Making foreign policy relevant at home

I am grateful to our hosts, the Institute of Welsh Affairs and the Cardiff Business Club, for arranging this event.  The IWA, I understand, is celebrating its 21st anniversary this year – so warm congratulations on that: debate of the kind you promote and nurture has never been more important.  The IWA, however, is a mere whippersnapper compared with the business club, which is enjoying its 95th year of stimulating debate on important international issues.

The reason I’ve come to spend time with you here in Wales is that we have a fundamental choice to make as a country. It is not just a choice for politicians because as Henry Kissinger once said, “No foreign policy – no matter how ingenious – has any chance of success if it is born in the minds of a few and carried in the hearts of none.”

The choice is whether we try to solve the problems of globalisation – from economic instability and inequality to climate change and global insecurity – with more global engagement and more global policies or less. It is a choice that affects all of us, and asks questions about our character as a country as well as our mindset as people and our policies as politicians.

I want to start with developments in the global economy. The impact of the banking crisis on savings and businesses, and the risks of a serious economic downturn are, I’m sure, at the forefront of all our minds.

The package the Chancellor announced last week to restore confidence in the banking sector involves a re-capitalization scheme to allow banks to restructure their finance while maintaining their support for businesses and individuals, and a credit guarantee scheme to kick-start inter-bank lending. We are now, I am pleased to say, seeing both the US and the Eurozone follow-suit.

But I want to emphasize that this is not simply about saving big business – if banks want to access the Government’s re-capitalization scheme they have to commit, over the next three years, to maintain the availability of and actively market competitively priced lending to small businesses and homeowners at 2007 levels.

And our focus is by no means limited to the City of London – a weekly Regional Council of Ministers chaired by Liam Byrne has been established to ensure that the issues and concerns of each region are heard and acted upon across Government. Paul Murphy is also a member of the National Economic Council and I understand that Paul and Rhodri Morgan have today held an economic summit here in Cardiff.

This is perhaps the world’s first truly global financial crisis and as such it raises questions about global issues and global governance. When the collapse of an Icelandic bank can leave not just an Icelandic banker without a job but a British businessman without the funds to run his business and a German family without their savings, no single country is immune. Our economic interdependence brings not just enormous opportunities, but also serious risks.

There will be siren voices calling for retreat, claiming that globalisation has gone too far and that we have rendered ourselves too vulnerable to external forces. There will be those who seek the shelter of trade tariffs, who want to raise the drawbridge to economic and political migration, and who argue that the only way to prevent a reoccurrence is to limit capital flows.

But we must resist these calls. We must remember that opening up our economies over the last half century has brought us more choice and better products for consumers, more jobs, better technologies, and better living standards. The influx of capital has helped to break our low-saving, low-investment cycle. Migration has helped to address skills gaps and provide essential public services. Competition has spurred innovation. Wales itself relies heavily on open markets – there are almost 500 international companies here employing 70,000 people.

I do not want to pretend that globalisation has been without any pain – the gains have not been spread evenly. And it means that we are more exposed to problems beyond our borders. But the answer is not to turn inwards and reject globalisation. The answer is to learn from the mistakes of the last few years: to improve regulation of, for instance, accounting rules and transparency; risk management and executive pay. And to acknowledge that we cannot do this alone – global problems require global solutions.

The agenda for reform was set out at the European Council by the Prime Minister yesterday. It will be guided by five key principles. First, transparency in relation to risks and balance sheets. Second, integrity – reducing conflicts of interest in the system. Third, the responsibility of management for the risks they undertake. Fourth, sound banking practices to ensure they are insulated against shocks and crises of confidence. And fifth, effective coordination across borders in recognition of the fact that markets are now global.

Just as we cannot afford to retreat from global economic affairs, nor can we afford to be a bystander to global politics. It is not just our prosperity that depends on that of the rest of the world but our security too. Terrorists may be home grown but they are globally linked – often to Afghanistan or Pakistan. High energy bills are a consequence of growing demand in Asia – we are feeling the impact of the extra 20,000 cars that are appearing on Chinese roads each week.

With 375 kilometres of coastline already artificially protected and thousands of homes and many millions of pounds worth of assets lying behind those defences, the people of Wales are well aware of the threat posed by climate change. And with an 8000 strong Somali community here in South Wales, no-one here can tell me that we need not care about wars in far away places.

So if we want to make a difference at the global level we need to be clear about our priorities. To my mind there are four critical challenges.

The first is the rise of international terrorism influenced by Al Qaeda in a world where weapons proliferation is a serious threat. It is why Afghanistan and Pakistan are a top priority for me, and why we need to do all we can to stop Iran from developing a nuclear bomb.

Second, is the threat from unresolved and latent conflict. I believe we have a moral interest in reducing human suffering, but we also have a direct national interest in stable, prosperous states playing by the international rules – because conflict fuels migration and threatens global peace and security, and ungoverned spaces give rise to terrorism and organised crime. Consider the fact that it was first in war-torn Sudan, and then under the Taleban in Afghanistan that Osama Bin Laden and Al Qaeda found a home.

Third, is forging the global low carbon revolution that we need, both to tackle climate change, and to improve our energy security. If a more densely populated, wealthier world continues to chase limited supplies of oil and gas, the impact will not only be felt in our pockets, but also on our environment.

