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<html> <head> <meta name="Generator" content="Corel WordPerfect 8"> <title>MR. PETTIGREW - ADDRESS TOTHE INTER-AMERICAN DEVELOPMENT BANKON GLOBALIZATION, TRADE AND THE AMERICAS - WASHINGTON, D.C.</title> </head> <body text="#000000" link="#0000ff" vlink="#551a8b" alink="#ff0000" bgcolor="#c0c0c0"> Also available in Spanish at the following address: <a href="https://bac-lac.wayback.archive-it.org/web/20070221061333/http://webapps.dfait-maeci.gc.ca/documents/min_publications/html/3068334b.htm">http://webapps.dfait-maeci.gc.ca/documents/min_publications/html/3068334b.htm</a> CHECK AGAINST DELIVERY NOTES FOR AN ADDRESS BY THE HONOURABLE PIERRE PETTIGREW, MINISTER FOR INTERNATIONAL TRADE, TO THE INTER-AMERICAN DEVELOPMENT BANK ON GLOBALIZATION, TRADE AND THE AMERICAS WASHINGTON, D.C. August 9, 2000 Introduction -- Globalization vs. Internationalization Thank you very much. I'm quite pleased to be back in Washington, and I am certainly honoured to have been asked to be your luncheon speaker today. I want to take this opportunity to share my views regarding this new era of globalization, international trade and, in particular, its impact on our hemisphere. I say new era of globalization because, to me, globalization started only 10 to 15 years ago. I don't think we should confuse it with internationalization. To me, these are two very different phenomenons. In the past, in the era of internationalization, ties between states, each in control over its own territory, multiplied: these included such things as defence pacts, treaties and economic co-operation agreements. Internationalization thus increased the interdependence among societies designed as nation-states and, in fact, the very word internationalization seemed to emphasize the impermeability of national, i.e., political, spaces. And now, we have this new phenomenon, globalization, which is so radically different and even contradictory with the more traditional phenomenon of internationalization. To me, globalization has had two births. Its economic birth was the very day in the mid-80s that we connected electronically the three major stock exchanges of the world: Tokyo, London, and New York. Globalization's political birth was a few years later, on the day that the Berlin Wall fell, in November 1989. Seattle Failed for Traditional Reasons, not Globalization And so, even though the so-called Battle of Seattle, as the media dubbed it, was all rhetorically about globalization, I believe the failure to launch a new round by trade ministers at that particular meeting was related to tensions and even conflict in the most traditional world of internationalization, not the one of globalization. Indeed, I would even say this: even if there had not been one demonstrator -- not one single demonstrator against globalization in Seattle -- we would have failed to launch a ninth round of trade talks last December. We failed to launch a new round for the most traditional reasons of clashes among those of the traditional international order -- national governments. We failed partly because of traditional East-West clashes on agriculture. The European Union, supported by Japan, and the United States, supported by the Cairns Group, could not agree. They spent a lot of time trying to agree but, in the end, did not. The North and the South -- the developed and the developing countries -- also could not agree on what kind of a launch we wanted. Developing countries, and the least developed in particular, highlighted the difficulties they face in implementing a large number of WTO [World Trade Organization] disciplines. Despite the grace periods provided under the Uruguay Round agreements, they argued that they still lack the capacity to administer an increasingly complex set of rules and regulations, including the "inside the border" measures that the WTO agreements now require. As I will mention later, addressing these difficulties through trade-related capacity building is clearly an area where development banks such as the IDB [Inter-American Development Bank] can play an important role. Seattle also pointed to the need to put much more effort into improving policy coherence between the international organizations that deal with trade, economic, social and environmental issues. Enhanced coherence and mutual support between the policies and activities of the WTO, the International Monetary Fund, the World Bank, and UN agencies such as the International Labour Organization and the United Nations Environment Program, will help to ensure that we address these issues by building on the strengths of the organizations created to deal with them. Despite the differences we saw at Seattle, I am confident that WTO members will be able to agree on the launch of a new round in 2001. Why? Because, all members know the enormous benefits that international trade can bring to their economies and societies. The Americas -- FTAA Holds Great Potential I see, for example, great potential in the discussions we have been having toward the creation of an FTAA [Free Trade Area of the Americas]. The Americas contain, at the same time, some of the world's wealthiest economies and some of its smallest and more vulnerable economies. Most share a distinguishing characteristic of economic openness and a growing reliance on international trade and investment as a means of promoting economic development. It has thus become increasingly important that the countries of our hemisphere develop and sustain a level of international competitiveness demanded by a globalized world. A key component to becoming and remaining competitive involves the negotiation of a Free Trade Area of the Americas. The FTAA represents an historic opportunity to unite 34 countries of the hemisphere into a free trade area of impressive proportions. The potential, as I said, is considerable: it is a market with a combined population of over 800 million and a combined GDP of $17 trillion. But hemispheric free trade is only one part of a broader agenda for hemispheric good governance and policy coherence. We must remember that FTAA negotiations were mandated by leaders within the broader framework of the Summit of the Americas process. The leaders' agenda