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Baroness Miller of Chilthorne Domer: My Lords, I wonder whether the noble Lord, Lord Mackay, was listening throughout to those of us on the Liberal Democrat Benches--for instance to the comments of the noble Lord, Lord Dahrendorf, on education and globalisation. I feel that he may have missed many of our points if he thinks that we are pessimistic.

Lord Mackay of Ardbrecknish: My Lords, I did not mention the noble Lord, Lord Dahrendorf, because I

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excuse him from most of the follies of the Liberal Democrat Party, including, dare I say, an affection for the euro, but let us not get into that subject.

Globalisation will, in the words of the Economist, lead to,

    "faster growth, cheaper imports, new technologies and the spur of [all kinds of competition including] foreign competition".

Of course there is a clash between the people who look at conditions in countries overseas and wonder whether we should be buying the products made there. Like other people in this country, I watch a television programme and wonder whether I should be buying the T-shirt or the football. But the alternative is often not "education, education, education"; it is perhaps the kind of starvation that we see in Ethiopia. It is not a black-and-white issue. As the noble Lord, Lord Desai, mentioned, it may be cheap labour, but it may be the best or the only job that people can get, and it is a good deal better than the alternative. We must bear that in mind.

The commerce Minister of Thailand, who will take over as director-general of the WTO in 2002, said this about the question of labour rights:

    "I have the feeling that some of the representatives from the developing countries ... might take this opportunity to walk away from any agreement on a new round. I know it is an important issue for the United States administration, but to have trade sanctions linked to labour rights violation would be really ultimately highly detrimental".

The poorest people in the world do not work for multinationals. They do not work in modern export industries. They work in subsistence agriculture, or they do not work at all. We should remember that. While I listened with care and interest to the speech of the noble Lord, Lord Brett, which was balanced--

Lord Lea of Crondall: My Lords, will the noble Lord give way?

Lord Mackay of Ardbrecknish: My Lords, this is a timed debate and I have only three minutes left.

Lord Lea of Crondall: My Lords, is the noble Lord aware that the same Thai Minister advocated joint talks between the ILO and the WTO on the question that he has mentioned?

Lord Mackay of Ardbrecknish: My Lords, the debate is time-limited. Normally, we do not intervene. I have a very few minutes left.

I think that the noble Lord, Lord Brett, was trying to make the point that we must be careful to balance these matters and make sure that we do not drive work, even low-paid work, away from those countries. Once the work arrives there, once it begins to develop, once the wealth--which may not seem very much in our terms--begins to come in to those countries, they will begin to raise their standards, and of course we ought to encourage them to do that. But, frankly, the wealth has to begin there before we start to raise standards. It is a difficult problem.

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One of the interesting points is that the World Bank, looking at east Asia, has stated that the number of people living on less than a dollar a day fell from 418 million in 1987 to 278 million in 1998. That may still be a large number of people, but the figure is half what it was just a few years ago. One of the key reasons for that measure of decreasing poverty in east Asia was growth in China--which saw an increase of 7.7 per cent a year in private consumption--and growing trade.

I have little doubt that, while many of us might put our hands in our pockets to give a donation to some of the aid organisations in which the noble Earl, Lord Sandwich, is involved, it is perhaps more important that we actually buy their products and that we do not raise tariff barriers against them. Too often people who refer to labour standards, or any other standards, in seeking to raise tariff barriers simply want to protect the developed countries. That is wrong. We must work with developing countries and give them the opportunity to trade with us. We in the developed world are the only people with the money to buy their goods and services and, in that way, to lift them out of poverty.

8 p.m.

Lord McIntosh of Haringey: My Lords, this has been a characteristically well timed and wide-ranging debate. It is well timed because it occurs at a time when again we see the raising of consciousness in Washington, which also took place at and following the meeting of the World Trade Organisation in Seattle. If we debate this matter at a time when there are demonstrations in Washington perhaps we are doing better than they are. The debate is also characteristically wide ranging. If in 2½ hours we are to cover, at the invitation of my noble friend Lord Borrie,

    "the economic and social effects of globalisation and its impact on fair competition, employment conditions and the environment",

it is very difficult for anyone, particularly a Minister who attempts to sum up, to deal with all of those matters adequately.

This has been a fascinating debate, which has had the huge advantage of attracting the maiden speech of the noble Lord, Lord Birt. The noble Lord did exactly the right thing: he spoke on a subject that he knew about but which he was not known for knowing about; in other words, he avoided broadcasting--and an excellent job he made of it.

The only way that I can limit myself is by indulging my incurable preference for talking about the things that we can do something about rather than those that we can do nothing about. If I concentrate my remarks on our approach to globalisation through the main international body concerned with it, the World Trade Organisation, I hope that your Lordships will forgive me. Globalisation, which gives rise to this debate, is the increasing internationalisation of economic activity. As many noble Lords have said, the huge increases in international trade and investment have been driven by a rapid change in communication and transport technologies. Here the speech of the noble Lord, Lord

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Birt, was particularly appropriate. He referred to the power of digital technology and its effect on both culture and economic growth. But these changes have had a profound effect on all countries, both developed and less developed, in the global economy.

