T55 - The London Annual Meeting (2001)

8/9/2019 T55 - The London Annual Meeting (2001)

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The Annual Meeting of The Trilateral Commission

LONDON

2001TRILATERA

LCOM

M

ISSION2001

ANNUALM

EETING


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Trialogue: 55

The Trilateral Commission was formed in 1973 by private citizens of Europe,

Japan, and North America to help think through the common challengesand leadership responsibilities of these democratic industrialized areas inthe wider world. The leadership tasks of the Trilateral countries need to becarried out with others to an increasing extent, and the 20002003 trien-nium of the Trilateral Commission has reflected this changing context andthe opportunities it provides.

See our website for more information: ht tp://www.trilateral.org

Copyright 2001 The Trilateral Commission

All Rights Reserved

East Asian

Chairman

Yotaro Kobayashi

North American

Chairman

Thomas S. Foley

European

Chairman

Peter D. Sutherland


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Editing

Damon C. Morris

Charles B. Heck

Layout & Production

Damon C. Morris

Graphic Design

John Hair

T a b l e o f C o n t e n t s

L O N D O N2 0 0 1

S E C T I O N 1

The Challenges of

Globalisation

3 Robin Cook

S E C T I O N 2

The Changing

Role of States

9 Gordon S. Smith

12 Ernesto Zedillo

S E C T I O N 3

Addressing Those in Danger

of Being Left Behind

15 Jusuf Wanandi

17 Nora Lustig

19 Jay Mazur

23 Otto Graf Lambsdorff

S E C T I O N 4

Improving the

Trading Regime

25 Mike Moore

28 Frits Bolkestein

30 Toru Kusukawa

33 C. Fred Bergsten

S E C T I O N 5

The Legitimacy and

Accountability of Key

Multilateral Organizations

37 Joseph S. Nye, Jr.

Jessica P. EinhornBla KdrHisashi OwadaLuis Rubio

Young Soogil

G L O B A L I Z A T I O N A N D G O V E R N A N C E

S E C T I O N 6

Britain: Public Opinion,

Economy, Business, Science

50 Robert Worcester

53 Bill Emmott

56 Martin Sorrell

59 Robert May

63 David HowardS E C T I O N 7

The International System:

A European View

65 Chris Patten

S E C T I O N 8

The Future of Africa

68 Frene Ginwala

S E C T I O N 9

The International Role of

the United States

71 Brent Scowcroft

76 Carla A. Hills

73 Yoichi Funabashi

78 Georges Berthoin

S E C T I O N 1 0

International Security

Challenges

80 Charles Guthrie

83 Sergei Yastrzhembsky

86 Lee Hong-Koo

89 Richard C. Holbrooke

* * * * *


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London was the location of the 2001 annu-

al meeting of the Trilateral Commission,which began on the evening of March 9

and ended at midday on March 12. The pub-

lication that follows draws together edited tran-

scripts and texts of presentations made in the

course of those three days.

The London meeting, the first of the Trilateral

Commissions new triennium, was also the first

annual meeting in the widened framework

agreed upon last year. Most notably, the Japan

group has been widened into the Pacific Asian

group; and the North American group now

includes Mexican members. Mexico and Pacific

Asia beyond Japan are well-represented in this

publication. Section 10 includes the speech of

Lee Hong-Koo (from page 86), former Prime

Minister of the Republic of Korea and head of

the group of Korean Trilateral members. Section

3 includes the presentation of Jusuf Wanandi

(from page 15) of the Centre for Strategic and

International Studies in Jakarta, one of fifteen

members from the original five ASEAN coun-

tries. In Section 5 are excerpts from the answers

to Joseph Nyes questions of Young Soogil, nowat the Insitute for Global Economics in Seoul.

Section 2 includes the London presentation of

Ernesto Zedillo (from page 12), former President

of Mexico. Luis Rubio, Director General of

Mexico City-based CIDAC (Center for Research

for Development), was among those respond-

ing to the Nye questions (Section 5). We are

continuing the practice in this triennium of invit-

ing a number of persons from other key areas

of the world to participate in annual meetings.

Speaking to the London meeting was FreneGinwala, Speaker of South Africas National

Assembly (Section 8 from page 68).

The substance of the London meeting was

centered on four sessions grouped under the

broad theme of globalization and governance:

The Changing Role of States (Section 2),

Addressing Those in Danger of Being Left

Behind (Section 3), Improving the Trading

Regime(Section 4), and The Legitimacy and

Accountability of Key Multilateral Organizations

(Section 5). The speech of Robin Cook (then

Britains Foreign Secretary) on the opening

evening of the London meeting was focused on

the challenges of globalization; and in this pub-

lication the Foreign Secretarys speech is pre-

sented as Section 1, with the globalization and

governancesessions. The growing interdepen-

dence that so impressed the founders of the

Trilateral Commission in the early 1970s has

become a process of globalization that in a

number of ways presents even more complex

and urgent challenges.

At the outset of the London meeting, Peter

Sutherland became the new European Chairmanof the Trilateral Commission. Mr. Sutherland,

now based in London as Chairman of BP Amoco

and of Goldman Sachs International, earlier

served as Director General of GATT/WTO, a

Member of the European Commission, and

Attorney General of Ireland. He takes over

from Otto Graf Lambsdorff, Honorary Chairman

of Germanys Free Democratic Party and for-mer German Minister of Economics. Paul

Volcker announced at the March London meet-

ing that Tom Foley would succeed him as North

American Chairman. In April Mr. Foley, for-mer Speaker of the U.S. House of Representatives,

completed service as U.S. Ambassador to Japan

and returned to Washington, D.C., as a part-

ner in the law firm of Akin, Gump, Strauss,

Hauer & Feld. In May he succeeded Mr. Volcker,

former Chairman of the Board of Governors

of the U.S. Federal Reserve System. Reflectingthe widened framework of the Trilateral

Commission, there are two new Deputy

Chairmen: Han Sung-Joo, former Foreign

Minister of the Republic of Korea and nowProfessor and Director of the Ilmin International

Relations Institute at Korea University; and

Lorenzo Zambrano, Chairman and Chief

Executive Officer of Cemex.

2 T H E T R I L A T E R A L C O M M I S S I O N

I N T R O D U C T O R Y

N O T E


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R O B I N C O O K

The Challenges ofGlobalisation

It is my pleasure to welcome you to yourdebates on globalisation in London. Therecould not be a more appropriate settingthan London in which to muse on the chal-lenges and legacies of globalisation. TodaysLondon is a perfect hub of the globe. It is home

to over thirty ethnic communities of at least tenthousand residents each. In this city tonight,over three hundred languages will be spokenby families over their evening meal at home.

That is a cultural diversity which reflectsthe long historic connections which Britainhas forged in seven continents. But it is alsoan economic advantage in a world in whichthe prosperity of a nation depends increasing-ly on the health of its trade and investmentnetworks with other nations. The national air-line of at least one of the countries represent-ed in this audience has recently relocated itsbooking operation to London preciselybecause of the linguistic variety of the staffwhom it can recruit here.

So I have every confidence that the stimu-lating environment of London will help you toresolve the problems of globalisation. To helpyou on your way, let me share some of theperspectives of a Foreign Minister.

The Impact of Globalisation

The effect of globalisation on business andindustry has been profound. Innovations cre-ated in one country are routinely manufac-tured in a second country, often mobilisingcapital from several countries. The compo-nents in the laptop on which this text was

produced may have travelled further beforefinal assembly than even the Foreign Ministerin the same period.

We live in a global economy in whichgrowth is driven by trade, which is expandingmore than twice as fast as output. And inwhich financial flows across currencies are

increasing even faster and every week outstripthe annual volume of trade. You will all befamiliar with the dramatic effects of thesetrends on your business over your lifetime.Even the youngest executive among you hasprobably seen a bigger growth in trade thanthat in the period from the IndustrialRevolution to the Second World War. And Iwill not embarrass the more mature among usby listing the even more dramatic changes wehave experienced in our lifetime. But the

impact of globalisation is as profound on pol-itics as on business. No national economy isnow an island. And every nation-state is asinterdependent as it is independent.

In the twenty-first century, the old dividinglines of national politics between domesticLeft and Right will be less and less useful as apolitical definition. A more relevant guide tothe forces of progress and those of reactionwill be provided by how they respond to thenew global reality of interdependence.

The progressive political forces will be those

who are cosmopolitan and outward-looking,who are comfortable building internationalpartnerships and who respect people fromdifferent ethnic identities. They will offersolutions that recognise that national securityrequires international alliances and thatdomestic prosperity requires the dynamicpursuit of external economic cooperation.They will be people who welcome foreigncontact as enriching, not as threatening.

