Business & climate are no longer an either-or choice, says Philippe Varin

Philippe Varin, chair of the International Chamber of Commerce, which represents over 45 million companies in 170 countries, is on an India visit while COP29 is underway. In a one-on-one interview in New Delhi, he tells Veenu Sandhu that any investment today must factor in sustainability from the very beginning, and explains why green trade finance is critical. Edited excerpts:

 

How do you assess the current global trade environment, especially in the context of rising protectionism and geopolitical tensions?

 

To address this, we need to consider both the short-term and medium-term perspectives. In the short term, trade and global GDP have not seen significant disruptions. Global trade is expected to grow by 2.7 per cent this year and 3 per cent next year, according to forecasts. However, within this broader picture, we observe varying trends. Asia is growing at 4 per cent, while the EU lags at about 1 per cent.

 

This macroeconomic stability hides some underlying shifts. For example, tensions are mounting, as evidenced by the sharp rise in trade barriers. Last year, there were 3,000 barriers globally, a significant jump from 600 barriers just five years ago. These barriers, which include export restrictions and regulatory measures like the EU’s carbon border adjustment mechanism, may create creating fragmentation.

 

A major concern is the current functioning of the World Trade Organisation (WTO), with its dispute settlement body being frozen and critical issues like digitalisation and the sustainability transition making slow progress despite efforts. The WTO remains the most important forum for creating, monitoring and enforcing trade rules. A recent ICC report showed that dissolution of the WTO system would result in GDP losses of close to $4 trillion over a five-year period for developing countries alone. 

 

Regarding a recent development, Gautam Adani has been indicted on bribery charges in a US federal court. How do allegations such as these impact India’s image as a business destination?

 

I cannot comment on specific cases like this one. However, at the ICC, we emphasise the importance of the rule of law and ethical business practices. Our organisation is well-known for its work in arbitration and upholding legal standards globally, which is critical for any country, including India.

 

What key trends do you foresee shaping international trade in the next five years?

 

The geopolitical tensions we’re seeing will certainly influence trade, though it’s hard to predict their exact impact. At the ICC, we are focusing on digitalisation, sustainability, and the circular economy as major drivers. The rise of digital trade, CO2 reduction measures, and the growing importance of circular economic models will be crucial in shaping the future.

 

How do you see India’s role evolving in the global trade ecosystem, particularly after its G20 presidency?

 

India is undoubtedly emerging as a major economic power, with significant influence in BRICS, the so-called Global South. The country’s success in sectors like services, especially IT and digital, is a key strength. India’s growing small and medium enterprises (SME) network also offers vast potential, particularly as digitalisation advances in business-to-business (B2B) transactions, which are still largely paper-based.

 

One area where India can take a significant leap is by passing the United Nations' Model Law on Electronic Transferable Records (MLETR). This would enable the digital transfer of titles for goods, facilitating smoother B2B transactions and unlocking major efficiencies for SMEs, and helping them access global supply chains. Currently, B2B digitisation is only at 1 per cent, and adopting this law could revolutionise trade.

 

Speaking of digitalisation, how does the ICC support SMEs in global trade?

 

We’ve developed a digital application called "One Click," which provides SMEs with access to ICC documents, guidelines on executing contracts, and dispute resolution tools. It is available in over 15 languages and aims to help SMEs navigate the complexities of international trade. 

 

We are also working on green trade finance, which would allow companies engaged in sustainable practices to access favourable financing. Currently, there are no globally agreed regulatory standards to classify trade finance transactions as sustainable. For India, in terms of attracting financing, this would be important.

 

How do you view the 'Make in India' initiative within the context of global supply chains?

 

The 'Make in India' initiative is crucial for boosting the country’s manufacturing sector, particularly in areas like electronics. While India has seen great success in exporting services, there is still potential to strengthen its position in goods production, especially in areas of electronics and component manufacturing. This will help diversify India’s economy and integrate it further into global supply chains, particularly with countries like the US and China also emphasising domestic production.

 

India has been actively pursuing free trade agreements (FTAs). How do you see these developments, and do you expect the UK-India FTA to materialise next year?

