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Goodman, John --- "Myths of Globalisation: Power, Legitimacy and Sovereignty" [2008] NZYbkIntLaw 2; (2008) 5 New Zealand Yearbook of International Law 3

Myths of globaliSation: power, legitimacy and sovereignty

John Goodman[∗]

I. Globalisation and the Nation State

Globalization… [is] the trend for people, firms and governments around the world to become increasingly dependent on and integrated with each other.[1]

Globalisation, which has been fuelled largely by technological development and the spread of liberal market-based economic and political ideas over the last 20 to 30 years, has spawned varied reactions from dread to outright triumphalism. For Thomas Friedman, for example, the world has become ‘flat’ while for Benjamin Barber it’s ‘falling apart’[2] (it is not yet clear who is right). For others, globalisation is solving all ills, although it has perhaps not gone far enough in reducing the size of the State; more yet needs to be done before Leviathan is finally laid to rest.[3]

Among these approaches, conventional wisdom certainly abounds to the effect that the State is under siege in a ‘borderless world’.[4] According to this view, globalisation is reducing States, governments, societies and cultures to shadows of their former selves. They are shrinking before the forces of international integration and homogeneity, imposed by a juggernaut of liberal economic and political ideas originating in the ‘Washington consensus’.[5] The process is said to be irreversible and to impair sovereignty, although on the latter point, there is disagreement on precisely how.[6] Some see sovereignty, along with power and authority, evaporating upwards to remote supranational legal bodies; others see it moving downwards to the regions, carving out islands of separatism beyond the reach of central governments. For others again, power is shifting sideways to transnational corporations (TNCs), some of which, it is claimed, have total assets greater than the GDP of many States. Globalisation is re-configuring the State and sovereignty under our noses.

Or is it? The claims are often taken as self-evident but what if anything is evident about them? Do they stand up to economic and legal analysis? In my view, it is important to keep globalisation in perspective, especially for New Zealand, which cannot be easily wrapped up in North American, European or Asian views. In recent decades, integration has intensified but this article seeks to show that this process is not new, that borders remain crucial, even as regional arrangements have become more prominent, and that the size of the State apparatus has, if anything, increased in modern times. Finally, a look at the current international order seeks to show that conspiracy theories are wide of the mark, particularly with regard to the State’s power of decision, its role in making treaty commitments, the ebb and flow of liberal policy commitments and the resulting balance between sovereignty and power. As the sheer variety of forces at work shows, globalisation is not a something being done unto us by some central international control point but is a confluence of separate forces on which States make their own judgements. It shouldn’t be demonised as a form of fateful necessity. States remain responsible for their own decisions and, to that extent, in control of their own destiny.

The main problem I have with the more extreme claims is that they do not correspond to my experience of working on the issues at the diplomatic coalface both at home and abroad for over three decades. There have been changes, increased integration with consequences for the nation State, but neither the changes nor the consequences have been as radical as usually portrayed. I have accordingly called a number of the common propositions ‘myths’ in the sense used by Christopher Flood in his book Political Myth: a ‘political myth can be defined as an ideologically marked account of past, present and predicted political events’.[7] It is not that such statements have no factual basis - they may have some - but a partial truth has been mistaken for the whole truth and exaggerated. What follows is comment based my experience gathered largely as a New Zealand diplomat; I make no claim to completeness.

II. The Myth of the New

A quick look at history shows that ‘globalisation’, in the sense of integration within wider political, legal and economic orders, has been happening for a long time.[8] Historians now identify earlier waves of it at the end of the 16th century, in the mid-18th century and at the end of the 19th century, while close forms of integration have existed in the constitutional arrangements of successive empires from the Roman Empire to, again, the 19th century.[9] Moreover, globalisation can take many forms. If the main criterion is the integration of the parts into a wider political, economic and legal framework, then the British Empire where there was a single sovereign and law for the parts would seem to qualify as one early form and an historical driver of globalisation in itself.

New Zealand’s own late-19th century experience within the empire, for example, illustrates this kind of ‘global’ integration. In an interesting article, Janet McLean sets out how New Zealand legislatively and judicially has been for much of its history legally integrated with ‘globalised’ British institutions – Crown, Westminster, Privy Council and armed forces in war – until quite recent times.[10] Although, as she points out, national politics have often been much in advance of legal developments, arguably the New Zealand Parliament did not acquire full sovereignty until as late as the Constitution Act of 1985. Others might argue that independence was not complete until severing the final link of appeal to the UK Privy Council in 2004. From a legal point of view, therefore, New Zealand was arguably more closely integrated into a wider framework at any time up until, say, 1947, than under the levels of integration involved under international treaties concluded in the second half of the 20th century.

The economic history runs somewhat in parallel. It is a truism that New Zealand could not have reached the levels of development it did without being part of British-led late 19th century globalisation. In practical terms, the linking of New Zealand by undersea cables to Australia, America and Europe in 1876 and the advent of refrigerated shipping in 1882 meant much national change and re-structuring. Formerly we were somewhat integrated with the economies of New South Wales and California, and with the Pacific Rim gold rush. There was significant traffic in goods, services and persons, trade and investment for New Zealand. From the 1880s, trade and investment underwent a massive and well-known shift in favour of free trade and integration with the British market.[11] In fact, at the time New Zealand’s dependency on the newly internationalised economy was so far-reaching, it exposed the country drastically to the global recession of 1875-1890. Then, too, as now, there were winners and losers as a result of these broad processes. But over the subsequent 60 years or so, the general assessment has been that the country as a whole was better off as a result of what would nowadays be called embracing change.

Similarly, in the 1960s, there was considerable anxiety that the country would be worse off if it could not re-establish its place in the global scheme of things following British entry to the then European Communities. The Rt Hon Jack Marshall’s aphorism at the time summed it up: ‘… in the past New Zealanders have come to Europe to fight and to die, today we are here to fight to live.’[12] Of course further re-structuring has gone on ever since, again transforming New Zealand into a global player - in the dairy sector, for example, New Zealand has markets in more than 140 countries.

Even so, however, current day New Zealand is not unduly exposed to globalisation by most usual measures. Two recent studies, which I have summarised in another context, show this:[13]

One recent overseas study based on wide cultural and other criteria rates New Zealand at eleventh among nations in terms of exposure to globalization, below comparable small countries such as Singapore, Switzerland, Ireland and Denmark. On narrower economic criteria, New Zealand would be further down the list. Domestic studies back this view. The New Zealand Institute series, Dancing with stars?, awards low marks on the role of trade in the formation of GDP, on inwards and outwards foreign direct investment and the like.

Still more recently, the OECD’s assessment is that ‘New Zealand has not yet fully seized the opportunities of globalization’.[14] Geographical isolation and the small size of many of its firms, the OECD says, make it difficult for New Zealand to compete in the fast growing areas of the global economy, such as services and technology. Measured against the 19th century attitudes to global innovation, New Zealand may have some distance to go yet.

At the global level, too, the degree of integration is rather less than might be thought. A recent assessment illustrates this by considering global levels of internationalism as a percentage of GDP in several sectors.[15] On this basis, fixed investment, migration, telephony (including the internet), management research and education, patenting and share investment all rate at about 10% of GDP, and even trade on a global average is just 20%. The number of long term international migrants, for example, reached a high of 3% of the world’s population in 1900 while the rise till 2005 was still slightly less at 2.9%. Looking at things the other way round, some 90% of fixed investment and other activities occur within national borders.

Accordingly, both for New Zealand and for the world at large, it seems likely that the globalisation of today has been overrated. The Economist recently assessed, for example, that[16]

some people reckon that, as the nature of innovation changes, so it is speeding up. But that’s not obvious… the arrival of the telegraph, for instance, was just as disruptive as the internet is today.

Likewise for the impact of, say, the locomotive on the contemporary scene, as George Eliot’s Middlemarch shows.[17] That book conjures up an ominous perspective on train travel as shrinking distances and, Eliot implies, destroying cultures and communities in the process. Other eminent Victorians made similar points about savage industrialism and the growth of large cities, then a novel and alien urban form. It may be understandable that the changes resulting from innovation today are deeply felt now but so were the sentiments arising from previous globalisations and it would be a-historical to think that ours are somehow felt more profoundly than theirs.

Overall, we have been there before – as Lawrence Mead has put it:[18]

We have, in fact, returned to a world order not unlike the late Victorian period at the end of the nineteenth century. Then as now, the world was globalizing, and English was the lingua franca.

