Changing norms in the emerging world order and the ethics of trade

Trade and communication across national borders is beneficial for the world. Global trade creates interdependency between countries, which is a good thing, said Foreign Minister Espen Barth Eide in his introduction about changing norms in the global economy.

 

1. What is the emerging world order?

Global shifts in trade and economic power patterns.

Economic strength and power moving East (China) and South (India, Brazil, Indonesia).

  • The world economy radically reshaped by the rise of emerging markets.
  • From 1950 to 2008 Asia’s share of global GNP went from 17 to 40%, North America and Western Europe fell from 56 to 39%.
  • Today, the fastest growing economies are in Africa.
  • Interestingly, China really took off only after joining the WTO in 2001.


Globalization

Changing forms of integration, production and patterns of trade.

  • One major “new” phenomenon is the development of “Global value chains”; most products we now consume involve bits and pieces and service inputs from many producers and countries. This challenges our conventional wisdom on how we look at and interpret trade and, in particular, the policies that we develop around trade.
  • The concept of “Global Value Chains” imply that imports should not be seen as threats to our domestic production, but as essential inputs that enables domestic production as well as exports.
  • OECD and WTO have developed new statistical tools to capture these trends:
  • The US trade deficit with China is reduced by more than 30 per cent when trade is measured in value-added and not in gross commercial value.
  • The reality is that we are becoming interdependent in manners not previously imagined.


Political power – zero-sum world

  • A multipolar world is perhaps emerging, but we are not yet there; The US National Intelligence Council last year predicted that by 2030, “no country — whether the US, China, or any other large country — will be a hegemonic power.” It anticipates the rise in economic importance of a variety of regional players such as Indonesia, Nigeria, and Turkey. The report openly wonders whether multipolarity will lead to increased resilience in the global economic order, or whether “global volatility and imbalances among players with different economic interests” will result in collapse.
  • In the words of Financial Times columnist Gideon Rachman, the ‘age of optimism’ that reigned between the collapse of the Soviet Union and the fall of Lehman Brothers has given way to a ‘zero-sum world’.
  • The Eurozone crisis makes fewer media headlines than one year ago, but the situation in the Eurozone is still difficult.
  • But beyond the markets and financial institutions this is about people; highly-educated Spanish middle-class families worrying that their children will never find jobs; young Greeks who have lost their faith in the future, who fear that they will be the generation that was never able to find paid employment. It is about individuals and the social tragedy they are experiencing in countries and societies that largely resemble our own.
  • The political challenge is to strike the balance between measures that are efficient and at the same time are perceived as socially just.

  • The good news is that The Millennium Development Goal of reducing extreme poverty by half since 1990 has been reached five years ahead of the 2015 deadline. This result represents a tremendous reduction in human suffering around the world.
  • Extreme poverty is falling in every region. A remarkable rate of progress has been sustained in China and India. For the first time both the number of people living in extreme poverty and the poverty rates have fallen in every developing region—including in sub-Saharan Africa, where rates are highest.
  • However, many countries with a high economic growth have at the same time experienced increased inequality, and he conditions in which extreme poverty thrives must continue to be addressed;
    • Hunger remains a global challenge; so does poor health and lack of education that deprive people of productive employment;
    • Environmental resources that have been depleted or spoiled;
    • Corruption, conflict and bad governance that waste public resources and discourage private investment;
    • And finally, war and conflict is today the main reason why poverty is not reduced at a higher speed.

  • The globalization process, when properly managed, becomes an important driver for inclusive growth, and economic growth, when widely shared, does more than increase living standards. It helps ease tensions within societies – and between societies.
  • In Europe and North America, a weak recovery and high unemployment have made voters fearful that any gains made by faster-growing emerging economies are coming at their expense. This has made governments even more reluctant to make what they see as “concessions” to China, Brazil or India in international negotiations.
  • Emerging economies have responded in kind, wary of losing hard-earned developmental gains.
  • The result is that multilateral rule-making on issues ranging from trade governance to climate change, already struggling prior to the crisis, has come to a near halt.
     

