COVER STORY • Prospects & Solutions for a Volatile Global Economy • 6TInterview with Gabriela Ramos, OECD Chief of staff & Sherpa to the G20

he OECD — the Global“Do Tank” & Its Rolein the G20 & G7

By Japan SPOTLIGHT

In a globalized world where there is increasing interdependence among nations’ economic policies andmultiple spillover effects, the role of international organizations and the global governance they support iscrucial to keep the global economy on the right track through collective action and policy coordination.
The G7 and the G20 are now apparently key fora for such global governance. In order to lead nations in
the right direction, the G20 and the G7 need facts and evidence-based analysis. The Organisation for
Economic Cooperation and Development (OECD), a global think and do tank, with high-quality expertise ineconomic, social and environmental policies, is one of the key players providing such analysis to enhance
the quality of global governance. Japan SPOTLIGHT held an interview with Gabriela Ramos, OECD chief ofstaff and sherpa to the G20.

Role of the OECD’s Sherpa
to the G20
JS: How do you see the G20’s
relationship with the OECD andG7 at present?

were exaggerating, because things do notdie just because we declare it so; they die ifthey are no longer useful, and the G7 is stilla very relevant group. It gathers together
countries with advanced economies that areprobably closer in terms of their mindset,
and has proven in the recent years that it
can raise the bar of ambition on certain
topics. It happened for example with theanti-corruption issues in the UK summit, or
the responsible business conduct agenda inGermany, and the previous summit in Japanwas very useful in pushing implementationon the tax agenda. There is a role to beplayed by the G7 in setting the ambition highand leading by example.

Ramos: The OECD has become a very
valued partner for the global governancegroups. We were invited first to the G20 by
President Barack Obama to participate in thePittsburgh summit, an invitation not only tothe secretary general to join the leaders’group but also to appoint a sherpa and help
Gabriela Ramos, OECD Chief of staff & Sherpa to theG20
the preparation of the summit. I think this is
one of the smartest innovations of the G20
that the G7 had in some ways, but not as an integral part. Leaders at
the G20 decided to keep the G20 informal, and to be flexible on theAssessment of Recent G20 in Hangzhou
topics they want to address. To support them, they rely on
JS: How do you assess the recent outcomes of theinternational organizations, their evidence and work, and this is a
G20, p a r t i c u l a r l y t h e H a n g z h o u s u m m i t i nvery interesting institutional innovation. They draw on the expertise
September?
of the OECD, the World Bank or the IMF to inform the related
discussions and put evidence on the table. And because the OECD isRamos: Initially the G20 was very good in terms of putting together
a multi-disciplinary organization dealing with all policy areas, but
a very strong stimulus package to avoid the worst from the crisis,
also developing standards, with a broader mandate than the WTO or
but eight years later it is finding it very difficult to steer a more
the ILO — on trade, investment, taxes, gender, social issues, anticomplex economy and achieve better outcomes. We are in a “lowcorruption and so on — it has given us a lot of space to contribute togrowth trap environment” as our chief economist has put it, wherethe debate.
global trade is behind GDP growth and investment is low, as well as
In terms of the G7, when the G20 emerged as the global forum fordemand. We are also documenting a retrenchment of global valueinternational economic cooperation, I remember that all thechains for the first time in decades. We also have concerns about theheadlines were saying that the G7 was dead. I thought of course they
24 Japan SPOTLIGHT • January / February 2017