III. Myth of the Borderless World

International integration is far from complete, and is likely to remain so.[19]

The idea we are now living in a ‘borderless world’ is something of a myth. It is true that modern inventions - enhanced technologies for communications, capital and trade flows - have diminished the distance between and within countries and increased interconnectivity. But reducing distance and increasing connections are not the same things as abolishing borders. Borders remain crucial not only because frontier controls on the movement of peoples, goods and services remain significant around the world, as any New Zealand Embassy will point out, but also because they are a prime means of defining the legal and administrative jurisdictions of countries.[20] And jurisdiction is what separates the citizens of one State from those of another - as well as separating both from the jurisdiction of international law itself, a separate legal order under the ‘dualist’ approach to international law followed by New Zealand. Before or after going abroad for ‘Overseas Experience’, the vast majority of citizens spend the bulk of their lives within a few kilometres of home and work and in a world divided by frontiers - think visas, customs, tax, health and phyto-sanitary controls, police and court jurisdictions. Shrinking distance for some purposes has not caused borders to vanish for others.

But has increasing scale changed matters? Has the increasing density and ‘interdependence’ of global business deals along with the increased awareness of global problems such as climate, change, bird flu or human rights abuses reconceptualised the international order? The answer is a qualified ‘yes’ but not with regard to the legal order relating to either State borders or to the reach of State authorities outside their own jurisdiction - they have none (unless by way of special international agreement which reinforces the original point that borders count). In fact, the limits of formal State jurisdiction are, as set out authoritatively in the Lotus case, still a valid case.[21] One consequence of all this for global problems is that effective action still depends mainly on action by the State and on its powers of enforcement within its own jurisdiction.

Borders accordingly remain real. Corroboration for this can be seen in the way today’s increased transactions provide massively increased business – and revenues too - for international law and accountancy firms handling cross-border business, all of which need to know the details of specific jurisdictions behind the borders. Borders similarly increase business for government foreign ministries and domestic departments or bodies with border powers and responsibilities: customs, health, immigration, agriculture, environment, central banks, tax authorities and agencies involved in the mutual recognition of qualifications.

IV. Are Regional Arrangements the New Borderless, Globalised Future?

It’s sometimes popularly argued that regional organisations and arrangements provide evidence we live in a new borderless world where States and citizens defer to ever-widening supranational orders. The European Union (EU), North American Free Trade Agreement (NAFTA) and the Australia New Zealand Free Trade Agreement (ANZCERTA), for example, were formed to liberalise borders. This is true and much progress has been made but it is generally far from complete. When one looks closely, it is clear that borders and the role of States remain more important than might be thought.

A. The EU is Unique

The EU, which is also the world’s largest economy, has achieved major successes in economic and legal integration.[22] Its history comprises a series of efforts to ‘integrate’ its member States into a wider ‘supranational’ order – starting with the ‘European Communities’ and the goal of transforming the State-directed economies of the post-World War II period into a Common Market of deregulation and privatisation; in 1986, creating a ‘Single European Market’ aimed at the barrier free internal movement of goods, services, capital and labour; in 1992 creating the ‘European Union’ by grouping the European Communities together with a programme for economic and monetary union and some additional machinery for a common foreign and security policy as well as cooperation on justice and home affairs. Largely the product of the 1992 Maastricht Treaty as amended by the 1997 Amsterdam and 1999 Nice treaties, the EU has strengthened institutions to make them more commensurate with the scope of its expanded objectives.

The upshot of 50 years or more of evolution is that there are several supranational institutions, among them, the Commission, the Parliament, the Court of Justice and the European Central Bank. Among these, the Commission in Brussels acts as a kind of ‘proto bureaucracy’, having notably the exclusive power of initiative to propose EU policies and measures for adoption by the Council, which is composed of Member State Heads of Government or Ministers (according to the subject matter under discussion). There is also now a dense picture of Community-wide law and regulation[23] and some strong Community-wide policies, such as the Common Commercial Policy, the Common Agricultural Policy and the Community Competition policy. The evolution continues. Among other things, for example, the recently adopted Lisbon ‘reform treaty’, when in force, will remove requirements for unanimous voting in the Council on a further 50 or so sensitive areas for most Member States and will aim to provide a single foreign policy spokesperson for the EU. The history has been one of a continual shift in the institutional balance from Member States towards the Community institutions.

For all that, however, anyone who has had to work with EU institutions, policies and regulations will have deeply internalised the lesson that borders and the reach of the nation State remain important both within and outside the EU. For a start, in practice, not all arrangements apply equally to all borders and not all policies and rules apply to all Member States. The UK and Ireland are, for example, not bound by the ‘Schengen acquis’, which aims to abolish checks at internal borders: both States have been given the right to continue to apply their national system of border controls. Under economic and monetary union, neither the UK nor Sweden is member of the ‘Euro-zone’ (officially launched in 1999), where the Euro has replaced national currencies and, in effect, currency borders for participating countries. The establishment of the Euro has been matched by the creation of a European Central Bank for monetary policy but as yet there is not a single EU budget comprising Member States - there is of course a budget for the EU institutions themselves - nor a single fiscal policy for member States. The UK and Ireland, again, have a series of opt-outs from the Lisbon ‘reform treaty’. The upshot of these (and other) variations is that the EU itself is thrown back on informal expressions such as ‘variable geometry’ to account for the fact that not all its members participate in all of its arrangements.

Again, even though common policies abolish borders in principle, they can re-appear in another form. The Common Agricultural Policy (CAP), for example, has always had significant special features that to some extent ‘re-nationalise’ policies. One such mechanism until the 1990s was the use of so-called ‘green currencies’ that enabled higher payments in fact to some members. That has now disappeared and serious reforms to deal with both the Doha Round and with the entry of the new mainly agricultural Eastern European members have now put the CAP on a different footing. Even so, policies have allowed individual members to stick with the old systems in certain circumstances and countries such as the UK could press ahead with more radical reform if they wanted to.[24] Many of the reforms made sense and were widely welcomed. However, the exceptional aspects point up the degree to which there are individual variations on the ground. Again, when Member States determine to defend major national companies regarded as national champions against EC anti-competition charges, the Competition Commissioner can face a stiff negotiation. And borders, of course, retain all their importance in the EU’s dealings with non-members, that is, with the rest of the globalised world.

Nor, according to observers, has the integration process much reduced the essential reach of the State within the EU. What struck me in Brussels (during the latter stages of the formation of the Single Market) was the degree to which the Member States play a significant role in relation to the main Community institutions and in the development of policies and measures that will be acceptable to Member States in practical terms. First, Member State representatives in Brussels coordinate activities closely with their capitals on the development of policy, point by policy point, in real time if necessary. At the informal working groups and committees that are called by the Commission to prepare policy instruments, the Member States representatives in Brussels, wearing their national hats, also coordinate closely with other Member State representatives and with the Commission. Finally, the Member States, acting through their Heads of Government and/or Ministers, constitute the Council, which is the prime decision-making and ‘legislative’ body for proposals made by the Commission.[25] Among all EU institutions, in practice, the Council of Minsters is a critically important body.[26] At the least, therefore, a picture of the EU should ‘not be based on a concept of the EU as driven by the Member States or by the actions of the EU institutions’ alone.[27]

As regards external policy too, non-EU countries at the GATT/WTO in Geneva are unlikely to forget that the European Commission makes few serious moves in negotiations without first consulting the Member States, known affectionately there as the ‘mothers-in-law’, which sit alongside it in meetings. The Commission has legal responsibility for the Common Commercial Policy but my experience of trade negotiations in Geneva, again as a New Zealand official, suggests the conduct of negotiations with the Community is more complex in practice than that would imply. In fact, the Council of Ministers must accept the outcome of negotiations so neither the Commission nor Member State representatives in Geneva would be likely to alter mandated positions without further authority from their Ministers meeting in the Council back in Brussels. At times, for example, with the conclusion in 1997 of the post-Uruguay Round negotiations on telecommunications and financial services, special meetings of the Council of the European Union or of key Ministers were called ready to sit contemporaneously with GATT/WTO negotiations in Geneva, the latter continuing through one or more ‘final’ sessions lasting through the night. In itself little or none of this is remarkable as State procedure for an end game to international negotiations. In comparable circumstances New Zealand Ministers, for example, would be similarly available for consultation by New Zealand delegations in Geneva. But it does underline the key decision-making role of EU States acting through their Ministers in Council in defence of national interests.

