EU: Recent Developments

Lord Ryder of Wensum Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Howell of Guildford]

Not necessarily. I would like to give a straightforward answer to the noble Lord, who follows these things, but there are a number of qualifications and details that I want to come to in my speech. I have tried to set them out most carefully because I know your Lordships’ detailed interested in them.

I was saying that to have incorporated the changes in the intergovernmental agreement, the fiscal union agreement, into the EU treaties now without the proper safeguards, which would have been the effect of signing in December, if my right honourable friend had gone ahead with it, would have risked changing the character of the European Union profoundly. It would have strengthened the euro area, but without corresponding balancing measures to maintain the integrity of the single market at 27. I shall come to the nature of those safeguards in more detail and why we felt they were not present.

As a result of the December meeting, eurozone countries and others are making separate arrangements outside the treaties for strengthening budgetary discipline, including by ensuring that there are much tougher rules on deficits. The Governments of 25 member states, so far, have indicated that they intend to sign up to the intergovernmental agreement reached in January.

This is a treaty outside the European Union. We are not signing it, we are not ratifying it and it places no obligations on the United Kingdom. It does not have the force of European Union law for us, European Union institutions or even the countries that have signed it. European Union legislation can be agreed only in the European Union Councils of Ministers, and we are a full member of them. There will be no inner group of European countries distorting the single market from inside the EU treaties. That is the protection that the Prime Minister secured in December, and that protection remains.

There has been much comment about the use of the European Union institutions, and I want to come to that. The new agreement sets out limited roles for the European Commission and the European Court of Justice. The legal implications are complicated and hinge upon how the agreement is implemented. It is for this reason that we have reserved our position.

We have been clear that we will not allow the institutions to be used in any way that would undermine the interests of the 27, in particular, the single market, and that we will insist that the EU institutions continue to work for all 27 nations of the European Union. Indeed, those institutions are established by the treaty, and that treaty is still protected. The intergovernmental agreement is absolutely clear that it cannot encroach on the competences of the EU and that measures cannot be taken which undermine the single market. As my right honourable friend the Prime Minister made clear to colleagues at the informal January European Council, we will be watching closely the implementation of this new intergovernmental treaty, and we are able to take action if our national interests are threatened.

We want to see a reformed and strengthened European Union better able to cope with the new international pattern of powers and influences. I agree with the comments that I read, made by the noble Lord, Lord Mandelson, that the EU model needs “dramatic reform”—I think those are his words—but we do not want to be part of a fiscal union. We do not want to be part of the eurozone, and we have made clear that the British people have a say before any further competence can be transferred to the European Union.

Having said that I agree with the noble Lord, Lord Mandelson, I slightly disagree with his suggestion that it is the European social model that should guide us, as I believe we should have confidence that we can develop potentially our own model, especially based on wider capital ownership, and wider ownership and distribution on a fair and balanced basis in our society, and that is what we should think in terms of.

Nevertheless, as I have said, it is in the UK’s interests that the eurozone sort out its problems. The UK’s attitude is supportive and constructive. We are involved in discussions on the implementation of this agreement and, as ever, in the machinery of building a prosperous and competitive Europe and a good single market. These remain our aims. The view that the only way to exert influence in the European Union is through surrendering more sovereignty and control to Brussels is, frankly, outdated.

The EU is not monolithic. It contains flexible arrangements such as the single currency and the Schengen agreement, and it is right that the European Union should have,

“the flexibility of a network, not the rigidity of a bloc”,

as my right honourable friend the Prime Minister said in his speech at the Guildhall last autumn. The UK is at the forefront of efforts in Brussels to develop our union according to this model, which we believe to be the right one.

Britain’s agenda in Europe is to promote growth, competitiveness and jobs. We have said repeatedly that the best way in which the European Union can drive growth and create jobs is to complete the single market, establish trade deals with the fastest growing parts of the world—which we are seeking to do on many fronts—and cut the regulatory burdens on business.

Last year the European Commission estimated that growth in the Union this year would be 0.6 per cent. The IMF now projects minus 0.1 per cent. Competitiveness remains Europe’s Achilles heel. More than half of EU member states are now less competitive than they were last year. It is essential that countries across Europe take bold action to recover their economic dynamism, get to grips with their debts, and secure growth and jobs for the future.

This is why the UK has been arguing for a pro-business agenda in Europe. We are pushing for the completion of the single market in services, where there are still 4,700 professions across Europe to which access is regulated by government, and in the digital area, where there are over a dozen separate copyright regimes. Together, these measures could add more than 6 per cent to European Union gross domestic product within 10 years.

We are also committed to reducing regulatory burdens, especially for small and medium-sized enterprises and microenterprises, and pushing forward a patent package to support innovation. This has been discussed in Europe for over 10 years and decisive progress is now at last being made.

