Opening of the 1998 BIAC General Assembly

It is a great pleasure for me to have the opportunity to address this prominent group of representatives at this year’s General Assembly of the Business and Industry Advisory Committee to the Organisation for Economic Co-operation and Development.

The Organisation for European Economic Co-operation, later the OECD, celebrated its 50th anniversary last April. Its establishment was a milestone event. After years of devastation and war, it marked the beginning of a new era of peace and prosperity in Western Europe. As a vital element in the post-war western liberal and democratic order, the OECD has been of great significance, economically as well as politically.

Let us first, by way of illustration, look at Germany. After the war, West Germany, as one of the founding members of the OEEC, quickly developed into a modern, industrial powerhouse by taking part in the reconstruction of a Europe based on market economy, free trade, and co-operation with the United States and Marshall aid. On the other hand, East Germany, through its inclusion in the Soviet bloc, was excluded from participating in this economic co-operation system. Since the Berlin Wall came down, the economic cost of bringing the Eastern part of Germany up to the standard of the Western half, in terms of public transfers, has so far been a staggering 1.200.000.000.000 - one thousand two hundred billion German marks. And this is only the economic side of the story.

Then let us look at the country still known as Yugoslavia. When I was foreign minister, in 1989, it was the only East European country member of the OECD aspiring to western economic integration. Now, after years of warfare and economic mismanagement, Yugoslavia, having turned its back on European co-operation based on liberal economic and political principles, finds itself poor and isolated. At the same time, other Eastern European states like Hungary, Poland and the Czech Republic have joined, while still others aspire to become members of the OECD and actively pursue reforms to this end.

These examples show that rejecting or subscribing to the values shared by all OECD countries – open market economy, democratic pluralism, the respect for human rights – has fundamental economic and political consequences. The fact that these values are now taking hold way beyond the traditional western circle of the OECD, gives great cause for optimism. In a European context, the revolutionary changes associated with the spread of democracy and the opening of markets in the past decade, means that we for the first time have the possibility of building a whole and free Europe. This is an historical chance that we must not miss. The OECD and the business community have a great responsibility in this regard.

My Government sees the OECD as an important element in a broader policy, aiming at the consolidation of a new, peaceful and integrated Europe. The focus in our European policy will be on promoting all-European security, co-operation and common institutions, based on the fact that Norway is member of a Europe that is wider and more than the European Union. My Government’s concern for values and ethics in our domestic policies, translates into an enhanced emphasis on democracy, human rights, individual freedom, and the rule of law in our foreign policies. We want to contribute to bring about economic growth and social stability on our continent and to create environmentally sustainable development in our part of the world, in co-operation with other European and OECD countries.

In these endeavours, Norway will make use of all the co-operation structures to which we belong. These include NATO, the OSCE, the Council of Europe, the Barents and Baltic Sea Councils, and, not least, the co-operation with the EU within the context of the European Economic Area. All of these are central to our efforts. I would like also to emphasise the importance of the Euro-Atlantic dimension and close co-operation with the United States and Canada - and not only in the field of security policy.

As regards the EU, the issue of Norwegian membership was decided by the referendum in November 1994. Actually, the government consists of three parties that all belonged to the no-movement. However, the result of the referendum was not a "No" to continued close political and economic co-operation with the EU. On the contrary, this is a key part of our European policy. Our relations with the EU are close and broad. We are pleased with the way our relations with the EU have developed. We do not see eye-to-eye on all matters, but we find that we have been able to deal with questions where we disagree in a rational way. Norway also has an interest in maintaining close ties with the EU's common foreign and security policy.

The Agreement on the European Economic Area - EEA - is Norway's main framework for co-operation with the EU. The EU is the dominant market for Norwegian exports and the establishment of businesses abroad. More than 76 per cent of our exports go to the EU, and 70 per cent of our imports are from the EU. Under the EEA-Agreement, Norway is an integral part of the internal market, and this safeguards the economic and trade-related aspects of our relations with the EU. The Agreement provides for the free movement of goods, services, capital and persons throughout the EEA, in addition to co-operation outside the four freedoms – co-operation on important socio-political issues like the environment, education and social policy, to name but a few. It is also our prime vehicle for exerting influence on the further development of the rules pertaining to the single internal market.

