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Charlie McCREEVY European Commissioner for Internal Market and Services Global competitive challenges and the role of the Internal Market National Forum on Europe Dublin, 23 February 2006 Reference: SPEECH/06/121 Date: 23/02/2006 HTML: EN PDF: EN DOC: EN SPEECH/06/121 Charlie McCREEVY European Commissioner for Internal Market and Services Global competitive challenges and the role of the Internal Market National Forum on Europe Dublin, 23 February 2006 Senator, Members of the Forum, Colleagues and friends, May I begin by saying what a genuine pleasure it is to be here. The Forum, under the wise stewardship of Senator Hayes, has done excellent work in furthering the debate on Europe in Ireland. Today’s world is busy, and it isn’t always easy to make people feel involved. But the Forum has always been ready to go the extra mile. You have taken to the byways and highways so that people can have their say; and you have digested the indigestible to make the big texts more accessible and interesting for non-experts. It is a difficult job, but one to which you have brought great energy and drive, and I am very pleased to have the opportunity to thank you in person. The Forum has offered a great many people the opportunity to make their voices heard. Today is my turn, and I hope that what I have to offer will be a useful contribution to your important deliberations. My message is fundamentally an optimistic one. We live in a world rich with exciting new opportunities and prospects. Change has never been quicker. What seems amazing to us now will be very old hat to our grandchildren. The possibilities are endless. Not only does Europe have what it takes to survive in this environment, it has what it takes to thrive and to prosper. When it comes to operating in open trading environments, our experience is second to none. We have learned a lot and we have a lot to teach. We have an excellent history of achievement. We have one of the world’s biggest economies. We are a global player on trade. We have a track-record of innovation and creativity, and we have been re-energised by the arrival of the new Member States on the scene. Europe should be looking forward with hope and anticipation. Unfortunately, many Europeans are not. For a considerable time, it has been fashionable in Brussels-type circles to be pessimistic about the Union, about its future, about enlargement. Across the continent, where opinion-formers meet, all is doom and gloom. Our economies are underperforming. Our populations are shrinking. Cultures are clashing, and we are about to be out-classed by new players from China and India. These dark prognoses sometimes lead to calls for protectionist gestures and anti-market measures, as if it were possible to retreat to some cosy internal euro-nirvana that never was. There is no denying that part of the analysis is right - there are issues we urgently need to address. But the pessimism and the prescription which follows from it are wholly wrong. Only a fool would not recognise that Europe is facing tough and testing times. It is. But there are those in life for whom the glass is half full and filling. For others the glass is always half empty and draining. For me, challenges are opportunities. They are there to be seized. They help us to see how we are really doing, and they oblige us to improve our game. Without external pressure, it is difficult to see how the case for internal reform in Europe could have gained hold. But it has. Europe is renewing itself. Leaders across the Union have internalised the need for change. I am convinced of this. From the Baltic Sea to the Straits of Gibraltar, I don’t know of a single figure of substance who believes that things can go on as they have done. Despite the critics and the doomsayers, as a continent and as a Union, Europe is adjusting to new world realities. There are sometimes lapses and missteps, but the message of reform is getting through. The journey won’t always be easy. Adjustment - particularly when it comes late - can be painful and slow. The logic can be more immediately clear to some than to others, and the political costs involved can be high. But, in acknowledging the need to change, we have taken the first and vital step to recovery. We now urgently need to convert analysis to will –to get the gears of intellect turning the wheels of action. That is what I would like to talk about today. Each generation of Europeans faces its defining test. In the 1950’s and 60’s, the challenge was to heal the scars of war and to build new foundations. In the 1970’s and 80’s the economic slowdown focussed attention on the need for a real internal market. The fall of the Wall opened new possibilities for the spread of democracy and freedom, and in the 1990’s the Union became both deeper and wider as we worked to reunite Europe’s divided family. Our challenge today is to reform and renew. It may sound more prosaic and banal, but it is every bit as demanding. I hesitate to mention the Lisbon agenda - I know that there is no phrase in the English language more destined to cause eyes to glaze over - but Lisbon has provided a framework within which the Commission and the Member States can work together to drive forward a change-oriented agenda. Not change for change’s sake. But change that can deliver a bright and sustainable future. Since we stripped the process down to its basics last year, the quality of cooperation has improved. Last autumn, Member States submitted National Reform Programmes under Lisbon which, to my mind, show a step-change in commitment and ownership. Our assessment of these, published last month, will feed into the meeting of the European Council taking place next month. We have made it clearer than ever before where responsibility for action lies. This has greatly enhanced the exercise. It is largely for Member States, acting within the framework provided by the Union, to get their macro and micro-economic policies right. The Commission can encourage and chivvy, but only the Member States can deliver. Of course, Member States have to be prepared to do what is necessary. I don’t entirely agree with my old colleague JeanClaude Juncker, who has said that the difficulty for politicians is that we all know what has to be done, we just don’t know how to get elected after doing it. But I know what he means. Tough political choices can be a hard sell. But we have seen that Governments can get elected on a reform ticket, and can build support when their policies are seen to deliver. But the Commission, too, must be prepared to play its part. For us also, this must mean being