Globalisation: riding the wave

Last thursday the British presidency of the European Union hosted an informal meeting of the heads of state or government of the EU member States together with those of future members Bulgaria and Romania.

The theme under discussion concerned "The opportunities and challenges of globalisation". A theme that had already been identified as being one of the critical, strategic issues facing Europe by Tony Blair in his speech to the European Parliament four months ago, just before the UK took over the EU presidency.

The informal summit was preceded by the publication of a discussion paper prepared by the Commission which was circulated on October 20, with the heading "European values in a globalised world". Its very first sentence provides a clear indication of the main thrust within this document.

"Europe must reform and modernise its policies to preserve its values. Modernisation is essential to keep Europe's historically high levels of prosperity, social cohesion, environmental protection and quality of life".

For several decades following the creation of the European Community, the structures that were put into place have managed to secure peace and stability within Europe and unprecedented growth and prosperity for the countries involved. However, this picture is now under threat from the forces of global competition and an aging population.

In the last few years, growth has slowed down and structural unemployment remains high in a number of EU countries. The need for change is widely recognised but this consideration has, today, become even more urgent.

I remember how almost three years ago, when as the then Minister for Economic Services I had presented a policy document establishing Malta's industrial policy. I had chosen the subtitle 'Prosperity in Change'. It is precisely the same strategic message that is being put forward in the Commission's position paper. Namely, the only plausible way forward is to embrace change and not to negate it. The status quo is not an option. One adapts, innovates and moves forward or else one can only fall behind as the rest of the world presses ahead.

Globalisation is not a new phenomenon but the speed at which it is taking place has accelerated sharply. More reliable and cheaper communication and transport costs have made it easier for businesses to secure goods and services from other parts of the world thereby increasing opportunities for exporters but also introducing new competitive pressures.

World trade has increased significantly during this last decade and a number of emerging countries have progressively expanded their share of it. The report published by the Commission calculates that, by the year 2020, China and India, taken together, could account for as much as half of all the manufactured goods traded worldwide.

Globalisation is a source of anxiety for many people because they fear that they could lose their jobs as a result of production being shifted to other parts of the world. However, it is important to keep in mind that, if someone else is getting richer, it does not necessarily imply that we must end up poorer for it. In actual fact, economic theory shows us that the opposite should be the case. Globalisation is the chance to increase the whole cake, so that everybody can get a bigger slice.

Globalisation is often projected as being promoted exclusively by the large multinationals. In reality, globalisation is driven by the very personal desire of billions of people to achieve a better life for themselves and their families. Ultimately, globalisation is being led by all of us through the daily choices that we make in seeking new and cheaper products and services.

Marked differences in labour costs are a critical factor in the success of the new, emerging economic players. It should have long been evident that Europe cannot expect to compete on costs alone but should rather seek to exploit and, as much as possible increase, its productivity and quality advantage, drawing on its technological strengths and ability to compete in products and services with a higher knowledge content.

This requires important policy choices at both the economic and social levels. In the words of the Commission document, the challenge represented by globalisation can only be tackled if "improved economic performance and effective social systems support each other" and when "modernisation of social systems accompanies economic reform."

Modernisation and reform are often used as acronyms for change, and change there must be. The starting point for this change process must be greater coherence between economic and social policies and better co-ordination between policy decisions at the various levels at which they will need to be taken.

The Commission document highlights the following actions that need to be reinforced and sustained. At the EU level: (i) Strengthen and extend further the internal market, including telecoms, energy and financial services; (ii) Deliver more open and fairer markets; (iii) Improve the regulatory environment; (iv) Encourage enterprise; and (v) Open additional third-country markets for European producers.

At the national level: (i) Implement the agreed structural reforms and policies within the renewed Lisbon Strategy for growth and jobs; (ii) Favour active labour market policies by promoting flexibility and adaptability, with the emphasis placed on the facilitation of people rather than the protection of jobs; (iii) Adapt pension, health and long-term care to meet changing needs; and (iv) Consider innovative solutions for the low paid to promote greater employability and avoid state assistance from becoming a disincentive to employment.

The EU institutions can promote and champion change but they cannot deliver change on their own. What is required is a partnership with the member states that can secure a more co-ordinated approach between the required action at the national and supranational, i.e. EU, levels.

In particular, there appears to be significant scope to enhance joint action in a number of key areas to address the following crucial objectives. To create an environment that gives incentives and rewards innovation. To direct more resources, both public and private, to education, training and the development of skills. To define and develop a coherent, long-term energy policy.

These reforms must be supported by effective measures to deal with the social consequences of economic restructuring and this will require a renewal of the social dialogue at all levels. It is not just a question of co-ordinating interventions at both the EU and national levels; these interventions must be able to rely upon the widest support possible which will require the involvement and commitment of all the social partners.

A successful seminar

The European Court of Auditors (ECA) seminar, held last week in Malta, was an unqualified success. The seminar proper provided the desired opportunity for the ECA members to discuss, in an informal but nevertheless structured manner, a number of topical issues that the court has to contend with in the execution of its responsibilities.

At the same time, the broader seminar programme provided the visiting members with the opportunity to get to know Malta better and more intimately. It was a very positive encounter and I was not only happy to be the host but also proud to be Maltese.

It is in situations like these that one remembers again what a rich and varied heritage we have, concentrated in such a small space. However, it is not only our past that left a positive impression on my colleagues but also our present. It is inevitable that we tend to focus on where we perceive the problems to be but, in reality, there is much in Malta that functions effectively and efficiently.