Observers of the scene back in Brussels are unlikely to see matters differently. The Member States routinely compete to meet major third country trading partners separately from the Commission, in a bid to secure their national advantage. Stories of this date at least from the 1980s when Japan was the most feared exporter to the EU. Now that China has supplanted Japan in that role, fresher stories are available:[28]

The 27 member countries are eagerly… undermining agreed positions in a quest for national advantage. …China knows perfectly well that the EU functions only rarely as a single block.

Member States believe they act legitimately. Inside and outside the EU, the individual views of Member States count along with those of European institutions. So, regarding integration, the realities of the EU confirm much water has yet to flow under the bridge. Diplomats, businesses and NGOs working with the EU are sensitive to this.

B. Other Regional Arrangements Seek Goals by Different Means

Other regional arrangements, such as the 1994 North American Free Trade Agreement (NAFTA) or, from our own region, the 1983 Australia New Zealand Free Trade Agreement (ANZCERTA) do not even attempt the mix and transfers of competences aimed for by the EU. No such agreement seeks such a degree of political and economic integration. Borders and the State remain visibly important, as does continuing dialogue between the members. Procedures, formal and informal, are overtly diplomatic.

Despite the creation of NAFTA, which links the Canadian, Mexican and US markets, there has been is no shortage of current dispute settlement cases deriving from border-related matters. Canadian lumber exports to the US are one perennial example. The right of Mexican delivery trucks to cross into the US instead of having to unload cargo at the border onto US trucks is another.[29] Similarly, ANZCERTA and related agreements, long a success story, have lowered an array of barriers – as a matter of historical record, well ahead of their original schedule – but much remains to be done about lifting Australia’s ban on apple imports to harmonise business law and tax requirements. And where there were once no controls on the movement of people between the two countries, New Zealand citizens are required to present a passport at the border in Australia.[30]

Based on the evidence, then, the idea that proliferating regional agreements will in time render a world without States or frontiers seems wide of the mark.[31] Arguably, indeed, such agreements increase global diversity and enough of them may increase discrimination in world trade, leading to what trade negotiators call the ‘spaghetti bowl effect’ as diverse agreements come to overlap and intertwine. Sorting out the confusion requires, again, careful interpretation of agreements with regard to specific borders. Paradoxically, perhaps, the reduction of distance and the intensification of global transactions have enhanced the importance of national powers, borders and jurisdictions.

V. ‘Honey, I Shrunk the State’

If borders remain realities, anti-globalisers nevertheless often claim that globalisation has diminished the State. Successive rounds of trade negotiations and financial liberalisation, it is said, may have reduced barriers to trade and investment and therefore to global growth but they have also reduced the size of the State and the powers of national governments.[32]

A. Leviathan has Shrunk in Some Areas

In one way, the claims are true. A foreign economic policy objective of successive governments has been to shrink the ‘free choice’ of governments as well as the size of barriers to trade and financial flows - at least in the sense of reducing the scope for poor government choices. Historically, for instance, some governments have ‘freely’ chosen protectionism, causing damage to competition, efficiency and consumer interests in their own country as well as in that of the exporter. New Zealand’s agricultural export sector has long suffered from the protectionism of other States, and the more recent advent of ‘food miles’, which should be seen for the protectionism it is, shows the risks are still alive and well. By the same token, New Zealand taxpayers and consumers have themselves sometimes been victims of comparable policies in their own country – with subsidies, import licensing and foreign exchange controls in effect prior to the reforms of the mid-1980s. In general, such laws and policies cause social inequities as well as depressing productivity, reason enough why most developed countries have taken decisions to liberalise unilaterally, in some degree at least, over the last 20 years or so. Indeed, more liberalisation has arguably occurred unilaterally over this period than through all exchanges of concessions in trade negotiations.

B. …But has Grown in Others

Contrary to the myth, however, it seems unlikely that there have ever been as many governments with so great an involvement in the life and economy of their countries as now, at least among democracies. States remain the main source of collective decision-making for citizens and, therefore, of sovereignty, political power, legitimacy and authority.[33] Governments have accordingly retained all of their main traditional ‘guardianship’ functions but nowadays have taken on many new ones not previously conceived.[34] And in recent decades, they have acquired bigger numbers and more professionalised staff as well as a massive capacity to monitor aspects of citizens’ lives in modern computer data bases. All this has led to a massive expansion of the ways in which the State can intervene in the life of the nation and of individuals compared to, say, a century ago.

A quick run through obvious State functions may help underline the point. States retain of course a monopoly on legitimate violence, policing, and through the court system, on dispensing justice. They are the main means of maintaining the legal framework of stable, functioning markets and of enforcing competition within them. They, similarly, maintain a stable framework for financial markets, liquidity and credit (and bailouts too) through central bank legislation and related arrangements. They now also play a major role in the domestic economy through taxation, regulation and standards as well as indirectly through State-owned enterprises (or their equivalents). Moreover, given that barriers to trade and financial flows have been lowered, only governments acting as ultimate authority can keep them lowered.

The State now also plays a far-reaching domestic social role, maintaining social cohesion and, in part, national identity through expenditure on health, education and welfare, including again the re-distribution of gains from wealth and from globalisation. (Globalisation creates growth, which in turn automatically produces a rise in the tax take, allowing governments to compensate any ‘losers’ by using some gains taxed from ‘winners’.) Further, although radical religion may be on the rise overseas, in New Zealand, it is Parliament that now seems the dominant voice on moral and cultural issues, in matters such as civil unions, child discipline, all matters formerly more the preserve of religious institutions. This is perhaps the first time in modern world history that the State has exercised such extensive roles with uncontested legitimacy.[35]

Rough quantitative measures exist, moreover, of the size and importance of the State’s role, viz, the expenditure of government as a proportion of total national economic activity, for which the usual measure is GDP. To take the 2006 figures for OECD countries, government expenditure even at the lower end of the spectrum, represented by Australia and the US, is respectively 34% and 36% of GDP while at the upper end as represented by Denmark and Sweden, it is respectively 51% and 56%. Most other states are clustered in the middle – New Zealand at 41%, Germany and the UK at 45%.[36]

These levels do not seem likely to reduce any time soon despite orthodox economic concerns that higher levels of government spending are associated with inflation and slower growth. The evidence suggests that OECD governments have been increasing their collection of tax in real terms for the last 40 years, notwithstanding periodic changes of tax rates and economic fashion, Keynesian and monetarist alike. According to the OECD, the average tax burden of OECD countries in 1975 was 29.5% of GDP, a figure that had risen to 36.2% of GDP by 2005.[37] The lift in the tax take gives the lie to alarms about the erosion of the national tax base to emigration and to multinationals. As the figures show, this is not happening. It is clear that the size of the State apparatus has expanded.

Although modern States dispose of massively expanded means, they vary in the services they provide with this funding and in how effectively they spend it. Both subjects would be studies in themselves. But even in small OECD States, governments command significant financial resources to address social concerns if the money is well spent. Qualitatively, New Zealand seems to be doing well. The 2007 Social Development Report is positive on the level of New Zealand’s achievements in many if not most social areas.[38]

It is also clear from the scope of government functions set out above that TNCs and international institutions are not serious competitors to the State, even in the smallest of States. TNCs, whatever their size, simply do not exercise comparable powers to those of a government, which may act to tax and regulate all bodies, including transnational corporations themselves. So much for the ‘power’ of TNCs.

C. …And Maintains its International Role

Again, the State retains its key role in the conduct of foreign affairs, a truism but it seems necessary to underline it in the context of the globalisation debate. As the State and its gatekeepers have sole command of the levers of statecraft, the State remains the principal international actor and power-broker. The State consults as necessary with domestic interest groups, such as business and NGOs, on policy issues, weighs competing interests and takes decisions on national positions for international negotiations. Through its representatives, the State then conducts the negotiations and where they result in treaties, decides whether or not to accept them, that is, become a party. If the State - Executive and Parliament - decides to accept a treaty, broadly, the State again decides on its interpretation and what national laws, regulations and administrative procedures will implement it.[39] There are many examples of the exercise of this power. In New Zealand, among the topical ones are successive government decisions, first that forest owners would not receive property in ‘carbon credits’ accruing in respect of designated ‘Kyoto forests,’ then later, that they would.