We are also actively pushing for decisive action to get trade moving. We want 2012 to see significant movement on EU free trade agreements with major partners such as Japan—which has been going for many years—India, Canada and the United States. Completing all the deals currently on the table could add an estimated €90 billion to Europe’s GDP. An agreement between the EU and the US could have a bigger impact than all of these put together.

For countries outside the European Union, the UK remains the gateway to the largest single market in the world. Of the 1,200 Indian firms operating in the EU, over half have their headquarters in the UK. Britain is a world-class destination for international business, and the most attractive foreign direct investment destination in Europe, and remains so. Being outside the euro does not affect that.

My right honourable friend the Foreign Secretary has emphasised that we need to develop our commercial, economic and political presence in fast-growing, emerging markets. We certainly do. At the same time, Europe is our neighbourhood and our biggest market. It is full of innovation and potential for the future. More than 40 per cent of our exports go to EU eurozone member states—more of course to Europe as a whole. Trade with the EU allows us to specialise in what we produce best and to run trade surpluses with other countries, such as the US and Australia. Our aim is to use this position to expand our exports to fast-growing markets in addition to our existing exports—not as an alternative or instead of them but, I repeat, in addition.

The Commonwealth is one such area. It is one of the great networks of the future. It provides a gateway to many of the great, new markets. It includes some of the world’s fastest-growing economies, with members showing democratic values and similar legal and accounting systems. These provide solid foundations for doing expanding business and a platform for trade, investment, development and, in turn, prosperity. Trade within the Commonwealth totals more than—

[Lord Ryder of Wensum]

I am very grateful to my noble friend for giving way. In light of all the wonderful objectives that my noble friend is setting out in his speech about British exports and how Britain is poised to gain even greater advantages in world markets, how does he explain the fact that the British Government barely opposed the clinical trials directive that is having considerable cost on our most successful manufacturing industry, the pharmaceutical industry, which brings in about £3 billion a year surplus on our balance of payments? Yet here we are in Britain with our pharmaceutical industries losing ground in terms of clinical trials to China and India. Ultimately, that will incredibly damage the British economy.

[Lord Howell of Guildford]

My noble friend puts forward one of the many challenges that we have to address. I will not go into the full details at this stage, but he is right; there are several areas where the challenges are very great for the whole of Europe, including this country, from the rising power of the great emerging markets. We have to face the fact that, as I began by saying, the world’s pattern of wealth and competitiveness has changed radically over the past five years. I am not sure that many people in the media or, dare I say, some of our great policy thinkers have always grasped this fact.

The changes that we are making provide solid foundations for doing business and a platform for trade, investment and development, which in turn will be the prosperity, or perhaps I should say in a more realistic tone the survival and maintenance, of our existing standards. Trade within the Commonwealth totals more than $3 trillion annually. Our European membership is very valuable in promoting trade interests and access to new markets such as these.

The UK continues to play a strong role in achieving collective European action on many foreign policy issues, when appropriate and effective, in order to advance our shared interests and values. We drove concerted action forward at the EU level in response to Libya. The EU was actively engaged since the early stages of the conflict and we secured a UN resolution and assembled a multinational coalition force faster than at any time in history. Today, we are playing a prominent role in the EU response to the continuing violence in Syria. Some 11 rounds of EU sanctions have already been agreed and we hope to agree further measures on 27 February at the Foreign Affairs Council.

We have been at the forefront of action on Iran where, along with France, we led the EU in agreeing an unprecedented package of sanctions. The UK continues to be a strong supporter of European Union enlargement, which helps to create stability, security and prosperity. Enlargement brings significant benefits for the United Kingdom. An enlarged market obviously expands the opportunities for trade and investment. We want European nations to succeed not just as an economic force but as an association of countries with the political will, when they wish to mobilise it, and the values and the voice to use their collective weight to make a difference in the world.

Looking ahead to the March European Council, the UK will focus on ensuring that EU initiatives and projects deliver growth and jobs as agreed at the January Council. The UK plays an important role in these and other issues of significance for the Union as a whole. We are driving forward the single market, we are improving competitiveness across Europe and we are leading decisive foreign policy action when collective action works. European eurozone members are often our closest allies on some of these issues. Britain is part of the European Union not by default but by choice. It does reflect our national interest to be part of a single market on our doorstep and we have no intention whatever of walking away.

We want Europe to be a success, and not just for parochial reasons. We are going through a fundamental rebalancing of global power, a point I have just made to my noble friend, as economic weight shifts from west to east and from north to south; some of us have been pointing this out for two decades. Political power is diffusing from the G7 to the G20 and beyond, and from global groupings of states to regional groupings such as the Arab League, the African Union, ASEAN and many others.