§ 5.53 p.m.
§ Lord Borrie
rose to call attention to the economic and social effects of globalisation and its impact on fair competition, employment conditions and the environment; and to move for Papers.
The noble Lord said: My Lords, I am delighted that so many of my noble friends and noble Lords have put down their names to speak in this debate. I especially look forward to the maiden speech of the noble Lord, Lord Birt, with his lifetime's experience of communication in all its forms, and broadcasting in particular.
The essence of globalisation is that one can communicate, travel, buy and sell across the whole world as easily, or almost as easily, as one could do previously within one's own narrower local community. What individuals can do with their limited resources, businesses, particularly major 753 corporations and enterprises of all kinds, can do on a large scale. In recent years, rapidly growing technology has eased and simplified visual and verbal communication around the globe and enabled goods and services to be offered to customers across continents.
Those changes, combined with an increasing willingness on the part of most nation states to pull down trade barriers, have enhanced the standards of living and opportunities for choice and employment among large numbers of people in all parts of the world. Because of free trade and the possibilities of rapid transport, people can enjoy edible produce out of season, seek out educational and employment opportunities abroad and benefit from the availability of good value products sold by suppliers who may be based anywhere. Competition on price, quality and service, along with the removal of trade restrictions, help to promote the consumer and economic welfare ideal of best value being offered over the widest possible range of goods and services.
Globalisation is creating consumer benefit on an appropriately global scale. So what is the downside? Certainly globalisation is not all benign. I suppose the most obvious downside is that the ready supply of goods from elsewhere to wherever one happens to be can destroy less productive indigenous industries and the jobs that go with them. The consumer's gain may be the employee's loss. Other downsides arise because global capitalism may pay scant regard to the economic and social interests of third world countries; and there are inadequate international controls to restrain powerful corporations.
For many economic, social and environmental reasons, most developed countries of the world have rightly come to consider that to allow business enterprises within their own boundaries complete freedom to exploit the national economy and its own citizens is unacceptable. Restraints are imposed, for example, to ensure that businesses do not create price-fixing cartels or abuse monopoly power which could destroy the very economic justification of the competitive free enterprise system; namely, the provision of maximum consumer value. Free competition, carried forward with vigour and determination, carries with it the seeds of its own destruction because the takeover of rivals and cartel arrangements between rivals may eliminate competition and the incentives to provide good value.
The governments of most developed states— starting with the United States towards the end of the 19th century, and followed by Japan, the European countries and the European Community as a whole— have each sought through regulation to combat those commercial tendencies towards cartels and monopolistic practices in order to preserve and maintain competition as the anvil on which consumer satisfaction and choice can continue to be forged.
Nowadays, modern nation states and larger politico-economic groupings like the European Community have developed rules to ensure that the excesses (I use a general term) of industrial production 754 do not cause havoc to, for example, the environment. "Make the polluter pay" and other policies are used as a deterrent. As industrialisation and the competitive push for more customers and more markets have developed, citizens of democratic countries with some kind of power over their own governments have pressed successfully for all kinds of excesses to be controlled by government, including the excesses of misleading advertising and exploitation, and disregard to adequate health and safety standards.
More and more states throughout the world have accepted the need to introduce and gradually strengthen legislation and regulation to safeguard the environment, the pay and conditions of workers, and safety standards for employees and for customers of goods and services.
However—and this is where I return to my theme of the downsides of globalisation—whereas free trade covers most of the world like a blanket, regulation providing safeguards against excesses of all kinds for citizens, employees and consumers does not. Whole swathes of the old Soviet Union, Asia and Africa are open in a large degree to the benefits of global free enterprise, but also to ruthless exploitation by global multinational corporations, and there is a dearth in those countries of regulatory restraint.
The safeguards, therefore, that governments in the United States and Western Europe have required for the benefit of their own citizens do not extend to the citizens of those less protected parts of the world. It follows, therefore, that companies based in the United States or Europe, whose relationships with citizens of their own countries are constrained and civilised, may rampage with impunity in the rest of the world, particularly in the so-called third world.
That is not to say, of course, that they necessarily do so. Many are responsible purveyors of goods and services, wherever and to whomever they are providing them. But tobacco companies, for example, which sell their products in countries that do not impose restrictions on sale or require health warnings are unlikely to adopt them voluntarily. Rather, they will seek to make up for the falling sales they now suffer in the West by marketing them with greater effort in the East, particularly targeting children to replace those who die or quit. Baby food producers restrained by various legal requirements in Europe may find fewer restrictions on their marketing in other parts of the world.
Bribery, which companies would be ashamed to indulge in when seeking to win contracts at home, may be engaged in and hypocritically justified abroad.
Companies may replace their Western work force with cheaper sources of labour in Sri Lanka, China or the Philippines, where rules against child labour and sweated adult labour are weak or non-existent. Appeals to the morality or humanity of the companies concerned may well be likely to be less effective than the force of law.
Globalisation should benefit the poor and the weak as well as the rich and the fairly well off. But globalisation, in terms of ease of communication, 755 travel and trade, has not been matched by the globalisation of regulation and restraint. The scenes in Seattle last year and in Washington in the past week or so have arisen because of real concerns felt by people, some of them no doubt eccentric or extreme, who are worried about this sort of thing.
The World Trade Organisation and the IMF have the meritorious and perfectly proper aim of reducing ever further barriers to world trade, but it does not seem to me that their aims are matched by seeking to ensure that legitimate concerns about the environment, health and safety and the exploitation of third world workers and consumers are properly met.
Of course, it is no good expecting—it would be impractical to do so—that developing countries would adhere, without delay, to the environmental and labour standards achieved in the West after long struggle and change over many years. Sudden change cannot be expected. Indeed, developing countries may only be able to become developed countries, may only be able to get on their feet, by taking advantage of the fact that at present their standards in these fields are lower. But the aim should be to combine further moves towards globalisation and free trade, the free movement of goods, labour and capital across national boundaries, with some sort of consensus and convergence across the whole world on the globalisation also of anti-trust measures and of basic minima of labour, social and environmental standards.
Multinational companies, unleashed from the restraints of American and European laws against anti-competitive practices and mergers, are liable to dominate the fledgling economies of developing countries unless their home countries concern themselves with the global, and not just the national, impact of those companies' activities.
I believe that the major countries of the world, which do restrain companies within their own boundaries as to their conduct at home, should also restrain them in the way they behave in other countries. Efforts have been made. I do not have time to give many examples, but I take a good example from the United States—that of dealing with footloose American capital moving to Asian sweatshops to employ unskilled Asian labour for wages below subsistence level. I refer to President Clinton's task force and the code of conduct it agreed in 1997, called, conveniently, "No Sweat", imposing minimum labour standards for all American firms in the clothing industry and applicable wherever in the world they employed labour, wherever in the world they chose to operate.
Free markets and globalisation are positive, life-enhancing concepts, but they need to be complemented by many initiatives of the kind that I have just mentioned. We have national governments, we have supra-national organisations, such as the IMF, the World Trade Organisation, the World Bank; we have organisations like the European Community; we have bilateral and multilateral agreements. All should be brought into play to ensure the consensus 756 that I have spoken about and to require multinational companies gradually to seek to apply—throughout the world high labour, safety and environmental standards when they operate in other countries.
The distinguished economist Professor Bhagwati, of Columbia University, sometime economic policy adviser to GATT, the predecessor of the World Trade Organisation, said, referring to multinational companies:In Rome, they must do not as Romans do, but as we do. Their example would spread".I beg to move for Papers.
§ 6.8 p.m.
§ Lord Hooson
My Lords, I should like, first, to congratulate the noble Lord, Lord Borrie, on introducing this debate, and on his timing of it.
We have memories of the battle of Seattle last year and the demonstrations in Washington very recently, and it is right that we should have an opportunity to address, however briefly, the legitimate concerns expressed about the economic, social, cultural and environmental effects of globalisation. I agree with the noble Lord that some of the expressions are violent. Some are unjustified; some are ideologically motivated. But many of them are expressions of completely legitimate concerns.
"Globalisation" is, I understand, a term that originally acknowledged the achievement of the developers at all levels of means of communication, but it is now increasingly used as shorthand for the world economy.
We look forward with interest to the maiden speech of the noble Lord, Lord Birt, and his interpretation of the terms of the Motion. We must consider the remit of the international agencies charged with developing the global economy.
My basic viewpoint—I believe that one should set that out in a debate of this kind—is that throughout my political life I have believed in the prime efficacy of free trade as an unrivalled long-term creator of prosperity. But I have also accepted the need, as I believe did Adam Smith, for ameliorating measures which might be necessary in the shorter term.
In broad terms, the 20th century saw a great battle between liberal ideas on the economy and politics and authoritarian ideas, whether disguised as communist, socialist or nationalist, and modifications of each of those. There is no doubt that the liberal ideas eventually triumphed. However, we must also acknowledge that the social and cultural aims of both sides were often highly desirable and that one side influenced the other.
There is now a danger of following a capitalist model on the development of the unprotected areas of the global economy. If we persist with it, we could force on the world generally and on developing countries in particular a version of capitalism which is completely dominated by an unrestrained profit motive with the idea that the sooner we exploit the 757 situation the better. That is highly undesirable and dangerous and it tends to be regarded as the American model.
However, there are other versions of capitalism which, if advanced and pressed with vigour, will carry a great segment of American opinion, which is the most important in this particular political context, in support of it as a more acceptable and efficacious way of achieving long-term ends without inflicting short-term misery, damage and disruption. One such alternative model is surely that of the European Union. Its emphasis is on achieving much greater freedom of trade, gradually removing national barriers and impediments to free economic and social exchange. In the process, it prudently safeguards important political, social, cultural and environmental goals, but modifies their potentially divisive effect.
This lengthy and often controversial approach has been the instrument of one of the greatest success stories of the 20th century. It rivals, in its way, the success of the infinitely less complex but more dramatic achievement of the dominant political, economic and cultural power of the USA. I believe that it presents an altogether more attractive and desirable version for the nations of the world to follow in developing a happy as well as prosperous global society. A prosperous global society is not necessarily a happy one, especially for parts of it. The global society is much more complex and multi-cultural than Europe ever was.
