When your Secretary-General Sujit Chowdury asked me to participate in this session of young entrepreneurs from approximately 100 countries, mostly developing ones, I was delighted. Let me be candid from the outset: I'm reasonably confident that many of your fellow citizens, like many Canadians, fear globalization. Many say it brings the decay of social values, cultures and the environment among other things. But I would argue that the main challenge is not to decide whether globalization is good or bad, rather how to ensure that it provides more fulfilled lives for many people, including the most disadvantaged. Globalization can be an agent of good, a force to create unprecedented growth and opportunity for all who embrace it.

It is a politically contentious subject almost everywhere. An article by Sophie Meunier published recently in Foreign Affairs grapples with France's anti-globalization sentiments. One of the most intriguing points she makes is a quote from the French newspaper Le Monde: "McDonald's red and yellow banner ensign is a new version of America's flag, whose commercial hegemony threatens agriculture and whose cultural hegemony insidiously ruins eating habits -- sacred reflections of French identity." This explains why José Bové, a sheep farmer who garnered international media coverage for bombing a McDonald's in France nearly a year ago, has struck a chord among average French nationals.

Economists have been talking about globalization for decades, even if the term itself emerged only recently. Many speak of a borderless world, but that is a far cry from today's reality where borders are still very real. Too often the term is thought of as synonymous with unbridled capitalism where any entrepreneur can raise money anywhere in the world, make anything and sell it anywhere. But globalization is much more than the free flow of goods, which has been the lightening rod for much criticism. It is also about the free flow of ideas, the exchange of culture, and values, the greater attention now being given to international issues such as human rights and environmental protection and technological advances, which have brought people closer together than ever before.

Global Benefits

Virtually all economists have concluded that the large majority of residents of our shrunken planet are considerably better off through the growth of markets and the efforts of the GATT [General Agreement on Tariffs and Trade] and its successor, the WTO [World Trade Organization], to keep markets open.

With ever expanding technology come expanded markets and increased demand for products, but also greater competition. There are now more people with computers connected to the world who are investing their hard-earned dollars as never before. As Klaus Schwab of the Davos World Economic Forum observed, "We have moved from a world where the big eat the small, to a world where the fast eat the slow." More than $1.5 trillion is now exchanged in the world's currency markets each day, and nearly a fifth of the goods and services produced each year are traded.

Consumers of goods and services in all countries are, of course, the first group who benefit from trade for reasons which include increased competition, comparative advantage, economies of scale and access to a greater range of products and services. There are those, however, who are likely to gain less than others from globalization.

Lower inflation is cited as a favourable consequence of globalization because increased competition makes businesses more reluctant to boost prices/wages unless warranted by productivity increases. Another possible benefit of globalization is faster technological and productivity growth if increased international competition has obliged business generally to innovate more rapidly since the 70s.

Social Tensions

Dani Rodrik of Harvard has singled out three sources of tension between global markets and social stability:

1) globalization makes the services of large segments of working populations more easily substitutable across boundaries.

2) Trade can unleash forces that undermine norms in national practices, for example when child labour in Honduras replaces workers in South Carolina or cuts in pension benefits in France are called for in response to the requirements of the Maastricht Treaty.

3) Globalization and its competitive pressures make it more difficult for governments to carry out their important functions of providing the social programs which, since World War II, helped to maintain social cohesion and domestic support for liberalization. I would argue that in Canada our commitment to maintain strong social programs has not been adversely affected by globalization.

Successful Globalizers

Rodrik also concludes from the experience of both Europe and Asia, that successful globalizers have had "market-friendly but pro-active governments, adequate social insurance and have integrated into the world economy on their own terms. This lesson contradicts much of today's conventional wisdom that globalization requires small government, that welfare states have to be cut down to size, and that there is a single (read Anglo-American) model on which all countries will reasonably converge." He also asserts that it is the overall quality of a society's domestic institutions -- respect for the rule of law, human rights, good governance, social and political stability, adequate infrastructure and a skilled labour force -- rather than labour costs or taxes that determines where investments go.

