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Speech by Romano Prodi

President of the European Commission

"The EU and Japan working together"

EU-Japan Business Dialogue Round Table - Third Meeting

Brussels, 9 July 2001

Viscount Davignon,

Mr. Sekimoto,

Your Excellencies,

Distinguished Members of the Round Table,

I am delighted to be with you today and to speak, for the second time, to the EU-Japan Business Dialogue Round Table.

The Round Table is a tangible, highly visible and valuable example of cooperation between the EU and Japan.

I would like to reflect for a few moments on that subject.

Just ten years ago in Tokyo, we agreed the EU-Japan Political Declaration.

This committed us to strengthening our bilateral relations, both political and economic, recognising and building on our common values and aspirations.

Since then, EU-Japan relations have improved enormously. I would even say they have never been better.

Two way trade has continued to expand substantially.

As you know, the Union still has some concerns about the high cost of entering the Japanese market.

Nevertheless, EU firms are becoming less preoccupied with the question of market access and more concerned with establishing themselves successfully once they are inside the Japanese market.

Meanwhile, Japanese investment is being increasingly welcomed in Europe, and in the last few years European firms have begun investing in Japan on a much larger scale.

The Round Table has made a very useful contribution through its secretariat the EU-Japan Centre for Industrial Cooperation.

The EU-Japan Centre is a joint venture co-financed by the European Commission and the Japanese Ministry of Economy, Trade and Industry.

Its 'Vulcanus' programmes place Japanese industrial students in EU companies and European students in Japanese firms.

It also provides a wide range of training programmes for business managers.

Over the last fourteen years it has trained nearly eleven hundred senior managers from European industry interested in adopting Japanese production technologies or in familiarising themselves with the Japanese business environment.

In this connection I want to mention the Executive Training Programme (ETP) run by the European Commission.

This is intended to give a thorough instruction in the Japanese language and Japanese business practice to young European business executives.

The programme is now into its 20th cycle, having trained almost 1000 young businessmen.

I would like to take this opportunity to thank Japanese industry which has generously hosted ETP trainees on 6-month work experience detachments in Japanese firms.

All these initiatives have contributed to the great improvement in EU-Japan relations over the past decade.

Most striking of all, our bilateral dialogue at all levels has increased enormously.

This led us to wonder whether the EU and Japan could now move forward from dialogue to concrete cooperative action and closer coordination of policies.

That is why I responded enthusiastically to former Foreign Minister Kono's speech in Rome last year, advocating that the first ten years of the 21st century should be a decade of EU-Japan cooperation.

As a result, the EU-Japan Summit in Tokyo last year agreed to launch an Action Plan covering a wide range of practical activities on which we would work together in the coming decade.

Activities such as reforming the UN, combating the proliferation of mines and small arms, stimulating investment and promoting people-to-people exchanges.

Such joint action would make our co-operation tangible and concrete, raise its public visibility and thus make it more politically credible.

The Action Plan has been negotiated and is now practically finalised. We are ready to adopt it at the next EU-Japan Summit and we want to begin to implement it soon.

I therefore hope that a date for the Summit can soon be fixed for later this year.

Let me say why I am convinced that close cooperation between the EU and Japan is not only possible but also extremely relevant today.

First, the EU and Japan are both committed to solving global problems through a cooperative and consensual approach.

We both depend for our prosperity on the multilateral system symbolised by the United Nations and WTO.

So we have been working closely together in the WTO in recent years.

We are now striving for a successful outcome of the WTO ministerial meeting at Dhoha next November as Peter Carl has already described.

Second, the EU is calling on Japan to join with us in ratifying and implementing the Kyoto Protocol. That is one of the purposes of the current "troika" visit to Tokyo, involving the Swedish Deputy Prime Minister and the EU Environment Commissioner Margot Wallstrom.

There is increasing scientific evidence that global warming presents us all with an awesome challenge. There is no room for fudge or delay in dealing with it.

Third, on the basis of our shared values, the EU calls on Japan to promote human rights, rule of law and good governance in its foreign relations.

These issues are important in themselves, and they are inseparable from the healthy development of trade relations, investment links and economic growth.

Current developments in the USA make common efforts by the EU and Japan particularly relevant.

After a ten year expansion, the US economy has now entered a period of slower growth. The whole world - and Asia in particular - is looking to the EU and Japan to take up the slack.

At the same time, the new US administration is settling in. My impression, having met President Bush in Göteborg last month, is that his administration will be less introspective than many people initially feared.

But some developments, such as the US rejection of the Kyoto protocol, place a certain responsibility on the EU and Japan to act together more effectively on the world stage.

There are worries that Japan's economy is entering another weak phase and that Japan is therefore unlikely to be able to play an active international role.

Clearly, we must recognise the serious risks facing the Japanese economy after a decade of stagnation.