I believe that the World Trade Organisation and the IMF should be authorised by the United Nations to continue its activities, but with a broader remit to consider economic, social, cultural and environmental consequences of its policies and actions. It is not enough, is it, to say that a free trade policy will benefit "a country" in the abstract if the price of that policy is that virtually the whole economy of a country can be taken over by a multi-national; or that there is a shattering of social and cultural life with either a dictatorial leader; or a very narrow class of people eventually benefiting from the so-called prosperity of the country? We have the need to safeguard the communities of the world from such development.
We in the United Kingdom and the European Union should politically challenge what is widely regarded as the American model of free trade; that is, an unfettered global capitalisation model which operates on the basis that there should be no fettering of the urge engendered by the entirely profit-ridden motive of the financial market. It is argued that global well-being will come faster in economic terms, and therefore eventually and by implication in social terms, if there is little or no interference on social, cultural, environmental or even political grounds.
In the advanced countries of the West, we would not stand for that. However, we stand for it in the development of the global economy. Misery, insecurity and the devastation of social and cultural communities in the short term has been accepted as a price worth paying for the eventual benefit of the world, according to this capitalist model. It is a 758 capitalist approach which I cannot accept and which most people in the world, if properly led, would not accept.
I say that as a great believer in the importance of the Atlantic alliance. I was hissed and booed at Liberal Party conferences when I stood up for NATO when it was extremely unpopular in my party. I have many American friends and business contacts and I know that it is feared that there is a closure of eyes to what is happening in the world economy as regards some of the large multinationals. We need to give a lead in this country and in Europe so that a more balanced view emerges. We need to change the rules.
I have a copy of last year's press release of Mike Moore, Director-General of the WTO, in spelling out the priorities of the Seattle conference. He referred to his own organisation as a rules-based institution. We know that it is restricted by some of those rules and we need to ensure that it can be enlarged. Today's debate is important because we shall extract from the Minister an indication of Government thinking on the subject, the initiatives that they are prepared to take and the grounds on which they are prepared to take them.
§ 6.19 p.m.
§ Lord Birt
My Lords, perhaps I may first thank the noble Lord, Lord Borrie, for prompting this important debate on globalisation, for launching it with a most distinguished thoughtful, reasonable and balanced contribution, and for offering me an opportunity to make my maiden speech on a subject other than broadcasting. At the same time, perhaps I may express my gratitude to noble Lords from all sides of the House for the warm welcome that they have accorded me over recent weeks. I thank the officers and staff of the House for their friendly guidance and help. This is a most welcoming place.
I shall focus on the impact of globalisation on the UK. For thousands of years, the movement of people, goods and ideas has had a profound social, cultural and economic impact on every single part of the world. Globalisation has been with us since ships set sail. Other technical advances since then, whether the steam engine, air travel, telecommunications and many more, have all quickened the pace of globalisation. The technological change that we are currently experiencing will accelerate it enormously.
Digital technology has many different characteristics. It allows an infinity of information to be conveyed on fibres and wires. It works on demand, enabling the consumer to call up a myriad of services: what you want, when you want it. Incredible processing power enables you to search and to find the needle in a haystack: the exact information that you want. The technology allows interactivity: communication is two-way and equal. Memory power is increasing and whole archives will soon be maintained on a small disc, whether at home or at the desk-top. The technology is increasingly mobile: what you want, on the move, wherever you are. The technology is global; it does not respect national frontiers: what you want from any point oil the globe.
759 I suggest that any one of those characteristics would bring about profound change in this and every other society in the world. Together, they are revolutionary. I believe that the digital revolution may prove to be at least as significant as was the industrial revolution. This revolution will have many consequences, but today I shall mention only two. First, it will accelerate the globalisation of culture. The globalisation of culture is not new. Just think, as you travel around the world, of the ubiquitousness of the baseball-cap and the trainer. However, it will accelerate even more when any kind of programme is accessible from any other point in the world and watched freely by every kind of person, including young people.
Secondly, digital technology will promote economic growth. As we know, the US economy has now been growing very rapidly and very robustly for quite a number of years, and it has surprised most observers. Silicon Valley is probably responsible for half of the incremental growth during that period of the US economy.
These technologies will place intense competitive pressure on every single kind of organisation. Those organisations will need to rethink the services that they provide to the consumer and they will need to rethink how they provide those services. I give one small example. Amazon.com, from a standing start in Seattle, is now, in only a small number of years, the UK's third largest bookseller.
We cannot, Canute-like, seek to hold back the digital tide. The Chinese can and do try to block independent journalism on the Internet, but in the end such actions are technologically futile; they can always be averted by the consumer. The response to those challenges needs to be positive and not protectionist. The best way to counter the globalisation of culture is to continue to support national cultural institutions of all kinds. I believe that, currently in the UK, we find almost all of our national cultural institutions in remarkably healthy condition.
The best way for the UK to deal with intense global competition is to promote national competitiveness. Here, I believe, there is no cause for complacency. Our digital infrastructure is developing reasonably well in the United Kingdom, but on-line take-up is well behind the world's leaders, even if it is ahead of many countries in Europe. ISDN penetration in the UK is low. On-line costs for business are high. There is weak awareness in UK boardrooms of the significance of the Internet and other new technologies, and little evidence of national industrial readiness in many sectors and in many parts of the UK.
Much of the responsibility for that lies with business, but government can help. First, I believe that a new regulatory framework is needed to promote competition and diversity, both in the supply of infrastructure and services. Secondly, government and the public sector can promote more rapid take-up of new technology: by dealing with individual citizens on-line; by providing all public sector services on-line; by 760 insisting on dealing with all government suppliers on-line; and, most importantly, by ensuring that no child leaves school in the UK without advanced computer skills. It is very hard to imagine that in a few years' time any kind of worker will be effective without them or that any kind of individual will be able to get the most out of their life if they are not computer-literate.
We need a conscious national response if the UK is to harness and not to fall victim to those powerful revolutionary and global forces. I look forward to debating that response with your Lordships in the years ahead.
§ 6.27 p.m.
§ Lord Desai
My Lords, it is a great pleasure and a privilege to congratulate the noble Lord, Lord Birt, on his excellent maiden speech. It was forthright and succeeded in laying down the law without being controversial. That is no surprise because the noble Lord has been very active in many fields. He has produced, controlled and directed various things in the media, and his career as director-general of the BBC is something which I am sure we shall all remember. I am sure that the noble Lord believes that now that he has left that behind, he can have a good time here. We welcome him.
It is very apt that the noble Lord, Lord Birt, chose to make his maiden speech on the subject of globalisation. I credit him for the fact that in many hotel rooms where I have arrived, jet-lagged, I have switched on the television to watch BBC World. Had it not been for him, BBC World would not have been there. Therefore, the noble Lord was a globaliser long before many of us, and I believe that we shall definitely enjoy his future contributions in the House.
I congratulate my noble friend Lord Borrie on introducing this subject. Globalisation seems to be everywhere. I believe that this week I have made a speech on globalisation every day; this is the fourth that I have made on the subject so far. There is so much to say that I shall put down some markers.
Although, as the noble Lord, Lord Birt, said, globalisation has been going on for a long time, I believe that its latest phase, which started some time in the 1980s, is most important and significant. As many noble Lords pointed out, current technology is very powerful and, unlike previous phases in which technology speeded things up, we are now at a stage where time and distance are almost annihilated. One can not only buy things instantaneously but one can also direct production across long distances. Communications are such that atrocities in the remotest parts of the world are exposed immediately. You do not have to wait for the cable or the stage coach to arrive. It is yet another form of capitalism. It started at the end of the 20th century. As the noble Lord, Lord Hooson pointed out, it is the first form of capitalism where there are no rival models. It causes a lot of frustration.
People do not like to call globalisation by its name, which is capitalism. During the 20th century many people thought that capitalism would not last until the 761 end of the century; many others thought perhaps it would change its spots and become more like socialism, communism or whatever. Even the enemies of communism, like Professor Rostow, thought that the best one could hope for was a convergence between communist and capitalist systems. None of that happened. This is now the only game in town. But profitability, and considerations of profitability, will drive the system around. People are uneasy about that. They are uneasy because there was a similar case of globalisation in the 19th century. It was called an empire then. But there was globalisation with a single currency, the gold standard, and there was the British Navy. There was a globalised world in which, unlike today, there was a lot of labour mobility. We forget that the agitation about asylum-seekers and refugees did not happen in the 19th century. In the 19th century no distinction was made between citizens and refugees. We were all told we could move where we liked.
However, today, quite clearly we have not a single currency but free unregulated movement of capital. We have democracies rather than empires. But the Second World War in particular gave us the idea—I would not call it a delusion—that somehow capitalism was controllable within a single nation state; that somehow we could have a compromise between labour and capital with government acting as a referee, as a kind of boss, and allow people to do what wanted to do. It almost worked for 30 years. The period 1945 to 1975 is actually an exception. The more one looks at it one sees that it is the exception and not the norm. Our modern globalisation wants to get back to that period when there were regulatory standards, when capital was made to behave itself and not go outside the regulations and so on. I think that one very peculiar result, which is very hard for us to accept, is that in today's world it is not possible to set up global structures, even if we want them for the best possible reasons.
It is not possible because the world remains largely unequal, much more unequal than any nation state was within its boundaries. Therefore, bodies like the IMF and the World Bank are dominated by the rich countries. Even the United Nations are dominated by the rich countries. Often developing countries, quite rightly, are suspicious of regulatory structures which could be set up, in which they will not have the sort of say they would like. The question of labour conditions is very sensitive—and I do want to provoke my noble friends Lord Lea and Lord Brett to say something about this as it is a controversial question.
I spoke at the International Metal Workers' Federation, where people were divided about the uniformity of labour conditions across the world. These trade unionists are divided about whether labour conditions should be made identical. The reason is—and my noble friend Lord Borrie referred to it—cheap labour and therefore it is capitalism exploiting cheap labour. For the people employed that is probably the best job they can get. They have no other alternative. Some people are working at one dollar a day but that is not a bad wage in many countries. Industrialisation of the third world has been 762 speeded up in the last 25 years. One of the reasons— not the only reason—for it is the bigger movement of capital that has occurred as a result of globalisation.
Official foreign aid did not flow in the amount that was needed. Even now it is about 50 billion dollars. Even today, after the Asian crisis, 200 billion dollars are moving across what we call the third world. That is our central dilemma. The central dilemma is that we would like to create our kind of Keynesian capitalism around the world in nice little chunks. That will not guarantee the growth of those really poor countries— China, India, Malaysia, Singapore and so on.
