Britain in Europe

I'll begin with a quote from a Report by the Standing Senate Committee on Foreign Affairs in July 1996:

"Right now, both Canada and the EU are occupied with their own agendas. The EU is engaged in an Intergovernmental Conference on the issues arising from deepening and widening the Union. For its part, Canada is working on new trade deals with Chile, Latin America and the Caribbean and the Asia Pacific region. Substantially stronger transatlantic commercial links need to be forged, so that the Canada/Europe relationship will be preserved and strengthened. Canadians cannot be indifferent... we have a very deep interest... in Europe."

That report urged the Canadian government to focus attention on Canada's links with Europe, and to follow more closely the debate in Europe about enlargement, plans for economic and monetary union and steps towards closer foreign policy co-ordination.

It called for action on both sides of the Atlantic to tackle the remaining trade barriers. It urged us to keep in mind the ultimate goal of transatlantic free trade--which your present High Commissioner in London, Roy MacLaren, and the British Foreign Secretary, Malcolm Rifkind, have championed so forcefully.

Yesterday Mr. Rifkind described the EU and the Atlantic Partnership as not just history's most successful model of international co-operation; but the world's most effective building blocks for global progress.

What does the relationship between Canada and the EU look like today? In the early 1970s, after the U.K.--then Canada's second-largest trading partner--joined the EC, the Canadian government sought to formalise its relations with the EC. A "Framework Agreement" was signed in 1976 providing the basis for EC-Canada co-operation. In 1990 this Agreement was complemented by a Declaration on EC-Canada Relations, which substantially broadened the political and economic dialogue between the two parties. There is now extensive co-operation on industrial policy, science and technology--Canadian institutions now have access to EU research funds--higher education and culture.

Earlier this year, the EU and Canada decided to take the relationship a step further. They agreed to draw up an EU/Canada Action Plan, identifying specific areas for closer collaboration, including economic and trade relations, trans-national issues such as the environment, migration, terrorism, organised crime and drug trafficking. Unfortunately, it has not yet been possible to finalise this Action Plan. But the British government very much hopes that it can be concluded before too long and that it will act as a further stimulus to increased EU/Canada links, particularly in the field of trade.

To illustrate the importance of these links, let me give you a few facts. With 370 million people the EU is the world's largest single market, accounting for well over 20 per cent of world trade. After the U.S., the EU is Canada's largest trade and investment partner. Yet the proportion of Canada's exports which goes to the EU has fallen from 12.4 per cent in 1973 to 6.4 per cent in 1995--despite the EU's enlargement. Canada is the most trade-dependent country in the G7. As the Senate Committee report noted, if Canada had maintained its share of the EU import market at 2.2 per cent you would have exported about $4.6 billion more merchandise to the EU. According to the Senate Committee Report, in rough terms this might have meant about 50,000 more jobs for Canadians.

So the European market matters to Canada and developments in the EU are relevant on this side of the Atlantic.

To understand what is now happening in Europe it will help to look back at why the Community was formed in the first place. At the end of World War II the economies of most European countries were in ruins. The Soviet Union's political influence was expanding in Central and Eastern Europe. Faced with these challenges, the countries of Western Europe sought to co-operate. They wanted to strengthen their economies and ensure that wars between them would never occur again.

The Community's origins go back to the formation of the European Coal and Steel Community in 1951. The two key dates were the 1957 Treaty of Rome establishing the EEC of six members (Belgium, France, Germany, Italy, Luxembourg, the Netherlands)--which Britain joined in 1973 and which today is a community of 15 and the 1991 Maastricht Treaty which established the European Union, provided for a common foreign security policy and set a timetable for economic and monetary union. The next steps are currently being discussed by member states in the so-called Intergovernmental Conference.

At its heart, back in the Rome Treaty, was the vision of a single European market--the free movement of goods, services and people. Within the EU, Britain has led the drive for a single European market which is open internally and open to the rest of the world. The benefits are clear. The removal of barriers to trade has provided a powerful trade stimulus throughout the EU, notably in Britain, increasing prosperity and competitiveness.

But the EU is more than a free trade area! Above all, it is the basis on which to consolidate democracy and prosperity across the whole of Europe. Enlargement of the EU presents formidable challenges for new applicants taking on obligations of membership and for existing EU institutions, which need to be adapted to a larger Union.

What will the future EU of 24/25 members look like? Will there be a single European currency? Will the barriers go up around Europe, as they come down within? A return to "Fortress Europe"?

Many politicians on the continent of Europe have pressed for "more Europe," i.e. more centralisation and more corporatist economic solutions. The British government has always resisted such demands. We want an open and outward-looking Europe. We do not favour an inexorable drift of power towards supranational institutions, the erosion of national parliaments and the gradual development of a united states of Europe. Other key players agree. In 1994 Chancellor Kohl of Germany told the German Parliament: "We want unity and diversity. We do not want a centralised European state that subsumes regional, national and cultural traditions or dismisses historical experience."

