"Europe and Globalisation" - Speech by EU Commissioner Mandelson

Speech by Peter Mandelson, EU Trade Commissioner, on "Europe and Globalisation" at London Metropolitan University, London

In this speech given to launch the new Global Policy Institute at London Metropolitan University, EU Trade Commissioner Peter Mandelson calls for the European Union to shape global economic change and more equally distribute the benefits of globalisation. Mandelson argues: "if we don't want a politics of retreat, and national chauvinism and protectionism in Europe, we will have to build a credible and practical politics of openness." Mandelson welcomes the creation of the new Global Policy Institute as an important step to "take back globalization from the pessimists".

Mandelson says: "Some in Europe would like to see the European Union act as a bulwark against globalisation; a wall and a gate we can pull closed in the face of change. This position makes a powerful appeal to our anxiety about change and our sense of social solidarity. But its picture of a static European society should worry us because everything we know about the global age suggests that nothing is standing still. It risks becoming a political fantasy about resisting change, holding back the tide, when we should be seeking ways to shape change and distribute its benefits more equally."

Mandelson argues that "one of the biggest political challenges for Britain is to explain how the European Union must continue to adapt to be an effective part of the answer to globalisation. Making and winning that case is critical both to Britain's engagement in Europe, and in shaping the sort of Europe in which Britain feels at home."

Mandelson calls for a successful conclusion to the Doha Round of WTO trade talks, arguing that "Doha can mark a pivot point in the history of the WTO in which it turns away from simple mercantalism towards an agenda that sees trade as a means to an equitable globalization."

Here are some numbers from a new world. Everyday, 10 000 new cars appear on the streets of Beijing; every week, the Chinese government builds a new power station. In 2004, Infosys in India advertised 9000 software engineer jobs: they got 1 million applicants. 1 in every 2 cranes standing in the world today is standing on a building site in China. The population of Egypt increases by a million people every nine months.

We all know we live in a world of rapid change - it has become a cliché to say it. We all know that a global economic and political order that has shaped the world since the middle of the nineteenth century is ending.

But sometimes it takes the image of those cranes and power stations - or the fact that in the time that I will be speaking to you today 400 new cars will roll onto Beijing streets and immediately get stuck in Beijing traffic - it takes those images to really bring home the world just over the horizon and how fast it is changing.

And although I will chiefly talk about the economics of globalization today, it is vital to remember that however central economic change is to what is happening around us, globalization is a deeply political phenomenon - the politics of globalization are the politics of the environment, climate change, migration, energy security and poverty alleviation.

The global age is interconnected in a deep and often subtle way. So that President Bush can announce a US push to grow more biofuels last Tuesday in Washington and the rise in the price of corn can have poor people in the streets in Mexico City yesterday protesting the rise in the cost of tortilla flour - their basic food.

Making sense of such a world, and Europe's place in it, has never been more important. I am a politician, so I'm going to give you a politician's perspective on the challenges of globalisation. Then I'll leave the real experts to get on with it.

Enlarging the cake

There is a tendency - and because there are plenty of economists in the audience, I should say that it is chiefly a political and journalistic tendency - to see the economics of globalisation as a zero sum game. Our jobs shipped off to their countries. Our livelihoods undermined by their cheap labour costs. Our prosperity traded for theirs.

The political problem in a liberalizing economy can be summed up very simply: the beneficial effects of economic change are generalized; the costs are localized.

The dismantling of the Multi-Fibre Agreement at the start of 2005 will save every person in this room hundreds, if not thousands of euros over their lifetime in the cost of clothes. I feel strangely confident in betting that not one person in this room lobbied a politician to end the MFA.

But if you have a friend or a relative in the textile industry - which if this was a Spanish or Italian or North or South Carolinian audience would be a certainty - the likelihood is that the last 5 years of their life would have been spent in political activity defending barriers to trade in textiles. Because China and other parts of the developing world are putting those parts of our textile industry that compete on labour costs out of business.

But China is not stealing our jobs. In fact, for every job that Europe has lost to economic change in the last two decades it has created a new one in more competitive parts of the economy. Thanks to growing internal and external trade.

In Europe we are still the world's biggest exporter, the world's biggest investor and the world's biggest market for foreign investment. We still dominate global markets for high-value goods. They wear Italian shoes in Japan. They don't wear Japanese shoes in Italy.

