2 November 2005
Ladies and gentlemen,
It is a great honour to speak here – in one of the oldest and most prominent centres of foreign policy studies in the world. Many intellectually challenging thoughts about world politics have been expressed within these respectable walls. Today, I have the honour to share with you my views about the current policy agenda for Europe – and how Estonia sees some of the strategic issues facing the European Union. I will focus on how to make Europe more competitive and stronger outside its borders.
There has been a lot of talk about crisis in Europe after the Dutch and French rejections of the Constitutional Treaty. This would be an overdramatised assessment of the state of affairs. There is no doubt that Europe – and the European Union - is functioning also these days. The fact, although regrettable, that another Treaty for the Union was not ratified in two of the Member States does not diminish the existing achievements of the EU. Our companies benefit from the free movement of goods and capital, our students study in other Member States and our people travel freely across Europe. Therefore, we are very much aware of these advantages Europe offers. We have also been able to directly benefit from another huge success of the Union – its enlargement which has enhanced stability and prosperity in our country. Talking of crisis people tend to overemphasize the difficulties of the day and forget the overall phenomenal success of Europe. Yet the history of the EU is marked by many difficult periods. In a paradoxical way, crises have led Europe forward. They have provided opportunities for debate and have triggered urgent changes. At the same time, the history of European integration has also taught us that in order to regain momentum, solidarity and the willingness of the Member States to look beyond their national interests are indispensable. We must not forget the very essence of the European project – to promote peace, to defend our common values and to enhance the wellbeing of our people. As it happens, in order to preserve its relevance, we need to remind ourselves of this essence often.
Of course, the rejection of the Constitutional Treaty triggered political turmoil for both the Union and its Member States. More alarmingly, it revealed a serious gap between the people and their leaders. People in Europe expect their leaders to take their worries seriously. Their dissatisfaction with their governments to promote their wellbeing and respond to their primary concerns quickly translates into unhappiness with the EU. Today, we need to restore confidence and to regain the momentum in Europe. One possibility for achieving this is to build upon shared views about the strategic issues facing Europe and its citizens. The Member States indicated the very need for changes at the informal EU summit a few days ago – thus providing a starting point for further discussions about their nature. Another way of restoring confidence is to ensure that Europe is capable of coping with its everyday problems as well as using its true potential within its borders and outside them. Europe must provide its people with tangible results. In fact, economic success might be the very thing that can bring a new impetus to Europe today, as it did in the earlier years of the Communities. Undoubtedly, there is a link between economic progress and the general attitudes of people vis-à-vis their leadership.
Prime Minister Blair’s recent noteworthy speeches in the European Parliament not surprisingly evoked diverse reactions in various Member States. There were those who were happy about the tabling of fundamental issues that the Union is facing. There were also those who thought that Mr Blair went too far. We in Estonia believe that he could have gone even further. We are alarmed by the decreasing competitiveness of the EU, especially when compared to the rapidly emerging economic power of huge countries outside Europe and the Euro-Atlantic area. Europe’s poor economic indicators show structural problems that will have a long-term impact on our education, innovation and productivity. The growth of China is unprecedented and India is catching up fast. Both also advance well in research and development. This is increasingly not just a matter of cheap labour. We politicians should be even bolder when discussing today’s realities and when making the decisions that deal with them.
Europe does not constitute a world in itself but is a part of it. Events outside Europe affect our jobs and way of life whether we like it or not. It is wrong to assume that the new Member States have caused problems for the old Members. Only a small part of the investments of the old Member States go to the new one while the bulk of it flows out of Europe. In fact, the new members of the Union are increasingly concerned by globalisation. It might come as a surprise to you that as many as 60% of Estonian people are worried about the transfer of jobs to low income countries. The external pressure of globalisation together with the internal pressure of demographic trends, creates serious challenges for the whole of Europe. To cope with them, we must increase our competitiveness. We can’t lock ourselves up behind a fence hoping that it will protect us and keep our social model sheltered from the storms.
Moreover, we should not overemphasize the negative aspects of globalisation. We sometimes forget that globalisation in fact reflects the progress of humankind. It offers considerable opportunities through increased trade, information flows and better technologies from which we benefit every day. It is not only about the transfer of jobs to low income countries. Often, it is a win-win situation in which our companies get stronger precisely thanks to their affiliates abroad and the new opportunities in emerging markets.
Ladies and gentlemen,
There has been agreement in Europe about how to increase our competitiveness for quite some years. The Lisbon Agenda with its reoriented targets of growth and employment very much reflects the main challenges for Europe – and those for Estonia. It is urgent to move on with these issues. It is worth doing it – it has been estimated that the full implementation of the Lisbon Agenda would increase the total GDP of the EU by 3% and would create 6 million additional jobs in Europe. Europe desperately needs both. Regrettably enough, the ambitious goals contrast sharply with the poor economic performance of the last five years. Not only has the EU failed to move towards its principal targets, it has even lost some of its ability to compete with the United States and Asian countries.
Of course, one of the main problems with the Lisbon Agenda is that the majority of competences which are essential for implementing it belong to the Member States and not to the EU. This means that the bulk of the agenda, including badly needed reforms of the labour markets, pension schemes and population policies, must be designed and implemented by the individual Member States. However, this does not mean that there are no areas where the EU could make a difference to bring the Lisbon process closer to its goals.
