Globalisation is having an enormous impact on the United Kingdom's economy and creates significant challenges for economic policy-making. An inexorable shift in global economic power from West to East is underway. China is rightly to the fore in much of the discussion about globalisation, but India is well-placed to be a powerhouse of the global economy in coming years.
The shift in economic power from West to East will have a growing effect on the United Kingdom as the global economic landscape changes within a 10 to 20 year period. The effects will be on felt on highly-skilled jobs as well as some less-skilled employment, and public policy needs to respond to the likely intensification of the impact upon highly-skilled sectors of the labour market.
We propose that, in order to promote understanding of the impact of globalisation on jobs and communities, the Government publish an annual review of new developments affecting the impact of and prospects for globalisation, reflecting the dynamic nature of the changes arising from globalisation and its increasing importance in policy formation.
Protectionist sentiment is increasing, and poses a threat to the progress of globalisation and to both developed and developing countries. We support the Government's promotion of a successful conclusion to the Doha trade round.
Globalisation is also threatened by the risk of a disorderly unwinding of global imbalances. While the probability of such an unwinding may seem low, its impact on the global economy, and that of the United Kingdom in particular, would be very considerable. The success of a reformed International Monetary Fund will be judged by its performance in ensuring global imbalances are properly addressed.
We consider domestic policy challenges relating to the promotion of innovation, improving the business environment and improving skills in the economy. Skills represent a fundamental challenge for the United Kingdom's ageing population. While there is firm evidence of the beneficial economic effects of inward migration, further analysis and debate are needed on the economic effects of migration.