2. There are continuing strong symptoms of a world in trouble:

 

a) Financial instability and crisis in Europe.

  • The Eurozone crisis makes fewer media headlines than one year ago, but the situation in the Eurozone is still difficult.
  • But beyond the markets and financial institutions this is about people; highly-educated Spanish middle-class families worrying that their children will never find jobs; young Greeks who have lost their faith in the future, who fear that they will be the generation that was never able to find paid employment. It is about individuals and the social tragedy they are experiencing in countries and societies that largely resemble our own.
  • The political challenge is to strike the balance between measures that are efficient and at the same time are perceived as socially just.

 

b) Continuing high levels of poverty in many parts of the world

  • The good news is that The Millennium Development Goal of reducing extreme poverty by half since 1990 has been reached five years ahead of the 2015 deadline. This result represents a tremendous reduction in human suffering around the world.
  • Extreme poverty is falling in every region. A remarkable rate of progress has been sustained in China and India. For the first time both the number of people living in extreme poverty and the poverty rates have fallen in every developing region—including in sub-Saharan Africa, where rates are highest.
  • However, many countries with a high economic growth have at the same time experienced increased inequality, and he conditions in which extreme poverty thrives must continue to be addressed;
    • Hunger remains a global challenge; so does poor health and lack of education that deprive people of productive employment;
    • Environmental resources that have been depleted or spoiled;
    • Corruption, conflict and bad governance that waste public resources and discourage private investment;
    • And finally, war and conflict is today the main reason why poverty is not reduced at a higher speed.

 

c) The lack of global consensus – the inability to take multilateral and necessary decisions

  • The globalization process, when properly managed, becomes an important driver for inclusive growth, and economic growth, when widely shared, does more than increase living standards. It helps ease tensions within societies – and between societies.
  • In Europe and North America, a weak recovery and high unemployment have made voters fearful that any gains made by faster-growing emerging economies are coming at their expense. This has made governments even more reluctant to make what they see as “concessions” to China, Brazil or India in international negotiations.
  • Emerging economies have responded in kind, wary of losing hard-earned developmental gains.
  • The result is that multilateral rule-making on issues ranging from trade governance to climate change, already struggling prior to the crisis, has come to a near halt.

3. “The power of trade” and why the multilateral framework is essential

 

