The impact of globalisation on regions

Explanatory Memorandum

I. Introduction

Globalisation takes the form of increased competition between nations, regions, enterprises and employees, and results in constant mobility of production elements. Demonstrations against its dramatic effects have been observed everywhere in the world, in Asia and Europe and during the international conferences of global financial and trade institutions.

The Congress of Local and Regional Authorities of Europe has primarily considered the issue of globalisation in the context of its Economic Forums, organised since 1994. In particular, the impact of globalisation was considered in Bucharest in 1999. The Conference of Presidents of Regions with Legislative Power also examined the topic from the perspective of regions with legislative power. Globalisation is an inescapable and unavoidable phenomenon which directly impacts on regions. Its effects have frequently been decried, and are reflected in headline-grabbing demonstrations by civil society or employees penalised by delocalisation. Since popular protests blocked and even sabotaged the Word Trade Organization conference in Seattle, it has become clear that plans to globalise economic and social policies are opposed by those unwilling to accept the models adopted by the major international conferences. However, it is agreed that the exchange of goods, ideas and services helps to increase prosperity and raise living standards. Indeed, the aim of the negotiations undertaken by the World Trade Organisation is to reduce and even abolish obstacles and barriers between markets. Traditionally, these negotiations have taken place at bi- and tri-lateral level between governments and states.

The Committee on Social Cohesion has decided to identify globalisation’s positive and negative consequences for the regions and draw up proposals to strengthen their position as active partners in economic and social development at regional level, in a global economic context characterised by open markets and increased competition.

II. The contradictory effects of globalisation

For regions, the consequences of economic globalisation are reflected in the economic sphere, where regions are faced with the following realities: they are now exposed to extremely strong economic competition, particularly with regard to investment and localisation of economic activity. At the same time, however, globalisation provides regions with new horizons for their own regional development policies and access to financial markets. Accordingly, it is important that the relevant regional authorities attempt to make the most of the advantages offered by this opening up and minimise the disadvantages of increased competition, which has a particular impact on investment and employment.

Through the restrictions that it imposes, globalisation affects Europe’s regions unevenly. Globalisation cannot be considered as an economic activity that creates inequalities: it merely “brings out or accentuates existing realities” (1) . Today, numerous regions are faced with the transformation of an obsolete industrial fabric unsuited to the needs of the global economy. The fragility of these regions is exacerbated by the fact that they face multiple problems: emigration and a “brain drain”, geographical isolation, lack of national and international investment, and so on. Thus, globalisation makes regions more vulnerable to external misfortunes and economic restructuring.

In this context, the regions of central and eastern Europe are faced with a double challenge: on the one hand, they must adapt to the transition to a free market economy at European level and, at the same time, they are subject to pressure from the new economy and the opening of global markets.

In constructing a global economic system, the free-market doctrine must be complemented by policies aimed at balancing out the adverse effects of regional territorial competition. In a global context, resources must be provided so that Europe, with its comprehensive regional planning approaches, is in a position of force, whilst preserving its characteristic features and diversity. It is therefore important that the European model takes account of Europe’s regional and cultural diversity, an asset that injects a human and social dimension that is likely to be overlooked in purely economic and liberal arguments.

Accordingly, the Europe of municipalities and regions is an essential factor in a European approach to competitiveness and the global economy.

III. Promoting the regions’ capacity for innovation in the context of globalisation

· Reminder: Regional economic development, decentralisation and global competitiveness

In this climate of international competition, Europe’s regions, confronted with the global economic strategies of multinational firms, must build on their socio-economic, environmental and cultural strengths. In particular, it is by developing strategies for sustainable regional economic development that the regions can showcase those factors that boost their comparative advantage and increase their competitiveness in the pursuit of investment and job-creation. Decentralisation is one element in this strategy, enabling the creation of new socio-economic potential. Self-generated development by regions is another. Regional planning policies should take account of these new realities and be used as a tool for strengthening regions’ positions in terms of international competition. As already stated in the European Charter of Regional Planning, the region is the most appropriate level for implementing regional planning policies. It is important, at national as well as European level, that successful regions do not dominate those that are less successful, given the differences in the state of their transport and communications structures or their commercial and industrial advantages. It would be appropriate to develop specific policies for regions with certain geographical or structural disadvantages, such as those undergoing industrial conversion, or outlying or mountain regions.

