Sumario: "Europe in the global age: open or closed?" - Speech by EU Commissioner Mandelson (8 February 2007: Stockholm)
Speech by Peter Mandelson, EU Trade Commissioner, "Europe in the global age: open or closed? » at the Stockholm School of Economics, Stockholm
I'm going to do today what politicians are usually advised against doing and make a prediction. And it's this: the big issues in politics in Europe in the next - say, ten crucial years - are essentially going to be about open versus closed.
We might be debating economic reform, or energy security, or migration, or our impact on the environment. But the root of these debates will be a debate about openness to change; openness to competition and challenge. Openness to new ways of thinking. Openness to risk-taking. Open Europe or closed Europe. Parochial Europe or Global Europe.
These are the fundamental questions for Europe. One of the reasons why the debate on the future of Europe is so difficult is that we have not resolved this prior question about open or closed. The ambivalence that still runs through the political cultures of Sweden and many other European Member states towards European Union - including my own - is partly a reflection of the fact that the European Union itself is ambivalent about its own role an a global age.
Do we want the EU to be our wall and gate we close against globalization? Or the instrument we use to engage with and harness globalisation? As individual nation states we have little hope of shaping the global debate with the US, Russia or China. Whereas with a Union of 550 million people and the biggest economy in the world we have a horse in the race.
A positive politics of globalization: three arguments
So my essential argument today is that we can and should come down on the side of openness - as I believe that Sweden has already done. Like many if not most in Sweden I think globalization is good for Europe and I think Europe has the capacity to harness the opportunities of globalization while acting to limit the costs, and fairly distribute the benefits. I'm going to try and distill that case into three basic arguments.
The first argument is this: a hundred million new jobs in the developing world is not bad for Europe - it is in fact good for Europe. The rise of a genuinely global economy and powerful, highly competitive, manufacturing economies in Asia and the emerging world has made us more competitive. They have lowered our input costs and they've reduced prices for our consumers. That has depressed interest rates and lowered inflation. We are better off. And so are they - the last two decades have seen
the biggest ever shift of a portion of humanity out of poverty.
And here's the point - they are not stealing our jobs. We have not traded away our prosperity for theirs. In fact, for every job that Europe has lost to economic change in the last two decades it has created a new one in more competitive parts of the economy.
In Europe we are still the world's biggest exporter - especially of high-value goods. We have maintained our global market share in the last few years while that of the US and Japan has declined. We shouldn't be complacent, but neither should we imagine that Europe is somehow going out of business.
The second argument is that the macroeconomics are not the whole story. Some industries in Europe, especially labour-intensive ones like textiles have been - are being - reshaped by globalization. This is often painful and traumatic for individuals and for their communities. The need for economic reform in Europe is urgent, but governments have to be ready to help with adjustment and to equip people for change. Preserving the huge aggregate benefits of globalization in Europe will only be
possible if we act to address the localized human costs and need for adjustment.
The third argument says that the European Union is the most important means Europe has to respond to globalization.
The EU is how we get the weight as Europeans to shape the global debate on issues like climate change and energy security. Through the EU we can show leadership and project our values.
This week the European Commission sent to Council vehicle emissions rules tougher than any equivalent in Japan or the US; rules that would make European cars the cleanest in the world and push our competitors to clean up their own standards.
Adopting these rules will be a test of Member States' commitment to ambitious action to reduce green house gasses. We need measurable and monitorable standards. And we need to look past the arguments about the immediate costs to the bigger advantage of leading the market in a direction it will inevitably go - and to the urgent need to lead the global debate by example. That's what I meant earlier by openness to new ways of thinking. Collective European action encourages our own industry to have
the confidence to change. It will compel those outside Europe to do the same.
In my own field of external trade the EU is the only way we can ensure that the markets of our larger trading partners remain as open to our trade as ours are to theirs.
The EU is how we drive and free up the single market, which not only gives European companies the biggest borderless customer base in the world but creates the competitive pressures that make European companies world beaters when they compete outside it. By enlarging the European Union we can keep building on those economies of scale and keep adding the human resources to our ageing society that will enable us to remain internationally competitive.
So: there is no effective European response to globalization without the European Union. The EU is how we assert Europe's collective interests in a globalised world, and how we equip Europeans for the economic and social challenges that it brings.
Lessons for Trade Policy in Europe
If that is the basic case for a positive politics of globalization, and the case for a European Union that helps to shape that politics, what does it imply for EU Trade policy?
Up until a few decades ago we made things in our economy and we traded them over the border in another economy - and the tariff was the tax that got in the way. Now what I buy in my economy is probably produced in more than one economy along a global supply chain. We still talk about - for example - 'Chinese exports' coming to Europe. But more than half of China's exports are from factories capitalised by non-Chinese companies - many of them European - and whose creative content originate
outside Europe. So globalisation has changed what it means to be a European business or produce a European product.
