Educational Program: How Reporters Can Use the Hinrich-IMD Sustainable Trade Index 2022

This educational program, developed by The Association of Foreign Press Correspondents  (AFPC-USA) in partnership with the Hinrich Foundation, provided foreign correspondents with the opportunity to learn from two experts, Steve Olson and Christos Cabolis, hear an overview of exactly what the Sustainable Trade Index (STI) is, and learn about policy implications and how reporters can use it. The STI is a tool like the World Competitiveness Ranking which helps shape the way we  think about economies. The STI can also highlight forward-looking issues. For instance: how modern-day slavery will affect our approach to supply chains. The content shared during this virtual  meeting also drew foreign correspondents' attention to some of the great visuals produced by Visual Capitalist in their executive summary of the STI which might be useful for  their reporting. 

The educational program took place on February 2, 2023 and was moderated by Patrícia Vasconcellos, the U.S.s and White House correspondent for Brazilian TV network SBT. The Association of Foreign Press Correspondents in the USA (AFPC-USA) is solely responsible for the definition and development of this program.

Stephen Olson

Patricia Vasconcellos

Christos Cabolis

Stephen Olson is a Senior Research Fellow at the Hinrich Foundation. Over the course of his more  than 30-year international career, Olson has lived and worked in Asia, the Middle East, and the  United States, holding senior executive positions in the private sector, international organizations,  government, and academia. He began his career in Washington, DC as a US trade negotiator,  serving as a member of the US negotiating team during NAFTA and the US-Canada FTA. He went  on to serve as President of the Pacific Basin Economic Council in Hong Kong. He subsequently  became Vice-Chairman at the Cairo-based ARTOC Group for Investment and Development. He  has also held Visiting Professor positions at various universities. In his current position at the  Hinrich Foundation, Mr. Olson conducts analysis and research on global trade and investment  issues, including US-China relations, the global trade architecture, and sustainable trade.

Dr. Christos Cabolis is the Chief Economist and Head of Operations at the IMD World  Competitiveness Center where he manages the five annual rankings related to competitiveness of 65  economies around the world and their performance with respect to digital and talent dimensions,  smart city index, and most recently, the sustainable trade index. He is also an Adjunct Professor of  Economics and Competitiveness at IMD. Before joining IMD, Christos was an Associate Professor  of Economics and Finance ALBA Graduate Business School at The American College of Greece.  He was the Executive Director of the International Center for Finance at Yale School of  Management from 2002-2004, where he is now Research Fellow. From 1997-2002 he was a lecturer  of Economics at Yale University where he also served as the Dean of Jonathan Edwards College.  Christos has also taught at the University of California at Santa Barbara and the University of North  Carolina's Kenan-Flagler Business School. Christos holds a BA from the University of Athens, an  MA from the California State University, Long Beach, and a Ph.D. in Economics from the  University of California at Santa Barbara. He has published in the Review of Financial Studies,  Journal of Law and Economics, and Journal of Banking and Finance among others. Christos is also  the recipient of the Inaugural "Jaime Fernandez de Araoz" Award in Corporate Finance.

Below, readers will find a summary of the most important takeaways from the  presentation.

Dr. Christos Cabolis gives a complete explanation of what the Sustainable Trade Index is,  highlighting countries and providing examples to foster a better understanding of the index.  

“The Sustainable Trade Index was launched as a collaborative work between the Hinrich  Foundation and the IMD, World Competitiveness Center, in November 2022. This is the  4th Edition. What we try to do here is to measure the readiness of [the] economies to  participate in the global trading system in a matter that supports the long term objectives  of Economic growth, societal Development and Environmental Protection,” he says.

Using a visual presentation, Dr. Cabolis dives into the main countries represented in the  STI. “This is a very important part of the world. The 30 countries we studied capture about  69 percent of the global GDP [gross domestic product] and about 63 percent of the global population. So we are discussing a very big component of the global economy and the global  demographics. It consists of countries that are both developed and developing,” he  explains.

The index international journalists and correspondents will find most helpful gathered 70 criteria included in three pillars.

● ECONOMIC PILLAR: Dr. Cabolis says that this pillar measures the ability of an  economy to promote growth through international trade. “The criteria we apply  here are related to the economy like inflation, investments and at the same time we take  into consideration the trade system”, he says. “We study tariff barriers, non-tariff barriers,  concentration of goods and concentration of countries that are exporting to this  economies”

Hong Kong, Singapore and South Korea dominate the economic pillar; Myanmar has the  lowest level. “What makes those countries stand out? What our analysis shows is that technological  innovation is a component that is very important for the countries that are ranking very  high. They also have robust macroeconomic fundamentals and of course they have a very  open trading environment,” he explains.

