CIAO DATE: 11/04

The European Issue in the British General Election

Lord Paul of Marylebone

Occasional Paper Series No. 44

May 7th, 2001

European Union Studies Center

Thank you for inviting me here today and for your warm welcome.

May I begin by saying I am grateful to our Consul General, Tom Harris, for having arranged this opportunity to talk to you; and, on a personal note, thank him for his kind responsibility at the Consulate this evening. As former Director General of Export Promotion in the UK, he brings a great deal of experience to this office and we are all proud of marvelous job he is doing in New York. In addition, we are all very proud of the work that our Foreign Office does, and we are seeing a lot of that in action here.

When I was asked to make this address, it was presumed that I would be speaking to you post election. However, this is not the case. Instead, we in Britain find ourselves approaching an election shortly. This election, like most, will be decided not on international affairs but rather on domestic issues, including unemployment, the strength of our economy and whether the government’s policies have had a positive impact on the everyday lives of the families in the United Kingdom.

And while the average voter may delink international and domestic affairs, we all understand that domestic politics and international relations are inextricably interrelated.

The international position of the United Kingdom to the United States, the European Union, and the rest of the world, has an important impact on the internal politics and economics of the UK. At the same time, British domestic politics shapes the formulation of British foreign economic policy.

So, first, may I clarify the most important point, which is that all three major parties – Labour, Conservative and Liberal, are agreed that Britain is, and will remain, a member of the European Union. These three parties are also mainly convinced that Britain and the British people will benefit from European Union.

When the Labour government was elected four years ago, there were still some residual doubts about the direction of the economic policy. There is no doubt whatsoever now. There is, at the moment, a remarkable consensus in Britain – a consensus that Labour policies have been good for Britain and good for Britain’s relationship with the world.

Our programs of fiscal, monetary, regulatory and bureaucratic reform have underscored the vital but limited roles that governments should play: providing economic stability, investing in our infrastructure and engaging internationally especially in Europe.

First, the Labour government has met its responsibility to pursue programmes to support economic stability. Over the years we have had violent swings from boom to bust in the economic cycle. Almost four years ago now, Labour reformed the whole basis of economic policy-making.

It took tough decisions early on to make the Bank of England independent, to put it in place a proper fiscal framework, and to pay back the national debt. As a result, inflation is now at a 30-year-low, the lowest in Europe. Long-term UK interest rates are around their lowest levels for over thirty-five years.

Over one million more people are in work than when Labour took office. Employment is at its highest level ever. Five national budgets have maintained both personal and corporate taxes at levels among the lowest in Europe. It has been able to cut annual government borrowing by forty-four billion, saving around three billion debt interest payments.

It has reduced welfare rolls through strong employment. The economy is now as strong as it has ever been – enjoying its longest period of uninterrupted growth since the war. We are, of course, aware that the slowdown in the American economy is bound to affect us, but we are making every effort to ensure it has minimum impact.

Let me now come to Britain’s relationship with Europe and United States, and why we in Britain believe we have strong role to play. America has many close and European ties. But Britain is uniquely equipped to be a bridge between the United States and the European Union.

Today, Europe and the US are more closely allied than ever. We live within a shared community of values. Respect for the rule of law, democracy and economic freedom are bound together – not in a federal United States of Europe, but a union of nation-states that embodies these values.

Since its early inception, the EU has sought to create peace and stability, and the commitment of the US to that is greatly appreciated.

In Britain – the European country with which America has the deepest relationship – there is a challenge that for some presents a contradiction, but to us is complementary.

While we want and need to deepen the relationship ties with America, our present government is devoting much of its time to developing ties with its European partners. This has sparked a commotion among those politicians who cannot reconcile themselves to Britain’ future in Europe and hanker instead for a renewed transatlantic relationship on the sole basis of the special relationship between Britain and the US.

However, this government believes that, far from being washed up, the transatlantic relationship has a great future; that European unity does not have to take place at the expense of stronger EU-US ties and that, as far as Britain is concerned, we can play a unique role in cementing these ties. We can be the bridge between Europe and the United States, but only if we fully commit ourselves to constructive engagement in Europe.

We should see this emerging world as a challenge and not a threat. There is an opportunity to put transatlantic relations on to a new plane, with the new economy and the wider conditions of security, now the driving forces.

Consider the economic facts. Trade between Europe and America stands at one billion dollars per day – the most inter-dependent relationship in the world. Together, we produce over half the world’s output. A quarter of our trade is with each other and is growing at the rate of ten percent a year. EU investment in the US stands as half a trillion dollars, supporting seven million US job and not far short of half of that investment is from Britain alone.

We want to see the transatlantic relationship make more constructive use of this enormous economic power. Not to halt or brake globalization – on the contrary, to maximize its benefits both for our own good and the wider world. It is an urgent transatlantic priority to launch a new WTO round – taking into account the interests of developing countries and recognizing where there are legitimate concerns over environmental and labour standards. But never allowing the voice of vested interests to hold back the cause of more open trade, which, it can be shown, has been more effective in increasing living standards and spreading a wider prosperity than any protectionist policy ever could.