The reactionary political forces will be those

who are isolationist and inward-looking, whofeel more comfortable clinging to the comfortblanket of a false idyllic past. They will offersolutions that are based on a retreat to narrownationalism and a reluctance to enter intointernational partnerships. They are more

2 0 0 1 L O N D O N M E E T I N G 3

S E C T I O N 1

TH E CH ALLEN G ES

OF GLOBALISATION

NO N AT I O N ALE C O N O M Y I S

N O W A N I S LAN D .

A N D E V E R Y

N A T I O N - S T A T E

I S A S

I N T E R D E P E N D E N T

A S I T I S

I N D E P E N D E N T .


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likely to keep out foreign contact than to wel-come it.

As you meet in Britain, permit me to saywhere the British Government stands.

Global Britain

This Government is firmly committed to

embracing the changing nature of the interna-tional reality as a condition of domestic suc-cess. We do not want to cling to a LittleEngland. We want to build a Global Britain. Acountry which accepts globalisation as anopportunity to be seized, not a threat to beresisted. A country which is confident in itsapproach to international partnership. A coun-try which is comfortable that it can face thechallenges of globalisation. A country which isat ease with itself and with its neighbours in

Europe. Global Britain can be confident in itsapproach to globalisation because it speaks thelanguage of globalisation. English has becomethe language of the Internet, of software, of thecommunications revolution. English has beenour countrys single most successful export.

Global Britain can be comfortable in facingthe challenges of globalisation because ourethnic diversity is a strength in the modernworld. A multi-ethnic society is betterequipped to handle a multi-polar world.

Global Britain understands that the stronger

we are in our own continent of Europe, thestronger we will be in the other six continentsof the world. Any sane foreign policy muststart by accepting the facts of geography. Wecannot manage a foreign policy that goes allthe way round the board of the globe withoutpassing Europe. Any responsible trade policymust start by accepting the laws of arithmetic.It is with the other countries of Europe thatwe trade the clear majority of our exports.

The prosperity and the security of our

nation depend on foreign contacts. Tolerancetowards the foreign resident who has madehis or her home in our country is the parallelto partnership with a foreign country abroad.

In the global village legitimate migration isthe necessary unavoidable result of economic

success which generates a demand for labourfaster than can be met by the birthrate of amodern developed country. We must ensurelegal migrants have the full opportunity tocontribute their skills and talents to the coun-try they have chosen as their home. By con-trast, discrimination at home is sister to xeno-

phobia abroad. In the age of globalisation,both damage the national interest. Neithershould have any place in the political lexicon.

I have said that we want a Global Britainthat is confident and comfortable and at easewith the challenges of globalisation. I wasvery struck reading through the papers foryour discussion that not all contributorsshowed that sense of confidence, comfort andease about globalisation. On the contrary,there were frequent strains of angst at being

misunderstood and a touching sense of hurtat not being regarded with more affection. Letme therefore as a politician address some ofthe questions raised by the gulf between glob-alisation and its populist critics.

Building a Wider Consensus

The age of globalisation is marked by remark-able economic vibrancy and rapid technologytransfer. In economic history, it is matchedonly by the experience of the post-wardecades, from the Marshall Plan to the

Seventies oil shockwhat the French call lestrente glorieuses. During that period, theBritish economy doubled in size, the U.S.economy tripled. Germany and Japan bothgrew ten-fold. However, the striking contrastbetween these two phases of similar growth isthe difference in public reaction. The periodof post-war growth was overwhelmingly wel-comed and by and large was not in itself amatter of political controversy. By contrast,the term globalisation has entered the lan-

guage as an unloved, faintly menacingwordas unattractive as it is polysyllabic.Why this contrast in popular reaction to twoperiods of similar growth?

The post-war settlement was built not justaround economic growth. It reflected a much

4 T H E T R I L AT E R A L C O M M I S S I O N

TO L E R A N C ET O W A R D S T H E

F O R E I G N R E S I -

D E N T . . . I S T H E

PARALLEL TO

P A R T N E R S H I P

W I T H A F O R E I G NCO UN TRY ABRO AD.


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wider political consensus which was broadlyshared across Western Europe. Business wasguaranteed a stable environment for sustainedgrowth. But the wider consensus was basedon an implicit social contract with the people.Their consent was based on other features ofthe post-war consensus. A universal standard

of welfare. Equal opportunity of educationand in employment regardless of birth. Anopen society and democratic government.These were the broad planks on which popu-lar support was built for the prolonged post-war period dynamism of business in theAtlantic area. Globalisation does not enjoyany such broad consensus. It is vulnerableprecisely because it is often perceived by itscritics as the globalisation only of investmentand of trade. If we are to defeat those critics,

we can do so only by building a wider con-sensus that globalisation must be much morethan just a global economy.

We will not construct such a consensussimply through better presentation or widerprocess. I have no doubt that both could beimproved. For instance, global organisationsneed to master the same structured dialoguethat national governments hold with NGOs.Non-Governmental Organisations are no sub-stitute for elected democracy, but they cancomplement it and are part of the strength of

any mature civic society. There are forinstance in Britain five times as many mem-bers of environmental NGOs as there aremembers of political parties. Prudent politi-cians treat them with respect.

If we are to divert sympathy of NGOs fromthose who take to the street, then we mustenable them to be part of the internationalcommunity in the same way as they are partof national society. And with a similar basis fordialogue. Official forums through which they

can formulate and express their concerns.More open access to working papers. Theexchange of secondments between staff of theofficial organisation and staff of the largerNGOs. The inclusion of representatives ofNGOs within national delegations. All of

these are methods which we have adopteddomestically in Britain. It does not spare usfrom criticism. The whole point of a Non-Governmental Organisation is to put forwardnon-governmental views. By and large,though, inclusion does engage those who takepart in a legitimate dialogue rather than ille-

gitimate disruption.But changes in presentation and process

cannot by themselves create a consensus. Thatalso requires changes of substance. So now Iwant to focus on two issues of substance, twoessential building blocks of a consensus onglobalisationGlobal Fairness and GlobalResponsibility.

Global Fairness

First, Global Fairness has made a strong net

contribution to development. In the pastdecade, the level of foreign direct investmentin developing nations has increased six-fold.It now runs at three times official develop-ment aid. Over the past generation, countriesin Asia have achieved such dramatic growthin trade that their incomes have moved fromsomething akin to African levels to somethingsimilar to countries in Europe. These are for-midable pluses on the balance sheet. But thebenefits of globalisation have been unevenlyspread. The overwhelming bulk of investment

goes to just a few developing countries. Africahas been passed by. Despite the excitingtrends and dramatic growth elsewhere, percapita income in Africa is less today than ageneration ago. It is not just an irony but atragedy that the poorest continent on theglobe is the one which has actually got poor-er during the age of globalisation.

The revolution in communications createslimitless opportunities for the transfer ofknowledge, technology and design. A prime

driver of economic growth will be the acceler-ating speed of technology transfer in a wired-up globe. But large parts of the face of theglobe are simply not wired up. Here inBritain, 95 per cent of households have a fixedtelephone line, and 65 per cent of the total

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NO N - G O V E R N -M E N T A L O R G A N -

I S A T I O N S A R E

N O S U B S T I T U T E

F O R E L E C T E D

D E M O C R A C Y , B U T

T H E Y C A N C O M -

P L E M E N T I T A N DA R E P A R T O F T H E

S T R E N G T H O F

ANY M ATURE

C I V I C S O C I E T Y .


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population now have mobile phones. But halfof humanity has not made or received a tele-phone call in their life. Like me, many of youmight feel one day without a telephone callwould be enriching, but a lifetime without itis impoverishing. The old divide based on dif-ferential access to investment or to skills is in

danger of being replaced by a modern divideover different access to the new technologiesof communication.

Globalisation is not to blame for this unfair-ness, but nor will globalisation alone removethe unfairness unless we consciously adoptGlobal Fairness as a deliberate objective.There is much that can be done.

It is one of the harshest paradoxes of glob-alisation that in the very decade when theworld has been integrating a global economy,

the global level of development aid has beendeclining. Moreover, the global distribution ofofficial aid sometimes appears to enhancerather than diminish unfairness. For instance,if we were to produce an index of poverty, itwould be unlikely to produce a spread ofdevelopment aid which allocated to sub-Saharan Africa only one-twentieth of the helpper head available to the Middle East andNorth Africa.

As Foreign Secretary, I pay tribute to mycolleague Clare Short, our Development

Secretary. Under her guidance, Britain isincreasing our aid budget by almost 50 percent in six years. And refocusing it on thepoorest people in the poorest countries.

