The United Nations Chief Economist and Assistant Secretary-General for Economic Development, Eliot Harris, called on world leaders to return to international multilateral cooperation and fulfill their obligations, especially in the areas of international trade and combating climate change.
In an interview with Asharq Al-Awsat, on the eve of the start of the 50th session of the World Economic Forum in Davos today, Harris warned of the decline in global growth, in light of the continued regressive policies and the rise of protest movements across the world, in the absence of an equitable distribution of returns, and the failure of governments to improve living standards.
On the other hand, Harris praised the economic reforms taking place in Saudi Arabia within the framework of "Vision 2030", and highlighted their importance for the Kingdom and for West Asia, with the Kingdom being the largest economy in the region. Harris highlighted the "leap" achieved by the levels of Saudi women participating in the labor market, supported by economic reforms.
Read below the text of the interview:
1. Both the WESP and the WEF’s economic outlooks warn of inward-looking policies and less international cooperation, how could these tendencies affect the world economy in the current year?
In recent years, several countries appear to be retreating from multilateral cooperation, especially in the areas of international trade and climate change. On the trade side, this has resulted in rising tariffs and heightened uncertainty – leading to a sharp slowdown in global trade activity and weaker investment. On the environmental front, the global response to the ongoing climate crisis has been slow and inadequate. Climate-related disasters are likely to continue rising in both frequency and intensity if countries fail to follow through with their global commitments, including those to the Paris Agreement. A continued move towards more inward-looking policies would not only dampen global growth this year, but also threaten to hinder progress towards the SDGs.
2. The US and China signed the first part of a trade agreement, signaling a potential end of the current trade war. Are you positive about the outcome of this agreement? And are you expecting more trade wars, say between the US and Europe?
Over the past year, trade tensions have flared up between various countries, not only the US and China, but also the US and Europe, as well as Japan and the Republic of Korea. Our baseline scenario assumes no further escalation of existing trade tensions. But downside risks to this outlook remain substantial. The phase one trade agreement between the US and China is positive news and has alleviated some uncertainty for businesses and investors. However, many of the underlying issues still need to be resolved, for example those related to technology transfer. Moreover, what is concerning is that these negotiations have taken place outside the rules-based multilateral trading system, which has been facing increasing pressure. A further erosion of the multilateral trading system would hurt global growth prospects by raising costs, lowering efficiency, and creating uncertainty.
3. Another source of great instability in the last year was the uncertainty around Brexit. Now that the UK is leaving on the 31st of January, what do you expect Brexit’s impact will be on the country, Europe and the world?
Significant aspects of the exit of the United Kingdom from the European Union remain unresolved. While the UN’s baseline forecast assumes that an orderly withdrawal will be concluded during the transition period, a disorderly exit would open the field to a host of negative consequences across the real economy and financial markets. With the modalities of the exit unclear and limited information regarding the nature and structure of the legal and economic relations of the United Kingdom with the European Union and the rest of the world after the transition period, corporate investment decisions have already become subject to tremendous political uncertainty. Businesses in the United Kingdom simply do not know what market they will be operating in. There is potential for disruption to supply chains. Membership in the European Union allows the free passage of production inputs and half-finished products across borders, in many cases numerous times before becoming a finished product. The lack of clarity over how these transactions will function in the future will continue to complicate investment decisions. A disorderly exit constitutes a significant downside risk to the United Kingdom first and foremost, and to Europe as a whole.
4. Saudi Arabia is undergoing significant economic reforms in accordance with its 2030 vision, how do you evaluate the impact of these reforms on the country and the region?
We think the ongoing economic reforms in Saudi Arabia are significant for the Kingdom and Western Asia, considering the Kingdom’s influence as the largest economy in the region.
We have seen several positive signs of the reform outcomes. Among others, the reforms brought more job opportunities to the Saudis. Despite weak economic growth – just 0.3 per cent growth is estimated for 2019 – the unemployment rate among the Saudi nationals edged down. In the 3rd quarter of 2019, it stood at 12.0 per cent, down from 12.8 per cent a year earlier. It is worth noticing that this decline in the unemployment rate occurred against a backdrop of rising labor participation, as reforms have supported a jump in female participation rates. Hence, it seems that the pattern of economic growth in Saudi Arabia is in transition towards a more inclusive one, which marks progress towards the SDGs.
5. How can countries strike a balance between tackling the climate crisis (clean energies, recycling, better waste management, etc), and steady economic growth?
Tackling the climate crisis and supporting steady economic growth do not necessarily need to pose a tradeoffs. In many countries, the transition towards cleaner energy will bring not only environmental and health benefits, but economic opportunities as well. For example, countries that rely heavily on imported fossil fuels stand to gain from developing domestic renewable energy sources – both from an improvement in energy security and an improvement in balance of payments. And 4 out of 5 people around the world live in countries that import fossil fuels. Other countries will see increased demand for the metal and mineral resources that are used in low-carbon technologies, such as copper, cobalt and lithium. On the other hand, countries that have been relying on fossil fuel exports to finance government spending or essential imports face revenue losses, and risks of stranded assets and job losses. Without appropriate policy strategies, the costs and benefits will be very unevenly spread across countries and individuals. Measures to compensate those who are negatively impacted are essential – both to protect the vulnerable and to safeguard the political viability of difficult but urgently needed policy actions. This makes clear the need for cooperative and coordinated global policies to make progress on energy transition.
6. In 2019, we have seen civil unrest all around the world fueled by economic discontent. Do you expect to see more of that in the short and medium terms? If so, why? And what can countries do individually and collectively to improve economic equality?
Civil unrest and social discontent were a major feature of the world economy in 2019. The growing discontent is related to many different causes, including social and economic inequalities and discriminations, political demands, corruption, gender, and environmental and climate change issues. Massive protests erupted quite visibly, and in some cases violently, in several countries around the world, including for example Lebanon, Hong Kong, Chile, France, Egypt, Bolivia, among others. While across some countries there are common causes behind the discontent, like social and economic inequalities, in others there have been specific triggers.
It is difficult to predict whether civil unrest will rise or not. What is important in to recognize that this social discontent reflects fundamental problems that societies need to address. In fact, social and civil unrest may continue to rise if the benefits of growth remain concentrated in narrow segments of the population, and if the economic system continues to have major difficulties in generating decent jobs for all and raising living standards for everyone.
As a result, countries need to make concrete and decisive efforts, with clear policy changes, in order to encourage inclusive economic growth that is environmentally sustainable and socially equitable. So far, many governments have relied mostly on accommodative monetary policies to encourage growth, but given the uncertainties of the policy environment, a more balanced policy mix is needed to address economic, social and environmental issues in the global economy. For example, with interest rates at historic lows, Governments that have ample fiscal space should make use of the current favorable financing conditions to address pressing public investment needs. Structural shifts in the design of fiscal policy should be carefully integrated with labor market initiatives, conducive business and financial regulation, the introduction and extension of effective social protection systems and prudently targeted investment incentives. Crucially, national policies need to be complemented by more effective international cooperation in order to achieve shared goals, particularly in the areas of climate change, international trade, and finance.