With the intensification of economic globalisation, it is important that increased devolution goes hand in hand with self-management of economic, social, ecological and particularly cultural resources. States that have decentralised, devolved or even federalised structures are at an advantage here, since decision-making occurs nearest to the political and economic players, who thus have more rapid and direct access to operational resources. Accordingly, it may be concluded that globalisation will lead to new research and projects on the need to decentralise or devolve state structures. Globalisation should not result in cultural and social homogenisation of the planet. Europe’s role, and particularly that of the Council of Europe, is to bring its specific features into the picture and to maintain its differences, particularly at regional level.

· Taking account of and promoting the regions’ cultural dimension

Regions provide their citizens with a local dimension, identity and social and cultural roots. These concepts are becoming increasingly important in a world where communication and information are speeding up global economic and financial strategies. Economic liberalism, the basic philosophy of all current globalisation policy, fails to take account of the importance of regional culture, which cannot be considered as an economic product, to be bought and sold like other commodities. Culture, with its regional and human characteristics, must be protected. In particular, negotiations on the broadcasting industry have highlighted the contrasting approaches during discussions between representatives of the American and European models. Thus, it is important that during international negotiations the European model takes account of Europe’s regional cultural diversity. Indeed, the Committee of Ministers, in its Declaration on cultural diversity of 7 December 2000, called upon member States of the Council of Europe “to examine ways of sustaining and promoting cultural and linguistic diversity in the new global environment, at all levels”.

· Developing regions’ capacity for innovation in terms of employment

New inter-regional initiatives should be taken in the field of employment in order to develop an infrastructure of small and medium enterprises, which are particularly weak in most central and eastern European countries. These strategies are an important element in the fight against unemployment, a blight that affects all European countries. Local and regional authorities suffer its consequences and are confronted with the need to develop initiatives for combating new forms of poverty and social exclusion.

In addition, measures must be taken with regard to training, whether for young graduates or in the area of in-service training for adults, so that the labour market will correspond to the requirements of the international market. In particular, emphasis must be placed on mastering computer equipment and languages, especially understanding of the new information technologies.

· Helping to minimise regional disparities

Particular attention should be paid to regions with geographical or structural disadvantages, such as outlying or mountain regions. Specific policies must be developed for these regions, enabling them to adapt to international competition while taking account of their particular needs.

Under the Common Market, the removal of borders and the introduction of a single market were accompanied by measures to soften the effects of competition and reduce regional inequalities. The European Union sought to achieve this goal by setting up the “European Regional Development Fund” (ERDF) in 1975. Five objectives were identified “to ensure … harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions” (Preamble to the Treaty of Rome). In 1987, the “Cohesion Fund” was set up to support countries with a GDP of less than 90. This measure made it possible to “adjust” the vulnerable economic position of the least developed states, which was exacerbated by the free movement of capital, goods, services and persons.

A region’s ability to be involved in the new economic systems depends on its willingness to become a “learning region”. A region’s apparent disadvantages can be overcome by the clearly stated willingness of regional decision-makers. For example:

· Thuringia has succeeded in carrying out a major transformation: the town of Jena has transformed its industrial landscape, with the Carl Zeiss industrial complex employing 68,000 people before the fall of the Berlin wall, in a high tech centre that taps 200 companies, particularly in the biotechnology field. The Land of Thuringia has at the same time reformed its education system.

· the Poitiers region has devised a development strategy based on communications technologies, multimedia (reflected in its Futuroscope Park) and a highly-qualified workforce. As a result, the Futuroscope Park has created 1200 direct jobs and 12,000 indirect jobs.

· the Scandinavian region of Øresund, a traditional industrial centre, has achieved a high concentration of research centres, higher education establishments and technological skills. These efforts have resulted in the construction of a bridge and a 16 km tunnel joining Denmark and Sweden.
Regions enjoy geographical proximity to suppliers, consumers and competitors, and consequently play an essential role in learning and innovation.

