There are short term and longer term aspects to the implicatio ns of competitiveness. In the short term we may wish to consider developing arguments that challenge notions that particular policies will reduce British ŇcompetitivenessÓ. In the longer term we may consider two sets of issues: firstly, what implication s globalisation and competitiveness have for constructing economic policies designed to raise growth rates in Britain, and, secondly, what role Britain might play in international institutions and fora in constructing arrangements that facilitate mutually -advantageous international interaction and reduce friction and conflict in these areas.

On the short term aspect, it is worth reiterating some basic points. Workers potentially affected by minimum wages and legislation to increase the rights of pa rt-timers are heavily concentrated in the non-tradables sector, so such measures should not directly affect BritainŐs trade position. Although we lack systematic evidence, foreign investment does not appear to have been systematically attracted to Br itain because of its opt-out from the social chapter. Equally we could stress the absence of grounds for believing that the levels of social welfare envisaged for Britain are incompatible with its trade performance. This raises two further points. Fi rstly, non-tradables production remains important in the economy, especially for levels of employment. Secondly, legislating for certain labour, social or environmental standards may require co-operation between states if the measures are to be intr oduced and operated effectively.

Several major claims have been made about the effects globalisation: international competition from trade and multinational production forces firms to operate at the world productivity frontier; this operates for priva te non-tradables where international production is significant, as well as for tradables. The parameters having been set by world markets, prosperity is determined by the ability of national industry to meet them. Countries may previously have had durab le sources of national advantage, but this is undermined by the global spread of technology. Technological advances may no longer be a source of advantage for the country in which they are generated if they can be realised in other countries. Diffusion of technology means that relative advantages can shift rapidly over time, putting a premium on an economyŐs ability to shift resources from declining to expanding sectors. In particular, acquisition of technology by developing countries has enabled them to out-compete developed countries in a range of industries.

It is important for us to emphasise that the principles of comparative advantage still apply, so that countries cannot be competitive in everything or nothing. As such it is not the case th at particular policies or income levels will simply make us uncompetitive. At present much of our current policy thinking accepts this and is based on the view that by specialising in the production of certain high-skill-intensive goods and services Brit ain can export successfully and maintain high living standards. This is still problematic. It is not clear how far it is thought that BritainŐs existing pattern of relative advantage is consistent with this and how far it is thought that BritainŐs curre nt specialisation is, or lies too heavily, in less skill-intensive areas that are vulnerable to low wage competition, so that the economy needs to develop new industries capable of delivering the desired performance. In the first case policy should be ori ented towards ensuring sufficient supply of resources to industry (and an appropriate macroeconomic environment) to facilitate its expansion; the second case is a much bolder vision of stimulating structural change within the British economy.

In eith er case developing human capital is seen as central - it is a key source of relative advantage, the government has a clear responsibility for important areas of it, the gains from it are largely realised domestically and they are widely diffused in the ec onomy. In the first case the presupposition would be that the expansion of existing industries, and thus the growth of the economy, is constrained by the supply of skilled labour. In the latter case enhancing human capital is seen as the prerequisite fo r the emergence of new industries capable of delivering the desired economic performance. This is still problematic. It is based on the assumption that human capital deficiencies are the key constraint on growth in the British economy. There is a dang er here of slipping between acknowledging that governments may be unable to influence aspects of the economy effectively, to implicitly assuming that these aspects are unimportant. This may be particularly important if it is envisaged that improving huma n capital will lead to the development of new specialisations. The theoretical logic of this is clear, and at least under endogenous growth theory it could kick the economy up to a higher long run growth rate. Whether adjustment would be quite so automa tic in practice is more debatable - there is a danger that in the short run it would simply reduce the relative incomes of skilled and educated labour and thus reduce the individual incentives to accumulate human capital. Further, the conceptions of educ ation and training policy tend to switch between a black box approach, in which higher levels of human capital simply give us better performance, and a manpower planning approach, in which government can plan and train for specific skill needs. The black box approach is too vague about the envisaged development path, whilst evidence from manpower planning is not encouraging.

Other policy tools seem largely to have been ruled out. Industrial policy, at least in the grand sense, seems off the agenda, even if significant structural change is envisaged. It is unclear whether the nature of the British financial system is considered to be a fetter on economic development and, if so, what (if anything) is to be done about it. Similarly the nature and rol e of technology policy is unclear. Other conditions may be necessary for it to be successful, otherwise high growth rates would appear to be possible simply by raising R&D expenditure as a proportion of GDP by a few percentage points. Technological adva ntage will necessarily have a limited life - it always did - but this does not mean that attempts to generate it are necessarily flawed. The evidence from British trade is ambiguous. Many lower skilled jobs have been lost in recent years, and much of thi s can plausibly be attributed to competition from developing countries. This would point to the need to shift resources, especially labour, between sectors. Against this, patterns of comparative advantage of advanced economies like BritainŐs show conside rable stability over time - it is not clear that globalisation has accelerated shifts in comparative advantage. Whilst blanket statements are over-simplistic, BritainŐs comparative advantage seems to lie with medium technology production. It is not clea r whether this is seen as sufficient to generate desired performance. If not, then it needs to be shown how policies would develop an advantage in more advanced sectors sufficient to enable Britain to compete with other countries in these markets. In ot her words, the envisaged development path for the British economy - how it is going to produce for world markets and how this will deliver the desired levels of income, standards and welfare - needs to be sketched out and assessed.

This raises a range of issues in relation to BritainŐs position in, particularly, the EU and the World Trade Organization. BritainŐs long-standing advantage in services exports means that it has a particular interest in current debates about the regime for these around the WTO. This could be expanded on later in much more detail. At this stage I wish to raise one issue. The decline of industrial policy has been matched by a rise in attempts to attract foreign investment. Much of this is inevitable and even desirable, bu t on both theoretical and empirical grounds competition between national and regional governments for investment is unlikely to effective in improving the welfare of its citizens. Pushing for European and wider limitations on competition to prevent self- defeating Ňbeauty contestsÓ for foreign investment seems a worthy aim.