We ought to create institutions. But we ought to create institutions without impeding the growth of those countries. That will help to create better conditions. That is not easy to do, because we will have to bring into play very substantially—much more than is the case now—the representatives of those countries. In the WTO, for example, the countries of India and China want an extension of WTO to the free-up of trade. The fear of globalisation is much greater now in rich countries because jobs are being displaced. And jobs displaced from here to there is good for them, although it may be bad for us. But we are rich, we can adjust. We should welcome the fact that some of the turbulence, some of the troubles that we complain about, are actually the positive side of globalisation. One should not necessarily want to reverse or halt it just so that we are happy and so that no Rover factories or coal mines are shut. But people need goods. Whatever else we may want to achieve as an objective on health, on culture, on environment, we must not make them feel this is once again the rich countries preventing them from growing because those rich countries have had their cake and they not only want to eat it but go on baking it again and again and have it entirely for themselves. That is the real issue of justice and I hope we can made some progress on that.
§ 6.37 p.m.
§ Lord Dahrendorf
My Lords, the noble Lord, Lord Borrie, has introduced a timely and important debate. In introducing it, he has reminded us of his experience as a guardian of rules of economic activity and the application of that experience to the world at large. The noble Lord, Lord Birt, in his splendid maiden speech, if I may say so, has added the technological dimension with its obvious and far-reaching implications. Both of them make it unnecessary for me to dwell on what we mean by globalisation. I think that that is quite clear, at least for this debate. It is the relation of powerful new forces which transcend all traditional and notably all national boundaries.
I share the view of those who see this as an opening up process; and therefore a process of new hopes and opportunities. It is also right not to be naive about it. It is no accident that important analyses of the economic and social effects of globalisation would have titles like The New Alchemists or Living on Thin Air, the latter by Charles Leadbealer, highly recommended by Mr Blair as "extraordinarily interesting".
How thin the air can be we have just seen when the 763 "new economy" shares crashed first in Wall Street and then around the world. There is a strange ambiguity about some of the preferred words of the new economy like "risk" and "flexibility". Is risk a threat or is it an opportunity? Is flexibility a new virtue or a source of insecurity?
I want to highlight two economic and social effects of globalisation which are directly relevant to policy: one to do with education and the other with work. I do that not as a plea to curb the creative powers of the globalising process but to point to some of the side-effects of that process.
"Education, education, education" seems an appropriate enough maxim for what is often called the knowledge society. The economic and social advantages of higher and further education are well documented. People with A-levels and more not only have significantly higher life-time earnings, twice as high on average and even more for women, but also other advantages: they are more likely to have managerial jobs; they are relatively protected from unemployment; they are much more likely to perceive themselves as in excellent physical health; they are less likely to be victims of accidents or assaults; they report fewer educational problems among their children; they are more likely to vote and to be involved actively with voluntary organisations; they are more committed to gender equality and anti-racist values.
Those are conclusions of a remarkable study conducted at London's Institute of Education. I am referring to a paper by John Brynner and Muriel Egerton which was discussed recently at one of those early morning seminars at No. 11 Downing Street.
The clear conclusion must be that it is desirable to make the benefits of education available to more people. The 40 per cent who now advance to A-levels and beyond must be raised to 50 per cent and, who knows, 60 per cent. But—and this is important—what about the remaining 40 per cent? Let us make no mistake. There will be 40 per cent who do not make it to A-levels and beyond. Indeed, that is more likely to be 50 per cent. They have all the disadvantages: lower incomes, higher unemployment, a worse health status, greater exposure to accidents, less involvement in civic affairs and, not least, more educational problems with their children.
The resulting problem of cumulative disadvantages is not just one of inequality in the sense of stratification. Such inequality exists in all societies. The new problem is that two social worlds emerge: one with all the advantages; the other with all the disadvantages. The two worlds barely meet. They may pursue their varied objectives in walking distance from each other, yet they are rarely in the same place—in the same schools, clubs, pubs or even political meetings.
There is something absolute about the divisions created by "education, education, education" as a response to the challenges of globalisation; something absolute for which no remedy has been found. Some believe that the remedy is work. They believe that full employment unites all in the post-modern societies emerging from globalisation.
764 That is an important subject on which I have commented in earlier debates in your Lordships' House. Some noble Lords may remember that the Leader of the House, the noble Baroness, Lady Jay, who I am delighted to see in her place, reported to us on 27th March on the Lisbon European summit. At that time, I expressed some surprise that the employment rate has become an objective and that leaders had agreed to raise it from its present European average of 61 per cent to nearly 70 per cent within 10 years.
My guess is that it is much more likely to go down to 50 per cent, where it already stands in major European countries. Longer education, increased early retirement and a further increase in portfolio working—part time and intermittent as it is—make the return of the old work society increasingly-unlikely.
That too is an economic and social effect of globalisation. But capital no longer needs much labour to create wealth. At any rate, the old relationship is gone which led Keynes to "save capitalism" by increasing the ability of labour to work, earn and spend.
There is, to be sure, enough work to do, but that is not imperative for the creation of wealth. On the contrary, as recent developments in banking and other services show, the less labour that is employed, the more wealth is created, at least in the macro figures so beloved by this Government and their predecessor.
When I write a book about those issues, I shall call it Capital Without Labour. That is not a matter for parliamentary debate. However, it is a matter for debate when a Government who appreciate the massive changes in our socio-economic environment have, so far, failed to see that those include the world of work. Work is no longer the remedy, either for healing a divided society or for reversing the process of social corrosion.
What is the remedy? I believe that the concepts are there, although so far, no one has put them together properly. I list a handful, each of them a subject for future debates in your Lordships' House: stakeholding—that is the involvement of those whose interest in business is not just based on the stock market; citizenship—that is the active participation in the numerous activities of civil society; community— that is the development of local networks of co-operation; the social economy—that is providing income in new ways from tax credits and basic income guarantees to time banks; social service—that is a contribution of time by all for common purposes and in ways which bring different groups together.
All that can be summarised in one word: "glocalisation". The simultaneous blossoming of global and local activities may appear to be a paradox but can in fact be, and probably should be, an answer to the problems of the new economy.
§ 6.47 p.m.
§ The Earl of Sandwich
My Lords, the demonstrations in Washington have prompted a few 765 thoughts on non-governmental organisations and I am very grateful to the noble Lord, Lord Borrie, for providing us with the opportunity for this debate.
NGOs represent a bridge between two groups of people, and that echoes much of what the noble Lord, Lord Dahrendorf, has said. At one end, there are their supporters in the rich world; at the other, the poorest, who are seen both as friends and as victims, in this case, of global capital and by association, the international financial institutions.
The argument runs that globalisation must be an enemy of the poor since it unites free market forces against labour and against the world's weakest economies. It introduces new rules of trade and investment which are bound to favour the well-established monopolistic trans-national companies over vulnerable third world societies.
I do not dismiss that argument altogether since, having worked with NGOs, I have seen the effects of structural adjustments and random so-called enterprise in Africa, Asia and even as near as Portugal, where you can still find the debris left behind by British mining companies. No one will turn them into a tourist attraction. And there are the more serious invisible scars on the lives of the poor.
I recognise also how necessary the Bretton Woods institutions are; how they evidently need to be guided by NGOs as well as by corporations and governments and how painfully slowly they have adapted their policies to the problems of the developing countries. That is putting it politely. Some would say that the IFIs represent economists in industrialised countries who are ideologically opposed to the interests of any country needing protection. Some would say that even the Labour leadership is currently listening to that viewpoint.
Much of the frustration of Seattle and Washington is about the failure of the IFIs to accommodate the interests of the poorer nations, even when they are swallowing the IMF medicine of adjustment and poverty reduction. Uganda is a current example. Who can blame the demonstrators, who represent widely different interests, for uniting to complain about that? The same organisations from all over the world have now become key players in the work of multinational organisations such as the World Bank. Some are now able to influence their policy even from within. For example, they have encouraged the bank's James Wolfensohn in his personal belief that good healthcare "makes good business sense".
Yet the NGOs themselves are learning lessons. About 10 years ago, the first sustained campaign against child labour expressed the somewhat romantic wish that all young people should be in school instead of weaving carpets, polishing gems or making footballs. Unfortunately, that campaign, which led to some genuine awareness of the extremes of child labour, backfired when it became an excuse for some industrialised countries to propose new core labour standards in trade negotiations. The desire to create an international code was nearly undermined by the resentment of the developing countries most affected.
766 Save the Children, to its credit, with a large South Asia programme of its own, was one of the few international NGOs which saw the need for proper balance. This Government are now one of the initiators and main signatories of the new ILO Convention 182 on the worst forms of child labour, which should help to take the sting out of the debate. But the example shows that NGOs are not always angels when it comes to footballs or even bananas in hard-nosed trade negotiations.
Nevertheless, wearing my NGO hat, I have no doubt that the actions and research of NGOs in reflecting the needs of the poorest and formulating codes of conduct—which the noble Lord, Lord Borrie, described—whether on carpets, baby milk, or through ethical and fair trading initiatives, have been essential in persuading governments, institutions and corporations to shape policies and practices according to internationally agreed trading standards. It was encouraging to hear Mike Moore, the head of the WTO, giving the International Development Committee his views on the necessity for standards, although, as that committee has identified, he will need every ounce of help that sympathetic governments can provide and many more resources if he is to get anywhere near achieving his objectives.
NGOs such as OXFAM have also helped to influence attitudes in our own society in the north, through their work in the education sector and their advocacy here at Westminster, where they have helped to shape our economic and development policy. When it comes to the developing countries, many NGOs now work directly alongside governments, as well as with their own partners and are helping to cultivate a new climate of democratic accountability, even in a country such as Vietnam. Vietnam's President Tran Due Luong's statement to the G77 summit in Havana a few days ago—made available, incidentally, courtesy of the BBC and the Hanoi website—expressed a broadly held opinion in that group when he said that international institutions should be,further strengthened to achieve the goals of development, equality, transparency and non-discrimination",and that developed countries should open their markets,for exports from developing nations, offer special and differentiated treatment in world trade and investment to South countries, [and] refrain from using environment, labour and investment standards as disguised measures to restrict and eliminate the competitiveness of developing countries".Vietnam is a good example of a nation which, despite its past troubles and its present defects is actively entering global markets and even—dare I say— promoting democracy and respect for international institutions. Perhaps the IMF can take some credit for that.
