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Internationall challenges in the 21st Century

Anförande i Mexiko City, Mexiko

To start with stating the obvious: trying to predict the future in these times of rapid and profound global changes is a most uncertain business.

Too often we assume that things happen in a linear way, and that the future is just some sort of prolongation of the trends of the present.

But as we have learnt during the last few decades, sudden and to many unexpected events can turn things in completely different directions.

In November 1989 the wall in Berlin that had divided a city, a country and a continent fell, and soon not only the Soviet Empire but the Soviet Union itself ended up on the scrap heap of history and the decades of fundamental transformation of my part of the world started.

The result: two decades of fundamental peaceful transformation of Europe. In spite of the tragedy of a decade of wars in the Balkans, it was decades of miracoulous success.

Then, in September 2001, a dozen or so of suicide bombers struck at New York and Washington in an armed attack that threw us into a very different geopolitical situation with very different geopolitical consequences.

The result; certainly the war in Afghanistan that is now entering its ninth year, most probably also the conflict in Iraq that still pins down more US forces than Afghanistan and a new element to the series of major challenges we are facing in the entire volatile and challenging area between Palestine and the Punjab.

The astute observer could say that both of these major events - turning points - were the culmination of trends that had been developing for a long time.

That the Soviet Union was an overmilitarized but stagnated bureaucracy had become increasingly clear - but still there were very few that dared to predict its sudden demise in the way it happened.

That a fundamentalist theory of terror had been gaining ground in parts of the Muslim world in the wake of the war against the Soviet invasion of Afghanistan had also become increasingly clear - but hardly anyone had dared to predict the scale of the attack that followed and the insertion of US and other international ground forces into the Hindu Kush for years to come.

I would argue that global development today has one true megatrend - the third phase of globalisation - although its further developments is profoundly influenced by the developments originating in 11/9 - the fall of the wall in Berlin - as well as 9/11 - the attack on World Trade Centre and that globalisation in itself is generating a whole new set of challenges.

Ours is the age of the third great wave of globalization in modern times.

The first wave of globalization - the one that ended so abruptly in August 1914 - had a distinctly European face.

Britain ruled the waves, railroads conquered new continents and the telegraph seemed to create the ultimate interconnected world.

The second wave of globalization - that took its true beginning in 1945 - had a equally distinctive American face. And to a very large extent it is in a world economy dominated by this second wave that we are still living - the era from the T-Ford to the iPod.

This certainly applies both to Mexico and to the European Union. The United States is our most important trading partner, and our mutual dependence is even greater if we look art flows of capital and information.

But even if this still is the case it is obvious that it is now the third wave of globalization that is increasingly asserting itself - perhaps even more clearly as the global economy is gradually climbing back after the profound crisis we have been experiencing since 2008.

To a very large extent the story of this third phase of globalization is the story of the return of Asia.

We often forget that for a thousand of years or so before the Europeans in earnest started to burst onto the global stage in the early 19th century - starting the process of industrialization - approximately three fifths of the global economy was in Asia.

It didn't really interact with the rest of the world - but still it was there. And now it is coming back.

The rapid increase in the production of goods in China and the production of services in India are transforming the global economy. Korea is racing to catch. Japan is a global high-tech hub. Indonesia is another giant waiting to burst on to the global stage.

Asia declined to a fifth of the global economy at the middle of the 20th century. It's now back to two fifths. And we can already look forward to it coming back to the three fifths were it all started a couple of centuries ago.

This third wave of globalization is the result of the combination of profound political changes going hand in hand with the profound revolution in science and technology that we are witnessing.

In political terms, it started in China in 1978 when we saw the de facto collapse of its collectivized agriculture, continued in 1989 as we saw the collapse of the Soviet empire over half of Europe and gained further momentum with the reforms after the 1991 collapse of the paleo-socialist policies of India.

Since then we have seen we the approximately 40% of the population of the world that were previously living in closed economic systems entering the global system of production and consumption.

After nearly a decade of rapid advance we went through the severe effects last year of the near-death experience of the financial markets in late 2008 with world trade declining in a dramatic way by nearly 15 %.

But the fact that we are now gradually recovering has once again demonstrated the basic resilience of the process of globalization.

It is a process that is constantly under strain - and it certainly needs to adapt in a number of ways - but its strength has been amply demonstrated during the past two decades.

The megatrend is likely to remain for decades to come - and the third wave of globalization will assert itself step by step.

Although it is the economies of Asia - in these days notably China - that are driving many of these trends, the picture is of course wider. When we speak of the emerging economies it is not only China and India, but also Mexico and Brazil, with Russia sometimes seen as part of the same picture.

Since 2007 the so called BRIC countries have accounted for approximately 45 % of all global growth - compared with the approximately 16 % the same group of counties accounted for during the 1990's.

This year it is assumed that these countries will contribute almost half of global consumption growth. In particular, China will contribute almost 30% to global consumption growth.

