State Secretary Elsbeth Tronstad, Norwegian Ministry of Foreign Affairs

Globalization and Sustainable Development

Lecture at The Diplomatic Academy Vienna, December 11, 2002

Ladies and gentlemen,

I wish to thank Ambassador Sucharipa, the director of the Diplomatic Academy for having invited me to address this audience. The topic I am going to speak on, "Globalization and sustainable development", is at the cross-roads of several great issues on today’s international agenda: trade and environment, environment protection, resource management, development cooperation, international governance. My subject is also a very wide one, so let me start by summing it up in one question: How do we make globalization work for sustainable development?

Before starting answering that question, let me briefly recall what we understand by "globalization" and what we mean by "sustainable development".

The now familiar concept of "sustainable development" was first launched by the UN Commission on Environment and Development in 1987 (which, as you may recall, was chaired by Norway’s former Prime Minister Gro Harlem Brundtland). The commission’s milestone report, "Our Common Future", defined sustainable development as "a development that meets the needs of the present without compromising the ability of future generations to meet their needs." The report also established that this requirement applies not only to environmental policies, but to economic and social policies as well.

The report was followed up at the World Summit on Environment and Development, which took place at Rio de Janeiro in 1992 and adopted Agenda 21. Agenda 21 has since constituted a major reference in the formulation of policies pertaining to sustainable development. Among its basic tenets are the precautionary principle and the recognition that each government is responsible for creating conditions for sustainable development within its own borders, with the participation of its own population and in international cooperation where needed. I don’t think any other single event has contributed more than the Rio Summit to raising global awareness about sustainable development and the urgent need for concerted action.

The term "globalization" is even younger than "sustainable development", at least in daily discourse on international affairs. In the economic sphere, "globalization" refers to the growing integration of the global economy, which is being brought about by incessant flows of goods and services, capital, technology and information across national borders. In its wider sense, globalization is used not only about economic processes. It also covers the increasing cross-border contacts in other spheres, including the exchange of ideas, knowledge and cultural manifestations.

This is not the first time the world is going through a period of sizeable capital flows, mass movements of people and cross-border cultural currents. However, the scope, the magnitude and the speed of change are all so much greater this time that many of the challenges posed by today’s globalization are indeed new.

Nevertheless, to my mind, globalization is first and foremost a continuation, a continuation of the historical process of internationalisation, which has increased the economic, social, environmental – and political – interdependence of countries. Indeed, the key characteristic of our globalized world is interdependence. Tony Blair, who is a one-liner expert, put it this way: " Your problem becomes my problem. One country’s war becomes another country’s asylum seekers. One country’s pollution becomes another country’s floods". Thus, one of the most important tasks facing politicians is to understand the complexity of forces that are operating. The next step is to make the necessary decisions to ensure equitable and sustainable development. And to make them in time.

In order to analyse the "forces at work", I suggest we consider the interlinkages between globalization and sustainable development area by area, that is: in relation to

poverty eradication

trade

the role of business, and

environmental degradation

Poverty, globalization and sustainable development

Poverty eradication is by far the greatest global challenge facing the world today.

More than 1 billion people live in absolute poverty, that is: on less than one dollar a day.

15% of the world’s population account for 56% of total consumption, while the poorest 40% have to make do with a mere 11 % of the global pie.

The situation is particularly difficult in Sub-Saharan Africa:

While most people have experienced growth in consumption in recent years, the consumption expenditure of the average African household is 20% less than it was 25 years ago.

While the overall poverty rate in developing countries declined during the 1990s, the number of poor has increased substantially in Sub-Saharan Africa, where almost half of the population now lives in poverty.

The poor themselves are, of course, the first victims of this state of affairs, but in fact, we are all loosers. We should not forget that poverty deprives the world of the benefits of the industry and talent of poorer nations. Being unable to reap the benefits of globalization, they are also unable to contribute to global wealth creation. Furthermore, there is a correlation between poverty and movements of refugees, between uncontrolled urbanization and the environment. In the final analysis, this constitutes a permanent threat to political stability and security, and to the world’s environment and natural resources.

