I am pleased and honoured, during my first visit to Tokyo, to have this opportunity to address such a distinguished audience.
I have already had a number of valuable meetings and briefings, starting with Minister Yosano - with whom I had a most constructive discussion. And with whom, I should add, I am in agreement on a whole range of issues, not least the importance of the close ties between our two countries.
Ties which I am delighted have been strengthened during my visit by the announcement earlier today of Toyoda Gosei?s investment in the UK. You will know that Toyoda Gosei, part of the Toyota Group, is a world-class player in the automotive component sector. The investment in South Yorkshire will create 400 new jobs and firmly establish Toyoda Gosei as a powerful presence in the distinguished ranks of Japanese companies already in the UK.
Investment is one of the main aspects of the relationship between our two countries. The other is trade. For over ten years now the Action Japan campaign has been helping British companies to develop their business in this market. The success of the campaign has been huge - helped of course by the excellent support of such Japanese partners as JETRO and the British Market Council.
The success of Action Japan also owes much to a man many of you will know well: David Wright, our former Ambassador in Japan. David is now the Chief Executive of British Trade International, the new body responsible for all aspects of our overseas trade. I know that with David in charge British Trade International will continue to attach the very highest importance to developing the Japanese market.
What I would like to do now is offer you my perspective on some of the major issues confronting trade and economic Ministers as we move towards the start of the new Century.
Effects of the Asian financial crisis
Two years ago we witnessed in South East Asia the onset of a series of traumatic events which not only threatened the economic stability of Asia but also called into question many of the mechanisms and assumptions on which world economic growth had until then been based.
I know that many of you here today have had first-hand experience of what the Asian crisis has meant for your businesses - a crisis more severe and long-lasting than the oil shocks of the ?seventies and ?eighties from which Japan recovered so quickly.
What we have come to call the Asian financial crisis was in fact a phenomenon which quickly spread far beyond the boundaries of the Asian region to become an event of global significance, impacting on Europe and other markets.
In the UK we have seen a deterioration in our balance of trade resulting from a significant fall in our exports to Asian countries, including Japan. Last year our visible exports to Japan fell by 23%. We have also seen how the problems in Asia have affected the confidence of foreign investors in the UK - in particular investors from Japan and other Asian countries, who have in the past made such a major contribution to the growth of regional employment and prosperity in the UK - not least in the North East of England, where I have my constituency.
We have avoided a full-scale global recession, thanks in part to the continued strong performance of the US economy. In the UK we have made our own contribution through the pursuit of prudent economic policies which have succeeded in maintaining positive growth during this difficult time.
But I must pay tribute too to the efforts which the Japanese Government and the Governments of other Asian countries have made to restore stability and carry out the painful but necessary structural reforms needed to restore business and consumer confidence, and to set the scene for a new and sustained expansion of investment and employment.
I warmly welcome the commitment of Prime Minister Obuchi and his Ministers to pressing on with the task of deregulating and liberalising the Japanese internal market. I shall continue to follow closely the development of the Japanese Government?s current three-year deregulation programme, especially in those areas where the UK has strong interests: telecoms, insurance, legal services.
And let me be clear that by deregulation I don?t mean the wholesale sweeping-away of all controls. What I have in mind is a culture of better regulation, strengthening competition and consumer choice but upholding necessary safeguards.
I have no illusions about the magnitude of the task. But I am confident that Japan will before too long re-establish herself as a leading engine of growth in Asia.
Tomorrow evening when I address inward investors at the Hotel New Otani I shall discuss developments in the European Union and in particular the Single Currency.
But tonight I wish to concentrate on world trade and globalisation.
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. Now we must manage it through more difficult times.
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 not so long ago seemed permanently left behind.
Now the trend is stalled, and in some places even reversed - but I believe that is a temporary setback, not a permanent condition. The essential answer to the problems of the moment is not less globalisation - not new national structures to separate and isolate economies, but stronger international structures to make globalisation work in harder times as well as easy ones.
Our urgent need is closer co-operation, continuing dialogue, and an unwavering commitment to open commerce. We must not let temporary instability put global progress at risk.