Few question that unprecedented freedom in many markets has resulted in spectacular economic growth in some economies. International trade since 1988 has doubled to almost US$7 trillion according to the WTO. Quite a number of countries around the world are experiencing rapid overall growth, and some currently enjoy record low unemployment rates. In the case of a uniquely export-dependent country like Canada, where about 43 percent of our gross domestic output is exports, I believe virtually all Canadians have benefited from more open economies worldwide.

UN Human Development Findings

Many people are legitimately concerned about the impact globalization is having on developing countries. Consider these statistics from the 1999 UN Human Development Report:

• The income gap between the fifth of the world's people living in the richest countries and the fifth living in the poorest was 74 to 1 in 1997, up from 60 to 1 in 1990.

• By the late 1990s the fifth of the world's people living in the highest income counties had

86% of world GDP [Gross Domestic Product] , while the bottom fifth just 1%,

68% of foreign direct investment, and the bottom fifth just 1%, and

74% of world telephone lines, the bottom fifth just 1.5%

And most striking of all, the assets of the top three billionaires are more than the combined GNP [Gross National Product] of all least-developed countries and their 600 million people. This has contributed to the perception that globalization benefits only the rich, leaving the poor behind.

NAFTA

When the North American Free Trade Agreement [NAFTA] began January 1, 1994 for Canada, the United States and Mexico, there were more than a few skeptics. Now, more than five years later, the figures speak for themselves: total merchandise trade across North America surpassed $752 billion in 1998; Canada's merchandise trade with Mexico doubled over the same period, reaching $9 billion a year; and in the last four years an estimated 1.5 million new jobs have been created in Mexico alone. Since NAFTA there are 15,883 new Mexican exporting firms.

Among skeptics there was also fear that NAFTA would lead to environmental degradation in Mexico; that environmental regulations would be relaxed in an attempt to woo investors. Mexican President Ernesto Zedillo put those fears to rest in his comments earlier this year in Switzerland. Since 1994, he explained, Mexico's enforcement of environmental standards has become stricter; he added that new employment opportunities offered by international trade have made it possible for highly polluting activities to be replaced by environmentally friendly ones.

Developing World

Over the last few years countries in Sub-Saharan Africa have begun to experience the benefits of globalization, and some have led the world in percentage economic growth. Angola, Uganda and Botswana already stand among the ten fastest growing economies globally. The IMF [International Monetary Fund] forecasts that Africa's overall GDP should grow by 5 percent in 2000, an improvement from 3.1 percent in 1999.

Botswana and Mauritius have been shining examples of the positive effects of globalization. Both economies have experienced exponential growth as they have embraced foreign investment on their own terms and married their economic success with good governance and generous budget allocations for education and health care. Botswana, often cited as a major African success story, was one of the poorest countries in the world at independence, but has been the fastest growing economy in the world since 1965, with an annual GNP growth rate of 13 percent. While such success may continue to be the exception and not the rule in Africa, there is no reason why other economies cannot follow suit and become new hubs of commerce.

Much of what separates the developed and developing worlds today is the knowledge gap. In many developing countries, resources and people are abundant; it is a relative lack of education and experience in economic, social and political structures that hurts their ability to compete. In 1998 the Internet had more than 140 million users and that number is expected to surpass 700 million by 2001. However South Asia, home to 23 percent of the world's population, has less than one percent of Internet users. Only 0.1 percent of Sub-Saharan Africans are linked to the Internet.

Dissemination of ideas through the Information Highway, television or satellites introduces ideas about the environment, democracy, human rights and even wealth creation. I would suggest that one of the best effects of globalization is that information technology has brought attention to the need for democratic development and the protection of human rights. The BBC World Service, TV-5 (cinq), CNN and other broadcasters are the principal vehicles of instant communication, which has revolutionized our understanding of the world. At the same time, many worry about the growing exports of American films, music and television programs.

Whither Globalization?

The European financial problems of the early 90s, the Latin American crisis beginning in Mexico in the mid 90s and the East Asian flu which also hit Russia and Brazil in 1998-99 were, of course, highly destructive of people's lives. If the sudden removal of capital from these countries caused financial instability it should be added that their access to global investments helped them to prosper earlier and for most of them to recover much faster then expected. Could not these crises have been avoided through better regulation of financial markets by international organizations and national governments?

