From a speech by
the Chancellor to the Federation of Bankers' Associations, Tokyo
MY VISIT today, representing the British Government, the current chair of the G7, reaffirms the partnership between the G7 countries as an indisputable foundation for international stability and prosperity. Our shared commitment to open trade and orderly progress among the G7 has been a driving force for growth - even in countries that not so long before seemed likely to be permanently left behind.
Now the trend is stalled, and in some places even reversed - but I believe that is a temporary setback, not a permanent condition.
I believe that the essential answer to the problems of the moment is not less globalisation - not new national structures to separate and isolate economies - but stronger international structures to make globalisation work in harder times as well as easy ones. Our urgent need is closer co- operation, continuing dialogue, and an unwavering commitment to open commerce. We must not let temporary instability put global progress at risk.
As the economic weather turns, as a storm in one region threatens to spread, there are easy but dangerous shelters - a return to protectionism, the breakdown of co-operation, the rise of beggar-thy-neighbour policies. But this can only yield further deterioration, not renewed growth.
All countries must actively work together to sustain domestic demand and maintain open markets for investment and trade upon which our shared prosperity depends. What is necessary is closer international co-operation to achieve stability and sustained growth, open trade and strengthened financial systems.
Irreversible global economic integration in capital and now also product markets has been accompanied by impressive growth in the world economy. During the 1990s, global output has expanded by an average of over 3 per cent each year, with developing countries growing at an average of 6 per cent and countries in Asia by an average of 8 per cent.
The first priority for Asia is to restore a platform of economic stability on which growth depends. The economic situation in much of Asia remains difficult, as the slowdown is turning out to be greater than expected. But progress has been made in restoring economic stability in some of the countries directly affected by the crisis, through full and timely implementation of the necessary reforms, in conjunction with the IMF. In both Thailand and Korea, we have seen significant currency appreciation this year, and this has allowed interest rates to be reduced to below pre-crisis levels.
I also want to mention the vital contribution which China is making to global financial stability. Its policy of maintaining a stable exchange rate is an important and responsible one in difficult times.
As our recent statement made clear, G7 countries, as well as the IMF and the World Bank, stand ready to support countries in all emerging markets which are prepared to embark on a course of strong and sound policy action. Of course, for the IMF to do this and be ready to help in times of crisis, it needs adequate resources now. I am glad to say that the British Government has taken action to play its part in doing this, and I urge others to do the same as a matter of urgency.
In Russia, economic progress can only be secured if there is political stability and a genuine commitment to both stabilisation and structural reform. As the G7 officials discussed at their meeting in London earlier this week, the international community remains ready to cooperate further with Russia in support of sustained efforts towards stabilisation and reform.
Vigilance is required not just in domestic macroeconomic policy but also in trade policy. We must guard against the risk that worries over cheap imports from Asia will encourage misguided calls for a retreat into protectionism.
We need to move quickly to a new round of trade talks that will take multilateral liberalisation forward, not backwards. We shall be looking critically at our own rules and measures. For example, The Voluntary Restraint Agreement on Japanese car exports to the UK expire at the latest at the end of 1999. The UK is and will remain firmly committed to the liberalisation of the UK and EU car markets.
We must never forget that the path of open trade and open capital markets that we have travelled in the last 30 or 40 years has brought unprecedented growth, greater opportunity and a better life for people across the world. No sensible policy-maker wants to turn the clock back to protectionism. We must make markets work - in tough times as well as easy ones.Reuse content