And fourth, perhaps the most critical generational challenge is how to build a rules-based international system that reflects the balance of power in the twenty-first century – rather than the balance of power after World War 2. Unless we can persuade the emerging economies – China, India and Russia – to pursue national interest though multilateral cooperation rather than national rivalry, to favour compromise over competition, we face the prospect of a much more unstable world, with a survival of the fittest scramble for power.

It is an ambitious, even daunting list. The stakes are high. But while we have less power than we might hope, we have more than we might fear.

Our position at the heart of all the major global institutions magnifies our influence on the world stage. Our Security Council seat at the UN has enabled us to pursue international justice for war criminals from the Balkans to Sierra Leone or Darfur. The bureaucracy in Brussels might be infuriating, but the sheer size of the EU’s single market means that if we regulate on car emissions or the efficiency of power stations, we can drive a global low carbon revolution to tackle energy insecurity and climate change. And whatever the motivation for Russia’s invasion of Georgia earlier this year, no-one can deny the role of EU and NATO membership in embedding democracy and stability throughout central and Eastern Europe.

Britain no longer has a global empire, but we can be a global hub. Because we are plugged into all the networks that matter; and because our citizens, our businesses and even our government have a truly global reach; and wherever we are in the world, we are bound together by our values.

We have diplomats in almost 150 countries, talking to governments, promoting British business and shaping the political debate. But we also have the BBC World service which last year broadcast to 183 million people; and this year has extended its reach with the launch of a 24-hour Arabic service as well as Farsi TV service for Iran.

We are world leaders in development, not just because DFID lifts thee million people out of poverty each year but because we are home to some of the most respected NGOs in the world – Oxfam and Save the Children for instance.

Our military commands respect around the world. Whatever your views on the rights and wrongs of the Iraq war, it is hard not to be proud when – as I have done – you talk to the young men and women who are risking their lives to build a better future for the people of Afghanistan and Iraq; and even more proud when you talk to Afghans and Iraqis about the difference they have made.

Last but by no means least are the personal networks. The 800,000 Britons of Pakistani origin, the Nigerians in London or the Somalis here, have contacts, access and influence in places the British government could only dream of.  And with British citizens clocking up 70 million overseas trips last year, it is clear to me that foreign policy is no longer the preserve of the foreign office mandarins. We are all diplomats and we all play a role in shaping the world beyond our borders. That is why I am here, talking to you all tonight. And it is why tomorrow I will be visiting two very notable communities here in Cardiff: one of the schools which is part of the twinning link with Lesotho and representatives of the Somali community.

Wales has a long and deep history of political and economic involvement in global issues, from its one time role at the centre of the world coal trade here in Cardiff Bay to its involvement in the movement which created the League of Nations and the quest for institutions committed to making the world a more peaceful and stable place. But I need your support and the support of the Welsh people across our foreign policy priorities.

Wales has a key role to play in tackling climate change and energy security. The Severn Estuary has the second highest tidal range in the world and the potential to generate five per cent of the UK’s electricity – as much as two or three nuclear power stations. It is a scheme which could save up to three per cent of total UK carbon emissions – much more than any other single renewables project. It would not only bring significant economic opportunity to Wales, but enhance the energy and climate security of the country as a whole.

And Wales has an important contribution to make as we continue the fight against violent extremism in places like Afghanistan.  Our actions there require substantial military support in which Welsh soldiers are playing a critical part, but we rely for our long term success not just on out-gunning the Taleban, but on successful investment in the infrastructure of government, in education, health, transport and other basic services.

I am in no doubt about the scale of the challenge in Afghanistan: the writ of the Afghan Government does not extend far enough. There are very serious problems with corruption, and the international effort is not as effective as it ought to be. But we should not ignore the fact that over two million girls are now enrolled in primary education – a stark contrast to when it was illegal for girls to go to school. The number of people with access to healthcare is up by over 70%. And despite threats and intimidation, Afghan Courts convicted over 400 people for drug related crimes last year.

When it comes to promoting a rules based international system, it makes a change to be speaking to an audience which is – according to Eurobarometer at least – more likely to be appreciative of the merits of the European Union. The millions of pounds of European funding that Wales receives each year, and the 40,000 additional jobs said to be the result of EU structural funding have surely played their part. The fact that Wales now hosts a record 41 Blue flag beaches and that, thanks to EU rules on single market competition, BMI Baby now flies in and out of Cardiff international airport must also have helped. But I believe the sympathy with the European cause runs deeper.  To be part of the EU is not to sacrifice our identity, it is to further our common interests, just as Wales does as a proud part of the UK.

I have always been a firm supporter of subsidiarity. On some issues – climate change or competition policy – that means pushing power upwards and sharing sovereignty. But in other areas it means devolving power downward, not just to the regional level but to local authorities, and even the individual.

That is why I supported the creation of the National Assembly here in Wales and why I welcome the continued evolution of that settlement, on the basis of the Government of Wales Act of 2006.

I was interested to learn that the recent survey conducted by the National Assembly suggested that support for devolution and the institutions of devolution here in Wales is continuing to grow. It was telling that only 10 per cent of those asked want Wales to become a fully independent nation. I do not believe that faced with today’s global political and economic challenges independence for Wales or Scotland speaks to the needs and interests of the people.  An evolving devolution settlement, of the kind that you are pursuing here in Wales, is what makes sense.

It was David Lloyd-George who, in preparing for the Paris Peace Conference in 1918, reportedly remarked that “Diplomats were invented simply to waste time”. I hope I have gone some way this evening to give you an alternative point of view.