The Rt. Hon. Patricia Hewitt

CBI Wales

I'm delighted to be here in Wales. As many of you will know, I spent many years working for Neil Kinnock. Being down here reminds me of one of Neil's favourite stories.

And I think it is particularly apposite because people don't often realise how much you in business have in common with us in politics. You have customers, we have constituents. You love every one of your customers, we love every one of our constituents. But, some customers and some constituents are a little bit more demanding than others.

Neil had this wonderful story about a local councillor: Dai Jones, an assiduous and public-spirited local councillor. But he had one particularly troublesome constituent who telephoned him very late one night.

"Councillor Jones, Councillor Jones", the constituent said. "What is it now?" asked Councillor Jones. "Oh it's the cats - they're making the most awful noise down at the bottom of the garden. I don't know what to do! It's terrible, councillor - ooh I don't like to say it - but they're "at it""…

Councillor Jones sighed and said, "Well have you yelled at the cats?" "Oh yes, I've flung open the window and yelled at them. Nothing will stop them though. They're making the most terrible noise"

Councillor Jones then asked "Have you tried throwing something at them?" "Oh yes, I've thrown half the wife's shoes at the cats and still yowling away they are."

So, Councillor Jones took a very deep breath and said, "Well have you tried telephoning them?" "Telephoning the cats, Councillor Jones? Do you think that would work?" "Well, it certainly stopped my wife and me!"

Turning to more serious matters… When I look back at the last six years, and I look at the partnership that we've created between Government, business, employees and their unions and all the other parts of our community and our country, I think we can be quite proud of what we've achieved.

It is quite extraordinary that Britain is the only major industrial economy in the world to have grown every quarter for the last six years. And that for a country that always used to be the first into recession and the last out when there was a global downturn.

It is remarkable too that, if we'd been meeting ten years ago, the big topic would have been unemployment and how we deal with it. And although, as Janet has rightly said, we still have very severe poverty and pockets of unemployment in some of our communities, the fact is we have record levels of employment.

And employment in Wales has been growing and inactivity diminishing even faster than in any other part of the UK. Interest rates too are still at practically their lowest level for forty or so years.

But none of that makes any of you complacent and it certainly doesn't make any of us complacent.

Because the challenges that we're facing as a country and an economy are really quite extraordinary. I have this sense that the economic geography of the world is being redrawn in front of our very eyes.
You've got China joining the World Trade Organisation, India producing a quarter of a million science and IT graduates a year; ten new countries joining the European Union in just a few months, and others queuing to join.

And all at a time when the speed of change in technology and customer fashion is so fast that product life cycles, once four or five years or even longer from design to decline, are now, in many cases, just a year or eighteen months.

And so huge new opportunities and new markets - but new challenges and new competitors too.

None of us can hold back those changes. We're not going to do a Canute and hold back the waves of technology or globalisation. Our response - as we see here in Wales and in other parts of the country - has to be innovation.

Responding to these new opportunities and new competitive challenges by investing in creating better products and better production processes. Getting the most out of their people in ways that will keep them competitive in this increasingly competitive world.

We're seeing this in Wales - not just in manufacturing, but in the creative industries too; and the new technology based industries of the future: nanotechnology, biosciences and ICT systems.

I was in Chepstow earlier today at Fairfield-Mabey. A 150-year-old engineering firm that's using Corus steel to make highway bridges - a rapidly growing market here in the UK.

Or Control Techniques that I've been hearing about this evening based in Newtown. A high technology engineering company that's been exporting its products all around the world. And, yes, I know that we too need to speed up some of our processes, notably export control licensing, to back you doing your job.

I also think of Airbus in Broughton, backed by UK Government with Launch Aid and also backed by the Welsh Assembly Government. Employing over 3,000 people in the most high value added part of the aerospace sector, building the wings for the new A380 Super Jumbo aircraft.

And many other companies too, like some of the new spinouts that we're getting from the universities. We've trebled the rate universities are spinning out companies in the last few years.

Companies like Critical Solutions Technology, a spin out company from the University of Glamorgan. Backed by £25,000 of investment from Finance Wales, now developing new technologies to help companies become more productive.

I remember years ago when people used to say, "We don't need manufacturing in Britain. Our future is all in services." I thought it was rubbish then, and I still think it is rubbish today.

We need our manufacturing. And I know very well that the best of British manufacturing is amongst the best in the world.

But we need more of it. We need more of it here in Wales. We need more of it across the rest of the United Kingdom.

And that's why, when I became Secretary of State, the first thing I did was sit down with the CBI, the TUC, the Engineering Employers Federation and many others, to put in place the first strategy for manufacturing that any British Government has produced in over 30 years.

It's about raising skills, creating the partnerships between business and our outstanding science and technology base. It's about getting the innovation that we need.

We had, just yesterday, the launch of Richard Lambert's review into the relationships between our universities and our business. And, in a few weeks time, we'll have our own review of Innovation policy led by David Sainsbury.

The messages we have had are very clear. To win in these new competitive markets, we've got to raise our game in the way that both business and Government back R&D. And we need more businesses doing what the best are already doing - partnering scientists and researchers in our universities to pull through the latest technologies.

Manufacturing is not the only part of our economy though. It's vital - producing a significant part of our output and more than half our exports - but the majority of our jobs, here in Wales and elsewhere, come from the services sector.

Although, again, we must remember that manufacturing and services are interdependent and intertwined.

We've been having, just this week, a very important debate about the future of our service sector - with the announcement here in Cardiff and other parts of the country that call centres are moving to India.

These job losses are devastating for the individuals involved, especially just before Christmas, and their families. They're particularly painful when they come in communities already devastated by the loss of traditional manufacturing.