Subsequently, the State (through its Ministers and diplomatic representatives) takes part in the decision-making bodies of international organisations, indeed States constitute those bodies. By way of example, New Zealand along with other active members of the WTO, such as Canada, Australia, the US and the EU, not only played a full part in negotiations leading to the establishment of the WTO (1994), UN Framework Convention on Climate Change (UNFCCC) (1992), and the Kyoto Protocol (1997), but also continues to intervene actively in the (large) annual number of ongoing meetings of these bodies. Much is made nowadays of growth in the participation of other institutions and NGOs in international negotiations alongside government officials. This development is rightly regarded as positive but participation in negotiations as a source of (often valuable) factual information and evaluation to officials and Ministers is not the same thing as decision-making. In New Zealand, the latter remains distinctly a matter for Cabinet and Parliament.

Even in formal international court adjudication, the process involving States is not quite comparable to that of parties involved in a domestic trial. The reality of an international court is that it more resembles a diplomatic process in the guise of adjudication. Unlike citizens in domestic courts, for example, States remain in many ways on a par with the international court or tribunal itself. At the International Court of Justice, for example, judges do not pose questions to the States appearing before them but rely on what States choose to submit in oral and written submissions. And when a decision is rendered, a State is certainly bound by it at international law and is accountable to the same international court. But within their own countries, States can again have considerable influence on how any international court decisions are interpreted and applied. None of this is to suggest the international dispute settlement process lacks value, quite the reverse; it can be good, though not watertight as even the WTO process, for example, demonstrates.

Overall, at home and internationally, the role of States remains considerable. As one recent historian also puts it: the ‘nation-State is nowadays the unit of affairs’.[40]

VI. Samson Agonistes: the State in Chains?

According to Thomas Friedman, globalisation has narrowed the choices available to States and their citizens: either to opt out of the (neo-)liberal system imposed by the ‘Washington consensus’ and into stagnation or accept ‘a golden straitjacket’ by which ‘your economy grows and your politics shrinks’.[41] A Samson in chains, as it were. To the anti-globalisers, the Washington consensus, embodied in the Bretton Woods institutions and in the WTO, seems a kind of hegemony of ideas, and to boot, one deprived of moral values. There is sometimes even a touch of the ‘conspiracy theory’ to such claims although on this the reality is more as Don McKinnon, a former New Zealand Foreign Minister now Commonwealth Secretary-General, once famously said that ‘whenever I hear claims of conspiracy in international affairs I find there’s only been a muddle’.[42]

Friedman’s view is true in one way. Following the failure of communism and State-directed socialism, a broad-ish commonality of views seems to have developed among economists on the main principles of national wealth creation.[43] Certainly in international economics, following on from the still-born ‘new international economic order’ of the 1970s, there is also less disagreement on the main principles than is usually thought. But none of this means that a government cannot choose to trade-off, say, higher growth against other objectives, if it felt it had a mandate to do so. Successive governments in France, for example, have generally felt they had such a mandate, although President Sarkozy’s ‘politique de rupture’ (break with the politics of the past) may reflect some coming changes to this view.

However, if elected governments choose broadly liberal policies and they broadly work, Friedman’s point doesn’t seem much of a criticism. So far, the domestic and international track record of broadly liberal polices has been promising – to the point where economists still speak of the last 20 years as the ‘Great Moderation’ – that is, the longest period of non-inflationary growth and stability since the gold rushes. The US economy

has grown fast and steadily. The hiccups, in 1991 and 2001 when growth stalled, were noteworthy chiefly for their shallowness and brevity. Something similar happened in 16 out of 25 OECD countries, including Britain, Germany, Spain and Australia.[44]

New Zealand has recently experienced its ‘longest period of uninterrupted growth since the 1950s’ according to Allan Bollard, Reserve Bank Governor and is regarded as being in a relatively sound position to weather the current (beginning in spring 2007) financial crunch.[45] True, the rise of commodity prices has commentators worrying whether ‘globalisation’ is now shifting from a non-inflationary force to an inflationary one but the spread of growth and prosperity over the period to date has been strong. If the policies work, this doesn’t seem much of a criticism.

Again, such policies arguably work well for developing countries. Representative examples show that many poor countries have become richer in recent decades and that others are now moving along the same path. In Asia, for example, 40 years ago India and China were among the world’s poorest countries but between 1980 (roughly the start of the latest wave of globalisation) and 2000, the real GDP per capita of India has more than doubled while China’s has quadrupled - to the extent millions of their peoples have now been lifted from rural poverty.[46] Elsewhere, in Latin America, despite the return of old-style leftism in Venezuela and Bolivia, other countries have seen poverty and inequality decline, and wealth spread.[47] Even in Africa, Tanzania, long regarded as an example of socialist economic failure last century, is a possible recent recruit with new plans for private industry to re-open diamond mines under stable terms of foreign investment. Closer to home, among Pacific Island developing countries where I have served, Samoa has been regarded for some time now as something of a success story among island economies for its adoption of liberal market economy reforms, including privatisation of some former State assets.

Links, moreover, between this growth and greater liberalisation and/or more liberal trade access are evident. The World Bank, for example, assessed 73 developing countries comprising 4 billion people – or about 80 percent of the world’s population – according to increases in their ratios of trade to GDP over that period.[48] Of those, a foremost group of 24 countries, including India, China, Brazil, Mexico, Thailand and Bangladesh (representing 2.9 billion people) increased that ratio by a total of 104 percent (compared to an increase of only 71 percent in fact in developed countries over the same period). Of course this group comprises mainly the large Asian and Latin American countries but together they represent nearly 3 billion people and the speed and scale of their development are historically unprecedented achievements. The picture is more complex for the 20 percent of the poorest comprising the ‘the bottom billion’, which are not only the least integrated but for which there seem few short to medium term solutions pending, according to one well-informed study, the institution of better ‘governance’.[49] However, the problems faced by the latter group of countries, where much human sympathy and assistance are also needed, pre-dated ‘globalisation’. Overall, one lesson to be drawn from the World Bank report is that countries integrated into the opportunities for faster growth provided by international trade have seen not only an increase in wealth and a reduction in poverty (though on the latter much remains to be done); they have also seen a significant diversification of their economies away from commodities into producing – and exporting – value-added manufactures and services.

The point is often made that few of these countries have adopted all tenets of the Washington consensus, as though this suggested none need ever be adopted. However, the vital thing is that the countries concerned have progressively chosen liberalising elements and that significant growth correlates with this choice. To put it the other way round, where there are doubts about the prospects for growth in these countries, they arise not from concerns about the liberalised parts of their economies but from the (fairly considerable) number of areas where State-directed policies still apply.[50] This shows up in international competitiveness rankings where, for example, China (34th of 131 countries) and India (48th) do not rank commensurately with their economic size. China’s competitiveness ranking is seen as being hurt by a weak financial system and India’s by employment market rigidities.[51]

Further, in the GATT/WTO, where developing countries critique (as they rightly do) the protectionist policies of major markets or form a pressure group – such as the ‘Group of 21’ - to lobby for greater access for agricultural exports, they do so using, among other arguments, the same liberal market principles a country such as New Zealand relies on for the same purpose. There has long been a convergence of interests between New Zealand and many developing countries on this, which as a general point deserves to be better known outside Geneva meeting rooms than perhaps it is. Such developing countries do not support the characteristic views of anti-globalisers, especially those of rich Western environmental groups or industry sources that lobby to exclude imports from poor countries on what amount to protectionist grounds.

The basic liberal principles may not be a universal panacea and their application can doubtless be improved in many if not most countries. Globalisation can doubtless be better or worse depending on how the principles are applied and on the social policies of redistribution and development that States choose to go with it. But they make a good start for rich and poor countries alike. And because participation in the liberal economic and political system increases economic welfare, the legitimacy and stability of the State is enhanced too. Unlike Samson, States retain their power to make good choices.

VII. The Strange Case of the Vanishing Juggernaut

The idea that States cannot resist a globalising ‘juggernaut’ seems to have caught on in many quarters. At first sight, it seems plausible. Anyone can see the world is large and that the small State is, well, small. In fact, however, the international environment is an inhospitable one for juggernauts. Negotiations for the adoption of international policies take place in a variety of countries – the author’s experience of climate change negotiations in the late 1990s, for example, took place in Kyoto, Bonn, The Hague, Lyon, Oslo, Reykjavik, Ottawa, Montreal, Washington, Buenos Aires, Suva, Wellington, Canberra, Melbourne, Buenos Aires, Tokyo, Bali, New Delhi and Marrakesh, a list that may be incomplete owing to the passage of time and imperfect recollection. The logistics are far from simple. Some fora are far flung, administrative support can sometimes be variable and there is a fairly large throng of officials, NGOs and business representatives attending multiple streams and sub-streams of meetings on specific and detailed aspects.[52] These circumstances can make logistics a challenge and negotiations diffuse and slow. In the diplomatic trade, the pace is often ‘glacial’ and progress is usually described in inches rather than yards. Finally, beyond the negotiations, national or domestic processes for the acceptance and ratification of treaties can spin the time line out to years if not decades. Juggernauts risk death by a thousand delays.

