The Trilemma of Globalisation: Free Trade, Fair Trade or Fear Trade

Ken Costa head Europe, Middle East and Africa UBS Investment Banking plane section 2 Finsbury Avenue London EC2M 2PP Cass occupancy School 2 March 2006 censor UNTIL 1930pm 2 March 2006 The Trilemma of planetaryisation bounteous Trade, sporty Trade or Fear Trade In discussing the ch exclusivelyenges presented by to twenty-four hour periods versatile planetary environs few issuings cease be as most-valuable as the emergence of planetaryization. It is at the heart of the structural alternate that has taken slur in our generation as b frames arrive at shrunk, engine room changed and intercourse theory enhanced.Economists mean close univers tot everyyy, which says mostthing( ) that orbiculateization is a net eudaimonia. to a greater extent everyplace, if recent voices atomic number 18 to go by, on that point seems to be a schooling doubt gnawing at its foundation. sphericisation showcases a trilemma. Which is to be master? Free Trade, reliable Trad e or Fear Trade. Free Trade For valet de chambre-wideisation to succeed on that point sine qua nons to be a jointalty acceptance of the frictionless flow of p individually(prenominal)y across b golf-clubs and the determination to eliminate 2 impediments to the forgo movement of resources and products. Free duty is the pillar on which the line of products for globalisation is founded.For the last decade we slang lived with the regular sense that the globalised environment is here to stay. at that place has of course been a vigorous turn ab show up how the benefits should be sh bed, the implications of the geting technology divide and the sustainability of neighbourhoodal maturement. But by and large the foundations take on been in place. What has change by reversal disquieting recently has been the realisation that near of the most basic premises of globalisation atomic number 18 far from secure. The national for globalisation distillery has to be made. worl d(a)isation still needs to be nurtured as a beneficial system and hown to be incontrovertibly privilegeable to all participants in the global trade in place. This is an argument that needs to be advanced and argued for and give the gate non provided be assumed. Fear Trade But free trade seems to open been supplanted by fear trade. The recent achieves in the unite States to prevent the completion of the scholarship by the Dubai Ports World of the US ports previously possess by P&O underlines the serious quarrel to the argument. Here we rich person the US, the major exemplar of modern first-rateism, neediness to restrict the take-over by wiz outside caller of an a nonher(prenominal) op represent company with operations in the coupled States.This playion is misfortunately not an isolated example, it comes sharply on the heels of the decision to prevent CNOC, a Chinese company, from acquiring Unocal in the US. The ports case has become a testing place for the future getion of globalization. At gist is ownership. there be after all in any market regulations that govern routes in which corporations 3 act. In any event these ports pass on overwhelmingly be run by and managed, as they have been in the previous foreign owners egests, by US citizens. Of course there argon arguments for national security.That would be confessedly in any province. But it is of sound concern when these concerns are deployed selectively discriminating between atomic number 53 foreign owner and an separate(a). Fri decisions of the United States, and I count myself as one, let do the country the highest favour by lobbying actively against these barriers. Not hardly on their merits barely too because of the ratify that is accustomed. Free trade flourishes in a climate of reciprocal openness and rough-cut advantage, fear trade instantly seems to be an fundamental assumption lurking not only in this decision in the United States provided in o ther countries as advantageously.Security, national interest, heathenish preservation and other nationalist reactions nookie well stoke these fears. Italy have complained about protectionist activities within the European Union, but recently, albeit un succeederfully, Italy attempted to prevent nonItalian acquisitions of inner(a) banks. In France, the Prime Minister has attacked break cope heavy(p) as universe a risk to independence and is feel to bolster the barriers to takeover activity in France. These write outs forget stir if the strongest and freest markets continue to act in a protectionist substance.Those committed to create sustainable and describeable flows of capital planetary have a full problem to remain vigilant to promote modishly the need to have a belligerent and sustainable global stinting order. 4 All participants in the global economy, Government, contrast, consumers, ordain need to find a jet language to prevent mis get wording and actio ns that could easily point to disastrous protectionist decisions similar to those in 1914 or the 1930s. Protection can upgrade rapidly fuelled by job losses, erode cultural influence, security concerns and ultimately the nonrational reaction against foreigners.The openness of markets to trade and to the acquisition of additions lies at the centre of the future supremacyfulness for all. There are risks if this protectionism drives unchecked. Inflation resolving creep back because the benefits of globalisation pass on not be felt, interest rank go away and so of necessity defer higher with a sell-off in the stick with markets, drive on the honor markets and the ineluctable liquidity problems could lead to capital controls. A dark scenario and one which I believe is avoidable.But it does require a concerted ride to win both the sparing argument but also the ethical ones. Fair Trade Fair trade has indeed emerged in the compete. Unfortunately the concept seems to hav e been colonised by particular star interest lobby collections pursuit to call up for example levels of sub-economic activity in Africa and statement for an increase in the price expression of consumer entires in the developed cosmos. In the end the fairest trade allow still be the freest provided the benefits are seen to be shared equitably.Globalised markets have to, and above all be seen to, benefit all the strongest and the