The 1930’s versus the crisis of 2008

  • The confidence of the people is essential to the functioning of open societies. When people see only a bleak future ahead, confidence in authorities and in democracy itself is undermined. The current economic crisis may, ultimately, pose a threat, not only to social development and welfare in Europe, but also to democracy itself.
  • Today, we are in the middle of the most serious economic crisis in Europe since the 1930’s – which ultimately led to a devastating World War.
  • The greatest difference between the current situation and the European crisis of the 1930s is that today we have regional and global institutions and organisations in place, such as the EU itself here in Europe, and the World Trade Organization (WTO), the International Monetary Fund (IMF) and the United Nations (UN) at the global level.
  • Without institutions such as these, as well as common rules and the political will to act, we would, in my view, be in a potentially far worse situation where crisis-ridden countries would once again have sought to export their problems to neighbouring countries by raising barriers to trade and economic exchange across borders.
  • The link between trade, development and security is evident around the world. Take the Doha Development Round, Mali and cotton as a case in point:
  • Mali, 13th from the bottom on the UNs Human Development Index, gets 40 % of its export earnings from cotton, with more than 40% of the rural population depending on cotton for their survival. The problem is that subsidies in rich cotton producing countries are undermining world market prices, and tariffs in key markets are prohibitive.
  • Together with three other West-African countries they have placed cotton firmly on the agenda in the WTO, with demands for reduced tariffs and removal of harmful subsidies that have suppressed world market prices and put pressure on their farmers’ livelihoods.
  • They have gained legitimacy for their cause. It is now inconceivable that the Doha-round can be concluded without addressing the cotton issue. Bilateral aid, technical assistance and capacity building has been greatly strengthened as a result of this attention, and the WTO dispute settlement body has made important rulings against US subsidies that will lead to important changes.
  • The WTO and its requirement of rules, fairness and legitimacy allows small countries such as Mali to have their interests taken into account.
  • But the negotiated results that will change the trade rules and which promise the greatest improvements have yet to materialize. As multilateral agreement eludes the international community, the hopes, interests, and development of Mali and a number of developing countries are placed on hold.
  • Would the political and security situation in Mali have been different if we had had a result in the Doha round? To answer yes is too risky, but there is no doubt that a stable, profitable cotton industry would be of great importance in the long run for Mali and their cotton producing neighbors.
    • The world is of course better off than in the 1930’s; we have learned something from our mistakes and have developed global and regional rules and institutions that work.
    • But the world has moved far beyond that and our institutions are not always able to keep up with developments in the real world.
    • What we have seen is a paradox: The world is multipolarising at an unprecedented scale and speed; Production and trade value chains are multilateralising. Trade governance, however, seems to be bilateralising or at best regionalising.
    • Bringing foreign policy interests back to the table might conceivably help countries build domestic support for multilateral co-operation on trade: not as a bulwark against a common foe, as during the Cold War, but because of their shared interest in preserving a functional international order.
    • The deadlock in the WTO Doha Round negotiations is due to disagreement among a handful of advanced and emerging economies; the US, the EU, Japan and the like on the one side, and India, China, Brazil and the like on the other side. Like the climate change negotiations, it is geopolitical in nature.
    • Advanced economies argue that emerging economies have now “emerged” and should therefore accept to take on commitments that are similar to theirs. Emerging countries argue that they still face daunting development challenges which require flexibilities in the form of “special and differential treatment”, as we say in the WTO, or what the UN climate process calls “common but differentiated responsibilities”.
    • Behind lies the basic question: are emerging countries “advanced countries with many poor people” or “developing countries with many rich people”? Until and unless both sides agree on the answer, consensus in major multilateral negotiations could remain elusive.
    • Addressing the challenges of the emerging world order is not only a responsibility for governments and intergovernmental institutions. A number of issues are extremely difficult and sometimes even impossible to deal with efficiently within an intergovernmental setting, and this is true in particular related to issues of values.
    • Civil society, individuals as citizens and consumers, as well as businesses, have an important supplementary role to play in promoting human rights, basic labor standards, Corporate Social Responsibility, and ethical trade.
    • While the role of Governments is establishing rules and regulations, preferably global ones, the role of civil society is primarily to make governments, politicians and business aware, accountable and responsible.
    • The international system is founded on universal values, first and foremost human rights, as set out in the Universal Declaration on Human Rights and other UN conventions.
    • These core documents spell out the rights of all individuals as well as the responsibility and duty of all states to respect and protect them. The Arab Spring is one example and recent developments in Myanmar another of their global significance.
    • For businesses, business as usual will not do in the face of increased consumer activism, resource constraints, changing demography and climate change. Growing social and environmental challenges will increasingly become drivers of innovation for the business community within a framework of sustainable development, good governance and accountability.
    • CSR has made a difference to how business is conducted, but there is still a long way to go. Attitudes have changed fundamentally. What was considered acceptable business behavior ten years ago will in many cases be considered unacceptable or may even be illegal today.
    • With the endorsement of the UN Guiding Principles on Business and Human Rights in 2011, we have an international CSR framework in place that are strong enough to prevail as a global norm, even in countries with rapidly growing economies that do not share all our values.
    • Weapons of course differ from other commodities. The arms trade has never been captured by traditional trading rules. Achieving a strong and robust Arms Trade Treaty (ATT) at the UN conference in New York next month is therefore of great importance.
    • The Arms Trade Treaty concerns more than just trade. Armed violence kills approximately two thousand people on a daily basis globally. Many as a result of illicit or irresponsible use of small arms and other conventional weapons. The negative humanitarian consequences of unregulated arms transfers are severe.
    • In Norway’s opinion such a treaty should have a humanitarian objective and contribute to prevent illicit or irresponsible arms trade that causes human suffering and armed violence. The goal should be a framework that ensures responsible and legal trade with legal weapons. The treaty must make a difference and result in fewer weapons ending up in the wrong hands and in the illicit market.

