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Address by Foreign Minister Urmas Paet at the conference on the EU Strategy for the Baltic Sea Region

18. January 2012 - 0:00

Tallinn University

Dear participants,

In our cultural and political history, appeals for us to be Europeans in addition to Estonians have quite a long and interesting history. However, the exchanges of ideas in our society on what lies between these two positions have been fewer and less regular. Sometimes it seems that our search for identity is limited primarily to these two levels. Yet, we also had a feeling of solidarity with Latvia and Lithuania during the era of the Baltic Way; the creation of a joint state with Finland has been proposed; there have been disputes about the entreaties to become a boring Nordic country, and so forth. We have also heard, I think, inaccurate opinions that Estonia does not invest in its relations with its close neighbours, and that this is an outright security risk.

Something is wrong with this picture that is presented to the public. There seems to be enough information – there are lots of cooperation formats and events, and information about them is readily available. I think that we can take some big steps in the coming year to clarify for the public in general Estonia’s positions in terms of regional cooperation, regional politics and the question of its identity. In 2014, Estonia will be presiding over the cooperation between the Baltic Three, the North Baltic Eight, and in the second half of the year, over the Council of Baltic Sea States. This provides us with great opportunities, but also requires a lot of preparatory work, considering, among other things, the accelerating development of the EU Strategy for the Baltic Sea Region and its impact on other forms of cooperation.

The regional level definitely plays a role in our security policy, and, for example, in the cooperation between the Baltic Three, this is one of the most successful and important fields of activity. Ideas on security issues are exchanged and cooperation takes place also within the North Baltic framework. However, it is also clear that cooperation within the broader framework of NATO is of paramount importance for ensuring our security, and the importance of the European Union is also increasing. Regional cooperation cannot replace these aspects, but, naturally, closer cooperation and stability at the regional level bolster them. Sometimes an attempt is made to create the impression that we can choose between ensuring our security either through transatlantic and EU ties or through regional cooperation. In our geographical position this is not an actual choice.

Based on many indicators, Estonia is quite deeply involved in economic and other forms of cooperation in our region. During the first 11 months of 2011, 12% of Estonian exports went to the other Baltic countries, 37% went to the Nordic countries and 66% to the entire Baltic Sea Region, including Russia, Norway and Iceland. This is a very high level of integration if we consider that Estonia’s exports-to-GDP ratio is quite high. The regional links are even stronger in the case of imports, with almost 71% coming from the entire Baltic Sea Region during the same period. Our largest foreign trade partners are close by and their relative importance is so great that it is unlikely that the percentages will rise much higher. Estonia’s distinctive feature is the high relative importance of the Nordic countries as its foreign trade partners.

Similarly, we can analyse the movement of foreign investments. As of last summer, 3% of the foreign investments made in Estonia came from the Baltic countries, 64% from the Nordic countries and close to 73% from the entire Baltic Sea Region. It is noteworthy that Estonia is characterized by one of the region’s highest ratios of foreign investment to GDP. The numbers are impressive – 13 billion euros of foreign capital investments have flown into Estonia, of which 4.3 billion came from Sweden and 3.1 billion from Finland. To a great extent, the state of our economy depends on our success in procuring foreign investments. Estonia also invests, and again, primarily in its neighbours – as of last summer, of the 4.7 billion euros Estonia has injected into foreign countries, 1.5 billion were invested in Lithuania and 1.2 billion in Latvia. Regardless of these impressive numbers, the situation is far from being as good as we would like it to be – the relatively low technological level of subcontracting in Estonia is having a significant impact on trade in goods as well as investments.

It is convenient to use numbers to create a picture of foreign policy or economics by listing meetings or discussing statistics, but in areas such as culture, science and social issues it is not so simple. However, the general situation is similar – we have quite a large number of contacts, visits and exchanges of ideas. The mobility of students, faculty members and scientists is increasing. We see less cooperation, however, in terms of carrying out specific assignments together. As a whole, Estonia has been quite successful at utilizing various EU financial instruments. Now, as Estonia is preparing its plan for using the resources of the budgetary framework, we must become more efficient at covering the needs of regional cooperation.

Therefore, the time has arrived to contribute with both ideas and actions to the development of various regional cooperation formats, by better recognizing their opportunities and by striving for increasingly efficient results. Estonia participates in a whole series of regional cooperation formats – the cooperation of the Baltic Three, cooperation of the North Baltic Eight, Council of the Baltic Sea States, EU North Dimension and the latest and newest, the EU Strategy for the Baltic Sea Region, which has great potential. Being located on the Baltic Sea does not mean that the local countries see themselves in the same way – for example, Germany and Poland speak of their Central European identity and have not considered the Baltic Sea direction to be of primary importance. The Nordic countries also contribute to the Arctic Council and to cooperation in the Barents Region. Different countries have different political priorities regarding formats – the fact that Finland plays an active role in the EU North Dimension and Poland is interested in Weimar cooperation with Germany and France is widely known.

