The Right Honourable Lord Howell of Guildford, Deputy Leader of the Opposition in the House of Lords,

Westminster and former Secretary of State for Energy

Text of Special Address by The Right Honourable Lord Howell of Guildford, Deputy Leader of the Opposition in the House of Lords, Westminster and former Secretary of State for Energy, 4th September 2009.

I am deeply honoured to be with you. I will speak today on The Global Economic Transformation process, in which we are all involved, and about the Drivers which carry it forward, the Dangers inherent in it and the Requirements for a new and better global economic order  which it imposes.

First let me welcome you to a country which sits at the heart of today's economic order. It is called Chimerica.

I refer, of course, to the extraordinary SYMBIOSIS which has grown up between America's endless desire for imports and  China's amazing capacity to provide exports; between Chinese saving and American spending – a process which led over two decades to American (and European)  borrowing on a vast scale, with  cheap money, to an unparalleled  surge in bank lending and the accumulation of a Chinese  trillion dollar reserve.

China has become the owner of billions of dollars of American bonds and the destination of major outsourcing by US corporations seeking lower labour costs. Chinese capital has been invested on a growing scale round the world, including in Britain.

A decade ago I named this process Easternisation –forecasting that we would see capital flows  not from West the East, but from East to West. I argued that the high-savings cultures of Asia, along with the Asian philosophy of hard work and investment in education, would make the East richer  and the West poorer and relying increasingly on funds from the East, and from the cash rich Arab oil world, to survive. Asian money, including so-called sovereign funds, would bail out Western banks and industries.

All this has occurred, although at the time the possibility  was ridiculed. The so-called experts said it could never happen.  But now it has. Furthermore,  there are three new motors boosting  the global economy transition.

· First, the consumer standards of America are spreading  to China and the rest of Asia as they grow richer.

·  Second, industries and consumers are creating a new pattern of green products and demands, re-shaping the world's energy systems and radically changing world markets. One only has to think of the electric or hybrid car replacing the petrol engine.

· Third, the biggest and best informed market of all has emerged, which is the world-wide web, transforming international trade.

These developments have brought huge benefits to man and womankind, but also great dangers – one of which we are just experiencing with the global credit crunch and the collapse of major Western banks.

1. Countries are trying to defend themselves by outing up protectionist barriers –using excuses such as carbon taxes – and discriminating against foreign investment.

2. This has reinforced the bad mood between the US and China, not just on economic issues but on geo-political issues and sore points.

3. The whole pattern of Asian surpluses and American deficits has greatly added to financial instability. The global financial  system has never been more volatile and unpredictable. More bank collapses may lie ahead.

4. Energy supplies – the lifeblood of all advancing or advanced societies – have become threatened by political instability, leading to a dangerous competitive scramble for access to oil, gas and coal supplies.

5. There is a possibility that the whole open globalisation process, which has brought such prosperity, could now go into reverse or break down under political and social pressures.

To avoid these outcomes we need action and cooperation on a new world scale, and my own country, the UK, will be committed to this action.

· Responsibility must be SHARED in building new global  institutions – to regulate global finance, meet the climate challenge, ensure energy security, defeat protectionism, check nuclear proliferation, curb terrorist extremism and  upholding good governance and human rights everywhere.

It has to be asked whether the international structures of the 20th Century, such as the IMF, the WTO or the UN as at present designed, can meet these challenges.

· I hope there will be a realistic and achievable agreement on CO2 emission reductions agreed at Copenhagen in December. But it must be GLOBAL, otherwise it is useless, and all our efforts in the West will prove trivial and have nil effect on greenhouse gases.

· To shape and implement all these new agreements will need high statesmanship and, above all, constant dialogue between the nations, east and west, north and south.

· To handle this difficult future we must bring to a close the era of confronting blocs, of isolationist 'go-it-alone' tendencies and of arrogant super-power behaviour.

The age of Western lecturing ,and attempting  to impose certain Western values, is, I hope now coming to an end. Bitter lessons have been learnt. The age of mutual respect and understanding must now begin.