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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

Europe 21 Lunch "Economic Reform in Europe"

London


Friday, June 30, 2000


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Tomorrow sees the start of the French Presidency of the European Union. A good time therefore to reflect on the challenges and changes that lie ahead.

Europe matters to Britain - and that's why it matters to this government.

Our approach is to look after British interests - and to do so by playing a constructive role at the heart of Europe.

Our membership of the European Union strengthens our influence in the world - opening trade, strengthening security. For British business Europe is not just some abstract political argument but the reality of everyday life. Access to a single market of over 380 million consumers.

People can now easily study, train and work across Europe.

And consumers have guaranteed and enforceable rights wherever they shop in Europe.

That's why I believe a strong Britain in a strong Europe is in the national interest.

In the debate on the future of Europe some still call for withdrawal or renegotiation of the Treaty. They do so not from a position of defending the national interest, British jobs or influence, but from a position of political dogma.

It is important that people understand the consequences of the positions advocated by those who deny that our future lies as part of Europe.

Some are calling for Britain to join NAFTA.

Those peddling this line are not really interested in the advantages of joining a free trade area several thousand miles from our shore. That is just a front.

They are effectively a 5th Column for the anti EU brigade. They are fully aware that if we wanted to join NAFTA we would have to leave the European Union.

That is the reality of the situation. And that is the real agenda of those who call for us to join NAFTA. And today a group of US senators, led by Phil Gramm, are in the UK to do precisely that. To argue for the UK to join NAFTA.

This is not just foolish. It is dangerous.

Over 3 million British jobs depend on Britain being in Europe. Those that peddle the NAFTA myth want to play political games with those jobs.

Leaving the European Union would mean turning our backs on a market that is more important to the United Kingdom than NAFTA could ever be.

Total trade with the European Union amounts to £240 billion per year, against £79 billion with NAFTA.

When Britain first joined the European Community, many claimed that our business relationship with the United States would suffer. But after 27 years of membership, our commercial links have never been stronger. Transatlantic trade is thriving. Investment in the UK by American firms is going from strength to strength.

Forty percent of all American investment in the EU comes to the United Kingdom, more than to all of Asia put together. Hundreds of thousands of jobs have been created by that investment: more than 44,000 this year alone.

Our position in Europe - allied to our modern, flexible and stable economy - is why they invest here. They come to Britain to gain access to the markets of Europe. If they wanted access to NAFTA, they would never have left home.

Next week, on Wednesday, we will be publishing details of inward investment in the last year. Will show record levels of investment. Demonstrates that investors regard Britain as the business centre of Europe.

We are increasingly seen as a bridge between America and Continental Europe in both cultural and business terms.

But if we were to withdraw from the European Union, the Americans and others, will go elsewhere to find a bridgehead to the single European market.

There is also investment in the opposite direction. When Germany's BASF Pharmaceuticals announced that they were moving their headquarters to London, our position as a bridge between Europe and America was cited as one of the reasons.

The Single Market is made up of over 370 million people, or 25 per cent of world trade. In an enlarged European Union, that market could be as many as 500 million people. That is the prize for inward investors.

Leaving the European Union would put up barriers to our exporters accessing that market and leave others setting the Single Market's rules.

This Government strongly supports closer trade co-operation between the European Union and the United States and closer links with NAFTA as a whole.

But to join NAFTA we would have to leave the EU - cutting ourselves off from developments in our own continent.

This would reduce our influence in America; it would reduce our influence in Europe; and it would reduce our influence throughout the world.

British membership of the European Union strengthens our special relationship with the United States; and our special relationship with the US strengthens our position in the EU.

Next week we are holding a joint UK-US conference looking at how we can support enterprise. Not only the UK, but the rest of Europe, has much to learn from the US experience.

In Europe we struggle to generate the dynamic approach which has helped to put the US economy on top of the world.

It takes twelve weeks to start a business in Europe, against just one week in the United States ? and it costs four times as much.

Across Europe business success has been discouraged by high taxation and over-regulation. Industries have been run by the state as nationalised, inefficient businesses.

But things are changing - and rapidly. Spain is privatising its national airline; Germany is privatising Deutschtelecom.

Portugal, Greece, France and Austria are reducing taxation to encourage business investment.

Belgium and Ireland have taken steps to minimise the burden of regulation.

And Italy and France have reduced social security contributions in order to lower labour costs.

At the Lisbon summit in March, the member states unanimously adopted a programme of economic reform. A new direction.

These reforms will benefit all sectors of the economy - manufacturing industry as much as dot.com companies.

They benefit all our people - by creating more jobs and wealth.