Much of the talk, as we have heard, is about information technology and the speed of communications, especially in education. My son, whose company works in that area, tells me that "knowledge management" is a concept now being used by commercial firms and education institutions all 767 over the world. He says that for him the most exciting prospect is the global sharing of knowledge which was not long ago the province of a few western universities.
I am proud of my own gradual ability to overcome neo-Luddite tendencies. I know about India's enormous success with new technology. But equally, I am aware of the divisions in society which can arise when one section—let us say, Bangalore—is in possession and another—call it Bombay—is denied access. There are questions here about the right to knowledge and information, which is in practice available only to some. Of course it is positive. In the poorest communities, teachers, doctors and social workers can save lives by using the Internet. But the same opportunities become available to the sharks and the less ethically minded companies—dare I say international corporations—which merely speed up the process of their exploitation. We know where most of their knowledge comes from: 96 out of 111 US delegates to the World Trade Organisation came from the US private sector.
The stated advantages of globalisation are not always apparent to those who may turn into its victims. Investment rules without regulations or standards can destroy the livelihoods of, for example, fishing communities which lose out to trawlers or commercial prawn farms, or small farmers who are sacrificed to agribusiness. The drama of the Narmada dams in central India demonstrated how easily the outside world can conspire in human and environmental disaster. In the words of Claire Melamed, a Christian Aid policy adviser, at the UNCTAD meeting in February,For investment to be beneficial to poor communities, we need to ensure that … it does not harm the poor by destroying the resources on which they depend".The efforts of governments and aid agencies to extend micro-credit have proved a highly successful means of injecting capital and increasing income among the poorest, especially the informal sectors of third world cities. Investment in those cities is not just a form of poor relief but a means of bringing them closer to the global economy, giving them more access to the latest skills and technologies.
The EU's Lomé agreement is a unique example of protection in its best sense; not one which will inhibit trade, but one which recognises the strength of individual economies and their historical dependence on one or two commodities. Having heard the two relevant Secretaries of State give evidence this morning, I know that there is plenty of good will around in Government, but I have one or two questions for the Minister. Does he accept that globalisation is not yet favouring the poorest countries and that the market share of the 48 LDCs has fallen drastically in the past two decades to below 0.5 per cent of world trade? Will he confirm that models of duty free access for LDCs such as Lomé must not be threatened under the WTO regime? Finally, does he agree that non-discrimination must not become a sacred cow of any new trade regime?
§ 6.57 p.m.
§ Lord Lea of Crondall
My Lords, I add my congratulations to my noble friend Lord Borrie for introducing the debate. I wish too to add my congratulations to the noble Lord, Lord Birt, on his imaginative and, indeed, upbeat maiden speech. It must be quite a dilemma for the BBC to know whether it should cover it. In any event, we look forward to many more contributions from that quarter.
There are three aspects of the issue that I want to cover. First, the question of what are the constituencies that we all represent in this kind of debate. Secondly, how can large multinational corporations live in harmony with very varied parent and host nations and their workforces? Thirdly, how does all that fit into the emerging world governance system?
I start from the question of constituencies, perhaps rather surprisingly, because it is worth asserting that we all have constituencies, whether geographical—as in Burton on Trent—or, in my case, a broadly based trade union constituency and, I like to believe, a European and a global constituency. I say right at the start that I am, on balance, upbeat. Let us consider, for example, the transfer of technology to the less wealthy parts of the world and all the other areas mentioned by my noble friend Lord Borrie. Not only am I all for it, but it is precisely what the development movement has been seeking for decades.
After leaving Cambridge my first job included a contract with the World Bank in Uganda on transport infrastructure. As they say about one's first love affair, that country and its problems has a special place in my heart.
Given that politics is about giving people an acceptable vision of their role in society, how can one relate Uganda to a constituency such as Burton-on-Trent? I see that as the issue, rather than assessing upside versus downside per se. Unless we factor in both of those constituencies—I use rather different language from the noble Lord, Lord Dahrendorf —our members will no longer believe that we represent their interests and they will turn to people who claim to represent them more directly.
People's living standards depend, first, on their role as producers—their income, security, pension and so on—and, secondly, on their role as consumers. I do not believe that there is much mileage in juxtaposing one as if, in some sense, it replaces the other.
Incidentally, the trade unions are the only bodies, in what nowadays is called civil society, that have substantial memberships and that make agreements in every part of the world and trans-nationally. That creates an enormously valuable "cement" in the world system that is inadequately understood. Who else will bring together representatives of the work force in the various plants around the world?
It is also worth pointing out that, at present and historically, the percentage of workers in trade unions is the main correlation with equality, both at national and inter-country level. I hope that no one will weep crocodile tears about the growth of inequality and then 769 cast aspersions on the role of the unions. After all, unions are the only support that an individual can have in a negotiation with a large corporation, as the chief economist of the World Bank, Joseph Stiglitz, recently adduced in a remarkable lecture.
More generally, what should be said about the role of the large multi-national corporations, a question posed by my noble friend Lord Borrie? In the 1970s those corporations were, according to the UN, transnational corporations. I was a so-called expert adviser to a UN commission with that title.
The terms "multi-national" or "trans-national" are misnomers in that overwhelmingly it is still the case that such corporations are not really multi-national, but ethnocentric, as some academics call them. The board of directors of a Japanese corporation are Japanese; the board of directors of an American corporation are American; the board of directors of a German corporation are German and so on. There are some notable exceptions but that is the general rule. There are glass ceilings for non-nationals of either sex.
I say that such corporations are large, which may be self-evident, but there may be those who would wish to deny that and say that small is beautiful. That may be so, but that is not what we see in the spate of mergers in banking, manufacturing, hotels, airlines, tourism and so on. The main logical corollary of globalisation is that we are no longer able to regulate the economy and industry by national rules alone. Hence the big idea for many of my generation is to use the European Union as a step towards global rules in many new areas. The paradox is that the United Nations' system is not in a position to supervise an overall system of rules, even though there are those—myself included— who say that that is exactly what is needed to bring together the work of bodies such as the bank, the fund, the WTO, the ILO, UNCTAD, and other acronyms that add up to a long list.
The United Nations Commission on Transnational Corporations was quite near to agreeing a code of practice, ranging from the rights of host countries to the rights of inward investors and the repatriation of capital. Eventually, it was blocked by an unholy alliance of Moscow and Washington, the former on the grounds that socialist corporations could not be included, and the latter on the grounds that it was all socialism anyway.
Countries like India and Brazil were strong supporters, and still are. The least developed group of countries has the main problem with the drawing up of a global set of rules, as we have found on Sub-Committee A of the European Communities Committee which is preparing a report on the EU mandate for the WTO, post Seattle.
An interesting fact is that the fastest growing area of globalisation today is the private services sector that is developing bilateral and multilateral agreements outside the scope of the WTO. They are doing so by bringing forward agreements that effectively bite on the internal policy of the host country in many aspects of company and tax law. Therefore, I cannot accept that labour and environmental standards should be 770 excluded from bilateral or multilateral agreements solely on the grounds that they touch on the internal affairs of the country concerned. The only logic in that is that we need one law for the investors and another for the workers.
Where can we find an emerging consensus on all these matters and one that builds bridges between north and south? There can be no better place to start than with the Secretary-General of the United Nations. Perhaps I may quote from his address last year at Davos when he proposed a global compact with business on human rights, labour and the environment. The Secretary-General, who has an umbrella role, referred to the fragility of globalisation. He said:history teaches that imbalances between the economic, social and political realms can never be sustained for very long … Specifically, I call on you—individually through your firms and collectively through your business associations—to embrace, support and enact a set of core values in the areas of human rights, labour standards and environmental practices".One reason why it is said that it is difficult to get teeth into global systems of rules is that the stages of development of countries are too different. That argument has some force, but I believe that it can be overplayed. After all, we have a strengthened International Court of Justice and we have the Universal Declaration of Human Rights inspired by Mrs Roosevelt in 1945 and everyone knows that that is formidable.
We certainly have regard to the fact that on some issues we cannot have a global benchmark immediately, such as on maternity rights. But we are not talking about that. In the time available I shall refer to only one aspect raised by my noble friend Lord Desai. Surely it is a canard to say that we are talking about labour conditions being identical around the world. That is a canard and I cannot let is pass. We do not propose that. On the labour front, we propose the four minimum core labour standards of the ILO, which, as everyone knows, relate to freedom of association, child labour, forced labour and discrimination in employment.
I am running out of time, so I conclude by saying that we cannot have a code in the world system that gives business interests what they want—the promotion of free trade alone, as the noble Lord, Lord Hooson has pointed out—and no rules governing anything else. That horse will not run. It does not have the legs and, as I indicated, we need to find a new compact.
§ 7.9 p.m.
§ Lord Phillips of Sudbury
My Lords, for much of his life the noble Lord, Lord Borrie, has been a distinguished public servant so it is entirely appropriate that he should introduce a debate on this subject. All noble Lords are grateful to him.
I have always had great admiration for the good judgment of the noble Lord, Lord Birt, since the day he hired me to present a programme on London Weekend Television. Tonight he has demonstrated again that 771 extreme good judgment. I am sure that noble Lords look forward to many contributions from him in years to come in this House.
My contribution tonight will be somewhat speculative and touch on some of the non-economic dimensions of multinational companies and their power and influence. As much of what I have to say will be in the critical vein, I emphasise that I am fully aware of the manifold benefits which the multinationals have brought and continue to bring to mankind.
It is a truism, is it not, to say that we live in a materialist age? The gradual collapse of Christianity in the West and the sudden collapse of ideological socialism more or less everywhere has left free market capitalism as the overwhelmingly dominant ideology. At the same time, consumerist preoccupations fuel and are fuelled by a radical individualism which has as another expression a personal liberalism bordering on libertinism.
The trouble with capitalism is that of itself it is fundamentally amoral; that is to say, it has no in-built or essential moral values, but only the utilitarian one of maximisation of profit. Of course, I am fully aware, as we all are, of the fact that the majority of individual business and professional people try to bring to their firms their own moral commitments. Charities like Business in the Community and the Prince of Wales Business Forum do good work to that end.