In the transatlantic relationship, we have much to learn from each other. Globalization brings challenges as well as opportunities. The need to recognize that people will lose long established jobs and have to find new ones. The need for education and life long learning as the main drivers of opportunity in this world. The need to prevent social breakdown where economic change accentuates deprivation and creates the breeding ground for crime and drugs. In the quest for solutions, Europe and the United States have much to learn from each other. British government policies owe much to US ideas on, for example, education and crime. We also believe American policy makers can find much of interest in the way we manage high quality public services. In areas such as education and law enforcement, where both countries face similar challenges, there are many ways we can help each other.

Since entering government in 1997 the British Labour Party’s approach to Europe has been characterized by a willingness to engage positively with partners, and find solutions to seemingly intractable problems. But we have done more than this. We have also shown that, contrary to past precedent, the UK can take the lead in Europe, ensuring that the EU and its institutions are prepared for the challenges of the 21st century.

Our approach has come as a pleasant surprise to many. After too many years in the wilderness, where the UK approach to EU negotiations was often characterized by isolation and intransigence, we have finally embraced a simple truth: our destiny lies at the heart of Europe.

There are numerous examples where our constructive approach is bearing fruit. We have played a leading role in moves to strengthen the EU’s voice on the international stage. For too long the Union’s voice has not been commensurate with its economic weight. We are beginning to redress the balance and it is perhaps in the field of European economic reform that our contribution has been clearest.

One of the EU’s finest achievements has been to create the world’s largest single market in goods and services. Down the years, European companies and consumers alike have benefited enormously from the efficiency gains, cheaper products and price transparency the Single Market has brought.

And in the 21st century, we face enormous challenges if we are to realize the potential of the IT revolution, and match the strides of the US economy. That is why Britain will continue to play a leading role in discussions to modernize the European economy.

In the weeks leading to election, newspapers are featuring stories about certain elements that believe the UK is losing itself, surrendering its culture, its history and, in fact, even the British pound to "a country called Europe". The thrust of the argument is that British identity is under attack from Europe.

To deny that Britain is a part of Europe is to deny both our geography and our history. Our culture, our security and our prosperity are inseparable from the continent of Europe. We should not accept that membership of the EU is a threat to our national identity. None of our European partners, with their own proud national traditions seems afflicted by this self-doubt and security. Britain has everything to gain from being a leading partner in a strong Europe.

What we must reject is the diffidence that prevents us from forging ahead; that ignores British history, which has benefited from outside cultures; and modern Britain, in which immigration has contributed to our current economic and cultural growth. Legitimate immigration is the necessary result of economic success – as you yourselves have found in the United States – which generates a demand for labour that cannot be satisfied domestically.

Every country needs firm but fair immigration laws but every society should be open and inclusive, welcoming newcomers for their contribution to its growth and prosperity. The cultural diversity is one of the reasons why Britain continues to be the preferred location for multinational companies setting up in Europe. As a member of the Cabinet said recently: This pluralism is not a burden we must reluctantly accept, it is an asset that contributes to the cultural and economic vitality of our nation.

Britain has spent the last two decades gearing up to be competitive in Europe. Today, we are at a significant moment in the economic development of the United Kingdom. Because of the decisions taken and choices made, our economy is strong. But these good times should not invite complacency. Instead we should use this opportunity to advance our agenda of modernization and reform. Not only in Britain, but also in Europe.

Regardless of the outcome of this year’s election, it will take much of our ingenuity and dexterity to make our way through the challenges ahead.

In short, to paraphrase some American political wisdom, it seems that all international politics is local. This year’s election provides the people of the United Kingdom an opportunity to embrace Britain’s future; and the realization that our national identity is based on shared ideals and aspirations.

Thank you.

The Lord Paul of Marylebone

Lord (Swraj) Paul, Chairman of Caparo Group, is a leading businessman and an active member of the House of Lords, who is firmly committed to promoting social and education policies. Born in Jalahandar, India in 1931, he was educated at Punjab University and the Massachusetts Institute of Technology, USA from which he graduated with a Masters degree in Mechanical Engineering in 1952.

He came to the UK in 1966 and in 1968 founded Caparo, the UK based industrial company, which specializes in the manufacture and supply of steel-based engineering products for industry. Caparo employs nearly 3500 people in four countries, and has an annual turnover in excess of $800 million.

Lord Paul is Chancellor of the University of Wolverhampton; Chairman, College of Senior Fellows, Thames Valley University; an Ambassador for British Business; Co-Chairman of the India-UK Round Table; a member of the UK Industrial Development Advisory Board; a Board member of the London Development Agency, the executive body of the Greater London Authority, responsible for London’s economic development and regeneration; a member of the Foreign Policy Center Advisory Council; Council member, Royal Institute of International Affairs and Chairman of Parliamentarians for Global Action Business Council, New York. He is also a member of the House of Lords Select Committee on Economic Affairs. Formerly a member of the House of Lords Select Committee on the Monetary Policy Committee of the Bank of England and the House of Lords Select Committee on Energy, Industry and Transport.

He was raised to the Peerage as Baron of Marylebone in October 1996.