Eradication of poverty is an absolute requirement for sustainable development. The Brundtland Commission saw social justice and human well-being as integral parts of the concept of sustainable development. Although sustainable development has often been viewed as a primarily environmental issue, the Commission left no doubt that one of the prerequisistes in the pursuit of sustainable development was the elimination of poverty. This was identified as a top priority issue at the Rio Earth Summit. Poverty eradication has been high on the agenda of all the major UN conferences of the 1990s, and in Johannesburg last Augut poverty eradication was again listed among the "overarching objectives of, and essential requirements for sustainable development", and it was named "the greatest global challenge facing the world today".

However, despite broad agreement that poverty reduction and better environmental management are essential components of development, it is apparent that the international community has not been able, so far, to follow up this agreement on what needs to be done by sufficient action.

In autumn 2000, at the Millennium Summit, the UN member states adopted a set of global development goals, known as the Millennium Development Goals. By adopting thes goals, we committed ourselves to halving world poverty by 2015. We agreed that the guiding principles of our work should be basic education, gender equality, health and combatting communicable diseases, and not least environmental concerns and sustainable development.

Poverty is the result of a variety of causes, and it takes a comprehensive policy, national and global, to fight it. We need a holistic development policy which is integrated into our own policy, and which is closely coordinated with the national policies of the cooperating developing countries.

My Government made a significant step in this direction earlier this year, when it launched its Action Plan for Combating Poverty in the South towards 2015. This is a comprehensive plan covering all policy areas of importance to poverty reduction, such as trade, investment and debt, economic aid, cooperation with international organizations, civil society and the private sector. It describes what the Government will do to ensure coordination and consistency between development policy and Norwegian policies in other areas, such as energy, fisheries and trade, to name but a few. But it also sets demands on the authorities of the developing couuntries themeselves, for creating conditions which will allow people to improve their own lot.

We are making progress. Norway and many other countries are taking concrete measures in areas such as trade, investment and debt relief in a comprehensive and more coherent approach. At the Conference on Financing for Development in Monterrey last March the United States – and parnot least the European Union – committed themselves to a considerable increase in development aid. This was a significant step in the right direction.

Aid, however, can never be more than a supplement to the efforts of the poorer countries themselves and of their governments. Still, in addition to aid, the international community can make a significant contribution by leveling the playing field, that is: by adapting global rules to meet the special needs of the poorest countries, in order to allow them to realize their potential for contributing to the global economy. This is particularly evident in the domain of international trade.

Trade, globalization and sustainable development

The globalization of national economies is to a large extent the result of a controlled process over the last fifty years, in which restrictions on international trade, capital movements and foreign exchange transactions have been gradually reduced or eliminated, often after comprehensive international negotiations.

Our open economy gives us access to goods, services and capital that we do not produce ourselves. In the case of Norway, we may safely assume that without participation in the global market, without access to foreign capital and use of new technologies, we would not have had the unprecedented economic growth which we are experiencing, nor the level of welfare, nor the opportunities and choices which are part of today’s reality.

Liberalization is no panacea, though. I attended a conference in Helsinki last week, on Democracy and Globalization. In his opening remarks to the conference, the Finnish Foreign Minister warned against the pitfalls:

"Trade liberalization should not be driven by short-term market considerations and the interests of large multinational corporations, lest the process turn against itself through increased mistrust and instability. In the age of globalization, trade must not only be open but also fair. There must be mechanisms in place to address legitimate concerns about the environment, labour standards, local and minority cultures and communities, human rights, social inclusion and the right to development."

An open economy is not enough. We also need rules. We must ensure that the international community is founded on the rule of law, with a stable, predictable rule-based system for trade and international economic cooperation. Todays’s system – or rather: systems – have been negotiated and developed over the past fifty years, and they reflect the developments that have taken place in the international economy during that period. But in order to be relevant in an ever more globalized economy, a world trading system has to respond to new challenges. One of the main tasks before us is to integrate all developing countries fully into the trading system; another task is to manage the increasingly close links between trade and the other facets of globalization.