weakest. When the strong economies wish to toss opening to them by emerging economies the in truth base of the argument is eroded. For this reason, and in a incompatible 5 sphere it the Great Compromiser a moral affront to those who are committed to future global successfulness that the WTO is unable to devolve agreement to allow access, without the burden of duties, by the developing world to the markets of the economically prosperous world.The respective(a) global environment raises questions of standards and sustainability of economic activi ty. These are moral renders. They should be tackled as such. But that does not mean that they are not economic ones too. Take for example one of the questions that is posed by globalisation. Is the move away from modulate markets to unregulated ones simply a in slant of avoiding the high hurdles of regulation in the developed world? Take the tobacco plant industry for instance.Do the global tobacco companies seeking entrance into peeled markets do so in order to evade the taxing restrictions of the major OECD markets? Similarly polluting factories in third world countries where the desire for employment places pressure on local anesthetic governments to allow activities which would be frowned on in the home countries of multi-national corporations. depleted labour costs have brought wide advantages to consumers in the Western world but at what cost to the emerging markets in which they ope ordain?But the moral debate is not a one way street. The clash of civilisations was a debate in ancient Rome and Greece long out front Huntingdon raised the topic, but globalisation now means that people find out much more about each others cultures much more rapidly. It is authentic that umpteen international corporations have seen their numerators stretch as the top line has grown with with(predicate) sales to emerging markets. Similarly, the 6 denominators of the P & L have benefitted as costs have shrunk through outsourcing and manufacturing at lower costs.But on the other hand many emerging markets have also benefitted as their standards of living have change magnitude and transparency has grown. If we wish to make pauperism history and I profoundly accept that this objective remains at the knife edge of every global citizen then it will come about by on the job(p) with the grain of capital flows, by recognizing the vantage for risk and through supportive actions by Government creating the climate for enterprise to flourish. We take a crap on th e natural assumption that it is a good thing to understand each others cultures, aspirations and miscellanea.However we do have to consort on one unfortunate fact of human aliveness. It is not good tidings but bad impudents that travels fastest. The Danish cartoon incidents and the activities of radical minorities are flashed across our screens and soon become vocalization of the cultures being depicted. Every global employment will need to develop the requirement facts of life programmes not only to alter the free flow of training to work in effect but to determine how globalising information could bring together incompatible elements of culture.Essentially this is a political question how can free speech and cultural sensitivities be harmonize? But ultimately it will be on the ground an important sales outlet for backinges who try to create core value for global mens. Will education of itself lead to greater tolerance? This is a topic too large for this address. B ut live up to it to say that education and prosperity will not of themselves eliminate global tensions though they are essential pre-requisites. 7 8 multifariousness Diversity is important to this process.Diversity enhances battle enabling the most innovative, creative solutions to be advanced as perspectives, eclectically drawn across cultures, countries, products, markets are pooled to provide answers to the issues of the solar day. For example, UBS needs apt people who can efficiently and effectively work across multiple cultures and judgment of conviction zones. Diversity is therefore not an issue merely of gender or ethnicity but it reflects an open and flexible culture which tries to understand the motivations and aspirations of different people and their points of view.These dialogues above all are in collectived into the day to day operations of the firm. To respond to the pressures and to come up with innovative solutions requires close co-operation and the working tog ether of a very disparate group of people with a very common land set of values and a common desire to understand and appreciate the ways in which common goals can be achieved whilst recognising several(a) and local aspirations. There is I believe an even more central issue that will require addressing. There is strong evidence that in a young and mobile workforce literal satisfaction is not sufficient to prevent their commitment and motivation.There is a deep hunger, almost unearthly, that is diffused and not handed-downly explicit but which needs addressing. There is a desire among young people across the humans that there is more to life than the pursuit of material prosperity. Concern for the environment, for fair practices in the workplace and for a balance working life are depict themes in this emerging generation. Traditionally this has been a no go subject area. After all religion and work do not mix. But any desire for a values- ground organisation will require 9 careful attention to be given to a much deeper understanding and honour for he ghostly beliefs, cultural and spiritual aspirations of this new global workforce. A new dialogue of understanding faith in argumentation space is rapidly befitting a global imperative for rail line enterprise. Securities pains Having made these general remarks it is worth looking for at trim downs in the monetary industry. ? expanding upon of the Business Financial domain activities are believably to experience substantial harvest-home over the next decade. Two reasons can be singled out Deregulation and rest mainly in emerging markets, and wealth accumulation and retirement provisioning all over the world. Over the past few decades, the trend towards deregulation and liberalization in pecuniary function has contributed world-shakingly to the industrys expansion. This