So the economic cake has got bigger, as economists have always argued that it can and does. A hundred million new jobs in the developing world have not cost Europe jobs or hurt Europe economically on aggregate. In fact the opposite is true - they've made us more competitive, they've lowered our input costs and they've reduced prices for consumers. They've depressed interest rates and lowered inflation. And we are better off.

And a hundred million jobs in the developing world - the biggest ever shift of a portion of humanity out of poverty - is hard to argue against. Not least because, as the Egyptian trade minister once put it to me: it's fine to congratulate the developing world for growing at 8 or 9% a year, but when you are adding a million new people to your population every nine months, you have to grow that fast just to create the jobs they need. So those jobs are also part of a wider picture of security and stability.

Nevertheless, a hundred million new jobs in the developing world means painful competition and restructuring for our economy. And a lot of old certainties have been eroded and some industries have already changed beyond recognition. And, by the way, if you think that the textile industry's challenges are not your challenges, then I would refer you to the 1 million Indian software engineers I mentioned. That might bring it closer to home.

Addressing that change is a genuine social justice issue in Europe. The dislocations can mean human tragedies - painful and traumatic - and all the macroeconomics in the world do not change that. Governments have to be ready to help with adjustment and to equip people for change. And if we don't want a politics of retreat, and national chauvinism and protectionism in Europe, we will have to build a credible - and practical - politics of openness.

Choosing the right Europe for a global age

So our challenge in Europe - your challenge at the Global Policy Institute - is to take back globalization from the pessimists.

In doing so, we need to acknowledge that globalization is not, automatically, a benefit for all. We need to recognize and address the adjustment costs involved while making the strongest possible case for the overall benefits of openness.

We should champion economic reform and greater dynamism because those things are the means of creating stronger and more prosperous societies. But we should argue that the benefits have to be sustainable and the benefits have to be shared by all.

The debate on the future of the European Union and its institutions presents us with competing visions of how the European Union can respond to these challenges in a global age.

Some in Europe would like to see the Europe Union act as a bulwark against globalization: a wall and a gate we can pull closed in the face of change.

This position makes a powerful appeal to our anxiety about change and our sense of social solidarity. But its picture of a static European society should worry us because everything we know about the global age suggests that nothing is standing still - and we do not want to be left behind. It risks becoming a political fantasy about resisting change, holding back the tide, when we should be seeking ways to shape change and distribute its benefits more equally.

A much more compelling case for the European Union as it begins its second half century sees the EU not as Europe's fortress against globalisation but as something that gives us the power to shape globalisation. For example, the EU is the only way that European member states will have sufficient collective weight to shape the global debate on climate change or energy security or development or trade. The alternative for European member states in dealing with powerful partners like the US, or Russia or China is diminished influence, or no influence at all.

By enlarging the European Union we can help secure the economies of scale and the human resources that will continue to make us internationally competitive. The EU is how we project Europe's collective interests in a globalised world, and how we equip Europeans for the economic and social challenges that it brings.

So one of the biggest political challenges for Britain - its political and intellectual leaders, and for this new Institute in the months and years ahead - is to explain how the European Union must continue to adapt to be an effective part of the answer to globalisation.

Making and winning that case is critical both to Britain's engagement in Europe, and in shaping the sort of Europe in which Britain feels at home. While some European countries have failed to make the case for globalisation, British Governments have not worked sufficiently to make the case for the European Union's essential role.

Trade's role in harnessing globalization

Now a word on trade. The way we channel the dynamic power of trade is arguably the single most important impact we will have in shaping economic development in the global age.

By progressively investing in export growth and opening their borders, Brazil, China, India and the other emerging economies have grown fast enough to double per capita income every ten years - which has no historical precedent.

And while all of these countries continue to face massive challenges of poverty reduction, and while new prosperity exists alongside old deprivation, each of them has taken an undeniable and irreversible step out of the developing world.

But here's another set of facts: despite having almost complete duty and quota free access to EU markets, Sub Saharan Africa actually trades less with the EU than it did 10 years ago. Over 50% of Sub Saharan Africa's exports to the EU are now just two products - oil and diamonds. Africa exports its capital rather than investing in itself.

