Responding to the three I’s

Inclusiveness, Implementation, Investment

In November 2014, the G20 agreed that raising global growth to deliver better living standards and quality jobs was the highest priority.

Over the past 12 months, the G20 has focused on promoting sustainable development and implementing actions agreed in Brisbane designed to increase G20 GDP by at least 2 percent by 2018 – particularly the individual country growth strategies contained in the Brisbane Action Plan. Despite these efforts, the recovery of economic growth globally remains weak; unemployment, particularly among youth, and labor-force participation by women have not materially improved, nor have small and medium-sized enterprises (SMEs) found firmer foundations. Globally, trade and investment are still at pre-crisis levels, while increasing technological disruption and falling productivity are also impacting private-sector activity, growth, and employment.

This year, the G20’s focus is on ensuring inclusive and robust growth through collective action in accordance with the “three I’s” – Implementation, Inclusiveness, and Investment for growth.

In response, the B20 has organized itself around six taskforces: five of them – Trade, Infrastructure and Investment, Financing Growth, Employment, and Anti-Corruption – built on the work of the previous cycles’ taskforces, and given the G20’s priority of implementation, focused on advocacy and refinement of the existing set of B20 recommendations. Given the G20’s inclusiveness priority, a new taskforce on SMEs and Entrepreneurship developed recommen-dations to better integrate SMEs into the global economy. The B20 taskforces identified a number of critical barriers to growth and employment across the “three I’s” where G20 intervention is required to promote and strengthen economic activity and create jobs, and developed actionable and policy-relevant recommendations.

Summary of B20 recommendations to the G20

The B20 puts forward the following set of policy recommendations to support the G20 leaders in their ongoing mission to implement structural reforms and to ensure strong, sustainable, and balanced growth. The B20 encourages the G20 leaders to cooperate effectively for sound macroeconomic policies and implement their respective growth and investment strategies. In particular, the B20 believes that by addressing the following recommendations, the G20 will remove obstacles to increased private-sector activity. The B20 asks the G20 leaders to address these recommendations and to advance them through corresponding policy mandates in their Antalya Summit communiqué:

To complete implementation of agreed policies, G20 members should: 1. Ratify and implement the Trade Facilitation Agreement. 2. Finalize and improve the implementation of the global financial reform agenda. 3. Reiterate the need for regulatory consistency and improve the consultation process in the financial reform agenda. 4. Implement the G20 High-Level Principles on Beneficial Ownership Transparency.

To invest in correcting imbalances, G20 members should: 5. Develop a common set of international investment principles and promote greater transparency and harmony in taxation related to FDI. 6. Develop country-specific infrastructure investment strategies linked to G20 growth aspirations. 7. Improve the infrastructure investment ecosystem to facilitate the development of infrastructure as an asset class. 8. Develop and finance programs aimed at reducing skills mismatches, in particular technical, managerial, and entrepreneurial skills.

To foster inclusiveness, G20 members should: 9. Implement comprehensive structural reforms, making labor markets more dynamic and inclusive, to advance employment opportunities. 10. Increase youth employment and female labor-force participation. 11. Make data on SME creditworthiness more transparent and available so that various finance tools that reduce risk associated with SME lending can be used effectively. 12. Broaden and deepen SMEs’ access to alternative financing by supporting and harmonizing policies, regulations, and standards. 13. Provide support to SMEs to comply with international standards and improve their access to international markets through capacity-building and technical assistance programs. 14. Incorporate a five-year universal broadband connection target into G20 Member Growth Strategies, improve SMEs’ access to the digital economy, and innovation ecosystems by increasing stakeholder collaboration.

To enhance competition, G20 members should: 15. Improve the global trade system for the emerging digital economy. 16. Initiate G20-wide entrepreneur visa programs. 17. Reaffirm their commitment to a standstill on protectionism and roll back existing protectionist measures, especially non-tariff barriers, including localization barriers to trade. 18. Develop and adopt a comprehensive digital environment for customs procedures and cross-border automated clearance systems in all G20 countries within five years through public-private collaboration. 19. Digitalize public procurement systems, develop high-level reporting mechanisms, and incentivize business compliance programs for public procurement processes.

Institutional support and leadership of policy responses is critical to timely and efficient implementation. In responding to these recommendations, G20 members should benefit from and utilize the World SME Forum and the Global Infrastructure Hub, as well as a proposed Global Skills Accelerator, alongside existing organizations, to develop policy and business solutions and facilitate implementation of the associated B20 recommendations.

Fully realizing the potential of digital technologies will be an important component of implementation across all recommendations given their impact on productivity, costs, reach, and transparency. This paper outlines the measures in different policy areas to be implemented by the G20 to increase the adoption of digital technologies both by business and governments.

While supporting implementation of the B20 recommendations, the G20 should acknowledge the importance of improved transparency, principled business practices, and good governance. These are the keys to building trust and achieving inclusive and sustainable development, synergistic with the environmental, social, and governance goals of the post-2015 development agenda.

The B20 recommendations will not have their expected impact on growth and job creation without a sound global macroeconomic environment. In this regard, the B20 reiterates the key role of the G20 in boosting confidence and reducing vulnerabilities through effective cooperation on implementation of macroeconomic policies. The G20’s macroeconomic policy coordination will become more effective with regular and sustained consultations with the B20 during the mutual assessment process, at global standard-setting bodies such as the Financial Stability Board, and in the relevant G20 working groups.

