Ambassador's Corner
WEEKLY MESSAGE FROM AMBASSADOR JOHN BRUTON
February 12, 2008
I was in Brussels last week to have discussions on European Union policy on a
wide range of issues including
Kosovo, the
Middle East Peace Process, relations
with Iran, the current round of
world trade talks and
climate change.
EU and US Climate Change proposals compared
I met EU
Environment Commissioner,
Stavros Dimas, who commended the legislation
now before Congress to place limits on greenhouse gas emissions, and to
introduce a cap and trade system which would reward those who reduce emissions,
and penalise those who increase them. But he said that even the most ambitious
proposal before the US Congress involved a smaller reduction in prospective
emissions than the measures proposed in the past two weeks by the European
Commission. For example, the Commission proposal is for a reduction of 20% below
1990 levels. The Lieberman-
Warner Bill would still allow a 2% increase of
emissions compared to 1990 levels.
Commissioner Dimas stressed the importance of
afforestation, reaforestation and
avoiding deforestation as ways of combating climate change. Deforestation has
already created 20% of the problem and effective measures are more important
than ever as demand from other land uses increases. An international agreement
to reverse deforestation could be efficiently monitored using satellite
technology.
Stavros Dimas also told me that
carbon capture and storage could also help. The
technology is viable. The main challenge was to ensure that the carbon did not
leak from the underground caverns in which it would be stored.
Access for US Poultry to EU Market
Commissioner Dimas and I discussed longstanding US complaints about lack of
access for US
poultry exports to the European Union. This has become quite a
controversial recently, but Europe's position has not been well understood in
the US
At the moment, US poultry, which usually is treated with chlorinated water or
other
solutions after slaughter to reduce surface contamination, is not accepted
into the European Union. This is because the European Union rules insist on
minimizing contamination at all stages in the production process. This EU system
is more rigorous, but it is also a good deal more expensive.
If the European Union were to accept US poultry products that had only been
treated with chlorinated water, it would also have to accept the same treatment
by European poultry producers.
The use of chlorine produces large amounts of contaminated
water, which may pose
environmental hazards. The densely populated continent of Europe does not enjoy
the same capacity to absorb water pollution as less densely populated areas of
the world, and the EU regards clean water as a precious resource. So it is
conducting scientific research into the possible side effects, before deciding
whether it can accept chlorinated water decontamination treatments as
sufficient. Meanwhile, there is no problem with US poultry exports that meet
existing EU specifications, i.e. not relying on the chlorine water treatment.
Mandelson optimistic of a World Trade deal
I met [Trade] Commissioner
Peter Mandelson to discuss the prospects on agreement in the
Doha World Trade talks. He was optimistic that a deal could be done. He stressed
that a global deal was important to get all the players in international trade
to respect the same disciplines. He emphasized the need to explain to the public
the positive benefits of globalization.
In his very interesting
Alcuin lecture in Cambridge, England, last week, Peter
Mandelson said that, in the thirty years between 1960 and 1990, the number of
people living in economically open societies had remained at about 20% of the
world population. But in the seventeen years since 1990, with the fall of
communism, there has been a dramatic change and 90% of the people of the world
are now in economically open societies and can compete in the global market.
This
change had led to one of the biggest reductions in global poverty in history.
Whereas, twenty years ago less than one $1 of every $100 dollars of foreign
investment went to developing countries, now $36 out of every $100 of foreign
investment goes to those countries.
This had been achieved without the wealthier parts of the world losing out.
Indeed they have gained by getting access to cheaper products and services. In
Europe there are now eighteen million jobs more jobs than there were ten years
ago. Paying the world's highest wages has not stopped Germany or Finland being
among the most competitive exporters in the world.
China's surge in exports also needed to be put in proportion. Peter Mandelson
said China is not getting all the benefits. An iPod may be manufactured in China
and sold to the US consumer for $299, but only $4 of that revenue actually stays
in China, whereas $160 of it goes to the US companies that design, transport and
retail the iPod.
Components are now sourced all over the world. The supply chain is both complex
and brittle. This makes the different parts of the world vitally interdependent
and mutually vulnerable. That interdependence requires an agreed set of rules,
and an agreed global system of rule making. That is another reason why a global
trade deal in the WTO is important.
Global markets need global rules
We also need global rules for the promotion of
competition, and anti-trust.
An open world trading system will not survive if monopolies or cartels can
dominate a particular market. One of the worries about Sovereign Wealth Funds
created by the Governments of countries with surplus cash is that they could be
used to create dominant positions in particular markets. This is a particular
concern in the energy and gas markets, and in sectors where there may be a
natural monopoly like radio frequencies.
We should not try to restrict investment across borders, nor should we exclude
Sovereign Wealth Funds from particular sectors. The best solution is active,
transparent and workable crossborder competition policies, which prevent or
penalise monopolistic behaviour, wherever it exists and whether it is undertaken
by Sovereign Wealth Funds or privately owned business.
That requires 100 different national competition authorities around the world to
cooperate.
The EU has an agreement on competition policy with the United States and with
other countries. But so far these agreements do not include the sharing of
actionable evidence that could be used to enforce competition rules.
EU Commissioner
Neelie Kroes has recently highlighted these issues. Her aim is
to ensure that consumers worldwide get the full benefit of globalization.
How can we reconcile global rule-making and democratic legitimacy?
The recent difficulties with the
sub-prime market, with collateralised debt
obligations and the resultant negative effect on the economy illustrate the
urgency of keeping government rule-making and supervision up to speed with the
pace of globalization. Whether it be toy safety, environmental standards,
monopolies or prudent lending practice, national rules and supervision are no
longer sufficient to protect our people and our economies. We need a system of
global rule-making, and global supervision of compliance with these rules. There
is no avoiding this.
But there is a difficult dilemma to which an answer has not yet been given.
Will global rules and enforcement mechanisms arise from democratic deliberation
on a global scale, or will they just emerge from a closed door diplomatic
negotiation?
Without some form of democratic deliberation, the process will lack
adequate legitimacy, and without legitimacy the system may not withstand an
eventual crisis. This tension between democracy and globalization contributes to
protectionism.
The European Union goes a distance towards providing an answer to this problem.
It is the only multinational organisation in the world that has a directly
elected legislative body – the
European Parliament – which is involved in
rule-making for its 27 Member States. This gives democratic legitimacy to EU
decisions of the kind that other multinational organisations and trade blocs do
not enjoy.
The European Union thus provides one model for reconciling the two great
realities of the modern world – globalization and democracy.
Mercosur is also going in this direction by setting up a parliament too. Will
NAFTA follow?
Please send me your
comments about this or any of my weekly messages or other EU matters. I
look forward to hearing from you!
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