None the less, and while happily noting the many exceptions (particularly among unquoted and small companies), the large corporations live in a tooth-and-claw environment, devoid of sentiment, driven by the bottom line. In that respect the City of London and Wall Street are probably the most ruthless, short-term, short-sighted and narrow-minded markets in the world. Their influence contrasts starkly with other countries, even Germany. I suggest that BMW would never have contemplated doing there what it did here.
The modern multinational often cultivates a sense of being stateless; of having no fixed abode. That suits its attempts to avoid identification with the diplomacy of any specific country—it can get in the way of tough decisions if there are loyalties beyond the company itself—and neutrality often suits its tax purposes.
Huge companies also mean huge salaries, with huge bonuses and option pay-outs. Any linkage with any normal sense of what is fair and reasonable has more or less disappeared. Questions of reward are truly amoral, relating solely to what the market may bear. Those words may be harsh, but the reality is often harsh and we too often pussy-foot around it. We kid ourselves that these grandiose excesses of global-scale capitalism are victimless. But they are not. It is odd that the first Labour Government for 18 years presides over a national society of fast-widening differentials in a rich world of rising poverty. It is little wonder that we now have a full-blown crisis of recruitment even in professions such as teaching, social work, medicine and legal aid law firms.
772 I turn now to the largely overlooked potential conflict between globalisation and democracy. Big business needs big government to control it. After all, that is a key rationale of ever closer integration within the European Union. However, both big business and big government exist uneasily with real democracy, especially where—as is broadly the case—big business will generally only do what is right so long as its competitors are compelled to do the same. Yet endless regulation, which the unscrupulous will in any event ever seek to circumvent, has already reached the point of self-suffocation, with all the obnoxious fall-out which that brings in terms of relative law observance.
It is a futile delusion to pretend that the democratic deficit is mainly a problem of inadequate information. Democracy can be vitalised only by a real relationship between citizens and the institutions of the state, including large businesses. Real democracy is about belonging and identity. On the part of its adherents it requires a sense of some control over their lives— social, political and economic.
But as regards the large multinationals (as ever, I generalise), one finds a combination of distant, anonymous and footloose ownership and control; minimal civic input to the local communities and societies in which they operate; an absence of committed loyalty to the locations in which they operate; plus a policy of mobility of key personnel, which largely prevents those people providing leadership in their temporary communities, and that is crucial. And those and other characteristics, which I do not have time to mention, can and often do put big business at odds with what democracy and society desperately need. I wholly concur with what my noble friend Lord Dahrendorf said in relation to cumulative disadvantage. I commend to your Lordships the report of the Policy Action Team on community self-help, which is one of the key teams trying to grapple with social exclusion. If we look at the report, we will find that community self-help is now recognised within the Prime Minister's Office and the Home Office as being perhaps the key to dealing with social exclusion.
Of course, one needs a competitive economy for jobs and taxes. It is also true that many more businesses are taking corporate citizenship seriously and that ethical purchasing and investment are rising. But it is also true, as I tried briefly to explain, that there is a bitter harvest from some, if not much, of the globalisation we are experiencing: over-legislation which becomes ever less effective; managerialisation of government; a growing disaffection with democracy; a rapid increase in work-related stress; a widespread decline in levels of work satisfaction; a related decline in family cohesion, with all that that must devastatingly mean; and, above all, a spiritual hunger and a consumerist shallowness about modern culture which looks so good but often feels so empty.
So too we have a global ecology which may already have been blitzed beyond repair, overstretched by the universal dash to ape us westerners. And with it has come a no less radical undermining of the human ecology, so that the very diversity of lifestyles, cultures and to some extent values which make for organic 773 identity, rootedness and self-confidence, are being demolished before our very eyes. The organic is being replaced by the contrived; the particular by the general; the vivid by the insipid.
Of course, I have painted tonight a picture which is too black and white, and in the process done too little to commend what great good is done by multinationals. But I believe that we have become too complacent about the assumed virtues of global materialism. The protesters of Seattle and Washington no doubt instinctively felt more than they could persuasively rationalise. Maybe we suffer the reverse defect.
§ 7.17 p.m.
§ Lord Brett
My Lords, I too thank my noble friend Lord Borrie for this timely debate, and my noble friend and the noble Lord, Lord Hooson, for a devastating critique of the downside of globalisation.
In my contribution I should like to meet the challenge of my noble friend Lord Desai and limit my speech to the impact on employment commissions of globalisation. Before doing so, I congratulate the noble Lord, Lord Birt, on an excellent maiden speech and urge support of one aspect of his remarks; namely, the strengthening of national cultures. As an extensive traveller, it is my unfortunate experience to find, not so much that BBC World dominates the world, but that CNN dominates the world. In my view, civilisation will have ended when every town and village on this globe has a McDonald's and we all speak CNN. CNN is not English and has a vocabulary of around one quarter of that of the normal English-speaking person. But that is perhaps prejudice on my part.
I turn to the vexed question of Seattle—that of core level standards—and attempt to meet the challenge of my noble friend Lord Desai. He said that we must not take away from the developing world the only advantage it has; that is, that it can compete on labour where it cannot compete on technology. I do not demonise the role of multinationals, as some trade unionists do. However, we have to think imaginatively how we can change the attitude of multinationals.
First, I turn to core labour standards. My noble friend Lord Lea of Crondall said that we are talking of only four basic rights: the right of freedom of association and collective bargaining; the right of freedom from forced labour; the right of freedom from child labour; and the right of freedom from discrimination. That is a compact which any country in the world—whether it be Tanzania or the state of Texas—should be able to sign up to, because those four rights do nothing other than enable workers to seek to enjoy the fruits of their labour.
A month ago in UNCTAD people were still saying that the core labour standards and the social clause that trade unions desire comprise an international minimum wage. That is absolute nonsense. The minimum wage will be what trade unions, employers and the governments concerned determine can be afforded. However, we have to find a format for these rights that is not threatening. I declare an interest as 774 vice chairman of the governing body of the International Labour Organisation. We need to debate how we create a mechanism which on the one hand protects core labour standards but which cannot be misused for protectionist purposes.
We all say that we are against protectionism but those who wish not to have a social clause in the WTO are fearful that we do not mean what we say. I wish to debate how one creates a mechanism that could not and would not be used as a protectionist mechanism by a developed country. I believe that we have made progress. In 1998 all the member nations of the ILO— some 174—signed up to a declaration of fundamental rights at work whereby governments accept that their membership of the ILO gives them the responsibility to ensure that they enact in their countries policies of freedom of association and collective bargaining, freedom from forced labour, freedom from child labour and freedom from discrimination. All of the conventions on those fundamental rights have been ratified by over 100 member states. The noble Earl, Lord Sandwich, referred to Convention 182—this, uniquely, has been unanimously endorsed by the International Labour Conference———onextreme forms of child labour. That is now part of the package.
However, what does one do when a government clearly have no intention of protecting those rights? How do we square that with globalisation? Globalisation will fail unless the vast majority of people believe that they are beneficiaries of it. Twenty years of globalisation in Asia have led to high rates of growth on the part of the so-called "Asian tigers". However, those growth rates had two characteristics: first, the countries concerned had semi-authoritarian regimes which denied trade union rights; and, secondly, not one of them introduced any form of social security. When the Asian crisis arose, Korean factory workers fought in the factories to defend their jobs as they had nowhere else to go. They lost everything with the loss of their jobs. Some 14 million people in Indonesia lost their jobs.
I shall not enter the argument about multinational wages being driven down. However, Nike paid workers 7.60 dollars per hour in the United States whereas in Indonesia it pays 2.35 dollars per day. It claims that is the minimum wage but others suggest otherwise. The Barclay brand of Nike shoes which sold at 81 dollars in the US at the time of the transfer of production still sells for 81 dollars as far as I am aware. Therefore the beneficiaries of that transfer have not been American consumers. To judge from the wage rates in Indonesia, the Indonesian workers have not benefited from that either. Michael Jordan has certainly been a beneficiary, as a 19 million dollar contract to promote Nike would suggest! How can we help those Nike workers in Indonesia? Nike could double the wage rate and add a dollar to the price of its shoes. However, I do not even suggest that. I suggest that if the workers of Indonesia have the right to form trade unions and the right to bargain with Nike there will, over time, be a sharing of the proceeds. Until the recent change of government in that country that was not possible. I say to those who 775 say that sanctions are not appropriate that it is no coincidence that the decree which ratified all core labour conventions was signed by the previous president of Indonesia on the eve of a decision about whether his country should receive a 43 million dollar loan from the International Monetary Fund. That is not coincidence and it is not democracy because the president of an authoritarian government can sign a decree overnight to reverse a policy that has operated for 15 or 16 years.
How do we fix these principles in the minds of governments and in the minds of those multinationals of which we are critical? As has been said, those companies are not truly multinational. Boards of management tend to come from a single nation state; namely, the host nation. In their home countries they tend to behave in a civilised manner. They are not ogres; they are reasonable men and women—mostly men—with families and religious and ethical beliefs. Secretary General Kofi Annan of the UN is appealing to chief executives of multinationals to realise that they have a moral responsibility in regard to the behaviour of their subsidiaries, their managers and their suppliers. I believe that we should take that process forward, but how do we do so?
"Geneva 2000" will be held in June, in Geneva. This is the "world social summit plus five". The noble Baroness who represented the then government at the social summit five years ago is not present tonight. At that summit there emerged the first enunciation of the core labour standards in the form we now know them. The position would be enhanced if the special session of the General Assembly in Geneva in June were to endorse the case that the ILO declaration of fundamental rights should be enshrined in all UN policies. That would include the ILO, the World Bank and the IMF, but not the World Trade Organisation which is not part of the United Nations.
We need to establish a working party in the WTO, if only to determine what is possible. However, at the end of the day some measures need to be adopted that can be applied to recalcitrant rogue states. I refer to Burma in this connection. Forced labour is endemic in Burma. The International Labour Organisation held a commission of inquiry which cost half a million dollars and involved three eminent jurists. A 256-page report was produced which catalogued the horrors to which that nation state has subjected its own people. Burma has been condemned at the International Labour Conference and by the ILO's governing body. It has also been condemned by the UN at large. However, nothing has persuaded the Government of Burma to change their laws to conform with the conventions that they have entered into voluntarily. In such extreme cases an international body—the World Trade Organisation is perhaps the most appropriate in this context—should be able to signal that a change of policy is required if sanctions are not to be applied.
