Address by President of the Republic of Finland Tarja Halonen at the ILO Governing Body in Geneva, November 17, 2003

(check against delivery)

It is a great pleasure and a privilege to address the Governing Body of the ILO. I thank Director General Juan Somavia for the kind words he addressed to me. I would also like to thank you for asking me to co-chair the World Commission on the Social Dimension of Globalization. The almost two years have been an interesting and educational experience.

I would also like to thank and congratulate the Governing Body of the ILO for its courage and open mind in giving the Director-General the authority to set up this independent World Commission. While its work will, of course, be highly relevant to the ILO, its scope and mandate go well beyond your organization. You have served as the base for something that aims at reaching to the whole world, and also to the rest of the multilateral system.

We are right now finalising the report and it should be made public in February 2004. It will be provided to you in good time before GB meeting in March 2004.

It is important to notice that of course all the commissioners have various viewpoints, due to their backgrounds, special knowledge and interests. We have tried to reflect this diversity in drafting the report. The forthcoming report is aimed at summarizing what is a broad over-all view of the commission.

We have taken our duty very seriously. The Commission has held six meetings, over 30 dialogues around the world and working sessions for example with misters Köhler, Supachai and Wolfensohn. I honestly can report that the commission has been well received everywhere. Sometimes the expectations seem to be even too great.

You know very well the background for establishment of the commission, so I will not dwell on that. Today, I shall concentrate on describing some of the salient points which we have discussed at length and depth, and which are important for arriving at balanced conclusions on what to do to strengthen the social dimensions of globalization.

I wish that you do not take these views as representing agreed positions of the whole commission, although at this stage its co-chair must have the right to make a summary of where all of us together have been going.

Our starting point in the Commission has been that in order to be sustainable globalization must meet the needs of people. Our ultimate goal is to help make globalization a resource to promote decent work, reduce poverty and unemployment and foster growth and development.

Based on this challenging goal we developed our vision, a vision for change. The main points in our vision are:

The current course of globalisation must change. Present situation is not ethical, nor politically feasible. Too few share its benefits. Too many have no voice in its design and no influence over its course.

The results of globalisation are what we make of it. While history and geography set the points of departure, much depends on the way it is managed and the values that inspire its actors.

We wish to make globalisation a force to increase human freedom and well being, and bring democracy and development to the communities where people live.

Globalisation needs also to be in balance with the environment so that it can be a force for sustainable development.

The principles that must guide globalisation should also be reflected in national institutions, rules and political systems. The basic principles are democracy, human rights and the rule of law.


Characteristics of globalization

Globalization is a complex phenomenon that has had far-reaching effects on people everywhere in the world. Therefore, the term “globalization” does not lend itself to a neat definition.

Some see it as an irresistible and good force for delivering economic prosperity to people all over the world. For some others it is a source of all contemporary ills. These extreme views are present also in the commission and there seem to be some truth in both views.

There is wide acceptance that the key characteristics of globalization have been the liberalisation of international trade, the expansion of foreign direct investments (FDI), and the emergence of huge cross-border financial flows. This has resulted in increased competition in global markets.

New technologies have also given a distinctive character to the current process of globalization, as compared to similar episodes in the past. Markets can now be global and take in ever more goods and services. The impact of new technologies on societies will be the major theme in the World Summit on Information Society in less than a month’s time here in Geneva.

Something else is also very different. Unlike earlier episodes of globalization, the current process largely excludes massive cross border movements of people. While goods, firms, and money are largely free to criss-cross borders, people are not. One could say that this is a notable discrepancy in the logic of globalization.


Impact of globalization

Compared on country level, there have been clear winners and losers in globalization. Among the primary winners are the industrialised countries, in spite of internal problems of adjustment that have generated losses for many workers. With a strong economic base, capital, skill and technological leadership, they have been well placed to gain benefits from increasing globalization of the world economy.

The other clear group of winners have been some developing countries – among them China and India - that have been highly successful in increasing their exports and in attracting large inflows of FDI. There are also some other examples of this in all other parts of the world, with the exception of Africa. Winners are for the most part countries that had relatively favourable initial conditions in terms of prior industrialisation, the level of human resource development, transport and communications infrastructure, and the quality of economic and social institutions.

At the other extreme, the exclusion of the least developed countries (LDC) from the benefits of globalization – and even the whole process of globalization - remains a reality. The LDCs are trapped in a vicious circle of interlocking handicaps including poverty and illiteracy, civil strife, geographical disadvantages, poor governance and economies largely dependent on a single commodity.

In order to assess the social impact of globalization it is essential to go beyond aggregate economic performance and examine what has happened to employment, income inequality, and poverty over the past two decades of globalization.

Employment performance over the past two decades has varied across countries and regions. It seems that there has not been drastic improvement or worsening of open unemployment in the world during the era of globalization.