distortionary impact of low interest rates, particularly in bonds andyields and asset and housing prices, which is creating a greatchallenge to the sustainability of the pension systems. Finally, wealso know that inequality of income and of opportunities is very high,and there is an emergence of protectionism and populism. Thissense of vulnerability that people are experiencing with no prospectof better economic performance at hand is really creating a lack oftrust in institutions, leaders, and processes. “Brexit” was just one
proof of this lack of trust, and so was the recent referendum inColombia.
So the context is complicated. In the last G20 summit, many
leaders made reference to the fact that people feel vulnerable andthey have fear: fear of the future, fear that their children will not bebetter off, fear that economic policy is not working. These require astronger move by leaders to give answers. And in that sense, theG20 summit in China delivered on many dossiers, by trying todevelop a strong agenda to boost growth. Particularly important was
the emphasis on innovation, and to move G20 countries into a morestructural agenda leveraging the benefits of the digital economy.
Indeed, the main outcome of the summit, the blueprint for innovative
growth, puts the emphasis on how economies can better prepare
themselves to take advantage of the digital revolution, of the new
production revolution, and of the innovative capacities of oureconomies — how to invest in those areas, upskill people to takeadvantage of it, upgrade the frameworks that we have to incentivize
more take-up of digital by small and medium-sized enterprises; how
to make sure that the digital economy is not creating just anotherdivide between the “haves” and the “have nots”. It is emblematic thatjust today we are having the last ministerial meeting of China’s G20presidency, which is dedicated exactly to these science andtechnology issues. And during the German presidency, we willcontinue working on this topic, because this is a very promising area
where all the G20 countries have a stake in its future. The mostadvanced economies like Japan are at the leading edge in manytechnological innovations, but need to continue to expand their use;some of the rest of the membership may need to improve theirinfrastructure, improve access to broadband, or improve skills forthe transformation of the economy. This is also an area wherecollective action is needed at the international level.
Another point is that the Chinese brought together the trade andinvestment agenda. We have been discussing these as separate
issues but they are linked in the world economy. This time emphasis
was put on looking at the two together, and also strengthening thewill of countries to avoid protectionist measures. Continued weaktrade growth, and the sharp slowdown in recent years, poses serious
concerns, because trade has been a major engine for growth. We arevery pleased to see that the agreement between the European Unionand Canada was approved; that is a boost to confidence and to theframeworks. But we need to make them work for all. We have been

Photo: Ministry of Foreign Affairs of Japan

G20 summit held in Hangzhou, China, on Sept. 4-5, 2016

documenting protectionism pressures along with UNCTAD and theWTO, and the outlook is not great. Incidentally, we received thismandate even before we were seated at the G20 table thanks to thestrong support of Yoichi Otabe, Japanese ambassador to thePermanent Mission of Japan to the United Nations and OtherInternational Organizations in Geneva and a former G20 sherpa, whopushed very hard to get the OECD into helping with this monitoring.
So this is something that the Chinese and the G20 framed in a usefulway. One interesting outcome was the trade growth strategy, whichlooks at bottlenecks to increasing trade; this can include the tradefacilitation agenda which countries still need to implement, or the
opening of more markets, or the implementation of major trade
agreements like the TTIP.
The tax agenda also continues to be very successful, while theanti-corruption agenda also yielded some interesting outcomes.
President Obama once said the tax agenda of the G20 might not be
capturing headlines all the time, or be understood by everyone in theworld, but it is the G20 at its best. Why? Because you identify therules or ways of operating that are not working, and you fix them.
That is where the G20 is an incredible group, full of power, especiallywith the support of very well respected institutions like the OECD.
The request to establish a global forum on steel over-capacity
facilitated by the OECD was one outcome of the Chinese presidency
that confirms this. This is a very difficult issue: steel industries aresuffering from distortions in the market and over-capacity in parts of
the world, and we need to be able to sit together and discuss theseissues and to try to influence policies taken by certain G20 membersthat affect the rest of them. So all in all, very interesting outcomes ina difficult context; I think the focus should now be on
implementation to make them count. There were also many otheroutcomes on employment (and employability) and in thedevelopment agenda, where SDG implementation took stage, and thecommitment with Africa. Finally, the Chinese G20 took a leadershiprole on climate change issues that was helpful for the achievement ofthe Paris Agreement.
Japan SPOTLIGHT • January / February 201725

COVER STORY 6

Photo: Ministry of Foreign Affairs of Japan

G7 Ise-Shima Summit in Japan on May 26-27, 2016

JS: The G20 meeting in China appeared to highlight amove towards more active fiscal policy, and awayfrom monetary policy. Do you think that is a positive
movement for helping the volatile world economy?