The twin challenges of the WTO and the global trading system are to manage these two - unfortunately divergent - trends. China and the other large emerging economies need to be fully integrated into the global trading system, and their contribution to the system in the form of reciprocal openness needs to reflect their growing strength.

For poorer countries we need to recognize that open markets are not a magic wand. In part because a lot of agricultural trade in least developed countries is actually protected from more competitive agricultural exporters like Brazil only by preferential tariff rates - which is why anyone who thinks that just liberalizing farm trade is a panacea for development doesn't get it. Liberalisation in these areas must be gradual and carefully assisted. That is the lesson of Europe's sugar and banana reforms and their impact in the Caribbean.

In part it is simply because these countries still lack the capacity to take advantage of open markets. They need the aid for trade and development assistance that will build the infrastructure and the capacity to get goods to market. It is necessary to tackle the complex and sometimes corrupt management of Africa's borders. It takes twenty days to get a container through a port in Eritrea. It takes two hours in Liverpool.

And we need to work to improve the conditions in Africa that will encourage people to invest there.

The importance of Doha

That is why we must complete the Doha Round of WTO talks. Unlike the Uruguay Round, which had too much smoke and too many mirrors, Doha will impose serious tariff cuts for all farm goods, and restructure farm support for good. And it will make big inroads into protection in other areas - in the developed world but also in the emerging economies. If we let it slip away the economic costs, and the lasting damage to the multilateral trading system, will be severe.

Doha is conceptually a different kind of trade deal - one that self-consciously accepts the imperatives of development and in which the voice of the developing world has been and will be decisive. One that will be accompanied by huge new packages of capacity-building aid and special and differential treatment for developing countries.

Doha can mark a pivot point in the history of the WTO in which it turns away from simple mercantalism towards an agenda that sees trade as a means to an equitable globalization.

Conclusion

Completing Doha would send a signal - a vital signal - that we can act collectively, through global institutions to shape globalization and global economic change. That we can harness the huge potential benefits while acting to limit the costs.

And, as I said at the beginning, this economic agenda is only part of a much wider political challenge. Doha must have its equivalents across the rest of the global governance agenda. Our management of climate change; our collective response to global energy security; our collective response to migration and global demographic change - a world in which more Egyptians are being born than ever before, and Europe faces a steep population decline. Only the EU gives us in Europe the capacity to act in all of them.

Finding the right solutions to the challenges of globalization first means asking the right questions and understanding the right problems. That is what this institute will help us do. That's why I'm pleased to be associated with its launch today.

To read other recent speeches by Peter Mandelson visit:
http://ec.europa.eu/commission_barroso/mandelson/index_en.htm

| Arriba |

• 'Doha deal could boost economic confidence and insure against recession,' says EU Commissioner Mandelson (17/9/2007)
• "The Future of the European Union: Managing Globalization" - Speech by EU Commissioner Ferrero-Waldner (31/8/2007)
• "Can Globalisation be a level playing field?" - Speech by EU Commissioner Mandelson (30/8/2007)
• EU-China Trade Ministerial Meeting 12 June 2007 (12/6/2007)
• "Reforming Europe for a Globalised World" - Speech by EU Commissioner Almunia (16/4/2007)
• "The challenges and opportunities of globalisation: a European Policy response" - Speech by EU Commissioner Almunia (13/4/2007)
• "Managing Global Insecurity" - Speech by EUHR Solana (21/3/2007)
• "EU agriculture in a globalised world" - Speech by EU Commissioner Fischer Boel (9/2/2007)
• "Europe in the global age: open or closed?" - Speech by EU Commissioner Mandelson (8/2/2007)
• EU Presidency Explanation of Position - Role of the UN in promoting development in the context of globalization and interdependence  (8/12/2006)
• EU Presidency Explanation of Vote - Globalisation and its impact on human rights (16/11/2006)
• Rede von Benita Ferrero-Waldner, Kommissarin für Außenbeziehungen und Europäische Nachbarschaftspolitik: "Globalisierung managen!" zum Beginn des akademischen Jahres, Wirtschaftsuniversität Wien (26/9/2006)
• EU Commissioner Mandelson on Suspension of WTO Doha Negotiations  (24/7/2006)
• Doha Development Agenda (DDA) Chronology (24/7/2006)