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Ministry for Foreign Affairs

Foreign Affairs Address to the Althing

Foreign Affairs Address to the Althing, March 29, 2001
(Unofficial Translation)


Mr. Speaker

In my address to the Althing on Foreign Affairs a year ago, I focused primarily on the ongoing integration process in Europe and its implications for Iceland. My purpose was to encourage further discussion here in the Althing on this most important aspect of Icelandic foreign affairs. On this occasion, I would like to use the opportunity to discuss a process which goes even deeper than the integration process in Europe, namely the trend commonly referred to as globalisation. This trend is already affecting, in one way or another, most of the major issues confronting the Icelandic Government and the Althing. As in the case of my discussion of European affairs last year, I now choose globalisation as my subject for the purpose of encouraging discussions here in the Althing on an issue that will have a decisive significance for the development of Icelandic society in the coming years. Various tendrils of this complex issue are discussed on a daily basis, but unfortunately we rarely have an opportunity here in the Althing to take stock of the situation and to assess the revolutionary changes brought about by the globalisation process in virtually all aspects of our community.

Revolutionary Changes
Some time ago, I appointed a working group to consider the future of Iceland in the light of the globalisation process. My instructions to the group were to focus particularly on our need to create an appropriate economic environment for the Icelandic industries. The group returned a report which was published by the Foreign Ministry over two years ago. The group was appointed at a time when it appeared that despite the robust health of the Icelandic economy and substantial economic growth, which had been in progress for months and even years, there was concern that Iceland was lagging behind neighbouring states as regards the globalisation of its business community. Much has changed since then. Icelandic enterprises have expanded across borders with increasing vigour, and the Icelandic business community is in many ways better prepared than before to take advantage of the numerous opportunities created throughout the world by globalisation. There has also been a change in attitude. There is now general understanding of the fact that our future depends to a large extent on our ability to compete to our fullest capacity in international markets.

There is no doubt in my mind that we are living one of the major revolutions of human history. The extent and profoundness of the transformation in progress is difficult to exaggerate. It is therefore imperative that we take advantage of all potential opportunities that present themselves and precautions against all potential risks. When circumstances are changing at their current rapid pace and in the current radical manner, we must constantly reassess our situation. This does not mean that we must abandon long-standing values and ideals; on the contrary; our adaptation to the new reality must be based on the firm foundations of our culture and education. All buildings need to be constructed on a solid foundation, and the same applies to our future in a globalised world.

It is said sometimes that we have no choice, and that in fact the principal feature of globalisation is that it erodes the freedom of individual countries to make their own choices. There is a certain truth in this, but also a certain misunderstanding. At the same time that the globalisation process calls for reduced government intervention and open borders, it calls in some ways for a stronger state. Globalisation places increased demands on governments for appropriate, general and transparent rules in numerous fields of business and social affairs which the same governments must be capable of implementing with determination and fairness.

Globalisation is based on the co-operation of independent, sovereign nations, and not on any supranational authority. When states co-operate for their common benefit, it gives some people the impression that they are divesting themselves of power and losing control of their own affairs. But what is the advantage of uncurtailed autonomy and self-determination if the result is curtailment of opportunities for progress? Co-operation between nations involving international commitments is the prerequisite of a market economy and increased prosperity. The establishment and implementation of appropriate rules of the road for the purpose of ensuring a thriving global market economy requires strong nations and organised co-operation on their part. There is no room for unreasonable discrimination among enterprises and states, leaving some nations to endure poverty and the environment in a shambles.

When the protection formerly provided by physical distance and restrictions on relations and trade are removed, it becomes the task of government authorities to ensure that the general environment of our industries, and of society, is as favourable as it can be made and competitive with the environment provided by other states. Getting it wrong can prove costly. Different states can take different routes to their objectives, and states with very different social structures and different social priorities have achieved good results. We need only look at the Nordic countries on the one hand and countries in Asia and America on the other to see that globalisation does not demand the same solutions everywhere.

It is a misconception of the nature of globalisation to assume that it detracts from the importance of politics and the role of the nation state. However, the role of the nation state is changing, and in order to react sensibly, politicians and others must understand the change. It is against this background that I wish to use this occasion to encourage discussion here in the Althing on the complex and revolutionary transformation which has been called globalisation.

Globalisation of the Industries
Just a few years ago, Icelandic industries were lagging behind the industries of our neighbouring countries in the globalisation process. Nevertheless, a number of steps had been taken to prepare the ground for globalisation of the economy, and this work has been continued.

