B20 Summit: John W.H. Denton On Mega Trends Impacting Global Trade

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00:00 Today is day two of the B20 summit that is being held in New Delhi and I have with me

00:05 John Denton, Secretary General of International Chamber of Commerce, the most representative

00:11 and the largest business organization.

00:14 Thank you, John, for joining us.

00:16 Sasha, great to be with you and I think a big shout out to all your viewers and everyone

00:21 in India who's made the G20 year of India so successful so far.

00:26 So India's G20 presidency comes at a time when the world is going through a lot of crisis

00:33 and chaos.

00:34 What are the two or three mega trends according to you when it comes to global trade and how

00:40 is this affecting the ICC members?

00:42 Oh wow, what a great question.

00:45 Well, I actually was appointed by the UN Secretary General, the terrorist, to sit on what's called

00:51 the UN Global Crisis Response Group.

00:54 We are looking at three critical crises there.

00:57 One which I think you'd be aware of is around food.

01:00 The other is around access to finance and the way the financial system is not playing

01:05 and the other is around the energy transition.

01:07 So there are three critical ones.

01:09 I think an important one to focus on, given that I'm in India now, and I think the important

01:15 role that India can play is actually on the food crisis.

01:19 And what we're seeing, of course, is with the illegal invasion of Ukraine by Russia,

01:25 we've seen a complete disturbance to the way in which food supply operates on a global

01:30 basis.

01:32 We are actually integral in creating what was called the Black Sea Agreement, which

01:37 is an idea that I took to Secretary General Guterres.

01:40 And my view was always that the UN was the best forum in which to have that completed.

01:45 And it was very successful and we saw when it was operating that the exacerbation in

01:52 food pricing, the challenges that were being felt in West Africa, Sub-Saharan Africa and

01:58 Egypt were diminished quite significantly.

02:01 And now with Russia's withdrawal from the Black Sea Agreement, we're actually seeing

02:05 a similar commencement of rise in grain prices.

02:08 Now, it's not as exacerbated as it was, though it is complicated.

02:12 As you know, India has put a ban on those couple of types of rice going out.

02:19 And of course, what they've done, which is eased it slightly, has made some accessions

02:24 for developing and emerging economies.

02:26 So I just want to say this is actually an issue because access to food and the failure

02:31 to get access to food leads immediately to social unrest and political instability.

02:37 We know as the largest business organisation in the world, and let's not forget we're

02:41 in 170 countries, almost 70% of which are in the global south, that civil unrest, social

02:49 disorder, political disquiet can actually completely undermine the business environment.

02:55 So it's in the interests of governments to ensure that people are adequately fed.

03:01 It's in the interests of business to ensure that people are adequately fed.

03:06 And it's in the interest, I think, of the G20 to make certain that the issue of food

03:11 security and access to food is something that's discussed.

03:14 And I hope the communique will actually reaffirm because this will send a very strong message

03:18 to the markets.

03:19 So that's, as I said, there are three crises I'm working on, but I just thought bearing

03:23 in mind the particular focus at the moment on food, I'll focus on that.

03:28 Right.

03:29 You have a pulse of what the global companies are doing, right?

03:32 So in terms of what they are seeing when it comes to investing in India, setting up manufacturing

03:38 bases in India, what is the take I would like to know from you?

03:42 Wow, what a great set of questions that you snuck a couple in at the same time, Ash.

03:47 So listen, just on the India side, I think it's important to acknowledge that the Indian

03:54 people and the Indian business has actually, I think, effectively supported an opening

04:01 up by the political class of the Indian economy.

04:05 So India has definitely over the last 10 years become a much more attractive place.

04:10 And you can see the results on the ground of poor investment, etc.

04:14 I mean, I first visited India some 30 years ago when we actually had the dual system operating

04:20 where the import prohibitions last were in place, etc.

04:25 That is all gone.

04:27 So that's a really promising thing.

04:28 But I think bearing in mind the political appetite and the civil appetite and the business

04:34 appetite for continued economic reform, I think it's really important that the Indian

04:38 government does not now sit on its laurels.

04:41 And I know that that's the last thing, if you're going to an election campaign as well,

04:45 that will happen.

04:46 But what's important here is to actually press the right levers.

04:49 There is no doubt as well that SMEs are the critical driving force of the Indian economy.

04:55 So we've got to be focused all the time on what can make it easier for SMEs to operate.

04:59 So we know their big issue is around access to finance.

05:03 And we know that economic development will be enhanced if more SMEs trade across borders.

05:08 Trade is increasingly digital.

05:10 So we need to ensure that, first of all, access to finance, that there's more work done on

05:14 that.

05:15 And the ICC has some initiatives that we're looking at to work with various Indian players

05:19 to support that.

05:21 The other is ensuring the ability to people to actually use digital modes of trade across

05:28 borders.

05:29 So digitisation will be critical as well.

05:30 So they're important levers to actually focus on in order to ensure economic recovery, but

05:35 also further economic development of this country.

05:38 On global trade itself, you're absolutely right.

05:41 There is an increase in fragmentation.

05:44 What we've been arguing against is this idea of decoupling.

05:48 And I think you would have heard that language used.

