What happened at the 2017 World Economic Forum?

World Economic Forum
By Eleanor O'Neill, CA Today

23 January 2017

In the same week that Theresa May publicly addressed plans for Brexit and Donald Trump was sworn in as President of the United States, economic and political leaders gathered in Davos for the 20th World Economic Forum (WEF).

CA Today has rounded up the top five most important questions for CAs raised at the event.

1. What position will Britain have on the world stage post-Brexit?

Following her speech regarding the government's plans for Brexit earlier in the week, Prime Minister Theresa May addressed the Davos congregation with talk of unity and forging international relationships.

In an attempt to inspire confidence in Britain as a global business leader without the EU, Mrs May denied that the country was turning its back on Europe.

She said: "It was simply a vote to restore, as we see it, our parliamentary democracy and national self-determination. A vote to take control and make decisions for ourselves. To become even more global and internationalist in action and in spirit.

"Because that is who we are as a nation. Britain’s history and culture is profoundly internationalist.

"We are a European country, and proud of our shared European heritage, but we are also a country that has always looked beyond Europe to the wider world."

German Finance Minister Wolfgang Schauble responded that the PM's claim of the UK becoming "truly global" after Brexit would only be "taken seriously" if she did not slash taxes to attract business.

On the last day of the conference, Chancellor Phillip Hammond joined Thorold Barker of the Wall Steet Journal, Ngaire Woods from Oxford University, Barclays' Jes Staley and Mario Monti of Bocconi University at a panel discussion on the new vision for the UK.

Focus remained on the economic consequences self-regulated border control would have on both the UK and the EU in the long run, with the Chancellor claiming that any new policy would not turn away highly-skilled workers.

2. How do we tax multinationals fairly?

Corporate tax came under scrutiny by a panel of politicians, economists and inequality experts discussing multinational tax in the wake of the Panama Papers leak.

Winnie Byanyima, Executive Director of Oxfam International, called for governments to take responsibility and regulate corporate tax competition across borders.

She said: "It’s worrying now. We’ve seen the promise from President-elect Trump to cut corporate tax. We’ve heard Theresa May threatening to make Britain a little island with low tax rates on the shores of Europe.

“These are steps in the wrong direction."

Nobel Prize-winning economist Joseph Stiglitz brought FinTech to the fore of the corruption discussion on day one, claiming that fading out currencies like the dollar in favour of a purely digital economy would cut corruption.

He said: “I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cyber-security, but it would certainly have big advantages.”

It is a move that Indian Prime Minister Narendra Modi put into action last year, removing 86% of his country's currency from circulation in an attempt to curb tax evasion and shut down India's shadow economy. While still at an early stage, the large deposits of old notes resultant from the initiative may be encouraging lower lending rates and therefore increasing credit growth.

3. Is globalisation still a good thing?

Chinese President Xi Jinping addressed the growing resentment toward globalisation among certain circles in his opening statement to the assembly of leaders.

He said: "There was a time when China also had doubts about economic globalization, and was not sure whether it should join the World Trade Organization.

"But we came to the conclusion that integration into the global economy is a historical trend. To grow its economy, China must have the courage to swim in the vast ocean of the global market."

President Xi said that China would continue to champion international free trade and set out a plan fix what are perceived to be the big issues of globalisation: sustainability of steady growth, inadequate global economic governance and uneven global development.

Ill-feeling still remains, however, and Gillian Tett, US Editor of The Financial Times, questioned in a session on 'protectionism' whether the world was headed for a new trade war.

CEO of UPS David Abney said: “It is too early to press the panic button. We need to see what ends up happening.”

Overall, the feeling was hope that trade deals would continue to be made between nations worldwide, including the Trans-Pacific Partnership (TPP) between the US and a dozen Asian countries, and a new post-Brexit agreement between the EU and the UK.

4. Are we prepared for the future of finance?

The Fourth Industrial Revolution was a common theme in many of the sessions in Davos, as was the emphasis on handling escalating disruption. The IMF, for example, issued its first white paper on virtual currency during the course of the week, noting that the rapid expansion of the market for digital cash required the attention of banks and policymakers.

Traditional financial institutions are finding themselves in competition with emerging FinTech start-ups, many of whom had an impressive presence at the conference. While critics in Davos argued that the concern surrounding the shift toward digital is premature, some are handling this new influx with collaboration.

JP Morgan, for example, expects to start settling loan trades using blockchain technology within a few months, thanks to a partnership with Digital Assets Holdings.

These innovations come with their own debate, however, on whether FinTech companies should be held to the same regulatory controls as traditional banks. 'Risk' may well have been the word of the week with radical new practices being treated with suspicion in some corners.

Citi's Chief Economist Willen Buiter stated: "We know that bitcoin itself is a complete failure and shows the number one law of programming and software: anything that can be programmed can be hacked."

Meanwhile, Deutsche Bank CEO John Cryan pointed to regulatory pressures as the main factor behind a lack of innovation in financial services and traditional institutions.

Economist Kenneth Rogoff concluded: "There's a phenomenal amount of innovation right now in finance, it's hard to know which direction it will take."

5. What lies in store for the US economy under President Trump?

Eyes turned to the US on the final day of the WEF as President Trump celebrated his inauguration, after a week of speculation concerning the new administration's policies on trade and international relations.

Anthony Scaramucci, new Head of the White House Office for Public Liaison, was in attendance and protested that, despite promises to dissolve trade partnerships and 'put America first', President Trump may in fact "be one of the last great hopes for globalisation".

He argued that measures to protect the middle classes of the US could in fact boost trade by raising the level of income and therefore boosting purchasing power.

However, Trump's pledge to dissolve the TPP, was still cause for concern for many attendees.

Jack Ma, who met with the incoming President ahead of the WEF, on the other hand thought that a trade war between the US and China was unlikely and ill-advised. He said: "I think we should give President-Elect Donald Trump some time. And he’s open-minded. He’s listening.”

Former Vice-President Joe Biden, speaking ahead of his exit from office, echoed the sentiment from China's President Xi, acknowledging that globalisation has had its issues but also that international trade and greater integration had lifted millions of people out of abject poverty.

He said: “I am a free trader and a supporter of globalisation, but it has deepened the rift between those racing ahead at the top and those struggling to hang on in the middle, or falling to the bottom.

“Our goal should be a world where everyone’s standard of living can rise together.”

Image credit: Drop of Light / Shutterstock, Inc.


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