The most important step was, and is, Iceland's membership of the European Economic Area, but besides that, the government has attempted to create conditions for increased globalisation of the Icelandic economy through reforms in the capital market, taxes, competition rules and other areas. In recent years, this policy has included measures to strengthen the foreign service and its support to Icelandic enterprises. In this year, two new Icelandic embassies will be opened in Canada and Japan, which are important trading partners.

The international expansion of Icelandic enterprises has been substantial in recent years. Mistakes have been made, and there have been failures, but there have been more successes, some of them quite extraordinary. A few enterprises in our small economy have become world leaders in their fields. Several others are competing internationally in large-scale industries with considerable success. Direct investment by Icelandic enterprises outside Iceland, which a few years ago amounted to a mere tenth of OECD norms, has multiplied in the course of a few years.

There are now 11 thousand people working for Icelandic companies abroad, three times the number of five years ago. In earlier times, this trend would no doubt have been the subject of criticism and there would have been muttering that it was not the business of Icelandic enterprises to provide employment for foreigners. This attitude has changed, and most people now regard this trend as a sign of strength. Fisheries companies in Icelandic ownership are now engaged in fisheries off the coasts of most continents, and selling their products across the world through an extensive international market network which they have created themselves.

This success of Icelandic fisheries companies underscores the truth of globalisation that the companies that achieve the best international results are usually the companies whose operations rest on firm home base. Globalisation does not require that we turn our efforts to new things of which we have no previous knowledge; on the contrary, globalisation entails that those who have the know-how should do the work. The expertise that exists in the country thus provides the foundation for international success.

At the same time, however, it is a matter of satisfaction that Icelanders have been able to learn and make use of valuable knowledge in the world's most technologically advanced sectors. These sectors are normally not dependent on the utilisation of natural resources. Our resources gave us a certain edge, which we have been fortunate enough to use to our advantage. In these new industrial sectors, e.g. in information technology, software production, the food industry, health sciences etc., we have seized the initiative by different means. Various aspects of our culture, education and mentality appears to fit in with the required characteristics of pioneers in this area, and in addition ventures into this area are also based on existing expertise. An additional factor is that the old restrictions posed by the country's geographical location have little relevance in these new sectors. These new shoots of the economy can also be vitalised and strengthened through sensible government policy.

Competition for People and Companies
At the same time that we welcome the excellent performance of many Icelandic companies abroad, we need to ensure attractive conditions for them in their home country. We need to make determined efforts to keep these companies here in Iceland, as otherwise the link with the most lucrative aspect of their operations may be broken. Those who excel have the choice of the entire world. We therefore need to devote increasing attention to the kind of environment we can offer to companies and individuals who are welcome everywhere.

A common feature of most Icelanders is that they have strong ties with their home country. But strong Icelandic companies and more and more individuals are being welcomed elsewhere. Companies and institutions in many countries are recruiting expert knowledge and educated workers wherever they can be found, and more and more people are becoming less attached to their home countries.

At the same time that Icelandic companies are succeeding abroad, and more individuals are increasing their education and training in fields which by their nature respect no borders, we want to keep as close ties as possible with our people, our companies, and we want their participation in Icelandic society. One of the things we need to consider is how we can increase foreign investment in Iceland, especially in new sectors. Although Icelandic enterprises have vigorously sought new opportunities abroad, from which we are reaping the benefits here at home, there has been less interest among foreign companies in coming to Iceland. Increased foreign investment in Iceland is necessary for a number of reasons. It adds to the diversity of the economy, creates new employment opportunities and increases prosperity.

Foreign investment in Iceland and Icelandic investment abroad are therefore two sides of the same coin. Both contribute to our taking advantage of the opportunities offered by globalisation, both are prerequisites for our well being in the coming years, and both have the effect of making our people more sought after in the world, while at the same time making it easier for them to choose Iceland as their home.

Regional Affairs
We also want people to have as wide and realistic a choice as possible of where they want to live in Iceland. In this respect, globalisation provides us with opportunities, contrary to what is sometimes maintained. It is not a natural consequence of globalisation for everyone to congregate in one place. Quite the contrary. The significance of physical distance has been reduced, and possibilities for communications have increased. It means less and less where products are manufactured, and it means more and more that they are manufactured efficiently and by those who do it best. Some features of globalisation involve the potential for more diffuse habitation.

But as with so many other things I have already mentioned, there is little that is self-evident in this matter. Distances still need to be conquered. What has changed is that the possibilities for conquering them have improved. Relations with the rest of the world do not materialise simply because the technology that makes them possible exists. Relations have to be sought and seeking them takes know-how.

