Trade wars lose US its competitiveness top spot: WEF

Geneva: The United States fell to second place behind Singapore in the World Economic Forum´s flagship Global Competitiveness Report, with the slippage linked in part to President Donald Trump´s trade wars.

The Forum, organisers of the glitzy annual gathering of business and political elite in Davos, have released an annual competitiveness report since 1979 that assesses which economies are well placed to see productivity and long-term growth.

While the report noted that the US "remains an innovation powerhouse" and the world´s second most competitive economy, some trouble signs have emerged, the Forum said.

"There are no two ways (about) it. It is important to ensure the countries are being open to trade," said Saadia Zahidi, a Forum managing director, when asked to comment on the impact of the tariffs imposed by the Trump administration.

She noted the lack of "hard data" on the impact of US tariffs imposed on several of its main economic partners, as the set of products impacted remains limited compared to overall trade.But, she said, "the sentiment" surrounding investing in the US "has been going down," she told reporters in Geneva.

"That will end up impacting long-term investment; that will end up impacting how decision makers are thinking; that will end up impacting the view of non-American business leaders (of) the United States. So it does matter in the long-term," she added.

The Forum´s competitiveness report relies in part of executive surveys, in addition to hard economic data. Zahidi said that the US had also fallen in the rankings because healthy life expectancy in the country was now lower than in China.

In data published last year, the World Health Organization said that a newborn in China could expect 68.7 years of healthy living, compared to 68.5 for American newborns. The report measures competitiveness on a scale of zero to 100 based on factors that include

infrastructure, health, the labour market, the financial system, quality of public institutions and economic openness.

Singapore scored 84.8 out of 100, but the Forum noted that the country had benefited from trade diversion through its ports triggered by the tariff battles between the world´s top economies.

At 83.7 the US slipped from a score of 85.6 in 2018. Hong Kong rose four spots to claim third place with a score of 83.1, but the Forum said the data used in the report was collected before waves of pro-democracy protests began shaking the financial hub.

The Netherlands finished fourth -- up two slots from last year —while Switzerland came in fifth place. —AFP

Geneva-based think tank said economies around the world have failed to boost productivity levels despite $10 trillion of central bank stimulus unleashed since the global financial crisis of a decade ago.

Productivity, a measure of an economy’s ability to generate growth, has become of a matter of increasing concern among policy-makers around the world as headline growth rates remain weak and fears emerge of a new economic slow-down.

The WEF urged countries to use fiscal policy and other incentives to boost research and development, workforce skills and infrastructure. “What is of greatest concern today is the reduced ability of governments and central banks to use monetary policy to stimulate economic growth,” Zahidi said.

“This makes it all the more important that competitiveness-enhancing policies are adopted that are able to boost productivity, encourage social mobility and reduce income inequality.”

Highlighting some of the trends captured by the report, the WEF noted in particular that technological innovation was racing ahead of workforce skills in many countries and urged governments to focus on labor and education policies.

Citing the threat of rising protectionism, the Paris-based Organization for Economic Cooperation and Development (OECD) said last month the global economy could be entering a new, lasting low-growth phase. It estimated global growth this year of 2.9 percent, the lowest since the 2008-09 crisis.