In the case of the WTO, the critics should note that its dispute settlement mechanism is much better than the one in the GATT, which required the unanimous agreement of all GATT members, including the offending member country itself. The WTO requires a unanimous decision to block a dispute panel report. Even large countries like the U.S. have thus stopped dealing with important trade complaints outside the GATT/WTO, which should benefit smaller economies generally.

Labour Standards/Environment

The WTO also promises to phase out over 10 years the Multi-Fibre Agreement, which limited exports of textiles and apparels from developing countries to developed ones. Some initial steps have been taken to include agriculture in the GATT by converting market barriers to tariffs as a first stage in negotiating them downwards. A parallel agreement to the GATT on services (GATS) hopes to do for services what the GATT has done for goods.

Three areas where the WTO has not extended its authority in a significant way are labour standards, human rights and the environment. In fact, I understand that the WTO does permit some uses of trade policies, including economic sanctions, for human rights abuses. The issue is more complicated for labour standards. Prohibiting slave labour and exploitive child labour is obvious, but what of issues such as minimum wages? If it is mostly better-paid employees in OECD [Organization for Economic Co-operation and Development] countries who lose from the WTO's present exclusion of labour standards from trade policy, is it not understandable that developing countries see the issue as protecting job-holders in developed countries?

So what really happened at the WTO ministerial meeting last December in Seattle? As I understand it, prior to the U.S. President's speech there, the U.S. and EU hoped to introduce labour rights into the negotiations in only a minor way. When President Clinton's talk openly favoured the use of trade sanctions to enforce labour rights, the negotiations train went off the rails completely because developing country leaders then refused to discuss labour standards at all. My impression is that the representatives of developing economies in Seattle were as unhappy as the thousands of protestors outside.

The way ahead is certainly unclear judging from the fairly recent protests at the IMF and World Bank meeting in Washington, D.C. The next U.S. President will probably have to obtain fast-track legislation from the new Congress before any new trade negotiations can make substantive progress. Greater participation by NGOs in trade negotiations might help win public support for further negotiations. Developing countries should be represented formally in WTO decision making, perhaps through a steering committee having permanent members from developed economies and rotating reps from small/developing countries.

The alternative to managed globalization could be even more painful if we recall what happened to the pre-1914 short-lived victory of free markets and liberal democracy over mercantilism and nationalism. Globalization today must be complemented by social programs, safety nets and more investments in education/ training. We ignore at our peril the challenge to build genuine legitimacy in each of our countries for more open economies.

Many people I talk to in Canada and elsewhere think the momentum today is with the anti-globalization forces. If Fred Bergsten of the Institute for International Economics is correct that on trade matters you either move forward or fall over -- the bicycle theory -- there is real work to be done by all of us. It is clear that globalization is a force of great change and not simply a spectre on the horizon. Through its technology, communications, and economics, globalization and our increasing interconnection with each other are inevitable. Time and distance are shrinking; globalization is a reflection of that reality. That is why I question those who wholly condemn globalization. Countries cannot succeed in isolation. A poor country that closes its borders to investment is likely to stay poor. Globalization, while at the same time posing a threat to the very system that sustains it, can also champion stability, democracy and greater sharing around the world.

Here are four areas in which Bergsten thinks each of us should be active in our own countries:

1. Public education above all, which will require better analyses of the real consequences of globalization, including all of its benefits.

2. An honest admission that there are costs and losers with globalization, together with creating better safety nets and education/training programs in many countries for those dislocated by globalization or related factors.

3. Review efforts to reform the international financial institutions to help prevent crises, including approving capital controls in certain cases, more effective early warning systems, better co-ordination of exchange rates among the big economies, and engaging the private sector more systematically in rescue operations.

4. Restart the truly multilateral liberalization of the global trading system, which will address the key issues of the critics including food trade, labour agreements and the environment.

As entrepreneurs the world is counting on your contributions to ensure that globalization is for the benefit of all people everywhere. I wish you the best of luck and I am looking forward to seeing you all again. Perhaps we will meet in Canada?

Thank you.

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