At the Amsterdam summit in June last year, the EU member states completed its revision of the EU treaties. It was decided to integrate the Schengen co-operation into the EU and to find a solution whereby Norway and Iceland continue to be associated with the Schengen co-operation. The aim is for the Treaty of Amsterdam to enter into force on 1 January 1999. Norway has for quite some time now been ready to start negotiations with the EU on the institutional agreement.

From the same date, the third stage of the EMU will be implemented. With this step, an important policy area and a key area of society - monetary policy, will be moved from national level to European Community level. The establishment of the monetary union will possibly result in growing pressure for a more closely co-ordinated economic policy. Many people have warned that the establishment of the EMU may result in greater political tension within the EU and that social and economic disparities may increase. The immediate effects of the EMU on Norway will probably be limited partly because Denmark, Sweden and the UK will not take part from the beginning. These three countries account for almost half of our traditional trade with the EU. The introduction of the Euro does not necessitate changes in our monetary policy regime, as the European dimension already has a major role in our monetary policy formation.

Norway respects the EU applicants’ goal of becoming EU members. At the same time, it is important to ensure that the enlargement process does not create new dividing lines across our continent. We support all the three Baltic states’ efforts to prepare for EU membership.

The enlargement process also has repercussions outside the EU and the applicant countries. It directly affects Norway because new EU members will also become parties to the EEA Agreement. Norway and the EU are therefore currently discussing information and consultation procedures terms of accession for the candidate countries on those issues that are relevant to the EEA Agreement.

My Government has ambitious policy objectives for co-operation in our neighbouring areas. We want to achieve an area of stability, democracy and prosperity which includes the whole of Northern Europe – also Russia, the Baltic states and Poland - in the dynamic and peaceful community of nations that has developed within the Nordic and Euro-Atlantic co-operation structures in the past fifty years. This is an immense task, which requires a concerted effort, not only with our neighbours and partners on both sides of the Atlantic, but also with the private sector and the business community. We must build wide-ranging political and economic co-operation with Russia in order to reduce the poverty gap, and avoid destabilisation and social disorder. The Government wants to involve key players such as the EU and the USA in this work. We support the Finnish proposal for a northern dimension for the EU, which will focus the attention of the EU on the enormous challenges in north-eastern Europe. The participation of our European and American partners and allies will provide the anchor for our regional efforts, and a wider framework for our bilateral assistance in a wide variety of fields, such as energy supplies, gas pipelines, environmental protection, nuclear safety, trade and communications.

The Barents and Baltic Seas Council are central – and complementary - elements in our strategy of integrating Russia into European co-operation. I took part at the Baltic Council summit in Riga in January this year, and was encouraged by the support for my vision for creating an integrated energy network for the region. We have invited all the eleven Nordic and Baltic Sea energy ministers to a meeting in Oslo in November to focus on how to make energy co-operation a new and significant dimension of the dynamic development in the Baltic Sea region.

Ladies and Gentlemen,

Norway wants OECD reform. The OECD should focus on its core activities. That means an emphasis on economic analysis and country reviews, trade policy, employment and sustainable development. The considerable expertise of the organisation should also be used to focus on questions related to the systemic, democratic, social and environmental challenges posed by the “globalisation process”.

In our domestic economic policy debates, the OECD regularly grabs the headlines with its high quality annual surveys on member countries’ economic development and policies. These are taken seriously by all governments. There is an obvious added value in recommendations drawing on experiences from 29 advanced member countries.

The BIAC, and the Trade Union Advisory Committee (TUAC), provide vital inputs to these discussions, by feeding their views into the work of the OECD, its secretariat, and its committees. My Government places great emphasis on maintaining the close dialogue with business and trade union organisations. In our national context, there is broad agreement in Norway on the need for co-operation between the social partners and the authorities, to ensure industrial competitiveness, stable economic growth and fair income distribution.