The history of international negotiations, even of ultimately successful ones, shows these risks. The reduction of tariffs under GATT since 1945, for example, is often cited as drastic globalisation – successive ‘rounds’ of tariff negotiations have lowered them from an average of over 100% to around 4% average today – but 60 years is hardly lightning speed and even now the average conceals numerous important ‘tall poppies’, including tariffs on agriculture products of key interest to New Zealand. The ‘Uruguay Round’, launched in 1986, suffered stagnation and crisis until brought to a quick last minute conclusion in 1994. Again, floating exchange rates were agreed as a matter of policy among major countries following the ending of the gold standard in 1971 - essentially because the US could no longer maintain it - but IMF rules were not amended to permit that formally until 1997. The Law of the Sea negotiations, launched in 1972, took 10 years to complete, but the US expressed reluctance to ratify even after a further special agreement, known as the ‘Agreement of 1994’, was drawn up to address specific US concerns. The current ‘Doha Round’ of trade negotiations was launched in 2001 but has since lurched from crisis to crisis and no conclusion seems to be on the cards any time soon. New Zealand’s point of view has generally been that the pace has been too slow and resistible, not that it has been too fast.

Before entering into force and becoming ‘legally binding’, let alone having ‘global’ effect, a treaty must be ratified (if the treaty requires that step) and implemented by a specific number of States (a number usually defined in the treaty itself). As the technical rules for becoming member of a treaty show, implementation for one State, let alone many, can be slow particularly where major legislation is required.

In fact, the notion that policies and agreements are somehow imposed on States as a result of globalisation seems muddled and ignores the fact that all States have a choice on whether they accept policies not their own or on how they participate in the adoption of treaties at international meetings and, subsequently, whether to become party to a treaty. Megaphone diplomacy does exist But this is generally more style than substance as can be seen in the current wrangles over, say, finalising the Doha round or, say, holding major States responsible for implementing their obligations under the Nuclear Non-Proliferation Treaty. At times, volume has not been lacking in these debates, but as one might expect, this has so far produced little.

In any event, choices on these matters are not lightly undertaken. In New Zealand the power of choice is protected constitutionally by the legal rules and procedures for the adoption of treaties and for becoming party to a treaty.[53] The rules are somewhat technical and thus not easily understood. They can be overlooked in the heat of debate. They play, however, a crucial role in blunting the impact of ‘compulsion’, if there is any compulsion, and protect both sovereignty and national decision-making.

In the first place, adopting the text of a treaty at an international conference is not the same thing as becoming party to it. Adoption is no more than it says: ‘adoption’ of a text embodying the outcome of negotiations among States. It is accordingly hard to see how treaties can be said to be ‘imposed’ upon a State when the State itself has had a role in shaping it to its liking. From the outset of negotiations, State diplomats and officials participate in negotiations under prior national instructions approved by the Executive, and conferences called to adopt texts are often attended by Ministers from the Executive in person. Similarly, at the conclusion of negotiations, neither Ministers nor officials agree to accept texts for adoption by the conference unless instructions are either met or, as suggested above, a compromise acceptable to the Executive is reached. Finally, in the (fairly rare) cases where a text is adopted against the wishes of a State, that State is able to make a clear statement distancing itself from the text as, for example, Australia did at the conference called to adopt the Kyoto Protocol in 1997.[54]

Then again, according to the principle of consent, States are not bound to become party to a treaty to which they do not consent. Essentially, under the ‘dualist’ approach to international treaty law followed by New Zealand, international treaties are not legislative in nature but depend on the consent of the parties.[55] Possible exceptions to this consent based law-making, such as some rules of international customary law, the singular case of human rights and the possible existence of so-called jus cogens laws, are not at the centre of the globalisation debate.

Recently it has been claimed that new international practices, especially the expanded use of consensus for the adoption of texts at international conferences, have done away with the need for State consent.[56] It is true that in conferences nowadays States make much greater use of consensus than express voting but this is because prior negotiations are intensive and most areas of disagreement have been settled in advance of the final plenary sessions calling for adoption of texts. And in any event, as mentioned, ‘adoption’ is not the same thing as becoming party to a treaty. Whatever the means of adoption, to become party to a treaty, New Zealand still follows standard constitutional procedure involving the Executive and Parliament. The procedures that protect sovereignty remain.

It is sometimes claimed that the choices involved are somehow not ‘real’ choices and of course political and economic pressures on States to join can be strong in some cases, as can be seen from megaphone diplomacy or the ‘golden straight jacket’. In diplomacy as in life, however, almost all decisions are trade-offs. If governments have other compelling priorities, history suggests pressures are not irresistible. New Zealand’s anti-nuclear and ANZUS stance in the 1980s, captioned at the time as ‘the mouse that roared’, shows this. The reality is that, for all States, the international order arguably allows for greater display of national hubris than may be evident from the outside, or is perhaps even wise.[57] Alternatively, if a State considers the advantages of a treaty outweigh the disadvantages and becomes a party, then perhaps it should not complain too loudly.

The main points to note here are that no international agreement or treaty applies in New Zealand without the Executive having first considered its adoption and acceptance in light of its own policy goals and priorities and no significant agreement so applies without consideration by Parliament, including the passage of prior legislation if necessary. Treaties such as those establishing the WTO, IMF, World Bank, OECD and the like embody liberal principles, true, although in fairness it should be pointed out they also contain numerous exceptions for national security, health and other reasons. But all of these - packages of rules and exceptions to the rules alike - apply in New Zealand as a matter of government choice. New Zealand chose to become a founding party to the GATT in 1947, backed incidentally by Parliamentary ratification at the time. But New Zealand did not choose to join the IMF, which was established in 1944, and the OECD (successor in 1960 to the Organisation for European Economic Cooperation), until 1961 and 1973 respectively. In addition, New Zealand lodged certain reservations where necessary to maintain existing policies. The power to add a reservation limiting the scope of acceptance is another safeguard against compulsion, provided they are not contrary to the object and purpose of the treaty.

Then again, under the ‘dualist’ approach, a treaty in itself binds only the States themselves and not citizens or businesses and corporations within States. It is still true that citizens, whether individuals or bodies corporate, are regarded as ‘objects’ of international law, that is, they do not normally have the rights that States (which are ‘subjects’ of international law) have to implead in international law in international fora. Similarly, if there are any disputes between States over a treaty, they are settled not in domestic law courts but in international fora such as arbitration hearings or, much more rarely, the ICJ, where only States participate. Again, as mentioned, the decisions of such fora apply only at international law, and not directly in New Zealand law.

Before a treaty accepted by the State is ratified (if the treaty requires that additional step) and has effect in New Zealand on New Zealand citizens, constitutional convention in this country requires that the rules of the treaty be first ‘incorporated’ in New Zealand’s domestic laws, regulations and, where necessary, administrative procedures. It is these laws and regulations, which are enacted or passed by the New Zealand parliament and/or executive, that give legal effect in New Zealand to any treaty. Moreover, once the treaty has been ‘incorporated’ into domestic laws and subsequently ratified, it is the domestic laws that bind citizens, not the treaty as such.[58]

Finally, New Zealand is free to withdraw from organisations and treaties or for that matter to abandon modern technologies and processes - though there would be no sane policy counsel to do any of this. If New Zealand were to do so, for example, one unpalatable consequence would be that policies of economic redistribution would need to be carried out from a smaller and slower growing economic base. It is easy to see that something like that would have occurred had New Zealand turned aside from, say, the globalisation of refrigeration in the late 19th century. It is sometimes said that opting out, too, is not a real choice. But as mentioned above, all choices are trade-offs so, in that case, it is hard to see what is really meant by complaints of compulsion.

These principles and procedures will be familiar to practitioners and others working in the field. But they are routinely overlooked in the debate on globalisation – perhaps the unkindest cut of all - so it is important to mention here their role in protecting the power of national choice.