Development aid in these circumstances isnot in competition with private investment. Itreaches those communities which currentlyreceive no investment and which will attractprivate investors only through sustaineddevelopment of human resources. And itneeds to be accompanied by an approach

characterized by a generous realism whichrecognises that poorer countries cannot devel-op their human resources if their debt burdenexceeds their education and health budgets.

Yet, I was struck that none of your contrib-utors saw an increase in official aid or a reduc-

tion in debt as part of the answer to the crit-ics of globalisation. I believe it is in the inter-ests of global private enterprise to press gov-ernments to reverse the general decline indevelopment assistance and thereby addressthe perception that globalisation is unfair.

There is a parallel here with the point I

made about the post-war consensus. Welfarefor the destitute, public health to protect thecommunity as a whole, and free access to edu-cation for all were essential elements in thatconsensus. It is precisely that development ofhuman resources which is now needed in thepoorest countries to enable them to takeadvantage of the opportunities of globalisa-tion. Businesses engaged in the spread ofglobalisation should openly demand suchinvestment by their governments. The other

means of promoting Global Fairness is trade.Even a modest shift in the terms of trade canproduce gains to a national economy thatwidely exceed any possible increase in devel-opment aid.

The fastest-growing developing countrieshave been those which have done most totake the opportunity of globalisation to boosttrade. As a result, global inequality fell in the1990s after three decades in which it soared.But global inequality remains much higherthan a generation ago and the benefits of

greater trade are uneven. The total exports ofIndia, Pakistan and Bangladesh together arebroadly similar to the exports of Thailands 60million people.

The collapse of the Seattle talks arose inlarge part from the feeling among the devel-oping countries that their priorities were nothigh on the agenda and that their voice wasnot influential in the Council chamber. Yet, itwould be a tragedy for those same developingcountries if we were not to take forward a fur-

ther World Trade Round. Halving trade tariffsworldwide would boost developing countriesincome by three times the total of develop-ment aid flows. We must persist with a furtherWorld Trade Round. But we must ensure thatit gives strong priority to promoting develop-


GL O B A L I S A T I O NI S N O T T O

B L A M E F O R . . .

U N F A I R N E S S ,B U T N O R

W I L L G L O B A L-

I S A T I O N A L O N E

R E MO V E T H E

U N F A I R N E S S . . . .


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ment. Free trade for the industrialised prod-ucts of the developed world must be matchedby fairer access for the agricultural products,textiles and clothing of the developing world.

This poses a particular challenge forEurope. The Common Agricultural Policy isthe largest system of agricultural protection-

ism on the globe. But it does not protect theliving standards of the farmers themselves, aswe have seen here in Britain. Nor is it in theinterests of our nations as a whole. Our con-sumers pay prices well above the world mar-ket, and in the case of commodities from thepoorest countries, such as sugar, they paythree times the world market price. Europecannot simultaneously be in the vanguard ofliberalising industrial trade and in the rear-guard of liberalising agricultural trade.

There is one simple but profound stepwhich the WTO could take to demonstrate itscommitment to Global Fairness. It shouldcommit itself to achieving agreed InternationalDevelopment Targets, such as the reduction byhalf by the year 2015 of those living below thepoverty level. It has the capacity to make amassive contribution to meeting those targets.It could thereby demonstrate to the develop-ing member states that their concerns areshared by the organisation as a whole. And itcould disarm those critics that see it as an

instrument of injustice rather than an advocateof Global Fairness.

Global Responsibility

The other foundation for a new consensusmust be Global Responsibility. The connec-tions between our actions and their resultswere much easier to understand in an agewhen most of the products we bought wereproduced domestically, possibly even locally.But now consumers buy their food, their

clothing and their compact discs from coun-tries which they have never visited. They haveno idea, and no means of knowing, what mayhave been the non-financial costs of their pur-chase. When they buy furniture, they have lit-tle idea of the environmental footprint on the

local forest. When they buy an engagementring, they cannot tell whether it was boughtwith blood in an African conflict.

Nor can their government address theseconcerns by unilateral regulation. Developingcountries are rightly suspicious of nationalenvironmental restrictions on trade as a covert

form of protectionism. And, in any case, theseare international problems which can besolved only by international solutions.Governments cannot hope at an internationallevel to discharge the public responsibilitywhich they are expected to exercise at anational level.

Nor is it unreasonable in the modern worldto expect a wider degree of private responsi-bility. One of the consequences of globalisationhas been the rise of transnational corporations

with assets greater than those of governments.Wal-Mart has a turnover broadly similar to theGDP of Norway and General Motors has aturnover greater than the GDP of sub-SaharanAfrica. Many of the larger corporations repre-sented in this room have more executivesworking in foreign capitals than I have diplo-mats working for the Foreign Office.

In these circumstances, it is reasonable toask for corporate good citizenship. Businesshas as much a duty as government to ensurethat its activities protect the environment. And

there are many striking examples of corporatebusiness accepting that duty. GlobalResponsibility means that it should becomethe norm within globalised business to observethe sound principles of environmental man-agement. The sustainable harvesting of timberand fisheries. The reduction of waste emissionsand energy consumption. The application indeveloping countries of the same safety stan-dards that they would apply at home. Thepublication of an environmental audit as a rou-

tine part of the annual reporting cycle.All of this is in our own interests as well asthose of the local population. The most com-pelling demonstration of globalised cause andeffect is the discovery of the intimate way inwhich disturbing the environment in one

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. . . C O N S U M E R S

B U Y T H E I R F O O D ,

T H E I R C L O T H I N G

AN D T H E I R

C O M P A C T D I S C S

F R O M C O U N T R I ES

W H I C H T H E Y

H A V E N E V E R V I S -

I T E D . T H E Y H A V E

N O I D E A , A N D

N O M E A N S O F

K N O W I N G , W H A T

MAY HAVE BEEN

T H E N O N - F I N A N -

C I A L C O S T S O F

T H E I R P U R C H A S E .


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hemisphere can produce profound and irre-versible changes in the climate in the otherhemisphere. Those businesses most active inthe globalising economy must show the great-est global responsibility in stabilising theglobal climate.

There are other examples where business

and government can work as partners todemonstrate Global Responsibility. Forinstance, diamonds from regions of conflict.

The majority of deaths in conflict over thepast decade have taken place in Africa. Andthe struggle for control over the diamondfields is at the heart of many of those con-flictsin Angola, in the Democratic Republicof the Congo, and in Sierra Leone. In all ofthem, control of diamonds is a principalincentive and the sale of diamonds is the prin-

cipal means of paying for weapons.Mainly because of our leading role in SierraLeone, Britain has been pushing for a globalban on rough diamonds from conflict areas. Ihave to say that we are very encouraged bythe positive response from the diamond tradeand I would particularly mention the strongleadership provided by De Beers. As a result,we are now on the verge of a world certifica-tion regime, which will ensure that rough dia-monds cannot be traded from countries inconflict unless they are validated by the legit-

imate government. This will reduce both thecapacity and the will of rebels to prolong aconflict. But this will also provide an illustra-tion of the positive potential of globalisationand the way global networks can be turned toadvantage if business and government togeth-er accept their Global Responsibility.

Conclusion

Globalisation is with us. It is not just here tostay. It is here to accelerate. Our prosperity

and our security will become increasinglyinterdependent. I have tried to sketch outsome of the elements of a political consensusto match that new economic reality. Greatertransparency of international organisations. Adetermination to ensure that the benefits of

globalisation are more fairly shared. A com-mitment that global trade does not knowinglydestroy the local environment or unwittinglypromote local conflict.

Of course, it will be a major undertaking toturn round the perception of those who seeglobalisation only as a threat and never as an

opportunity. But I said at the start thatLondon might prove a stimulating environ-ment for your discussions. Perhaps I couldend by adding that the example of Londonprovides not only a stimulus but a hope.London was after all first established as thecapital of England by Romans from Italy. Whowere in turn driven out by Saxons and Anglesfrom Germany. The great cathedrals of thisland were built mostly by Norman bishops,but the religion practised in them was secured

by a Dutch prince. Contact with the outsideworld did not begin with globalisation.London City and the British nation have

both been shaped by successive waves ofmigration and foreign influence. And there isa consensus among my countrymen of natur-al pride in the culture and economy that hasresulted from their past contact with the out-side world. I offer that happy ending as anencouragement to your d iscussions and a signof hope that with effort it should not beimpossible to build a similar consensus on the

accelerating foreign contacts required byglobalisation.

Robin Cook was the United Kingdoms Secretary

of State for Foreign and Commonwealth Affairs in

the first Blair Government (19972001), includ-

ing during the March 2001 Trilateral meeting. In

the Cabinet shuffle after the June 2001 elections

he became the Governments leader in the House

of Commons.


