Last year, I completed the manuscript of a centennial history of the International Chamber of Commerce (ICC). It’s a long work: 400 pages, more or less. It will be only the second history of this remarkable institution. The first was published in 1938.
ICC commissioned the history in 2013, but has recently decided to wait until 2019 — the actual centenary of its creation — before publishing, updating the most recent chapters in 2018.
The final chapter of the current manuscript, “Future Challenges”, will likely be out of date by then. For good or ill, overtaken by events.
Or maybe not… what do you think? Here is the draft text of the final two chapters in the current manuscript. Judge for yourself.
Chapter 68: Achievements
We could say that longevity is an achievement. Certainly, in the ever-shifting terrain of international business and politics it is a kind of vindication. But what distinguishes ICC most among international organizations, private or intergovernmental is its record, over almost a century, of organic growth and development. As any history of world affairs in the past century shows, international institutions have come and, mostly, gone over a few decades’ span. ICC, too, has struggled. But it has not merely survived; it has, finally, thrived. Only two or three private or intergovernmental organizations of the same vintage still exist and none can make quite the same claims.
No other international NGO, let alone international business group, has the same wide horizons or broad base. It imposes a responsibility on ICC, rare among NGOs, to adopt decisions and plans that reconcile the many interests of its diverse membership. ICC derives its authority still, in 2014 as in 1920, from its direct representation of international businesses in almost all trading nations. The “Charter” signed by every national committee guarantees ICC’s representative structure. It ensures the NC’s access to ICC representation and services and its responsibilities to adhere to ICC policies. ICC retains the commitment of multinational enterprises that account for most international trade. Today, as in 1919, top leaders of international businesses give years of public service to ICC, conferring an invaluable stamp of authority. The collective ‘Chairmanship’ — now a formal arrangement but practiced from the start — ensures that ICC’s leaders are among the world’s most accomplished and experienced. Also, ICC speaks through, as well as for its membership. The chairs of the Commissions and of the CEO-led initiatives associated with ICC (BASIS, BASCAP, G20 Advisory Group) have a prominent role in delivering ICC’s message.
ICC survived the early trans-Atlantic misalliance to build a worldwide membership. It endured the World War and adapted to continuing changes in members’ interests and activities. It continues to expand its participation through the addition of national committees, the growth of the Court and the consolidation of WCF. It continues, also, to extend its scope through its business rules and standards, its alliance with the WEF, the intellectual leadership of the Foundation, and its CEO-led initiative with the G20.
Through the century, the Chamber faced many of the same political, financial and governance challenges that have tripped up — and submerged — both private and public institutions in the “Bretton Woods” group or in the League of Nations or the UN or on their margins. For most of these, the 20th century has been an unhappy experience. It was a time of unequalled economic growth. It brought overturning change in the technology, volume and velocity of international exchange. It also saw unprecedented conflict and market disruption. Under these pressures, the collaborative efforts of governments after the Great War barely got off the ground. Even building on that experience after the World War, collaborative institutions either quickly collapsed (Bretton Woods payment system) or slowly deteriorated (GATT). And still, after the turn of the 21st century, governments’ collaboration in the remaining key institutions (IMF, WTO, BIS) has been patchy and even discouraging. Other international institutions — such as ILO or ICAO or the patents and trademarks conventions — endure because of an essential specialization or a narrow technical function. But, over the decades ICC has carried a broad mandate, a representative structure and consensus decision-making that other institutions have been unable to sustain for more than a few decades.
ICC has been successful rather than ‘fortunate’. It was not by luck or some special endowment that ICC prospered. Rather, it was by good management when it was called for, and by the support of its members when it mattered. These two assets allowed ICC to change the world when it could, and to be changed by it when it needed to be. Its endurance allowed ICC put its stamp on the century through the international agreements it fostered. They include the 1947 GATT, the 1958 New York Convention on Foreign Arbitral Awards, the 2013 WTO Agreement on Trade Facilitation.
Of course, its high profile business leadership has been an asset to ICCs reputation. But the factor that has won and retained for ICC the confidence of inter-governmental organisations has been its outstanding record of timely, evidence-based public policy recommendations. That record began with the extensive compilation by the ICC Production Committee of devastation and recovery in the European industrial landscape (1920). It continued throughout the Great Depression with analysis and policy publications in conjunction with the Carnegie Endowment. Then, shortly after the World War the detailed recommendations in Brochure 106 (1946) cut through the heavy-handed Proposals for a new multilateral trade organization. Recently, the Banking Commission’s analysis of collapsing trade finance (2009) and the Open Markets Index and G20 “Scorecard” stand out as examples of ICCs unmatched capacity to apply the test of market reality to international governance.