VIII. Medusa or the Myth of ‘Irreversibility’

Some think that globalisation is now set in stone, Medusa-like, or as the political phrase has it, ‘irreversible’. This seems too good to be true. Reversibility of policy direction is in fact among the greatest current risks to a liberal polity and economy. In practice, anticipating such risks and seeking to avoid them where relevant comprises much of the bread and butter work of New Zealand diplomacy.

Liberal political advances are not invulnerable, despite, for example, the exponential rise in numbers of liberal democracies last century – from around 25 in 1900 to more than 60 today.[59] In fact, complacency over democracy seems a kind of Anglo-American weakness,[60] reflecting the fact those societies have, despite inevitable historical imperfections, never succumbed to forms of totalitarianism. Not too long ago, other democracies did succumb - in Germany, in Italy and potentially in France. Democracies can still falter; think of recent events in Thailand, Bangladesh or Zimbabwe. Or they can assume forms that do not accord with generally known criteria; think of Russia since 1999. On the irreversibility of the spread of democracy, the jury will likely be out for some time yet.

Economic policy is similarly vulnerable. Despite rhetoric about the ‘Washington consensus’ and the like, there seems to be no country that has fully applied the tenets, including possibly in Washington. In fact, the level of State spending as a proportion of GDP, for example, has generally risen. In New Zealand’s case this has happened despite fiscal reforms and the Public Finance Act 1988, which provided among other things for transparency and prudence in government accounting. Spending has risen from around 33% in the mid-1980s after reforms to around 40% in 2007 (44% if State-owned enterprises and local government spending is counted[61]). Over the same period, Australia has had similar issues with ‘big government’.[62]

Again, since the 1980s in many countries, there has been much deregulation – from price controls to transport (road, rail and air) to the professions and banking. However, regulations have multiplied in other areas, in environment, health safety and security some of which may even affect property rights. According to one assessment of the US[63]

experts admit that they don’t even know whether the regulatory burden is growing or shrinking… [and] quite a lot of cost benefit analysis is done, but it is sometimes shoddy and politicians often ignore it.

Similar concerns have prompted some to call for greater scrutiny of regulation-making powers in New Zealand.[64]

International agreements also risk being reversed. That the body of the international legal system offers benefits is doubtless another truism. Less often observed, however, are the underpinnings, which can corrode, allowing gains to be whittled away, sometimes to the point where some agreements can come to look close to reversible. The trade area, important to New Zealand, provides examples. New Zealand’s frozen sheep meat trade to the EU has been subjected to numerous attempts at reduction by the EU since the EU first agreed to bind the tariff at 20% in the Kennedy ‘round’ of GATT trade negotiations in 1962;[65] and in general the sheer number of WTO Dispute Settlement cases illustrates the costs of securing compliance when there is a dispute. New Zealand’s timber trade to the US has been subjected to attempts at limitation under the guise of phyto-sanitary regulations. The protectionist problems discussed above in relation to borders are further continuing challenges. Effective sanctions can be hard to come by - moral suasion may often be the main recourse.

In time, the current international liquidity crisis may come to show the risks of reversible rules and policies. Doubts currently exist about the willingness of central banks to hold the line against risks of reversion to the overly easy monetary policies of the Keynesian years and inflation:

[T]he hard-fought lessons of monetary policy can all too easily be forgotten, - especially in a slowing economy. In the short run, loosening policy too much after this summer’s turmoil could send inflation expectations back up. [66]

The history speaks for itself. A recent book by Alan Greenspan, former chairman of the US Federal Reserve, sets out those details well,[67] even if Greenspan’s own policies are now being held, in large, partly responsible for the current credit crisis.

Other examples of reversibility are easy to identify. In the conservation sphere, Japan consistently seeks to erode the effect of limits on the number of whales taken under the anti-whaling agreements. Environmentalists complain that States may agree in principle to ‘sustainable development’ commitments at international meetings but continue to permit non-sustainable procedures in practice afterwards. Contrary to the fears and arguments of anti-globalisers, New Zealand’s interests lie in countering the tendency for policy and agreements to unravel over time.

In any case, complaints about irreversibility seem fundamentally mistaken. Honouring negotiated outcomes, whether legal or of any other sort, is usually considered a good thing. Treaties are generally intended to encourage adherence and therefore greater stability in international affairs. Diplomats commonly speak of seeking to further the ‘rule of law’, or in trade negotiations, of ‘locking-in’ States to their commitments. In the environment area where there are fewer hard legal obligations, advancing the rule of law often means ‘setting the agenda’ for the future and trying to stick to it. International law broadly supports these ideas as is reflected in the fundamental principle pacta sunt servanda – agreements should be honoured in good faith.[68]

IX. Globalisation, Sovereignty and Power

The point is sometimes made that powerful States and organisations have been setting trade and finance agendas, which may not have impaired their own sovereignty but which have done so for small or poor States. Globalising treaties are now often couched in the language of ‘conditionality,’ ‘governance,’ ‘templates’ for action and so on. Some see this as the language of power, mechanisms for powerful States to press norms onto other – smaller – countries whilst escaping control themselves. But is that true?

Ultimately, these are the kind of claims that fit theories better than practice. The idea that law follows power is not new. That has long been at the centre of the ‘realpolitik’ school of thought.[69] And it is true there are imbalances of powers and obligations, such as the privileged positions of the veto-wielding countries in the UN Security Council or that of the reserve currencies countries in the IMF or, again, that of the agricultural sector of major countries in the WTO. But the relationship between power and sovereignty is not always what it is commonly supposed to be, namely that powerful agents always get their way and keep their sovereignty while weak ones have little to gain and lose it. There have been cynical abuses – Nazi Germany comes to mind - but overall the common view is too cynical and, if true, would mean that other States never had anything to gain from negotiations. Such a view cannot even explain why major States would conduct negotiations in the first place. Why would they not just declare game over and go home? In fact, major States gain credibility and legitimacy from investing the effort in international law and order rather than in what one might call alternative approaches. Small States stand to gain something otherwise they would have no incentive either. That ‘something’ is a balance of advantage or of interests shared at least to some degree. Clearly, this doesn’t always work out, in which case re-negotiation is likely. Justice can be rough. But overall, the total ‘payoff’ for most States is likely to be higher through negotiations than through other means.

Power, in short, cuts both ways. Consider how this works. In instituting broad liberal regimes, such as the Bretton Woods institutions and/or WTO, for example, major economies have clearly sought to maintain control. But equally they have also agreed to set up regimes with enough autonomy to be at once legitimate and interesting to other countries. They too have had to make trade-offs to accommodate at least some interests of other countries.

Similar realities apply to the famous ‘conditionality’ provisions of the International Financial Institutions (IFIs), the World Bank and IMF (although States now look to apply ‘conditions’ in their bilateral relations too, for example, EU practices with countries seeking market access or accession). Conditionality as used by the IFIs can mean requiring borrowing countries to make domestic changes such as restructuring, reductions of subsidisation policies or increases of taxes as conditions for the grant of loans. The power imbalance between global financial institutions and poor countries, it is said, ‘strains the consensualism’ at the heart of accepting agreements. It’s seen as one more of the ways that globalisation challenges legal notions of sovereign equality besides seeming to distribute costs and benefits unequally. It also underlines inequalities in the capacities of countries to participate in the new kind of international order.

Experience shows in fact that the power imbalance is generally less than might seem. It is true there have been headline cases of institutional heavy-handedness which have exacerbated the problem. The 1997 Asian crisis or the crisis in 2001 in Argentina spring to mind. Insiders have it that at times the US can treat the IMF as an arm of the US Treasury. And in the WTO, it is folk-lore that ‘there will be no agreement without the US’. But beneath the headlines in most cases reality is more mundane. First, sound economic management is less a mystery than might be imagined. One reason countries that suffered under the Asian crisis are well-positioned today is that they have tightened up substantially on their economic management and on domestic regulation – all in fairly similar ways. In fact, when a country gets into economic and/or financial difficulties, the problem is less in identifying the remedies to be applied – these are not rocket-science – but in managing a situation where all options are drastic because the situation has been allowed to get beyond easy retrieval. One doesn’t have to carry a brief for the IMF to recognise that countries might then prefer to let IMF technocrats take the rap for tough remedies.