Trade, development and of security

  • The link between trade, development and security is evident around the world. Take the Doha Development Round, Mali and cotton as a case in point:
  • Mali, 13th from the bottom on the UNs Human Development Index, gets 40 % of its export earnings from cotton, with more than 40% of the rural population depending on cotton for their survival. The problem is that subsidies in rich cotton producing countries are undermining world market prices, and tariffs in key markets are prohibitive.
  • Together with three other West-African countries they have placed cotton firmly on the agenda in the WTO, with demands for reduced tariffs and removal of harmful subsidies that have suppressed world market prices and put pressure on their farmers’ livelihoods.
  • They have gained legitimacy for their cause. It is now inconceivable that the Doha-round can be concluded without addressing the cotton issue. Bilateral aid, technical assistance and capacity building has been greatly strengthened as a result of this attention, and the WTO dispute settlement body has made important rulings against US subsidies that will lead to important changes.
  • The WTO and its requirement of rules, fairness and legitimacy allows small countries such as Mali to have their interests taken into account.
  • But the negotiated results that will change the trade rules and which promise the greatest improvements have yet to materialize. As multilateral agreement eludes the international community, the hopes, interests, and development of Mali and a number of developing countries are placed on hold.
  • Would the political and security situation in Mali have been different if we had had a result in the Doha round? To answer yes is too risky, but there is no doubt that a stable, profitable cotton industry would be of great importance in the long run for Mali and their cotton producing neighbors.

4. Global institutions and negotiating forums have not moved with the times

  • The world is of course better off than in the 1930’s; we have learned something from our mistakes and have developed global and regional rules and institutions that work.
  • But the world has moved far beyond that and our institutions are not always able to keep up with developments in the real world.
  • What we have seen is a paradox: The world is multipolarising at an unprecedented scale and speed; Production and trade value chains are multilateralising. Trade governance, however, seems to be bilateralising or at best regionalising.
  • Bringing foreign policy interests back to the table might conceivably help countries build domestic support for multilateral co-operation on trade: not as a bulwark against a common foe, as during the Cold War, but because of their shared interest in preserving a functional international order.
  • The deadlock in the WTO Doha Round negotiations is due to disagreement among a handful of advanced and emerging economies; the US, the EU, Japan and the like on the one side, and India, China, Brazil and the like on the other side. Like the climate change negotiations, it is geopolitical in nature.
  • Advanced economies argue that emerging economies have now “emerged” and should therefore accept to take on commitments that are similar to theirs. Emerging countries argue that they still face daunting development challenges which require flexibilities in the form of “special and differential treatment”, as we say in the WTO, or what the UN climate process calls “common but differentiated responsibilities”.
  • Behind lies the basic question: are emerging countries “advanced countries with many poor people” or “developing countries with many rich people”? Until and unless both sides agree on the answer, consensus in major multilateral negotiations could remain elusive.

5. Cooperation between state and civil society

  • Addressing the challenges of the emerging world order is not only a responsibility for governments and intergovernmental institutions. A number of issues are extremely difficult and sometimes even impossible to deal with efficiently within an intergovernmental setting, and this is true in particular related to issues of values.
  • Civil society, individuals as citizens and consumers, as well as businesses, have an important supplementary role to play in promoting human rights, basic labor standards, Corporate Social Responsibility, and ethical trade.
  • While the role of Governments is establishing rules and regulations, preferably global ones, the role of civil society is primarily to make governments, politicians and business aware, accountable and responsible.
  • The international system is founded on universal values, first and foremost human rights, as set out in the Universal Declaration on Human Rights and other UN conventions.
  • These core documents spell out the rights of all individuals as well as the responsibility and duty of all states to respect and protect them. The Arab Spring is one example and recent developments in Myanmar another of their global significance.