Not long ago it was US consumption that was the key driver of the global economy - this year Chinas consumption growth will be almost double that of the US.

Within a decade or so it is a reasonable assumption that approximately 80% of the global middle class will live in the countries we in Europe previously called developing. It's the new global middle class from Shanghai to Sao Paulo that will drive the new consumption patterns.

The European Union with its 27 member countries and 500 million people represents the largest integrated economy in the world today - and the by far largest trading entity.

But if present trends continue we will see the global economic order change in a dramatic way in the decades ahead.

In a couple of decades we will have a situation where the economies of the US, the EU and China will be of roughly equal size - with the Chinese economy on present trends surpassing first the European Union and then the US.

An economic shift of this magnitude will not pass without significant strains. The demand for adjustment in our different economies will sometimes be brutal, and we must be aware of the risk of this unleashing political and forces that could be disruptive both within and beyond borders.

On Thursday of next week the heads of state and government will meet in Brussels and start their discussions on the so called EU2020 strategy that they intend to take decision on in June.

It was in 2000 that the leaders of the then 15 members states of the Union launched the so called Lisbon Process with the declared aim of creating "the most dynamic and competitive knowledge based economy in the world by 2020".

Back then, it was the dynamism of the US economy during the 1990's that was the call to action. As we now assess what has been achieved, and the tasks that lie ahead of us, we will focus on the much broader and deeper challenges of the third phase of globalization.

A very clear conclusion must be that we must be even more clear in our commitment to open economies in an open global economy. Barriers to trade will be barriers to growth for us - as well as to everyone else.

Another clear conclusion must be that we must further strengthen our investments in research, development and higher education.

In the world of tomorrow it is increasingly your human capital that determines your possibilities - we can not avoid noting that spending in these areas is significantly higher in the US, Japan and Korea and that China and India are rapidly catching up.

But an equally important conclusion must be that we must strengthen our strategic links and partnerships with all the important actors in our increasingly multipolar world.

The European Union and Mexico have had a free trade agreement since 2000, and we are now aiming at the signing of an important Action Plan for the Strategic Partnership Agreement at the Summit in Santiago in Spain in May.

Mexico has been an important partner for Sweden for a very long time. Nearly all major Swedish corporations have important operations here.

Just the other day I talked with one of our leading industrialists who told me of the plans of one of our most important multinational companies to continue to relocate production from the United States to Mexico.

When we strengthen the strategic relationship between the European Union and Mexico we should do so with the clear aim of being better able to shape the continued process of globalization.

We do have key common interest in these regards - ranging from the global trade talks over the need to combat global health hazards to the urgent need to get a strong global agreement on limiting global warming and facilitating the transition to a low-carbon global economy.

Mexico is a key partner for us in all these increasingly important respects.

Much of the discussion on the consequences of the global shifts we are now seeing concern not only its economic dimension, but also what this will mean in more classical terms of power.

Today, US military spending is roughly as big as all other relevant players taken together. But this will change.

If the Chinese economy continues to expand at present rates, and the share spent on military resources is kept up, within a couple of decades Chinese military spending will be on level with that of the US, and of course very significantly larger than that of Russia.

The future of China is obviously a very key factor. The figures I have just given all assume that it will continue its impressive rise in a smooth way, but we must know that this by no means can be taken for granted.

The impressive growth figures of China during these years of crisis, with both your economy and the different European economies recording significant declines in 2009, are to a large extent the product of the mother of all stimulus packages.

One way of looking at this might be to see it as driven by the fear of the Chinese leadership of any instability that could follow in the wake of any significant slow down of the economy. Thus, it can be seen as an illustration of the possible political weakness as much as of the obvious economic strength of the country.

While there is little doubt that the political system of India can withstand turmoil's and troubles of different sorts, we have no way of knowing whether the Chinese political system will be able to adapt and reform in a smooth enough way in the decades ahead.

One of the tasks of the foreign policy of the country is clearly to create as favorable conditions for the continued rise of China as possible.

The rapidly expanding Chinese economy is dependent on the an increasing flow of raw materials and energy from different parts of the world, and political or military tension would clearly endanger these flows that are so vital also for the domestic stability.

If you listen to parts of the US debate you find voice talking about the possibility of military conflict with China further down the road, pointing at how China is clearly aiming at extending its defense perimeter Eastwards into the Pacific Ocean.

But to me this seems farfetched.

With a Chinese leadership naturally very concerned with maintaining a rate of economic growth that assures social and political stability, and this being very dependent on the free flow of resources and goods to and from China, conflicts of a major nature does not seem to be in the interest of the country.

The concern that China must have in safeguarding the free flow of resources is a concern that will be increasingly important to all of us.

Indeed, safeguarding what we might call "flow security" will in the future be at least as important as the traditional concept of safeguarding territorial security.

And the more globalization proceeds, with the situation in each territory being increasingly dependent on different flows between the different territories, the more important will this be.

