Ahead of the launch of the World Economic Situation and Prospects report in January 2019, UN chief economist Elliott Harris talks about multilateralism and global trade outlook as trade tensions continue to rise among the world’s largest economies.
Q&A – embargoed until 21 January
What are the findings in the new World Economic Situation and Prospects report? Why is it important?
It is an important report in a sense that we provide an assessment of where the global economy stands and what the outlook is in a context where global developments have been less than sound. We have still relatively strong growth, but we do see rising risks on the horizon and an increasing likelihood that some of these risks might actually materialized.
We have a situation where global trade tensions have actually accelerated and that is having an impact already on global trade; it has an impact also on employment.
We have a situation where global trade tensions have actually accelerated and that is having an impact already on global trade; it has an impact also on employment. If it continues to accelerate, if the situation, the tensions continue to deteriorate, and of course, that will have a really negative impact on the prospect of the global economy going forward.
There are other challenges we face as well. We face the challenge of climate change. We just had the conclusion of the Conference of the Parties in Poland a week ago. And again, the challenges arising and we do need to work together in a concerted manner, so we can face these challenges successfully. We have other risks that are on the horizon, such as a rising level of debt that we need to pay close attention to. But I do think that a greater awareness of where the potential risk lie, as well as a greater willingness to address these risks working together, countries in harmony, we have a very good chance of avoiding these risks or minimizing their impacts.
Over the course of 2018, there was a significant rise in trade tensions among the world’s largest economies. How did it impact the global trade outlook? Should we be concerned about the trade disputes interrupting a sustainable global economic growth?
The impact of the trade disputes thus far has been negative; we do expect the growth of the volume of the trade will be lower in 2019 than it was in 2018. The impact on those sectors have been directly affected by the increasing tariffs has been negative, although that impact has been softened a little bit by direct stimulus measures, by compensating actions in other areas of policy.
If, however, those tensions continue to escalate and if the trade dispute becomes more widespread, we will likely to see disruptions of global value change for example, and bear in mind that the participation of global trade has been one of the ways that developing countries have participated in the rising global prosperity and have accelerated their own developments. So anything that disrupt that, of course, [will] have a negative impact on their abilities to increase their levels of prosperity and to develop sustainably.
We will also find that it will have an impact on global employment, it may very well cause disruptions in financial markets that will have ramifications as well for overall investment. So basically anything that can reduce those tensions and lead us back into a multilateral rules based framework where we could deal with our disputes in a regulated manner. I think it is certainly to be welcomed and we should all work towards that outcome.
The other alternative which is to see those trade tensions escalate, possibly even beyond control, that would be a very very negative blow to the global economy and for the ability of countries to reach the Sustainable Development Goals.
In Africa, economic growth needs to rise to double-digit levels to reach poverty reduction targets. It is well beyond growth rates recorded over the last 50 years. Are you still optimistic about economic growth in the continent and what needs to be done to achieve it?
The efforts and the economic performance in Africa have been positive in recent years. It has reasonably strong growth, however, they also have a rather large rate of population growth, and per capita increases in income have not been high enough to guarantee that we will be able to eradicate poverty by 2030.
So we have two challenges, one is to make sure that we maintain and perhaps even increase the overall growth of the African economy, the economy of the individual country, because again not every country is performing equally well. But we also have a major problem in Africa as we do in other countries and other regions of inequality. Income growth alone probably not be enough to reach the Sustainable Development Goals No. 1 – Eradicating Poverty – as long as we have this major problem with deep inequality in the distribution of income. If we can make progress in reducing that inequality and will reinforce that positive impact of higher growth rates in reducing the overall level of poverty and reducing also the poverty that particularly affected some of the more marginalized groups.
Now part of the problem that we had in the past in Africa is that many of African economies do remain dependent on commodities. And as you know, in 2014 and 2015, we had a massive decline in commodity prices, and that sets back easily the economy quite substantially. But there are also problems with a more structural nature, there is a need to improve the infrastructure, to invest if you will, in these rapidly growing cities, and to make sure that the framework is well established for monitoring micro-economic stability so the investment decisions can be made and the foundations for future growth laid out.
