Speech by Mr Jukka Valtasaari, Secretary of State: "The future of the EU and its relevance to India", 18th-19th January 2001, Calcutta, Mumbai

18th-19th January 2001, Calcutta, Mumbai

Mr Jukka Valtasaari,
Secretary of State,
Ministry for Foreign Affairs of Finland

"The future of the EU and its relevance to India"

EU-India relations go back to the early 1960s when India was amongst the first countries to set up diplomatic relations with the then six-member EEC (European Economic Communities). The relations have been based on a series of bilateral agreements signed in 1973, 1981 and 1994. The last one represents a considerable evolution in the relationship as it was accompanied by a joint statement on political dialogue which has since led to regular ministerial level meetings and - most recently - to the historic EU-India summit in Lisbon in June 2000. As the new millennium begins, the EU and India are deepening and broadening their relationship in all its dimensions: economic, political, social and cultural.

The driving force behind the development of EU-India relations has been trade and investment and this is likely to remain so for the foreseeable future. The EU remains India’s largest trading partner, accounting for one quarter of India's total imports and exports, and it is the largest single source of actual foreign direct investment. However, for the EU India’s input is relatively modest, at just over one per cent of the EU’s total trade. This means that there is vast potential for expanding economic relations.

Over the years, several important initiatives have been taken and a number of projects have been launched to enhance economic co-operation between the EU and India. Let me just mention The EU-India Cross-Cultural Programme, which aims at forging new links in three areas: the media, the academic world and business enterprise.

In the field of co-operation for development, the EU Commission, in addition to the member countries, has grown into a sizeable partner. The cumulative total of Commission support for Indian development since 1976 is more that USD 2 billion. At this moment, the emphasis is on health (200 million euro) and education (150 million euro) plus humanitarian assistance for victims of natural disasters.

The Lisbon Summit of 28 June, 2000 raised the EU-India relationship onto a new level. The EU now has a top level dialogue with India that is comparable with its dialogue with other great powers of the world. The implications of this cannot be adequately discussed within a short talk like this, but I would like to illustrate the point by taking - almost at random - a few examples from the wide-ranging agenda which was established at this first summit:

  • to initiate dialogue on preventing and combating terrorism and to strive for a Comprehensive Convention on International Terrorism</li>
  • to strengthen co-operation to combat international drug trafficking and drug abuse</li>
  • to co-operate closely in identifying and furthering common interests in international organisations</li>

    One does not need to be an expert in international relations to understand how much these and dozens of other similar objectives change the relationship, making it closer and more comprehensive. In the future, we will not be talking only about the nitty-gritty of trade and investment, although they remain important, but we will also try to solve together the central problems of international relations in the 21st century.

    Looking into the future, the most relevant observation is that both the EU and India are at a very dynamic phase in their internal and external development. This implies, of course, a certain amount of unpredictability but it also implies new aspects in the interrelationship betwen the EU and India. Both approach the next multilateral trade round with a determination to increase global trade and investment and, in particular, their bilateral trade and investment. The enlargement of the EU, which means a significant enlargement of the internal market, will increase the weight of the EU as a player in the context of setting new rules for international trade. It is true that at this moment it appears as if profound and unbridgeable gaps exist between the EU's and India's positions on such matters as promoting social justice and protecting the natural environment in the context of international trade. But the direction India has taken in its external economic relations since 1991 has convinced us that there is a basis for dialogue and perhaps even scope for joint action in future negotiations.

    Another factor which is likely to have an impact on the EU-India relationship is the changing role of both parties as players in security policies both in their own regions and globally. Without going into detail on this subject, I would still like to recall that both India and the EU, each in its security policy environment, are in the process of assuming new responsibilities. These new responsibilities, which in this era of globalisation cannot be but global, will inevitably lead the EU and India to seek each other’s understanding and support. This, in turn, will add an important dimension to the relationship.

    Some of you may think that I am being overly optimistic in my predictions and that the EU and India are condemned to be competitors and thus wary of each other even at the best of times. I admit that this is not an impossible scenario. But it is unlikely in view of the basic values of democracy and human rights which we both share. They unite us at a level unlikely to change in the ebb and flow of international relations. The US often refers to itself and India as the "two largest democracies in the world". This overlooks the fact that the European Union has almost one third more inhabitants than the US and is every bit as democratic.

