CBI National Conference

Birmingham

31 October 1999

I have spoken to the CBI before in various guises. Environment Secretary; Conservative Party Chairman; colonial governor - and now European Commissioner, which some think amounts to the same thing. This is my first major speech at home since I became a Commissioner, and I am delighted it should be to the CBI.

You and your members have long pressed for a hard-headed but positive British approach to Europe.

You make your case rooted in the real world, aware of the advantages to our country of its membership of the world's largest single market. It’s a market you helped to create. But you are conscious too of those things the European Union could and must do better, and you have sensible ideas about reform.

I recognise that the debate on Europe raises concrete and intricate issues. I will have many opportunities to get into the detail on other occasions. But today I would like to set out my vision in more general terms.

It is ten years since the fall of the Berlin Wall.

Ten remarkable years.

A decade which has changed the face of Europe.

To the East, the Iron Curtain - still in place a decade ago - is a rusty memory.

Budapest, Prague, Warsaw are now the thriving capitals of free democracies. NATO members since the spring, I saw some of their soldiers serving on Friday alongside British soldiers in Kosovo. And of course these countries are desperately keen to become members of the European Union as soon as possible.

The Baltic states are proud nations once again, like Slovakia, Slovenia, Romania and Bulgaria - aspirant members of NATO and the EU.

But while freedom and democracy have marched across much of the continent, tragedy and despair have rampaged through the Balkans, bringing scenes of horror that many thought we would never witness again in our continent.

The century that began bloodily in Sarajevo has ended bloodily in Sarajevo and Pristina.

The Cold War may be over. But the struggle for freedom and democracy continues in that corner of our continent.

And what of the European Union?

Ten years ago, the single market was still work in progress. Now it is taken for granted. Austria, Sweden and Finland welcomed as new members. The euro is a reality.

The EU is seen as an oasis of prosperity and stability. It is starting to export those attributes beyond its borders - making up, in part, for Europe's failure to respond adequately to the Balkans crises.

A decade of dramatic change. And more to come, as the EU enlarges to the East.

But against this backdrop, one thing has remained resolutely unaltered.

The damaging argument in Britain about Europe.

It rattles on today in familiar style, having succeeded, in the interim, in destroying two Prime Ministers, polarising the press, pouring regular doses of poison into the body politic and dividing the country and weakening our diplomacy.

Let me lay my cards on the table.

I have argued throughout my political career – indeed, it is one reason why I went into politics, one reason why I joined my party - that Britain's interests are best served by a policy of positive engagement in Europe. Fighting our corner, always; driving forward our own agenda, certainly.

Behaving, in other words, in a manner befitting the major European power that we are, not pulling up the drawbridge in truculent isolationism.

'Let me be quite clear. Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny lies is in Europe, as part of the Community'.

Not my words, but Margaret Thatcher's at Bruges in 1988.

Right, then; and right, now.

I look at what has happened in the European Union since then, and what a policy of engagement pursued by successive Conservative Governments has achieved.

The advance of the single market. The growth of European - and British - influence in world trade. I see the deregulatory zeal of my fellow Commissioner, Mario Monti, who has described state aids as an 'evil'. I look at the growth in competition within the EU, in the airline or financial sectors for example, and I applaud how British companies are benefiting from all of that.

I look at all that, and then I tune into the Today programme every morning, and I scratch my head, as the same old European debate drones on.

Isn't it time for a bit of tub thumping? Time to bang the drum, to ram home the message that it's not just in Britain that the battle for liberal economics and flexible markets has been won.

Because if you're old Labour in attitude in Europe today, it's hard to claim things are going your way.

I acknowledge how much the EU and its institutions still need to change, not least the European Commission.

This new Commission has promised to put its house in order.

I will support Neil Kinnock 100% as he sets about that difficult task. And I will work vigorously to improve the EU's management of external and development assistance within my own area of responsibility. We have got to do our job faster and more efficiently. Be seen to make a difference.

Some in my party regard it as curious that Mr Kinnock and I should now be allies in this enterprise; just as others raise an eyebrow that I should have accepted appointment from a Labour Prime Minister as the Conservative European Commissioner.

I take a simple view. I regard it as a grown up way to behave in a democracy.