prepared to be unpopular nobody in this room will be surprised when I say that this is not a prospect that gives me sleepless nights. The Treaties have given the Commission an almost sacred duty to act as its guardian. We have to be prepared to take a stand. As the Commissioner with responsibility for the internal market, I take my responsibilities very seriously indeed. I am prepared to work closely with Member States to ensure they fulfil their responsibilities, and I am prepared to call them up on it when they fall short. Because it is impossible to defend the European interest without being robust in defence of the internal market. The four freedoms – the free movement of goods, services, capital and labour – are the bedrock of the Union. They were the foundation stones of the Economic Community that became the European Community that led to the European Union. Without them, there is no internal market. Without an internal market there is no Union. If we can’t get it right on these core principles, then we are in deep trouble indeed. When it works, the internal market is like air – ubiquitous and invisible. It has become a part of people’s lives, whether at a personal or business level. Young people, in particular, have a hard time imagining what life was like without it. They have grown up able to move across borders with ease. Many spend at least some time studying or working in another Member State. They are used to being able to use the same currency across much of the Union. To them, the internal market is simply a part of the background. Business has also, to a considerable extent, come to take its benefits for granted. But those who work across borders on a daily or even occasional basis are acutely aware that, in certain regards, the internal market remains incomplete. There are still obstacles and barriers. It doesn’t work as smoothly as it should. It would be unrealistic to expect people to be grateful forever. As the old saying goes, eaten bread is soon forgotten, and that is as it should be. But there must be a danger that if we come to take things for granted, if we don’t appreciate the importance of what we have, we will cease looking after it and we will start to go backwards. Although we have yet to realise its full potential, the internal market has created immense new opportunities for Europe’s citizens and businesses. There results are there to prove it. The first 10 years of the internal market added 1.8% to GDP- an additional €877 billion in real terms. To put that in context, it represented an average of €5,770 for every household in the then 15 Member States. It helped to crate 2.5 million jobs. In tying the economies of the Member States together, the internal market has largely eliminated exchange rate uncertainty – the euro, for those countries that use it, has reduced the risks associated with cross-border trade and investment. As a result, trade between Member States has grown strongly. By harmonising standards and technical requirements we have made it easier to move goods across the Union, reducing costs and lowering administrative burdens. In opening up sectors such as telecoms, energy and air travel we have increased choice and lowered prices, for business as well as private consumers. Prices have converged. Investment has grown. More jobs have been created. At a time when we are facing new and growing economic challenges, we would do well to remember that getting us this far took considerable energy, commitment and political will. The same resources are needed now. The way to respond to the challenges of globalisation and increased competition is not to throw up barriers, but to exploit to the maximum the advantages we already enjoy. Openness cuts both ways. Allowing others to sell into Europe opens new opportunities for us too. And competition hones skills. Open markets help businesses to evolve and survive. A Europe which is competitive internally will be more competitive externally. A business sector competing across 25 Member States is better equipped to compete at a global scale. It will be more creative, innovative and flexible. It will have the benefits of scale. A market place of 450 million consumers – almost twice the size of the US - with a highly educated and motivated work force is a more attractive location for foreign investment than any one Member State could possibly hope to be on its own. At a time when many people speak of a loss of confidence in Europe, we should not be too afraid to trumpet our successes. We should also not be so afraid of criticism that we fail to acknowledge where we have made mistakes or where we have fallen short. There are gaps in the internal market that remain to be filled, markets that have not achieved the level of integration we would wish to see. The world is changing. The role played by Europe’s manufacturing sector – reflected in the importance attached to creating a free market and open for goods – has been and remains of great importance. But real growth in recent years has been in services – they now represent between 60 and 70% of the EU’s economic activity. Until recently, they have been something of a Cinderella at Union level. We have failed to give them the attention they deserve. Extensive studies have been undertaken to find out why Europe’s services sector has not thrived to the extent that it should. These have revealed a welter of barriers that hold businesses back, or that put them off the idea of trading across borders completely. There are obstacles to establishment, to distribution, to sales and to after-sales follow-up. There is a mountain of red-tape and regulation, some of it national, much of it local. Sometimes it is hard to believe what this can amount to. In one Member State there are over 700 national and local regulations that apply to opening a new shop. Even the simplest things can trip people up. Opening a bank account, for example, can be necessary to facilitate payments, but extremely difficult because of residence and tax certification requirements. Opinions have converged around the need to do something – there are very few defenders of the status quo. But there have been very different views on what approach ought to be taken. My predecessor in office, Frits Bolkestein, and his colleagues in the Prodi Commission decided to act. In doing so, there were two basic paths they could have followed. The first, following the model with which the push for a single market in goods began, was to aim for sector by sector harmonisation to the degree that differences were eliminated and goods could flow freely. This would require slow painstaking legislative work that would