"Globalisation and Europe: Prospering in the new whirled order"

American Chamber of Commerce to the European Union
Brussels, 28 February 2008

Ladies and Gentlemen,

I would like to start by thanking AmCham EU for inviting me to attend this presentation of the important study "Globalization and Europe: Prospering in the New Whirled Order".

I had the pleasure to have received the AmCham Executive Council last year (I understand that the study we are launching today follows from that meeting).

The work of Daniel Hamilton and Joseph Quinlan on globalization and transatlantic relations is already compulsory reading for many entrepreneurs, politicians, journalists and academics. So it is a particular pleasure for me today to comment on their latest study before an audience of distinguished experts on globalization.

It is also especially appropriate to do so under the auspices of AmCham EU, whose activities have contributed so much to strengthening relations between the European Union and the United States, whether through promotion of trade and transatlantic investment or as a vital link between the world of business and political decision-makers.

I am very happy to note that, using objective and quantifiable data, this study shows that confidence in the European Union's capacity to position itself in the world as a large, integrated and open area is fully justified.

We are now a well integrated and prosperous Union, the world's largest trading power with an internal market of some 500 million consumers and a single currency shared by a majority of its 27 Member States. These internal changes have had profound external repercussions. The EU is the world's leading exporter and the main source of foreign investment and development aid. Europe’s capital markets are now more globally competitive because of the growing attractiveness of the euro as a world reserve currency. Despite the rise of China and India, the EU’s share of world exports has actually increased this decade, from 40.8% in 2000 to 42.1% in 2006, particularly to developing countries.

The data clearly show that Europe has taken full advantage of economic globalization: over the past decade, the rapid spread of technology, growing trade opportunities, lower barriers to investment and policy reforms have generated more cross-border trade and investment, lower inflation and interest rates, higher incomes and more jobs, with modest increases in real wages, and GDP growth. With only 7% of the world’s population, EU GDP accounts for nearly 30% of the world’s economic output. Europe counts among its members 7 of the 10 most competitive nations in the world, and 9 of the 10 most “economically globalised” nations in the world.

However, like all factors which generate paradigm change in a short period of time, globalization will continue to engender more fear than enthusiasm in some people. In a fast-changing world, such fears are sometimes legitimate, as the authors of the study point out, because the benefits of globalization have not been shared equally by all.

We know that globalization will not automatically generate benefits for all at the same time. This is why it is necessary to introduce adjustment mechanisms, such as the European Globalization Adjustment Fund, which was launched in 2007 following a proposal from the European Commission, with a view to helping the newly unemployed to find jobs in more competitive sectors.

However, the fears generated by globalization are often unfounded as there is a tendency to blame it for problems – like unemployment or rising prices.

Let me give you some examples: There is a tendency to see the economics of globalization as a zero-sum game: more jobs in China would mean fewer jobs in Europe, for instance. This study demonstrates that globalization can support better jobs in Europe and in China. According to this study, for every job that Europe has lost to economic change in the last two decades it has created at least one new one in more competitive parts of the economy. Offshoring accounted for less than 8% (200 000) of all jobs lost in Europe over the past four years. Over 70% of all European offshoring expenditure, in fact, occurs in Great Britain or Ireland. Also, notwithstanding all the talk about the rise of China and India and their ability to export, the EU’s share of world exports has actually increased this decade.

Countering preconceptions in this way is all the more important, as perceptions can be more important than reality in creating the right environment for change.

This is why I share the authors' view that it is necessary for Europeans to reach a new consensus on globalization. In achieving such a consensus, no argument will be as convincing as the practical and tangible changes to the lives of European citizens and companies.

This "Europe of Results" is an integral part of the European Union's response to globalization. The renewed Lisbon Strategy for Growth and Jobs, relaunched by the European Commission in 2005, is a central contribution to such a response. Economic reform and modernization of social systems are key words for a successful response to globalization.

