Sustainable Trade Index 2018 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

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

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

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 South Korea Singapore Japan USA Taiwan Sri Lanka China Vietnam Philippines India Malaysia Thailand Indonesia Brunei Pakistan Bangladesh Laos Cambodia Myanmar

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

Overall results

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

Vietnam’s performance: Change in scores from 2016 Social pillar Change Economic 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 * 1.5) Financial sector depth 1.6) Foreign trade and payments risk 1.7) Export market concentration 1.8) Export product concentration 1.9) Foreign Direct Investment 1.10) Gross fixed capital formation 1.11) Trade costs * 1.12) Technological innovation 1.13) Technological infrastructure 1.14) Growth in labour force * 2.1) Inequality (Gini coefficient) 2.2) Educational attainment 2.3) Labour standards 2.4) Political stability   Improving Negligible Backsliding Environmental pillar Change 3.1) Air pollution 3.2) Deforestation 3.3) Water pollution   3.4) Environmental standards in trade * 3.5) Transfer emissions * 3.6) Share of natural resources in trade

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

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