The Geneva Business Declaration

Statement by Helmut O. Maucher, President of the International Chamber of Commerce, at the conclusion of the Geneva Business Dialogue
Geneva, 24 September 1998

Today, many companies and a number of economies all over the world are going through a difficult period, and in some instances it has turned into a crisis. Business has a clear responsibility today. We must not lose our nerve and embark on short term reactions. Our long-term policy must be maintained.

Industry is defining its own new structures as part of that process of looking to the future. ICC is responding with initiatives of its own. It is engaged in intense discussion with intergovernmental organizations about the framework in which business can operate in the future to raise living standards worldwide and to create jobs. The 1997 ICC Shanghai Congress Declaration outlined three priority areas for action under our organizati on's long-term agenda: to establish a productive balance between freedom and rules; to encourage more global decision-making; and to prepare for the emerging knowledge economy. The Geneva discussions showed the remarkable progress made in following this roadmap, and how far there is still to go. Three more priority areas have been added to the Shanghai agenda to make a total of six in the Geneva Business Declaration. They are not arranged along the lines of traditional ministerial responsibilities and international organizations. The six priorities are built around the basic principles, international strategies and mechanisms that are needed to respond effectively to a challenge that is becoming increasingly global.

1. Finding the balance between freedom and rules for running local and global businesses

The free flow of goods and services, investment, know-how, technology and information remain a priority for world business. Deregulation and improvement of market access must continue as a gradual process with clear objectives and taking into account social costs; it must be accelerated where discriminatory double standards are still being used to defend entrenched interests. Ultimately, this process of liberalization fosters competitiveness and prosperity as the most reliable basis for individual freedom and dignity.

Freedom can only work within rules, and the same holds good for markets. Business needs the backing of effective laws, rules and institutions for its own operations and to ensure overall civil stability. Governments and intergovernmental organizations are the main rule-setters. In the last decade, governments in both industrialized and emerging economies have contributed to significant improvements. In the emerging economies, they have modernized rules of special significance to business, such as those governing stock exchanges, and have improved the protection of physical assets, equity investments, and intellectual property. On the international level, governments have completed new WTO agreements on basic telecommunications and cross-border financial services.

In this process of modernization and globalization of rules, ICC is making a positive contribution, both as an advisor and through its own standard setting. ICC is giving a lead in the areas of trade facilitation and electronic commerce, including digital certification. New rules of arbitration, designed to meet today’s more complex business environment, are in place - as are rules to combat corruption.

Broader efforts should now follow in order to foster rules-based freedom for business, with the WTO assuming a key role. Especially today, we must demonstrate the resolve to move ahead in terms of implementation and comprehensive negotiation. New negotiations to further liberalize world trade are already scheduled to begin around the time the world enters the 21^st century. They should be extended to become more comprehensive than currently planned; and they should be brought to a successful conclusion without the damaging delays that characterized the Uruguay Round.

A truly global framework of rules for cross-border investment is needed, especially in view of the lack of progress so far at the OECD. A global market view will also require competition policies that impede neither trade nor investment. The question of labour standards should be addressed in order to strengthen consensus on basic rules. But we must do this in the appropriate forum of the ILO. Cross-border environmental problems sh ould be resolved in a responsible way through multilateral environmental agreements and not by trade measures. Policy-makers should be aware that truly global problems cannot be solved by isolated national or regional efforts. Being responsible and aware in these matters also means focusing on essentials and refusing to be swayed by emotional and irrational arguments.

2.In many respects, we still lack a public consensus based on a shared understanding of key market mechanisms and business tools

We need this understanding to underpin agreement on basic economic goals in industrialized countries, to overcome pitfalls in emerging economies, and, ultimately, to ensure coherence of policies worldwide. Two aspects are worth highlighting:

First: The opening and deregulation of markets, and the modernization and globalization of rules and institutions relevant to business, should no longer be seen as concessions to foreign investors. A truly global framework for investment is a win-win proposition. Multinationals have a well-proven record of improving social and environmental conditions in countries where they invest. In the recent Asian crisis, their long-term vision and commitment had a significant stabilizing impact. Also, to scrap non-tariff barriers is not primarily a concession to competitive emerging economies. All these actions remove stumbling blocks impeding both local and international business; they increase competition and wealth in an economy as it opens up. New international devices for continuous regulatory reform in a market perspective (such as public policy benchmarking) should now be considered. This will also help the local economy.