The Chamber has had many reversals through the century. There have been periods of rapid growth and geographical expansion and of declining relevance, governance problems and weak finances. In the second half of the century, ICC suffered both from emerging economies’ mistrust of private enterprise and from the anti-growth enthusiasms of NGOs in wealthy economies. But the Chamber has adapted. It has continually renewed its Council and its constitution. It has restructured and expanded its national committees. It has redesigned its offer, responding to the “market” for its services among international businesses. All these helped with its endurance.
Still, ICC’s greatest strength may be its determination in pursuit of its original goals: the public — rather than the private — interests of its business members in more open and more efficient world markets. There is no stronger demonstration of this than the event that concludes this history. After a century of untiring efforts, ICC has secured multilateral commitment to cut trade red tape in the name of greater global growth and employment. It remains focussed on this agenda because the things that mattered to international business in the first era of global markets still matter: only more so. The networks of global supply are still more trade and investment intensive. But ICC has not kept its focus at the expense of a breadth of vision. ICC’s engagement with governments in the pursuit of global public goods is still as broad in the second decade of the 21st century as it was in the second decade of the 20th. What John Fahey said, briefing the press at the Constitutive Congress in June 1920, about the compass of ICC activities is as true today as it was then:
“The chief functions of the International Chamber of Commerce … will be to consider laws affecting commerce, to suggest changes and the enactment of new measures which will improve conditions; to effect reforms on their own initiative in business customs and practices which will bring better results; to gather and distribute information necessary to the better conduct of commerce and suggest to governments improvements of existing systems.”
ICC has also sought, from the outset, not to be merely a voice for international business but also to answer the demand for international business services. It set out to be, and has remained, an essential source of business infrastructure. It began with an ambition to restore trans-Atlantic trade and production infrastructure after the Great War. It succeeded beyond the limits that feeble intergovernmental cooperation imposed. Today, simply, international markets would not work as well without ICC standards and codes such as INCOTERMS, UCP, Uniform Rules for Bank Payment Obligations (URBPO), Arbitration of international business disputes, and its DOCDEX rules and model contracts. ICC’s self-regulatory standards like the ICC’s Rules on Combating Corruption and the Code of Advertising and Marketing Communication Practice (introduced in 1937) help secure the trust and transparency on which all markets depend. Its Commercial Crime Services safeguard international ocean transport against piracy and fraud and help to maintain secure currency and reputation marks.
Chapter 69: Future challenges
How will these characteristics stand up in future? Of course the future is an empty page in any history. Still there are some uncomfortable signs at present about the governance of the world economy.
Global markets under floating exchange rates have cycled several times though similar crises over the past half century. After the oil shocks of the mid–1970s and the early 1980s, integrated financial markets recycled funds from surplus to deficit countries. Loosed from the never-quite-credible bonds of Bretton Woods capital controls, the markets helped deliver the funds needed for spectacular 20th century economic development. But liberalisation of capital controls and floating exchange rates often needed more sophisticated regulation than governments could manage. Financial volatility caught out mis-governed national markets during the regional debt crises of the 1980s and the late 1990s. Still, the markets recovered to recycle the huge current account imbalances that appeared in the late 1990s, in part a legacy of the earlier crises. The first years of the 21st century saw an equities bust — the dot.com recession — that cooled financial markets briefly and led to relaxed monetary controls. But the recycled surpluses helped to re-inflate an asset bubble floated by easy money, regulatory insouciance and social lending. A bigger, deeper, more prolonged crash followed. The market had gamed itself as well as customers and regulators.
The price we have paid for otherwise valuable market integration, when coupled with poor regulatory control, has been repeated sequences of bubble and bust. It has begun to seem this is the natural rhythm of global capitalism. Yet governments have done little to build a better system. Every crisis gives them a political opportunity to remedy structural and systemic faults. Often there have been some domestic market regulatory reforms. But collaboration on international system reform in the IMF and WTO’s trade regime, and in domains such as investment and competition policy remains weak. The G20 began with determined action, up to its London Summit in 2010. Since then, its bland resolutions, like those of the G8, salute the opportunities with a nod, but often pass by without effective action as the ICC’s mixed-to-poor ‘scorecard’ reveals. Still, the changes needed for stronger trade growth and better IMF performance, or to ensure major banks do not need a public bailout every few years are no mystery. In some cases (the IMF, the BIS) the governance changes needed have been nearly complete for some time.
