Mar 24, 2021, Paris: CREATING an emergency rapid response forum and revising risk management policies and frameworks are some of the broad recommendations made by the Organisation for Economic Cooperation and Development (OECD) to the G7 nations on building economic resilience.

The report, requested by Britain which is currently holding the G7 presidency, underlines the need for governments to cooperate both with the private sector and with other countries to boost transparency, discipline export restrictions and adhere to international regulation and standards.

The devastating impacts of the 2008 Global Financial Crisis and now the COVID-19 pandemic will continue to leave lasting scars on economies and societies, says the OECD.

With the risk of other systemic threats on the horizon – starting with climate change but also spanning security threats, including cyberattacks – it is critical to learn the lessons of these and previous crises in order to tackle the vulnerabilities of our economic system, absorb shocks and engineer a swift rebound.

Ensuring the resilience of global supply chains of essential goods is crucial, the report says. An emergency Rapid Response Forum would provide the world's biggest advanced economies and other governments with a means of upstream policy coordination and, particularly, consultation ahead of the imposition of any trade restrictions. Such an initiative could also prepare timely cooperation on logistics, transportation, procurement, planning and communication.

"As we have seen in the past decade alone, in today's interconnected world, shock events can quickly cascade across borders and economic sectors, and have devastating effects on people's lives, jobs and opportunities, and on their trust in governments, institutions and markets," said OECD Secretary-General Mr Angel Gurria said.

"Building economic resilience in the face of future shocks is a global challenge for the post-COVID world. For global markets and supply chains to serve as a source of resilience, governments and the public need to have the confidence that markets are and will remain open and fair, including during times of stress," he added.

The report says the COVID-19 crisis has caused a huge surge in demand for certain goods, notably in the health and information technology sectors but argues that global supply chains have been part of the solution. After shortages of masks and personal protective equipment, in particular at the beginning of the pandemic, both global production and trade of facemasks later increased tenfold to meet demand.

Strategies based around a reliance on domestic production are unlikely to ensure supply of essential goods and can remove important risk management options such as the diversification of sourcing, the report says. Global supply can allow products to be sourced from the most efficient and cost-effective supplier and enable access to more and different varieties of medical products, ensuring that future surges in global demand are fully met.

The report looks at how to build resilience in global markets, including by reducing distortions and promoting a level playing field for competition, trade and investment.

Ensuring global markets are reliable and predictable includes ensuring access to critical raw materials. This calls for enhanced cooperation to develop international agreements for stronger monitoring, notification and disciplines on export restrictions on critical raw materials, promoting responsible sourcing and increasing circularity in this sector. Tackling harmful practices that undermine trust such as foreign bribery is also key.

The OECD proposes governments revise their risk management policies and frameworks to ensure a systemic all-hazards-and-threats approach to resilience with international co-operation playing a central role. This could be supported by a comprehensive evaluation of the lessons learnt from the COVID-19 crisis, including benchmarking and comparison of national preparedness responses.

It also advises that emerging technologies, particularly digitalisation, can contribute to boosting resilience through prevention, absorption and recovery capabilities but can also pose threats.

Among its recommendations, the report says governments could strengthen the responsiveness of innovation systems to global policy challenges, reconsidering the way they are organised, structured and financed. It also proposes linking support for innovation more closely to broader public policy objectives and improving international collaboration on emerging technology governance, including by moving towards smarter and more agile regulation.