reforming the domestic economy. For example, Modi outlined some of the policy changes that his government aims to make at home, such as slashing bureaucratic measures that can hinder inflows of foreign investments, as part of an effort to reach the goal of US$5 trillion in domestic GDP in seven years’ time.
Trudeau welcomes CPTPP, makes clarion call for gender equality
Canadian Prime Minister Justin Trudeau also spoke on Tuesday, confirming the news that Canada and 10 other Pacific Rim nations had concluded talks to advance the Trans-Pacific Partnership (TPP), now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The Canadian leader, praising the deal as a game-changer for the trading system, devoted much of his subsequent speech to “the importance of progressive values in the context of globalisation,” particularly in terms of inclusiveness.
For example, he highlighted the technological changes that are rapidly changing work opportunities and the growing fears in some quarters that these advances could lead to job cuts. He also criticised politicians, business leaders, and other decision makers for not doing enough to ensure long-term, meaningful policy change that can help “the folks who aren’t in this room.”
“The gap between the rich and poor is staggering,” he warned, suggesting that many politicians have become “disconnected” and many businesses have prioritised their own profits over the needs of their employees. He also suggested that one area of immediate reform could be in fostering gender equality across the board, calling such efforts long overdue.
“In Canada, like all over the world, much of the economic and labour force growth we’ve experienced over the last many decades is because of women entering into – and changing – the workforce. But there is still so much room for improvement, and such enormous benefits to be had,” Trudeau said.
He also cited numerous studies which suggested the billions – or even trillions – of dollars in GDP that countries could gain by addressing the gender gap in the workplace and ensuring women are better represented in leadership positions.
Trudeau also confirmed that this year’s G7, under his country’s presidency, would have a Gender Equality Advisory Council co-led by Melinda Gates and Isabelle Hudon in order to “ensure that gender equality is a priority through everything the G7 does this year.” Gates is the co-founder of the Bill & Melinda Gates Foundation, while Hudon is Canada’s ambassador to France and a former business leader.
Merkel, Macron issue warnings against isolationism
Leaders from some of the EU’s largest economies were on the speakers’ list on Wednesday, with German Chancellor Angela Merkel and French President Emmanuel Macron among those taking the stage to call for international cooperation on economic challenges and other policy areas.
Merkel dedicated her remarks to the importance of multilateralism, cautioning that countries acting alone and the rise in populism have already shown their dangers throughout history.
“Ever since the Roman Empire, ever since the Chinese Wall, we know that shutting ourselves off doesn’t help to protect your borders. You also need good cooperation with your neighbours, you need good agreements, valid agreements, that are respected,” she told the Davos audience.
Along with referring to the continued challenges posed by the migration crisis, she also flagged the opportunities posed by the digital economy, as long as countries make sure that digitalisation remains inclusive and addresses concerns such as privacy and job impacts. Above all, she repeatedly emphasised the value of international cooperation – and avoiding isolationism and trade protectionism – going forward.
“We believe that if we are of the opinion that things are simply not fair, that there is no reciprocity, then we have to seek multilateral answers to this and not pursue a unilateral protectionist course where we isolate ourselves against the other,” she said.
Macron, for his part, also focused on the technological challenges of today’s world, and the importance of education and training, as well as innovation. He noted his country’s own recent electoral experience, in which the populist National Front party had initially appeared to have a fighting chance at the presidency last year.
“Let us not be naïve, globalisation is going through a major crisis and this challenge needs to be collectively fought by states and civil society in order to find and implement global solutions,” he said. Macron also called for a “ten-year plan” for the EU bloc, arguing that strengthening the union would be key in tackling global challenges.
The French leader further highlighted the importance of climate action, pledging to shutter domestic coal-fired power stations by the year 2021 and take other steps to ensure that France is “a model in the fight against climate change.”
A move away from international cooperation in key policy areas like trade and climate change, he also warned, would counteract the benefits that globalisation has managed to deliver so far, and potential opportunities to improve it going forward.
Waiting on Trump
Some of the major speeches of the week are still to come, which could affect the tone of the conference’s final days. Chief among these is the expected address from US President Donald Trump, currently slated for Friday afternoon local time.
The US leader said in Washington earlier this week that at Davos he and his team will “be talking about investing in the United States again, for people to come in and spend their money in the good old USA.”
The comments were made as he was signing off on presidential proclamations to impose safeguard tariffs on solar cells or modules and large washing machines for home use from around the world. The move has drawn criticism from a host of US trading partners, as well as some lawmakers and many players within the country’s domestic solar industry. (For more on the safeguard tariffs, see related story, this edition)
Cabinet officials from the US presidential delegation in Davos have already been laying the groundwork for Trump’s speech, with Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross among the officials on hand discussing their fears and plans for the American economy.
Ross, for his part, indicated that Washington will continue to do what it feels necessary to defend itself on trade, telling reporters that “trade wars are fought every single day.”
“A trade war has been in place for quite a little while, the difference is the US troops are now coming to the rampart,” said the US commerce chief.
Meanwhile, Gary Cohn, the Director of the National Economic Council, told reporters in Washington on Tuesday that Trump “believes we can have truly win-win agreements on trade,” suggesting that the president’s rhetoric on “America first is not America alone.”
“He’s going to talk to world leaders about making sure we all respect each other, we all abide by the laws, we all have free, fair, open, and reciprocal trade. And if we live in a world where there are not artificial barriers, we will all grow and we will all help each other grow,” Cohn added.
Trump’s speech will come shortly after Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo Villareal are due to speak on a Davos panel about the North American Free Trade Agreement (NAFTA) negotiations and other “new avenues for global trade.” The NAFTA modernisation process also includes the United States.
The sixth round of NAFTA talks is ongoing this week in Montreal, Canada, and will conclude on 29 January with a meeting of the parties’ trade ministers.
Other major speakers coming up include UK Prime Minister Theresa May. Also on the docket is an address and press conference from Argentine President Mauricio Macri, who is due to focus his remarks on the G20, given that his country holds this year’s rotating presidency of the coalition.
ICTSD reporting; “Trump Team at Davos Backs Weaker Dollar, Sharpens Trade War Talk,” BLOOMBERG, 24 January 2018; “Davos 2018: Merkel warns against 'poisonous’ populism - live updates,” THE GUARDIAN, 24 January 2018; “Narendra Modi aims to double size of Indian economy by 2025,” FINANCIAL TIMES, 23 January 2018; “France's Macron says globalization is going through a major crisis,” CNBC, 24 January 2018.