These days, titling a speech “Globalization and a Just Society” may seem like a recipe for trouble. Some would argue that they are a contradiction in terms. Current political correctness in some quarters would have it that the global economy is worthy of the kind of fear inspired by the Plague or Ivan the Terrible. Certainly it is difficult to think of any other essentially benign economic and social transformation inspiring such a degree of misgiving, suspicion and misrepresentation. The only comparable example in the UK is the European Union although those who attack it are a very different constituency.

I intend to suggest that globalization is neither unjust nor, for the most part, to be feared, and that to seek to tear down the institutions – however imperfect they may be – which are the best hope for bringing a degree of management and direction to the process is foolishness of an extreme order. I hope that few in this audience might disagree with these views but there is an increasing need to articulate them.

This task is not an easy one. Those of us who believe deeply that economic integration and increasing interdependence in Europe and in the world are the best hopes for the future of mankind have, to say the least, been on the back-foot for sometime. In some cases the argument is on national sovereignty and in others it is anti-capitalist. The experience of the World Trade Organization in Seattle, though damaging for the institution, was a pivotal event. Despite the fact that the meeting failed, through inadequate preparation and major divergences on substance, it was portrayed as something quite different. Trade officials and ministers inside the conference centre, attempting to defend and develop the economic interests of their people, were made to look to superficial observers like conspirators against the poor. Outside, even if they were violent, it was the people in the streets with the supposed moral strength and outrage to speak up against the failures of business and government – real or imagined – who were superficially the only winners.

Much of the media went along with the show. It did so again when demonstrators marred IMF and World Bank meetings and it positively relished the contrast, last month, between the Davos meeting of the World Economic Forum and the counter-Summit in Porto Alegre, Brazil. Not that coverage of any of these gatherings is bad in itself. If the coverage were about the debate, it would be welcome. In fact, even serious newspapers, have largely given up reporting substance: confrontation is the story.

That is more than worrying. The only exposure that many people have to the debate on globalisation is pictures of violent demonstrations and ignorant sloganeering. And the media is not wholly to blame. Neither senior political figures nor – I am sorry to say – senior businessmen are prepared any longer to speak up for principles and institutions which underpin the affluence of most modern economies and provide promise to the rest. This all applies equally to the European debate.

Let us look quickly at some basic propositions. The first is that globalization is something new. It may seem new, because it has a fancy new name. But the development of an interdependent world has been underway since the Second World War. Arguably it started with the US Trade Agreements Act of the mid-1930s which started the process of recovery from global depression and beggar-my-neighbour trade and exchange rate policies.

That story alone is worthy of much attention from those who see economic integration as an evil of our time. The legislation was promoted by one of the greatest and most visionary Secretaries of State in the history of the United States, Cordell Hull. As a young Democrat Member of the House of Representatives during the First World War, Hull articulated the link between trade protection and military conflict. In a speech to the House in 1916, he said,

“If I were President of the United States, I should…propose to the governments of all commercial nations that at the close of the present European war an international trade conference be held…for the purpose of establishing a permanent international trade congress.” The objective would be to consider “all international trade methods, practices, and policies which in their effects are calculated to create destructive commercial controversies or bitter economic wars….and to promote fair and friendly trade relations among all the nations of the world.”

The multilateral route was to take a further thirty-three years before the GATT became a reality. The experience of the 1920s and early 1930s hardly needs restating here. The Trade Agreements Act of 1934, under which the US started to negotiate bilateral trade deals whose results were enacted on the basis of unconditional most-favoured nation treatment was the best Hull could achieve. And it was too late: Germany was already rearming, and importing the necessary raw materials on the basis of bilateral barter deals.

In his memoirs, Cordell Hull notes that US exports to the sixteen countries with which trade agreements were negotiated between 1934 and the end of 1938 increased by 40 per cent. German exports to the same 16 countries over the same period increased by less than two per cent: though, of course, exports were hardly the point.

In the event, the US legislation became the foundation upon which the multilateral trading system, the GATT, was built. The principles are no different from, the system we have today and are embodied in the World Trade Organization. A just cause? It would be difficult to argue that Cordell Hull’s philosophy and achievements were anything less than just.

That philosophy was rooted less in the tragedy of the Great Depression than in the view that the 1914-1918 War had been the inevitable result of the retreat from an open world economy. In the nineteenth century the world had known what sometimes is referred to as a “golden period” of trade expansion based on globalisation.

