Cooperation between the OECD and G20 will help to build and maintain momentum on shared global challenges, from the current energy crisis to the fast-digitalising jobs market
The world has entered a highly challenging and disruptive period. Pressures from economic fragmentation around the world are real and growing. After two years of dealing with the Covid-19 pandemic, Russia’s war of aggression against Ukraine has darkened the outlook for the global economy.
Of course, that war is first and foremost a humanitarian crisis for the people of Ukraine. However, the impacts go well beyond. We are facing lower growth and higher inflation, and negative impacts on business investment and private consumption. And, crucially, the worsening outlook and heightened tensions are serious continuing threats to our rules-based international order.
It is exactly at times like these, although deeply challenging, that we need to maintain and build momentum in the G20 on shared global challenges that rely on our collective ability to address them.
First, ensure energy supply, security and affordability.
The price of energy has risen dramatically, especially in Europe, and there is uncertainty about supplies going into the winter. Food prices also remain high, putting poorer households and countries under pressure. These issues are front of mind for governments and well-targeted, means-tested and temporary support measures should be considered. The Organisation for Economic Co-operation and Development’s independent data, analysis and policy best practice advice can help to address these challenges, while also focusing on the longer term structural challenges we are facing, such as securing energy supply in ways that keep us on track for the urgent and necessary green transition.
As we look towards the next United Nations climate conference in Sharm El Sheikh in November, we need to translate ambitions into action. The OECD is advancing the Inclusive Forum on Carbon Mitigation Approaches in order to improve the quality of our multilateral dialogue and to help inform decision-making. Given the global nature of the climate challenge, the success of this initiative will rely on the widest possible participation from advanced, emerging and developing economies. We hope all G20 members will join.
Second, ensure everyone has the opportunity to participate in and benefit from the green and digital transformations of our economies.
Digitalisation is changing business models and creating new opportunities but also disrupting existing jobs. Giving people the best possible opportunity to navigate these challenges means investing in their training, upskilling and reskilling with an eye on developing labour market requirements. The revised G20 Skills Strategy issued this year with OECD support will help align skills provision to labour market needs and improve cross-border recognition of qualifications and prior learning.
Leveraging the full potential of new technologies for sustainable growth also relies on universal access, which will remain out of reach without access to reliable, affordable electricity. To meet the dual climate and development objectives of countries, we need to support the development of modern energy infrastructure and the deployment of clean energy at greater scale and speed. The G20 Blended Finance Principles championed by Indonesia’s G20 presidency are a powerful tool to direct commercial finance towards these projects while also providing financial returns to investors.
Third, keep markets open and functioning.
Open markets remain essential for growth and for the innovation we need to raise living standards, support good jobs and decarbonise our economies. Rules-based trade enables opportunities for all countries, providing the predictability and certainty needed for the private sector to invest and create jobs. Trade is also a source of economic resilience and diversification along supply chains.
Over the past decades, however, the international trading system has been exposed to important changes in the global economic and policy environment that together are putting the system under significant pressure. We need to strengthen the rules-based trading system with the World Trade Organization at its centre.
Indeed, we need to further open markets in key areas and reduce the use of counterproductive and market-distorting subsidies in sectors such as agriculture and industrial goods. There are no silver bullets, but the OECD will continue to support the G20 on practical action to strengthen supply chain resilience and make globalisation work better.
We also need to rebuild our fiscal buffers.
We need to give ourselves the fiscal space to address all these structural challenges, while also making sure we are in the best, most resilient position possible to deal with the inevitable next external shock. This is also why broadening tax bases is important and why the full implementation of our agreement to reform international corporate tax arrangements will be essential.
There is much we can do together. The OECD remains strongly committed to working with the G20 and stakeholders on all these fronts and more.