But we must also recognise its considerable strengths, not least in terms of Japan's huge financial reserves and your highly-skilled people.

Overdoing pessimism is as big a sin as complacency.

Let's hope that the outcome of the important Upper House elections at the end of July will open the way for the Japanese government to implement the mix of policies needed to lift the economy from the doldrums and to restore business and consumer confidence.

One concrete way in which the EU can help and which is very relevant to this Round Table is by stepping up direct European investment in Japan.

Over the past decade, foreign investors have been very active on the Tokyo stock market. But only in recent years have EU companies begun to expand appreciably their direct investment in Japan.

I believe much more could be done to encourage this trend. It is an important policy issue, and I am glad to see it being addressed in this year's White Paper from the Ministry of Economy, Trade and Industry.

I have the impression that despite increasing competition from China EU firms are still extremely interested in Japan. This confirms what I said just now about Japan's medium- and long-term potential.

I also hope the Japanese authorities can draw some lessons from our bilateral dialogue on regulatory reform, and that we will reinforce it in the coming years.

Let me now say a few words on what the Union is doing within this broad context.

As I mentioned when I spoke to you in 1999, the Union is making great efforts to promote prosperity, peace and stability on the European continent.

The key to this is the health of our own economy.

We do not expect to escape totally the adverse effects of the American slowdown.

Until now, oil prices have also remained high. Nevertheless, our overall economic performance and growth potential is much better than it was a decade ago.

Important economic deregulation measures are now under way in the financial and telecommunication sectors and in labour markets.

This will further support economic growth - though much remains to be done to achieve the objectives set out in the conclusions of last year's Lisbon Summit.

My colleague, Erkki Liikanen has already spoken to you on one important aspect of our efforts promoting the e-economy.

The euro has been launched successfully and provides an environment for stable growth, with rather low inflation and interest rates.

Budget positions are much more sound than they were a decade ago, which is very important given the major challenge of the ageing society.

This is an important challenge for both Japan and the EU in the next two to three decades.

With our economic base sound, we have been able to proceed in a workmanlike way with the preparations for enlargement.

This in itself will be a major historic event bringing in countries that have long been cut off behind the Iron Curtain.

As you know, the aim is to have the first accessions before the next elections for the European Parliament in 2004.

That of course depends on completing the negotiations successfully. These are very well advanced, but some difficult areas remain for instance, agricultural support and structural fund assistance.

The Union must also make important internal reforms if enlargement is to take place successfully.

Meanwhile, we continue our efforts to secure peace and a return to prosperity in the Balkans. Clearly, there are still major worries, most recently related to the situation in Macedonia.

Nevertheless, there have been major successes too, most strikingly (i) the move by Croatia to a liberal, democratic government which has allowed the negotiation of a bilateral Stability and Association Agreement to be signed in the autumn, and (ii) the historic political changes in Serbia which have opened the way for that country to return to the European mainstream and to start on the road to economic recovery.

Meanwhile, in a rather quiet way, the situation in Albania is also improving noticeably.

In this context, I should mention that the Union is extremely appreciative of the generous financial support provided by Japan for reconstruction in the Balkans.

Meanwhile, the Union continues to develop relations with the countries of Eastern Europe, principally Russia and the Ukraine.

One of our main concerns is to persuade the governments of these countries to create conditions for significant increase in business investment and employment which is essential for bringing their economic structures into line with that of the EU in the longer term and to create a common European economic space.

In parallel, we are developing the instruments the Union needs for an effective and coherent foreign policy. The Union is already an important trading partner and provider of development aid and other forms of assistance.

But we are now setting up additional mechanism such as the rapid reaction mechanism which will enable the Union to react quickly where a situation in a particular country seems to be entering a downward spiral.

The European Union is active not only in our immediate region, but globally.

Our great interest in Asia reflects not only the extensive economic links of today, but, the deep historic and cultural links which have built up over centuries.

Our commitment to developing relations with Asia will be underlined when we shortly submit to the Council a major communication on that subject.

The Union has greatly helped the recovery of the Asian region since the financial crisis by holding its markets open and providing a stable demand for exports from the region.

Clearly, the current slowdown in the major economies could have important negative consequences for the export led economies of the Asia Pacific. But Europe will continue to play its constructive role.

To summarise therefore, there is wide scope for developing practical cooperation initiatives between the EU and Japan.

I believe that Japanese businesses, with their deepening involvement in the Union and in the accession countries, are very much aware of what could be done given sufficient political will.

So I look to you to bring back the message to Japan that the European Union regards Japan as a valuable partner and that we are ready to work together on a much larger scale than ever before.

For our mutual benefit and for the benefit of the international system on which we both depend.

This is the message which should issue clearly from the next EU/Japan Summit.

Thank you.

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