True, it was a globalisation founded partly upon colonialism. It was driven largely by the British Empire, the industrial revolution in Europe and, later, the coming of age of the United States. Nevertheless, trade thrived through steamships, the demand for food, commodities and machinery and through new technical gadgets like the telephone and telegraph. Countries got wealthy through trade. And not just in Europe and North America. Colonies and other nations we now refer to as “developing” sometimes had per capita incomes as high as countries in southern Europe. In 1870, long after their independence, both Chile and Argentina had per capita GDPs somewhat above Spain and Portugal while Mexico and Brazil were not far behind. The share of exports in GDP, at around ten per cent was on a par with the countries of Northern Europe. And the discrepancies in national income per head we now see between many of the poorer countries of Asia and European nations were nowhere near as acute in the hay day of free global trade.

Not only is globalization not new, the factors which drive it are not especially new either. The nineteenth century had new steamships, railways, automation, high-speed communications and relatively efficient capital markets. The twenty-first century has refrigerated air cargo carriers, high speed trains, multimodal courier services, robot-based production, mobile phones, the Internet, instant data transfer and relatively efficient capital markets.

What the nineteenth century had far less of was barriers to international trade in services and the movement of labour. It was a time of mass migration – skills and expertise went relatively freely where skills and expertise were needed. So – with the inevitable exception of agricultural commodities – did goods. Openness a century ago made the United States what it is today.

Europe had its problems of course. It protected its commercial shipping fleet from competition. Britain had its Empire preferences – early precursors of the European Union’s banana regime. It also had the Corn Laws. This legislation, introduced between 1815 and 1827 as an exception to major tariff reductions for most other imports was designed to safeguard the interests of rural landowners from the effects of cheap imported wheat.

If ever there was a just cause in liberalizing trade it was the fight against the Corn Laws. Richard Cobden, who led the fight partly through the heroic efforts of the Anti-Corn Law League, used his maiden speech in the House of Commons, in 1841, to protest the injustice of the legislation. He told the embarrassed Members, many of whom gained directly from the Corn Law, that the family of a nobleman paid one half-penny of “bread tax” on every hundred pounds of income. However, the effect of the tax on the family of a labouring man was not less than twenty per cent. The condition of the labouring class had deteriorated woefully. It still took until 1846 to repeal the Corn Laws.

The free traders of the nineteenth and much of the twentieth century occupied the moral high ground that many anti-globalisation campaigners claim to occupy now. It is a strange inversion of history, economics and common sense that the foundation of so much economic and social development is now regarded with such hostility. And where there is no such hostility, there is also no stomach to make the contrary case, to stand up for the principles of open markets and integration.

That is no less true for the European Union, undoubtedly the greatest, the most noble and the most complete initiative in economic integration of the twentieth century. We are subjected to much exaggeration and misinformation about so-called “Fortress Europe” and the iniquities of the Brussels bureaucracy. The reality is that the European Union has become the world’s single biggest market for other people’s goods, services and, yes, even agricultural products. The contribution of a united, integrated Europe to global development has been vast – and most of all as an example that works. Of course it is supranational rather than intergovernmental. In areas of application its laws are superior to national law and will be enforced against national governments even by national courts. And laws can be made by majority votes. This is, in principle, something about which we Europeans should be inordinately proud.

In his memoirs, Jean Monnet stressed his conviction that European integration was part of a wider process – a process of global integration. So it has proved to be the case. Without European integration we would not have launched the Uruguay Round and we would never have negotiated with a powerful single voice. Without Europe there would have been no World Trade Organization. Indeed, a compelling reason for advancing further towards an ‘ever-closer union’ in Europe is the imperative need for an adequate response to, and contribution to, globalisation.

Whilst in many ways its major achievement has been political Europe stands out, in the past fifty years, as a hugely successful exercise in creating and reaping the economic rewards of interdependence. Without European supranational institutions where would we be today? At the multilateral level, the process has been a more faltering one. In a sense, we have spent the last half-century struggling through a series of the most tortuous trade negotiations ever, to get back to the state we were in 100 years ago. And we have not succeeded yet.

So, globalisation is not new, nor is it qualitatively different from the nineteenth century. What then is all the fuss about?

The first point to make is that the much hyped claim – especially in the streets – that globalisation is a conspiracy between business and government is nonsense. It is equal nonsense to pretend that globalisation is a policy that governments are free to pursue or abandon. Mobile phones and electronic data transfer cannot be abolished by governments. Boeing and Airbus are not about to stop building cargo planes while CD manufacturers in Europe and cut flower producers in Colombia are not about to stop using them. I can also assure you that Goldman Sachs is not about to give up participation in global bond and equity markets.