The renewed Lisbon Strategy for Growth and Jobs will be at the centre of the March European Council, which is expected to endorse the beginning of its new cycle. The strategy will remain focused on growth and jobs, keeping as priority areas for action the labour market, business environment, research and innovation, energy and climate change. This reform strategy is starting to deliver tangible results: for the first time in 10 years, there has been an increase in productivity while the unemployment rate across the EU, at around 7%, is the lowest for 25 years; 6.5 million jobs have been created in two years.

The facts, therefore, justify a feeling of confidence in the EU economy. The macroeconomic fundamentals are sound, and Europe is expected to continue along the path of economic growth, despite the current turbulence in the financial markets. Growth in 2008 is currently forecast at 2%, which is far from a recession. The resilience of the European economy is due in part to the strength of the euro and the discipline associated with the single currency, but also to the economic reforms introduced by the renewed Lisbon Strategy, which are making our economies increasingly strong.

Ladies and gentlemen,

This study argues strongly not only for the crucial role played by the opening-up of markets for European prosperity, but also for the enormous costs and disadvantages which a protectionist reaction to the uncertainties of a globalised economy would bring.

We are committed to open markets and open investment regimes. Protectionism cannot make Europe wealthier. But we will not be naïve. We can and will require a level playing field. Protecting competition and our internal market rules does not mean being protectionist. It means protecting European citizens and the European interest and values.

The Communication on the European Interest which I presented last October to the Informal European Council was very welcome and led to a Declaration on Globalisation in December. Both stressed that an open global trading system is in the interest of the European Union, which will stand firm against unfair practices in trade, investment and distorted competition.

Let me give an example using a very topical issue at present: sovereign wealth funds. The current financial turmoil shows that sovereign wealth funds can help stabilise financial markets. We want to maintain an open investment environment, in Europe and worldwide. But we cannot allow non-European funds to be run in an opaque manner or used as a tool of geo-political strategy.

The Commission's proposals to address these concerns will be discussed by EU leaders at the Spring European Council in March. These proposals were adopted by the Commission yesterday. The proposed EU common approach should benefit both, investor and recipient countries, avoiding distortions to the single market through divergent national responses. It should also help to establish a set of principles for transparency, predictability and accountability at European and international level.

As the two biggest trade powers in the world, both the EU and the US must remain open to investment. Let me emphasise here the importance of strengthening transatlantic dialogue on international relations. As the study points out, "no two continents are as economically fused as Europe and North America...The «multilateral versus transatlantic» dichotomy is a false choice.”

I am convinced that greater transatlantic cooperation within the Transatlantic Economic Council, which was set up to foster regulatory cooperation and convergence between the EU and the US, could benefit the whole international community.

Ladies and gentlemen,

Let me conclude with some words on climate change, a global phenomenon by definition.

My Commission is proud to have proposed last month a series of measures on energy and climate change which could be considered historic. It is not only the most important European action plan for the 21st century, but the most comprehensive and ambitious project in the world to combat global warming.

The measures to combat climate change and to reduce dependence on oil are an economic necessity and a platform for growth, employment and development of new technologies which will have an enormous economic impact.

The ambitious and compulsory targets proposed by the Commission strengthen Europe's legitimacy as a leader in the fight against climate change, and its credibility and influence in the world.

European leadership in this respect is a clear demonstration of the importance of the European Union in a globalised world. It is only through the European Union that the Member States can acquire sufficient collective weight to influence the worldwide debate on climate change, energy security and sustainable development. With the Lisbon Treaty, the Union will be in a better position to lead international negotiations on a new world climate change agreement which, I hope, will also be supported by the United States, China and India.

Ladies and gentlemen,

If globalization is to continue to turn perceived threats into opportunities, its benefits must be shared with the international community as a whole, creating more resilient economies and societies.

To paraphrase Boris Cyrulnik, a leading specialist in the concept of resilience, I would like to conclude by saying that globalization will be what we make of it: a failure or a success, depending on the way in which we tackle change.

From the Commission's viewpoint, globalization is certainly not something being imposed on us which is beyond our control. It is instead a future of opportunities which we should seize and shape without fear, not as reluctant passengers, but firmly in the driving seat.

Thank you.