Since there are many countries in the region and many directions to work towards, it would probably be too difficult, if not impossible, to achieve a permanent, strict and extremely efficient system; instead, we should proceed from the current multitude of formats and their development based on the contributions of participants. The objective of the Baltic Sea Strategy is to clean up the Baltic Sea, achieve better cohesion among the countries in the region, and increase wellbeing – similar objectives have also been established in the other formats. Currently discussions are underway about what the future holds for the various regional cooperation structures, and all kinds of ideas are being floated about how they might be combined and changed. Nothing has yet appeared that might cause everyone to declare – this is the ideal solution. Therefore, we should make use of all the possibilities, and contribute to the competition of “bottom-up” initiatives in various cooperation formats.

Through the years, many reforms have been implemented in the cooperation of the Baltic Three and the trend has been to focus mainly on the fields of activity that require joint action, like national defence, energy and transport. The structure of the Baltic Council of Ministers could be further updated. We hope that the parliaments of the three countries will find a way to repair the Baltic Assembly. Today, our Riigikogu believes that its activities are too weakly connected to the agendas of the national parliaments and too declarative.

New ways are being sought to move forward with North Baltic cooperation, and a good basis for this is definitely provided by the Birkavs-Gade Report from 2010, which contains a whole series of practical proposals. More could also be done in the course of implementing these proposals, and we should again note that Estonia and the other Baltic countries need to start contributing more of their own resources. Of course, we are also following with interest the exchange of ideas developing in the Nordic Council regarding the modernization of its work. Economic relations in the North Baltic are quite close, although it is too soon to speak of thoroughly integrated economies. There have also been setbacks, when some Nordic companies have withdrawn from their projects on the east coast of the Baltic Sea. The initial momentum of cooperation between local governments has abated somewhat and setbacks have occurred because of the scarcity of money caused by the economic crisis.

During the last few year, the Council of Baltic Sea States, which is celebrating its 20th anniversary, has changed its approach and sees itself primarily as a forum for various cooperation networks and primarily a project-based association. It is important for many that the CBSS organizes forums where contacts can be established with Russian representatives of various levels. The successful fields of activity are becoming increasingly apparent – they are primarily related to the issues of cleaning up the Baltic Sea and preventing accidents. We benefit directly from our increased cooperation in the fight against crime, especially its cross-border forms. Raising awareness about the dangers of human trafficking and the harmonization of the quality of victim support has been an important part of this cooperation for many years. The future of cooperation in the energy field needs to be rethought within the framework of the Council – the importance of this topic is emphasized by the fact that it was discussed in February at the CBSS foreign ministers’ meeting in Plön, Germany.

The European Union North Dimension has achieved success in the environmental field. It has now also become more active in other fields of activity, although it is not easy to achieve equivalent progress in other fields. There are several issues regarding the division of work between the North Dimension and the Council of Baltic Sea States that require clarification.
Let us take a closer look at the EU Strategy for the Baltic Sea Region. Considering the abundance of participants and fields of activity, and the fact that this has been the first EU macro-regional strategy, it is not surprising that “getting up to speed” has taken time.

In November, the Council of the European Union adopted the conclusions on the review of the strategy. This was based on the Commission’s summer report on the promotion of the Baltic Sea Strategy. In the conclusions, the actions that have been carried out to date to implement the strategy were recognized, but the need to make it more effective and result-oriented was also acknowledged. Political support at all levels of power is required, as well as the recognition of the territorial dimension within the framework of various EU policies. The Council confirmed the need to take the strategy into account at all levels and regarding all relevant fields of activity during the next EU budgetary period. In the conclusions, the European Commission calls upon the stakeholders to increase their contributions to the implementation of the strategy. The conclusions reiterate the three “no principles” – no new EU funds, no additional EU formal structures and no new EU legislation. The Council calls for the creation of better ties with the main stakeholders of the Baltic Sea Strategy and the administrators of various financial resources. Based thereon, it is true that, to date, only about one in seven of the possible EU financing instruments have been used to fund the projects. In order to achieve this goal, it is important that the strategy’s plan of action be updated as quickly as possible, and be completed by the summer. The review of the plan of action must produce a situation where plans with poor prospects or little interest are left aside sufficiently early and attention is directed primarily at the projects that have good prospects. In summary, the EU Strategy for the Baltic Sea Region must be prepared for its first actual funding period and its needs must be well aligned with the new 2014–2020 budgetary solutions.

Based on the Commission’s report, the success of the strategy will be analysed every two years, which means that the next analysis will be conducted in 2013, when all the activities related to macro-regional strategies will be reviewed. As we know, the Danube Strategy also exists as of 2011, and there are thoughts circulating about the creation of new strategies. The Council also established the goal of developing indicators in order to better understand the productivity of the strategy – this work is already underway.