Parties scrap and quarrel and rightly so. The arguments matter. They are the currency of politics in a democracy.

But what should unite us all as democrats and patriots is our determination to do what we believe to be in the interests of our country, regardless of party affiliation.

Not too long ago, my party enthused about EU membership. So too national newspapers. Politicians who put country before party were lauded. Just look back and see what the papers said in those days about Labour leaders who worked with Conservatives on Europe.

Those same newspapers today are ready to discount what I and other supporters of the EU have to say. I am accused of going native: even of turning my back on the British way of life. An odd reading of presenting the benefits of the EU to the UK. Or I am portrayed as a European gauleiter, determined to haul down the Union flag over London, as history obliged me to do in Hong Kong. That sort of junk is said and written by editors and politicians who expect to be taken seriously.

Why does the debate on our future in the EU (or outside) need to be conducted in this relentlessly third-rate way?

Why does it remind me of the letters I receive from people who underline their main points in green ink?

I am sorry for David Owen, Jim Prior and John Sainsbury who have legitimate and important arguments on the euro or European defence but are associated with that sort of ill-judged populism.

I shall come to the euro in a moment. There is a serious argument about whether Britain should join, with respectable views on both sides. It is wholly right and proper that the matter should be fully aired and discussed, and that the British people should then make the decision themselves in a referendum.

I do not take issue with any of that.

What I find unacceptable is that a perfectly rational debate about the euro should be used as a stalking horse by some to devalue and undermine Britain's whole participation in the European Union.

But that is what is happening.

So let me set out the case, once again, for Britain's membership of the European Union. Let me explain why it is in our national interest to be inside fighting our corner at the negotiating table rather than outside waiting for crumbs of news from a passing Belgian or Austrian third secretary, splendid in our isolation.

Why are we in the EU?

There are strong moral arguments for the EU as a factor of peace and stability in Europe. And the single market has had a huge multiplier effect in terms of economic integration, shared wealth and mutual understanding. For you in business, the case for EU membership boils down to two things.

First, what happens on the continent affects Britain.

Palmerston knew that.

Palmerston would never have dreamt of leaving France and Germany to run Europe on Britain’s behalf.

The UK's exports to the EU are 4 times as great as those to the US. In recent years, UK trade with Germany alone has been running at the same level as trade with the US. France takes 5 times as many British exports as Japan.

3.5 million British jobs are linked to business in Europe. 700,000 companies have European business. 100,000 British citizens work in other EU countries - not all of them in the Commission, I hasten to add.

Think too of the ease with which our people travel to the continent. 34 million visits by British citizens to the rest of the EU in 1997. 200,000 of our retired citizens have chosen to spend their retirement in other Member States. At the other end of the age scale, 10,000 British University students study in other Member States each year. These figures, and more, tell us why we can't turn our back on the EU which - like it or loathe it – is the only serious game in our bit of town.

None of which underplays the importance of winning new markets outside the EU. We want more markets everywhere. But the figures do suggest rather convincingly that we have a huge stake in what happens on our doorstep.

Our nation's prosperity has long depended on our ability to look outward, to project power and influence across the world, to win markets for our goods and services.

In the past, we used to look to the Royal Navy to wield the necessary clout. Today we rely on more pacific methods; our membership of the EU is one of the most powerful at our disposal.

Secondly, our influence is much greater inside than out.

Let me give some specific examples.

First, because it gives us the right to help decide the rules in the largest single market in the world, set to grow still further with enlargement. Overseas investors fall over themselves to be based in Britain to benefit from it. As a full member of the EU, we take part in decisions on how that market should operate, giving us influence that many countries crave. That gives British companies a great advantage.

Second, the EU gives us more clout in world trade negotiations, where we carry much more weight with our European colleagues than we would on our own. The EU is hugely influential in the WTO. Leon Brittan fought hard and with success for free-er world trade for nearly a decade as a Commissioner; he should have been lauded by his party for exporting with such spectacular success that core Tory belief; instead he was regularly denounced for 'going native'.

When I spoke of our huge trade with Europe, I could hear "disgusted of Tunbridge Wells" muttering that huge figures for internal EU trade clearly show the importance of opening new markets outside the EU. Quite right. But we can more effectively penetrate these markets as a member of the world’s largest trading bloc.

