Projects Constructive Dialogue on Globalisation Issues 1st July 2003: The Minister

Constructive Dialogue on Globalisation Issues

1st July, London Metropolitan University, Moorgate EC2N 6SQ

Presentation to the conference

Mike O'Brien, Minister for Trade and Investment

Mike O'Brien

I am delighted to be here today to speak at this important conference on globalisation. Worldaware does much invaluable work spreading understanding about trade and other development issues among the leaders of tomorrow.

Globalisation is a word we hear all the time, but means different things to different people. The most common understanding is the growing interdependence and interconnectedness of the modern world. We have seen this trend accelerate since the end of the Cold War. The increased ease of movement of goods, services, capital and information across borders has created a truly global economy. Technological advances have also driven this process forward, so too, the reductions in the cost of international transactions.

Globalisation has radically improved the way we in the west now live. We sometimes take the benefits it brings for granted. Who here hasn't accessed the internet, used a mobile phone or listened to CDs featuring artists from all over the world?

But the benefits of globalisation have not been equally shared. We live in a world in which one in five of the world's population live in abject poverty: living on less than a dollar a day without adequate food, clean water and education, where HIV/AIDS is threatening to destroy the future prospects in Africa in particular and elsewhere.

Faced with challenges and inequalities of this scale, is it any wonder that millions of young people are contemplating their future with new foreboding? It is no surprise that many are frustrated with today's leaders, be they political or economic figures.

Many see globalisation as the root cause of these problems. To its fiercest critics, globalisation is a force for oppression, exploitation and inequality, which, like terrorism, thrives on poverty. It overrides democracy, puts profits before people and encourages a race to the bottom in labour, environmental and health standards.

I disagree with that analysis. I believe globalisation has the potential to create opportunity and prosperity for all. To lift millions of the world's poorest people out of poverty.

That is why, as Minister for International Trade and Investment, I believe that the current Round of World Trade Organisation (WTO) negotiations - the Doha Development Agenda - are so important. They provide an opportunity to ensure that the increased ease of movement of goods, services, capital and information across borders is managed in a way which works for the world's poorest people.

Trade matters because it is good for people's jobs, living standards and prosperity. Take the UK as an example. Last year our companies earned more than 270 billion from selling their products and services abroad. Trade generates more than 4,500 for every man, woman and child in the UK. One in four British jobs is linked to business overseas. Trade makes a huge contribution to our wealth and prosperity.

Economists have increasingly acknowledged the link between trade and growth. Look at the experience of Ghana and South Korea. Back in 1955 Ghana was 25% richer than South Korea. But by 2001 the average South Korean was seven times better off than the average Ghanaian. What was the secret of Korea's success? Investment and education and sound macroeconomic policies definitely played their part. But also the realisation that firms that were exposed to international competitive pressure were more likely to succeed in the long run.

During the 1990s the number of people living in abject poverty in the world fell by 125 million - almost entirely due to improvements in India and China spurred by their economies' increased openness to trade. Of course progress has been uneven and some countries have not done so well in recent years. But there are no examples of closed economies with high rates of growth. And the problems of poverty within countries cannot be tackled without economic growth. This is why I am redoubling my efforts to ensure a successful outcome to the Doha Development Agenda - an outcome which benefits developed and developing countries alike.

Studies have shown that a successful Round could boost developing country income by 150 billion per annum - three times what they get in aid. And in terms of poverty reduction it could lift 300 million out of poverty by 2015.

We recognise that the current system is not working for many developing countries. We need to do more to help the poorest countries secure better access to rich country markets. For too long richer countries have dictated the terms of trade and this must change.

We will push the WTO as hard as we can to get an agreement that works for developing countries. We will not accept or agree to any proposal we believe will damage the prospects of developing countries trading themselves out of poverty.

We cannot preach free trade abroad, while practising protectionism at home. We must liberalise trade in agricultural products and reduce farming subsidies which distort trade. The decision last week to reform the Common Agricultural Policy is a good step towards ending a system which costs 45 billion Euros a year, the equivalent of paying $2 for every cow in Europe.

Progress in the negotiations has been disappointing to date, especially on the issues that matter most to developing countries such as agriculture and access to affordable medicines. Unlike previous rounds, this trade round provides an opportunity to make real progress. We must make sure that it delivers for developing countries.

Globalisation is also characterised by the growth of multinational companies. Today many are concerned about the role which these organisations play, arguing that that they can be more powerful than governments and consumers.

But I believe that many multinationals bring great benefits to the communities in which they invest providing additional capital, helping to transfer new technologies, increasing local skills and generating employment. And all the evidence suggests that multinationals do pay their workers significantly better than local employers, and provide better employee protection and better pension rights. They can and must be part of the solution.

We warmly the welcome the growing trend of companies to report on matters of corporate social responsibility. Today corporate social responsibility has evolved into an understanding that economic, social and environmental objectives can be pursued by companies and communities together.

Through expanding access to ideas, technology, goods, services and capital, globalisation has the potential to create the conditions for faster economic growth. But by itself it is not enough. For the reality is that globalisation, like economic and social change, produces winners and losers. The industrial revolution involved hugely painful economic and social costs - but just about everyone agrees that these changes were worth the cost.

The role of governments and international institutions is to help manage the process of change - to maximise prosperity and opportunity for all, to equip people, through education and training, to take advantage of opportunities and to provide support to those groups who may be adversely affected, especially in the short-term.

At the beginning of my address I mentioned that we enjoy the benefits of globalisation. But there are far too many in the developing world who are cut off, disconnected from the benefits of globalisation. Today, Africa's share of world trade is about 1%. The global economy has passed much of Africa by and this must change. As the Prime Minister has said, if globalisation only works for the benefit of the few, then it will fail and will deserve to fail.

The challenge for governments, business, the international institutions and civil society now is to work together to ensure that globalisation works in the interests of all the world's citizens. That is something which this government is firmly committed to achieving.

Answers to the delegates questions included discussion about global organisations such as the WTO and their benefits, the reasons behind company location in certain countries, and free market views in the South.