The Council pointed out that the dissemination of information to the wider public should be strengthened, and the involvement of new participants should be stimulated. The Council supported the idea of holding an annual forum – the last forum took place in October in Gdansk along with the Baltic Sea Development Forum that is held within the framework of the Council of Baltic Sea States. The forum, which attracts a large number of participants, provides good opportunities for discussions as well as finding new contacts. The participation from Estonia could be more active. The next opportunity is this year’s forum in Denmark.

As we know, Estonia is the lead state for one part of the 15 priority areas of the Baltic Sea Strategy, namely issues related to the internal market. A more exact formulation of its objective is to remove the hindrances to the development of the internal market in the Baltic Sea Region and to improve cooperation in the field of customs and taxes. We have fulfilled our coordinator role in the narrow sense – the work is being led by the Ministry of Economic Affairs and Communication. At the same time, we would naturally like to achieve more and this calls not only for coordination, but also initiative on our part.

The subject of the internal market, and especially the digital internal market, is currently a very important item on the EU agenda and quite a few new EU decisions are therefore being developed in this field. It is important to realize these decision in our region as quickly as possible. After all, we do feel unhappy about the fact that the activities of our entrepreneurs in neighbouring countries are hindered by numerous burdensome regulations. In some countries in the region it is difficult to register new businesses. There is a lot of trouble with acquiring residence permits, which is complicated and takes a lot of time. Even such things as getting electricity take a lot of time. According to the World Bank and the IFC Doing Business Index, getting a living permit in the important economic centres of the strategy countries can take from 66 to 301 days, and it can take from 17 to 148 days for a business to get electricity. However, in regard to building permits, we could probably learn from others, since the report shows that the corresponding waiting periods are quite long in Estonia.

However, there are also informal hindrances – from the Estonian perspective, mistrust in our economy, the fear of recognized taxation systems of clients from the eastern shore of the Baltic Sea, and so forth. In order to overcome these fears, our economic diplomats and Enterprise Estonia representatives are working in many of the countries in the region. However, there is still a lot to do – local government can also make a contribution by using their various contacts and projects.

Great benefit can be gained from the cross-border digital identification flagship project led by the Ministry of Economic Affairs in the area under our coordination. This issue is also subject to many hindrances and various approaches. While it is often thought that regulations in Estonia are looser and more liberal than elsewhere, in this field, the solutions based on our ID card often have a greater level of security that the means of identification used in some other countries.
Many important topics of the Baltic Sea Strategy are related to the environment, including the condition of the Baltic Sea as well as other issues. The most important player in this field is Helcom, the activities of which are now strongly integrated with the framework of the Council of Baltic Sea States. It should be noted that in these matters, burdens and limitations are seen more often than opportunities. Yet, it is the field of environmental engineering and technology where our business circles could find additional opportunities in both the domestic market and elsewhere.

An important element of the new European budget plan is directing large amounts into the development of infrastructure to connect the member states. Although there is much talk about Rail Baltic and other projects, we do not see local governments and entrepreneurs showing any clear interest in the project. They do not seek to exploit the related opportunities and link the project to their own economic plans by, for example, utilizing the opportunities provided by the Baltic Sea Strategy.

Or let us look at an important direction of the strategy related to the improvement of maritime traffic safety – this also involves both expenditures as well as opportunities for our companies and scientists. Continuing along these same lines – energy conservation is currently a very important topic for local governments. Again, we have the opportunity to use the successful solutions developed within the framework of these projects and the private sector could be involved in this. The Baltic Sea Strategy is a very complex undertaking and this puts a great burden on the few people dealing with it in Estonia’s small state machinery. Questions, for example, about the European Commission’s technical assistance for the Priority Area Coordinators are totally justified. The Commission and the European Parliament have been able to allocate some funds, but this topic is not entirely off the table. I believe that despite the principle of “no new funds”, some future steps need to be considered in this regard, in order for the solutions to be more systematic and sustainable.

The Baltic Sea Strategy is just picking up speed, and therefore, the fact that so much attention is being paid to the organizational side and financing is quite natural. However, to achieve success, the most important thing is to work on the projects. It is vital to note that we need a two-sided approach which combines, on the one hand, the “bottom-up” ideas for various projects and, on the other hand, the necessity of having certain goals set by the Commission and member states, in order to make sure the strategy is well integrated with EU 2020, any national reform plans and so forth. It is also especially important at this point to consider possible partners in other strategy states and create contacts with the Priority Area Coordinators in the corresponding fields. The everyday concerns in a difficult economic situation naturally demand a lot of attention, but a sense of perspective must be maintained, also when thinking about co-financing. The people who are responsible for the EUSBSR in the ministries can definitely be of help.

I wish you interesting and informative discussions on the issues related to local government and universities, as well as any other fields that require contemplation. In any case, I thank the organizers.

Thank you for your attention.

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