Third, we pack a weightier diplomatic punch as a leading member of the EU than on our own, just as we are more secure and more effective as a military and political power as a leading member of NATO or the G8 than we would be alone.

Being an enthusiastic member of the EU does not mean relinquishing our special relationship with the United States any more than being a member of NATO means losing ties with Australia and New Zealand.

We are a better ally - and will be listened to more attentively in Washington - as a key player in the EU than as a semi-detached member, half in, half out.

As Ray Seitz, the distinguished former US Ambassador to London puts it: " If Britain's voice is less influential in Paris or Bonn, it is likely to be less influential in Washington - while Britain's role in the EU is indisputably complicating to our relationship, it is also indispensable to the relationship."

So why is it, I ask myself, that we get so hung up about our role in the EU, but not about our role in NATO?

NATO, after all, makes demands on our sovereignty. We are obliged as a member of the Alliance to regard an attack on an ally as an attack on ourselves. We have just extended that rather serious obligation, rightly, to include Poland, the Czech Republic and Hungary.

In NATO we have no hesitation about getting stuck in, and we take pride rightly in our leadership role. We do so knowing that we contribute first class armed forces - that we make a powerful contribution.

We need to adopt a similar attitude in our relationship with the EU.

Everything in our history tells us that when Britain engages wholeheartedly in the affairs of the rest of our continent, we have a powerful role to play.

But we also know from our history that when we stand aside, when we appear ambivalent, things can go badly wrong. We have seen too often this century the consequences of Britain turning her back on Europe. British isolationism is in its own way as dangerous for Europe as US isolationism. If anything, it is likely to encourage it, with disastrous consequences on both sides of the Atlantic. It is a simple fact: we are more likely to keep the Americans engaged in Europe if Britain is engaged – and seen to be engaged – at the heart of the European Union, if I may use that phrase.

Some members of my own party have recently suggested more flexible relations between Britain and the EU. That we should be able to pick and choose the policies we like and discard the rest. Europe "à la carte". This is a serious suggestion. It was exhaustively discussed by the last Conservative Government. The last round of Treaty changes which culminated in Amsterdam introduced a flexibility clause in the Treaty. But this article is very carefully framed with conditions and limited scope. Why is this? Because it cuts both ways. Would UK companies like it if Germany could opt out of unwelcome EU competition and state aid rules?

How would we feel if France could legally - I repeat, legally - disregard EU law on lifting the beef ban? Would that be in Britain's interest? Independence of a kind: independence with a large price tag.

We also have a great deal to share with our EU partners in terms of a well-developed civil society; a liberal free-market economic model that is inspiring other Member States to pursue deregulation and economic reform; a strong sense of democratic accountability; the rule of law; and a sense of fair play. All of these things command respect for Britain among our European partners.

But there are other areas where, I gently suggest, that we may even be able to learn something from our European partners. You don't have to spend very long in France or Germany to notice the roads are on the whole rather better, the public transport more efficient. Dig a little deeper and you find that they do better on certain social indicators too. Yes, the economy has been transformed in Britain. But there is still room for improvement.

Let me say a word about the single currency. Should we join? It is a decision that should be based on one simple test: is it in our national interest, or not?

How do the arguments stack up?

On the one hand, there is, I recognise, a political argument - that the constitutional implications of joining would be too great.

But if you believe that today, presumably you will always believe it. The constitutional argument doesn’t have a sell by date: it does not expire by magic at the end of the next Parliament.

Joining the euro would imply some sharing of sovereignty. British interest rates would be set by the European Central Bank, and we gain a seat at the table in setting rates for the euro zone as a whole.

With free international capital movements, it is anyway impossible for countries to have their own wholly independent monetary policy, without any regard for external market conditions.

The decisions of the ECB already have a powerful effect on the British economy and huge influence on the interest rate policy of the Bank of England.

We need to weigh carefully the consequences of being excluded for very long from those decisions, buffeted by their consequences, powerless to make them. We need to note that although our own economy is strong, our interest rates are higher than our European competitors; and the strong pound affects our exports. Are these the by-product of our non membership of the Euro? If so, are we willing to put up with these consequences indefinitely?