At the WTO ministerial meeting in Qatar last year, the negotiations resulted in the Doha Declaration, also known as Doha Development Agenda because of its strong development perspective. The Agenda is actually a negotiating mandate for the years to come, covering agriculture and services, market access for industrial goods, anti-dumping and subsidies, trade and environment and parts of the Agreement on Trade-Related aspects of Intellectual Property Rights. That Agenda is a compromise. In an organization based on consensus between all members, compromise is the rule. Nevertheless – or perhaps for exactly that reason – , I believe it will prove a good platform for progress on a number of issues, for both developed and developing countries.

The broad agenda and the single undertaking of the conduct, conclusion and entry into force of the outcome of the Doha round allows member countries to balance their concessions in some areas with other member`s concessions in other areas. The aim must be that all countries gain from these negotiations in areas that are important to them.

However, not all countries are in position to benefit from the increased opportunities and welfare gains generated by the multilateral trading system. We therefore have to help the developed countries, and especially the least developed countries, the LDCs, to become better integrated into it. WTO rules do provide for special and differential treatment of developing countries, but those provisions have proved difficult to invoke and apply. Developing countries need technical assistance in order to help them benefit from the existing rules and strengthen their participation in the negotiations on future arrangements. But most important:they need better access to foreign markets. Representatives from Africa in the WTO have repeatedly stated that this is an important precondition for growth and development in their countries, and we share that analysis.

As of July 1 ^st> this year, Norway granted duty- and quota-free access to all products from LDCs. In the negotiations on agriculture we have proposed that special attention be paid to products of particular interest to developing countries when further tariff reeductions are to be considered.

Norway is also among the major contributors to the technical assistance offered by the WTO.

Trade and environment has become one of the most controversial issues on the Doha Development Agenda. So far, WTO member countries have discussed a broad range of trade-related environmental issues. Now the time has come to negotiate some of them.

Basically, the position of developing countries has been that environmental concerns have no place in the multilateral trading system, and they fear that the industrialized countries, and in particular the West-European ones, are arguing for their inclusion on the WTO agenda mainly for protectionist reasons. That Europe is in the focus of developing countries’ concerns, should not surprise us; it is a reflection of the fact that sustainable development and environmental concerns with trade are higher up on the political agenda here than in, for instance, the US.

The WTO is not and should not become an environmental organization. But trade is a means of development that does not operate in a vacuum. The preamble to the WTO agreement, therefore, stipulates that one of the main objectives of member countries is to ensure that trade contributes to sustainable development. Furthermore, trade and environment have become increasingly interconnected. A win-win scenario should be the universal aim here. Protectionism should not be part of this. There are more than 200 multilateral environment-related agreements in force today, of which some twenty provide for trade measures in some form or other. One issue to be negotiated is thus the relationship between existing WTO rules and specific trade obligations in Multilateral Environmental Agreements (MEAs). In these negotiations, we must ensure that we maintain the mutual supportiveness of the multilateral trading system and the MEAs. We must continue to insist on that there is no hierarchy among them, that is: that no automatic priority is given to WTO rules in case of conflict with environmental agreeements. We had to fight at Johannesburg to defend this principle, and are prepared to fight for it again.

Corporate social responsibility, globalization and sustainable development

One of the salient features of globalization is the ever-increasing ease with which companies can establish branches or enter into partnerships abroad. It makes it all the more tempting to locate production in low-cost countries. Many of these offer not only low salaries, but less developed workers’ rights and lower health and safety standards than in the west. Environmental legislation and similar constraints are often absent or circumventable. On the other hand, many foreign companies show the way by adopting standards which are above the legal minimum requirements.

Legislation and enforcement are ultimately the responsibility of the state. In the West, issues such as human rights, environmental issues and health and safety of employees are now embedded in legislation and business practices. But we also expect business to be aware of their responsibilities when moving abroad. The Norwegian public, for instance, has high expectations regarding the conduct of Norwegian companies operating abroad, and keeps a close watch on them. The Confederation of Norwegian Business and Industry has established its own programme on corporate social responsibility, in order to raise awareness on the subject and inform members on the do’s and dont’s.