The companies that have achieved international results in recent years are not all located in the metropolitan centres of the world. Many are located in small communities. We have several examples of this here in Iceland. The number of these companies needs to be increased, and the conditions for their creation are materialising. The future of rural Iceland, beyond any question, depends on daring and knowing how to take advantage of the opportunities afforded by globalisation.

Despite the common criticism that globalisation entails the domination of a handful of megacorporations, globalisation has in fact opened international opportunities for smaller and smaller companies. Even small companies located in remote places are now engaging successfully in international trading. Often, this is simply a question of daring, but it is always a question of knowledge.

Governments have many ways of facilitating participation by enterprises in international trade, and frequently it is small enterprises that benefit the most from such assistance. At the same time that the Foreign Ministry has been making every effort to increase its capacity to assist companies in markets far and near, special efforts have been made to promote these services among companies outside Reykjavik.

Rural Iceland is subject to by the same rules as the rest of the Icelandic economy. The key to progress in the coming years is to seize the opportunities offered by globalisation. The opportunities exist; this has been proven by our own experience and by the experience of others, but we need to show more boldness and imagination in discovering them and using them.

Globalised Problems
Even though globalisation has brought great opportunities, we have to remain alert to problems against which distance used to provide a defence. It is not only model companies that have taken advantage of the new communications technology, improved transportation and reduced restrictions on the flow of capital. International criminal groups have done the same. The countries of the world are engaged in an increasingly difficult defensive battle against drug trafficking and money laundering. Smuggling of people and slavery are also a growing problem with no less tragic dimensions than the drug trafficking.

International co-operation in these areas is growing, and Iceland has made a point of keeping abreast of developments. Regional co-operation has also opened new and important opportunities in the struggle against crime. Iceland's participation in Schengen is particularly important in this context. It has opened new opportunities for police co-operation with the European Union and greatly increased the capacity of European states in the battle against organised crime. Also, our participation in Schengen may have the effect that Iceland will be among the first states to take up formal co-operation with EUROPOL.

Regardless of what we may think of globalisation, the protection previously afforded to us by physical distance is largely a thing of the past. The increased risks to Iceland resulting from international organised crime, such as drug trafficking, is not a result of our participation in the globalisation process. On the contrary, our active participation with other nations provides us with increased opportunities to react to these risks. Another example of growing threats which can be attributed to improved communications and relations is the increased and increasingly rapid transmission of various epidemic diseases. Epidemics have never respected borders, as we know from old and new experience. However, the pace is much faster than before, and this entails new risks which can only be addressed through international efforts. No country is self-sufficient in these matters, and active co-operation in this area is even more necessary for small nations than for other nations.

The Environment
The environment is everybody's business, and environmental problems tend to unite us in the realisation that there is only one Earth, and it needs to be preserved carefully so that coming generations will also be able to live a decent life. It is our business what other people are releasing into the sea on the other side of the ocean. It is also our business whether and by what means people are reacting to air pollution on the other side of the world. The fear of the so-called greenhouse effect and potential changes to the Earth's weather systems has forced people across the world to rethink these matters.

Among the people opposing globalisation are large groups of environmentalists who believe that the growing pollution and destruction of nature can be attributed to globalisation. There is some truth in this, but also, in many cases, a fundamental misconception.

There is no doubt that improved means of transportation in the world and the growing prosperity in many countries, which can be traced to globalisation, have increased the release of pollutants into the atmosphere and increased the pressure on sensitive ecosystems in many parts of the world.

But the connection between growing pollution and globalisation is not as simple as it appears. We have to distinguish between the consequences of economic growth and the consequences of globalisation.

Those who want to slow down economic growth in order to reduce environmental damage may have a point. But the view that slowing down globalisation will reduce pollution is probably a fallacy. We can observe this simply by looking around. Where is the worst environmental situation? Is not the worst situation in many of the states that remained closed to globalisation for the longest time? Where is the best environmental situation? Is it not precisely in some of the states which have most actively engaged in international co-operation and globalisation in all its aspects?

This does not mean that globalisation will save the environment. But globalisation as such does not necessarily aggravate environmental problems. The problems of the environment are not a result of globalisation and solutions to the problem will not be found without effective international co-operation. The environmentalist campaign itself is a case in point. There is, perhaps, no movement in the world as globalised as the environmentalist movement.

One interesting plan to reduce air pollution is of direct concern to Icelanders. This is a plan based on globalisation and a powerful international market system. I am referring to the international market for so-called release quotas, which could have the effect that industrial production would be conducted with the cleanest energy available and the most efficient production methods available. Through active international co-operation in this area, international market powers could be harnessed to break the link between economic growth and increased pollution.

