social europe journal vol. 1 no. 3

Social Europethe journal of theeuropean left

Issue 3December 2005

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BreakingEurope’sDeadlockContributions byElisabeth GuigouJohn PrescottGünter Verheugenand others

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Detlev Albers (Chief Editor)Giuliano Amato (Former Italian Prime Minister)Josep Borrel (tbc) (President European Parliament)Karl Duffek (Director Renner Institute)Elisabeth Guigou (French MP, Former French Europe and Justice Minister)Zita Gurmai (President PES Women)Stephen Haseler (Chief Editor)Neil Kinnock (tbc) (British Lord, Former EU Commissioner)Alan Larsson (tbc) (Former Swedish Finance Minister)Poul Nyrup Rasmussen (President of the PES)Angelica Schwall-Dueren (Vice Chair SPD Bundestag Group)Giuseppe Vacca (President Gramsci Foundation)Jan Marinus Wiersma (Vice President Socialist Group European Parliament)

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We are happy to present the third issueof ‘Social Europe. the journal of theeuropean left’. In this issue, we haveintroduced a new section 'Opinion' inwhich controversial viewpoints will bepublished. We believe it is necessary, inorder to achieve our fundamental aimof informing the basic discussions inEuropean Social Democracy, that wereach out to all opinions within thesocial democratic family. We cannotand should not avoid the controversieswithin the European left. On the con-trary. We are determined to provide aspace for the different positions andtheir most prominent proponents. Inthese days in particular, in which theEuropean project itself is pervaded bycleavages, such an approach is indis-pensable. At the same time however,we would like to make clear the posi-tions of the editors, such as our ‘yes’ tothe Constitutional Treaty for instance.

An enlightened discussion needs toinclude all actors if it wants to gaingeneral acceptance. Building on theFrench controversy about theEuropean constitution, relating towhich we published the opposing view-points of François Hollande and HenriEmmanuelli in the first issue, we go ondiscussing the European role of NewLabour in this issue. We would like tomake clear however, that the viewsexpressed are the ones of the respec-tive authors only and do not represent

the collective opinion of ‘SocialEurope’.

In the first three issues published thisyear, we have brought together a widevariety of authors from a range of dif-ferent European countries. We areaware, however, that some countrieshave not had the voice they deserve inthe debates led in our journal. This wassimply due to the limited scope ofaction in the growing up of a youngjournal, but we promise to work espe-cially on this point in the next year.Article proposals from countries thathave been underrepresented so far aremore than welcome.

Last but not least, the whole ‘SocialEurope’ Team would like to thank youfor your interest and support over theyear now coming to a close. We hopeyou will stay with us in the next year tooand help us stimulating the debates inEuropean social democracy. We wishyou, your friends, and family a MerryChristmas and a Happy New Year 2006.

Social Europe the journal of the european left December 2005

Dear Readers,

Stephen Haseler and Detlev Albers

Detlev AlbersChief Editor

Edi

toria

lStephen Haseler

Chief Editor

Elisabeth Guigou ‘The Consequences of May 29th’ 73(Link to French version)

Garrelt Duin & Martin Schwanholz ‘Danger for Europe’ 75(Link to German version)

John Prescott ‘A New Social Europe’ 79

Neal Lawson ‘What can the European 82left learn from New Labour?’

Günter Verheugen ‘A New Industrial Policy for Europe’ 87

Hubertus Heil ‘The Freedom We Mean’ 89(Link to German version)

Silvio Pons ‘Putin’s Russia - 91Love and hatred towards the EU’(Link to Italian version)

Socialist Group Special Supplement

Social Europe the journal of the european left December 2005

Contents

http://www.social-europe.com/issue-3/ponsitalian.pdf

http://www.social-europe.com/issue-3/hubertusgerman.pdf

http://www.social-europe.com/issue-3/schwanholzgerman.pdf

http://www.social-europe.com/issue-3/guigoufrench.pdf

The crisis of Europe today isfundamentally differentfrom any other crisis that

has slowed down the Union'sprogress so far. Until now, every single one of thesecrises, including the most severe ones such as the'empty chair' crisis in the 1960s or that of the Britishrebate in the 1980s, had resulted from the shock ofnational interests. But with the French 'No' of May29th and the Dutch one of June 1st, it is now theEuropean project itself which is in crisis. Two foundingmembers of the European Community have expressedtheir mistrust of Europe as it is being built. The major-ity of these two countries' citizens do not understandvery well where Europe is going. This is a crisis ofmeaning. Europeans do not really know what they wantto do together any more. As long as the driving forcebehind the European project was to ensure peace, andthen democracy, the objectives and the direction wereclear. Now that both can be taken for granted, we needa new project if we are to give Europe a new meaning.