Secondly, size is not everything when it comes to details. In my experience, even micro-States of a hundred thousand people or less, for example, are able to deal with major international financial institutions in the dark arts of negotiations. In loan talks in such countries, it’s clearly hard for an IFI to be sure of its ground – and therefore of insisting on all it might wish by way of terms for a loan - if, say, the relevant statistics for the country have not been calculated for years, or they have been calculated on the basis of an obsolete 1981 format no one else uses, or they have simply been lost.

Again, once the IFI grants a loan, any remaining imbalance erodes further over time. Successive variations and extensions to loans over the years can leave the IFIs as much in the hands of recipients as vice versa. The reality is that there is a political requirement for everyone that loans must ‘succeed’. Negotiators on the spot in remote places therefore do not like to report failures to head offices, head offices do not like to report them to governing bodies and the latter do not consider them to be a ‘good look’ in annual reports. Governing bodies, moreover, are made up of all member States, including the one with which negotiations have just failed (if they have failed). In negotiations and in re-negotiations alike, therefore, both sides can find themselves needing to salve honour, a critical process that levels the playing field and gives even the smallest of micro-States political purchase. As with all families, it is not the smallest member of the clan that is necessarily the least powerful.

In fact, a reality-check often favours more benign interpretations. Major States are usually needed to take a leadership role on a major global issue. Indeed, in tandem with their own role, other States often appeal to them to assume this responsibility, as New Zealand has, for example, in seeking support on issues ranging from climate change to closure on the Doha Round. On the former, for example, although Administration views later shifted, US leadership between 1995 and 1997 was critical to the conclusion of a Kyoto Protocol with legally binding – as opposed to voluntary - emission reductions targets. In global economic crises, such as today’s liquidity crises, major decisions are in the hands of the major economies, which issue the reserve currencies used in international transactions. In this regard, other countries expect – indeed demand - that major economies assume their global responsibilities. Conversely, it is rarer for a middle power to be able to take the lead - although of course this is not unknown. Australia successfully led the international aid effort after the 2004 Asian tsunami, for example, and on regional issues, such as within the Pacific, Australia and New Zealand often seek to provide leadership.

Much of this is simply a question of resources. All States can (and a great many do) contribute but larger countries are obviously better placed to contribute relatively more on such matters as the deep background on technical matters and/or possible options for independent consideration by other states. Thus provided, all States have something to bite on and, if digestible, can then form an independent view protecting their own interests as they perceive them. Moreover, better-resourced economies and institutions frequently offer help to poor countries, and if the offer is accepted, give advice on such questions as how to draw up schedules of trade concessions, how to implement UN terrorism conventions and the like. In the case of the terrorism conventions, for example, the relevant better resourced countries in the South Pacific were New Zealand and Australia, and both have provided assistance to fellow Pacific Islands Forum countries to enable appropriate implementation. Pacific Island countries often thank Australia and New Zealand formally and informally for leading in the region on economic development, political stability and international issues. During my recent four-year stint in the Pacific I was often asked by several governments to convey their thanks to New Zealand for assistance in this way.

Indeed, at most levels of international society, providing leadership does not seem to be a bad thing. The world generally welcomed US post-war leadership in the establishment of the Bretton Woods and other institutions of the time, just as it has sometimes lamented the absence of such leadership over the last seven years. Europe similarly welcomed US assistance after World War II in its reconstruction efforts and largely continues to this day to rely on US leadership in NATO for its own fundamental defence. Given the realities of the international scene, there is a need for pragmatism.

X. Conclusion

The idea that ‘market liberalism’ is a globalising juggernaut, overpowering national sovereignty and governments, does not square with my experience of having to deal with these issues in practice over the decades in which globalisation is supposed to have happened. Liberal policies have been widely adopted but less radically than generally thought. Governments have made legitimate sovereign choices in favour of such policies but have then had a hand in formulating the international agreements that enshrine them. To put things the other way around is to get the cart before the horse. It is rare for a government to have to do what it does not wish to do or should do anyway as a result of an international agreement. And nationally and internationally, ‘as long as there is no world army or police force, States remain the unique vectors of law creation and enforcement’.[70] Overall, therefore, the State is far from having had its day.

Does the debate matter? Yes, it does. Myths are not helpful to public discussion of long running issues. Liberal polices produce rising national wealth and thus increasing tax receipts allowing the possibility of compensating those perceived to be ‘losers’ through redistribution policies, but the path may be long, bumpy and involve unpopular decisions. Rather than stay the course, governments can waver or choose to shift responsibility onto international events supposedly beyond their control. As the public cannot necessarily be expected to know much about some of these areas, it risks being led by the nose. Business may be no greater help. Adam Smith thought that business preferred monopoly and rent seeking to market competition and were apt to confuse their sectional interest with the national good. But in debate, such postures by governments and business are apt to disorient the public and prepare the way for the politics of fear and fatalism. Such outcomes may have been inevitable in Adam Smith’s time or a century ago when the public were barely literate. Nowadays, the public deserves a better deal.

Despite the soft focus and conceptual downsides, however, ‘globalisation’ still seems a useful description for the trends of the last 20 to 30 years. It constellates a range of associations from the immense increase in prosperity overall in society today to the kind of existential unease with change itself that is always likely to be with us. As a slogan it seems better than, say, the commonly heard but fairly anaemic ‘post-modern’. It captures something people might actually feel whereas probably few people could ever lay claim to having just had a ‘post-modern’ moment.

[∗] John Goodman, MA (Hons), LLB (Canterbury), LLM (Lon) is Visiting Scholar, Faculty of Law, Auckland University and a former diplomat. The views set out are his personal views. Among many, I would like to thank the Auckland University Law School, especially Deans Julie Maxton and Paul Rishworth, Deputy Dean David Williams, Jane Kelsey, Treasa Dunworth, Elsabe Schoeman and Caroline Foster for bringing other perspectives to bear as well as for unfailing help and kindness. I would also like to thank Allan Bracegirdle for his help. As ever, any mistakes are my own.

[1] Matthew Bishop, Essential Economics (2004), 112.

[2] Benjamin Barber, Jihad v McWorld: How the Planet is Both Falling Apart and Coming Together and What This Means for Democracy (1995); Thomas Friedman, The World is Flat: A Brief History of the Twenty-First Century (2005), although the latter does recognise some lumpy areas.

[3] Des Moore, ‘When will the Leviathan Fade Away?’ (2006) Spring, Policy 10-16.

[4] The expression was coined by Kenichi Ohmae in The Borderless World: Power and Strategy in the Interlinked Economy (Harper Business/HarperCollins Publishers, 1990), but the idea has now passed into the language and has a considerable following, too numerous for complete citation; among the economists sceptical of globalisation: Joseph E Stiglitz, Globalization and its Discontents (2002) and Jeffrey Sachs, The End of Poverty, (2005); among political scientists, John D Gray, False Dawn : the delusions of global capitalism (1998), as well as more populist sources such as Thomas Friedman, above n 2, Prem Shankar Jha, The Twilight of the Nation State: Globalisation, Chaos and War (2006) or Bryan Gould, The Democracy Sham (2006). For a review of the latter, a New Zealand book, see John Goodman ‘Globalisation, Progress and Politics’ (2007) Spring, Policy 46-52. Among defenders of globalisation are Martin Wolf, Why Globalization Works (2004); Jagdish Bhagwati, In Defense of Globalization (2004), to both of whom I am indebted. Brian Easton’s book, Globalisation and the Wealth of Nations (2007) unfortunately appeared too late to be taken into account in this essay.

[5] Susan Strange, The Retreat of the State (1996); Saskia Sassen, Globalization and its Discontents (1998); Jacques B Gelinas, Juggernaut Politics: Understanding Predatory Globalization (2003).

[6] A representative selection of views is contained in Michael Byers (ed), The Role of Law in International Politics, Essays in International Relations and International Law (2000) and in Paul Schiff Berman (ed), The Globalization of International Law (2005).

[7] (2002).

[8] See, for example, Jurgen Osterhammel and Niels P Petersson, Globalization: A Short History (2005) and bibliography.

[9] Livy (Loeb edition), Natural History Book XIV(1), 187; Book XXVII(1), 39.

[10] Janet McLean, ‘From Empire to Globalization: the New Zealand Experience’ (2004) 11(1) Indiana Journal of Global Legal Studies 161. I am grateful to Treasa Dunworth, Auckland University Law School, for drawing my attention to this article.

[11] According to one economic historian, New Zealanders had always been passionate advocates of free global trade: William B Sutch, Poverty and Progress in New Zealand (1941), although it should be noted Sutch himself was not one of the advocates.