Sweden is almost a textbook example of this: for a relatively small country it has produced a large number of global companies, almost all of which trade down long global supply lines.
In the last year - from memory - I've met Swedish business people in Cairo, Manila, Beijing, Kuala Lumpur and Mumbai. About 1 in every six Swedes in Sweden works for a foreign company, and Swedish companies employ almost a quarter of a million Americans - in America.
Part of what Sweden does very well is working out what to do here in Europe, where management skills, or capital intensive research is at its strongest, and what to do in the workshops of the emerging world. Companies like IKEA or H&M are not just profitable because they outsource - they exist because they can outsource.
The Global Europe trade policy strategy that was adopted by the European Commission in 2006 is based on this picture of our economic world and what it takes to be competitive in it.
It argues that the line between the local and the global has been blurred by globalisation. That internal and external policies both need to pursue the same goal: adaptable and globally competitive European companies and workers, in dynamic and growing economies that support strong and prosperous European societies. It is the right approach to globalisation: one that recognises our strengths, and accepts the competitive challenge of others. In 2007 I want to drive the Global Europe agenda
forward in several key areas.
The first is by completing the Doha Round of WTO negotiations. We have a small window of opportunity to get a breakthrough in the negotiations this spring. The EU has shown that we have the courage and the political will to secure a deal that, even on the basis of what is already on the table, would be the biggest liberalisation of global trade in history; deeply restructuring farm support in the developed world and opening new markets in agriculture, manufactures and services, not least in the
developing world, where tariffs and barriers to trade and investment are highest.
The Doha Round is an opportunity to integrate growing economies like China and India and Brazil into the multilateral system and to lock in a new level of global economic openness - which is our insurance policy against the ever-present political temptation of protectionism.
Europe has negotiated itself into a position in which our ambition - even in the highly sensitive area of farm trade - is now being questioned only by those who are demanding more than anyone can reasonably accept. And more, in some cases than they themselves have shown willing at this stage to match. Now is the time for all WTO members - and for all of us in Europe - to recognise what we lose if a deal slips away. A failure would set back the rules-based, multilateral trading system for a
generation.
Alongside Doha Europe also needs to get to work on a fresh bilateral trade agreements that go further in areas where the WTO as a whole is not willing to advance - particularly in services trade and investment.
This next generation of agreements will be 'WTO plus', enlarging, not simply diverting new trade. They are based purely on commercial potential, with partners who choose the same ambitious agenda. Growth in EU market share in the emerging economies of ASEAN, India and South Korea has been static: new free trade agreements with these economies will help correct that.
The Global Europe strategy also argues that free trade is about more than tariffs. Tariffs for most goods have fallen steeply in the last 50 years - at least in developed countries - and the real barriers to trade are increasingly found behind the border in the form of rules or regulations or administrative loopholes, transparent or otherwise, that discriminate against foreign trade. Much of my work as a trade negotiator focuses on working with our trading partners to fix that kind of
problem.
We are also looking for ways to widen access for European companies to public procurement markets where ours are open to others. We are taking new steps, including cooperating much more closely with the US, China and Russia to ensure that international rules regarding international property rights are enforced by all our partners, which is vital for Europe's knowledge-based industries. A patent in Stockholm is worth next to nothing if the ideas it protects aren't protected in China.
We've also launched a public consultation on Europe's trade defence instruments such as anti-dumping. I know that this is a controversial issue here, and I welcome Swedish backing for a frank debate. Recent deep divisions among European Member States over anti-dumping duties on Chinese leather shoes showed the consensus underpinning the system is coming under pressure. We need reflect on the role and rules of anti-dumping in Europe; one that reflects the changes in the global economy in the
last decade.
So we will be more activist in finding opportunities for European exporters. But we have to flank these policies with policies that equip Europeans for the tough competition we are inviting. Sweden's openness and balance of labour market flexibility with strong individual social protection should be a model and a benchmark for the rest of Europe.
And we can't demand this openness from others from behind barriers of our own. We need to make sure that Europe's own market stays open. In a global economy where European companies operate global supply chains, Europe needs to import to export. So, Europe should be activist in opening markets abroad while rejecting protectionism at home.
Conclusion
I've talked a lot about the economics of globalization today, but it is vital to remember that however central economic change is to what is happening around us, globalization is a deeply political and controversial phenomenon.
The politics of globalization are the politics of the environment, climate change, migration, energy security and poverty alleviation. Our trade policy in its wide and modern sense will contribute in all these areas, because trade is about creating prosperity, but also a secure and stable world.
Sweden is an open, outward looking country: it wants to be part of an open, outward-looking European Union. These are politics that we have every opportunity to shape - if we chose to do so. Making sense of such a world, and Europe's place in it, has never been more important. Will we chose open or will we chose closed? It's up to us. But only one way will secure of future.
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