The Ministry of Foreign Affairs has established a Consultative Body for Human Rights and Norwegian Economic Involvement Abroad. This consultative body has representatives from a wide range of sectors, including private companies and business and trade organizations, trade unions, NGO’s, research institutions and ministries. The main purpose of the consultative body is to strengthen awareness of ethical issues, such as human rights and the political aspects of business in areas of conflict and war. The body acts as a forum for mutual information, for the exchange of ideas and know-how, and may also provide policy-makers with valuable inputs.

Today, violations of ethical standards or human rights are rapidly documented and made known to a world-wide public. This public includes NGOs, many of which are becoming increasingly professional and exert considerable political influence. Being ethical, however, is good policy in itself, not only as a means of escaping the pillory. Experience shows that it’s actually good for business. Companies with well-developed ethical, social and environmental standards are usually to be found among the top performers within their respective lines of business, and in the stock market.

At the Johannesburg Summit, Kofi Annan put it this way: " Without the private sector, sustainable development will remain only a distant dream. We are not asking corporations to do something different from their normal business; we are asking them to do their normal business differently."

Environment, globalization and sustainable development

I have already explained that, if we are to ensure sustainable development, we must do our utmost to eradicate poverty. But we cannot solve that task without an ambitious and global environmental policy. When climate change and resource depletion lead to droughts or floods, it is poor people and poor countries, their health and their economies, that suffer most. Without comprehensive international efforts to solve these problems we will never reach the path of sustainable development.

There are many links between the various globalization processes and the main environmental problems. The elimination of trade and capital barriers makes it possible, for instance, to locate production in countries with lower environmental requirements, increasing the risks of pollution or waste of resources. Outsourcing of production across several continents, as is often the case, increases transportation needs. More transportation equals more greenhouse gas emissions plus a higher risk of propagation of invasive alien species. Technological developments fuel ever faster changes, increasing the gap between the rate of depletion and nature’s ability to repair and replace. And, overarchingly: globalization contributes to more material wealth, which augments stress on the environment.

It is more or less universally agreed that climate change is – in a global context – the most pressing environmental threat. It is far from being the only important environmental issue of global scope, and the increasing use of chemicals, for instance, was high on the Johannesburg agenda, as were the various threats to biodiversity. Today, however, I propose to deal with climate change in some more detail.

We cannot assess with 100 percent certainty to what extent human activity affects the climate, nor can we be sure about future consequences. But a vast majority of the world’s scientists agree that if we fail to reduce greenhouse gas emissions, it will seriously affect the climatic balance, and "extreme weather events" will become even more frequent than they are today. Since Austria was among the countries hit by such an "event" last summer, I see no need to describe the reality behind this meteorological euphemism, and I think you all agree that the precautionary approach should and must be our guiding principle.

Climate change is in certain ways related to globalization and sustainable development.

Sustainable development, because our dual challenge is to reduce the emissions of CO ₂ globally and at the same time supply energy that fuels economic development .

Globalization, because with today’s technology and without drastic political moves, continuing globalization and trade liberalisation are likely lead to a substantial growth in energy consumption, which will increase emissions of CO ₂.

The International Energy Agency (IEA) estimates that by 2030 we will consume 2/3 more energy than today. Fossil fuels are expected to cover more than 90 percent of this estimated growth.

Obviously, a substantial technological development related to transportation, energy-efficiency and renewable energy should be encouraged. Governments must assume greater responsibility and we must agree on more effective instruments and more ambitious targets at the international level.

We have managed to reduce emissions of lead in gasoline, we have managed to successfully address ozone depletion through the Montreal Protocol, and we have managed to almost eliminate the problem of acid rain. We know it is possible, but we also know that the issue of climate change and energy is more complex and will require changes that are far more comprehensive and demanding than anything we have done so far.