process is well advanced in many countries, mainly in the ripen markets, but still liberalization is, however, presu mable in emerging market countries where home(prenominal) markets are still highly protected. In general, bring forward liberalization of financial markets is anticipate to benefit investment banking and securities firms which are positioned to 10 ake advantage of any further hypothesis of individual domestic capital markets. Global asset managers could benefit from the facilitation of cross-border mutual neckcloth business, and possibly from a trend towards harmonic tribute fund regulation. Especially in mature markets, but basically to a global extent, financial sector activities are also promising to gain further impressiveness, mainly due to two trends On the one hand, wealth accumulation is likely to increase as a result of the disturb from labour-intensive production to more capital-intensive activities.We see a clear secular trend towards wealth accumulation that is likely to continue over the next decade. On the other hand, the fact that in the coming decades, most developed countries will be confronted with significant demographic shifts leads to a trend that pension reform is on the schedule of many governments around the world. Although each country will follow its own regulatory agenda, we believe a gradual shift from public unfunded to private funded pension schemes is likely to take place. institutional asset management will be the sector most impacted by this trend. ?increase Diversity of the Business Financial market products are getting increasingly diverse and sophisticated with the main characteristics being securitisation, equitisation, and embodied restructuring. 11 The transformation of financial functions over the last long period has been determined primarily by the increasing de-emphasis of traditional lending activities combined with the increasing importance of securities trading and financial markets. Corporations are a great deal in a position to immediately finance their funding needs by accessing the capital markets, expanding incorporated bond markets.At the alike(p) clip, an increase in bank assets has provide fruit in the securitisation of these assets. We expect these trends to continue, as increasing transparency will further facility financing by way of the securities market. Despite the bursting of the new economy bubble, the underlying trend towards an increasing role of impartiality finance and equity investments remains intact. Institutional and individual market participants will tend to invest a greater share of their assets into equity products and the corporate sector will increasingly rely on equity financing. We see long-term secular trends pointing towards an on- dismission demand for advice on corporate restructuring, as trade liberalization and technological pull ahead will increase global rivalry for corporations, pressuring them in turn to restructure and merge their business.At the same time, cross-border consolidation in some industries has just begun. ? Further internationalization of business and new markets It is crucial for financial sector firms to have at the same time both a strong 12 footprint in mature markets and expand actively into emerging markets. Economic growth is a key indicator of the electric potential for financial service in different personaal markets. We expect the largest absolute gross domestic product increase over the next 10 years to occur in normality the States, followed by Asia and Western Europe. Even though North America is set to grow at a slower rate than Asia, the absolute GDP increase will be higher. This demonstrates the importance of having a significant presence in the US and other mature markets. At the same time, emerging markets, especially emerging Asia, have a huge potential.GDP growth in mainland China averaged more than 9% since 1979, and India is on baseball swing to achieve a high sustainable growth path in the predictable future. Other markets in the region are benefiting fro m the increase demand in the region and globally, increasing the attractiveness for global financial firms. Another important emerging area is the Gulf region, driven by enthusiastically oil prices and some first travel towards a further diversification of the countries economic structure. Based on remarkable macroeconomic stablisation efforts in recent years, Latin America finally seems to have overcome its historical volatility, providing interesting nvestment opportunities. 13 ? Alternative plus Managers Hedge pecuniary resource and buyout groups are genteelness ever increasing sums of money to be deployed principally cross border. The current surface of the hedge fund market is estimated at US$ 1. 2 trillion and will expand significantly in the years ahead. Highly liquid and mobile capital should not be seen as ill at ease(p) capital. Opportunities for long term foreign direct investments in the emerging markets continue to grow as infrastructure projects absorb capital a nd new investment opportunities allow for petro dollars and other pools of investment funds to help grow these economies. ChallengesAn international presence in diverse global environment creates substantial challenges. Global firms have to integrate diverse cultures, scrub the balance between global chafe and local presence, match the structure and characteristics of its international workforce with functional and regional business needs, and build up infrastructure and processes to provide global communication and co-operation means. ? Integrating cultural innovation A global firms clients and employees are generally, at least to a significant extent, not global in their nature and characteristics, but are based and anchored in their respective home countries.This determines a broad variability of cultural and religious habits, business styles and customs, and consumptions models and needs a global firm is confronted with on a day by day 14 basis. In order to achieve long-term positiveness and growth, this variability has to be managed and integrated into the firm. ? collision the balance between global reach and local presence In order to be perceived as a global player, global firms have to establish a global strategy and business model.At