GL O B A L I S A T I O NI S W I T H U S . I T

I S N O T J U S T

HERE TO STAY.

I T I S H E R E T O

A C C E L E R A T E .


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G O R D O N S MI T H

Globalization andGovernance

Iunderstand globalization to be more thanan economic phenomenon, even one withclear social and cultural implications.Other things than the economy are globaliz-ing. Security has been globalized ever sincethe advent of nuclear weapons and the long-

range means of their delivery. We now seeenvironmental challenges as global in a num-ber of areas; none more obviously than climatechange. Again, I would argue this definition istoo narrow. Global challenges, by definition,are those that require responses at a globallevel. No individual state can develop ade-quate policies on its own. That is the point onwhich I shall build.

Let me tell you something about my experi-ence as the Canadian Prime Ministers sher-pa, or personal representative, for the G-7/8Summits in the mid-1990s. Two decades ago,the first summits focused on macroeconomicissues. I found fascinating in the mid-1990sthat, when the leaders were alone talkingamongst themselves about their major wor-ries, they talked about a much broader rangeof global challenges and the management ofour increasing interdependence. Of course,they talked about the Bretton Woods institu-tions, the WTO, a possible new environmen-tal organization, and the UN. But they also

talked about other particular challenges insome depth. Climate change will not surpriseyou. But infectious diseases and transnationalcrime might. Both are subjects that sherpaswere asked to prepare for substantive discus-sion at future summits. Why were leaders so

interested in these issues? Quite simply, theyunderstood that they could not deal withthem at a national level, and believed that theinternational machinery was at best creaky.

Globalization, particularly in the economicarea, is not new. Impressive numbers can bebrought to bear showing the high importance

of international trade and investment onehundred years ago. It is also clear from thatexperience that economic globalization wasnot and is not irreversible. War can certainlybring it to an end. In todays context, so can amajor backlash against globalization. Such abacklash could even undo other forms ofglobal integration being caused by new tech-nology and the increasing pressure of humanson the planet.

Global Governance at Besta Work in Progress

I also want to ensure we all understand inbroadly the same way governance. It is obvi-ously not synonymous with government. Tome, global governance refers to the manage-ment of issues that spread across borders andtypically involve governments, of course, butalso international organizations, civil society,often the private sector, and sometimesandindeed increasinglyformal or informal net-works. These issues require, in many cases,what has been called global public policy. Todeal with climate change, for instance, it isobvious that there must be just such a globalpublic policy.

These changes in the public policy agendahave clear implications for the role of statesand of international institutions. So does therise in importance of civil society. The num-ber, scope, and influence of non-governmen-tal organizations have grown impressively.This process has been facilitated by the infor-

mation revolution, which makes it so mucheasier for people around the world to connectquickly and cheaply. We are also seeing thespread of democratization and its conse-quences. While not universal in scope or inquality, it has meant that more people now are

2 0 0 1 L O N D O N M E E T I N G 9

S E C T I O N 2

T HE C H AN G IN G RO LE

O F S TAT E S

GL O B A L C H A L -L E N G E S , B Y

D E F I N I T I O N ,

A R E T H O S E

T H A T R E Q U I R E

R E S P O N S E S A T

T H E G L O B A L

L E V E L . N O

I N D I V I D U A L

STATE CAN

D E V E L O P A D E -Q U A T E P O L I C I E S

O N I T S O W N .


12/95

aware of what is going on and feel a right tobe involved in decisions that affect them.They are asserting that right, sometimes onthe streets. There is mounting discontent asdecisions that have important effects at thelocal level are taken by international bodiesthat are not perceived to be part of a gover-

nance process for which there are clearaccountability mechanisms.

In an increasingly interdependent world, itis obviousI think to most everybody, butmaybe I am mistakenthat one needs betterand universally applicable rules of the road.We need means of ensuring we dont collide,and at a higher level, that will enable us toarrive at our chosen destinations. The ruleshave to be both effective and accepted as fair.How to bring this off is not obvious and does

lead to questions about who should make therules, how they should be made, how flexibleshould they be, and who, if anybody, is toenforce the rules. You will recognize these asclassic questions about politics and gover-nance. Yet we have no clear system andprocess of global politics and global gover-nance. We have parts of a system, but nothingthat is remotely complete. The building hasmany architects and many workers, and canat best be described as a work in progress.

It is clear we will not have comprehensive

global government for a long time, if ever.That does not mean that building governancein a more conscious way for the major globalchallenges that require policy and manage-ment is not urgent. It is. Governance has toreflect the state of global politics, even if it isnow a messy one. It also has to reflect a systemof accountability that has more acceptancethan the present one. And that has implica-tions for transparency and participation.

I have no doubt that global institutions feel

quite accountable to those they understand tobe their stakeholders. The latter are govern-ments, or more accurately, parts of govern-mentsindividual ministries. I would arguethat the series of separate links back frominternational bodies to national governments

is part of the problem. The decisions of theseinstitutions can have truly dramatic effectsacross economies, societies, and cultures.Think about the Asian crisis and that dramat-ic picture of Michel Camdessus standing witharms crossed waiting for Indonesia to acceptthe terms established by the IMF. Despite

recent efforts to improve transparency, partic-ipation, and accountability, these institutionsfall far short of what one would expect from ademocratically elected government. This isnot because of the insensitivity of manage-ment and boards. It is in no small partbecause the stakeholdersmember govern-mentswould not have it any other way.

The end result is not satisfactory. There is aneed for greater inclusion, a sharing in thebenefits of globalization, and better means of

managing what economists call global publicgoodsand badswhich cut across a num-ber of institutions. Otherwise the backlashagainst globalization will mount and we will findourselves with more and more important envi-ronmental and security problems. This wouldnot be a pleasant world in which to live. Thegood news is that we dont have to live there.

States Must Still Lead,

but in an Inclusive Way

Let me now turn to the changing roles of

states, the traditional locus of authority andaccountability for governance. The reality ofmajor global challenges that can only be metthrough intensive international cooperation isa major change affecting the efficacy of indi-vidual states. We live in a world in which,despite some rather impressive concentra-tions, I would argue power is increasingly dif-fused. Sovereignty has been ceded upwards tointernational institutions. Non-state actors(civil society and the private sector, nationally

and globally) have simply asserted theirincreasing power. And sub-national levels ofgovernment are increasingly constitutionallyrequired to be part of the process. There areclear contenders to the states formerlyunchallenged exclusive authority.


IN ANI N C R E A S I N G L Y

I N T E R D E P E N D E N T

W O R L D , I T I S

O B V I O U S . . . T H A T

O N E N E E DS

B E T T E R A N D

U N I V E R S A L L Y

A P P L I C A B L E

R U L E S O F T H E

R O A D .


13/95

But it does not follow the state is goingawayfar from it. What is needed is for thestate to learn how to share power. Thisrequires more than better information andeven consultation. Let me recall two examplesthat I have experienced. First are the negotia-tions on a multilateral agreement on invest-

ment (MAI). Experts in the field who met atthe OECD conducted them. A variety of dif-ferences emerged that required difficult andabsorbing negotiations, but meanwhile thoseinvolved lost sight of the developing opposi-tion to the MAI in civil society that eventuallydid in the negotiations. That opposition wasan alliance of convenience of groups that inother circumstances would have had difficul-ty agreeing the time of day.

My other example is the treaty to ban anti-

personnel landmines, so often heralded as asuccess by my former boss, Lloyd Axworthy,who was Foreign Minister of Canada. Let mesay very clearly that if we had concentratedour efforts on lobbying other foreign min-istries around the world, we would not havecome very far. Instead we built on and helpeddevelop a coalition of NGOs. We worked withthe late Princes Dianaa transnational per-sonality if ever there was one.

What this means is that governments needto act in different ways. While they can and

must lead, they need to do so in an inclusiveway. They need to become more and morecomfortable working with civil societynotnecessarily all of it, but key parts. Subordinateorders of government (in a constitutionalsense) need to be brought into the tent.Nonetheless, the state retains its uniqueauthority. It is uniquely accountable to itselectors. NGOs may be increasingly powerful,but have in many cases questionable repre-sentativeness and accountability. The state is

an indispensable part of governance at theglobal level. Global environmental change,transnational health and crime problems can-not be solved without the state. This is quiteapart from the fact that many, indeed most,policy issues and program services are best

handled at the national level.We are living in a world in which there is

simultaneously integration and fragmentation.Traditional lines between domestic and for-eign have broken down. Old national loyal-ties are being undermined. There is increasingdistrust of governments and other institutions.