For a small open economy such as Norway, trade policy is high on the political agenda. We therefore appreciate that trade policy is a core activity of the OECD. At the Ministerial meeting a study on the benefits of trade and investment liberalisation was introduced. It represents a valuable contribution from the OECD to discussions prior to the upcoming negotiations on further trade liberalisation.

The negotiations in the OECD on a Multilateral Agreement on Investment (MAI) have not proceeded as planned. They have been far more complex than foreseen at the start of the negotiations in 1995. They present problems of delimitation, for instance with regard to national sovereignty, and they have caused quite some criticism from civil groups in many countries. At the Ministerial meeting it was decided to have “a period of assessment and further consultation between the negotiating parties and with other interested parts of their societies”. This was in our opinion a wise decision. At this stage in the negotiations it can be beneficial to analyse in more detail the potential impact of an agreement.

There are a number of important issues that have to be solved before a MAI-agreement can be put on the table. Amongst these issues are the questions relating to the treatment of environment and labour standards, dispute settlement, relationship with other international agreements, and relations with developing countries. We regard it as especially important that the MAI does not restrict a country’s possibilities for controlling its own development.

An important aspect is how to keep outside parties informed of the process. On the Norwegian side we are working on how best to supplement the information and consultations we have already undertaken vis-à-vis the Parliament and the NGOs.

The work in the OECD on bribery has marked a major advance in the fight against corruption. The Convention on Combating Bribery is a landmark in this battle. But, our efforts must not end here. It is important that all OECD Members and other signatories fulfil their obligations to present legislation and seek ratification by the end of 1998. My Government has already started the process of preparing the necessary changes in the Criminal Code, to develop legislation for prosecuting bribery of foreign public officials. The amendment will be presented to Parliament before the summer recess this year.

The emergence of electronic commerce is a revolutionary aspect in the global economy. Norway has one of the world’s highest PC densities in small and medium sized enterprises. Nine out of ten enterprises with more than five employees have a PC at their disposal. It is important for enterprises that electronic commerce is treated in the same way as more traditional ways of commerce. True global trade in this area can best be reached through multilateral solutions worked out by governments and private operators in co-operation. From Norway’s point of view it is important to solve basic fiscal issues such as taxes and tariffs in connection with border crossing electronic commerce. A level playing field for electronic and non-electronic commerce must be created. Norway strongly supports the common effort put forward by all OECD member countries in this field. We are looking forward to the ministerial conference in Ottawa on electronic commerce later this year and will participate actively.

Now, I would like to emphasise the importance of sustainable development as a key strategic objective, not only for governments, but for all actors in society. Of particular importance in this regard is the need for promoting co-operation between governments, business and international organisations - none of us can achieve sustainable development by ourselves. The achievements of the World Business Council for Sustainable Development are a clear indication of the commitment of industry. I believe there will be a further initiative at the forthcoming Ministerial Conference in Århus, on behalf of the European Roundtable of Industrialists.

The role of international organisations such as the OECD is also very important. In this connection I should like to pay a special tribute to Secretary General Donald Johnston for the substantial steps taken over the last year or two in his Organisation. There is no doubt in my mind that the OECD is particularly well-suited to play a key regional and global role in promoting sustainable development, and in following up the commitments made in Rio in 1992 and in New York last year. I welcome the effective development of a Strategy for Further OECD Work on Sustainable Development, and the appointment of a Deputy Secretary General with a special responsibility in this regard. The fact that he is a Norwegian gives even more reason for satisfaction!

An overarching priority for the OECD in the next century must be to ensure that sustainable development becomes the framework for integration of economic, social and environmental objectives. I believe that the industrialised countries must take the lead in promoting sustainable development, both in our own countries and in developing countries. Through common efforts, we can achieve this objective.

Ladies and Gentlemen,

The OECD has played an important part in one of the most fundamental developments in the world economy of the past two decades – the liberalisation of financial markets and tremendous growth of international capital movements. This has been essentially a politically driven process, accompanied by the rapid development of communications technology, financial innovations, and the growth of international investments and multinational production. In my view, the integration of world financial markets is a central element in what is often loosely termed the “globalisation process”.