addresses a range of issues of direct concern to the citizens of the hemisphere, including the strengthening of democracy, respect for human rights, co-ordinated action to combat the drug trade, social and economic development and many others. Only by moving forward on all of these fronts together can the nations and peoples of the Americas truly make progress into the 21st century. Canada is proud of the leading role it has in this process: Canada's prime minister will play host to the hemisphere's leaders at the Summit next April in Quebec City; and, last November, at the culmination of the crucial start-up phase of the FTAA negotiation, Canada chaired a meeting of the hemisphere's trade ministers in Toronto. The IDB has been an important player in this process to date and I encourage you to become even more engaged in designing and supporting future Summit commitments. We place a priority on these negotiations because free trade has been undeniably good for Canada and for Canadians. Simply put, trade is first, foremost and always, about people -- people finding rewards for their efforts, markets for their products and hope for their future. I am confident that freer trade will help the people of all the FTAA nations to realize important social and economic gains. Globalization has taken on so many negative connotations that the important message of the real and tangible benefits that economic openness brings has become drowned out. Living standards are without question substantially higher because of the linkages between nations. Which leads me to the subject of trade opponents. For those who, for whatever reasons, oppose free trade and trade agreements, let me ask: why would we exclude others from the kind of prosperity we enjoy, built on trade and engagement with the global economy? Why condemn to isolation the others of this hemisphere who aspire to the same quality of life, range of choice and opportunity that we wish for ourselves? Why deny them the same paths that we ourselves have followed to prosperity? We cannot -- we must not -- let the voices of opposition undermine our efforts to ensure that all of our hemispheric partners share in the prosperity we have enjoyed. An important overarching element of the FTAA negotiating process is helping the hemisphere's smaller economies realize the benefits of liberalized trade. And, I want to take this opportunity to acknowledge the very dynamic role that the IDB has played, along with other members of the Tripartite Committee (i.e., the OAS [Organization of American States] and ECLAC [the United Nations Economic Commission for Latin America and the Caribbean]), in providing technical assistance to smaller economies in the hemisphere. I have no doubt that a free trade agreement can be successfully negotiated and implemented between large countries and smaller countries. Canada's experience with the U.S. is evidence of this and I am confident that the Canada-Costa Rica FTA negotiations will also bear this out. I believe that in today's globalized world, social and economic agendas are inextricably inter-connected and that government policies and institutions must recognize and respond to this reality. The growth and development that the FTAA will help to generate will in turn support the over-arching objectives being pursued in the broader Summit of the Americas agenda, such as improving human rights, promoting democratic development and eradicating poverty. Trade has had a Positive Impact on Environment and Human Rights History has shown that as countries achieve greater economic growth and increased standards of living, higher environmental and labour standards are realized. While I firmly believe this to be true, I readily acknowledge that the breadth and scope of what can be achieved on social issues through trade negotiations is limited. But, in saying this, I do not mean to undermine the legitimacy of the concerns of environmental, labour and human rights groups. I am saying that government has a responsibility for prudent management of these issues, that as leaders, we must harness the forces of globalization and harvest its benefits. We are not powerless to fashion our own futures. In fact, the WTO and the rules upon which we and 137 other members have agreed, are an example of what governments can achieve in bringing direction and order to these global forces. But, I believe the right way to tackle these issues is through institutions with clear expertise and mandates in these areas. For instance, the recent Organization of American States meeting in Windsor, Ontario, served as an unmatched regional forum for high-level discussion on fundamental human rights and democratic development issues. By contrast, the central (and proper) focus of the FTAA is hemispheric economic integration, achieved through a rules-based trade and investment liberalization system. Increasingly, these norms and standards of the multilateral trading system -- in which the countries of the Americas participate -- are being shaped by the network of international agreements managed and negotiated under the auspices of the World Trade Organization. Canada Recognizes the Benefits of an Orderly, Equitable Trade System Canada has been and continues to be a strong proponent of rules-based trade on several levels, be it bilateral, regional or multilateral. Beyond the NAFTA with the U.S. and Mexico, we have bilateral free trade agreements with Chile and Israel, are currently involved in free trade negotiations with Costa Rica, and are exploring a potential free trade agreement with Singapore. An example of this rules-based system at work is in the management of Canada's long-standing dispute with Brazil over the provision of export subsidies to the regional aircraft sector. Four successive WTO panels have ruled that Brazil's Proex export subsidy violates its WTO obligations and must be withdrawn. Canada values its relationship with Brazil and is respectful of Brazil's international role and stature. We do, however, expect that Brazil will comply with its WTO obligations. There are those who would style this dispute as pitting a developed against a developing country. This is not the case. Canada is simply seeking Brazilian compliance with WTO