●  SOCIETAL PILLAR: According to Dr. Cabolis, this pillar captures the social factors that  contribute to an economy’s capacity to trade over a long period of time. “For this, we try to  capture two things: the development of human capital which is a very important  component and also we try to capture whether the public supports the trade. How do we  do that? With respect to the development of human capital we measure things like  education, good health which is for example life expectancy at birth, labor standards. With  respect to public support of trade we measure things like income equality or political  stability,” Dr. Cabolis explains.

He also talks about the presence of modern slavery and how this reality impacts global trade. New Zealand, Canada and Australia represent the top three countries on this pillar. The last positions are taken by Pakistan, India and Myanmar.

●  ENVIRONMENTAL PILLAR: Dr Cabolis notes that this pillar captures by which  extension an economy is engaging in environmental sustainable trade and how the  development of the environmental capital of a country is seen now and in the future.

“How do we measure those components now, at the present? We take into consideration  the quality of air, the quality of water, and the deforestation ratio that a country has. How  do we measure the future? Well, by trying to establish what kind of environmental  standards a country has to see what is going on with carbon emissions of a particular  economy,” he explains.

The leading countries in this pillar are New Zealand, the U.K. and Mexico. The last positions are  taken by Brunei and Russia.

●  STI OVERALL RANKING In the overall ranking of the Sustainable Trade System 2022,  New Zealand, United Kingdom, Hong Kong, Japan and Singapore appear in the first five  positions. Pakistan and Russia are in the last positions.

ON HOW THE SUSTAINABLE TRADE SYSTEM CAN BE USED BY JOURNALISTS

After the presentation of Dr. Cabolis, Stephen Olson highlighted some topics that  journalists might find useful while analyzing the Sustainable Trade Index.

Olson says that the STI provides a unique prism to assess in a more holistic way how  different countries are approaching international trade. “We are not only looking into the economic  aspects, which countries are getting rich through international trade but we are also looking at the  societal and environmental aspects of the way they engage in the International trade. And that  allows us to make a preliminary conclusion to which extent these countries are engaging int trade,  in a way it will be sustainable in a longer term,” he says.

Olson explains that journalists will find interesting angles for stories in using the STI.. Below are some examples.

OVER AND UNDER PERFORMING COUNTRIES

“So you have the richer countries towards the top of the index and you have some of the poorer  countries towards the bottom of the index. But one thing we find interesting is to look into the  countries that are either over performing or underperforming their income level,” he says. To better explain this perspective, he notes that the United States is under performing in the  index. “The U.S. ranks number 2 in terms of per capita GDP. However on  the STI the U.S. ranks number 9,” he says.

Olson also notes: “One of the primary reasons for this U.S. under performance is because of the  large number of tariff and non-tariff measures that the United States has put in place in recent years.  So if the United States was interested in thinking about engaging in trade in a more sustainable way  some of those tariff and nontariff barriers would be a good place to start,” he argues. 

If we take a look at a country that over performed in the index, like the Philippines, we can see that the country over performed its income level by 11 or 12 spots. “What is the Philippines doing so well? A big part is driven by a very strong performance on the environmental pillar. The Philippines scores  number 5 in the environmental pillar as a result of a number of factors,” Olson says. He adds that the country has high standards for environmental agreements. 

MODERN DAY SLAVERY AND DEVELOPED COUNTRIES

Olson says the STI also provides a framework for thinking about future issues that do not enter the trade discussion as much as they should. Consider, he says, the role of large developed countries in  modern day slavery. “Most of the large developed economies that we looked at maintain fairly high  labor standards within their own borders but unfortunately this was undercut by the fact that many  of the same economies have a propensity to import products that are at risk of being produced by  modern day slavery. So although they might not tolerate modern day slavery within their own  borders, they are part of this global demand which is allowing modern day slavery,” he says. 

LIFE EXPECTANCY

According to Olson, life  expectancy is another factor that should be considered (how much a country takes care of its people, for example). He says COVID-19 might have impacted the life expectancy in the last year but it’s not the only reason. “If you look into a  economy like the United States, the coronavirus is not the entire explanation for this decline in life  expectancy that we are seeing,” he says, pointing t the fentanyl and opioid crisis as well as the growing number of suicides, particularly among some age groups in the U.S. Olson argues that it is important to think about realities that also affect life expectancy in a country in regard to the trade discussion and the sustainability of the trade over time.

● THE FUTURE OF THE WTO Olson offers valuable insights into the dysfunction within the World Trade Organization (WTO). According to him, the WTO is basically dead and this is a consequence of a  disturbing increase in tariff and non-tariff barriers. “The ability of the WTO to negotiate new trade  rules, to update rules or to negotiate more trade opening agreements has almost been entirely drained by the divisiveness, by the factions within the WTO membership which makes it impossible to agree on anything as a consequence thinking that the entity works with consensus,” he says, arguing that what the world sees is merely the law of the jungle.