Second: In the new context of global markets, practical business tools such as marketing, advertising, or new financial instruments have become even more important for creating wealth in an economy. Their potential still needs to be better understood by public policy-makers.

3.We have improved physical production, and achieved high levels of exchange and efficiency

Now, the world is shifting into a global knowledge economy - a challenge to countries and companies alike. The main contributions of business are research and innovation, the free flow of knowledge and an atmosphere of learning and re-learning. Knowledge is actively managed as an asset exposed to competition. More research and innovation, together with unprecedented growth in flows of technology, people and ideas, have become key drivers of prosperity. International firms have turned into highways and nodes in global networks for transmitting knowledge and advancing research and technology in a global perspective.

The knowledge economy needs a different framework. In recent years, developing countries have facilitated the creation and flow of technology and ideas through better enforcement of intellectual property rights. This deserves further encouragement. One big task ahead is to clarify business requirements for protecting intellectual property in the digital environment. Another is to speak up in the public debate, responding to increasing hostility towards technological progress - for instance in the field of biotechnology - in high-cost industrialized countries, and particularly in Europe.

4.Globalization can and must succeed.

Some aspects:

First: Business takes popular anxieties about globalization seriously. We are aware of the plight of the unskilled and the risk that some people will be left out. At the same time, globaphobia must be opposed by improving understanding of globalization and its true impact on jobs and wealth. ICC has been speaking out on the benefits of globalization; this message needs further strengthening. We must work towards encouraging all people involved to take a realistic, positive and proactive view by demonstrating that all countries can participate in the gains from globalization, provided that they focus on the right policies. We must confront allegations of social dumping with the reality of greater overall wealth and the rapidly increasing number of people living above the poverty line.

Second: Not everything becomes global – supply will, but not consumption. The greater choice open to the consumer increases the diversity of local demand. Some critics of globalization say that countries that integrate into world markets lose their societal and ethical values; they warn that civilizations will clash. Societal values will indeed be increasingly exposed to global competition and dialogue. But this will enrich mankind by offering choice, cross-fertilization and strengthening of ideas and values that are respected by all cultures and societies. As companies go global, they propagate trust. Businesses oriented towards the long term share a wider range of values than shareholder value alone.

Third: A key challenge in the context of a rules-based freedom for business is to prevent financial meltdowns and maintain a stable international financial system. As the end of this century approaches, the introduction of the euro will be a major innovation in this system. Its imminent arrival is not only a matter of European politics; it raises big issues of global governance with respect to the future relationship between international currencies. It will inevitably have far-reaching policy repercussions – for instance, with regard to the US current account deficit.

5.As trade and markets become global, and many problems can no longer be solved at a national level, we need effective global decision-making and institutions; and we need a meaningful international policy dialogue involving business.

First: Global governance and the adequacy of international organizations require priority consideration. Competencies – supranational, national, subnational and global – must be reorganized according to a broader overall view. Currently, too much duplication and inadequate coordination are preventing intergovernmental bodies from handling effectively the complex and interrelated problems of the late 20^th century. Intergovernmental organizations will need additional authority, but with the proviso that they must pay closer attention to the contribution of business and competition to wealth creation, recognize the need for less bureaucracy, and bring a clear focus to really important global problems. These reforms have now started, but they are of course a long-term undertaking. Once the UN’s own structure is overhauled, it and its General Secretariat would be the natural choice to assume responsibility for coordinating international decision-making more efficiently. It is in this perspective that we think that a strong UN is good for business.

