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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)Globalisation and Free Trade |
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I want to consider what globalisation means in terms of free trade and open commerce. For some there is no more threatening word in our vocabulary than globalisation. It denotes a nightmare of greed and inequality. A threat to our culture. With Coca-Cola, McDonalds and American TV sit coms replacing Tizer, fish and chips and two way family favourites on the radio (or should it still be the wireless). For its proponents globalisation represents the sun-lit uplands of growth, opportunity and prosperity. A belief that increased trade between nations promotes prosperity and by promoting prosperity and the links that come from trade we promote peace between nations. I believe that globalisation can be a bringer of opportunity and not a threat. And I do so for the following reasons. If we turn our backs on globalisation then we will end up retreating into nationalism and protectionism. That of course was the response of many countries to the financial crash and depression of the 1920's and 1930's. We all know the bloody and destructive results that were produced as a result. Compare that situation with the long period of growth in the US and Europe as trade barriers come down in the 1950's and 1960's. Or look at the situation of South Korea. In 1970 poorer than Ghana now richer than Portugal. A recent study by Sachs and Warner found that developing countries with open economies grew by 4.5% a year in the 1970's and 1980's while those with closed economies grew by just 0.7% a year. But we clearly need to do far more to make the case for free trade. So that our people can realise the opportunities and benefits that globalisation has to offer. We must do this because in a democracy we will not be able to embrace globalisation if too many individuals and organisations feel they are being left behind. And we need to be in no doubt. The backlash against globalisation is real and it is gaining power and momentum. An unholy coalition has been cobbled together. Media aware pressure groups and old fashioned protectionists stand together shoulder to shoulder. Last December from the convention centre in Seattle through the clouds of tear gas I could see red-neck steel workers from Philadelphia walking alongside anarchists. Grandmothers dressed as turtles alongside unemployed textile workers from downtown Seattle. Often with contradictory demands nevertheless it is the diversity of these groups which make them such a potent force in any democracy. I think politicians can be rightly criticised for not having done enough to explain the nature of our global economy and to ensure that the power of national governments being exercised through international organisations can be harnessed to the public good. In rising to this challenge we have to acknowledge that free trade and open commerce can cause enormous and sometimes painful upheavals. Whole sectors of an industry can be devastated under the challenge of foreign competition. Both people and investment will need to be flexible in their response. Governments can lose revenue and domestic companies can lose profitability. Here there is a role for an active as opposed to an interventionist government. Our role should be to lead people through this process of change. With support through retraining and updating their skills. To help companies identify and then diversify into new markets or products. As politicians we must reject the soft, easy choice that the difficulties that might be experienced should be enough for us to call halt and put up barriers to free trade.
Candle makers were not allowed to block the introduction of electricity. Free trade causes change and boosts economic growth. It is about greater competition which weakens the power of vested interests. It provides greater opportunities and improved standards of living for millions rather than provide privileges for a few. Of course the alternative view is often put that globalisation simply plays into the hands of the big multinationals. They can operate through cosy cartels and that by removing trade barriers we are simply allowing them to monopolise an even bigger market. I don't believe this approach stands up to scrutiny. Go back ten years and look at the world's ten biggest firms by market value not one of them is in the present top ten. So I believe that globalisation can be a force for good not just for the developed world but for the poor wherever they might live. Nations it is said act out of self interest. Anything else is a delusion. In some respects this of course is true. Politicians will rightly back the national interest first. But recognising that we are part of a wider international community is in the long run in our own self interest. There is no point in pretending that the events in Seattle last December were not a setback for global free trade. We have all had time to reflect on what happened and the reasons for it. I want to propose a number of initiatives to break the present stand off that exists and carry forward the agenda to support free trade. First launching a new round of trade talks is crucial. This side of the US Presidential election this will not be easy. However I do believe that we should try to launch a new round during the course of this year. Even if a new round is impossible to launch - and I don't underestimate the difficulties. Preparatory work now will put us in a strong position after the US Presidential elections. Establishing a framework for such a new round will be the crucial first step. In this context it is vital that the European Union indicates its willingness to look at liberalisation of the present regime of agricultural subsidies and tariffs. Second, working with our colleagues in the Commonwealth we need to provide practical assistance and confidence building measures to ensure that developing countries can play a full part in the decision making process of the WTO. Third we must develop the Commonwealth as a forum for discussions on trade matters. Members of the Commonwealth are key players in almost all the main trading blocs. This puts the Commonwealth in a potentially pivotal position. It is a position we intend to use more effectively and constructively in the future. Fourth, we need to look again at the dispute settlement. The present system was one of the major achievements of the Uruguay round. We all benefit from a process which allows disputes to be settled for the most part with consensus and certainty. However it is becoming increasingly clear that loopholes exist in the present rules. Allowing losing parties to delay the implementation of any remedies. Such flaws need to be resolved. We are now at the stage when we must give consideration to setting down a clear timetable with deadlines.