As the economic weather turns, as a storm in one region threatens to spread, there are 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 further 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.
There are those who say that globalisation and excessive liberalisation carry much of the blame for the crisis and its wider impact. They see these trends as innately harmful, bringing benefits only to a handful of multinational companies, widening the gap between the richest and poorest, threatening the environment and undermining social structures.
Such people can be found at all stages of human history, casting doubt on progress and pointing to the ills it allegedly brings while ignoring the benefits. Today their modern counterparts reject the market and the concept of growth; they dismiss profit as greed and see science and technology as a threat rather than as a means of improving people?s lives.
There is no doubt that progress pursued blindly and without thought for the consequences carries with it risks and costs. The Asian financial crisis exposed dangerous weaknesses in the ways we regulated and supervised financial markets and anticipated and managed crises.
But I am an optimist and I believe that we should learn from our mistakes. As Secretary of State for Trade and Industry I have made it my business to develop a culture of responsible risk-taking, encouraging a climate of enterprise in which hard work, innovation and entrepreneurial flair can flourish.
Learning from our mistakes and avoiding them in future is part of that climate. By working together we can confound the critics and show that globalisation and liberalisation together can be a decisive force for good. But in our democratic societies we need to work at convincing our electorates they are to be welcomed rather than feared.
To do this we need to engage in and win the intellectual debate, and confront head-on the allegation that globalisation is inherently harmful. If it were true that globalisation was about the unregulated power of cynical multinational corporations coercing Governments and playing off one country against another - the so-called "race to the bottom" - then I would be the first to call a halt.
But the evidence points decisively the other way. Globalisation, through the free flow of foreign direct investment, leads to a more equal distribution of capital; greater competition and productivity; the expansion of markets; the transfer of technology; wealth creation and growth in employment. Potentially everyone is a winner.
Nor does globalisation represent the pursuit of irresponsible gain by large business. As this audience knows well, the decision to invest capital, technology and human skills overseas is not one that is taken lightly.
Investment is all about long-term commitment, reflecting of course the legitimate interests of the investor, but also the needs of the environment in which the investment takes place; of customers, suppliers, and employees.
And this commitment means accepting environmental regulations and supporting improvements in social conditions. Good corporate behaviour makes good commercial sense.
And what about liberalisation? No-one doubts the immense benefit to the global economy brought by the progressive opening-up of markets and international trade over the past fifty years. The creation of the European single market, in which the UK played a leading role, was an immense achievement.
It is against this background of real progress that the experience of the past two years needs to be viewed. Of course the Asian economies have suffered a serious setback. But where would those countries be today if they had remained closed and had been denied access to the major markets of Europe and North America when they were developing at such an astonishing pace? Where would their recovery be if those same markets were denied them now ?
No-one doubts the need to underpin the security of global markets through adequate prudential and corporate regulation and sound macroeconomic and exchange rate policies. But what is needed is more liberalisation, not less.
Ensuring that globalisation and liberalisation bring the greatest benefit to the greatest number of people requires firm action at the national and international level, with Governments and the business community working together to reach common, not contradictory, goals.
I have already paid tribute to the work the Japanese Government is doing to revitalise the domestic economy. In the UK we have been working to develop the respective roles of Government and business, charting a "third way" between outdated interventionism and destructive forms of individualism.
We are working to exploit the potential of our science and engineering base, and the skills we need to compete in an increasingly competitive world.
We are bidding to create greater competition, for example in the energy market, where full competition in electricity and gas supply is bringing benefits to private and industrial consumers.
And we are acting as a catalyst to collaboration between businesses, and between business and the science base. Encouraging greater business-to-business learning, and the takeup and expansion of best practice.
And at the international level, great efforts are being made to promote better collaboration and joint action. My colleague Gordon Brown, the Chancellor of the Exchequer, has made clear what he believes needs to be done to restore stability and growth to the world economy.
A framework of internationally agreed codes and standards accepted and applied by the countries which participate in the international financial system.
A re-focusing of our existing international financial institutions to make them work together more coherently to support this framework. And a new framework for partnership for crisis prevention and resolution between the private and public sector.