Ironically, in June, the ILO will consider taking action against Burma under Article 33 of the ILO constitution. That is the first time that such far-reaching measures have been considered in 80 years. If 776 the motion is carried any member state can take any actions supported by international law that they deem appropriate to make Burma fulfil its obligations under ILO Convention 29 on forced labour. The issue of core labour standards and their application requires major debate. I fear that the North and the South are talking past each other, not to each other. I hope that such a dialogue will enable us to enjoy the full fruits of globalisation but with civilised standards which can be applied both in the North and in the South.
§ 7.28 p.m.
§ Lord Harris of High Cross
My Lords, I join others in warmly thanking the noble Lord, Lord Borrie, for this opportunity to discuss this ambitious and wide-ranging topic of the economic and social effects of globalisation and its impact on fair competition, employment conditions and the environment. At the outset I confess an interest. For 30 years I spent my time at the IEA as a font of teaching on the principles of market economy. As a result I accept some small share of responsibility for having helped to wean both the Tory and the Labour leaders from their post-war delusions over the mixed economy.
It is truly difficult in this civilised assembly to recall that a mere 30 years ago even such outstanding intellectual exemplars as the noble Lord, Lord Jenkins of Hillhead, and the noble and learned Lord, Lord Howe, were saddled in office with beliefs which today have banished the likes of Wedgwood-Benn and K. Livingstone to the lunatic fringe.
Some of the speeches that I have heard which are now calling for fairly detailed regulation of the globalised economy come from people, let us face it, who once believed that governments could run the commanding heights of the economy; that incomes policy would remedy the inflation caused by monetary incontinence and trade union monopoly; and that entrepreneurship was little more than a front for exploitation; in short, that market forces were a discredited form of ideology.
Where we were once almost all Keynesians, today we are, thank heavens, almost all followers of Adam Smith. Even new Labour politicians, mercifully, have learned that all their ambitions for economic progress—and therefore for future electoral success— depend on working with the grain of market forces. After all, what are market forces except the actions of free men and women acting out the interplay of consumer choice and producer competition in a free society?
In principle, the phenomenon of globalisation means no more than the widening of competitive markets by a dual process. First comes the removal or penetration of national barriers to trade and investment between countries, and, secondly, the unstoppable explosion of information about changing products and services, their relative prices, performance and availability. In simple terms, this process holds out the prospect of speeding-up innovation and multiplying output ever more copiously.
777 Before turning to the undoubted problems, we should almost daily remind ourselves of the neglected boons of global free trade. In 1776, Adam Smith pointed out that there were mutual gains to be had from trade between countries concentrating on that for which they enjoyed the greatest comparative advantage. It now seems so obvious.
For me, free trade is the best panacea available for world poverty. The mindless protestors against the WTO and the IMF who talk of exploitation, must be patiently instructed—perhaps by the admirable noble Lord, Lord Desai—that the poorest countries in Africa, for example, are those least touched by international trade and the dreaded multinational companies. Trade alone has enabled Hong Kong, in a couple of generations, to trade up, as I like to put it, from low Chinese wages to fully European standards.
If the chief economic effect of globalisation is to move faster towards the annihilation of poverty, it cannot be denied that its social effects must inevitably be disturbing and even periodically disruptive. New products and services, different lines of domestic and foreign trade, fresh sources of competition, all threaten existing employment and investment.
I have periodically ventured to remind the House that it should be a little more backward looking. Even the Tories—let alone Labour and the Liberal Democrats—are not sufficiently backward looking. Instead of straining for novelty by seeking some illusory new economics of a third way, I urge all party men to pay attention to the wisdom of the neoclassical economists.
I offer a new name for the 21st century—a new name even, I hope, for the noble Lord, Lord Desai, who knows more than most of us about economic theory. In 1934 the late A.G.B. Fisher, I believe from New Zealand, wrote a book entitled The Clash of Progress and Security. His simple theme was that economic progress was impeded by natural, universal resistance to change.
In 1945 he expanded this analysis with a second volume entitled Economic Progress and Social Security. For present purposes, I summarise his warning that, faced with rapid economic growth, attempts to preserve the status quo by resisting timely adjustment of employment must aggravate rather than moderate the disruptive consequences of change.
Time permits only the briefest examination of some lessons for policy. First comes the importance of giving more weight to competition for consumer choice, which favours new products and injects dynamism while, as the noble Lord, Lord Borrie, has emphasised, monopoly and producer interests always seek to protect and prolong the status quo. But, unlike the noble Lord, Lord Borrie, I believe that globalisation, allied to media publicity, will on balance prove great solvents of the established dominant producers, the dreaded multinational companies which haunt the unlikely liberal, the noble Lord, Lord Phillips.
778 Secondly, classical economists have long recognised—and new Labour was quick to emphasise—the continuing importance of basic education, training and retraining, which are among the top priorities if the labour force is to adapt to new opportunities. The noble Lord, Lord Dahrendorf, did very well to emphasise the limits of present policies in this respect.
Thirdly, if occupational flexibility is important, I continue to think that geographical mobility is no less so. That would imply a liberal policy on road building, land release and development that would certainly be unpalatable to such old Labour lags as John Prescott.
Fourthly, if British entrepreneurs are to respond swiftly to the impact of unforeseen change, it seems a truism that the less regulation with which they are encumbered the better. Even more than the Tories, new Labour has allowed Brussels to hobble small businesses, which should be the seedbeds of flexible economic progress. I solemnly fear that within the next decade or two the restless global economy is likely increasingly to relegate continental Europe, if not the whole of the EU, to an economic backwater.
Finally, for now, conventional social security schemes are not likely to offer more than what Herbert Morrison more than 50 years ago called,at best nothing more than ambulance and salvage work".Faced with the quickening pace of change, families will need more ample financial reserves than the state can or should guarantee. From rising incomes, private savings in all forms, including personal investment and insurance, would be a far better cushion for change than going into debt to tide over the scale of adjustments that lie ahead.
It is a measure of Gordon Brown's complacent myopia that, having soaked insurance companies in his first budget and wound up PEPs, he could think of nothing better than the complex, stingy ISAs. It is high time that we moved towards taxing expenditure and exempting savings, an idea much loved by the late Lord Kaldor. Our aim should be to spread substantial nest-eggs against the fluctuations in family fortunes which must accompany the otherwise enriching processes of globalisation.
§ 7.38 p.m.
§ Baroness Miller of Chilthorne Domer
My Lords, we on these Benches thank the noble Lord, Lord Borrie, for introducing the debate. It has proved to be most illuminating and, at times, quite controversial. I particularly thank him for defining the issues so clearly, as have many subsequent speakers. I congratulate the noble Lord, Lord Birt, on his excellent maiden speech. His point about investing in national culture—which found particular resonance with the noble Lords, Lord Phillips and Lord Brett— is something that will bear further thought and debate in your Lordships' House.
I am not sure that we have resolved whether globalisation is the Holy Grail that will bring mutual benefits to the peoples and environments of all countries and in trade terms bring increased wealth to 779 many, or whether it is a satanic plot of the multinationals to carve up the world into market places and factories. The comments of the noble Lord, Lord Lea, on how we need to link constituencies, so that these issues can be debated in different parts of the world with the aim of reaching some understanding and having some common themes, were particularly interesting.
We on these Benches believe that the outcome can be a fairer and more responsible world. We need to make it clear that that outcome will come about only if the rules governing such a process of globalisation are in place and are followed and that the non-observance of the rules will be strictly dealt with. The noble Lord, Lord Brett, painted a particularly graphic picture of what happened in Korea and Indonesia when those rules were not followed.
Until now, those around the table in the trade arena wrote the rules and frequently, as the noble Earl, Lord Sandwich, pointed out, have not even provided a seat at that table for many other stakeholders. It was no wonder that so many developing countries and many NGOs which work on social and environmental issues felt so excluded and angered by, first, the GATT rounds and now the WTO rounds. I do not believe that they are, to use the words of the noble Lord, Lord Harris of High Cross, mindless protesters. Many of them have thought deeply about the issues. We certainly need a democratisation of the process.
Just after Seattle a Question was asked in the House on this subject. In reply to one question the noble Lord, Lord McIntosh, said:In a sense the World Trade Organisation is too democratic".— [Official Report, 6/12/99 col. 1008.]The noble Lord may have been reflecting some of the frustration of the previous weekend when the vote not to proceed had been very difficult. I hope that the Minister can tell us the Government's ideas on how all countries can be part of the process—not just that the developing countries' concerns are "taken care of. Developing countries would not be happy with that. They want to have a voice.
The process of globalisation has until now been either unmanaged or mismanaged. It has failed to deal equitably with the three essential pillars of sustainable development: economic, social and environmental. The noble Lord, Lord Lea, reminded us of the comments of the UN Secretary-General on how essential it is to bring those three strands together. Increased economic activity is unlikely to bring any social benefits unless all three of those pillars are balanced equitably. Unrestrained increased economic activity will almost always bring environmental damage. The full realisation that trade and the environment are inextricably linked is a fairly recent realisation. Although the world has begun to understand that there is a relationship, it has not yet found mechanisms to assess the environmental impacts of trade policies or to judge the effects on trade of environmental measures. More sophisticated, but the right way forward, is the use of trade measures to achieve environmental policy aims. The noble Earl, 780 Lord Sandwich, made the valid point that environmental measures must not be seen as disguised trade barriers. Perhaps, regrettably, in the past, they have been used as trade barriers. That would be a misuse of them and would bring them into disrepute.
The issues of environmental degradation are truly global. Global warming, the loss of the ozone layer, the poisoning of water sources and polluted air are not issues that remain within the boundaries of nations or continents. The fact is that the mechanisms for liberalising trade are progressing much faster and are being much more adequately resourced than mechanisms for protecting the global environment and social concerns. Can the Minister say what proposals the Government have for encouraging the international community to resource these areas of work? Are the Government willing to sponsor investigations into the Tobin tax—an international tax raised as a percentage tax on foreign exchange transactions? It has many merits to recommend it. At a time when we are struggling to find resources, it would be one way forward.
The EU and this country have been pressing for greater clarity in the relationship between the WTO rules and the multilateral environment agreements. The environmental aspects have been subject to some very good protocols and conventions, such as the Montreal convention on trade in substances that deplete the ozone layer and in Kyoto on climate change. There is also a convention on biodiversity. They were drawn up in the 1980s and 1990s. Although we have signed up to them, as has the EU, they need vigorous implementation and enforcement throughout the world.