take years. It would also place an enormous burden on business as it sought to comply. The second approach was more radical, in that it sought to get matters moving a lot more quickly. Taking as its point of departure the basic principle of free movement under the Treaties, its aim was to remove all obstacles in one stroke unless they could be justified for sound public interest reasons. They chose to take the second route. As a decision, it was bold and brave. It was a genuine attempt to get the job done. But, politically, it was very ambitious indeed, and it was always likely to give rise to controversy. I have had a long political career. But rarely have I seen a legislative proposal give rise to such controversy and dispute, much of it well wide of the mark. Many believe that it was the proposed Directive, and its embodiment, the fabled Polish plumber, that brought down the European Constitution in France. After I had had time to study what was on the table, I made it clear that I did not believe that the proposal as drafted would fly. It was obvious to me that many people were not as yet ready for very sensitive sectors, such as health, to be included. It was also clear that matters relating to labour and workplace standards were raising concerns. There were issues relating to law, and to consumers’ rights, that would have to be resolved if the Directive were to achieve the wide consensus it needs. I said that I was prepared to accept any changes that improved the text, and that could help it to win the widest possible support. But I also made it clear that I would not support an empty husk. I want a Directive that will get the job done. The task of scrutinising the proposal fell, in the first instance, to the European Parliament. It finished its first reading last week – voting for the Directive by a margin of two to one – and I pay warm tribute to the way it went about its work. It went through the text slowly and carefully, line-by-line, and it found a way to bridge the differences that were causing deep divisions within its own ranks. Its work was solid and the result is worthwhile. It is not as radical as some would like, and it goes too far for others. But I think it is a balanced approach that has the capacity to make life very much easier for business. It will simplify the procedures and reduce the costs involved in setting up a business in another Member State. It will be possible to complete all of the formalities online. It will not be a requirement for a company to be established in a country in order to provide services there. Consumer rights will be fully protected – people will be entitled to the information they need to make informed choices. It rules out discrimination against a consumer on the grounds that they live in another Member State. It obliges Member States to streamline their administrative procedures so that the information necessary to proper supervision can be exchanged more efficiently. Agreement in the Parliament was not only a significant step forward for the Directive, it was an important boost for the Union. The past year or so have not been easy ones. The votes on the Constitution and the difficult negotiations on the financial perspectives have taken their toll. But the Parliament took a mature and highly democratic approach, demonstrating that amid the very different points of view it is possible to find an agreed way forward to which most could sign up. I know that the Irish MEPs played an active and intelligent part. I should add, of course, that the central role played by the Parliament reflects the strengthened part it now plays on the European stage. More policy areas are now subject to co-decision- where the Council and Parliament both act as legislators. The voice of the Parliament, the most directly democratic of the Union’s institutions, has to be taken very seriously indeed. Based on the Parliament’s text, I will now come forward with an amended proposal, and I hope that we will be able to make rapid and early progress in the Council. With continued goodwill and a bit of wind in our sails, I am hopeful that we will be able to make serious headway in the coming months. We really have a great opportunity to get things moving – to demonstrate to the negative forces that Europe is still ready to be open, engaged and forward-looking. And this is the last point I want to make today. As I have said, if we don’t appreciate what we have built, there is a danger that we will see it crumble. I don’t see it as an immediate danger, but there is a risk over time. Since I have been in Brussels, there have been developments that I have not liked. That have worried and unsettled me. I have found some of the arguments advanced against the free movement of workers from the new Member States depressing and, frankly, distasteful. I am hopeful that a number of Member States are going to follow the lead given by Ireland, UK and Sweden, taking down the barriers that remain. Solidarity in the Union is something from which Irish people have greatly benefited. We travel around Europe. We do business around Europe. When we sit down at the table, we do so as equals. All Member States, all citizens, should enjoy the same benefits. Europe is not a club in which there can be first and second class members. It isn’t fair and it isn’t right. Equally, I have been disappointed by the approach of some Member States in the face of increased competition. Arguing for openness in others while seeking to erect protectionist fences around their own patches. Whether in banking, or in takeovers, or more generally, not only is such action against the spirit of the Treaties, it is a singularly misguided policy approach. Protectionism doesn’t work. There is a direct correlation between openness and prosperity. Putting up barriers damages those trapped inside every bit as much as those left outside. Where it happens, I will do what I can to stamp it out. Last week we celebrated the twentieth anniversary of the signature of the Single European Act. It was a significant moment in the Union’s history - a bold and forward-looking act. There were critics then, just as there are critics now. History has shown how right it was to ignore their sirens calls. The past twenty years have brought great benefit to business, workers and consumers – to all of Europe’s citizens. Nowhere more so than here in Ireland. Now is not the time to hesitate, to get cold feet or to turn in on ourselves. Europe has nothing to fear, and everything to gain, from open, free, rules-based trade. Europe has what it takes. It is up to us to make it work.
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