 

While I cannot predict the outcome of specific negotiations like the UK-India FTA, the ICC is a strong advocate of free – and fair – trade agreements. FTAs help countries engage more deeply in the global economy, especially at a time when multilateral trade mechanisms like the WTO are facing challenges.

 

How do you see India balancing economic growth with environmental concerns?

 

India is making significant strides in energy investments, and it has its carbon sinks and potential carbon capture technologies. At COP29 in Baku, there has been agreement on Article 6 of the Paris Agreement, which will enable carbon offsetting. The ICC, too, is working on voluntary carbon markets and advocating for stronger financing mechanisms to support sustainability transitions, which will also be vital for India’s future economic development.

 

How do you think India's digital advancements will influence global trade standards?

 

India's progress in digitalisation positions it well to influence global trade standards, especially in services and SME integration. If India can fully harness the potential of digitalisation, it has the opportunity to significantly increase its exports and improve its position in global trade.

 

India has urged the WTO to review the customs duty moratorium on ecommerce. Your thoughts?

 

While the ICC understands India's concerns, we believe the e-commerce moratorium is essential, particularly for SMEs. It facilitates the free flow of data and digital goods, which is crucial for expanding digital services — a key area where India is already thriving. Without this moratorium, we may see an increase in costs and tariffs, which could ultimately hamper growth in these sectors.

 

We recognise that there is a debate, but from our perspective, the moratorium benefits India’s digital economy by preventing other countries from erecting trade barriers. In the long term, India stands to gain from maintaining this framework.

 

With international trade disputes on the rise, how is the ICC’s role in arbitration evolving, and what new mechanisms are being considered to ensure fair and efficient dispute resolution?

 

Arbitration is a key part of our services, and we handle around $20 billion worth of claims annually. We’re currently modernising our processes by digitalising and introducing AI to speed up case management. We’re also expanding our arbitration centres, including a new hearing centre in France.

 

In India, about 30 per cent of ICC arbitrations are domestic, which shows that our services are not limited to cross-border disputes. Indian companies are using ICC arbitration for internal disputes as well, which speaks to the trust placed in us. We’re also different in terms of fees — our fees are structured based on the value of the contract, making arbitration more efficient and cost-effective compared to other systems.

 

With global trends like decoupling and reshoring on the rise, how do you see these impacting trade? What is ICC's stance?

 

The global landscape is indeed shifting. We’re seeing a move toward more sovereign-driven policies, especially in regions like the US and China. The EU has been slower to adopt such policies. These policies are impacting trade, particularly when it comes to critical materials and industrial policies.

 

The challenge is finding a balance between industrial policies and free trade. At the ICC, we are working on this issue, collaborating with think tanks to develop a comprehensive policy. Subsidies, for instance, are a complex issue. While some are counterproductive, particularly those linked to fossil fuels, others, such as those promoting innovation in CO2 reduction, can be beneficial. It’s a matter of defining clear criteria to separate the virtuous subsidies from the harmful ones.

 

How can emerging markets like India balance economic growth with sustainable practices?

 

It's no longer a matter of choosing between investment, trade and climate – it is all the same now. Any investment today must factor in sustainability from the start. Whether you're building a new plant or entering into trade agreements, integrating green practices at the outset is the most cost-effective approach. If you delay, the costs will only increase.

 

Climate finance is crucial in helping developing countries like India achieve this balance. While there was a pledge of $100 billion per year from developed countries to support climate change mitigation, this target has only been met once. In reality, we need much larger sums — perhaps even a trillion dollars — to address the climate crisis effectively.

 

How is the ICC helping emerging markets like India overcome business challenges?

 

One of ICC’s primary objectives is to enable trade, and we do this through various means — setting standards, offering arbitration services, and now more than ever, through digital tools. 

 

Another area we are focusing on is the circular economy. Take the example of plastic. The rate of plastic recycling globally is just 9 per cent, which is alarmingly low. Over the next 30 years, we’re expected to extract as many resources from the planet as we have since the beginning of human civilisation. This is reason to be alarmed, and we’re working on developing sustainable solutions.