Almost every day in the media we come across new figures of species under threat. Although bigger furry species such as tigers or giant sea otters get more press coverage, the rate of projected loss of plant and insect species is appalling. For how many years have we been worrying about the loss of rain forest—10, 15 or 20— and has the rate of loss slowed down? We are not very good at measuring the effect and taking responsibility for it. If we are not, how can we expect poorer countries to start to implement multilateral environmental agreements? They certainly need additional resources and those could be distributed by the Global Environment Facility. We have the mechanisms but not the resources.
The United Nations Environment Programme is recognised as carrying out most useful work but its budget is tiny—minuscule—at 100 million dollars per year compared to the scale of the problems that require urgent attention. It needs to be given the resources, the powers and the responsibilities commensurate with the urgency of the issues. The environment's health in its widest sense is crucial. It should not be seen as a preserve of the world's environment Ministers, though I pay tribute to Michael Meacher, who made a particularly strong showing at Seattle at the last WTO round. He tried to broaden out the issues and make colleagues understand that the environment should be the responsibility of every department and every 781 Minister. Can the Minister say how the Government view environmental issues? Do they have a cross-cutting international environmental approach?
I wish to turn briefly to noble Lords' comments on the social issues. The noble Lord, Lord Desai, gave an excellent explanation of why we may not be able to create global regulatory structures for social issues. It was very interesting if a little depressing. I should like to think that we would be able to create them. The noble Lord, Lord Lea, expanded on the difficulties of drawing up rules and gave us a detailed and interesting perspective. He said that if we focused just on full rights for workers, as mentioned by the noble Lord, Lord Brett, we would be able to come up with something that did not cut across the right of countries to self-determination in terms of labour.
As consumers, we need a better sense of what is the true cost of consumer items. We have no system of knowing what is the true cost of the cheap clothes we buy. If the losers are children and their education in the countries which produce those cheap clothes, we ought to know that. Our labelling system is truly underdeveloped. Indeed, in our own country we have developed neither eco-labelling nor any other kind. We need to provide a lead in that area.
Although I do not want to cross swords with the noble Lord, Lord Harris of High Cross—the noble Lord's view of history is undoubtedly longer then mine—he exhorted us to be backward-looking. I should prefer us to be forward-looking. We on these Benches believe that, with our partners in the EU, we can make progress towards a prosperous and environmentally sound world. We need to work with our European partners, and indeed our partners in all parts of the world. The global village needs global government, but it certainly does not need a feudal squirearchy to manage it.
§ 7.50 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, I was enjoying the debate introduced by the noble Lord, Lord Borrie, until the noble Lord, Lord Phillips of Sudbury, and his noble friend Lady Miller of Chilthorne Domer, rose to speak. Wracking my memory, I remembered Corporal Fraser in "Dad's Army", who at every turn said: "We're all doomed!". That seemed to be the dismal message from both noble Lords on the Liberal Democrat Benches. If the noble Lord, Lord Phillips, thinks that the modern world is terrible, I suggest that he joins the castaways who are busy experiencing a Hebridean winter for some dismal and rather silly television programme. I am not entirely sure whether it is made by the BBC or the other lot, but it seems to be a bit of a joke. If the noble Lord wants to experience an older and perhaps gentler world, he should try that. For my money, I prefer where we are now, with all its problems, to the kind of complaints and reservations that the noble Lord, Lord Phillips, seems to have about the modern world.
I do not believe that we are all doomed. Thank goodness for the noble Lord, Lord Birt, who in his maiden speech was much more positive and upbeat, 782 seeing the world in a more progressive way and welcoming globalisation, as did the noble Lord, Lord Desai, and as I certainly do. The noble Lord, Lord Birt, referred to globalisation being with us since ships set sail. That is true; and few countries know more than we do about sending ships all around the world to create wealth for this and many other countries. The noble Lord missed out the next stage of globalisation—the jet engine. It made an enormous difference to a great many ordinary people. Many of our citizens have abandoned our cold, rain-swept country for warmer climes this Eastertide, thanks entirely to the jet engine.
The real lift-off—space age globalisation—has been that given by information technology. If I noted the comments of the noble Lord, Lord Birt, correctly, he said that we cannot seek, Canute-like, to hold back the digital tide. Nor should we want to. The expansion of ships, navies, travel, and now communication will aid the world economy. According to the International Data Corporation, the number of Internet users world-wide was approximately 142 million at the end of 1998 and will grow to 399 million by the end of 2002. That growth will impact on trade with the advent of e-commerce. There is a Bill before the House on this very subject. It must be the only Bill that is not being taken through this House by the noble Lord, Lord McIntosh of Haringey. I must say that the noble Lord encapsulates globalisation: he is all over the Government, globalised by the Government—two debates today, two Questions earlier today, a Bill yesterday. I wonder whether any other government Ministers do any work. The noble Lord should talk to some of his trade union friends about his workload.
E-commerce, worth some 50 billion dollars in 1998, is projected to grow to 733 billion dollars by 2002. That is a huge increase. We can all see it happening. Earlier this year, I was on the other side of the world and I could not help but notice that almost every advertisement on television carried a reference to a website. I have since noticed that that is happening here. I am sorry to tell those on the Liberal Democrat Benches that there is nothing they can do to stop that developing. What we must do, and encourage all other countries in the world to do, is to take advantage of it. There are huge advantages in trade—and indeed in free speech. Is it not true that the Internet provides freedom of speech, even to some whose speech we do not like? It is a terrific opportunity for organisations. It gives them the means to communicate. I mentioned China.
§ Baroness Miller of Chilthorne Domer
My Lords, I wonder whether the noble Lord, Lord Mackay, was listening throughout to those of us on the Liberal Democrat Benches—for instance to the comments of the noble Lord, Lord Dahrendorf, on education and globalisation. I feel that he may have missed many of our points if he thinks that we are pessimistic.
§ Lord Mackay of Ardbrecknish
My Lords, I did not mention the noble Lord, Lord Dahrendorf, because I 783 excuse him from most of the follies of the Liberal Democrat Party, including, dare I say, an affection for the euro, but let us not get into that subject.
Globalisation will, in the words of the Economist, lead to,faster growth, cheaper imports, new technologies and the spur of [all kinds of competition including] foreign competition".Of course there is a clash between the people who look at conditions in countries overseas and wonder whether we should be buying the products made there. Like other people in this country, I watch a television programme and wonder whether I should be buying the T-shirt or the football. But the alternative is often not "education, education, education"; it is perhaps the kind of starvation that we see in Ethiopia. It is not a black-and-white issue. As the noble Lord, Lord Desai, mentioned, it may be cheap labour, but it may be the best or the only job that people can get, and it is a good deal better than the alternative. We must bear that in mind.
The commerce Minister of Thailand, who will take over as director-general of the WTO in 2002, said this about the question of labour rights:I have the feeling that some of the representatives from the developing countries … might take this opportunity to walk away from any agreement on a new round. I know it is an important issue for the United States administration, but to have trade sanctions linked to labour rights violation would be really ultimately highly detrimental".The poorest people in the world do not work for multinationals. They do not work in modern export industries. They work in subsistence agriculture, or they do not work at all. We should remember that. While I listened with care and interest to the speech of the noble Lord, Lord Brett, which was balanced—
§ Lord Lea of Crondall
My Lords, is the noble Lord aware that the same Thai Minister advocated joint talks between the ILO and the WTO on the question that he has mentioned?
§ Lord Mackay of Ardbrecknish
My Lords, the debate is time-limited. Normally, we do not intervene. I have a very few minutes left.
I think that the noble Lord, Lord Brett, was trying to make the point that we must be careful to balance these matters and make sure that we do not drive work, even low-paid work, away from those countries. Once the work arrives there, once it begins to develop, once the wealth—which may not seem very much in our terms—begins to come in to those countries, they will begin to raise their standards, and of course we ought to encourage them to do that. But, frankly, the wealth has to begin there before we start to raise standards. It is a difficult problem.
784 One of the interesting points is that the World Bank, looking at east Asia, has stated that the number of people living on less than a dollar a day fell from 418 million in 1987 to 278 million in 1998. That may still be a large number of people, but the figure is half what it was just a few years ago. One of the key reasons for that measure of decreasing poverty in east Asia was growth in China—which saw an increase of 7.7 per cent a year in private consumption—and growing trade.
I have little doubt that, while many of us might put our hands in our pockets to give a donation to some of the aid organisations in which the noble Earl, Lord Sandwich, is involved, it is perhaps more important that we actually buy their products and that we do not raise tariff barriers against them. Too often people who refer to labour standards, or any other standards, in seeking to raise tariff barriers simply want to protect the developed countries. That is wrong. We must work with developing countries and give them the opportunity to trade with us. We in the developed world are the only people with the money to buy their goods and services and, in that way, to lift them out of poverty.
§ 8 p.m.
§ Lord McIntosh of Haringey
My Lords, this has been a characteristically well timed and wide-ranging debate. It is well timed because it occurs at a time when again we see the raising of consciousness in Washington, which also took place at and following the meeting of the World Trade Organisation in Seattle. If we debate this matter at a time when there are demonstrations in Washington perhaps we are doing better than they are. The debate is also characteristically wide ranging. If in 2½ hours we are to cover, at the invitation of my noble friend Lord Borrie,the economic and social effects of globalisation and its impact on fair competition, employment conditions and the environment".it is very difficult for anyone, particularly a Minister who attempts to sum up, to deal with all of those matters adequately.
This has been a fascinating debate, which has had the huge advantage of attracting the maiden speech of the noble Lord, Lord Birt. The noble Lord did exactly the right thing: he spoke on a subject that he knew about but which he was not known for knowing about; in other words, he avoided broadcasting—and an excellent job he made of it.
The only way that I can limit myself is by indulging my incurable preference for talking about the things that we can do something about rather than those that we can do nothing about. If I concentrate my remarks on our approach to globalisation through the main international body concerned with it, the World Trade Organisation, I hope that your Lordships will forgive me. Globalisation, which gives rise to this debate, is the increasing internationalisation of economic activity. As many noble Lords have said, the huge increases in international trade and investment have been driven by a rapid change in communication and transport technologies. Here the speech of the noble Lord, Lord 785 Birt, was particularly appropriate. He referred to the power of digital technology and its effect on both culture and economic growth. But these changes have had a profound effect on all countries, both developed and less developed, in the global economy.