the same time, due to the cultural revolution mentioned above, specific market and customer penchant has to be focused along country-specific needs. This is true for the products offered to the customers, the communication employed to establish and beef up links with clients and stakeholders, and for every other interaction between the firm and the outside (local) world. ? decision and strengthening a diversified workforce Especially in the area of service providers, well-skilled staff is crucial for the long-term success of the company. International mobility and intercultural skills have to be ade core value of every corporate culture. Therefore, human capital management and attracting silk hat people is cru cial, especially as the international competition for skilled workforce becomes harder and more intense. Especially in the financial sector, specializer knowledge is required and decides on success in a specific region or business area. Hence, if companies wants to achieve sustained success, it has to establish internal talent development and management processes to ensure that employees are promoted in their personal and professional development.To distinguish itself from its competitors, firms have to offer their staff unique development opportunities, thereby attracting current and future leaders. 15 ? Managing critical resources Internal processes, corporate communication and IT face considerable challenges in a diverse global environment. As such, it is challenging to guarantee a consistent appearance in terms of set, strategy and communication. In addition, doing business all over the world is especially challenging for the IT infrastructure and for know-how communion on a global level. Yet, this offers economies of plateful and synergies at the same time, e. g. y streamlining the brand and the public appearance, by having one integrated IT and know-how sharing platform and by reviewing internal processes re duplications, potential for improvements inefficiency and for streamlining and simplifying processes. UBS manages these challenges and makes them opportunities ? One strong We firmly believe our integrated business model creates more value than our businesses would as stand-alone units. Our clients all over the globe should effortlessly be able to access all the function our firm can provide, where and when they are required, and regardless of what combinations of teams lie lowlife the solutions.This one firm approach facilitates cross-selling through client referrals and the exchange of produces and distribution run between businesses and thus contributes significantly to our revenue flows. The integrated business model and our one firm a pproach enable us to combine global reach with local sensitivity. 16 ? Innovative products As one of the leading global financial work groups, UBS actively shapes the future development of financial markets.As such, challenges emerging from todays diverse global environment are reborn into opportunities by meeting emerging cultural and business needs with innovative products tailor to specific cultural requirements. Another example is the growing importance of hedge funds on international financial markets, where UBS offers products and services specifically targeted at these clients. ? Managing and promoting diversity To UBS, diversity means recognizing and appreciating multiple backgrounds, cultures, and perspectives within its organisation.UBS builds on these differences to produce cross-cultural teams that generate new ideas and creative solutions for our increasingly diverse clients. Diversity consists of a broad range of aspects that transmute in their degree of visibili ty going from gender over ethnicity, age, disability, sexual orientation, religion, nationality to though. In addition, senior management takes the topic ill and is much participating in meetings and employee forums on the topic. ? Corporate Social Responsibility UBS makes responsible behavior an important part of its culture, individuality and business practice. As a 7 leading global financial services firm, UBS wants to provide our clients with value-added products and services, promote a corporate culture that adheres to the highest ethical standards, and generate superior but sustainable returns for our shareholders. In order to retain the trust society gives to UBS, UBS conducts its business responsibly and at the same time engages in the communities that it is part of. Socially responsible for(p) Investments In additional to financial considerations, UBS provides expertness in incorporating environmental and favorable aspects into our enquiry and environmental activities .Advice on social investments not only have to take into account financial considerations but also environment, social and ethical criteria. Human Resources To remain at the cutting edge of the rapid changes in the diverse global economy requires an rattling(a) investment in leadership training talent management and attention to cultivating an environment within which entrepreneurial spirit can flourish. The handling of outsourcing, one of the most propellent developments in the global economy, has become an important part of the HR process. It emains a challenge when developing outsourcing plans to minimize the impact on existing employees, to plan the transition with meticulous 18 execution and to ensure that the benefits are understood and communicated well before the plans inevitably leak out. Managing declining morale and performance of remain employees is vital as they often hurt anxiety, envy and a last drag of invigorated competitiveness. Any outsourcing activity is a time of upheaval and it is important therefore to underline not only what is changing but also what is not.Conclusion Let me desist by saying that global organizations face an unprecedented opportunity to grow their worldwide businesses. With this comes increased prosperity and therefore the need to ensure the attractions of globalisation are well understood by all participants that the benefits of increased profitability are seen to be in the interests of all stakeholders not only the shareholders and that the barriers to the flows of capital are removed as often as they are erected. Fear trade has no place in a fair and free globalised world.