Managing Challenges of Globalization

John Evans who is the General Secretary of the Trade Union Advisory Counsel to the OECD. And we're just going to start out with a quick question to the three panelists and I'm going to start with Dr. Bischoff, which is before we talk about the solving the challenges of globalization. Let's see if we agree on what they are. What do you think is the greatest challenge to globalization? If we're talking about the integration of economies, the free flow of goods and services and people and capital today. Actually I see two main challenges for globalization and I hope we all understand under globalization the same things, free exchanges goods, services, and information based on the stage of modern technology. I see the first challenge is what I call the acceptance of a free market economy including the free exchange, especially in the more advanced countries. The second challenge I see is that free exchange, by far, is not complete. Look at how limited we are in the agricultural sector or look at some countries (INAUDIBLE) free exchange partially yes, partially no. There are countries which limit the free flow of information. At least they try to. There are limitations through that free flow. So I think we have that big challenge to show our own populations that globalization is good for everybody. And I think that is a very big issue and the other one is our limitations to that basic idea. Secretary Kimmitt, is it both acceptance by the public and at the same time lack of completion by those who are engaged in trying to keep the momentum up? Certainly I think those would be two of the challenges, Margaret. It's always interesting to me, anytime we talk globalization we go immediately to the challenges. There are tremendous benefits from globalization and there are tremendous opportunities from globalization. We went from 20 percent of the world population living in poverty in 1970 to just seven percent in 2000. That's still too many people, but there have been benefits from globalization. I agree with Manfred on the challenges he mentioned. I think, fundamentally globalization has produced a period of accelerating dynamic change that has led to uncertainty, concern, and even anxiety among populations. I think it's a time for real leadership to let people know that the answer to that dynamic change is more open. It's not more protectionism and barriers. John Evans did you agree with the diagnosis and let's move onto answers. Is the answer more openness? No, I don't think it is. I think it's a question of insuring that global trade and investment actually does transmit into higher liver standards and that those living standards are more shared internationally and in within our economies. And at the same time, that that whole process is sustainable from an environmental point of view. And I think that the major challenge at the moment is that too few people are actually gaining from globalization and the potential fruits are actually being distributed very unfairly. And we've seen writing in equality, both within our (INAUDIBLE) and also gaps appearing between countries. So it's a question and I'd perhaps challenge the Deputy Secretary on some of those figures on polity. It depends what you're actually looking at, but I think the major challenge unless some of the fruits of globalization are shared more evenly, distributed better, then the public concern as you've mentioned, they are not just perceptions. They are reality of insecurity and unfairness of what's happening on the ground. Do you think it is perception, Dr. Bischoff or reality, what the public is sensing? That it's leading to a growing gap actually. But it's interesting to note that's a difference in perception. It's obviously different if you look, for example, in emerging markets in Asia. So it's a widespread feeling that globalization was a real success for such countries. In some of the more developed countries, you know, it's not so obviously seen; because clearly we have profited quite a lot and I totally agree with Bob if you see, for example, increase in world trade. And I always take my special example, how trade, even between developed countries can be very successful. You only have to look at what has happened inside the EU for example for the trade between France and Germany. It's the same you have seen the world over so it's the more advanced countries were very successful, for example, in exports. We have an internal problem in each of our countries in that the fruits of those are not, you could say, equally distributed. So you have more people who profit. I think there are more people who profit clearly. But for sure there's some who are left behind, and we have to give an answer to decide internally. But are they less equally distributed now in this area of globalization than they were? I don't think the root cause for that, basically, is globalization, because part of it is technology. And I think we would have to face that problem how we distribute the national income and how it's created into individual countries anyhow. So I think it is somewhat misleading to say the root cause for that is globalization. Actually although John disagreed with me on the point of openness being the process that we should follow, I actually agree with the points that he made, both as to perception and as to facts. Those are part of the challenges of globalization. But I don't think that we meet those challenges by being closed to trade or closed to creating new opportunity. And I think it's important to recognize that a lot of the disparity is a that is, a wage disparity in some of the other disparities that John mentioned really go back to the fundamental point that if you look at who is educated, who is trained, those are the people who tend to do well, whether they're in a developed country or a developing country. And therefore I think we need to look at what is causing this disparity, and recognize, in my view, that a continued investment on education, on training through a lifetime of learning, a lifetime of employment at a time again of accelerating dynamic change is going to be an important step to take. So that sounds as if you're talking about that the remedies are domestic in nature. Well, no. I think, of course, each country will have a palate of domestic remedies. We have in the United States, for example, trade adjustment assistance, the Workforce Investment Act. We also have the lifetime learning credits, the Hope credits, subsidized student lending. Those types of things are domestic responses. But I don't disagree, I think, with the point that John was making, that as we look at trade agreements, as we look at bilateral relations, that we do have to look at some of the issues that have been mentioned, including workforce, environmental and other issues on a global basis. Now John Evans, you're, and then we're going to go to the audience, so get your questions ready. Your organization is also concerned still about capital flows. Explain that. Yes. Well I think it would be wrong to look at the problems just as a trade issue. And I don't disagree with many of the things which have been said. But I think what has changed about globalization is that now work is a part of global supply chains, and this has increased the exit option for companies in those sectors. Well, you can say if you don't like it here, we just source from China; we'll source from somewhere else. And that pressure has, I think, started now to show up in the figures. If you look at the share of national income, which has been going to wages and work compensation throughout the OECD, that has actually fallen over the last 15 years quite substantially, and has actually now reached record lows, the actual, the share of wages. And even within that wage share, if you look at some of the key countries, and particularly the United States and I'd agree many of the solutions may be domestic, you see very rapid growing inequality. I think in 2005 the top ten percent in the wage share. Their income rose by 14 percent. The bottom 90 percent, sorry, bottom 80 percent, their incomes actually fell by 0.6 percent. So you need the domestic policies. The Nordic countries haven't had that problem. They've been able to distribute it better. As a result, our affiliates are actually more confident about what you can do about trade. But you also have to tackle the issue of what are the rules in the global economy. What are the rules on core labor rights in different parts of the world? What are the rules on how multi nationals can operate? What are the rules of financial markets, and look at both directions. What hands domestic and also what you can put into trade investment agreements and other forms of governments. All right, well let's bring all of you all in now and yes right here. Even though we know one another, please announce your name, and if you are in the back rows you actually already have microphones. All you have to do is press the button. You don't need to lean in.