First of all, the EU should make sure that all four freedoms of the Internal Market function fully. A Europe-wide single market in services is a core element of the Lisbon Agenda. Providing up to 70% of European GDP today, the services sector is of huge economic importance. Truly open competition in the service sector will therefore stimulate entrepreneurship, provide additional employment and create new opportunities for both our businesses and consumers. In short, it will give a much-needed boost to the EU economy. This is a clear example of where we need a wider perspective in order to make European ideas work. The Internal Market cannot function fully if some of its cornerstones are missing.
It goes without saying that another cornerstone of the Internal Market is the fully free movement of labour. We appreciate the decision of the United Kingdom as well as that of Sweden and Ireland to open up their labour markets for citizens from the new Member States. Evidence from Britain shows, that the newcomers bring new impetus into the economy. We Estonians hope that other Member States will follow the British example soon, look at the matter in a more rational way and abandon their transitional periods for the free movement of labour on 1 May 2006. Let us talk openly - nearly all the people in Estonia who were seeking an opportunity to work abroad have already found a way to do so. I cannot foresee much additional movement of labour from the 10 new member countries to the old. The advantages of the free movement of labour in Europe are obvious: increased labour mobility, more effective use of human resources and enhanced competitiveness of each Member State and of Europe as a whole. We could probably also avoid some economic immigration from outside of Europe.
To move towards the Lisbon goals, we also need simpler legislation, more efficient administration and more transparency both on national and EU level. A lower administrative burden would cut operating costs for companies, save their resources for productive activities and thus improve the business environment. We Estonians are particularly happy to notice the recent Commission initiative to cut red tape and over-regulation. As the bulk of Estonia’s economy consists of SMEs for which heavy regulation could be devastating, we simply cannot afford it in our country. Estonia has recently simplified the registration procedure for new companies in order to promote entrepreneurship and accelerate the start-up phase of doing business. In this context, allow me to mention that with a GDP growth rate of nearly 10% in the second quarter of 2005, Estonia currently has one of the fastest growing economies in Europe. Estonia also enjoys the 20th place in the world competitiveness report, one of the highest among the new Member States.
Many high-sounding words have been voiced in connection with the Lisbon Agenda. Yet if the ambitious goals remain on paper, they will quickly become meaningless. The Member States must have the courage to translate the Lisbon Agenda into real action. Their national budgets must also reflect the Lisbon priorities. While saying this, I will not try to conceal the difficulties faced by Estonia in finding the resources needed to increase the financing of education, innovation and research. The smallness of our country naturally imposes limitations and due to the small size of our companies, the level of private sector investment in innovation is limited. The planned increase of public investment will not be enough to reach the Lisbon innovation targets for a number of years. We hope that a more coordinated policy for innovation research and development at the European level will help to alleviate the problem. The recently proposed European Research Council would be a step in right direction.
Ladies and gentlemen,
The priorities of Lisbon should also be reflected in the budget of the EU which must not reflect the challenges of the past but those of the future. It must be a tool for increasing economical fitness and must reflect the political priorities of Europe. Our common budget must reflect the objectives of a “knowledge-based economy” and prioritize education, research and innovation It must also promote cohesion among the Member States. Being on the borderline of the EU, another priority for Estonia is the protection of the external borders of the EU and positive interaction with what is beyond – the Neighbourhood Policy. It is in every European’s interest that our borders be safe and that welfare and stability increase beyond them.
And, it is equally important that there is a budget. It was encouraging to see that the divergence of views regarding the launching of accession negotiations with Turkey could be overcome even in a very difficult situation. We truly hope that coming to an agreement regarding the financial perspective will be no more difficult than that and that this can be achieved during the British Presidency.
I would finally like to say some words about the role of Europe in the world. Probably due to the geographic circumstances and the small size of our country, Estonians expect Europe to assume an even stronger role in the world than the average European does. We would like to see more unity in the European foreign policy - be it vis-à-vis Russia, the United States, Asian countries or Europe’s neighbour countries. We also want European foreign policy to reflect our common ideals and values more consistently – and be guided by them. These very values of democracy, the protection of human rights and other fundamental freedoms in fact hold us Europeans together. There is no doubt that Europe’s values are strong. Why don’t we represent them more boldly in our relations with the rest of the world?
In particular, we should be more open towards countries further east. Estonians know from their own experience that the prospect of EU membership is a powerful engine for political and economic change in an applicant country. It also serves the purpose of anchoring the very values we all care about. To keep this motivation up and to further extend our area of stability and prosperity is in the very interest of Europe as a whole. An open door policy is a crucial tool for maintaining an area of stability and enhancing prosperity in our neighbourhood. Even if enlargement is currently not popular in some Member States, negative rhetoric concerning it should be avoided. Having benefited directly from enlargement, we see it as one of the most successful foreign policy tools of the Union. And common sense suggests moving forward with successful tools. There is no need to hold abstract discussions about where to draw the borderline of Europe. For us, prospective membership is first and foremost about the willingness of applicants to commit themselves to Europe’s values. On our part, we are happy to offer our reform experience to help others on their way into the Union. We must not lose a broader strategic vision by becoming mired in political concerns of the day.
During the past decade, Estonia has proven that it has the courage to carry out reforms. Today, there is a pressing need for changes in Europe, too. And we all need a lot of courage. I am confident that there will be enough of it to take the European project forward.
Välisminister Urmas Paeti kõne Suurbritannia Rahvusvaheliste Suhete Instituudis (inglise keeles)
2 November 2005
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