Second: A more substantive involvement of business must be part of the reform. Here, ICC has confirmed and strengthened its position as the voice o f business through a close working relationship with the WTO and constructive consultations with the UN Secretary General and the heads of UN agencies. ICC is able and willing to contribute to agenda-building, to substance and to a constructive follow-up. Our positioning in the dialogue reflects the key function of business – to create wealth.

Third: There is a need to clarify leadership and to define shared responsibility, with roles for an extended G-7, the European Union and key areas of the developing world.

Fourth: Globalization creates new threats. Authorities must cooperate in the fight against new forms of organized crime threatening firms (counterfeiting, cybercrime, fraud, etc). Critical infrastructures on which communities depend – telecommunications, banking and finance, energy, transportation, government services – require protection through the joint commitment of the leading economies and the private sector.

6. Individual markets in different countries are where ideas are translated into reality. Those markets benefit from stable, strong and efficient (i.e. lean) government.

First: Increased reliance on markets and competition calls for governments that are able to refrain from regulation where possible, but also to set and strictly implement rules where necessary. Only stable, ordered and honest societies prosper.

Second: In countries with extensive entitlements and aging populations, we must examine the issue of long-term imbalances in the welfare state, in order to take decisions to ensure the sustainability of pension schemes (which will include longer lifetime work) – and, ultimately, the state, its institutions and the trust of citizens.

Third: ICC recognizes how societies are changing, with citizens speaking up and expressing their deep-felt concerns. However, in some respects, the emergence of activist pressure groups risks weakening the effectiveness of public rules, legitimate institutions and democratic processes. These organizations should place emphasis on legitimizing themselves, improving their internal democracy, transparency and accountability. They should assume full responsibility for the consequences of their activities. Where this does not take place, rules establishing their rights and responsibilities should be considered. Business is accustomed to working with trade unions, consumer organizations and other representative groups that are responsible, credible, transparent and accountable and consequently command respect. What we question is the proliferation of activist groups that do not accept these self-disciplinary criteria.

Fourth: Economic nationalism, negative-sum disputes, unilateralism and extraterritorial imposition of national laws should not be confused with strong government; they are out of step with the realities of a global economy. But nationalist reflexes keep coming back – recently, for instance, on tax issues. Countries compete against each other for a higher share of corporate taxes through closer scrutiny of so-called transfer pricing, taxation of technical assistance, etc. thereby increasing the burden on international firms – both in terms of tax rates and paperwork. In many areas of regulation, countries seek to impose their own standards instead of relying on mutual recognition.

 

Six conclusions are to be drawn from the discussions here in Geneva

1. We need to achieve a balance between freedom and rules for running a business.
2. Understanding of key market mechanisms still needs to be fostered.
3. Business and rule-setters must respond to the most important challenge of today, the emergence of a global knowledge economy.
4. We must overcome a diffuse but virulent globaphobia, address the real problems that hinder wealth and job creation, and we must make globalization a success.
5. On many issues of global concern, decision-making must now also become global, with business involved in a meaningful policy dialogue.
6. National governments will continue to have a key role in the future; economic growth and societal stability require strong and efficient governments.

These six points will be the focus of the expanding dialogue between business and intergovernmental organizations. They are also major items for ICC's own agenda.

The discussions of the last two days have also demonstrated that some important internal homework for ICC remains to be accomplished. We need to strengthen our regional and –- in some instances – our national structures, and to clarify the role of ICC national committees. ICC is the only global body that represents companies, large and small, across all sectors. It is on this strength and vocation that we must build.

We want to become even more focused and efficient in our policy work. To be able to speak up clearly and strongly for business on major global issues, we must make sure that our own message has both substance and long-term relevance. In ICC, we must improve our services and further develop our role as a rule-maker. The work accomplished in 1997 and 1998 demonstrates our determination to focus on priority projects and to streamline structures. This will give us the necessary strength and flexibility to take on the challenges business will face in the 21^st century.

Helmut O. Maucher
President of ICC