Economic interdependence among nations is nothing new in the post-war era. But the size and speed of private international capital flows in the 1980s and 1990s has profound political implications that are of concern for many people. Future moves towards increased market openness must therefore go hand in hand with enhanced international co-operation, controls, and regulations. This is necessary to ensure the stability of the international financial and trading system, as well as the viability of the democratic welfare state as we know it.

It is against this background that I announced in Geneva last week that my Government has decided to organise, in Norway next year, an international symposium on the effects of globalisation. We believe that such a conference can increase understanding of the issues, and of how to address them. All of us must take seriously the growing public concerns about globalisation. Increasing wealth disparities, both between and within nations; eroding influence of democratically elected institutions; global warming and environmental degradation – these are among the challenges facing us.

The G-8 leaders discussed globalisation at their recent summit meeting in Birmingham. Important steps were taken to create greater openness in the financial system. As the Asian economic crisis recently has shown, further international political measures are needed to avoid overly disruptive economic and social consequences of rapid financial market movements. It remains to be seen what long-term implications the Asian crisis will have, if any, for the world economy. While acknowledging the negative effects of market instability, we must not, however, forget the positive political effects of market economic integration, in terms of promoting openness, democracy and sound economic management in more and more countries and areas of the world.

As regards the Norwegian economy, I do not believe that the direct consequences of the Asian crisis will be substantial. Norwegian export growth has continued to be strong so far this year. Our monetary policy is geared towards maintaining a stable exchange rate. Despite signs of growing wage inflation and pressure in the labour market, our domestic economy remains fundamentally sound and healthy. Strong growth – of about 3,5% - will continue in 1998, for the sixth consecutive year. In the Revised National Budget 1998, the Government proposes several new fiscal measures to dampen the growth in domestic demand. The general Government Financial Balance will show a surplus of 5,2% of GDP. (The Maastricht criterion is a deficit of 3% of GDP.) The current account surplus is expected to fall, mainly due to the decline in gas and oil prices, but will still be 2,5% of GDP in 1998. The Government Petroleum Fund, which stood at 115 billion Norwegian kroner at the end of last year, is estimated to grow to 173 billion kroner by the end of this year, and to 660 billion kroner by 2002.

Future petroleum revenues are thus expected to be very large in relation to the Norwegian economy. The Petroleum Fund has a double purpose. It serves as a buffer in case we are hit by an external shock, such as a fall in oil prices. And it is an instrument for saving part of Norway’s petroleum revenues for the next generation, which will have to cope with a dramatic increase in pension payment obligations. The new guidelines for the Fund specify a benchmark portfolio with investments of between 30 and 50% in equities, the rest in fixed income instruments. Norges Bank – the Central Bank of Norway – which manages the Fund on behalf of the Ministry of Finance, aims at investing 40-60% of the portfolio in Europe, 20-40% in North America, and 10-30% in the Pacific Area. Companies quoted on the major exchanges in 21 countries have been selected as eligible for investment from the Fund, in what is thus a truly global diversification strategy.

Ladies and Gentlemen,

In a world where large private and multinational market actors are as resourceful as most states, we must co-operate to meet the challenges of globalisation. Poverty and pollution can not be the responsibility of governments alone. The international business and financial community must also contribute to national social welfare and environmental protection around the globe. Together, we must ensure that the undoubted benefits of globalisation are distributed more equally. We must create a system that can harness the dynamics of globalisation to serve also the poor in the least-developed states that risk exclusion from the world economy. My Government is determined to contribute substantially, in co-operation with you and other actors. We must all strive to create freedom, wealth, security, and justice for the greatest possible number of people - not for the few at the expense of the many. Debt relief and development aid for the poorest countries must be a common endeavour. Only then can we handle the costs of globalisation and prevent its negative effects. Only then can we ensure the continued popular legitimacy, vitality and the expansion of the liberal, democratic order that has brought such unprecedented peace and prosperity in the western world. In this way we will promote our common ideals and values - of solidarity, compassion, and respect for the fundamental freedoms and rights of each human being, and for the natural environment.