obligations freely entered into, something that other developing countries, including India, Argentina and Indonesia, have done when WTO rulings have gone against them. Canada, too, has revised its programs when they have been found not to comply with our obligations, including in this very dispute. Rules-based international trade is in the best interests of all countries, including Brazil. Indeed, Brazil's Minister of Foreign Relations acknowledged this in a recent letter to the Folha de Sao Paulo in which he wrote "The rules of the WTO, which Brazil helped to construct and wishes to preserve and perfect, establish limits for government assistance to export activities." And we should not diminish the importance of the process we are going through with Brazil. Here we have two countries that, let us say, enthusiastically disagree. Both of us believe we have a valid argument in our favour and we are both putting forth the strongest possible effort to assert our views. But it is important for our citizens to recognize that we have agreed on how to disagree. We have built an institution with processes and rules by which we will abide. We are battling, but our battle is civilized, our disagreement orderly, and the rules of engagement clear and equitable. That 137 member countries have fashioned such an international institution is of immense importance. It is a symbol of how much countries can achieve in global institution building and in reaping the benefits of globalization for all. Nevertheless, it is in some respects a work in progress. As became so evident during the WTO Ministerial in Seattle last November, there is much to be done to ensure that all countries -- both developed and developing -- can meet the obligations and benefit from the rights established under the WTO. During its recent meeting in Okinawa, the G-8 recognized this challenge and paid particular attention to the need to ensure integration of developing countries into the multilateral trading system. The G-8 acknowledged the importance of a concerted effort from the international community in trade-related capacity building, ensuring that all WTO members can take advantage of existing market access concessions. Meanwhile, globalization has created, or at least greatly empowered, the very players who would decline globalization. The irony is that they came to decry the very movement that brought them there. They seek to diminish institutions that can help countries bring order to what would otherwise be a very disorderly world trade system. Globalization, by definition, challenges the role of government, ignoring not only economic but also political borders. Corporations are now able to integrate functions from one space to the other independently of borders, as if they did not exist. Globalization, then, is the result of a combination of a number of factors, including technological advances, mostly in the technologies of information, trade liberalization and deregulation. To me, it represents the triumph of horizontal management, horizontal power against the vertical power of the state on a given territory, and these are very, very different forces. Seattle -- Clash Between Two Worlds In Seattle, we saw a clash between the traditional international order, with its finite number of actors, represented by 135 ministers, and what I refer to, without meaning to be pejorative, as the global disorder. This was really the first time we saw this other world. It was a very bizarre sort of world, a world of an infinite number of participants, not at all well-codified, not at all predictable, going in all kinds of directions, but ironically, often represented by horizontal organizations, whose power has been greatly enhanced by globalization. These two worlds met, and they didn't like one another very much. The predictable outcome was and remains tension, which we will be living with well into the next century. And though governments will have to deal with it, this tension is not exclusively between governments; it also involves competing sectors of society, industries, and entire socio-political, cultural, ethnic, and economic blocs, as well as traditional nation-states. We previously had this wonderful, predictable international system -- so predictable that we knew everyone's speech ahead of time, because it had been repeated so very often, and in any case, everyone checked in advance with everyone else to make sure that no one would be offended. And, now comes this new world, quite anonymous, quite peculiar, absolutely unpredictable, because of the number of participants, and it is sometimes real, often virtual. So as these two worlds collided, they both felt -- quite rightly -- that they represented something valid and credible. Role of Civil Society As we all know, civil society has an important and useful role to play in strengthening democracy. I believe governments should seek to support and strengthen civil society. Part of this support must involve active engagement, in the form of a true dialogue aimed at developing constructive partnerships on a broad range of issues. We can definitely learn something from them. But I feel no hesitation in also saying that it, too, has something to learn from those of us who are business or government leaders. When I met with civil society leaders and the Canadian representatives of many NGOs, they said to me, "We hate globalization." My response was, "But I'm a member of the government, here with a mandate from my Cabinet. It is far more difficult for me to accept globalization, because globalization is threatening the role of governments and states everywhere. We are affected in a much more significant way than you -- this phenomenon has little or no respect for the legitimacy of government." I said, "You ARE globalization. You, the NGOs, who can now in 48 hours gather through the 'net, at very low cost, thousands of people to demonstrate -- you ARE a proof that globalization is very effective and is changing the name of the game." My conclusion from that discussion was that many did not understand what I was saying, because most people do not fully understand what globalization is about. Too many people think globalization is a policy that governments have dreamed