More directly, we can see the advantages for euro-zone companies which no longer face exchange rate risk and uncertainty in a home market of 290 million consumers. If EMU brings permanent low inflation and stability, there would be benefits for UK companies in the euro zone. And nobody knows what the effects would be for inward investment if the UK was to stay out for too long.

Against this we need to weigh the consequences of a one-size-fits-all interest rate policy that might not be right for all sectors of the British economy. This can already be a problem at national level; just compare the booming housing market in the South East with parts of the inner cities, where it is impossible to sell at all. Would the effects be magnified with European interest rates set centrally? How easy would it be for the UK to use other policy instruments for economic adjustment as other countries in euro zones do today?

The key issue is to ensure that the necessary economic conditions are right from the start. That is clearly not the case today. I have always thought we should wait and see, provided that the necessary preparations are made to ensure that there is a real choice when the time comes. I am therefore in the unusual position of supporting the policies of the last Conservative government and those of the present government, which Mr Blair is at pains to stress is not Conservative.

Legitimate questions, legitimate arguments. We can put them off for a while. But we cannot postpone them for ever.

Why? Because sooner or later the uncertainty will start to exact an economic price. And because there are those with hidden agendas on both sides of the debate.

Some supporters of "wait and see" have already decided that they want the euro now. Others say "wait for longer and see". Many of them have already decided they never want the euro, or that we should leave the EU altogether. I am reminded of the expression, time like the medlar has a way of going rotten before it is ripe.

It will not be possible to rely on a sense of inevitability changing attitudes by osmosis. If we are to join, the public will expect a case to be put to them for doing so.

Whatever we decide on the single currency, I hope we will be able to have the debate without it clouding everything else that is going on in Europe.

Take defence and security. Important decisions are being taken about how Europe should improve its contribution to its own security. They are decisions of immense sensitivity, and they matter hugely. I will be working with Javier Solana and George Robertson to try to find ways to beef up Europe's contribution to its own defence. That is the undisputed lesson on both sides of the Atlantic of the Kosovo crisis - that Europe must be able to do more for itself. The fact that 4 out of every 5 strike missions over Yugoslavia had to be flown by US aircraft shows how far we have to go. I repeat: Europe must do - and be seen to be doing - more for itself if opinion in the US Congress and among US voters is to continue to support major defence commitments in Europe.

Britain has a central role to play in that debate. It is essential that whatever is decided actually works - and upholds NATO as the cornerstone of European defence; that there is no de-coupling from the US and Canada; that the concerns of non-NATO partners and non-EU allies are fully appreciated and respected. The worst of all worlds would be to fetch up with extravagant rhetoric which would alarm US opinion without delivering any boost to Europe's military punch.

Take, above all, enlargement.

Bringing in the new democracies of central and eastern Europe is a cause for which Britain should be arguing with a passion. The case is strategic. But it is a moral case too.

We have the chance, for the first time this century, really to consolidate democracy throughout the continent; the chance to overcome the divisions that history and ideology have etched on the map of our continent throughout this century.

That is what the new democracies to the East want most of all as they celebrate their tenth birthdays. That is what the Poles and the Czechs, whose pilots fought alongside ours in the last war, want from us today - our encouragement and support in their quest to join the European Union. Almost every day in Brussels I have foreign ministers, Prime Ministers and Presidents of these countries coming to impress on me how determined their countries are to join the European Union.

They see it - as one of their leaders put it to me the other day - as the chance to rejoin the European family, as recognition that the boundaries of European civilisation extend beyond what we used to call the common market.

It is a tremendous, historic enterprise.

An opportunity to bring together the largest community of democracies in the world.

An opportunity to create, at the dawn of the new millennium, a Europe that is truly whole and truly free.

Do the British people want to watch that being done by others?

Or do they want to play a full part in Europe's affairs in the next century – helping to ensure that we do not repeat the grim and tragic mistakes that have disfigured this self-styled cradle of civilisation in too much of the century that is ending ?

Given leadership, given inspiration, I am sure that I know the answer, an answer which will see us again rise to the level of great events not fall, bickering and resentful, well below them.

Frankly and simply, Britain deserves better.