Bring down the barriers
An open international trade and investment environment is fundamental to foster economic growth, job creation and prosperity. These conditions are particularly present in Hong Kong, Singapore and Luxembourg, leading the Open Markets Index (OMI) by the International Chamber of Commerce.
The scores of the 75 economies reviewed are split across five groups. Category 1 has only two countries – Singapore and Hong Kong – which receive an aggregate score of “excellent” (score of 5-6) in terms of their overall market openness. Luxemburg takes the bronze medal with a score of 4.9 and leads Category 2. This group of 27 economies with above-average openness includes 22 European countries, but also Canada, Australia, New Zealand, the United Arab Emirates and Chinese Taipei. Smaller European countries like Luxembourg, Belgium and Malta record the highest scores within the group.
The OMI is composed of four sections. First, there is the observed openness to trade, where Luxembourg scores 4.8 out of 6. Trade-to-GDP is one of the key indicators in this category. This ratio reflects the relative importance of international trade to an economy. Real merchandise import growth is another indicator. It captures the dynamic of the integration process of an economy, as the OMI report puts it.
It is a fact that imports expand faster in open rather than in protected economies. For the second component – trade policy – Luxembourg receives a score of 4.7. This category sets out the key indicators to evaluate the import-friendliness of the trade policy regime. As the 27 EU-members have one common tariff schedule and a single anti-dumping legislation and administration, it is therefore postulated that individual countries’ trade policies are identical to that of the European Union.
Luxembourg performs best in components 3 and 4 - Foreign Direct Investment (FDI) trade openness and infrastructure (5.3 and 5.2). The “FDI welcome index” is one of the indicators of component 3. It comprises the number of procedures needed for business start-up, the number of days needed to obtain authorisation and the ease of establishing a foreign subsidiary. Component 4 comprises amongst others the quality of logistics services and Internet use per 100 people.
This OMI Index also provides analysis on the performance of G20 members. Going through these scores, it seems that claim and reality are often far apart. While G20 leaders have continuously touted the importance of open trade, they have failed to lead by example. Canada is the only G20 country ranking among the top 20 economies (19th). Germany comes in 22nd place, the United Kingdom ranks 29th and the US is in 38th position. The authors of the OMI Index underline that only four G20 countries have above average openness.
The good thing about the OMI Index is that it not only assesses the performance of the 75 economies reviewed, but also provides policy makers with suggestions for action and improvement. Implementing duty-free and quota-free market access for exports from least-developed countries and encouraging the growth of e-commerce are two of the short-term measures they recommend. Regarding long-term measures, the experts of the International Chamber of Commerce suggest liberalising trade in services and foster greener economic activity through trade.
In a nutshell, the OMI index reveals that despite the progress made in the past, countries still have much to do to improve the openness of their economies and the G20 is not demonstrating the global leadership it should. CW