So globalization has a life and dynamic of its own. To that extent, it is neither just nor unjust. What remain in the gift of governments are decisions on how quickly and to what extent nations and economic groups should throw themselves into the game and how the results can and should be fairly distributed. In other words, opening markets for goods and services, allowing free capital flows and permitting people to move into and out of markets to earn their living are the responsibility of politicians.

It is these decisions which companies seek to influence. And if this is what critics want to call a conspiracy, then of course they will. But it is quite wrong to see only multinational corporations in this role. Most countries now have a major private sector and most have companies for which international markets are part and parcel of their ambitions. This is as true for sub-Saharan Africa as it is for China or Brazil.

Nevertheless, there is almost no government which, when it goes to negotiate in the World Trade Organization, does not have a balance to weigh. For every forceful, thrusting enterprise that wants barriers to trade and investment in overseas markets broken down there will be a fearful, defensive uncompetitive firm pushing to maintain or reinforce domestic protection. They are often more focussed than those who believe in fostering openness. Almost every government goes to the negotiating table with a wish list and a refusal list. The list of examples clearly demonstrate the issue: Abolish export subsidies, yes. Abolish anti-dumping, no. Better investment conditions for insurance companies, yes. Do away with audio-visual sector preferences, no way.

One thing is for sure in the realpolitik of trade relations – never expect consistency. The principles of trade liberalization and comparative advantage are absolutely OK – especially for other people, and just so long as they do not get in the way of domestic sensitivities.

Now, economists have long argued that there ought to be a public interest element injected into trade policy-making. A very few countries have statutory provisions for public (largely consumer) interests to be considered when decisions are taken on, for instance, anti-dumping duties. Nevertheless, there is no doubt that producer interests dominate decision making in most countries. The focussed minority always makes more noise by far than the unfocussed majority.

At least that was the case until very recently. And here I think we are getting closer to a more up-to-date notion of justice in the global economy. For a whole variety of reasons, a large number of new constituencies now see far more clearly that they have a stake in the processes of economic integration.

Trade unions always worried about cheap labour overseas making domestic goods uncompetitive. Now they worry that, with a global economy, large firms can move production around the world too easily – social “dislocation” has become a hot political issue. Consumers always understood that high tariffs drove up prices in the shops. Now they are concerned that the imported food they buy is safe or that products are not produced through prison or child labour. Those concerned by climate change or the preservation of biodiversity have their concerns about globalization as do those focused on poverty relief, human rights and access to medicines. In fact, almost every ill facing humanity has been put at the door of globalization and the international organisations that are seen as its embodiment in recent years.

Now, it has to be said very quickly that some of the alleged concerns being expressed in some quarters are no more than protectionist special pleading. It has become the fashion to substitute often bogus concerns about poverty, labour rights, human rights and the environment for the classical protest against foreign competition per se. These new ideas sound better in the media and command political respectability where outright protectionism is no longer acceptable. Moreover, some of the proponents have become adept at putting forward extremely dangerous views with a clarity and conviction that sound both credible and seductive.

However, having had the temerity to suggest that not every proclaimed cause is what it seems, I also have to recognize that there is a significant degree of genuine concern about the impact and justice of globalization which needs to be addressed.

At root, the basic fear is one of loss of control. There are issues of sovereignty which are real, and I shall come back to them. There is a sense in which the market will never deliver benefits where they are most needed unless it is restrained and directed. There is a view that the international institutions that are best placed to bring a sense of justice to the process are either too weak or, perhaps, too powerful to do so effectively.

We have to face up to these widespread perceptions. But in doing so we need to separate out the emotion, special pleading and downright ignorance. If the remedy is not to be worse than the disease, we must be sure that at least some of the fears related to globalization are rational and that the responses do not serve to create a much less fair and much less secure world.

For that we need to look at the past twenty years of economic change. (Don’t worry, I do not intend doing it on a month-by-month basis.) Apart from that part of globalization which has been driven by technology and communications, a large part of the reconstruction of a truly global economy has been policy driven. But it was never solely a question of trade liberalization. The defeat of inflation; the retreat of the public sector in Europe; the transition of centrally-planned to market economies in Eastern and Central Europe; and the creation of conditions for the global mergers and acquisitions boom were all mileposts.