 

Corporate Social Responsibility (CSR).

  • For businesses, business as usual will not do in the face of increased consumer activism, resource constraints, changing demography and climate change. Growing social and environmental challenges will increasingly become drivers of innovation for the business community within a framework of sustainable development, good governance and accountability.
  • CSR has made a difference to how business is conducted, but there is still a long way to go. Attitudes have changed fundamentally. What was considered acceptable business behavior ten years ago will in many cases be considered unacceptable or may even be illegal today.
  • With the endorsement of the UN Guiding Principles on Business and Human Rights in 2011, we have an international CSR framework in place that are strong enough to prevail as a global norm, even in countries with rapidly growing economies that do not share all our values.
  • Weapons of course differ from other commodities. The arms trade has never been captured by traditional trading rules. Achieving a strong and robust Arms Trade Treaty (ATT) at the UN conference in New York next month is therefore of great importance.
  • The Arms Trade Treaty concerns more than just trade. Armed violence kills approximately two thousand people on a daily basis globally. Many as a result of illicit or irresponsible use of small arms and other conventional weapons. The negative humanitarian consequences of unregulated arms transfers are severe.
  • In Norway’s opinion such a treaty should have a humanitarian objective and contribute to prevent illicit or irresponsible arms trade that causes human suffering and armed violence. The goal should be a framework that ensures responsible and legal trade with legal weapons. The treaty must make a difference and result in fewer weapons ending up in the wrong hands and in the illicit market.

Decent work

  • Efforts to promote decent work are not obstacles to competitiveness and progress. On the contrary, decent work contributes to improved competitiveness, primarily by maximizing the potential of the individual and the community.
  • We are seeing increasing pressure worldwide for more decent working conditions. I hope that this pressure will grow, in China, in Vietnam and elsewhere.
  • In Europe, there is no doubt that EU membership has done a lot to help improve working conditions in Southern and Central European members. That is good news for Norwegian workers as well; the higher the standards are in competing countries and firms, the less Norwegian workers will face pressure on wages and social dumping.
  • Norway will host the 9th ILO European Regional Meeting in April. Ministers, social partners and global leaders will discuss responses to the economic and jobs crisis, with particular focus on job-rich growth, social dialogue, youth employment and labor standards.

6. My conclusions: multilateralism is the answer!

  1. The world has never been more interdependent in terms of production processes, economic stability, food security, climate security, and even health and political security.
  2. This interdependence can only be viewed as very positive.
    a) Primarily; it is sign of growth, increased wealth, more and better jobs and less poverty in new parts of the world;
    b) It helps the “old” world hit by recession and financial crisis to recover faster and with less pain,
    c) It brings hope for those not yet out of poverty that it is possible given the right policies and circumstances, and
    d) It helps lessen tensions among world powers (“Countries that trade with each other tend not to go to war”). An example is the U.S. and China's interdependency: Due to the fact that the U.S. and China depend on trading with each other, their relationship will most likely be much better than the historic relationship between the U.S. and the USSR, two superpowers who had no significant trade connections.
  3. And still the goal of finding multilateral solutions eludes us. My answer is geopolitical. It requires that:
    Emerging countries must accept that, as they develop, they will align their level of international commitments to those of advanced economies.
    Advanced economies must recognize that, given their own historical responsibilities in existing global warming and the remaining unfairness in trade rules, emerging countries deserve long transition periods to converge towards common commitments, and
    For the poorest countries, whether on trade or on climate change, the issue is less what level of commitments and more how to help them build the capacity to be active members of the international family.
  4. There are roles for both governments and civil society.
    There are essential roles for NGOs, political pressure groups and consumer activists, as well as businesses in promoting human rights, basic labor standards, CSR, and ethical trade.

 

*** Thank you***

 

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