All this will have strong beneficial effects on the global trading environment. Avoiding severe instability in exchange rates will help to deter some trading nations from citing such instability as an excuse to delay market opening.
The economic analysis done by the IMF and the World Bank shows all countries, including those aiming to join the World Trade Organisation - the WTO - the benefits of trade liberalisation; and the orderly integration of domestic financial markets will be further helped by deepening the commitments in the WTO?s Financial Services Agreement.
World Trade Organisation (WTO)
The World Trade Organisation itself has a vital role to play in putting the global economy back on course.
The WTO is a younger organisation than the IMF and the World Bank but as we look towards the 21st Century it is increasingly clear that world economic growth will depend on free trade and open commerce. The WTO needs to stand alongside the IMF and World Bank in the world economic order.
The real threat to the spread of global prosperity today is posed by protectionism and discrimination.
The WTO must lie at the heart of the global trading environment based on clear and firm rules designed to protect weaker economies from exploitation, and to deter stronger economies from confrontation. This framework depends upon the commitment of its 135 members to the cardinal principles of transparency and non-discrimination.
The WTO must not stand in the way of the highest standards of corporate behaviour; the efforts of governments to care for the environment, to improve labour conditions or to take measures to protect human health.
Indeed trade liberalisation is central to achieving these objectives, to enabling international trade and investment, to building strong economies with new job creation, and to raising environmental and living standards.
The WTO is often seen as being secretive and unaccountable, yet the WTO functions on the basis of consensus and is fully accountable to the Member States? governments, themselves accountable to their electorates.
But there is clearly room for improvement, and I firmly believe that the WTO must be made to operate more effectively and that its agenda must be ambitious and far-sighted. I would like to set out four areas where I would like to see change, and where we need to enlist the support of other WTO Members.
First, transparency. The WTO is not a secretive body. However, there are lessons to be learnt from the experience of the Multilateral Agreement on Investment. There is, on the part of all international organisations, a need for a positive policy of communicating to a wider audience the relevance of their work and what it means in simple, non-technical terms. The WTO must explain its decisions or risk undermining support for free trade in general.
There is also a need for broader consultation to enable the views and concerns of various interests to be better understood. The recent High Level Seminars in Geneva on the environment and development are good examples of what the WTO can do.
Governments too must also be prepared to explain and consult: we need to pursue a path of greater openness if we are to maintain public confidence and allay anxieties. Democracy demands no less.
Second, realising wide-ranging economic development. Developing countries have benefited greatly from the expansion in global trade over the past fifty years.
But there is more we can do to integrate all countries, and in particular the least developed countries, more closely in the multilateral trading system and the global economy. Economic development depends on expanding trade opportunities. Successive studies have shown that countries with open markets achieve higher levels of economic growth than those which restrict trade and investment.
Technical assistance has an important part to play, as have mechanisms to enable all countries to get their voices heard, individually and collectively in the WTO, so that their interests are given their proper prominence in Geneva. And as we embark on the task of defining the range of subjects to be discussed as part of the new round of negotiations, we must make sure that topics of particular concern to developing countries are given their proper priority.
Third, the relationship between trade and the environment. It is not a sufficiently well-known fact that there are already around 200 multinational environmental agreements in operation, about 20 with trade provisions. These are the cornerstone of global environmental action.
It is not the WTO?s role to engage in environmental regulation. But what we must do is to ensure that there is no conflict between desirable and legitimate regulation and trade rules. So far, work in the WTO has made slow progress, partly because of understandable fears that environmental regulation can be used for protectionist purposes. We must find solutions to these issues.
Ultimately we must ensure that there is no conflict between protection of the environment and the expansion of trade. Both are aims of the highest importance. We must find a way forward.
Fourth, dispute settlement: the dispute settlement system in the WTO is one of the great achievements of the Uruguay Round. We all benefit from a process which allows disputes to be settled for the most part peaceably and with certainty.
However, as at least one recent case has shown, some of the procedures, such as those governing the application and enforcement of judgements, are open to argument. Loopholes in existing rules allow losing parties to delay the day of reckoning. Such flaws need to be resolved. Consideration must be given to setting down a clear timetable with deadlines.