The business community believes that, by implementing the B20 recommendations, the G20 will boost confidence in line with its objectives to strengthen the global recovery and lift potential, enhance resilience, and buttress sustainability. At the same time, the private sector, including SMEs, will be encouraged to invest and trade more, thereby creating more jobs. The global business community commits to working with the G20 in implementation of these recommendations and enhancing the public-private dialogue.

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B20 Trade Taskforce Policy Paper

Executive summary

Trade growth has been sluggish in recent years, slowing to 3.5 percent in 2013 – half of what it was in 2011 and slightly below current global GDP growth. This growth rate is well below the pre-crisis average of 7 percent (1987-2007) when trade grew at twice the rate of GDP. The International Monetary Fund (IMF) and World Bank estimate that trade growth may decline to 2 percent if current conditions persist. Slower expansion of global value chains (GVCs), rising protectionism, and the decline in trade-intensive investment components of GDP are some of the main structural drivers. To spur growth to pre-crisis levels, the G20 should ratify and implement the WTO’s Trade Facilitation Agreement, reaffirm the standstill commitment and roll back existing measures (especially non-tariff barriers to trade, starting with forced localization barriers), and improve the global trade system for the emerging digital economy.

Expansion of the GVCs will potentially be one of the main drivers for the recovery of global trade growth. To enable GVCs, products need to cross borders multiple times; red tape in customs represents significant friction against such flows. The Trade Facilitation Agreement aims to streamline customs procedures between nations and expedite the movement and clearance of goods, removing inefficiencies and “greasing the wheels” of international trade. Implementation of the agreement has been estimated to contribute up to $1 trillion (1 percent) to world GDP, creating 21 million jobs – 18 million of which will be in developing countries. Consequently, this agreement plays a significant role in the G20 target of adding 2 percent to global GDP and it is one of the most targeted and actionable actions that the G20 governments could take.

Although governments reiterated their commitment to the standstill agreement and pledged to roll back protectionist measures, last year non-tariff barriers did not receive the desired attention in the Brisbane communiqué and protectionist measures – particularly forced localization policies, including local content requirements – continued to accumulate during 2015. Therefore, the members of the G20 should reiterate their commitment to the standstill agreement and take specific actions in initiating the rollback of protectionist measures. The B20 identified forced localization barriers to trade as the priority for rollback because of their substantial impact and recent proliferation. The rollback of all protectionist measures introduced between 2008 and 2013 would add $460 billion to global trade, while the rollback of LBTs introduced over the same period would add $93 billion.

Finally, the B20 Trade Taskforce recommends that G20 governments unleash the potential of the digital economy by improving the global trading system. In this regard, the B20 is seeking to attract G20 governments’ attention on some key issues that impede the gains from the emerging digital economy. These include data-flow restrictions, burdensome custom procedures for e-commerce shipments, onerous compliance to legislation for e-traders, and lowering barriers to the trade of information technology goods.

The following actions have been suggested by the taskforce to accomplish the proposed recommendations:

1. Ratify and implement WTO’s Trade Facilitation Agreement:

• Ratify the WTO’s Trade Facilitation Agreement by the 10th WTO Ministerial Conference in Nairobi in December 2015 or commit to the earliest deadline, to fulfill previous commitments and show leadership to other WTO members.

• Establish and strengthen their national trade facilitation committees to systematically support and coordinate implementation of trade facilitation measures. The committees should have balanced representation from the public and private sectors, and should oversee effective TFA implementation and identify solutions to regulatory, administrative, legislative, and cost barriers to cross border trade.

• Commit to high-quality and prioritized high-impact implementation plans in order to ensure substantive impact of the TFA on the real economy. Among immediate steps the G20 can take to accelerate implementation is to adopt the “single window” approach, by expanding pre-arrival processing, and improving the transparency and predictability of the advance-ruling mechanism, and developing digital systems in order to increase electronically executed operation and risk assessment.

• Implement tried and tested UN and World Customs Organization (WCO) tools and guidelines, most notably the WCO Revised Kyoto Convention and UN TIR Convention, to facilitate implementation of TFA.

• Coordinate support to developing and least-developed trade partners and commit as soon as possible to provide the necessary financial resources and capacity building in order to encourage developing countries to ratify the TFA and ensure its ambitious implementation. The G20 should encourage technical assistance be provided by multilateral development banks and other intergovernmental organizations where appropriate.

2. Reaffirm the standstill commitment and roll back existing protectionist measures, especially non-tariff barriers starting with localization barriers to trade (LBTs):

• Reaffirm the standstill commitment and roll back existing protectionist measures especially non-tariff barriers

• Focus on eliminating forced localization barriers to trade through bilateral, plurilateral, and regional agreements to demonstrate a commitment to the rollback of non-tariff barriers. Further elimination of localization barriers to trade should be negotiated through the ongoing development of the Trade in Services Agreement and the Environmental Goods Agreement.

• Initiate negotiations of a plurilateral code on localization barriers to trade through the WTO, since existing WTO agreements are not sufficient to limit these barriers.

3. Improve the global trade system for the emerging digital economy:

• Improve access to IT products by accelerating finalization of the ITA II agreement.

• Discuss measures that go beyond the TFA to facilitate customs procedures with a direct focus on e-commerce transactions.

• Establish one-contact information centers to support SMEs around legislative issues concerning cross-border e-commerce.

• Roll back data flow restrictions and improve cyber-security.