National borders are more porous. It is harderand harder to frame policies strictly at thenational level. Events move more rapidly.These are challenging times for policymakers.

The Role of the United States

Before closing I would like to say a wordabout the United States, obviously the coun-try that has by far the most power in theworld today. The leadership of the UnitedStates in building a rules-based system with

strong institutions to manage those areas inwhich we are interdependent is crystal clear.That wont happen if the United States suc-cumbs to the inclination to act unilaterally. Iam not worried about isolationism. I worryinstead about the concept of U.S. exceptional-ism, as well as attachment to sovereignty,which I know is deeply rooted in Americanpolitical culture. I am absolutely convincedthat the idea of a world in which there is oneset of rules that the United States establish-es for itself and another for the rest of the

world wont fly. Think about the example ofthe International Criminal Court. Therewould not be an ICC without the leadershipof a number of Americans. If the United Stateswishes to be able to bring to justice war crim-inals, can there be a system for Serbs andRwandese, not to mention Canadians andGermans, that cannot by definition apply toAmericans? Excuse me, but I think not.

* * *

My conclusion, therefore, is that while global-ization, global change, global interdepen-dencewhatever you want to call itis goingforward and leading to the development ofinnovative forms of governance that increas-ingly often include civil society, the state is not

2 0 0 1 L O N D O N M E E T I N G 11

WE LI VE I N AW O R LD I N

W H I C H . . . P O W E R

I S I N C R E A S I N G L Y

D I F F U S E D .

. . . T H E R E A R E

C L E A R C O N -

T E N D E R S T O

T H E S T A T E S

F O R M E R L Y

U N C H A L L E N G E D

E X C L U S I V E

A U T H O R I T Y .


14/95

going away. Other actors have joined it on theworld stage. The state needs to learn some newroles, to operate in different ways. And thereare more and more opportunities for those ofus at present not in governments to have influ-ence. There are some interesting politicalimplications from this. The capacity of electedgovernments to deal with an increasinglyimportant set of problems is circumscribed.This reflects on how governments are seen andwhat they must say to their electors. As exter-nally agreed decisions and rules have growingimpact, including on social cohesion, who isto be accountable and how will that account-ability be exercised? There will be a large polit-ical cost to fudging the answers.

Global politics on the great issues of pover-ty, sustainable development, climate change,

and the like are now only working in a rudi-mentary way. There is no assembly or parlia-ment; nor is there likely to be one for a while.Yet something has to be done at the globallevel to permit non-governmental voices to beheard in a more systematic way. It seems tome that there is something the TrilateralCommission, as a good NGO, can do to facil-itate this process.

Gordon Smith is Director of the Centre for Global

Studies at the University of Victoria and former

Canadian Deputy Minister of Foreign Affairs.

E R N E S T O Z E D I L L O

Globalization andthe ChangingRoles of States

It is commonly believed that globalizationis forcing nation-states to adapt. This viewconsiders that modern globalization ismainly a result of technological progress inproduction methods, transport, and telecom-munications. It attributes to nation-states asomewhat reactive, even passive, role in theprocess. At the very best, proponents of thisstandpoint look at the nation-state as just one

among several important factors in the global-ization process. An extreme version of thisview would submit that globalization fre-quently proceeds in spite of nation-states. Idispute the validity of this view because itdoes not correspond with practical experienceand it can also lead to mistaken policy deci-sions. I believe that modern globalization hasoccurred not in spite of the nation-state, butreally, to a significant extent, because of deci-sions and actions taken by nation-states.

Global integration, economic and otherwise,

has indeed been driven by technologicalprogress and economic incentives, but itwould be inconceivable in its present formwithout the universe of political decisionstaken by states at both the national and inter-national levels in many fundamental respects.The rapid expansion of international trade andinvestment in recent decades has certainlybeen facilitated by technological progress, butit would hardly have occurred in the absenceof very deliberate policies implemented by

member-states of the international community.At the national level, sovereign state decisionsto foster the market economy by opening toforeign trade and investment and liberalizingfinancial markets are, more than anything else,key to explaining present economic integra-


. . . M O D E R N G L O B -

A L I Z A T I O N H A S

O C C U R R E D N O T

I N S P I T E O F T H E

N A T I O N - S T A T E ,

BUT. . . BECAUSE

O F D E C I S I O N S

A N D A C T I O N S

TAKEN BYN A T I O N - S T A T E S .


15/95

tion. At the international level, it has beenchiefly by virtue of political decisions made bysovereign states that many agreements leadingto unprecedented integration have been made.

For example, regional agreements such asthe European Union, Mercosur, and NAFTAwere not the result of technological progress.

They have been above all the result of politi-cal visions and decisions by sovereign states.The processes which have produced, forexample, the remarkable, albeit yet incom-plete, rules-based WTO system are of anequally political nature. Believe me that notechnological factor would help to significant-ly explain the way in which the Mexicaneconomy has integrated into the world econ-omy in just a few years. Sheer political deci-sion and action explain why today Mexico has

free trade with more countries than any othernation in the world. Of course, this circum-stance includes NAFTA and the unprecedent-ed FTA with Europe.

Acknowledging the strong political roots ofglobalization brings with it both good andbad news. The good news is that notwith-standing their current adverse reputation, thehuman inventions of politics and the nation-state are still doing a lot of good. The badnews is that, contrary to some beliefs, global-ization, being to a great extent a creature of

political decisions, is not an irreversibleprocess. Its technological determinism is a fal-lacy. Beware of the possibility that govern-ments and politicians can still resort to newforms of protectionism to roll back existingliberalization and can also make policy mis-takes that could lead to a less propitious envi-ronment for the expansion of the internation-al economy. They can, in short, adhere tooquickly and too blindly to the emergingpolitical correctness that fallaciously

imputes to globalization all the present evilsof the world. Let us not forget that, in modernhistory, globalization was already reversedonce by the actions of states with disastrousconsequences for humankind.

If we believe, and I certainly do, that global-

ization is not the cause, but part of the solutionto the problems of poverty and inequalitywhich unfortunately prevail in the world, thennation-states have an enormous responsibilitynot only to confront, with good politics andwise public policies, the present hostilitytowards globalization, but also to continue

playing an active role in its orderly develop-ment. Our conference chairman, PeterSutherland has rightly pointed out that, Whilethe market economy system is largely agreed inprinciple, the mechanisms to make it workinternationally are at an early stage of develop-ment. This is by no means an exaggeration.The agenda facing nation-states to harnessglobalizations full potential contribution tohuman development is very challenging aswell as fascinating. Of course, I do not intend

to burden you with an exhaustive discussion ofsuch an agenda. Fortunately, it is being coveredto some extent in the various sessions of thismeeting. Just allow me to hint at a few pointsthat I consider to be of some relevance.

First, I would insist on the fundamental andirreplaceable role of nation-states in the con-struction of global governance. In this task, asin many others, it is absurd to try to bypassthe nation-state with agents of nil democraticrepresentation and of dubious transparencyand accountability. Indeed, let us be attentive

to all voices, but without allowing the state tobe overruled by other actors, however altruis-tic they may claim to be.

Second, nation-states should continue tostrive for a rules-based international system.This is in the best interests of the weakermembers of the international community. Farfrom diminishing modern national sovereign-ties, a rules-based system enhances the powerof weaker states to safeguard their legitimateinterests. I liked what Secretary Robin Cook

said to us yesterday, We are now as interde-pendent as we are independent. In referenceto the developing countries cases I couldchange somewhat Mr. Cooks idea to make iteven more appealing: We are now indepen-dent to the extent that we are interdependent.

2 0 0 1 L O N D O N M E E T I N G 13

LE T U S N O TF O R G E T T H A T ,

I N M O D E RNH I S T O R Y , G L O B -

A L I Z A T I O N W A S

ALREADY RE-

V E R S E D O N C E B Y

T H E A C T I O N S O F

S T AT E S W I T H

D I S A S T E R O U S

C O N S U Q U E N C E S

F O R H U M AN K I N D .


16/95

Third, the WTO experimentindeed thefirst post-Cold War era rules-based institu-tionshould not only be fully completed in anew comprehensive round of negotiations,but the basics of this model (binding regula-tions and dispute settlement provisions)should be extended to other essential areas.

Rather sooner than later, the internationalcommunityrepresented by nation-statesand assisted by existing multilateral institu-tionsshould begin to decide on new or rein-forced global institutions in fields such as theenvironment, investment, world taxation,banking standards, and accounting standards.Likewise, the fundamental issue of globalpublic goods should be tackled.

