LONDON, June 6 (UPI) -- British Chancellor of the Exchequer Gordon Brown struck a blow for free trade in a key speech Monday night, warning that the current wave of protectionism sweeping industrialized nations would have devastating consequences for the global economy.
Britain would "stand against protectionism in all its forms," he pledged at a London dinner hosted by the Confederation of British Industry. "What we must now do is win the argument that is raging throughout the world -- whether it be up against economic patriotism in Europe, or populism in Latin America -- showing that embracing globalization not retreating into protectionism is the best way to growth, jobs and prosperity for all."
Issuing a rallying cry to free marketers the world over, Brown urged governments to put their protectionist instincts aside to agree a radical deal on free trade in World Trade Organization talks. The current Doha round was meant to be finished in 2004, but negotiations are still limping along amid disagreements over subsidies and import tariffs.
Brown acknowledged that the current trend for protectionism was arising from an anxiety at the negative effects of globalization, such as manufacturing job losses and offshoring of services, but characterized this mood as "general resistance to change which holds back necessary forward momentum."
The last year had shown the "sheer scale, speed and scope" of globalization the world over, he said. Asia had seen the biggest inward shift of economic power for centuries: it was now outproducing Europe and had taken up to one million manufacturing and 250,000 service jobs from Europe, the United States and Japan. Meanwhile its demand for oil and other commodities was growing rapidly, contributing to rising global prices, he noted.
National governments and businesses were experiencing "the biggest global industrial and economic restructuring the world has ever seen: the replacement of national flows of capital by global flows of capital, the national and continental sourcing of goods and services by global sourcing of goods and services," Brown said.
"Just as we have seen a step change in the pace of globalization, so we have seen an increase in the reaction -- indeed, you may say backlash -- against it."
However he urged nations not to see globalization as a threat but as a positive force: "for opportunity for all through competition and investment, and for prosperity through innovation and change."
He noted that even with the instability of oil prices in three years, the world economy had last year grown above its 30 year average for the third year in a row; global trade had grown by nearly 15 percent on the previous year, while global foreign investment had increased by 30 percent.
Yet in Europe, the last few months had seen governments undermining the principle of the single market by maneuvering to create national champions, he said: France blocking Italian utility take-overs, Italy blocking Dutch banking take-overs, Spain blocking German energy bids, and Poland blocking Italian financial service bids.
This mood had stalled progress in both European liberalization and in the WTO talks, he said, which if successful would create "a level playing field" for all to benefit from globalization.
Breaking the deadlock at the WTO would result in a 50 percent increase in world trade and $300 billion in economic growth, he added.
"The key that will unlock that door is America and Europe offering progress by reducing protectionism in agriculture, and India's and Brazil's willingness to move with liberalization of industrial goods and services," Brown continued.
Agricultural protectionism in Europe and America meant that $300 billion a year was being spent in subsidies to shelter the richest parts of the world, dwarfing the $50 billion spent on aid for the poorest, he said.
In Europe, Britain would fight for deregulation and an end to all forms of agricultural protectionism, he insisted, for "a Europe which must move from what I call trade bloc Europe to become global Europe -- open, outward looking, reforming, liberalizing, and opening up services."
He would raise such issues at the St. Petersburg summit of G8 finance ministers Saturday and at IMF meetings in September, he said.
The aggressive intervention of Brown, who is widely tipped to succeed Tony Blair as prime minister, is no doubt intended to dispel concerns that he is an Old Labor dinosaur who will take the party back to its socialist roots. However it will alarm those on the left-wing of the party who are hoping for a reversal of the New Labor agenda, and chill the hearts of those in Europe who fear a British attempt to destroy the EU social project with an injection of unfettered capitalism.
Britain's Trades Union Congress will argue in a pamphlet published Thursday that liberalization must be balanced with social protection if globalization is not to become a destructive force.
Co-author Lord Lea, a Labor peer and former TUC general secretary, said ahead of the publication: "The chancellor -- among others -- has been warning against the dangers of protectionism. The message of this booklet is that there is a trade-off. If we wish to avoid protectionism in relation to trade, then protection of a different kind is needed -- a model of economic restructuring that protects the rights and living standards of those now in the front line affected by globalization."
Meanwhile John Monks, general secretary of the European Trade Union Confederation, called for a framework to help working people handle the challenges of globalization, through active labor market policies and strong social protection.
He insisted: "Globalization needs regulation, if it is not to degenerate into a free-for-all ruled by rampant casino capitalism."