Ramos: Monetary policy has been playing a very important role in
keeping the economy going, but again, it is creating risks that weneed to take into account. The major message that has come fromthe G20 and the work of the OECD is that we need to rebalance thepolicy mix. One of the good outcomes of the summit is that some
economies in the G20 are now moving away from the austerity
principle. They are now considering how they can also use fiscal
tools to re-ignite growth, and to try to influence global demand, oneof the weakest parts of the economic chain. Global demand andglobal investment are very low, and therefore the thinking is about
how we move to fiscal expansionary measures that might channel
resources to investment, and impact the future output growth of oureconomies. At the OECD we will prove that, in the current context,
and after several years of fiscal consolidation in many G20 countries,
now is the moment to go “fiscal”. Putting the emphasis on
infrastructure to boost growth is also the right approach that the G20
has taken, and this is not only in terms of roads and ports andconnectivity, but also in the infrastructure of the digital world such asbroadband access, skills, or the social safety nets that are soimportant.
But this also needs to be coupled with structural reforms. TheOECD has been advising a trilogy of tools for some years: themonetary, which is now overburdened; the fiscal, which is very
important in terms of advancing and promoting additional stimulus;
but also the structural reform, for advancing the potential output of
our economies to grow further. But even then it is not only about
which tools, and how, and when. It is doing it collectively, together,with coherence among G20 members, that is going to bring a higher
26 Japan SPOTLIGHT • January / February 2017degree of confidence and effectiveness. If some countries move one
way and others move in another way it is not going to work. TheOECD produced an analysis calculating that governments could
undertake a half percentage point of GDP fiscal spending initiative forthree to four years, which would boost growth in most largeadvanced economies by about 0.5% in the first year and significantly
lift business investment, but the interesting point is that if all thecountries go for this together in a coordinated way it would not raisedebt-to-GDP ratios in the medium term — which is amazing,
because in this current context of low or zero real interest rates, youwill be gaining through the growth path, and then of course throughthe tax receipts, and then with the low interest rates debt would
remain at a manageable level.
Now, of course, there are countries that cannot go expansionary,and Japan is one of them where public debt is projected to reachnearly 240% of GDP by 2018. The goal for Japan is to have acredible fiscal consolidation plan. But there are many other countries
in the G20 that really need to move to a more balanced agenda, while
Japan also has the same element to consider in terms of advancing
on structural reform.