There is a real fear that, having lost so much of our traditional manufacturing employment to new technologies and foreign competition, we're now going to see the services jobs, call centre jobs, that appeared to be the lifeline, also disappearing abroad.

There is very real fear and genuine pain. Particularly in the communities affected, But it's important that we dispel a few myths here. Because quite honestly, to read some of the recent headlines, you'd think that our entire call centre industry was about to ship itself offshore.

And that simply isn't the case. The call centre sector here and across our country is big, is here to stay and is growing.

24,000 people already work in call centre operations here in Wales. 400,000 people across our country.

Yes, call centres are going to grow in India. We have no monopoly on this sector. And India has many advantages, but they are set to grow here as well. Not because we can offer lower wages. Of course we can't. And we shouldn't be seeking to compete against India or China or these new economies on the basis of low wages. They'll grow here because we can compete on quality.

I was in Bristol earlier today visiting the Royal Bank of Scotland's call centre. They announced earlier this week that they have no intention of moving their call centres offshore because, as they say, "we've got wonderful employees, we are delivering superb service to our customers, we're making good profits. Why would we want to destroy that and risk our reputation and the loyalty of our customers and the quality of our service by moving abroad?"

That is the attitude that EDF is also taking, that Interflora is taking, that the Carphone Warehouse is taking - they recently announced investment in a new call centre up in the North West.

And many others as well. 118UK, the operators of 118888, opened a call centre in Swansea earlier this year. The Book People, one of Britain's biggest direct mail booksellers, decided to open their new call centre in Bangor, not Bangalore.

But there is more we must do.

We need to do more work with business and the unions, looking at the dynamics of the call centre sector. Looking at how we keep that sector competitive. This is a microcosm of the larger story - exactly the story that Janet was telling - about how across Wales and across the United Kingdom, across manufacturing and services, we have to keep moving up the value added chain. Not trying to compete in the lower wage and lower margin jobs.

We need to stop falling into despair and assuming that all the jobs will go. It would be crazy to do when, after all, we've got record levels of employment.

We also need to avoid falling into the trap of protectionism.

Yesterday, we had the very welcome announcement from President Bush that, after two years of determined fighting by us, our steel industry, our steel workers and all our partners in the European Union, the United States Government has agreed to respect the rules of the World Trade Organisation and lift their unlawful tariffs against our steel exports.

That is good news for Corus and for all of our steel companies that have suffered.

But, I'm not going to spend two years fighting unlawful protectionism in the United States, only to then pretend that we're going to protect our jobs here - call centre jobs or otherwise - by putting up trade barriers, import control tariffs or laws telling companies they can't invest or employ people abroad. Of course, we're not going to do that.

Britain is one of the most open and one of the most successful trading nations in the world. Millions of jobs depend on our ability to export around the rest of the world. And a large part of what I am doing as Secretary of State for Trade and Industry, working closely with the CBI and the TUC, is to try and get a framework for world trade that is fair as well as free.

That will open up markets - and that's good for us here in Britain - but will do so in a way that will enable the poorest people in the poorest countries in the world to do what they desperately want to do, and that is to work, produce, earn and trade their way out of poverty.

The reality is that as India becomes richer, we don't become poorer. We become richer too. Because as India grows, they buy more from us. We're seeing it happen already, indeed, we're seeing Indian companies, software companies in particular, investing in the United Kingdom because it's their natural launch pad into the European Union.

We know this from our own experience here in the European Union. Fifty years ago, six countries came together and pulled down the barriers to trade between them. And as more have joined, and as trade has grown, so all our countries have grown better off.

That's what we need right across the world. In manufacturing and in services as well. We export far more services than we import services from the rest of the world. And that too is good for our jobs. And it's good for our pension funds as well.

More competition and world trade, together with the dynamics of new technologies, all mean a restructuring. In some cases, it is inevitable there will be job losses. And where there are, we have to make sure that we're at people's sides, making sure that they get new jobs and, if necessary, new skills as quickly as possible.

At this point, I want to pay tribute to Rhodri and the work of the Welsh Assembly, the Welsh Assembly Government, the WDA, Education Learning Wales, JobCentrePlus and all the partners who together are doing exactly that for workers faced with job losses. Workers, for instance, at Corus and, more recently, at ASW who were faced with losing their jobs.

So we have to do that.

We also, as Janet rightly said, have to do even more on education and skills. Just look at Ireland. Twenty years ago, Ireland decided to make itself one of the best-educated countries in the world. They've seen huge wealth creation and prosperity come and grow as a result.

We must also do more to build partnerships here in Wales and in every part of our country. Because the paradox of globalisation is that the more you have globalisation, the more you need localisation.

We can not sit in Westminster and Whitehall, however committed and well intentioned we might be, and pretend that we know what the right strategy is going to be for Wales, for my own city of Leicester or for any other part of the country.

Because the real experts in Wales, the real experts in the future of Wales, are you. The people who run businesses, who invest and work and live here.

The creation of the Welsh Assembly, to the creation of the English Regional Development Agencies, the Scottish Parliament and so on, was not simply because of a political principle that decisions should be made as close as possible to the people they affect, by the people they affect. But it was also, and remains, a core part of our economic strategy.

And I know from what Janet's been saying, from what I know of the work of the Welsh Assembly Government and others, that you are seizing that opportunity to take those decisions and choose where resources go. Building the partnerships between business and the elected councillors and the universities and the colleges and the local communities that are essential for nations and regions and cities to thrive.

So, together, we have the vision - the knowledge economy of the future.

We have the partnerships - and this includes, of course, the partnership between the Welsh Assembly Government and the United Kingdom Government.

And, although there are huge challenges ahead and much much more to do, together, I have no doubt at all that we will win.

Thank you.