Perhaps I should say a word about the much-debated European Monetary Union (EMU) and the plans for a single European currency--the "Euro"--in 1999. To qualify for EMU, member states must satisfy strict criteria on such issues as level of inflation and budgetary deficits. It is already clear that only a small number of EU members will meet the criteria (Britain could be one of them).

But, thanks to the protocol negotiated by the Prime Minister John Major at Maastricht in 1991, Britain is not bound to join, even if we meet the criteria. We shall have to make a hard-headed assessment of the implications for British interests including the impact on the economy and the political and constitutional implications. But one thing is certain: whether or not the U.K. joins EMU, our commitment to sound business-oriented economic policies and to the integrity of the single market will be undiminished.

Britain is a partner both to Europe and across the Atlantic to Canada. Geography makes that sensible--just as Canada is both an Atlantic and a Pacific country, with interests in both directions. But why is Britain the natural gateway for Canadian companies wanting to do business in Europe?

Britain's record speaks for itself! We have one-sixth of Europe's population but we attract one-third of all new investment to the EU and half of all investment from North America. Britain is the world's second-largest overseas investor--after the United States. Eleven of Europe's 25 quoted top companies by market capitalisation are British. Unemployment is 7.6 per cent--lower than our other major EU partners (Germany, France, Italy, Spain). More of our working-age population are in work than in Germany and Britain imposes a much lower burden of social charges on both employers and employees--half the level of some of our European partners.

Firms which choose to come to Britain--many of them Canadian--were free to locate their business anywhere. They chose Britain because of the strength of the British economy, because of our open market policies and because we are a major European partner. The British Canadian Chamber has played a key role in promoting business and investment links between Britain and Canada.

The benefits are mutual. The U.K. is Canada's third-largest trading partner. We are the second-largest investor in Canada. Canada is the sixth-largest investor in Britain and the second-largest foreign employer in the U.K. Over 600 British companies have subsidiaries in Canada and over 200 Canadian companies have subsidiaries in the U.K. Their investments are worth nearly $14 billion. You cannot travel far in the U.K. without coming across an office or plant owned by a major Canadian company: Alcan, Inco, Nortel, McCain's, Bombardier. Last month I attended the unveiling of the Bombardier Global Express Business Jet at Downsview, Toronto. Its fuselage is made by Bombardier's subsidiary in Northern Ireland, Shorts of Belfast. Other British suppliers include Rolls Royce, Lucas and Dowty. Britain is a natural springboard for increasing still further your trade with the rest of Europe.

Britain is in Europe to stay. That is why we are debating so hotly the type of Europe we want to see. Sometimes there are disagreements between partners. It would be unusual if there were not! But differences can usually be worked through, as we are doing on the question of beef exports and measures to eradicate BSE--"Mad Cow Disease." The British press of course are always ready to attack so-called "barmy Brussels legislation." You may have seen the reports of EU bans on short bananas, bent cucumbers, square strawberries, and the classification of snails as "land-based fish" so that snail farmers could benefit from special EU funds. I can assure you that these are all myths--Euro-myths.

The reality is:

• U.K. trade with our European partners has increased 20-fold since we joined.
• U.K. business and financial services trebled their surplus with EU countries, from 1 billion pounds to 3 billion pounds in a decade.
• We are a magnet for inward investment. Forty per cent of all Japanese and U.S. investment in the EU comes to Britain; as does nearly half of all Canadian investment in the EU.
• The single European market has provided enormous opportunities for British business to expand in all sectors.
• We now sell snails and wine to the French, pizza and shoes to the Italians and chocolate to the Belgians! Who knows? We may end up selling beaver tails in Ottawa!

I began with a quote from a Canadian Senate report. Let me end with two more quotes. The first is from the former British Foreign Secretary, Douglas Hurd. Some of you may have read his article on Britain and Europe in The Globe and Mail last October. He said:

"Canada will perhaps find it easier than the U.S. to understand the plans taking shape in the European Union. You have found it awkward to reconcile two cultures and two languages. Our variety is far greater. The European answer will not be the Canadian answer or the American answer. But you should bear with us patiently. We are trying to create something unique--not a United States of Europe, but a union of European nations and peoples which banishes wars and trade wars in Europe, and makes it possible to work together without artificiality or dominance of one by another."

The second--and last--quote is from the present British Foreign Secretary, Malcolm Rifkind:

"Britain is committed to Europe. Its future is our future. We will not turn our back on it. We cannot seek to limit it to a mere free trade area. It is too important to stability and peace in our continent. We have too many shared interests in foreign policy, justice and home affairs. The EU is central to our prosperity--but not only in the single market; also for our capacity to shape a global trading system in which commerce and prosperity can flourish."

The theme of my speech has been "Britain in Europe." The thought I want to leave with you is the need to strengthen ties between "Canada and Europe." But this is not only a task for politicians or diplomats. Working together with the BCCTC, we must ensure that our companies--on both sides of the Atlantic--take full advantage of the enormous potential of each other's markets as we move towards the 21st century.

The appreciation of the meeting was expressed by Robert Dechert, Partner, Gowling, Strathy & Henderson, a Director, The Empire Club of Canada and President, British Canadian Chamber of Trade and Commerce.