The market powers themselves are blind to the environment. The market will not solve anything. But the market is a powerful instrument that governments can utilise for this purpose through extensive international co-operation. And this applies not only to release quotas. A second example is the international co-operation on the discontinuation of subsidies on energy sources that cause air pollution. A third example is international co-operation on pricing of fuels based on their negative environmental impact. Such measures pave the way for the development of new technologies, both in transportation and industry, and promote the use of clean and renewable energy sources.

Fisheries
Another aspect of the link between globalisation and the environment has a direct impact on the Icelandic economy. I have tried to point out, in various international fora, the connection that exists between government subsidies in fisheries, overfishing and overexploitation of the world's oceans. Tariffs on fish products also promote overexploitation. They encourage the fishing industry to emphasise quantity rather than quality.

The precarious situation of marine ecosystems in many parts of the world, largely as a result of the overexploitation of recent years, is becoming more and more obvious. Globalisation has opened ways of pressing for solutions in these areas, both as a result of increased international co-operation and because the markets for fish products largely determine the ways in which states utilise their marine resources.

For this reason, I have placed great stress on exercising Iceland's influence in international fora, particularly within the World Trade Organisation, to promote the abolition of market restrictions in fisheries, including state subsidies and tariffs.

There is no way that these problems can be addressed by means of international overregulation. Globalisation sometimes calls for global solutions and sometimes for more local co-operation. It is clear that the increasing pollution of the sea cannot be prevented without global co-operation. It is equally clear that most of the fish stocks in the ocean are not global but localised. Overfishing therefore calls for local solutions and not global ones. State grants in fisheries and protectionist tariffs, on the other hand, are a global problem.

Regional affairs should be dealt with by means of regional agreements. In the fisheries sector, as in so many other matters, the most important thing is to appeal to the responsibility of those who have most to gain. Therefore we must oppose all ideas of global fisheries control and focus instead on regional co-operation based on deep-sea fisheries agreements and regional organisations.

As more regional organisations are formed, more deep-sea areas are being closed to uncontrolled fisheries. Iceland participates actively in fisheries control in the North Atlantic, and we have also involved ourselves in fisheries control in more distant oceans where we have interests. To give an example, an agreement on fisheries control outside economic jurisdictions in the southern Atlantic is scheduled for signature in the near future. We will be full parties to that agreement.

Regional Co-operation
One of the characteristics of globalisation in recent years, and perhaps a paradox, is that regional co-operation has increased substantially. Globalisation and regional co-operation have sometimes been set up as alternatives, but this is a misunderstanding. Increased regional co-operation is more often than not the result of reactions to increased globalisation.

Thus, the integration process in Europe in recent years may be regarded as a reaction to globalisation, and the same is true of growing regional co-operation in other parts of the world. International trade has been increasingly liberalised in the course of the year, but there is still a long way to go before the world can be regarded as a single, open economic area. With the growing competition in all areas, it has become necessary for countries to expand the market for their own industries, and this has been done through regional co-operation.

Icelanders managed to preserve their interests through participation in the EEA, which gives them access to the largest and richest market in the world, i.e. the internal market of the European Union. The membership of EFTA and the EEA is crucial for Iceland's participation in the globalisation process. This has been invaluable to Icelandic industry, and is in fact one of the cornerstones of the tremendous progress of the Icelandic economy in recent years.

This environment in Europe is now undergoing a substantial change. New member states will join the European Union in the coming years, and rapid and important changes will take place within numerous aspects of the EU. New areas of co-operation have come up, and Iceland's participation in the globalisation process is increasingly linked with our co-operation with the EU. We will need to monitor this process carefully and show determination. The basic interests of the Icelandic nation are at stake.

Our national interests as regards security are also based on regional co-operation. The ideal of a global security system for the entire world, which was the concept underlying the foundation of the United Nations over half a century ago, is still a long way from materialising. The end of the Cold War has brought us closer to the ideal, but the work must now continue on the basis of regional co-operation.

The security co-operation in which Iceland is a full participant has also changed, and the number of participating states has grown. NATO has reacted to new opportunities on the one hand through enlargement of the Alliance and on the other hand through strong co-operation with states outside the Alliance. Examples of this include the Partnership for Peace, involving a number of states from a former opposing military alliance, special partnership councils involving Russia and the Ukraine and the Euro-Atlantic Partnership Council. Co-operation is also in preparation between NATO and the EU on a European defence capability, where Icelanders have special interests which we have pursued with great determination in recent months and years.