These are the issues that African governments are well aware of and they have been working on it for a while, but we do think that a step-up effort in all of these areas will contribute to accelerating not just growth but the equitable nature of that growth, and lead to a greater amount of prosperity that can carry us towards [the] SDGs [and] elimination of poverty in 2030.
Climate risks are intensifying as the world experiences an increasing number of extreme weather events. The human cost of disasters falls overwhelmingly on low-income and lower-middle-income countries. What needs to be done to help the most vulnerable nations, who are already facing weak economic growth?
I think the one of the most important things we do right now is to provide supporting system for these countries to invest in climate resilient infrastructures, not just in the case of where they [are] rebuilding after a disaster, but to prevent a disaster from having as deeper impact as they had in the past. Now the large part of that is to mobilizing resources for the investment, designing those investment in a way that is the most effective and executing them.
There are a lot of difficulties still in raising the financing necessary for investment not only in mitigating the impact of climate change, and in adapting too – the climate change impact we already are experiencing. There has been a lot of progress; we find that increasingly the private sector seem interested in understanding what climate risk is, and invest to mitigate that climate risk and to adapt to it going forward. But a lot more needs to be done to make sure that the resource that they need can be mobilized in the places where they are needed, in time to make those sorts of preventative investment and to enhance the resilience of these countries. So when a disaster occurs, the recovery is more rapid, less painful, less costly.
By the same token however, I think there is a real need for us to reinforce a collective global action to really get a control over the whole process of climate change.
There is a real need for us to reinforce a collective global action to really get a control over the whole process of climate change.
We understand the science behind it, we understand the urgency behind it, now we need to reach a political agreement and commit us all again to reach the objective of the Paris Agreement and accelerating what we can do to global emissions, and making the necessary investment to enhance our resilience to climate change.
Multilateralism is critical for achieving the Sustainable Development Goals but increasing threats and disputes are affecting collective and cooperative action. How will this impact efforts to advance the 2030 Agenda, especially for the least developed countries?
The challenges we face in the world today are often challenges no one nation can solve on its own. Climate change is just one of those. Now in many respects the problems that we are experiencing with the multilateral system reflect the fact that people, countries are somewhat disappointed in the way which the existing system works.
The challenges we face in the world today are often challenges no one nation can solve on its own. Climate change is just one of those.
We have had for example globalization has generated tremendous gains and prosperities but not everybody has prospered equally. And people tend to lose trust in institutions if they see that they are falling behind, if they see their needs are not being met. But the response to that should not be to fill into populism or nationalism, it should be to strengthen those aspects of multilateralism system that are not working well.
The alternative is much more negative. It means that we will not be able to work collectively with fully effect to address some of the bigger problems. It means some of the smaller countries, the less powerful countries will find themselves marginalized in these international discussions and agreements may be made that do not actually reflect the best interest of these countries because they were being done by bilateral or multilateral, plurilateral context other than a multilateral system. And we find ourselves unable to agree on our global priorities would be and it reduces the overall effectiveness of addressing some of the challenges that we face.
So it is really a challenge for us today to make sure that notwithstanding the problems we’ve encountered in dealing with some of these issues, and making multilateralism system work well, we should not fall victims to the tendency to say that let’s go off on our own, let’s do something differently.
we should not fall victims to the tendency to say that let’s go off on our own, let’s do something differently.
Instead, we should focus on strengthening the system, dealing with these shortcomings, understand fully that this is the best hope we have in responding to our challenges and ensuring and guaranteeing us all a sustainable future.
Elliott Harris was appointed Assistant Secretary-General for Economic Development and Chief Economist in the Department of Economic and Social Affairs (DESA) in 2018. Prior to that, he served as Assistant Secretary-General and Head of the New York Office of the United Nations Environment Programme (UNEP).