    The growth of bilateral EU-India relations is bedevilled by an information deficit: we simply do not know enough about each other and that allows us to entertain our prejudices and preconceived notions. They, for the most part, are harmful to our co-operation. There is no shortcut to remedy this. Patient dialogue at every level, determined programmes to inform ourselves better will, over the years, deal with the problem.

    The Euro

    Among the visible products of the recent deepening of European integration are European monetary union (EMU) and the soon-to-be-launched common currency, the euro. The common currency represents by far the most important step in the pooling of sovereignty in Europe and, in my opinion, also the most important step in the external relations of the Union.

    The introduction of the euro two years ago was in many ways a historical milestone. With the birth of the euro, 11 Member States of the European Union replaced their national currencies with a single currency. Currently, the euro area consists of 12 Member States, after Greece also adopted the euro in the beginning of this year. As you recall, the UK, Sweden and Denmark have opted out for the time being.

    The introduction of the euro was a logical next step in the completion of the Single Market and accelerated economic integration. All Member States of the EU are increasingly linked with each other - irrespective of whether a country has adopted the euro or not.

    A stable currency presupposes an elevated degree of coordination of economic policies. Obviously, budgetary policies have an essential role here. The governments of the Member States carry sole responsibility for the conduct of budgetary policies. However, in order to facilitate their task, they agreed to submit themselves to budgetary surveillance.

    What does the euro offer to India? These are still early days for the single currency, yet two things are clear: A macro-economic balance in a large trading area like the EU is good news for everybody. When the euro has established its position and when you can carry it in your pocket, it becomes an alternative reserve currency for all countries.

    Another issue worth noting in this respect is the contribution that the euro is making to financial stability both within the euro area and at the global level. This follows from the respective obligations to which both the European Central Bank and Member States are firmly committed, that is to say maintaining price stability and ensuring sustainable public finances. A good illustration was the collapse of the Russian rouble in August 1998. Then, the Finnish markka remained absolutely stable. The situation was different in the early 1990s when the Finnish currency had to be allowed to float because of international speculation.

    One of the more interesting and perhaps unexpected results of the launching of the euro a year ago is that it produced - even before the currency's physical existence - a large new financial market. The rapid increase in the flow of investments across the Atlantic is a clear proof of this new reality. The euro has generated a dialogue among other currencies in the world. This dialogue has been somewhat hesitant in its initial stage, as the fluctuation of the euro's exchange rate indicates. I am confident that we will see a consolidation of this new currency architecture in a not too distant future as the new requirements for macro economic policy coordination among euro Governments present a formidably solid foundation for its construction.

    Now, what can be said about experience and performance of the euro so far? Well, economic developments in the euro area are indeed very favourable. So are the prospects. In general, the economic fundamentals are sound: budgetary positions have substantially improved, employment is rising and price stability has been maintained. In a global perspective, there is no doubt that the euro area has achieved the best macroeconomic balance. Hence, the conditions for a sustained upswing are well in place. There is strong determination to promote the necessary structural reforms with a view to increasing the growth potential of the euro area.

    EU enlargement

    Enlargement is the single most important challenge for the European Union over the coming few years. It provides us with a unique opportunity for a peaceful unification of Europe after the collapse of socialism in Eastern Europe. In other words: a European Strategy for Europe. The final objective for enlargement of the Union to the east is to consolidate peace and security in our continent and to do it by economic means.

    Countries in Central and Eastern Europe, now free to choose their destiny, consider membership in the European Union as a possibility to anchor their societies to democratic principles in an irreversible manner, to increase their security and to strengthen their economies. The perspective of membership is an important catalyst for the transformation of these countries into democratic, market economy states. The European Union supports them during this transitional period by economic assistance and through a pre-accession strategy which has been designed for each of the negotiating countries.

    Enlargement will bring benefits to present members, too. After enlargement the Union will carry more political weight in international relations. Conditions for economic growth and employment will improve throughout the Union. Furthermore, the costs of enlargement should be weighed against the consequences of prolonged division of Europe, for example in the fields of environmental pollution and organised crime.