The more that we can introduce greater clarity about the obligations and rights of those engaged in the process, the greater the chance that we can avoid destructive confrontation. This is not a simple matter but it should certainly be a priority for all WTO Members to contribute proposals for improvement.
I hope we can make progress in all of these areas at our Ministerial meeting in Seattle later this year. But our first priority at Seattle is to launch a new comprehensive round of trade negotiations.
Comprehensive trade round
We know from the lessons of the 1930s that a protectionist response to global crisis makes matters much worse. As open markets and free trade are a key part of the recovery process, it is essential that momentum for further liberalisation is maintained. That is why the UK and the EU have pledged to resist protectionism and are at the forefront of efforts to secure a new round of multilateral trade negotiations. While some liberalisation is possible outside of a Round, in reality we all know this is limited.
A Round brings with it greater political focus and commitment to trade liberalisation and thereby brings the prospect of wider and deeper liberalisation closer than might otherwise be the case. And it allows issues of importance to all countries to be brought to the negotiating table. I know that while we share these objectives with Japan, not all countries are committed in the same way. But I see no other choice.
In terms of benefits, a new comprehensive Round should ensure continuing growth in the global economy and provide a boost to confidence, thus helping to offset protectionist tendencies. A Round would also help to inject greater flexibility and competition to stimulate sluggish economic growth.
More specifically, it should secure improved market access for our businesses through the lowering of tariffs, the removal of non-tariff barriers, the expansion of services commitments, reducing business costs and developing a more efficient system for international trade, thus maximising the benefits of electronic commerce. It should further reduce the burden on consumers and taxpayers imposed by agricultural protection. And it should increase our competitiveness by giving our businesses better access to the most competitive inputs to production processes.
UK priorities reflect our assessment of the benefits and those areas we have identified as remaining trade barrier problems. These include securing further industrial tariff reductions, reducing the burden on business and barriers to trade represented by industrial standards and technical regulations, simplifying trade procedures, opening up government procurement markets in third countries, ensuring proper enforcement of intellectual property rights around the world, seeking substantial progressive reductions in support and protection for agriculture and developing better regimes to cover issues such as food safety, deepening and broadening the liberalisation of trade in services and establishing a liberal, rules-based framework for international investment.
Let me focus for a moment on one particular UK priority - trade facilitation. As tariffs have fallen and trade volumes have risen, the significance of trade procedures themselves has come more sharply into focus as an expensive barrier to trade. Exporters face a dense, bewildering thicket of regulations and procedures which cost them time and money. These are costs which the ultimate consumer has to bear as well in higher prices in the shops, in delays in receiving vital components and raw materials in the factory.
Everyone stands to benefit from new multilateral rules to simplify trade procedures through more focused enforcement, using modern technology and proven risk assessment techniques. Otherwise we have a trade deterrent, in particular for small and medium sized companies and those countries where the volume of trade in individual transactions is low. The record shows that a simplified approach improves effectiveness and efficiency and increases Government revenue by increasing detection of fraud and evasion and by stimulating increased volumes of trade. This has wider implications for attracting investment capital and realising continuing economic development.
The UK?s commitment to a three-year round based on the single undertaking concept reflects the need to be seen to deliver results quickly to benefit world economies. The WTO also needs to be seen to be keeping pace with new technologies.
This audience is not one that needs to be convinced of the benefits of globalisation and trade and investment liberalisation. These are clocks that cannot be turned back. But this is not a view that is shared universally.
We live in a complex and difficult world where there is a need to make sure that policy aims are consistent and coherent. That is as true for business as for governments. And we should be learning from each other: the free interplay of ideas and insights between Government and the business community needs to be a vital part of the process of developing new solutions to the new challenges created by closer integration, closer interdependence.
At Seattle in the autumn we will have the opportunity to demonstrate that we can make progress towards a more open and free international market while recognising our wider responsibilities for the environment and the pursuit of sustainable development. A market in which legitimate ambitions and aspirations can be achieved and in which all countries, from richest to poorest, have a chance to enjoy stability, economic growth and opportunity. I am sure that this audience will lend its support to this major enterprise.