> Roberto Azevêdo’s speeches
Ladies and gentlemen,
Good afternoon. It’s great to be here. Thanks to the IMF for hosting us this afternoon.
Let me start by saying that I feel a lot better making the case for trade today than I did just a year ago. Back then it felt like a lonely position to take!
It seems that ill-informed anti-trade arguments have encouraged more people to speak up for trade.
But let me say one more thing upfront. While I believe that trade is essential for economic growth and development around the world, I also believe that trade is imperfect.
Despite the overall gains it delivers, it can have negative effects in some parts of the economy. And those effects can have a big impact on some people’s lives.
We cannot ignore that, and we all have a responsibility to reflect on it and to respond.
To start with, we have to work harder to ensure that the benefits of trade are more widely shared. And we also have to work harder to make a credible, balanced, powerful argument for trade.
We need to put some rationality back into the discussion. We need a clearer analysis of the challenges before us so that we can tailor our response.
The charge often levelled against trade is that it sends jobs overseas, particularly in manufacturing.
Trade can indeed cause this kind of displacement, and we need to respond to it. But actually trade is a relatively minor cause of job losses.
The evidence shows that well over 80% of job losses in advanced economies are not due to trade, but to increased productivity through technology and innovation.
150,000 Kodak employees lost their jobs to new technologies like Instagram, which was developed by just 15. A 10,000 to one ratio.
There are currently over 3.5 million truck drivers in the US, and many more jobs supporting those drivers — providing coffee, food, motel rooms and so on.
Self-driving technology is set to dramatically transform that picture. So how are we going to adapt?
You could ask the same question about many other lines of work.
In fact, almost 50% of existing jobs in the US are at high risk of automation. And the number is higher in many developing countries.
So we need to be clear-eyed about the problems in the job market. No-one could attack technology — trade is a much easier scapegoat.
But the wrong diagnosis leads to the wrong medicine. And, when trade is considered the main issue, all too often the suggested prescription is protectionism. This medicine would harm the patient, rather than help him.
Protectionism is flawed in so many ways.
By pushing up prices, it hits the poorest the hardest.
People on high incomes would stand to lose up to 28% of their purchasing power if borders were closed to trade. But what would happen to the poorest consumers? They could lose up to 63% of their spending power.
More than that, protectionism is an ineffective and very expensive way of protecting jobs.
When the US applied tariffs on Chinese truck tyres in 2009, it was estimated that, due to higher prices, it cost the economy $900,000 to save each job. Furthermore, there were job losses in the tyre retail sector due to slumping sales.
For these reasons — and many others — protectionism is the wrong medicine.
We also need to understand better the situation in trade growth.
Last week the WTO announced revised trade forecasts. We now expect trade growth in 2016 to be just 1.7%. This would be the lowest rate of expansion since the financial crisis.
Of course the primary causes for this poor trade performance are sluggish economic growth and weak investment activity.
However, even if protectionism is actually a relatively minor factor here, it does pose big downside risk.
So we need policies which are designed to respond to these challenges. Policies that:
- promote a more inclusive trading system;
- boost trade growth; and that
- respond to the labour displacement effects of technological innovation.
New domestic policies will be essential.
Action is needed across government — not just in trade ministries. More efficient labour market policies - like reskilling - will be essential. These policies need also to provide for adjustment support to the unemployed.
We should learn from where things have been done well — such as the adjustment programmes in Singapore, Denmark and South Korea.
All of this will require political leadership. And it must be joined by leadership at the global level as well.
It’s great that Chrystia Freeland is here today, because Canada — and Prime Minister Trudeau — is one of the real champions of this issue today.
Over the last three years the WTO has made a lot of progress — delivering trillion-dollar deals, such as the Trade Facilitation Agreement and the Information Technology Agreement.
There is now a clear sense that we can do more.
As well as discussing the longstanding issues, WTO members are also looking at issues that promote inclusive and sustainable growth. The Environmental Goods Agreement is making good progress.
They are also discussing, among other things:
- how to better support SMEs;
- how to harness the power of digital trade to foster inclusive growth;
- how to lower the costs of trading (including in services); and
- how to reduce subsidies that harm the environment - like those that lead to overfishing.
We are still at the early stages of these discussions, but engagement is high and so is ambition.
So there is a lot to do.
We have to work together to make a well-informed and balanced case for trade.
We must join forces to produce new research and new arguments to help make the case. Today’s seminar marks the start of this shared effort. This is a fantastic start.