In Europe, we have seen the extension of the European Union to 15 states, the revolution of the Single Market, and the emergence of economic and monetary union. Part of this has been a liberalization of monopoly sectors such as telecommunications and energy which often historically acted as a hidden tax on the consumer. Elsewhere, governments throughout the developing world have taken autonomous decisions to open markets and reduce the paraphernalia of protection. And I must stress that point. Long before the conclusion of the Uruguay Round nations were liberalizing, and not because they had international commitments to observe or because the IMF was pressing them. The decision to open economies was simply the best of the long-term policy options open. Mexico did it; Australia did it; and so did Morocco, Chile, the Philippines and many others.

One way or another, every one of these changes – and many more I have not mentioned – have served to allow businesses in rich and poor countries alike more space in which to compete. But individual governments could never do it all – even the European Union. What was needed to make sense of these individual policy responses to the challenge of the new globalisation was a multilateral framework, a framework of rights and obligations, of rules and market access commitments.

That was the World Trade Organization. So what is this monster? It has been accused of everything from creating starvation to taking medicines from the poor and removing the last vestiges of sovereignty and national identity from everyone…bar the United States.

If I had to sum up the WTO in just a few words I would say it is the best tool available for managing globalisation for the benefit of all. Or, to put it another way, it is our best hope of making globalisation and a just society less of a contradiction. So why do people want to tear it down?

The real problem is that most people have either lost sight of what the WTO really is or just do not want to know, since they have other agendas. Yet the institution is founded on just a few very basic principles, and they have a lot to do with justice and fairness.

In essence, the WTO is a set of rules enforcing a package of trade commitments made through negotiation by each of its members. It is an inter-governmental institution with a secretariat. It also has a system of dispute settlement.

At the institutional level, the first principle worth mentioning is that it makes all important decisions by consensus. That means that any country can stop a decision being taken – even a small country. If you doubt that ask any of the representatives in Geneva about the day last year when the tiny island of Saint Lucia stopped the dispute settlement body in its tracks over the bananas issue. This is not to pretend that everyone has equal weight in negotiations but it does mean that nobody can be forced to give up on issues of overriding national interest.

The WTO is probably best known for its dispute settlement process. Unlike that of its predecessor, the GATT, today’s system is extremely powerful. It can and does give authority to governments to retaliate where findings are ignored or inadequately implemented. Although strongly in favour of the dispute resolution system I happen to believe that there is some danger in the system being overused, especially as a substitute for negotiation or a lower-key, pragmatic approach to resolving disputes. Nevertheless, it is a solid and credible system which is there for all to use. And, more and more, developing countries are doing just that. They no longer shy away from making the elephants answerable for their actions in the trade field. It is a system of justice geared to a global era.

As for the rules of the WTO they are many and varied. But they all tend to relate to those few simple principles. At the core is the principle of non-discrimination. Non-discrimination through the most-favoured nation clause was the hallmark of the old GATT and of Cordell Hull’s Trade Agreements Act also. MFN (or normal trade relations as the US now calls it) means that member states of the WTO must offer the best conditions of market access they offer to anyone, to everyone. Historically, it has meant small and poor countries without economic muscle enjoying automatically, and without concessions on their part, all the advantages negotiated by the powerful players. Yes, it is true that bilateral and regional free-trade agreements have undercut MFN to some extent. But the founding fathers of the GATT saw such agreements – and customs unions like the European Community – as trade creating for all so long as they met certain criteria.

The principle of national treatment – another facet of non-discrimination – requires that once goods and services enter markets they must be treated no less favourably than the same goods and services produced domestically. Again, that gives the small-fry in world trade some further security.

A third principle is that of transparency in trade measures and regulation. It is just too easy to hamper trade access through hidden barriers and secretive administration of customs or government procurement, for instance. It should not happen under WTO rules.

Let us not get too obsessed by principles! The point is, I hope, clear. The WTO is a credible and enforceable system of trade rules which brings to the weak and poor a chance – but only a chance, much else has to be in place for anyone to succeed in the trade arena – to succeed in the global economy.

There has been much talk of disappointment on the part of developing countries in what the WTO has delivered. I have some sympathy with that view, but only some. We may have under-estimated the amount of technical assistance that poorer countries would need in terms of institutional capacity building and in creating trade infrastructure. That shortcoming is now recognized and much more is being done to provide adequate assistance, especially in partnership with, and at the demand of, the private sector.

Equally, I would have preferred the industrial countries to have been much more open-handed in their commitments to wind back protection in textiles and agriculture. Nevertheless, even those sectors are opening and, generally, developing countries are exporting increasingly successfully to the North American and European markets. It is not as bleak a picture as often pretended. But, even where markets are open, that is only the first step for developing countries. Most need high levels of inward investment if they are to succeed in the global economy. But that investment only comes in an environment of security, good governance, efficient and honest institutions, and a private sector which is willing and able to participate in a competitive domestic economy and in competitive markets outside national boundaries. Where would the developing countries be today without it? Those who seek to destroy the system would do well to ponder this question.