Fourth, and most important, nation-statesshould more effectively confront the acute

problem of social exclusion at both thedomestic and the international levels. Theyshould start by dispelling the mistaken ideathat globalization per se is a main cause ofexisting disparities. Globalization offersunique opportunities that hardly any othereconomic arrangement could provide. Thequestion is why some are able to take advan-tage of those opportunities, while others can-notor are left behind. The bottom line (or Ishould better say, the dividing line) has to dowith freedom. People are left behind because

they are not free. And they are not freebecause they lack nutrition, education, train-ing, health, basic human and political rights,security, elementary infrastructure, andemployment. By means of well-designed andfocused social policies which expand basichuman freedoms, the most vulnerable mem-bers of societies can be empowered to sharethe opportunities provided by the marketeconomy and globalization at-large. Ofcourse, this is more easily said than done. It

requires sound domestic policies pursued bystrong and democratic national institutions,but in many cases it also requires vigorousinternational cooperation that, unfortunately,is today practically absent from the agendas ofthe well-off countries of our world.

I hope that, beyond any altruistic senti-ment, self-interest will advise a change in thepresent status quo about aid and internation-al cooperation. Otherwise, confusion and ani-mosity about globalization will prevail. Andmuch sooner than later, everyone will have topay for that.

Ernesto Zedillo is former President of Mexico

(19942000).


. . . I T I S A B S U R D

T O T R Y T O

BYPASS THEN A T I O N - S T A T E

W I T H A G E N T S O F

N I L D E M O C R AT I C

R E P R E S E N T A T I O N

A N D O F D U B I O U S

T R A N S P A R E N C Y

A N D A C C O U N T -

ABILITY.


17/95

J U S U F W A N A N D I

Benefiting fromGlobalization:DomesticFoundations,International Help

Iwill talk about developing nations in dangerof being left behind in the globalizationprocess. This does not mean that no parts of

the developed world are experiencing the sameproblem. The demonstrations in Seattle againstthe WTO, in Washington against the IMF andIBRD, and in Australia and Switzerland againstthe World Economic Forum are ample evi-dence of that. But larger parts of the developingworld are definitely being left behind.

Sub-Saharan Africa: Hardly Touched So Far

There are two big groups among developingnations. One group is hardly being touchedby globalization, including most countries ofsub-Saharan Africa. In order for them to ben-efit from globalization in the future, a greatdeal of effort will have to be undertaken bythemselves. In many of these countries, peacehas to be restored and a modicum of domes-tic stability achieved. Policies have to be rightand a certain level of institutionalization hasto take place. A certain level of economic

development and growth has to happenbefore globalization is going to touch them.The international community can help in

various ways. ODA (Official DevelopmentAssistance) and technical assistance are stillvery relevant and should focus on education

and health care. Debt relief, as has beenpromised, is critical for these countries tofund their development. Aid programs toeradicate diseases such as malaria and tuber-culosis are also very important. Public- andprivate-sector cooperation from the West iscritical for these efforts to save their populace.

Of course, it is true that these countries andtheir leaders first have to help themselvesbefore outside assistance will have any mean-ingful impact. Without some political stabilityand security, a certain level of institutionaldevelopment, and at least some economicgrowth, there is almost nothing that outsiderscan do. A lot of aid and assistance to thesecountries has been squandered due to the lackof some of these basic factors.

East Asia, Latin America:Real Benefits, but Havoc Created

In the other group of developing countriesglobalization has had an impact. Some coun-tries have benefited, especially in East Asiaand Latin America. Most of the countries inEast Asia have benefited tremendously fromopening up their economies to the influenceof globalization. They have been able tochange their socioeconomic structures andreduce poverty. In Indonesia, for instance, thenumber of people living below the poverty

line has been reduced from 40 percent of thetotal population in the 1970s to only 11 per-cent in 1997. This is a tremendous improve-ment. China has done even better. The finan-cial crisis increased the number of people liv-ing below the poverty line, but to a lesserextent than initially thought to be the case.

While the benefits are real, the havoc glob-alization created in Latin America in the1980seven before the impact of full-fledgedglobalizationand in East Asia since 1997

has been quite dramatic. These experiencessuggest that certain policies and institutionshave to be in place in these countries beforethey can benefit from globalization in a moreenduring way.

In Indonesia, the changes that have resulted

2 0 0 1 L O N D O N M E E T I N G 15

S E C T I O N 3

ADDRESSING THOSE IN DANGER

OF BEING LEFT BEHIND

. . . C E R T A I N P O L I -

C I E S AN D I N S T I -T U T I O N S H A V E

T O B E I N

P L A C E I N

T H E S E C O U N -

T R I E S B E F O R E

T H E Y C A N

B E N E F I T F R O M

G L O B A L I Z A T I O N

I N A M O R E

E N D U R I N G W A Y .


18/95

from the opening up of the economy are feltin every aspect of life. In the socioeconomicfield, the changes have created a dualisticsociety. There is a divide between the 20 per-cent of the people who have benefited fromglobalizationbasically the middle classand the 80 percent who have been left

behind. This 80 percent benefits somewhatfrom the trickling down effect, but Indonesiais experiencing a widening income gap. Thisposes a real political problem.

In the sociopolitical field, globalization hascreated a middle class that is more assertiveand independent from the government. Theydemand a more flexible political system,which in most cases can be offered only by areal democratic system. In the socioculturalfield, values are changing very fast, resulting

in the alienation of some of the populace whothen try to protect themselves behind tradi-tional values based on religion, race, and eth-nicity. These changes have created greaterdivides in society at-large and have causedmore political problems.

In retrospect, Indonesias troubles are obvi-ously related closely to domestic politicaldevelopments. The crisis in 1997 was preced-ed by a very authoritarian political system.Rules and institutions, and the flexible politi-cal system necessary to cope with globaliza-

tion, did not exist. Socioeconomic andsociopolitical changes are required beforeIndonesia can benefit more fully from global-ization. Transparency, accountability, goodgovernance, the rule of law, flexible politicalinstitutions, and adequate financial institu-tions (including the right sequencing of theprocess of opening up the financial system)are prerequisites that must exist in conjunc-tion with the globalization process. Inequalityis a special concern that can be overcome by

special policies and measures, especially inthe education and training fields. These poli-cies and measures are critical for workers thatlack skills, and small and medium-sizedenterprises that lack technology. So, as in thecase of the first group of countries, domestic

policies and institutions are critical for reap-ing the benefits of globalization.

The international community can andshould help those developing countries dis-rupted by globalization willing to continue tobe part of the globalized world to becomehealthy again. If most of them cannot over-come the setbacks they are now enduring,then support for globalization will be set backand fewer countries in the developing worldwill stay partners of the West.

What do these countries expect from theinternational community, particularly theWest?

First, global fairness. The developing worldexpects a level-playing field in trade, espe-cially access to Western markets for textiles,footwear, and agricultural products.

Second, global ethics. It is hoped that goodgovernance is valid not only for govern-ments, but also for the private sector, whichhas caused so much damage to the environ-ment and in the treatment of their labor.Cooperation between the public and pri-vate sectors in these areas can lead to theestablishment of rules of good governanceand to overcoming the problem of trainingand education, and the problem of health-care for the people.

Third is review and renewal of global rules andinstitutions. Since the Bretton Woods institu-tions were established in 1944, dramaticchanges have taken place and many morecountries now take part in these regimes.One very obvious problem is in the area ofinternational finance. Short-term move-ments of funds have caused havoc in thedeveloping world. Another issue relates tothe role of the IMF and the need for greatertransparency and accountability. The devel-

oping world feels that, in the developmentof global rules and institutions, the Westhas been too dominant. Therefore, it is onlyfair to demand some changes. Correctionsare also needed in the field of trade. Newconditionalitiesenvironmental and labor


. . . I N T H ED E V E L O P M E N T

O F G L O B A L

R U L E S A N D

I N S T I T U T I O N S ,

T H E W E S T H A S

B E E N T O O

D O M I N A N T .

T H E R EF O R E , I T I S

O N L Y F A I R T O

D E M AN D S O M EC H A N G E S .


19/95

standardsto be included in the nextround of WTO negotiations are stronglyrejected because they may be a disguise forprotectionism. Environmental and laborissues are important, but they have to behandled separately and by the appropriateinstitutions, such as the ILO in regard to

labor standards.

