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More prosperity through more networking

Excerpts from a column about the agreement that Frank Appel wrote for the German business newspaper Handelsblatt on December 18, 2013:

December 7, 2013, was a good day for the world economy. After years of wrangling, the delegates of the 159 countries represented in the World Trade Organization (WTO) reached an historic agreement at their meeting in Bali. The far-reaching accord that emerged from the conference will result in sweeping changes that will streamline world trade.

The agreement illustrates two points: The WTO has demonstrated its capacity to act. And the global community has shown its clear determination to overcome its differences and move global prosperity and inclusion for all to the very top of its agenda. In addition, the agreement serves as a strong psychological counterpoint to the financial and sovereign-debt crisis as well as to fears about renewed protectionism.

But global prosperity and inclusion for all will not arise all by themselves. They grow and thrive particularly well in international networks. The DHL Global Connectedness Index shows that the degree of global connectedness is correlated to GDP growth rates and that highly connected countries enjoy more growth and, thus, higher standards of living. Europe and the export country of Germany located in the middle of it are impressive examples of this success. Europe is the world’s most connected region and dominates the top 10 ranking of the most connected economies around the globe.

The European Union committed itself at an early stage – one could describe it as a pioneer in this regard – to the principle of free movement of goods, services, capital and workers. As a result, it has been able to write a historic success story that continues to evolve today. The EU and the common currency, the euro, are worth fighting for. And the reason is obvious: They are the foundation of Europe’s prosperity. The strengths of this continent are primarily fueled by growth. For this reason, more, not less globalization is the order of the day from a European perspective.

But this world is not as globalized as many people would like to believe. The converse is actually the case: The world is less connected today than it was in 2007. The DHL Global Connectedness Index shows that about 60 percent of international trade takes place within regions or continents. For trade, capital flows and information exchange, the degree of globalization is less than 20 percent, and, frequently, it even falls below 10 percent.

Trade barriers must be taken down. They inhibit the economic and, thus, social development of many countries. With the Bali agreement, delegates have set the course for free trade and increased market access around the world.

In Europe, too, much work still must be done before the single market has been completely put into place. This work includes eliminating restrictions like the cabotage ban in freight traffic, dismantling bureaucratic barriers related to customs and security, and exploiting the strengths of all means of transport to create seamlessly connected infrastructure and climate-efficient mobility.

Logistics is a strong lever. It creates the necessary infrastructure, links markets and people – and actually makes globalization possible. In Europe, logistics is the largest industry with potential market volume of about EUR 900 billion and more than 7 million jobs.

The Bali agreement is far-sighted in this regard as well: Through the streamlining of trade and customs regulations, important steps have been taken to support logistics. The dismantling of bureaucratic barriers will be a milestone in the effort to create cross-border supply chains.

But: The spirit of Bali must not become a fly-by-night phenomenon. It is now up to political leaders to move beyond national egotism and, thus, enable all people to share in progress and prosperity. The momentum must be used to apply fresh force to such major projects as the Transatlantic Trade and Investment Partnership and the Doha Round of the WTO, an effort that is designed to address trade issues that affect developing and emerging countries, among other areas, and that many people have given up for dead.

The formula for future success is this: More prosperity through more networking. One point is clear: Bali can only be a beginning.

Beyond economic gains: Why a EU – U.S. free trade deal is vitally important
More information on the Global Connectedness Index 2012
Pankaj Ghemawat: Track Connectedness Today to Deliver a Better Tomorrow
Is globalization still the answer? – Delphi Dialog with Frank Appel and Pankaj Ghemawat

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