In his keynote address at the 51st annual meeting of worldsteel (World Steel Association) held in Brussels on October 16-17, Angel Gurria, Secretary General of the Organization for Economic Co-operation and Development (OECD), began by saying that there was a lot at stake for the global economy in the months to come, with signs that the economy is escaping from its period of low growth. He said that OECD economies are expected to grow at an average of 3.5 percent in 2017 and at 3.7 percent in the following year. Before the crisis, OECD growth was at a cruising speed of 4 percent, he said, adding that this has not yet been achieved, which gives an idea of the damage done by the crisis and so we are not entirely out of the woods yet.
He also pointed to the fact that real wages in the OECD have only grown by 0.2 percent since 2003, while also noting that households have not yet regained the purchasing power they had in 2007. Furthermore, he stated that the average income of the richest 10 percent of the population is 10 times the average income of the poorest 10 percent, stating that this trend is also moving in the wrong direction. In passing, he mentioned a possible threat to the global economy from the rapid rise in credit growth in countries such as China, Russia and India.
Turning to the issue of global trade, the OECD Secretary General stated that global trade is foreseen to grow by 4 percent both this year and next year, following the flat or negative growth seen in recent years. He added, however, that while 4 percent is considered a good level of growth in global trade following a long period of stagnant GDP growth, in fact it should be at around 8 percent, but this again shows the impact of the crisis. He also remarked that structural factors, not just cyclical ones, are at work. For example, in China booming investment has been a major driver, whereas the country has now started to adapt its growth in line with a more sustainable model.
New technologies and digitalization may be game-changers, Mr. Gurria stated, adding that the steel industry is now focusing more on value-added than on volumes and tonnages. Digitalization will have a key role, he said, in particular with regard to smart control of furnaces. Its benefits will improve efficiency and increase safety of workers.
Gurria went on to say that changing trade patterns will need to be taken into account. As for what kind of policy package should be recommended, he suggested an integrated approach so that benefits would be more evenly spread. He said investments need to be made in infrastructure and people, business should be made easier for SMEs, trading needs to be made cheaper, tariffs should be cut, barriers to services should be removed and credit needs to keep flowing to industry. Other key issues for the OECD are to ensure transparency, with fair and effective rules of the game needing to be defined, while he also said that more needs to be done in the area of anti-corruption.
Regarding the steel sector, the OECD Secretary General remarked that steel capacity has eased this year, though the numbers continue to be very large. In the longer term, steel demand growth is expected to be sluggish, while structural imbalances will continue to plague the market. Another problem, he said, is that many subsidy problems remain outside the scope of the WTO. He stated that all companies should be treated equally, regulated and taxed in the same way, with the same obligations in terms of labor and the environment, and that a level playing field should be put in place. Incentives should be such that non-viable firms exit the sector. He commended the decision of the G20 leaders in Hamburg when they chose a multi-lateral approach on the steel overcapacity issue as opposed to a unilateral approach. The alternative, he added, was in nobody’s interest.
In conclusion, Mr. Gurria stated that steelmakers must abide by the signals the markets are giving, going on to say that the solution lies in innovation and openness and not in protectionism and in a closed environment. He said furthermore that it is a major responsibility of the steel industry to revive faith and trust in open markets and to save globalization from itself.