It is incumbent on major world players, like the European Union and the US, to play by the rules. Carousel retaliation as proposed by the US Congress and to be implemented by the administration is an example of the easy option, pandering to domestic opinion. It is simply unacceptable conduct and is an example of how not to deal with trade disputes.
This approach has been supported by the European Union which has agreed to present an initiative on both internal and external transparency to the WTO in the autumn. This is an approach that we have asked for. We now need to take the necessary steps to ensure that the European Union puts forward proposals for radical reform and change. As part of this process of reform I believe that we need to consider ways in which all WTO members can effectively participate in the work of the organisation. In addition we must look again at the procedures for appointing the Director General of the WTO. The process last time round which led to the bruising battle between Mike Moore and Doctor Supachai with the six year term of office being split between the two is an experience that must not be repeated in the future. In driving forward this reform agenda the United Kingdom is in a unique position. We are members of the European Union and the Commonwealth - important blocs in terms of world trade. Our good political relationship with the United States means that we can act as a bridge between the US and other key players. We must use this privileged position to learn and apply the lessons of Seattle. To turn failure into opportunity and redouble our efforts to reform and strengthen the WTO and to renew confidence in world trade itself so that a new round can be launched. But the debate about globalisation raises an important question for our own national situation. How in an era of globalisation when we are seeking to extend the benefits of free trade around the world can we meet our clear responsibility to spread the benefits of economic growth to all parts of our country? This is imperative for a government elected to govern for the whole country. We cannot be satisfied if the average standard of living is rising as a result of a few people doing a lot better. The creation of a privileged "winners circle" limited to certain people, geographical areas or sectors of the economy will hold back our economy. Whilst the description north-south divide is an over simplification it is clear that there are disparities between regions. In the last ten years the regional percentage of national GDP has declined in the North East, North West, Yorkshire and Humberside, West Midlands, Wales, Scotland and Northern Ireland and increased in the South West, London, South East and Eastern regions. The issue is complex. Within each region there are areas of prosperity and pockets of poverty. Different communities face different local problems. The challenges facing inner cities, rural communities and areas of industrial decline are shared between regions. The United Kingdom's economic success depends on all parts of the country achieving their full potential. Too many areas are still underperforming. The existing disparities have serious economic cost implications which also lead to disturbing social costs - poverty, crime, poor education, ill health and social exclusion. We need strategies which address the underlying causes of this economic failure. As a result of the recent spending review we are now able to put in place measures to address this pressing issue. It is clear that there will be no quick fixes or easy answers. We are dealing with problems, which are not a recent creation but go back generations. In order to address the deep seated reasons for under-performance we need to invest in skills, promote enterprise, support business start ups and improve educational achievement. Conclusion We must not lose sight of the opportunities that have flowed from the new age of globalisation. We have benefited from the integration of the international economy. A shared commitment to open trade and orderly progress - certainly among the G7 and in the EU - has been a driving force for growth - even in countries that no so long ago seemed permanently left behind. But there are economies facing difficulties.
Our urgent need is closer co-operation, continuing dialogue, and an unwavering commitment to open commerce. Under political pressure there are soft options, easy but dangerous shelters - a return to protectionism, the breakdown of co-operation, the rise of beggar thy neighbour policies. But this can only yield a worsening of the situation, not renewed growth. Let us be clear, protectionism anywhere is a threat to prosperity everywhere. Closing off national economies only increases national and international instability. And across the world it is the poorest, the most vulnerable members of society who suffer from financial crisis and stagnation. In the new global economy, neither the United Kingdom nor any other country or trading bloc can afford the easy illusion of isolationism.
We must never forget that the path of open trade and open capital markets that we have travelled in the last 30 or 40 years has brought unprecedented growth, greater opportunity and a better life for people across the world. The Single Market is undoubtedly one of Europe's greatest achievements. No sensible policy-maker wants to turn the clock back to protectionism or the belief that we can operate in isolation from the very real pressures and challenges facing the world economy. To do so would be a simple recipe to export employment and growth to more competitive rivals outside Europe. But to move forward, we need active governments, acting together through reformed international institutions.
This Government believes the problems of today and the future can be met with a vision, and intelligence, and an energy which will make the world economy stronger, more stable, and more prosperous - ultimately more open not just to the free flow of goods, but to the rising tide of people's aspirations. We must make markets work - in tough times as well as easy ones. That is the burden and responsibility of all of us in this time of globalisation. |
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Other speeches by Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)
(the following are available from the archive) |
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