Income inequality has increased in some industrialised countries. There seems to have been less solidarity when the additional wealth, made possible by globalization, has been distributed.

Outside the industrialised countries, there has been a mixed picture on changes in income disparity. Large majority of countries have experienced a rise in income inequality and many perceive this to have happened because of globalization.

There are contradicting views on how globalization has affected poverty reduction, which is one of Millennium development goals. The number of people living in absolute poverty worldwide has declined significantly from 1237 million in 1990 to 1100 million in 2000. Most of this improvement is accounted for by the changes in China and India. In sub-Saharan Africa poverty has increased considerably and in other parts of the world the change has been smaller.

The economic benefits and social costs of globalization are not evenly distributed among social groups. Even in the industrialised countries some groups of workers have been adversely affected by trade liberalisation and the relocation of production to other countries.


Governance of globalization

Successful participation in globalization is bound up with national capabilities and policies. I will reiterate the three basic principles for a modern state: democracy, human rights and the rule of law. Countries, which do not subscribe to these principles, will not in the long run be able to provide benefits of globalization for their people.

People living in well-governed countries with strong social justice and education systems, income distribution mechanisms and social safety nets are more likely to gain from globalization.

For these reasons it can be said that the response to globalisation begins at home. It is also a good reason to make the nation state a stronger entity.

Regional integration and cooperation can promote a more equitable pattern of globalisation in many ways.

By effectively increasing the size of domestic markets, integration increases the capacity to withstand external economic fluctuations and can help build the capabilities needed to take advantage of global opportunities.

In addition, when social goals are built into regional integration, it provides a starting point for building them also into the wider global economy.

Increasing globalisation has given rise to a broadening range of issues that can be effectively dealt with only through concerted global action. Examples of these include the problems of financial contagion, communicable diseases, cross-border crime, tax havens and tax competition.

The response to these new challenges so far has been unsystematic. We need a more coherent approach to these challenges. This could be done under the leadership of the UN.

In the fields of economic and social development, also the actions of the Bretton Woods Institutions could be better balanced. Besides economic growth and stability, there should be enough emphasis on social justice and employment. All countries share the goal of better employment, whether rich or poor.


Fair rules

In order to make globalization a positive force for people it is important that the rules governing it are fair. We have today a global economy, but not a global society. The governance and rules are clearly lacking behind the economic developments.

The rules of the global economy need to be fair, both in creating opportunity and determining outcome. They need to reflect the diverse situations of peoples and countries.

The rules of the global economy need also to be applied more equally and fairly, so that multilateral rules for trade, investment, intellectual property and labour adequately reflect the common interest.

Of course the Members of the Commission have also discussed the question of the role of labour standards in globalization processes. On this matter, you in the ILO have at your disposal a number of tools, and in particular the 1998 Declaration on Fundamental Principles and Rights at Work. There is a crucial role for the ILO to promote and ensure a situation where basic rights at work are effectively respected all over the world, without exception.


Better international policies

Action to achieve fairer rules also needs more coherent and equitable policies at the international level. This is essential to ensure that the benefits of globalization are more widely distributed and common goals are realised.

We need international solidarity to raise capability and security. We also need to make decent work a global goal. Policies and action at the international level need to embed fundamental rights at work; realise the goal of full employment; support national social protection systems, and facilitate social dialogue among representative workers and employers organisations in global production systems.

The key to better international policies lies in the integration of social and economic goals. Besides national governments, also multilateral institutions need to direct their policies towards achieving these common global goals.


International co-operation

The Millennium Summit, the Monterrey Summit on Financing for Development, the Doha Meeting of the WTO and the Johannesburg Summit on sustainable development were all recent high points of International Community’s commitment to solve common challenges together.

Since those meetings there have been setbacks, most recently in Cancún. It seems that when the expectations become very high, the negotiators become inflexible as they try to respond to these expectations. And this does not apply only in the WTO but in other international organisations as well.

However, I am a strong believer in and determined supporter of the multilateral international system. The challenges and opportunities before us require participation of all nations. No one can respond to challenges like globalization, international terrorism, or environmental deterioration alone and no one should be left alone to do so.


****

For my own country, Finland, globalization is everyday reality, not just theory. In most of international comparisons we seem to be doing fine. This is certainly true so far, but also in Finland we feel very strongly the uncertainties of present day globalization.

Tax competition, relocation of businesses, unemployment, protection on foreign markets and efforts to attract foreign investments are issues with which we deal on a daily basis. It is not enough to be successful today, we want be successful also tomorrow.

If there would be only one issue to concentrate on, it would be education. In order to fare well a small nation of 5 million inhabitants needs to educate all. This is what we have done and are going to do in the future also. Education provides for innovation and capacity for successful adjustment. And globalization is about constant adjustment to new challenges.