Sustainable Trade Index 2018 Sustainable Trade Index 23

Sustainable Trade Index 2018 #Sustainable. Trade. Index 23 November 2018 Stephen Olson Hinrich Foundation Research Fellow

Topics for Today • Context for this year’s Sustainable Trade Index • What do we mean by “Sustainable Trade”? • How did we construct the STI? • Results from the 2018 STI • Key themes & policy implications 2

The context in 2018 • Rising protectionism & the risk of full-out trade war • Global trade system in tatters • Fraying social stability, attributable to real or perceived impacts from trade • Environmental degradation 3

Defining Sustainable Trade Sustainable trade Engaging in international trade in a way that not only generates balanced economic growth, but also strengthens social capital and provides for environmental stewardship. • Although trade is an indispensable ingredient in economic development, it cannot be sustainably pursued without responsible environmental stewardship and a commitment to fully developing social capital • Based on UN Brundtland Commission – 3 pillars: economic, social & environment 4

Creating the STI • Evaluates 19 Asian economies + USA across the 3 pillars • Process – Produced by EIU, based on literature review, expert consultations & workshops • Indicators structure – 14 indicators under economic pillar – 4 under social – 6 under environmental • All pillars & indicators equally weighed Hong Kong India South Korea Malaysia Singapore Thailand Japan Indonesia USA Brunei Taiwan Pakistan Sri Lanka Bangladesh China Laos Vietnam Cambodia Philippines Myanmar 5

Overall results • Broad regression in sustainable trade – Most notable among richer economies • Improvements in economic pillar offset by backsliding on social & environmental • Top performer Hong Kong was a bright spot – Technological infrastructure and labor force – Steady increases in educational attainment, political stability • Several middle income countries performing well 6

Overall results 7

Over-performers & under-performers • Various indexes tend to correlate with levels of income • Over / under-perform an alternative measure – 10 economies over-perform – 6 underperform – USA underperforms by 4 places 8

Vietnam’s performance: Change in scores from 2016 Economic pillar Change Social pillar Change 1. 1) Growth in per capita GDP 1. 2) Current account liberalisation 1. 3) Tariff & non-tariff barriers 1. 4) Exchange rate volatility * Improving 2. 1) Inequality (Gini coefficient) 2. 2) Educational attainment Negligible 2. 3) Labour standards 1. 5) Financial sector depth 1. 6) Foreign trade and payments risk 1. 7) Export market concentration 2. 4) Political stability Environmental pillar Change 1. 8) Export product concentration 1. 9) Foreign Direct Investment 3. 1) Air pollution 1. 10) Gross fixed capital formation 1. 11) Trade costs 3. 2) Deforestation * 3. 3) Water pollution 1. 12) Technological innovation 1. 13) Technological infrastructure 1. 14) Growth in labour force * 3. 4) Environmental standards in trade * * 3. 5) Transfer emissions 3. 6) Share of natural resources in trade Backsliding

Important themes and policy implications • Sustainability drives competitiveness – Important for FDI • Companies taking more leadership – Sustainability codes of conduct, audit procedures, company to industry wide initiatives – Profound shift over past 20 years • Trade sustainability is NOT just a luxury for wealthy countries • Low and middle income countries embracing sustainability 10

Sustainable Trade Index 2018 Vietnam Chamber of Commerce and Industry #Sustainable. Trade. Index 23 November 2018 Hanoi, Vietnam