Globalization Potentially Beneficial,

but Requires Corrections

As was evident at the recent Porto AlegreWorld Social Forum in Brazil, there are differ-ent perspectives on the impact of globaliza-tion and economic liberalization. The global-izers tend to look at the impact of globaliza-tion at the aggregate national level and in amacroeconomic sense, while the globalizees

tend to see concrete cases of poverty, starva-tion, or complete deprivation of basic humanneeds. A second difference in perspective isthe timeframe. While the globalizers usuallyrefer to the medium to long term (five to tenyears or more) for overcoming the inequalitygap, for the globalizees the problem is oneof the coming days or months, because theimpact could be a calamity for a family, a vil-lage, or a region. But some agreements werereached in the dialogue at Porto Alegre; and,except for some NGOs that hold extremeviews, the process of globalization has beenaccepted as potentially beneficial, albeitrequiring a lot of corrections.

NGOs should not be considered enemies.There are various kinds of NGOs and manyperform very useful roles in correcting andcriticizing governments. But to expect thatthey will replace governments is also wrong.They do not pretend to replace governments,so to expect them to fulfill the conditionsexpected of governments, such as democratic

representation, transparency, and accountabil-ity might be the wrong approach. If NGOs arenot credible, public opinion will graduallydeflate their importance and discount theirviews. There are good and bad NGOs, just asthere are good and bad governments, but to

deny their role because there are bad NGOs isnot going to be effective in dealing with them.In some developing countries, their role iscrucial to continuing democratic change and,for that reason alone, their existence and rolehas to be respected.

Jusuf Wanandi is Member of the Board of

Directors, Centre for Strategic and International

Studies, Jakarta, Indonesia.

N O R A L U S T I G

Sharing the

Benefits ofGlobalizationMore Widely

Iam going to address three questions. Isthere evidence that there are people andcountries in danger of being left behind? Isglobalization helping or hurting those in dan-ger of being left behind? What actions areneeded so the benefits of globalization aremore widely shared?

Those in Danger of Being Left Behind

On the first question, I want to share with yousome figures. In 1960, per capita GDP in therichest twenty countries was eighteen timesthat of the poorest twenty countries. By 1995,this gap had widened to almost forty times.There is evidence that wage disparitiesbetween skilled and unskilled workers havebeen on the rise in many parts of the devel-

oping world (particularly the middle-incomeLatin American countries) and also the devel-oped world. Gains in life expectancy since themid-twentieth century will soon be wiped outin countries at the center of the HIV-AIDS epi-demics in Africa. In the transition economies

2 0 0 1 L O N D O N M E E T I N G 17

TH E R E A R EG O O D A N D B A DN G O S , J U S T A S

T H E R E A R E

G O O D A N D B A D

G O V E R N M E N T S . . . .


20/95

of Europe and Central Asia, the number ofpeople living on less than a dollar a day rosefrom about one million in 1987 to twenty-four million in 1998more than twenty-fold.Ethnic and racial minorities face higherpoverty rates in many societies and this maynot be improving. In Peru, for example,

indigenous groups were 40 percent more like-ly to be poor than non-indigenous groups in1994, and 50 percent more likely in 1997.

While donor countries economies grew inthe 1990s, at the same time their develop-ment assistance shrank from one-third to one-fourth of one percent of their combinednational product. It has been estimated thatindustrialized countries trade barriers causeannual losses in developing countries poten-tial welfare of more than twice the yearly

amount of development assistance. Only 10percent of the $5060 billion in healthresearch worldwide each year is spent on thediseases that afflict 90 percent of the worldspeople. Over thirty-two million HIV-positiveindividuals in the developing world do nothave access to treatment because AIDS drugscost $10,000$15,000 a yearbetween fiveand fifty times more than annual averageincomes in some of these countries. There isalso evidence that, in many developing coun-tries, public spending is not progressive and is

not protected from adverse shocks.

Globalization Is Producing

Winners and Losers

Whats the link of all this to globalization? Iinclude in the concept of globalization theprocess of market reforms, particularly theprocess of liberalizing trade and capital accountsand deregulating the economy. The evidenceshows that market reforms in general haveresulted in positive outcomes in countries that

have introduced them. Studies on Latin Americaindicate that the counterfactual of no reformswould have cost, on average, two percentagepoints of growth in the early 1990s. The coun-tries of the former Soviet Union that reformedfaster did better. China is a very good example of

a country that reaped large growth dividendsfrom the introduction of market mechanisms.

More growth, as we know, means lesspoverty. At the same time, however, I think wehave to recognize that growth in developingcountries has been disappointing, partly asthe result of external shocks, but partly

because some reform processes have failed todeliver what was expected or failed entirely. Insome cases, financial and capital account lib-eralization has been one of the main causes ofsignificant banking crises worldwide. Anotherproblem has been the capture of the reformprocess by rent-seeking elites.

Country-focused studies have found thatliberalization can generate benefits for thepoorer sectors of society, particularly when itinvolves agriculture. In some cases, like

Ghana, Chile, China, and Uganda, there havebeen gains for everybody, including the poor.However, other studies show that the processof liberalization has created losers, particularlyduring the transition when subsidies are elim-inated and trade barriers are dropped. Some ofthese losers may be the already-poor or peoplewho become poor as a result of reforms.

Level the Playing Field and

Address Systemic Risks

What actions can be undertaken so the bene-

fits of globalization are more widely shared?Economic growth continues to be one of themain factors in reducing poverty worldwide.There is no doubt about it. But we have to beaware that reducing poverty through growthmay be quite slow. For example, in Brazilwhere half of Latin Americas poor liveforthose people who live at below half the pover-ty line, their income would have to increase300 percent in order to reach the poverty line,so it would take several decades for them to

become non-poor. This is the case even if thecountrys GDP per capita grows steadily at 3percent, a growth rate higher than Brazils pastperformance.

In order to accelerate the spread of benefitsthat growth may bring, specific actions are


. . . W E H A V E T O

BE AWARE

T H A T R E D U C I N G

P O V E R T Y T H R O U G H

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needed both nationally and internationally.Actions are needed to level the playing field,particularly by increasing the asset-base ofpoor people in the areas of education, health,and land; by making markets work better forpoor people; and by reducing social barriersthat keep certain ethnic and racial groups or

women in a state of disadvantage in society.The other important sets of actions that haveto be undertaken have to do with risk man-agement. It has to be recognized that reformscan produce losers and new sources of riskduring the transition. Mechanisms reducingthe likelihood and risks of shocks, and help-ing poor countries and poor people cope withshocks when they occur have to be integralparts of the process of globalization if the ben-efits are to be shared.

Beyond the domestic arena, there is also anumber of international actions that can helplevel the playing field and address systemicrisk. One is the importance of reducing pro-tectionism in developed countries. A secondis promoting financial stability. There is now adebate over how that stability has to be pro-moted. In particular, how important are ex-post rescue packages? In a world where con-tagion and herd behavior prevails, timely res-cue packagessupported by appropriatedomestic policieswill continue to be cru-

cial. Another is promoting global publicgoods, such as research in agriculture andcommunicable diseases that affect the devel-oping world, and providing access to theresults of this research to the poorer parts ofthe world. Other actions include focusing aidon poverty reduction; stemming armed con-flict; and encouraging the constructive partic-ipation of the poorer countries and poorerpeople in the world fora that decide how theprocess of globalization takes place.

Nora Lustig is Senior Advisor and Chief of the

Poverty and Inequality Unit of the Inter-

American Development Bank and was Co-

Director ofWorld Development Report2000/1: Attacking Poverty.

JAY MAZUR

GlobalizationMust Work forEveryone

Ivery much appreciate the opportunity toparticipate in this discussion, for I believeit reflects a positive shift in the focus ofdebate on the direction of the world economy.For too long the great debate on globaliza-tionparticularly tradehas been reduced tosterile caricatures that are increasingly mean-ingless: Labor is protectionist; big businessfree-traders. This is not true. In fact, I find that

a strange reversal has taken place in thisdebate. The continued resistance to the inclu-sion of worker and environmental rights intrade agreements might very well be called theNew Protectionism. What do I mean bythat? I mean protection of the privilege andpower to exploit workers and the environmentwithout regard to the human consequences;protection against the sometimes inconvenientdemands of industrial and political democra-cy; protection to buy and sell without anyrestrictions, including responsibility for the

social implications of this commerce.Let me be absolutely clear about this. The

labor movement and its allies do not believethat higher trade barriers are the solution topoverty and oppression. Increased trade canand has created new wealth and raised livingstandards for many people around the world.We do not believe that the industrialized coun-tries can turn our backs on the struggle of devel-oping nations to raise the living standards oftheir most destitute citizens. We do not believe

that globalization is the new Evil Empire.So when we speak of those in danger ofbeing left behind, we are talking about thosewho have not shared in the benefits of global-ization. But we are not talking about a fewstragglers in an otherwise orderly march of

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humanity toward a bright future. We are talk-ing about multitudes who do not believe thesystem is working for them. They have beenleft behind, and they know it: workers whohave seen their real incomes stagnate ordecline over the past decade, which is whatmost workers have experienced in both devel-

oped and developing nations; the nearly twobillion people who live on less than a dollar aday; the hundreds of millions who are illiter-ate and malnourished; the 2.6 billion peoplewho lack even basic sanitation.

