Bridges Weekly Trade News Digest • Volume 13 • Number 24 • 1st July 2009

Ministers Call For Green Growth at OECD Summit

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“Green growth” is the solution to the global financial crisis, declared ministers from 40 countries at the Organisation for Economic Co-operation and Development’s (OECD) annual ministerial meeting last week. The participants also pledged to resist protectionism, promote business transparency, and collaborate with international actors in order to get the global economy back on its feet.

“We are talking about a paradigm shift in policy,” explained Korean Prime Minister Han Seung-Soo, who chaired the meeting, held 24-25 June in Paris. “Technological development and actions to protect the environment and combat climate change can also be harnessed in favour of economic growth.”

The meeting’s participants included ministers from the 30 OECD member states, five candidates for membership - Chile, Estonia, Israel, Russia and Slovenia - and five emerging economies that partner with the OECD: Brazil, China, India, Indonesia and South Africa. Together, these countries represent 80 percent of the world’s economy.

The ministers issued two statements at the end of the meeting: a list of conclusions and a Declaration on Green Growth.

The ministerial conclusions outlined the participants’ objectives in light of the current economic climate. “Recovery plans should serve people by addressing the social and human dimensions of the crisis, through support for the most vulnerable, including active labour market policies, skills development, income support, effective social safety nets, pensions, education and enhanced training projects,” the countries pledged. The ministers also encouraged governments to adjust their fiscal policies in order to limit the effects of growing debt.

The Declaration on Green Growth called for green investment incentives, sustainable management of natural resources, and better biodiversity protection. The ministers also confirmed that trade liberalisation could advance - rather than impede - green growth. They also pledged to respect trade law when implementing climate change policies. “We are resolved to ensure that measures taken to combat climate change are consistent with our international trade obligations,” the declaration stated.

The OECD hopes that this document will promote environmental co-operation among OECD members as well as with non-members, particularly in the run up to the UN climate conference in Copenhagen in December.

“We have recognised the importance of well-targeted policy instruments encouraging green investment to contribute to both short-term economic recovery and long-term green infrastructure,” said OECD Secretary-General Angel Gurría. “This is a significant signal and staging post on the road to what we hope will be an ambitious agreement on climate change in Copenhagen at the end of the year.”

The participants called for a swift conclusion to the Doha round of trade negotiations, noting the need for export credits for developing countries and emerging economies. They committed to openness and non-discrimination and denounced protectionism in order to better facilitate international trade and investment.

The declaration invited the OECD secretariat to develop a “Green Growth Strategy,” which will take into account green growth initiatives in both OECD member and non-member states and will incorporate prior work done by the OECD as well as the resolutions of the climate change conference in Copenhagen. The strategy document is slated for release in 2010.

A green approach to economic recovery was one of many policy recommendations offered in the OECD Strategic Response to the Financial and Economic Crisis, a report published under the responsibility of the OECD Secretary-General in December 2008. The economic slowdown should not weaken efforts to achieve long-term, low-carbon economic growth, the report warned. Instead, recovery efforts should invest in green technologies, especially for infrastructure projects with a long lifespan.

The Secretary-General’s report recommended a two-pronged approach to recovery, addressing finance, competition, and governance on the one hand and sustainable economic growth on the other. On the finance side, the report recommended international co-operation on corporate governance principals and the removal of tax barriers which impede the performance of financial markets. On the sustainable development side, the report recommended pro-labour policies and stressed the importance of keeping markets open, in addition to environmentally-friendly development.

The ministerial meeting came on the heels of the OECD economic forum, held 23-24 June, during which the OECD released its latest economic outlook for 2009 and 2010. The OECD projected that rich economies will shrink by 4.1 percent this year, and grow by 0.7 percent in 2010. These figures are slightly better than its March projections of contractions of 4.3 percent in 2009 and 0.1 percent in 2010. This report marks the first time OECD has raised its economic outlook in two years.

Despite the mild upgrade, no one is under the illusion the recovery process will be easy. “Economic activity in the OECD countries is reaching bottom,” OECD Secretary General Angel Gurria told reporters. “We foresee a recovery that will be rather slow and fragile for some time.”

ICTSD reporting; “OECD Body Adopts ‘Green Growth’ Declaration,” THE KOREA TIMES, 30 June 2009; “OECD Raises Outlook for First Time in Two Years (Update 2),” BLOOMBERG, 24 June 2009.