up, and they don't understand that this is something that we, too, are confronted with. They also don't understand that this is not something that is being imposed by corporations or big business, because, as we know, many of them are finding it very, very tough and challenging to deal with. We all know most multinationals were very comfortable with the old international order. The formula for success for a multinational was simply to replicate faithfully all its functions in every country through the creation of subsidiaries. But now, multinationals are being replaced by global corporations, which simply integrate functions independently of any political borders, where they find it most advantageous to develop. So, the multinational, too, is being challenged by globalization. It is being replaced by the far-more flexible global company. The multinational is starting to look like a dinosaur now. That's the different kind of world in which we are living. Globalization is, quite simply, a part of the natural evolutionary process. It goes hand-in-hand with the progress of humanity, something which history tells us no one can stand in the way of. Emergence of Notion of Corporate Social Responsibility While in many instances corporations are struggling themselves to deal with the changes that globalization has brought, I would say that there is greater recognition today of the important contribution corporations can make to the social and environmental aspects of governance. Indeed, civil society is calling on the business community to pay greater attention to these issues. In many countries the business communities are responding through the adoption of voluntary codes of conduct that promote socially responsible behaviour in business operations. For example, a number of Canadian multinational enterprises have adopted the International Code of Ethics for Canadian Business, which promotes ethical conduct in many areas, including environmental protection and human rights. At the multilateral level, I recently joined other OECD [Organization for Economic Co-operation and Development] ministers in adopting the revised OECD Guidelines for Multinational Enterprises. This multilateral instrument promotes corporate social responsibility and enjoys the collaboration of governments, the business community, labour organizations and other interested parties of civil society. These are very positive developments that Canada supports and hopes to see advanced in the Western Hemisphere. Moving from Industrial Capitalism to Financial Capitalism For the past while, we have been witnessing the move from industrial capitalism to financial capitalism. That's the basic thrust of globalization. It took us generations to tame the beast of industrial capitalism. Industrial capitalism, we will all agree, has certainly brought humanity to the highest level of economic, social, and cultural development we've ever seen. It brought a lot of prosperity which we learned to redistribute in some very effective ways. Industrial capitalism 200 years ago also brought about the phenomenon of exploitation. Politically, we learned to tame industrial capitalism, to make sure that people would stop being exploited. But, at least when you're exploited, you exist in a social relationship. You can organize, clamour for your rights, get a union to fight for you, get better labour laws by voting for this or that party. And indeed, that is the story of industrial capitalism. We represent the first generation of the era of financial capitalism, where we create wealth very, very differently. Now the victims are not only exploited, they're excluded, because in financial capitalism, you can be excluded. You may be in a situation where you are not needed to create that wealth. This phenomenon of exclusion is far more radical than the phenomenon of exploitation. Exclusion may be the biggest public policy challenge facing governments today. In my view this is where regional development banks can play a vital role, since they have the most "hands on" knowledge of their regions. And so, I see an important role for the Inter-American Development Bank (IDB) in helping countries achieve good economic governance through coherent and mutually supportive trade, financial and social policies. We know from experience that policies of free markets and free trade will only lift people out of poverty if these economic policies are supported by good politics -- including democracy, regulatory reform, inclusiveness of stakeholders in policy making, adequate social safety nets, investment in workers, and protection of the environment and human rights. With respect to trade, I believe the excellent job the Bank does at emphasizing growth to overcome poverty could be strengthened by giving greater emphasis to trade-led economic growth. We have seen movement on this front from other international institutions. Six other agencies -- under the auspices of the Integrated Framework -- are now working together to help support least-developed countries in meeting WTO obligations, in particular through trade-related technical assistance and capacity building. This includes the World Bank and the International Monetary Fund, which have agreed to factor trade into their poverty reduction planning through Poverty Reduction Strategy Papers (PRSPs), a useful move since it allows each country to identify its own specific group of priorities and constraints. I encourage other donors to include such considerations into their own poverty reduction exercises and to work with international and regional institutions to meet countries' needs. This integrated, coherent approach is important for agencies such as the IDB. The WTO, which is not a development institution, does not have the funds and cannot take on the job of trade-related capacity building on its own. I therefore urge the IDB to take a leadership role in the Americas in this area; to join with regional partners to develop regional and country-specific views on how trade-related capacity building might be addressed and how countries' efforts to integrate into -- and benefit from -- the international economy might be supported. Thank you. </body> </html>

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