There are a number of misconceptions about globalisation, in particular in relation to the way that it affects environment and social standards. Globalisation is neither the destructive force that some people believe it is nor the Holy Grail to which the noble Baroness, Lady Miller, referred. I just take the view that it is a fact which we can do nothing about; we will not turn it back. Globalisation produces winners and losers. More often than not, the winners are those with open economies who have embraced the global economy. Among developing countries, those with more open economies have consistently grown faster than those with closed economies I do not know whether that provides the noble Lord, Lord Harris, with any consolation. I do not believe that the noble Lord alluded to Popper but he certainly referred to Adam Smith and reminded us of the theory of comparative advantage, which is appropriate to what which we are discussing today. That certainly struck a spark with my noble friend Lord Desai, in his fourth speech of the week. My noble friend did not remind us of his excellent article in the New Statesman last week which covered this very point.
A number of noble Lords have referred to the demonstrators in Seattle and Washington. We have sympathy for them because some of them are like us when we were young, perhaps with the exception of my noble friend Lord Desai who, as I recall, was always on the side of the revolting students. Nevertheless, we have sympathy with those who have an instinctive opposition to what they see as uncontrollable forces which become greater if they are international. They blame globalisation for the destruction of the environment, the undermining of social standards and the gulf between rich and poor. The noble Lord, Lord Phillips, who is still at heart a demonstrator, blamed globalisation for virtually everything in the world today; for example, the destruction of language and the fact that music is no longer comprehensible. He did not say it, but that was because he had only 10 minutes. It is a fundamental mistake to believe that we can turn back the clock on globalisation.
It is right for my noble friend Lord Borrie to expatiate on the downside of globalisation. I also understand the position of those like the noble Earl, Lord Sandwich, who describe the scars of uncontrolled capitalist exploitation, which cannot be denied, but we must work with the world in which we live. We believe that the challenge for governments is to ensure that globalisation acts in the interests of people and the environment and contributes to the goal of sustainable development. That is our aim in the policies that we have adopted, which we seek to persuade the World Trade Organisation and other international organisations to undertake. I hope the noble Earl, Lord Sandwich, recognises that the inclusion of NGOs in our delegation to Seattle— tribute was paid to my right honourable friend 786 Michael Meacher—was a major step forward that enabled us to set up a new network within the context of the WTO which has done a great deal of good.
It is easy to say that trade liberalisation is important to us. The UK is a major trading country; it is the fifth largest exporter of goods and the second largest exporter of services. In terms of investment stocks, the UK is also the world's second largest inward and outward investor. Therefore, it is vital to the UK economy that we maximise the benefits of global trade liberalisation. But I hope that we go further than that and seek to use the pressure for trade liberalisation for constructive purposes. We see the World Trade Organisation as essential in meeting the challenge of globalisation. The WTO, and its predecessor GATT, has brought enormous benefits in terms of sustained growth in the world economy.
There is a profound difference between the WTO and the IMF, World Bank and United Nations: democracy. After all, in the WTO every single member state has an equal voice. When did the United Nations or International Monetary Fund last venture to censure the United States? Yet both the US and EU have been censured by the World Trade Organisation and have had to act on it—and a good thing too, even if we do not agree with the particular case. The WTO rules offer equal rights to all trading nations to the particular advantage of smaller states. If we did not have a multilateral rules-based trading system smaller countries would not have protection against the greater trading weight of large economies. The multilateral trading system allows small and medium-sized businesses, not just large companies—I shall turn to multinational corporations—to trade freely and with confidence, and that is one of the most important spurs to innovation and improving competitiveness.
I turn to multinational corporations. It is inevitable that as markets become more open companies structure themselves in the best way. Therefore, increasingly companies have become players on the global stage. In the past century we have seen some conspicuously horrible examples of how multinational companies have exploited the countries in which they have operated and to which they have sold.
I am not sure whether my noble friend Lord Desai advocated capitalism in one country. If so, he would have been the Stalinist of new Labour! But I think that he used the issue as an Aunt Sally rather than applauding it.
But of course we recognise the fear—it was expressed most eloquently by the noble Lord, Lord Phillips—that companies may grow beyond the reach of national governments and become powerful enough to exert pressure on governments, in particular those of less well off countries. That is why it is important to heed the call of my noble friend Lord Borrie for considering the impact of globalisation on fair competition. We agree with what he said. We agree that although in this country we have rightly given companies more freedom through deregulation, at the same time we have balanced that with fair trading and 787 competition rules and—dare I say it?—with the provisions of the Financial Services and Markets Bill which is progressing through this House at present.
My noble friend Lord Borrie gave examples of control of misleading advertising and of health and safety. But of course there are many more. It is true that multinational corporations which behave well in their home countries need comparable control of their activities when they are working in developing countries. We shall return to that when we talk about labour standards.
The answer must be that in the multinational trading system we want to advance some of those principles of fairness as well. We take the view that effective competition authorities are in the interests of all countries and consumers, and in particular restrictive business practices in developing countries could be a significant constraint on growth and therefore on the opportunity for the people in those countries to benefit through a better quality of life. The noble Lord, Lord Birt, by analogy talked about the task of competition being to ensure that technology is not restricted. I think that that applies very much to the role of competition in multinational trade.
So how do we approach it; and how do we, as one of those participating in the European Union approach to the WTO, approach this multilateral framework of common principles of competition? We present the argument in this way. The more economies are integrated into the global system the more they need competition rules to control the power of global businesses in their markets. It is argued that the absence or inappropriate enforcement of competition rules can create barriers to trade. That is certainly true. A commitment by WTO members to a common set of competition law principles would be a helpful means of addressing both issues. Countries also need to have measures to control restrictive business practices in order to reap the full benefits of trade liberalisation.
I turn to environmental and social controls. These are the other aspects of this issue after competition. Of course there are concerns that trade liberalisation has an adverse effect on environmental and social standards. The noble Lord, Lord Hooson, was the most eloquent exponent of that view. But we believe that an open, transparent and stable world trading system is not only compatible with progress towards our other aims of promoting sustainable development but also essential for it. That is the way in which we shall have higher environmental, social and other regulatory standards.
We recognise many examples to the contrary. But trade liberalisation can help to improve the efficiency with which the world's resources are used, and the spread of cleaner technology. Rising income levels are associated with improving environmental and social standards. This happens because countries have the wealth to tackle those issues and richer households are more demanding that their authorities do so. Where economic activity is unsustainable—trade can act to magnify it—it is essential that environmental considerations are taken into account.
788 The relationship between trade and labour standards has always been a sensitive issue; and it was today. There have been calls—although not today— for the World Trade Organisation to take on new roles in enforcing environmental and social standards: for there to be a social clause for the WTO. There are dangers here. It would mean the WTO acting in areas which include other international institutions such as the International Labour Organisation—it has found an effective voice in my noble friend Lord Brett—and the United Nations environment programme. We should not make the WTO solely responsible for dealing with environmental and social issues. We need to ensure greater co-operation between the WTO, the ILO and UN bodies so that global problems are addressed coherently.
Specifically we do not think that restricting imports would be an effective way of tackling issues such as child labour. My noble friend Lord Borrie blamed the corporations for child labour; and, of course, to some extent they are to blame. But, as my noble friend Lord Brett recognised, there is also indigenous child labour. Carpet works are not multinationals. The noble Earl, Lord Sandwich, made the same point. The primary cause of child labour is poverty. Trade sanctions could increase the problem by displacing child workers into the informal or non-expert sectors where conditions could be even worse. My noble friend Lord Desai had that right—he had support in the most unlikely form of the noble Lord, Lord Mackay—when saying that it is often the best job they have. Of course these are terrible aspects and it is right that we support the four standards expounded by the noble Lord, Lord Brett. But if developing countries are to grow they must have access to world markets.
I turn rather rapidly to the environment. Of all the speakers, only the noble Earl, Lord Sandwich, and the noble Baroness, Lady Miller, touched on this issue. We look to see that trade liberalisation and sustainable development are mutually supportive. We went to Seattle with a number of specific objectives. We wanted a commitment for environmental considerations to be taken into account in all negotiations because we think that there are important synergies between trade, environmental protection and development in such areas as agriculture, fishing, environmental goods and services, and technical barriers to trade. The European Union is committed to conducting a sustainability impact assessment of proposed new trade measures. We completed the preliminary stages of this before we got to Seattle.
We also want a new round of negotiations to include three priorities on trade and environment: first—I hope that this answers the noble Baroness, Lady Miller—greater legal clarity in the relationship between trade measures taken under multilateral environment agreements and WTO rules; secondly, confirming the WTO compatibility of open, transparent voluntary labelling schemes, in particular eco-labelling schemes; and, thirdly, examining the scope for precautionary action within WTO rules. It is important in the interests of all governments to be able to take measures under the precautionary principle 789 which are science based and proportionate in protecting their environments. We are grateful to the noble Baroness, Lady Miller, for her support for the existing conventions and for the work of Michael Meacher.
The noble Baroness asked me about the Tobin tax. There is a debate on this subject in another place. I suggest that she reads the Government's reply to that debate rather than expect me to repeat it—since I have not read it myself.
Clearly the WTO is at the heart of many of the concerns expressed by your Lordships and which are in the realm of the possible of politics. Although clearly trade liberalisation and the growth of international multinational trade are an essential element of our objectives for improving the standards of living in the world, and Clare Short and the Department for International Development have ambitious targets in that respect, we believe profoundly that the increasing trade liberalisation will achieve the objectives we want only if it is allied with proper concern for fair competition, employment conditions and the environment.
§ 8.20 p.m.
§ Lord Borrie
My Lords, if, as the noble Lord, Lord Harris of High Cross, suggested, the terms of my Motion were ambitious, my ambitions have been fulfilled. Noble friends from all parts of the House have ranged very widely over the subject. I did not expect each and every one of them to examine every aspect of globalisation, but my ambitions have in more than a sense been fulfilled, because that was done by my noble friend the Minister, who touched on virtually every aspect. We all benefit from that in coming towards the end of the debate.
§ I beg leave to withdraw the Motion for Papers.
§ Motion for Papers, by leave, withdrawn.