The 21st century could see a reprise of past mistakes. According to WTO, trade protectionism is rising, although probably not as fast as it has during other periods of recession. But WTO member governments have not taken arms against protection. WTO’s ‘big round’ negotiating strategy now looks unworkable. The modest agreements on ‘impediments’, extracted with difficulty at Bali 2013, were the first in almost twenty years. WTO members must follow-up — with agreements on trade in services, agriculture and manufactures — or WTO and its essential dispute settlement mechanisms will loose credibility. But the largest economies (USA, EU, Japan, China) are paying lip-service to multilateral agreement. They are directing their efforts, instead, to creating mega-regional agreements (TPP, TPIP, RCEP). To the extent that these agreements build on the foundations of existing WTO commitments, the degree of trade discrimination they imply — the margins of tariff preference, say — may seem small. But, even if the discrimination is small, trade-blocs are inimical to the global business networks operated by ICC’s members. They fragment markets and add to the costs of global supply networks, especially for SMEs that comprise the majority of members of ICC-associated Chambers.
It is almost impossible for ICC, as a private organization, to bring its resources to bear on the solution to international problems unless there is effective intergovernmental collaboration. This was the lesson of the 1930s, especially, for ICC. It is still true a century later. The G20 is at present the highest-profile global governance body. But as an instrument of multilateral collaboration, it has some potentially-fatal drawbacks. It has a small, self-selected, membership. It is a transient organization that lacks any powers delegated by its members. ICC has established an effective — even innovative — relationship with the G20. It contributes ideas through its CEO-led advisory group and provides public support for market liberalizing decisions. It supplies G20 governments with objective feedback on their programs. Still, there is little sense that G20 will be a long-term partner for ICC.
What happens next in global market governance will likely reflect the continuing redistribution of wealth and production in the global economy between the industrialized and the emerging economies. It may also depend on the extent to which changes in the location of wealth and production affect the global and regional expression of economic interest by states. It is unclear whether the growing wealth of India and China will be matched by greater contributions to governance. But, for now, the prospect is a ‘flatter’ distribution of wealth and economic power in a ‘multi-polar’ world marked by mega-regional trade and economic agreements that, at least at the margin, are mutually discriminatory.
ICC’s challenge, then, will be to minimize the costs to its members of a trading economy partitioned into two or three mega-regional and ‘the rest’. Its ability to do so may depend on the whether the national committees in each ‘pole’ can influence governments to keep markets open on a de facto non-discriminatory basis. Also, ICC will need to continue and probably to increase the efforts it has made in the past decade to extend and enliven its presence in China.
It is possible, too, that ICC could play a still more central role if markets coalesce in giant trade blocs. If they emerge, the mega-regional agreements will not re-build the trade framework from scratch. All will likely rely on — and even cite — WTO’s rules and provisions as their foundations. (So, paradoxically, the members of mega-regional agreements will have a large stake in maintaining a credible multilateral system.) Like WTO’s rules, ICC’s codes and standards will stand out as global business infrastructure linking markets across the boundaries of mega-regional membership. They will be essential reference points for the private supply networks that will no doubt continue to account for most global trade and a large share of global production.
“Only two or three private or intergovernmental organizations of the same vintage still exist…” Among private international organizations, the most significant are the International Committee of the Red Cross (1863, but it is not a universal membership organization); the International Cooperative Alliance (1895); and the remnants of the International Federation of Trade Unions (1919, the ICFTU and the ITU are the main splinters). Among IGOs, the ITU and ILO, both formed as private-government partnerships before the Great War but became UN specialized agencies after the World War. ↩
WCF = “World Chambers Federation”. The short version: ICC is not, as many guess, a federation of chambers of commerce. Instead, it is based on 90-something National Committees each of which includes a number of national business organizations including chambers of commerce, employers, exporters and individual firms. WCF is an ICC-created network of Chambers of Commerce from around the world. It’s basically a big annual networking event for Chambers but it also operates a couple of ICC-owned trade-infrastructure services.
“Greater contributions to governance…” Especially in the case of China. Well-accredited Western experts speak of China as a “partial power” whose capacity to project power beyond its immediate region is limited. See (Shambaugh, 2013) and whose interest in a greater role in global governance is correspondingly smaller than that of the Western countries. ↩