Still, the Johannesburg Summit failed to deliver a concrete target to increase the global share of renewable energy. I shall revert, in a few minutes, to what we actually managed to agree upon in Johannesburg. It wasn’t altogether too bad. But in the field of renewables, it was far from satisfactory.

To compensate for the lack of global targets, the European Union and other like-minded countries, including Norway, established in Johannesburg a coalition that will work together to increase the use of renewable energy. My government intends to take an active role in following up this intiative.

Austria is a close ally in these matters. I would like to take this opportunity to express our appreciation for the active role played by Austrian government by initiating and being the driving force of the Global Forum for Sustainable Energy. I am convinced that both Austria and Norway also in the future will continue to engage in international efforts to increase the global share of renewable energy and reduce the emissions of greenhouse gases.

The Kyoto Protocol will probably enter into force next year. That is an important step forward. Still it is only a small step. More ambitious targets are needed beyond 2012. The world will have to start working now towards a more ambitious climate change regime, with broad and balanced participation. That means more emission reductions, but having today’s parties to the Kyoto Protocol agree on new targets will be less important than having the rest of the world join the reduction programme, industrialized and developing countries alike. That is essential for progress beyond the first phase.

Climate change illustrates how globalization and the environment often are two sides of the same coin. Globalization is part of the problem. I believe, however, that it also is part of the solution. The interdependence of the globalized world should indeed motivate governments to agree on common goals and on the steps to take to reach them. Likewise, a dynamic global economy constitutes the best basis for developing the new technologies which we will need to reach our emission targets.

Special challenges and the need for closer international cooperation

Globalization has demonstrated both its benefits and its limitations for development.

On the one hand, it has opened up new possibilities for wealth creation, welfare and development. The UNDP points out that more people have been lifted out of poverty over the last 50 years than during the preceding 500. It seems safe to assume that this would not have been possible without the spectacular economic growth which took place during the same period.

On the other hand, pressure on nature’s resources goes on rising along with economic activity, and the benefits of globalization remain unevenly distributed. Many countries, especially the poorest ones, are unable to reap its fruits, and have on the contrary experienced so-called negative growth during the last decade.

Countries which are unable, or unwilling, to develop the structures they need to benefit from globalization, will in the long run find themselves on the wrong side of a welfare gap. Countries and businesses which have managed to adapt to new circumstances have prospered; those which have been unable to do so – due to lack of technical capabilities, infrastructure or institutional capacity – have seen the differences widen between themselves and the rest of the world. This inequality becomes all the more apparent as information flows make comparisons ever easier, and it is often perceived and presented, wrongly or not, as an injustice. As such it is a permanent threat to political and social stability.

Globalization and technological developments also bring us new challenges in the field of crime prevention and detection. Today’s organized, international crime includes drug, arms and people smuggling, computer crime, money laundering and trafficking – trade in human beings. These are not new fenomena, but the speed and volume of international financial transactions combined with lowered border controls in some parts of the world, and particularly in Europe, make life easier for the criminals. The only way to combat them goes through extensive and close international cooperation at many levels.

The terrorist attacks in New York and Washington brought home to us how vulnerable we all are. They have led to renewed efforts for international cooperation, not only in the fight against terrorism itself, but in other areas as well, such as in the efforts to trace and block its financing mechanisms.

Improved international cooperation is likewise the answer to the challenges of globalization, not withdrawal and isolation. We just have to recognize that we depend on each other and that there is no real alternative to multilateral solutions.

Since globalization is far more than a trade-related issue and sustainable development is far more than a matter of environment and resource management – in fact they both affect the very fabric of our societies – any policy that is to rise to the challenges must be cross-sectoral.

Sustainable development encompasses a number of basic political challenges: democratization, equitable distribution of wealth, respect for human rights, combating corruption and sound resource management, to mention just a few, but essential elements of our common effort to promote sustainable development. These issues cannot be handled within national borders alone. We therefore need to develop sound institutions at all levels, local, national, regional and global, to ensure that all these elements are reflected in our future cooperation.