We understand that these problems cannotbe solved overnight, that there has been someprogress. But there is one indisputable factabout globalization that I believe holds the keyto this discussion: Globalization has createdspectacular concentrations of wealth. Some of

this wealth has inevitably trickled down, butthis process should not be confused withsocial development or even economic growth.Whatever else we may say about globalization,the rich are getting richer and the poor are get-ting poorer. Even some of the most ardentproponents of globalization have come toacknowledge what I suggest to you is thispotentially fatal failure of the current system.

Globalization increases income and socialdisparities within and among nations.Globalization has left many people behind. It

is wrong to protect only those who invest fora living and not those who work for a living.If globalization is to work, it must work foreveryone. When the assets of the two hun-dred richest people in the world are greaterthan the combined income of the two billionpeople at the other end of the economic lad-der, there is something wrong. The sheer size,and with it the power, of multinational corpo-rations is overwhelming national states. Ofthe one hundred largest economies in the

world, fifty-one are corporationsthe otherforty-nine are countries. I would venture tosay that never before have so few benefited somuch from the labor of so many.

These inequalities impact not only peopleand nations of the developing world. There are

many millions of working people within theTrilateral countries themselves who believe,and have reason to believe, that they have beenleft behind. A recent Business Weekpoll foundthat only 10 percent of Americans supportedfree trade; 37 percent called themselves pro-tectionists. And fully half said they favored

the kind of fair trade that the labor movementand its allies have long advocated. It is oftensuggested that the way to address the discon-tent arising from this situation is by enhancingthe social safety net, providing more effectiveand comprehensive job retraining, upgradingeducational and health care systems, providingadequate unemployment and retirementinsurance, and so on and so forth. This, ofcourse, is an excellent idea, but unfortunatelyone that flies in the face of current political

realities. For it is those very same unregulatedcompetitive forces of globalization that haverelentlessly pushed corporations and govern-ments to cut back on labor costs and socialprograms. By all means, let us work at provid-ing better safety nets, as a few companies andgovernments have, but let us have no illusionsabout what we must do to get at the heart ofthe matter. It is one of those moments in his-tory that requires systemic changes, of under-lying attitudes and overarching architecture.

We Need a Global New Deal

An essential point of departure is to remindourselves that labor is not just another com-modity, not just another factor of production,however accustomed we might have becometo describing it that way. Labor is an expres-sion of unique human value. Its rights areincorporated into the Universal Declaration ofHuman Rights alongside the other rights wehold to be fundamental and essential tohuman dignity and political democracy

noble sentiments with which I trust everyonein this room agrees. But in most of the worldtoday the rights of labor are indifferentlyenforced, blatantly suppressed, or violentlydenied. This not only offends our sense ofdecency, but it is also extremely short-sighted


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from an economic point of view. More thananything else, what the global economy needsare consumers with money to spend, workerswho can buy the goods they produce.

So when we talk about workers rights, howdo we get from agreement in principle toapplication in practice? It is no longer accept-

able to say that today we will have free tradeand tomorrow we will figure out how toenforce labor rights and environmental stan-dards. It is no longer acceptable that we vig-orously sanction the violation of patents,intellectual property rights, and investorrights, but are unable or unwilling to designappropriate sanctions for the violation ofworker rights. Even Charlene Barshefsky, theformer U.S. Trade Representative, has calledthe notion that labor rights should be discon-

nected from trade intellectually indefensi-ble. The elements of the system must belinked if the system is to function properly.Universal rights must be enforced universallyand simultaneously, not sequentially. Whenthe enforcement of rights is taken seriously, asin the case of property rights, that is the waythe system works. We can do no less for thedignity of human labor or the physical healthof the planet.

I am reminded of a remark made by theformer Secretary General of the World Trade

Organization, Renato Ruggiero, who said,We are no longer writing the rules of inter-action among separate national economies.We are writing the constitution of a singleglobal economy. To the extent that this istrueand I believe there is a great deal oftruth to this statementwe must rememberthat a constitution is a political document. Aconstitution of the global economy mustreflect and embody our democratic princi-ples. It must respond to the legitimate needs

of the majority while protecting the rights ofthe minority. It must be clear that our eco-nomic system and the markets that drive itare not ends in themselves.

I believe there is a lesson to be learned in thehistorical experiences of our own nations. We

have learned that the market, by itself, couldcreate havoc as well as wealth, famine as wellas feast, oppression as well as opportunity. Welearned that some degree of regulation wasnecessary if markets were to reflect our valuesand meet our needs as a society. Laws werepassed to temper the social distortions shaped

by unrestrained capital and markets.Mechanisms were created to enforce theselaws. Countervailing institutions were devel-oped to moderate the power of capital in theworkplace and the broader political discourse.There was resistancesometimes a lot ofresistanceto these changes. But businessleaders who saw beyond the immediate heat ofthe battle, who looked to the long-term inter-ests of their shareholders, who were willing tothink and act anew, played a pivotal role in

harnessing the wild energy of our economicsystem toward the greater good of our peoples.We need such leadership today, particularly

from the Trilateral countries. The global econ-omy of today is like an economic Wild West,with speculative capital flying around theworld at well over a trillion dollars a day andgoods and services increasingly free to movewherever a dollar can be made. I do notbelieve that these profound structural prob-lems are going to be fixed by tinkering at themargins. There must be changes in our way of

thinking as profound as the problems them-selves. I stated at the outset of my remarksthat I believe there has been a shift in thefocus of the debate on globalization. We areapproaching a new consensus that there needto be new rules for the global economy, notonly to address the immediate problems ofthose who have been left behind, but also tostabilize a crisis-prone financial system and tofill the institutional vacuum created by aninternational economy that has overwhelmed

our national political systems.But what are these rules? Who makes them?And how are they enforced? We need a prag-matic leap of imagination. I dont claim to haveall the answers, but I know we need a bold newapproach, a new vision, a Global New Deal:

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E X P R E S S I O N O F

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The rights of workers, and the protection ofthe environment, must be given equal con-sideration with the rights of capital andproperty and the regulation of trade.Whether this is done primarily through theWTO or by strengthening the ILO, or somecombination of the two, is an open ques-

tion. But there must be a commitment tomake this happen and to assure that theserules are built into the global trade andinvestment system with sanctions to enforcethem just as property rights are enforced.

Debt forgiveness for impoverished nationscannot continue to be a carrot offered onlyafter disastrous cuts in social and educa-tional programs. These countries desperate-ly need relief, and the funds saved can betargeted on basic needs like health care and

schooling. Something must be done to bring global

financial speculation under control. I leaveit to the technicians to determine the bestway to do this, but serious considerationshould be given to the kind of tax proposedby Nobel Laureate James Tobin on themovement of speculative capital. Thiswould not only lower the speculative fever,but also raise significant funds that could bededicated to improving the prospects ofthose in danger of being left behind.

Toward a New Internationalism

Let me say one last word about those whohave been left behind. They have begun toreact, to organize, and to protest, as I am sureyou have noticed. They are in the streets andat the factory gates. They are on the net andthe web and in the offices of lawmakers andother elected officials. They are workers andstudents, churches and womens groups, envi-ronmentalists and human rights activists. This

is a truly grass-roots, international movement,linking North and South, East and West. Thedin you hear may sound confused and confus-ing at times, some of the ideas may be foolishand the behavior excessive, but this is a socialmovement that is growing stronger and more

coherent around a New Internationalism.It is a movement that is not going away

until there are fundamental changes in thesystem. While the WTO can convene on anisland, the protest cant be put out to sea. Thisis not a public relations problem; it is a per-formance problem. The global economy just

isnt working very well for working people.They and their allies refuse to accept the dic-tates of the market as the final arbiter of thecondition of the human family. They do notbelieve that undirected growth and open mar-kets alone will lift them out of poverty or givetheir children the opportunities they did nothave themselves. They want the freedom tospeak their minds and a fair share of the fruitsof their labor.

There is only one way this can happen. The

laws and political institutions that were devel-oped to protect people against the creativedestruction of markets at a national levelmust now be boldly and imaginativelyextended and adapted to the new internation-al realities. Victor Hugo once said that there isnothing more powerful than an idea whosetime has come. It is not uncommon for suchideas to originate and gather force outside tra-ditional institutions. I believe this movementtoward a New Internationalism reflects

Documents

T55 - The London Annual Meeting (2001)