I believe that the only way of persuading a sceptical British public on Europe is if this reform agenda is maintained.

We have taken swift legislative action at EU level since Lisbon to put in place the firm legal framework that business and consumers need to buy and sell over the internet with confidence.

Last week the summit at Feira in Portugal put in place a number of further measures agreed at Lisbon.

The European Small Firms' Charter will make a real difference.

In it, all members of the European Union recognised the "values of knowledge and flexibility in the new economy".

And committed themselves to an action plan to encourage the creation of a stronger enterprise culture, to cut the cost and the time of setting up new businesses - to match the most competitive in the world.

Heads of Government agreed to simplify legislation.

To benchmark national bankruptcy laws against best practice.

And here in the UK, I will shortly be announcing reforms to our bankruptcy laws.

These reforms show Europe is changing and that the radical programme of economic reform agreed at Lisbon is being implemented.

Tomorrow France takes over the Presidency of the European Union.

Some have suggested that economic reform will be put on the back burner under the French Presidency over the next six months.

But their actions show that in practice they too are committed to economic reform. The Jospin Government has pushed through more privatisation measures than its Conservative predecessor; it has encouraged enterprise through more generous stock options.

French companies like Vivendi and EdF have too much to gain from world markets for the French to want to buck the push towards reform.

They know that economic prosperity depends on ensuring that Europe catches up with the United States.

And the British Government will be reminding them of this. We won't let economic reform fall by the wayside.

We shall make a reality of the Single Market. In particular, we shall keep up the pressure for liberalisation of energy markets throughout the European Union.

Over the next year or so there will be much debate about how we manage an enlarged European Union.

Those who claim that Europe is on the way to a super state have been proved wrong by the Lisbon and Feira summits.

Lisbon marked a major step away from central regulation towards an open, a more competitive European Union taking forward economic reform.

At Feira heads of state rejected tax harmonisation in favour of the approach advocated by the UK.

They also came out in favour of the UK approach to institutional changes to be agreed later this year - focusing on those necessary to prepare for enlargement.

France and Germany have traditionally worked closely together. But as the Lisbon summit showed, Britain is now more influential than ever before.

Working constructively with other Member States. Forming strong alliances.

With France on defence. With Germany and Italy on liberalising energy markets; with Spain, Belgium and Sweden on active labour market policies and welfare reform.

We do so in Britain's national interests. Not driven by dogma, but what works in practice.

We take the same approach to the single currency.

As the Chancellor said in October 1997, in principle "the potential benefits of a successful single currency are obvious - in terms of trade, transparency of costs and currency stability".

Whatever you may read, our policy has not changed.

We will judge if the five economic tests laid down by the Chancellor have been met early in the next Parliament. If the economic tests are satisfied then we should join a single currency - if that is what the Government, Parliament and the people decide.

But as we know there are those who would refuse to join the euro on principle or to rule it out for the whole of the next Parliament even if it was in the economic interest of the UK to join.

Yesterday's statement by Carlos Ghosn of Nissan shows how dangerous that approach is. Putting at risk investment in the United Kingdom and the loss of jobs as a result.

His statement also clearly demonstrates that provided the five economic tests are met, joining a successful single currency would help us create the conditions for higher and more productive investment in Britain and for greater trade and business in Europe.

It is essential for Britain to develop its role as a key player in Europe. Not for Europe's sake, but for Britain's.

At the summit in Feira we met all our key objectives.

As the Prime Minister said, we hope that this "finally breaks the mindset that every European Summit for Britain is always about Britain versus the rest of Europe. This summit has finally laid that to rest."

The summit showed that a constructive, positive role in Europe is the right course for Britain. Not just for British influence but also as the best safeguard for British jobs, British industry and British economic prosperity in the future.

Of course there may well be - there will be - issues which divide us from other countries from time to time - as is inevitable in a Union of different traditions and cultures.

But we should not lose sight of the reality.

Before Feira everyone thought we would lose the argument on the withholding tax. The fact is that Member States have rejected tax harmonisation and agreed the approach put forward by the UK.

Before Lisbon everyone said we wouldn't secure agreement to a package of economic reform package. The fact is that we did and that it is now being taken forward.

And there are many other examples where we have persuaded our partners to amend or modify their ideas by patient diplomacy and argument.

By pointing out - for example - the damaging effect plans for an artists resale right would have on the over £3 billion London art market.

Or making sure that rules to facilitate e-commerce did not affect our rights to video our favourite TV programmes.

Of course, people do sometimes come up with policies that would take us in the wrong direction. But when they do, we will argue the case against them.

And unlike in the past, we will argue from a position of strength - as constructive players at the heart of Europe.
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