The freedom of the seas was of course a key concern to the maritime empires of the past - the Spanish, the Dutch, the British and others. The command by their fleets of the critical maritime trade routes was the key to their commercial and political position.

Britannia ruled the waves - until the US Navy took over.

Gradually, we see how issues of flow security are becoming more and more dominant.

The terrorists now dominating the headlines are not aiming at capturing our territories - their attacks are directed at the different flows critical to modern societies, and we are forced to spend enormous sums protecting these.

The air transportation system is of course the most obvious example. But we now have also the combined efforts to protect the maritime lines of communication in the Gulf of Aden from different forms of attack.

Airports. Pipeline hubs. Harbors. Nodes in the financial system. In the future certainly also the different nodes in the global digital infrastructure.

Increasingly the security in the age of globalization will be a question of protecting these against new forms of threats emerging - from the medieval grievances of the terrorists of today to the possible cyber-luddities of the future.

Flows in the age of globalization could be good - and should then be protected.

But flows in the age of globalization could also be of a completely different nature - and should thus be prevented. Let me give you on example of each that I am convinced of will be of even greater importance in the future.

The first concerns the rapidly growing need to protect all our different digital system from the most different sorts of intrusions, disruptions or attacks.

With our societies rapidly becoming more and more dependent on networked digital devices, there is a risk that the vulnerability of our societies will increase in a dramatic way.

It takes no great skills of prophecy to say that the area of cyber security will be much more important tomorrow than it is today.

We have already seen somewhat rudimentary forms of cyber attacks being used in more traditional disputes and conflicts with both Estonia and Georgia, and we know that there are states investing heavily in both defensive and offensive cyberwar capabilities.

We can say for certain that there will be nu future conflict of relevance without an important dimension in the networks and cyberspace - and that this dimension is going to increase rapidly in importance.

We also know for certain that increasingly sophisticated networks of hackers sometimes can be recruited for different causes in order to create confusion and possible chaos.

As the issues of cyber security become more important, we - governments as well as industry - will be faced with a number of difficult issues. Protecting the digital flows and the digital systems is clearly key to the continued process of globalization.

A flow that is growing in importance, and needs to be prevented as far as possible, is the flow of illicit drugs that is creating havoc in different parts of the world.

The figures are staggering - and Mexico is certainly not a place where I need to explain this.

But look at the situation we are facing in Afghanistan - which today has a global market share of more than 90 % when it comes to opium.

Five times as many people die from overdoses of heroin from Afghanistan each year than the number of international soldiers that have been killed during the entire conflict in the country during the past decade.

It is obvious that funds from this trade feed into the insurgent and terrorist networks of the region and give them a financial clout that easily translates into power in poor societies.

But the effects of these flows are very dangerous not only in the areas of origin or in the regions of destination.

Iran today has the largest number of opiate users in the world - approximately a million - as a result of the flows from Afghanistan.

And we see the power of the networks eroding not only regions of Pakistan - notably Baluchistan - but increasingly also the fragile and important region of Central Asia.

Indeed, the UN agency in charge of these matters has warned that "the perfect storm of drugs, crime and insurgency that has swirled around Afghanistan/Pakistan border for years is heading for Central Asia."

We are distinctly less successful in combating the production of drugs in Afghanistan and the flows following from it than we have been when it comes to the cocaine production in the different Andean countries.

Still, we are becoming increasingly aware of the highly disruptive effect these flows are having on fragile regions and states.

West Africa is today one of the most fragile regions of the world, and here we can easily see a pattern of weak states being challenged by the power of the networks of illicit flows - primarily, but not only, cocaine from Latin America aiming at the weak underbelly of Europe.

This is an additional reason why we are closely following your efforts to fight these illegal networks of death and destruction.

Fighting these networks and the destruction they bring requires new levels of international cooperation. To fight a network within just one territorial unit is next to useless - the flows rapidly find other ways.

I think it is clear that the process of globalization has entered a more turbulent and challenging period. Sweden belongs to those nations that have built its wealth on the success of its companies on the global markets.

Indeed, Europe is the original globalizer - and with its dominant position in terms of global trade the globalizer par excellence.

Mexico also belongs to the nations that have obviously benefited from the process of globalization with your important free trade agreements with both the North American and the European markets - the two biggest in the world.

Now we have a common interest in helping to shape the coming decades of globalization - to make it truly resilient and truly sustainable.

To promote and protect the good flows of peoples, of ideas, of information and so much else that will bind us closer and closer together in a world of increasing possibilities and prosperity.

But to contain and control those flows that risks undermining our societies, threaten our freedoms and endanger our future - be that the cyberthreats of tomorrow or the deadly drug trade of today.

And we have a common interest in promoting the networks of global governance that will give us better possibilities of meeting the common challenges of the future.

Hosting COP16 in Cancun later this year, as well as being a member of the UN Security Council and on the verge of signing the Strategic Partnership Agreement with the European Union, your country will be most important in these respects.

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