These examples illustrate regions’ ability to overcome their disadvantages and develop innovative policies. However, it should be noted that no support and protection mechanisms exist for weak regions at global level. Accordingly, the Council of Europe, and especially CEMAT, has a specific rôle to play, when drawing up regional planning policies for Greater Europe, by developing appropriate policies for reacting to globalisation and helping to minimise new regional disparities.

IV. Benefiting from globalisation

While globalisation has many adverse effects, it also offers regions new perspectives for their own regional development policies and access to financial markets. Accordingly, it is important that the relevant regional authorities seek to benefit as much as possible from the advantages of this opening up and to minimise the disadvantages arising from increased competition, which primarily affects investment and employment.

The regions are thus called upon to reconcile their specific cultural identity with the universal nature of the global market economy. Using the appropriate means, regions can encourage inter-regional economic partnerships as an up-to-date method of improving a region’s competitiveness with, and not against, other neighbouring regions, both national and cross-border.

Europe’s regions, faced with the global economic strategies of multinational companies, should strengthen their socio-economic, environmental and cultural advantages in this international market place. In particular, it is by drawing up sustainable strategies for regional economic development that regions can showcase those factors that boost their comparative advantages and increase their competitiveness in the pursuit of investment and job-creation. To this end, regions, like enterprises, must satisfy the “productivity criterion” (2) , namely innovation, product quality, productivity and rapid adaptation to the environment.

Sustainable development implies that management of natural resources is compatible with the long-term challenges of environmental protection. The market economy also presupposes parallel advances in the areas of democracy, respect for national and regional cultural identities and the implementation of measures for social equity. Failure to respect these cultural, social and democratic values is liable to result in a crisis for neo-liberalism, as recently observed in certain Asian countries.

Conclusions

Today, regions must be involved in the global economy while also dealing with local problems, a situation that can be summed up in the slogan “Thinking globally, acting locally”.

Globalisation requires that regions become active players in their economic development and social cohesion. A few ideas can be identified here:

- promoting cultural, socio-economic and environmental assets;
- encouraging initial and in-service training for the working population, taking account of technological innovations;
- possessing the skills to draw up economic and social development tools that are adapted to the requirements of globalisation;
- defining long-term strategies for sustainable development;
- developing cross-border and inter-territorial partnerships and network structures to stimulate joint action for complementary development.
The Council of Europe’s bodies are all invited to react to these new challenges and to develop appropriate policies for promoting a more people-centred and social Greater Europe.



Indicative bibliography

PARLIAMENTARY ASSEMBLY OF THE COUNCIL OF EUROPE, Recommendation 1461(2000) on the Council of Europe’s role in regional planning and Recommendation 1308(1996) on the World Trade Organisation and social rights;

CONGRESS OF LOCAL AND REGIONAL AUTHORITIES OF EUROPE, “The challenge of globalisation for regions with legislative power”, Barcelona Conference Document Conf/Barc (2000)4; “The regions and globalisation”, CPR/GT/LEG(7)4

COMMITTEE OF MINISTERS OF THE COUNCIL OF EUROPE, Declaration on cultural diversity, adopted on 7 December 2000 at the 733rd meeting of the Ministers’ Deputies.

COMMITTEE OF THE REGIONS, Opinion 157/2000 on “The structure and goals of European regional policy in the context of enlargement and globalisation: opening of the debate” and Opinion COM (1998)718 “The competitiveness of European enterprises in the face of globalisation: how it can be encouraged”

DE JOUVENEL, Hughes (1999), Mondialisation et gouvernance, Futuribles, December 1999

LARSEN, Kurt (1999), “Learning cities: the new recipe in regional development”, OECD Observer, 1 October 1999

PAULET Jean-Paul (1998), Les régions à l’heure de la mondialisation (Armand Colin, France).

« La mondialisation génère un creusement des inégalités entre les pays et au sein de chaque pays », interview of Pierre-Noel Giraud, Le Monde, 13-14 January 2000



(1) Zaki Laidi
(2) Jean-Paul Paulet