Apart from the co-operation within NATO, Iceland participates actively in the Organisation for Security and Confidence in Europe (OSCE), and in the work of the Council of Europe which performs an important role in regional security through its focus on strengthening democracy in Europe and its neighbouring states.

All of this regional co-operation in which we have actively participated has given us an opportunity to protect our basic interests and exert our influence on numerous issues which we could not have addressed except through this participation.

For small nations, international organisation play a key role, and membership of such organisations is a prerequisite for active participation in international affairs. Larger states have a greater capacity for engaging in active bilateral co-operation, even though we are engaged in various forms of bilateral co-operation with other states, near and far. Without membership to strong organisations, to which we are fortunate enough to belong, there would be no possibility for countries of Iceland's size to involve themselves in so many issues.

Iceland's International Tasks
During my tenure as Foreign Minister, I have placed particular emphasis on increasing Iceland's participation in the international organisations which are most important to us. We must participate in full seriousness in the work of these organisations and pay the expense of doing so. We cannot expect others to take us seriously if we do not do so ourselves.

Various preparations are in progress in this respect. Next year, we will host the NATO meeting of foreign ministers in this country. This will be the largest international meeting ever held in Iceland, with the participation of almost a quarter of all the nations of the world.

We have expressed our will to take a seat on the United Nations Security Council within a few years, and preparations for our candidacy for a seat on this most powerful organ of the United Nations are under way. The UN faces a number of important tasks in the near future. Generally speaking, however, it must be admitted that the institutional framework of the United Nations has not been able to cope with the increased pressures brought about by globalisation, even though the work of the Organisation has been strengthened considerably under the effective leadership of the current Secretary General, Mr. Kofi Annan. It is food for thought that it has not been possible to strengthen the UN and its special agencies sufficiently to render them capable of meeting the demands inevitably made on them in light of the tremendous growth in international trade, international capital movement, international communications and international relations in general.

Weaknesses in the international system can give rise to serious threats. They also have the effect that co-operation on solving various international problems, ranging from poverty and human rights violations to environmental and technical issues, is not sufficiently organised and effective. For small nations, successful reinforcement of international organisations in the coming years is even more urgent than for the larger nations.

Of the major tasks facing us in the near future, our decision to increase dramatically our contribution to peacekeeping in the next few years deserves mention. Our work in this area is a relatively new development. The steps we have taken in this area so far and our experience of our work have encouraged us to shoulder a greater responsibility. Work is in progress on preparations, and news of this work will appear soon, when advertisements are published requesting applications from people who are prepared to take on peacekeeping work for Iceland.

Icelandic development aid has also been strengthened and organised in recent years. It is our wish to continue on that path. In recent years we have been working on improving our capacity, and the seriousness of our efforts is underlined by the opening of a new Icelandic embassy in Mozambique.

We have elected to concentrate our efforts on several states in southern Africa. The African countries have been falling behind other countries of the world in recent years. The effects of globalisation have been felt least in Africa. The poverty of African countries is therefore not a result of globalisation; on the contrary it is the result of the limited possibilities of this part of the world to take advantage of the opportunities afforded by the globalisation of world trade.

Of course, all this work on international affairs costs money. But it cannot be reasonably maintained that we are spending money on international affairs beyond the levels that may properly be expected from a wealthy nation that wants to be taken seriously by the international community. Through active participation in international organisations of which we are members we can both protect our own interests and also contribute our share. The benefits we derive from active work in these organisations exceed the value of our contribution. Active participation by small states like Iceland in international organisations, regional organisations and international work in general is necessary to enable the protection of Icelandic interests in a globalised world.

The same applies to Iceland's participation in international co-operation as to the participation of Icelandic industry in the international market. Standing idly by only deprives us of the opportunity to influence our own destiny. Standing by is always an option, but by doing so we change nothing but our own chances to benefit ourselves and others.

Although there are those who believe that globalisation carries a variety of risks for Iceland, I believe that globalisation presents numerous favourable opportunities. The results we achieve depend largely on ourselves and our utilisation of these opportunities. Icelanders are a well-educated nation and conscious of their own ability, and desire, to excel in the international community. Icelandic society has always fared best, both in a cultural and economic sense, during times when its relations with other countries have been at their most extensive. Success in international co-operation is a decisive factor for progress and prosperity in Iceland. Powerful industries capable of facing international competition and active co-operation by Iceland with other states to ensure non-discrimination and equal opportunities for people and enterprises are the prerequisite for the future well-being of the Icelandic nation in the new century.

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