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					               THE ISSUE IS GLOBAL GOVERNANCE - NOT GLOBAL FREE TRADE

                                     A Perspective on FTAA


Kimon Valaskakis Ph.D.

Dr. Valaskakis was the Canadian Ambassador to the OECD during the MAI negotiations. He is
currently the president of the Club of Athens an assembly of world leaders interested in
improving the state of global governance.

The backlash against market-led globalisation is not new. It started           during the MAI
negotiations at OECD in 1998. At that time a proposed comprehensive agreement on investment
was blocked by strong street protests and some reluctant governments. Contrary to popular
perception, Canada was among the reluctant countries and was the first to voice significant
reservations about the agreement. But it was France who stole the show as leader of the
opposition and the MAI was given a first class burial. Since that time the backlash against
globalisation has grown to become a regular feature of meetings seeking to further
globalisation. The Quebec FTAA Summit is viewed by some as a resurrection of the MAI. Is there
any truth in that view ? More generally how is FTAA related to globalisation and how desirable
is it at this point in time?

 “Globalisation” whether we like it or not is a deep historical process. It is characterized by the
“death of distance’ as some have called it resulting in a much smaller planet. All the World has
now become the stage. The prime movers behind globalisation are in descending order are (a)
mounting global interdependence (acid rain, mad cow disease, global warming) (b)
technological change (the Internet etc.), (c) the surge of multinational enterprise and (d) the
voluntary abdication of governments in the face of the above.

The first force, global interdependence cannot be stopped either by street protests or anti-
globalisation declarations. This is also true of the second prime mover, technological
innovation which has a dynamic of its own. It would be extremely difficult if not impossible to
abolish the Internet. The third, the ascent of multinational enterprise is taking place as a
result of technological innovation. But the fourth, the explicit transfer of power from
governments to markets is quite optional. There is nothing fatalistic about it. Viewed in the
context of globalisation itself the regional free trade agreements which are mushrooming all
over the world may turn out to be the wrong moves at the wrong time. There are three reasons
for this.

First there are already over 25 sub-regional trade zones in the Western Hemisphere and dozens
more worldwide in an alphabet soup of acronyms which even the experts cannot decipher.
Exactly how the FTAA will relate to them and to the broader WTO agreements is unclear. The
WTO has the power to invalidate regional trade agreements if they contain discriminatory
clauses against outsiders as was recently the case with the Canada-US Auto Pact. The general
points is that as world trade is becoming freer anyway, regional agreements may become
irrelevant and redundant (unless they are comprehensive as the European Union which features
political as well as economic integration).

Second, there is a school of thought which argues persuasively, that both the FTAA and the
WTO may be putting the cart before the horse. In today’s world, trade follows investment
rather than vice-versa. With 60% of international exchanges taking place between subsidiaries
of multinationals, the direction and volume of trade is determined by location decisions of



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footloose multinationals. These, in turn are influenced by a host of criteria such as exchange
rates, comparative fiscal systems, political stability, infrastructure etc. with tariffs playing
only a small role. To focus on trade may be missing the point and fighting yesterday’s war. In
this sense the MAI issue i.e. investment rules, was correctly judged by protesters as much
more important than trade. At this juncture a new more even-handed MAI, with social,
environmental and cultural clauses which would be acceptable to all might be more useful than
a lopsided free trade deal. In spite of lip service to the contrary , this is not the direction the
FTAA is likely to take.

Third, governments have already gone overboard in abdicating much of their power to market
forces through privatisation, deregulation, tax cuts and expenditure reduction. Nation-state
governments are becoming bit players in the international economy. In an exercise which we
performed at OECD, in 1998, it was discovered that if the 100 top economic entities were
assembled, from both the private and public sectors 52 would be national governments and 48
corporations. The rise in corporate power is greatly reducing the policy capacity of elected
governments. Bill Gates has substantially more power than three quarters of the world’s
governments. The emerging imbalance between private and public players is ushering in a
major crisis in global governance where an increasing number of sectors are spinning out of
control. Global finance, global warming, global epidemics and criminal activities are now
escaping any serious form of control. These issues have to be addressed.

Rather that rush headlong towards a borderless world which is likely to degenerate into a
ruleless world, national governments should focus their activities on a more even-handed and
balanced globalisation. Economic and technological globalisation must be complemented by
social and “political” globalisation (in the nobler sense of “political” derived from the Greek
“polis” or City-State). Globalisation must be governed by the rule of law. Since the present
structure of authority is territorially based while most challenges are transboundary, new forms
of a true rules-based world system must be explored. This is a far cry from today’s trend of
abolishing national rules, in the names of free trade without replacing them at all.

The danger of the FTAA is that it may distract our attention from those more important tasks
and unnecessarily polarize positions along mistaken battle lines. The choice is not between
Globalism vs. Localism but between a wild economic free for all vs. a more civilized Planet
Earth providing prosperity and democracy to all. The issue is global governance not global free
trade. If the 200 governments of this Earth do not address this issue in the near future a
cascading series of deleterious crises will destabilize the entire world system.



                          Kimon Valaskakis Ph.D. : Biographical Notes

Kimon Valaskakis was Canada’s Ambassador to the OECD from 1995 to 1999. Before that he was
professeur titutaire de sciences économiques at the University of Montréal and President of the
Gamma Institute an international forecasting and planning think-tank based in Montreal. He
was also chairman of Isogroup Consultants a global strategy firm with offices in Montreal, Paris,
London and Sofia. He is the author of 8 books and over 100 papers. He was described by the
British Periodical The Economist as “one of Canada’s most perceptive thinkers.”

Dr. Valaskakis is currently the president of the Club of Athens. This new international initiative
involves a number of world leaders interested in better global governance. Its name is derived
from Fifth Century Athenian democracy as described in Plato’s Republic and it conveys the
message that what is needed in today’s world is to design the Gobal City-State or the Global
Athens so to speak. Dr. Valaskakis divides his time between Europe and Canada in the
promotion of this venture.




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