At the global level we have a long way to go before the systems are sufficiently effective and coherent. Strengthening global governance is about strengthening international organizations and how they work together. It involves a complex web of international agreements, treaties, standards and codes that address a number of interrelated topics on the global agenda, including environmental issues, poverty reduction, trade, finance and economy, social issues, human rights and new technology. This variety of topics has its parallell in the variety of institutions involved. (It may be utopic to dream about reducing their number and their staff, but we must at least try to make them work towards the same overarching objectives.)

Within the United Nations family in particular, much could be gained by improving internal coordination within the UN system itself. And the UN should become better at cooperating with other organizations and institutions, in particular the Bretton Woods institutions, and vice-versa. Today, much work is hampered by overlapping, time-consuming negotiations on detailed resolutions and decisions, at the expense of interactive and focussed policy debates.

Concluding remarks: The way forward from The World Summit on Sustainable Development

Governance was one of the main topics of the Johannesburg Summit last September, but on this issue the more than 100 heads of state and government failed to agree on any concrete steps.

More generally, the task of the Summit was to identify the principal challenges of sustainable development, and to agree on a number of major but implementable decisions. Decisions which should bring us closer to the goal of ensuring an acceptable standard of living for a world population that keeps growing, while at the same time achieve a balance between human activities and our natural environment, for ourselves and for generations to come.

Much was achieved at the ‘Earth Summit’ in Rio de Janeiro in 1992. But over the decade leading up to the recent World Summit of sustainable Development in Johannesburg, there was a sense of lost momentum. As pointed out by the United Nations Environmental Programme (UNEP) before the Summit, one important task at Johannesburg would be to demonstrate that sustainable development is an exceptional opportunity for mankind. An opportunity in the economic sense: to build markets and create jobs. An opportunity in the social field: to bring people in from the margins. An opportunity in the political domain: to reduce tensions over resources that could lead to violence. And finally, of course, for the environment: to protect the ecosystems and resources on which all life depends.

It is an understatement to say that it was an ambitious agenda. Accordingly most countries in Europe had high ambitions for the summit. We wished to see an action-oriented plan with timebound targets and with poverty eradication as the overriding goal. We wished to strengthen the UN’s role in the work towards sustainable development. The results of the summit, however, fall short of what is needed to meet the challenges facing the world today in dealing with environmental degradation and poverty. Nevertheless, given the complexity of the issues and the difficulties encountered during the negotiations, the results are better than we had feared.

We succeeded in reaching consensus on ambitious targets in some important areas. Water and sanitation is one of these. It was a significant step forward that the summit added the provision of adequate sanitation to the Millennium Development Goal on drinking water, so that we have agreed by the year 2015 to halve the proportion of the people who do not have access to basic sanitation as well as the proportion of people without access to safe drinking water. We also made progress on chemicals and agreed to ensure that they are produced and used in ways that will minimise harm to human health and the environment. And we made commitments to reduce the loss of biodiversity by 2010, and to reverse the current trend in natural resource degradation.

The significance of the World Summit, however, will solely depend on how it is followed up. The Millennium Development Goals and the Summit are closely linked. The UN will monitor progress towards the Millennium Development Goals. We must now ensure that monitoring of progress towards the targets and goals of the World Summit are closely coordinated with this work.

It is governments that have the primary responsibility for implementing the commitments made in Johannesburg. We should all be prepared to assume our share of responsibilities here. We must ensure that the Johannesburg Summit is followed up by concrete action to reduce poverty, change production and consumption patterns and improve management of natural resources.

If the Johannesburg Summit is followed up by action, I believe it will been seen as a significant contribution towards making globalization work for sustainable development.

Globalization is a process, not a state of affairs. The world is not in equilibrium, it is in constant change. In order to understand a process we have to identify its driving forces. Once these have been identified, we may be able to influence the process. Such should be our political ambition: to shape the process of globalization so that it contributes to creation of wealth while ensuring sustainable development in all its aspects: economic, social and ecological. The only way to fullfill this ambition goes through concerted and decdicated action by all governments.

Thank you for your attention.