Role of OECD in World Undergoing
Structural Reform
JS: Now that international economic policy discussion
is moving from demand-side policies to supply-side
policies, given that the latter are basically domestic
policies, “peer pressure” would perhaps be very
important. Could the OECD be expected to play a
crucial role in that context?
Ramos: I do not think we are moving from demand-side to supplyside policies; both need to be brought together in a very different
policy mix depending on the countries we are talking about. Demandis actually one of the flagging elements in the world economy.
Probably the only policy area in which all countries need to advanceis structural reform. The “Going for Growth” publication we produce
every year tells us that countries are lagging behind on this part. But
demand is weak, so we cannot move away from boosting demandand investment, and of course the supply side is important. But weneed to get away from traditional economics and ‘think out of thebox”. At the OECD, we have launched the “New Approaches toEconomic Challenges” (NAEC), which I am also steering and helped
to establish, to try to use the best understanding of economics, anddefine best policy options. And we claim that the issues should beaddressed in an innovative way. For example, productivity growth isslowing down in advanced economies, and also in emerging
economies from a lower base. If we couple that with the inequality
story, we need to think in different ways about how to address theproductivity slowdown, which is not only about being more efficient,or producing more with less, or trying to introduce technologicalprogress in certain parts of the economy. This is part of the story,
but the fact is that you have 40% of populations in the OECD
countries that have been left behind, both in terms of income
inequality but also inequality of opportunities, because when you
belong to a low-income group, your opportunities to have goodeducation, good health or good jobs are lower. This is an economic
agenda, because you are wasting the talent of the people, of thesmall and medium-sized enterprises, and the talent of regions to be
more productive. That is why at the last ministerial meeting theOECD launched the “Productivity-Inclusiveness Nexus”, and a call toaddress the inequality and productivity stories together to produce
better outcomes.
This is exactly what we are bringing to the table of the G20: ways
to address the issues that are not traditional or standard. The
challenges we are facing require new and intelligent approaches. We
are an evidence-based organization, but we also recognize that all ofus — countries, institutions, universities — have not done well inreally understanding how the globally interconnected world operates.
The complexity, the volatility, the uncertainty is part of the equation
now, and we need to get used to it: nothing is certain, everything ismoving, the world economy is complex. Therefore by trying to beevidence-based, and leveraging the work we have been doing in theNAEC, by using complexity systems thinking, behavioral thinking,sociology, history, and many other sciences, we might produce
better answers.
But we also have the mechanisms to monitor and peer review,which are important. We are particularly proud that some institutions
like Transparency International, an international NGO leading thefight against corruption, have always said that the OECD is the gold
standard for international organizations in the anticorruption area,
because we do not only get into certain policy discussions but also
have monitoring systems and a peer-review process. The G20 has
also borrowed that and asked the OECD to monitor outcomes, suchas how well countries were delivering on the 2% growth rate
Brisbane commitment, or the gender target, which is a very
promising avenue for Japan. They have asked us to deliver systems
such as the Global Forum on Tax Transparency, but also to create theIT systems to exchange information for tax purposes.
So what is very interesting is that the G20 has this mindset of not
only producing good communiqués or good messages, but of
ensuring that the infrastructure is in place, relying on institutions likethe OECD to follow up and deliver. This is why they have also asked
us to address the steel over-capacity issue, because they know that
we will produce the best evidence and be objective, but also that wehave this framework by which countries commit to exchange
information, gather evidence, take decisions and follow up.

G-Zero World or G20 World
JS: Finally, what do you think about the idea of the“G-Zero” world described in a book by Ian Bremmer,
in which no single country or bloc has the political or
economic leverage, or the will, to drive a truly
international agenda?
Ramos: I do not believe in a G-Zero world. I believe in a G20 world.
I really think the G20 has the leverage to deliver on major economic
agendas. It comprises 85% of the global economy, and has shownthat if it acts collectively it can really arrive at very difficult but
successful agreements in many areas, as it did on the tax
agreements, on gender and on innovation. Around the table at a G20
summit you have the key to addressing the major concerns of theworld: to solve the climate issue; to ensure that the Sustainable
Development Goals are delivered; to boost the global economy andaddress the issues of inequality.
And this is not only about what happens in terms of thecommuniqués or the very important work of the sherpas. What ismore important is that leaders come together there and create adeadline by which they need to deliver to the people and the world.
You can see that for example in China’s move from being a country
not convinced about having to do something on climate change tobeing the first presidency to issue a statement at the sherpas,
encouraging everybody to agree and deliver on the climateagreement. It is a huge, huge change, but one that was possible
because of the G20. The kind of interactions, understanding anddynamics of this leaders’ group is very promising. And that is why
we need to take a hard look at what they agree, and then be
merciless in terms of pushing them on the implementation. ThereI think we can really count on this amazing group to improve thestate of the world, and of course they too can always count on theOECD to help them advance.
So no G-Zero world; rather a G20 world where every single
presidency advances important agendas and solutions, and connectswith what people are feeling. As I said at the beginning, the fact thatleaders recognize that people have fear, and that the future looks
uncertain and worrisome, gives them more energy to tackle theissues and to produce the solutions we need.

Written with the cooperation of Chaobang Ai, a Tokyo-based editor andblogger.

Japan SPOTLIGHT • January / February 201727