05:53 If you look at decoupling and then you look at what the IMF has actually predicted as

05:56 an outcome of complete decoupling, it's a negative 7% on global GDP.

06:01 Now that is a very significant number.

06:03 And of course, 7 doesn't sound that big, but you know what will happen to economic opportunity

06:09 in countries.

06:10 And it will be devastating, not just in the north, but also in the global south as well.

06:14 We've been urging a movement away from this idea of decoupling.

06:18 And we're pleased to see that a lot of the rhetoric has now come away from that.

06:21 But the rhetoric now has to shift not just to compete a strategic competition, which

06:25 is where it is now, but actually, when you talk about competition, where must you cooperate?

06:32 If you think about it, global trade is actually underpinned by supply chains.

06:36 They operate globally.

06:37 We need to have more cooperation on a global basis to ensure that those supply chains continue

06:42 to operate.

06:43 The best way to actually ensure that happens is to have a strong and functioning multilateral

06:48 trading system.

06:49 So I think ensuring that the multilateral trading system continues to have legitimacy,

06:55 continues to operate, but also is refreshed to actually reflect very much the new reality

07:00 about how trade is done.

07:02 Is that something important?

07:04 We're very heavily involved with this.

07:06 We're involved with the WTO level.

07:07 In fact, I've just created with the Director General of the WTO Business Advisory Group.

07:12 These are the sort of things that need to happen because business needs to be brought

07:15 much more into the engine room of multilateral trade as well, rather than an observer.

07:22 We're actually an end user.

07:23 We need to be part of the shaping of that system and its reshaping to make it function

07:28 in this more complex world in which we operate.

07:31 You mentioned about lack of access to financing.

07:34 So could you tell us what kind of investments, like is there an estimate that, you do several

07:39 studies.

07:40 Do you have an estimate in place, like what kind of investments should come in to bring

07:44 back the trade volumes back to the pre-COVID levels?

07:47 Well, let's look at a couple of big numbers.

07:49 I mean, the reality is that there's a deficiency or a lack of about $1.7 trillion, which is

07:56 missing in order to enable trade finance.

07:59 So we need to actually work to fill that gap.

08:02 So there's lots of things that can be done here.

08:04 We can look at how trade finance is weighted from capital accuracy point of view, through

08:08 the Bank of Indonesia and through the Basel process.

08:11 There's lots of things we can do.

08:12 We can actually look at how the whole trade finance system operates.

08:16 So these are all areas and most of them are policy areas.

08:19 And also making certain that we align that.

08:22 But also need to recognize this.

08:23 It's not enough to say we're going to provide a billion dollars, which is fine, which is

08:29 something that World Bank or the IFC might say.

08:32 When the gap is $1.7 trillion, we need to look again at how that whole system is operating.

08:38 But that is a long journey, right?

08:40 It will not happen in a matter of like three or four years.

08:42 To be frank, this is the discussion we've had with the Indian G20 Sherpa at the beginning

08:48 of the Indian year.

08:51 And I think there's an increasing recognition that this work needs to happen at the G20

08:55 level.

08:56 And I'm actually pleased because, as we were saying before, SMEs are such an important

09:01 part of the Indian economy.

09:03 And if the key element which is needed to enable them to be successful, and that element

09:08 also will help them trade across borders, which will lead to increased economic development,

09:13 this is a matter of some considerable importance in this country.

09:16 All right.

09:17 So lastly, the most important issue that is the climate crisis.

09:21 Everybody is talking about it.

09:23 So I would like to know what are the recommendations from ICC with regards to climate crisis during

09:29 the G20?

09:30 Wow.

09:31 Well, we'll be actively at the moment.

09:33 One of our key roles is to crowd the voice of the private sector into the whole COP process.

09:39 And one thing that's become increasingly clear is the private sector is actually way ahead

09:44 of governments in terms of its action.

09:46 The big issue at the moment is actually not the rhetoric around climate change.

09:51 It's how do you shift the global financial architecture to allow more private sector

09:56 investment to support the transition.

09:59 Governments and multilateral development banks alone do not have the capacity to finance

10:03 this transition.

10:04 Philanthropy can't do it.

10:06 We need to ensure that the incentives are there to shift the whole of the finance system.

10:11 We are doing our bit.

10:12 The ICC, we curate through the various instruments that we manage and actually are responsible

10:20 for something like $10 trillion worth of trade finance.

10:24 We're actually working to align that with sustainable frameworks around climate.

10:28 So we're the first group to actually do the hard yards, to actually bring the whole of

10:33 that trade finance market, which is around $10 trillion, in line with the climate, with

10:38 Paris effectively.

10:40 So we're actually, I'll be taking more considerations on that to Dubai at the COP28 process this

10:46 year.

10:47 So there are the sorts of things that need to happen.

10:49 But ensuring that the private sector is involved as part of the solution rather than being

10:54 yelled at is actually going to be key here as well.

10:56 All right, John, thank you so much.

10:59 Wishing you all the best.

11:00 It was a pleasure talking to you.

11:01 Thank you so much, Priyanchala.

11:02 Thank you.

11:03 Thanks a lot.

11:03 Thanks.

11:03 Bye.

11:04 Bye.

11:05 Bye.

11:06 (upbeat music)

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