    The negotiation process for enlargement determines the conditions under which each candidate country will join the EU. The negotiations specifically focus on the terms under which candidates adopt, implement and enforce EU legislation. The accession negotiations take the form of a series of bilateral intergovernmental conferences between the EU member states and each of the candidate countries. The Commission proposes common negotiating positions for the EU for each chapter and they must be approved unanimously by the member states. There is no fixed timetable for the conclusion of negotiations. Each candidate is judged on its own merits and has the right to move forward according to its own level of preparedness.

    Finland is a keen supporter of a prompt conclusion of the enlargement. We expect the window for first accessions of new Members to the Union to appear between about 2003 to 2005.

    Institutional reform: Intergovernmental Conference and the Post-Nice agenda

    The EU must prepare itself for the enlargement process. Institutional structures of the Union, which were originally designed for six Member States, would not function effectively with 25 or 30 members. The Union is committed to being ready for enlargement at the beginning of 2003. The Intergovernmental Conference of 2000 was convened in order to achieve comprehensive and lasting institutional reforms so that the Union could increase its membership to include all the states involved in the enlargement process.

    The conclusion of the Conference at the Nice European Council in December opened the way for enlargement. The Union completed the necessary changes for the accession of the new Member States. In this respect the Conference was successful. However, the reform was not as far-reaching as we hoped for. One of the aims of the Conference was to make the decision-making system of the Union simpler and effective. In this respect the results could have been better. Finland was in favour of a more comprehensive reduction in the scope of decisions requiring unanimity in the Council and a simpler, more effective voting system. We may have to look at some of the questions again in the future. However, the main aim - making the Union ready for the accession of the new Member States - was achieved.

    In Nice, the Member States decided to continue the work related to the future of the Union and called for a wider debate about its evolution. The objective is to encourage wide-ranging discussions with all interested parties; representatives of national Parliaments, political, economic and academic circles, and representatives of civil society. In December 2001, the Union will decide on appropriate initiatives. A new Conference will be convened in 2004 in order to complete the process by making the necessary Treaty changes.

    In future work, the main aim is to improve the democratic legitimacy and transparency of the Union and its institutions, and to bring the Union closer to its citizens. The agenda will include at least four objectives, namely establishing a more precise definition of competencies between the European Union and the Member States, defining the status of the Charter of Fundamental Rights of the European Union adopted in Nice, simplifying the Treaties in order to make them clearer and better understood, and defining the role of national Parliaments in the European architecture.

    European security and defence policy

    Apart from the Intergovernmental Conference, agreeing on the further development of the common European security and defence policy was another achievement of the Nice summit. The European Union now has a solid basis for the creation of a military crisis management capability. Our aim is that this capability will be fully operational by 2003. There is still work to be done in finalising the structure of co-operation with Nato and with other partner states, but I am convinced positive progress will be made.

    Events in the Balkans demonstrate clearly the vital importance of the transatlantic link. Now it must be further developed in the field of crisis management. We Europeans must be prepared to do more to prevent and manage crises on our continent. An efficient capability to act in crisis management is an essential part of the Union's credibility. The development of crisis management capability will not prejudice the specific character of the security and defence policy of the Member States. All Member States will nationally decide on their participation in crisis management operations.

    Civilian crisis management is also growing in importance in the broad arena of conflict prevention and crisis management. It is imperative that progress be made in the fields of civilian police capacity, strengthening the rule of law, civilian administration and civil protection.

    Developing a common security and defence policy provides an opportunity for the Union to involve the candidate countries. The aim is to associate the 13 candidate countries and other non-EU Nato members as closely as possible with the whole conduct of the ESDP. This stems from the logic that there is no political or practical need for parallel attempts at crisis resolution within NATO or the EU.

    The European Union is stronger with its new crisis management capabilities, and with them it can better serve all its members and partners in improving cooperative security on our continent. The Union will contribute to international peace and security in accordance with the principles of the UN Charter. The Union will cooperate with the UN, the OSCE, the Council of Europe and other international organisations in a mutually reinforcing manner in stability promotion, early warning, conflict prevention, crisis management and post-conflict reconstruction.

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