There are a number of misconceptions about globalisation, in particular in relation to the way that it affects environment and social standards. Globalisation is neither the destructive force that some people believe it is nor the Holy Grail to which the noble Baroness, Lady Miller, referred. I just take the view that it is a fact which we can do nothing about; we will not turn it back. Globalisation produces winners and losers. More often than not, the winners are those with open economies who have embraced the global economy. Among developing countries, those with more open economies have consistently grown faster than those with closed economies. I do not know whether that provides the noble Lord, Lord Harris, with any consolation. I do not believe that the noble Lord alluded to Popper but he certainly referred to Adam Smith and reminded us of the theory of comparative advantage, which is appropriate to what which we are discussing today. That certainly struck a spark with my noble friend Lord Desai, in his fourth speech of the week. My noble friend did not remind us of his excellent article in the New Statesman last week which covered this very point.

A number of noble Lords have referred to the demonstrators in Seattle and Washington. We have sympathy for them because some of them are like us when we were young, perhaps with the exception of my noble friend Lord Desai who, as I recall, was always on the side of the revolting students. Nevertheless, we have sympathy with those who have an instinctive opposition to what they see as uncontrollable forces which become greater if they are international. They blame globalisation for the destruction of the environment, the undermining of social standards and the gulf between rich and poor. The noble Lord, Lord Phillips, who is still at heart a demonstrator, blamed globalisation for virtually everything in the world today; for example, the destruction of language and the fact that music is no longer comprehensible. He did not say it, but that was because he had only 10 minutes. It is a fundamental mistake to believe that we can turn back the clock on globalisation.

It is right for my noble friend Lord Borrie to expatiate on the downside of globalisation. I also understand the position of those like the noble Earl, Lord Sandwich, who describe the scars of uncontrolled capitalist exploitation, which cannot be denied, but we must work with the world in which we live. We believe that the challenge for governments is to ensure that globalisation acts in the interests of people and the environment and contributes to the goal of sustainable development. That is our aim in the policies that we have adopted, which we seek to persuade the World Trade Organisation and other international organisations to undertake. I hope the noble Earl, Lord Sandwich, recognises that the inclusion of NGOs in our delegation to Seattle--tribute was paid to my right honourable friend

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Michael Meacher--was a major step forward that enabled us to set up a new network within the context of the WTO which has done a great deal of good.

It is easy to say that trade liberalisation is important to us. The UK is a major trading country; it is the fifth largest exporter of goods and the second largest exporter of services. In terms of investment stocks, the UK is also the world's second largest inward and outward investor. Therefore, it is vital to the UK economy that we maximise the benefits of global trade liberalisation. But I hope that we go further than that and seek to use the pressure for trade liberalisation for constructive purposes. We see the World Trade Organisation as essential in meeting the challenge of globalisation. The WTO, and its predecessor GATT, has brought enormous benefits in terms of sustained growth in the world economy.

There is a profound difference between the WTO and the IMF, World Bank and United Nations: democracy. After all, in the WTO every single member state has an equal voice. When did the United Nations or International Monetary Fund last venture to censure the United States? Yet both the US and EU have been censured by the World Trade Organisation and have had to act on it--and a good thing too, even if we do not agree with the particular case. The WTO rules offer equal rights to all trading nations to the particular advantage of smaller states. If we did not have a multilateral rules-based trading system smaller countries would not have protection against the greater trading weight of large economies. The multilateral trading system allows small and medium-sized businesses, not just large companies--I shall turn to multinational corporations--to trade freely and with confidence, and that is one of the most important spurs to innovation and improving competitiveness.

I turn to multinational corporations. It is inevitable that as markets become more open companies structure themselves in the best way. Therefore, increasingly companies have become players on the global stage. In the past century we have seen some conspicuously horrible examples of how multinational companies have exploited the countries in which they have operated and to which they have sold.

I am not sure whether my noble friend Lord Desai advocated capitalism in one country. If so, he would have been the Stalinist of new Labour! But I think that he used the issue as an Aunt Sally rather than applauding it.

But of course we recognise the fear--it was expressed most eloquently by the noble Lord, Lord Phillips--that companies may grow beyond the reach of national governments and become powerful enough to exert pressure on governments, in particular those of less well off countries. That is why it is important to heed the call of my noble friend Lord Borrie for considering the impact of globalisation on fair competition. We agree with what he said. We agree that although in this country we have rightly given companies more freedom through deregulation, at the same time we have balanced that with fair trading and

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competition rules and--dare I say it?--with the provisions of the Financial Services and Markets Bill which is progressing through this House at present.

My noble friend Lord Borrie gave examples of control of misleading advertising and of health and safety. But of course there are many more. It is true that multinational corporations which behave well in their home countries need comparable control of their activities when they are working in developing countries. We shall return to that when we talk about labour standards.

The answer must be that in the multinational trading system we want to advance some of those principles of fairness as well. We take the view that effective competition authorities are in the interests of all countries and consumers, and in particular restrictive business practices in developing countries could be a significant constraint on growth and therefore on the opportunity for the people in those countries to benefit through a better quality of life. The noble Lord, Lord Birt, by analogy talked about the task of competition being to ensure that technology is not restricted. I think that that applies very much to the role of competition in multinational trade.