[12] Then Deputy Prime Minister of New Zealand in a Speech to Council of Europe, Strasbourg, 25 September 1961; quoted in Terence O’Brien, ‘Britain, the EU and New Zealand,’ in Brian Lynch (ed), Celebrating New Zealand’s Emergence. A Tribute to Sir George Laking and Frank Corner (2005) 27.

[13] Goodman, above n 4. The studies referred to are, respectively: AT Kearney & Co, ‘The Globalisation Index’, (Nov/Dec 2006) Foreign Policy, 74; and David Skilling & Danielle Boven, Dancing with the Stars? The International Performance of the New Zealand Economy (New Zealand Institute, Dec 2005).

[14] OECD Review of Innovation Policy: New Zealand OECD, Paris, September 2007.

[15] Pankaj Ghemawat, ‘Why the World isn’t Flat’ (Mar/Apr 2007) Foreign Policy 54-61.

[16] The Economist, Special Report, ‘Revving up; How globalisation and information technology are spurring faster innovation’ (Oct 2007), 10.

[17] (1878-85).

[18] Lawrence Mead, ‘Anglo Primacy at the end of history: The Deep Roots of Power’, Speech delivered as the 24th Annual John Bonython Lecture, Sydney, 27 June 2007.

[19] Clive Crook, ‘Globalisation and its Critics,’ in (various authors) The Economist:,Globalisation, (2001), 32.

[20] Andrew Ladley and Nicola White’s Conceptualising the Border (2006) affirms the continuing importance of borders for New Zealand.

[21] SS Lotus (1927) PCIJ Rep, Series A, no.10, 18-19.

[22] To keep it simple and to reflect normal language in international negotiations, I have referred to the ‘European Union’ throughout although it needs to be recalled that, technically, the economic and commercial policy instruments referred to are contained in the treaties establishing the European Communities while political and other elements are set forth in the Treaty establishing the European Union.

[23] See for example, the scope of regulations on one subject alone in Gustavo Luengo Hernandez de Madrid, Regulation of Subsidies and State Aids in WTO and EC Law (2007).

[24] Dick Leonard, Guide to the European Union (9th ed, 2005), 161.

[25] Among the institutions, it is true that the Commission has a monopoly on making normative proposals for adoption by the Council and that this can lend it margin for manoeuvre among often disparate Member State positions. Successive changes in voting rules to reduce the scope of unanimous voting provisions in the Council and extensions to the powers of the Parliament have also shifted the balance somewhat in the direction of the supranational bodies. But in essence the Council remains the prime decision-maker, adopting the instruments – sometimes with the Parliament – to give legal effect to common policies and to international agreements.

[26] Barry Eichengreen, ‘Putting it Together: The Foibles and Future of the European Union’ (Jul/Aug 2003) Foreign Affairs 195.

[27] Josephine Steiner et al, EU Law (9th ed, 2006), 16.

[28] ‘The China trade syndrome’ (6 October 2007) The Economist, 54.

[29] ‘Free Trade and Fire Balls’, (15 September 2007) The Economist, 47.

[30] The requirement is not reciprocal.

[31] See references above in footnote 4.

[32] See, for example, Gould, above n 4.

[33] This is not the place to go into it but modern political theories of sovereignty locate it in the relations between a people and its State government.

[34] On the concept of ‘guardianship’ associated with government and differences from the ‘commercial’ morality, see Jane Jacobs, Systems of Survival: a Dialogue on the Moral Foundations of Commerce and Politics (1992).

[35] David Lindsey, Auckland University, reported in Garth George, ‘Modern-day Morality Tale: How State has taken over from Church’ (1 October 2007) New Zealand Herald, A19.

[36] Source: OECD Economic Outlook, no 82, December 2007, Annex: Table 25.

[37] Reported in (27 October 2007) The Economist, 118.

[38] Ministry of Social Development, The Social Development Report (Wellington, 2007).

[39] Standing Orders of the House of Representatives, Parliamentary Standing Orders 387-390, and the Department of the Prime Minster and Cabinet, Cabinet Manual (2001), paras 5.83-5.91. See also Ministry of Foreign Affairs and Trade, ‘Treaty-making process in New Zealand, available at <>. Interpretation of treaties is also subject to the Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27 January 1980).

[40] Eric Jones, The European Miracle (3rd ed, 2003), 127.

[41] Thomas L Friedman, The Lexus and the Olive Tree (2000), 101.

[42] Personal knowledge of author.

[43] See, for example, Thomas Sowell, Basic Economics (2002) and Kenneth Dam, The Rules of the Game (2001). I have greatly benefited from both writers on the economics.

[44] Special Report, ‘Heroes of the zeroes’ (20 October 2007), The Economist, 8.

[45] Allan Bollard, reported in (14 September 2007), New Zealand Business Herald 5.

[46] World Bank, Globalization, Growth and Poverty: Building an Inclusive World Economy, (2002). The World Bank, World Economic Outlook 2005, confirms that ‘all developing regions are now growing faster that their average growth rates of the 1980s and 1990s’ although some areas are performing less well than others.

[47] Alvaro Vargas Llosa, ‘The Return of the Idiot’ (May/Jun 2007) Foreign Policy.

[48] World Bank, above n 46.

[49] Paul Collier, The Bottom Billion: Why the Poorest Countries are Failing and What Can be Done About It (2007), 161.

[50] On China, see John Lee, ‘The False Promise of “Market Socialism” in China’ (2007, Spring), Policy 23-29. On India, see Pankraj Mishra, ‘Impasse in India’ (28 June 2007) New York Review of Books 48-51.

[51] The latest World Economic Forum Global Competitiveness Report, reported in The Economist (3 November 2007), 106.

[52] At the Kyoto conference in 1997, for example, around 1,500 government officials rubbed shoulders with an even greater number of press and NGOs.

[53] For detail on procedures, see Allan Bracegirdle, ‘Domestic Procedures for International Treaty Actions: Description of New Zealand Procedures’ (2003) 14 Public Law Review 28; and ‘Domestic Procedures for International Treaty Actions: the Courts and unincorporated treaties in New Zealand’ (2005) 20(1) Australasian Parliamentary Review 54. Also: Ian Cram, ‘Judging Rights in the UK: The Human Rights Act and the new relationship between the Parliament and the Courts’ (2007) 12(1) Review of Constitutional Studies 53.

[54] The author was in the plenary meeting room when this statement was made.

[55] Please see above n 53.

[56] Neil McCormack, Questioning Sovereignty (1999).

[57] For a discussion of this point, see Malcolm Templeton’s Standing Upright Here: New Zealand in the nuclear age 1945-1990 (2006).

[58] See references cited above n.53.

[59] Hoover Institute, The Roots of Democracy (2007), 8, Fig 1.

[60] Francis Fukuyama, The End of History and the Last Man (1992).

[61] See local government expenditure at Statistics New Zealand, online: <> (last accessed on 8 April 2008).

[62] Hon Peter Costello, ‘Not So Big Government’ (2007) Winter, Policy, 8-9, disputes this and is responded to by Andrew Norton, ‘Not So Small Government’ (2007) Winter, Policy, 10-12 and Robert Carling, ‘The Tax Take is Up’ (2007) Winter, Policy, 13-14.

[63] ‘Of horse’s teeth and liberty’, (27 October 2007) The Economist, 50.

[64] Roger Kerr, ‘Economic Constitutions: Do we need a regulatory responsibility Act?’ (Speech delivered at Law and Economics Association of New Zealand, Auckland, 9 May 2007).

[65] In fairness, it should be noted that negotiations with the EU to reduce quantities were traded off against reductions in the tariff and increases in available chilled quota. Since the Uruguay Round, access levels have been secured under those arrangements, although these have been since exposed to some barriers of a more or less technical nature.

[66] The Economist, above n 44, 10.

[67] Alan Greenspan, The Age of Turbulence: Adventures in a New World (2007).

[68] Jack L Goldsmith and Eric A Posner, The Limits of International Law (2005) correctly point out that there is an ‘empirical’ element to this particularly as regards environmentally ‘bad’ treaties between former communist countries, which it may be undesirable to enforce. But these seem special cases or treaties concluded before States became liberal democracies.

[69] See for example, Hans Morgenthau, Politics among Nations: the Struggle for Power and Peace (1959).

[70] Brigitte Stern, ‘How to Regulate Globalization’ in Byers (ed), above n 6, 267.

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