OECD candidate: The US is back as ‘guarantor’ of international liberal order

Diamantopoulou: "China should respect the rules-based fair trade norms too". [Photo by Anna Diamantopoulou's office]

With the new US administration, Washington has again taken up its role as a guarantor of multilateral system, former EU Commissioner Anna Diamantopoulou who runs for the OECD top job, told EURACTIV.com in an interview.

“I think it has become very clear that following the Biden-Harris inauguration, the United States will get back to its role as guarantor of the international liberal order and all its fundamental foundations,” she said.

Diamantopoulou is running to be the Organisation for Economic Cooperation and Development’s (OECD) next Secretary- General. She was EU Commissioner for Employment in the Prodi Commission and has served twice as a minister of education, development and shipping.

The Paris-based 37-nation club, which has the stated goal of boosting economic progress and world trade, will need a new secretary general when Angel Gurria’s third five-year term ends in May 2021. It’s the first time that Greece presents a candidature for the OECD. 

INTERVIEW HIGHLIGHTS

  • A sudden reversal to excessive austerity does more harm than good
  • Europe is leading in climate change but not in digitisation
  • ‘Flexicurity’ should prevail in the new era
  • The US will get back to its role as guarantor of the international liberal order
  • China should respect the rules-based fair trade norms

A new economic reality will emerge after the COVID-19 pandemic. Is there a way to implement structural reforms without austerity-driven strict fiscal measures? National income was lost during this period, could structural reforms alone help compensate?

European governments have correctly relaxed their fiscal stance in order to support incomes and jobs in the short run and help sustain the recovery in the medium and long run. In the medium term of course the higher deficits and debts which were created during the pandemic crisis will have to be addressed preferably through credible, fair and sustainable roadmaps. Undoubtedly, economic growth will help in that; once vaccines are in place, there is no reason to believe our economies will not experience a sharp rebound.

Beyond the automatic and benign effect of higher growth rates however, we will need at that point to look at the fiscal stance. Experience has shown that a sudden reversal to excessive austerity does more harm than good; so, we will need to proceed carefully, and fiscal policy needs to be in synchrony with what central banks do. At the same time, governments have to proceed with concrete, ambitious structural reforms and targeted financing projects with high productivity potential and as big as possible returns in GDP terms.

Which structural reforms would you prioritise for Europe in particular? In what fields is the bloc lagging behind?

In the vision statement I presented to the OECD, I put emphasis on inclusivity: this means tackling inequalities among states, within societies and among generations and sexes. I suggest prioritising policies in three sectors: digital transformation, climate change and labour market reforms. The EU is a champion in crafting results-oriented policies as regards climate change. However, it does lag behind in the digital domain.

Unemployment has already increased, and the future figures are not promising. Do you project changes in the labour market? Are we moving toward more flexible labour regimes at least on a temporary basis?

Changes were already ongoing even before the pandemic. Globalisation and digitalisation have brought to surface new labour models, such as those related to platform economy. What is indeed necessary now, is a broad range of changes, starting from upgrading digital skills for all adult workers to welfare system reforms, securing workers’ rights. The success of “flexicurity” responds to the last part of your question. It is a system guaranteeing security and flexibility at the same time; and it should be given prominence in the era ahead.

Do you fear that the looming economic crisis will sacrifice or overshadow efforts to tackle climate change?

Not actually, at least not in the EU. As has been rightly said, climate change is a pandemic in slow motion. So, based on abundant and well-documented evidence, we do know that we should prepare ourselves and get resilient. The Green Deal is proof that the EU is absolutely committed to the Paris Agreement. Additionally, we shall not forget that according to the Recovery and Resilience Facility, each country’s plan must include 37% of expenditure related to climate. Hence, green growth is fostered and so is environmental sustainability.

Especially, public infrastructure with green criteria is an investment worth making as it contributes to reducing unemployment rates. Lastly, I do believe that our goal should be to marry two objectives: creating jobs and bringing emissions down. Given the current state and cost of renewables and green technologies, these two objectives are perfectly complementary. Green growth makes a perfect economic and investment case that needs to be pursued.

Global trade: in recent years the world has experienced cases of protectionism. Do you see this changing after the pandemic especially among western countries with the new US administration? 

That is true. Especially, during the first phase of the pandemic, we all witnessed instances of closing of borders, including by a number of advanced and open countries. Based on the experience acquired during these past ten months, we can say with certainty that international cooperation on research and development as well as resilience of global value chains, particularly for basic goods, is imperative.

International organisations such as the WHO, the OECD and the WTO are well-placed to provide evidence-based knowledge regarding the damage brought about by trade restrictions and protectionism; damage to the economies, to welfare systems, to efficiency levels and productivity. Monitoring and assessing the impact of these damages is necessary so as to better contain them; and hence to protect the multilateral system. As regards the new US administration, I think it has become very clear that following the Biden-Harris inauguration, the United States will get back to its role as guarantor of the international liberal order and all its fundamental foundations.

While the West is still struggling to cope with the COVID-19 impact, China has recorded strong growth in trade. How could the West react to avoid a backlash?

Through the centuries, trade has undoubtedly been the steam engine of economic growth. Today, trade agreements cover, apart from trade itself, a number of crucial policy aspects as well; from protection of intellectual rights, consumer protection and sustainability to international investment and labour flows. That is exactly what we call a rules-based fair trade; respecting it is a prerequisite for level-playing field among states. China should respect the rules-based fair trade norms too.

 

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