Once again we come back to the reality. The WTO and other international institutions can only seek to provide the right conditions under which globalization is an opportunity not a threat. It is only governments and companies that can turn opportunity into business.

Thus to say that the WTO and institutions like the World Bank and IMF work against the interests of the poor is ludicrous: it is also to condemn the poor. It is the multilateral bodies which provide an inadequate but credible basis for progress. Without them, it would be truly the law of economic power – and often the law of the jungle.

I want to take the point further. Because the complaint is not simply that developing countries do not always benefit from globalization as they should. It is also that we are all losing control of our economic, even political destinies and our identities. If it were true, it would be a serious flaw, to say the least. I would be the first to retreat to the coast of Ireland to spend the rest of my days pondering the ocean.

However, we have not lost control. We have certainly seen power transferred in the sense that there are more major players – countries and companies – engaged in global commerce today than 50 years ago. And in ten years time there will be more still. We have seen power transferred in the sense that regional economic integration – and notably the European Union – requires some transfer of decision-making if it is to work. We have seen power transferred on an international scale in the sense that multilateral organizations must, almost by definition, be key players in a global economy.

But if the process of globalization is not easily slowed and, still less, halted, then these transfers should be welcome. We need some element of what can be termed global government if a global economy is to be harnessed for the good of all. The World Trade Organization is the most developed institutional element of global governance we have so far put in place. It provides a tool that brings back to sovereign states the opportunity to determine the direction and nature of globalization. And, as I have already stressed, it does so on the basis of decision-making by consensus within a set of solid principles. I believe in majority voting in the EU simply because it is dealing within a Treaty context with a group of advanced and sophisticated democracies within a carefully developed institutional framework. At a global level consensus is still the best way.

So the next time you see slogans saying “The WTO Kills People”, take a moment to think about what the perpetrators of such rubbish are seeking to tear down. There is nothing else. There is no other credible set of principles on which to base trade relations. The alternatives have all been tried. And they do not work. The WTO can always be improved through negotiation – and it is high time a new trade round was launched, precisely to permit a more rational development of the system than through perpetual dispute settlement cases. But we undermine the system itself at a very great risk indeed.

Which brings me to my final point. The WTO is a powerful institution. Unlike most others in the international arena, it has the ability to take some economically telling decisions – on a global basis – and to enforce them. That power has made the organization, at one and the same time, the object of suspicion and criticism that it somehow harms social development, the environment and human rights and an attractive vehicle for many causes outside the field of trade. Thus, we see groups demanding that labour rights be a determinant of trade rights through the WTO. We hear that environmental standards must be met if WTO nations are to benefit from trade concessions. It is also proposed that the observance of largely western concepts of human rights be conditions for trade access.

These may all be good causes. The question is whether tying them to trade conditions will advance them. I frankly doubt it. The record of outright trade boycotts – let alone the more modest trade sanctions that might be envisaged through the WTO – have a dismal record of improving social and political conditions. Tying labour rights to trade concessions is widely (perhaps even generally) and rightly regarded in the developing world as protectionism by another name. Even the Victorians talked about the “pauper labour” question on very much the same basis. And opening the way for operating trade instruments which penalise goods on the basis of production methods that do not meet advanced industrial-country environmental standards is another dubious proposition.

And every one of these propositions rides roughshod over the principles of non-discrimination which have made the trading system created in 1948 the huge success it is. The fact that the WTO cannot cope with every shortcoming of the global economy is not a reason to condemn it. The real problem is that this institution is on its own in an era when other solid elements of global governance need to be put in place to take on the challenges we all want to meet.

That is the real challenge of globalisation at present: to reinforce or rebuild multilateral machinery which is up to the job of helping sovereign states guide a just global economy. At the World Economic Forum in Davos, three former Directors-General of the GATT and WTO proposed a new commission to provide the intellectual input necessary to make the right kind of decisions on these crucial questions. I hope political leaders will take up that proposal.

In short, it is time to climb down from the emotional and ill-informed precipice to which political debate has been driven on globalisation. Let us recognise the real shortcomings in the governance of the global economy but, at the same time, get back to the principles that underlie economic development and fairness in world trade and reassert them loudly. It is high time to drown out the cacophony of those who would drag us back to the law of the jungle. I could say precisely the same about the European debate.

This is the text of a speech delivered by Peter Sutherland as The John Garnett Memorial Lecture