December 25, 2020

'Hinrich Foundation Sustainable Trade Index 2020' Presents Four Recommendations on Building More Resilient Communities in the Post-Covid-19 World

According to the 2020 version of the Hinrich Foundation Sustainable Trade Index (STI), "Sustainability was gaining more traction in the years leading up to the Covid-19 pandemic. Firms stepped up commitments to corporate social responsibility (CSR) initiatives. Investors started incorporating environmental, social and governance (ESG) issues into their asset allocation decisions. And consumers voted with their wallets to support sustainable production, purchasing goods with certified claims regarding their environmental impact and use of labor."

Commissioned in 2016 by the Hinrich Foundation, an independent charitable foundation headquartered in Hong Kong, and devised by The Economist Intelligence Unit (The EIU) in 2016, the STI "was originally created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, executives and leaders from civil society must take into account when managing and advancing international trade. That purpose remains, but we hope that governments and businesses around the world start to also view it as a tool for building resilience into their international trade policy and their economies, more broadly."

What is more, the STI constructs "an index to measure the capacity of 20 economies—including 19 in Asia, and the US as an external benchmark—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection and strengthened social capital. The 2020 edition of the index is the 3rd, following the 2016 and 2018 versions."

The key results and findings from the 2020 STI include:
  • "For the first time, there is a tie atop the index. Japan and South Korea both receive scores of 75.1 (out of 100), placing them five points clear of Singapore in third place (70.0) and a group of three other economies—Hong Kong, Taiwan and the US—in the high 60s. These six together have been the mainstays at the top of the index throughout the three, slightly different iterations of the STI that have now been published since 2016. But this is also the first time for either Japan or South Korea to rank first in the index; Singapore was number one in 2016 and Hong Kong in 2018.
  • "The economic pillar is, in this edition, by far the most tightly packed, which was also the case in 2016. The difference in scores between the top-ranked economy, Hong Kong at 69.1, and the economy at the bottom, Laos at 44.6, is just barely over 25 points. The only consequential moves in the top half of The 2020 STI finds four key areas the pillar were by China and the Philippines. China continued its ascent up the ranks, although more because of consistency than progress. The Philippines rebounded to 9th, where it began in 2016 before slumping to 15th in 2018.
  • "To the praise Taiwan already garnered this year for its effective handling of the Covid-19 outbreak, we can add the accolade of being first in the social pillar of the STI, the second time it achieved the rank. It is further recognition that the economy is getting many things right.
  • "Japan registers the strongest performance in the environmental pillar (80.0), leading the same group of four—Singapore (78.7), Hong Kong (77.4) and South Korea (75.2), being the other three—that has excelled, with a few exceptions, across all three pillars of the STI from the start. Then there's a considerable drop. China and the US come next in the rankings, but are both 20 points below the top four in scores.
  • "Pretty much all we can be certain of is that there is going to be another crisis at some point. Preparedness matters. The original intention behind the STI was not necessarily to serve as a tool for crisis preparation. But it has taken on that dimension. We hope that governments and firms around the world, not just in Asia, will use it as such."

In presenting its key recommendations, The EIU says: "A good start towards avoiding having to ask what if when the next crisis hits would be for policymakers, business leaders, international institutions and NGOs to address the following four areas:

Reducing inequality

"The pandemic has just exacerbated an existing trend. Unless significant steps are taken now, the gap between the rich and the poor will only widen further when the next crisis comes, making sustainable trade all the more difficult."

Improving education

"Without progress in education, many economies in the STI may find themselves left behind."

(Re)lowering barriers to trade and investment

"None of the developing economies (in the STI) have the internal demand or the capital base to grow, let alone grow in a manner that will alleviate poverty and create a middle class. Trading, and trading sustainably, are really their only paths. That means keeping their economies open and welcoming the kind of foreign investment that supports those goals."

Building on the environmental benefits of the pandemic

"Governments have an opportunity to apply the environmental lessons learned from the crisis to their policy decisions and ask themselves questions about how to retain the gains already made, such as:
  • "With fewer cars on the road, and industrial demand for electricity down, how can we continue reducing air pollution when those two return to normal? Should they return to normal?
  • "Similarly, how do we build upon and accelerate the drop in emissions that the world will see in 2020?
  • "What can be done to ensure that the improvements in freshwater pollution levels are not lost?"

On Oct. 27th, 2020, Hinrich Foundation speakers presented the STI's key findings and discussed politics and economics in the wake of the pandemic at the Excelsia- Lumen Symposium Series. As explained by Pragya Bhatnagar, a Research Associate with the Hinrich Foundation where he focuses on International Trade Research, the virtual event entitled "Building Back Better with Sustainable Trade" "featured presentations from six experts in the fields of international trade, education, politics, technology, and culture. The speakers surveyed the post-pandemic landscape and identified key challenges – and opportunities – facing global society."

Do you find the STI a useful tool for building more resilient communities in the post-Covid-19 world? Do you agree with the report's recommendations?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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