‘We must be cognizant of the challenges that global trade is facing if we want to continue enjoying its huge accelerative benefits’
The 30 economies studied in the 2023 Hinrich-IMD Sustainable Trade Index, released today together with a publicly available report – Advancing trade sustainability in a fragmenting world – represent approximately 67% of global GDP and account for about 63% of the total global population.
“While the Index has a clear Southeast Asia and Oceania focus and covers a small number of economies relative to out other rankings, these economies represent a huge share in terms of human capacity and economic potential,” said Christos Cabolis, Chief Economist at the WCC.
Their readiness and capacity to participate in the international trading system are analyzed via indicators that fit into one of three areas: economic growth, societal development, or environmental protection.
Many among the 71 indicators show deterioration, seen globally, including in the areas of long-term barriers to trade, trade costs, the rule of law, pollution, and energy intensity, “Things we should be worried about as a human race,” in the eyes of Chuin Wei Yap, Program Director, International Trade Research at the Hinrich Foundation.
“We must be cognizant of the challenges that global trade is facing. The STI is a blueprint of how we see the world and how we see policy as managing, in equal parts, the huge accelerative benefits of trade along with its potentially quite devastating effects on society,” Yap added.
In this year’s edition, New Zealand topped the table, followed by the UK – both retaining their 2022 positions. Singapore climbed two spots to take third.
‘A trade-off between efficiency and sustainability’
“New Zealand has, for a long time, had the advantage of having pollution management and clean energy standards in place,” said Yap.
Compare this, for instance, to its neighbor Australia, who came fifth, gaining a position.
“Australia would like, in principle, to put coal on the back burner, moving forward with renewable sources. But this is a very costly exercise involving a trade-off between efficiency and sustainability,” said Cabolis.
The Singapore-Australia Green Economy Agreement was signaled by Yap as a reflection of both Singapore and Australia’s exemplary approach to sustainable trade. He describes it as an innovative agreement not just for its contents but how it was signed (In October 2022).
The Agreement lays the foundations for greater collaboration between the two countries, in terms of driving growth while reducing emissions.
“The two sides approached it in a ‘cards facing up way’ which is unheard of. They got to an agreement pretty quickly, and it serves as a template for the rest of the world,” said Yap.
This Index also shines a spotlight on the importance of not just the creation of policy but also its implementation over the long term.
“In the environmental pillar, the economies that perform well – the UK among them – are using very high environmental standards and they not only have laws around all this but they actually implement them,” Cabolis said.
Such laws address issues of water waste, pollution, carbon, and energy intensity. Those countries that perform better also making the transition towards more renewable energy sources.”
‘Advancing global sustainable trade’
The reason the Index measures an equal split of economic, societal, and environmental criteria is to give a picture of advancing global sustainable trade and not just trade itself.
“Trade can supercharge growth, especially when applied to small economies, such as those in Asia Pacific. But if you let this growth become untrammeled, mismanaged, or neglected – for instance by policy – you end up with the kind of situation that we saw in 2016 where two-thirds of the US GDP voted for one candidate but the third of GDP that voted for the other got that candidate elected. These are the kinds of outcomes that the rest of policy needs to manage to make trade effective,” Yap said.
The index includes members of the APEC free trade and regional trade agreements, The Regional Comprehensive Economic Partnership (RCEP), and The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Outside that, it includes Ecuador (an applicant to the latter) and four major players in Southeast Asia: India, Pakistan, Bangladesh, and Sri Lanka.