30 may 2017
Globalisation has failed to create a level playing field in trade, investment and corporate behaviour, being one of the factors contributing to a backlash against openness in many countries and a decline in confidence in government institutions. Only by stepping up international co-operation and improving and ensuring global markets, companies and institutions play according to the same rule book can productivity growth be restored, excess capacity avoided and public confidence improved, according to a new OECD report.
The OECD Business and Finance Outlook 2017 says that strengthening global governance and co-operation on corporate and financial issues involves establishing “rules of the game” which are both fair and perceived by all to be fair.
The report argues that countries participating in globalised markets need to commit to a common set of transparent principles that are consistent with mutually beneficial competition, trade and international investment. This would reduce the problems left to be dealt with by domestic policy. It would also help improve resource allocation through promoting productivity growth and reducing the extraction of rents that harm consumers.
“The backlash against globalisation has grown in many countries and too little has been done to help more people cope with the inter-related impact of trade, foreign direct investment and technological change,” said OECD Secretary-General Angel Gurría. “In addition to developing more effective domestic policies, it has become essential for all nations to work together to ensure a level playing field in trade, investment and corporate behaviour to better address the downsides of globalisation while preserving the benefits of economic openness. This will ensure that the growth it fosters is inclusive and sustainable, and that globalisation works for all.”
Greater fairness in cross-border interactions reinforces policies to help workers affected by globalisation and technological change. These should include: increased infrastructure investment, structural reforms, safety nets, worker retraining and education, and kick-start adjustment support for trade-exposed workers.
The report also addresses other areas where action is needed to level the playing field. These include:
International organisations like the OECD have an important role to play in developing these rules, says the report. More needs to be done to broaden adherence to standards such as the Anti-Bribery Convention, the G20/OECD Principles of Corporate Governance and the OECD Guidelines of Multinational Enterprises. Governments also need to step up their implementation and enforcement to level the globalised playing field.
Illustration Photo: Dignity factory workers producing shirts for overseas clients, in Accra, Ghana (credits: World Bank Photo Collection / Flickr Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0))