So how do we approach it; and how do we, as one of those participating in the European Union approach to the WTO, approach this multilateral framework of common principles of competition? We present the argument in this way. The more economies are integrated into the global system the more they need competition rules to control the power of global businesses in their markets. It is argued that the absence or inappropriate enforcement of competition rules can create barriers to trade. That is certainly true. A commitment by WTO members to a common set of competition law principles would be a helpful means of addressing both issues. Countries also need to have measures to control restrictive business practices in order to reap the full benefits of trade liberalisation.

I turn to environmental and social controls. These are the other aspects of this issue after competition. Of course there are concerns that trade liberalisation has an adverse effect on environmental and social standards. The noble Lord, Lord Hooson, was the most eloquent exponent of that view. But we believe that an open, transparent and stable world trading system is not only compatible with progress towards our other aims of promoting sustainable development but also essential for it. That is the way in which we shall have higher environmental, social and other regulatory standards.

We recognise many examples to the contrary. But trade liberalisation can help to improve the efficiency with which the world's resources are used, and the spread of cleaner technology. Rising income levels are associated with improving environmental and social standards. This happens because countries have the wealth to tackle those issues and richer households are more demanding that their authorities do so. Where economic activity is unsustainable--trade can act to magnify it--it is essential that environmental considerations are taken into account.

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The relationship between trade and labour standards has always been a sensitive issue; and it was today. There have been calls--although not today--for the World Trade Organisation to take on new roles in enforcing environmental and social standards: for there to be a social clause for the WTO. There are dangers here. It would mean the WTO acting in areas which include other international institutions such as the International Labour Organisation--it has found an effective voice in my noble friend Lord Brett--and the United Nations environment programme. We should not make the WTO solely responsible for dealing with environmental and social issues. We need to ensure greater co-operation between the WTO, the ILO and UN bodies so that global problems are addressed coherently.

Specifically we do not think that restricting imports would be an effective way of tackling issues such as child labour. My noble friend Lord Borrie blamed the corporations for child labour; and, of course, to some extent they are to blame. But, as my noble friend Lord Brett recognised, there is also indigenous child labour. Carpet works are not multinationals. The noble Earl, Lord Sandwich, made the same point. The primary cause of child labour is poverty. Trade sanctions could increase the problem by displacing child workers into the informal or non-expert sectors where conditions could be even worse. My noble friend Lord Desai had that right--he had support in the most unlikely form of the noble Lord, Lord Mackay--when saying that it is often the best job they have. Of course these are terrible aspects and it is right that we support the four standards expounded by the noble Lord, Lord Brett. But if developing countries are to grow they must have access to world markets.

I turn rather rapidly to the environment. Of all the speakers, only the noble Earl, Lord Sandwich, and the noble Baroness, Lady Miller, touched on this issue. We look to see that trade liberalisation and sustainable development are mutually supportive. We went to Seattle with a number of specific objectives. We wanted a commitment for environmental considerations to be taken into account in all negotiations because we think that there are important synergies between trade, environmental protection and development in such areas as agriculture, fishing, environmental goods and services, and technical barriers to trade. The European Union is committed to conducting a sustainability impact assessment of proposed new trade measures. We completed the preliminary stages of this before we got to Seattle.

We also want a new round of negotiations to include three priorities on trade and environment: first--I hope that this answers the noble Baroness, Lady Miller--greater legal clarity in the relationship between trade measures taken under multilateral environment agreements and WTO rules; secondly, confirming the WTO compatibility of open, transparent voluntary labelling schemes, in particular eco-labelling schemes; and, thirdly, examining the scope for precautionary action within WTO rules. It is important in the interests of all governments to be able to take measures under the precautionary principle

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which are science based and proportionate in protecting their environments. We are grateful to the noble Baroness, Lady Miller, for her support for the existing conventions and for the work of Michael Meacher.

The noble Baroness asked me about the Tobin tax. There is a debate on this subject in another place. I suggest that she reads the Government's reply to that debate rather than expect me to repeat it--since I have not read it myself.

Clearly the WTO is at the heart of many of the concerns expressed by your Lordships and which are in the realm of the possible of politics. Although clearly trade liberalisation and the growth of international multinational trade are an essential element of our objectives for improving the standards of living in the world, and Clare Short and the Department for International Development have ambitious targets in that respect, we believe profoundly that the increasing trade liberalisation will achieve the objectives we want only if it is allied with proper concern for fair competition, employment conditions and the environment.

8.20 p.m.

Lord Borrie: My Lords, if, as the noble Lord, Lord Harris of High Cross, suggested, the terms of my Motion were ambitious, my ambitions have been fulfilled. Noble friends from all parts of the House have ranged very widely over the subject. I did not expect each and every one of them to examine every aspect of globalisation, but my ambitions have in more than a sense been fulfilled, because that was done by my noble friend the Minister, who touched on virtually every aspect. We all benefit from that in coming towards the end of the debate.

I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

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