What have the French, and the Dutch after them,expressed when they refused to ratify the DraftConstitutional Treaty? Some of them expressed theirgeneral rejection of Europe, be it for nationalist rea-sons or because they reject the free-trade liberalism theEuropean Union embodies to their eyes. People whoreject the European construction in principle havealways existed; their opposition is long-standing, andhas already been manifest in France in the vote for theMaastricht treaty. What is new in this vote is that manystaunch supporters of the European process havevoted against the Draft Constitutional Treaty. Somehave done so because they were against enlargement,either the previous enlargement that led to the 25-country Europe, or the possible future accession ofTurkey. Others have feared the free-trade liberal ortechnocratic drift of the Union. The Bolkestein direc-tive, which was discussed during the French debate, hasheightened the fears of social regression linked toEurope, even more so since few people understood theprocess that led to its elaboration. In other words, whathas been rejected is a certain obscure, incomprehensi-ble, non-democratic way to build Europe. Without aproject behind it, without a real desire to live together

and to further the understanding between our coun-tries, Europe has eventually been reduced, in the eyesof many, to a mere machine that produces complicateddirectives that give rise to incomprehensible debatesbetween unknown institutions. The fear of an infiniteenlargement has also played a significant part.

The Draft Constitutional Treaty has paid the price ofthis image and of these fears. An arid, complex readingfor everybody who was not completely up to date onEuropean debates, it has not convinced the French ofthe real progress it made possible. It has, on the otherhand, comforted them in the belief that Europe issomething distant and incomprehensible. Another dif-ficulty of this text is that it was presented as a constitu-tion, which it was not: it was not produced by aConstituent Assembly, and the member states had toratify it separately. It also comprised a third part oncommunity policies, which had no reason to be in aconstitution, and this helped to make it illegible.

Even if the other member states ratify it, it will beimpossible to have the French vote on it a second time.There is so far no 'plan B', which would allow us todraft another text, on the horizon. It will therefore, Ithink, be necessary to start new negotiations, probablyafter 2007, when France will have a new President ofthe Republic - in the hope that the latter will be inter-ested in the European Union.

It is up to us, in the meantime, to show that Europe cangive itself a new project. To do this, we must first of allgive ourselves a significant European budget which willallow us to enact concrete projects.

The structure of this budget must be changed to allowfor future-oriented spendings. We must go on reducingthe sums allocated to the CAP, whose weight hasalready gone down from 70% to 42% of the Union'sbudget. We must accept the principle of limiting exportgrants, since they have a perverse effect on theeconomies of developing countries. Conversely, thesums invested in rural development and territorial plan-ning and development will become more and more use-ful. And we must put a strong emphasis on research, asit is most important for our economic future. Whateverhappens, Europe will not be able to exit this crisis aslong as it has not reached an agreement on the budget.This is our first and foremost emergency: if we cannotreach an agreement under the British presidency, it will

73 Social Europe the journal of the european left December 2005

The Consequences ofMay 29th

by Elisabeth Guigou French MP & former Justice &

Europe Minister

be a new blow for the Union.We must also increase this budget. Our Union will onlybe able to realise its potential if it gives itself an ambi-tious budget: the current limit at 1% of the GDP isinsufficient if we want to both finance the commonpolicies, particularly the cohesion policies, and success-fully manage enlargement.If an agreement is reached on the budget, the EU willbe successful again and we can use this impetus tolaunch a few concrete projects that can be immediatelyunderstood by Europeans, for instance the project of adigital library, which binds together culture and newtechnologies. But we can also think about renewableenergies: they start to be competitive as the price ofpetrol goes up. Aside from research on the hydrogenmotor, we should develop a way to stock up these ener-gies and, once again, such a project can only take placeat the Union's level, not at that of states or privatecompanies.More generally, reinforced cooperations can also allowus to go further provided we see them not in terms ofincluding or excluding such and such member state, butas defined by their content: this logic is what made thesuccess of the Schengen and Euro projects. Prioritygoes to reinforced cooperation on economic and mon-etary union issues, so that the Eurogroup can havemore weight in its dealings with the ECB.

Finally, the Commission should encourage and finance

throughout the Union a number of debates on whatEuropeans want to do together as well as on theboundaries of the Union. Associations and Europeanfoundations have a central role to play in this matter.Indeed, we will not be able to have a real political unionas long as the boundaries of the EU are not defined.The strong, federal, integrated political union I call forhas only meaning inside fixed geographical boundaries.For me, the Balkans, and Turkey (if the conditions aremet) are meant to be a part of it. On the other hand,for Ukraine, Moldavia and Belarus (once this countrybecomes a democracy), the question needs to be debat-ed, since it raises the question of the relations betweenthe EU and Russia. Reaching an agreement on theseissues will take time, probably years, but it is a questionwe can no longer avoid.Defining the boundaries of the Union also implies toredefine our relationships with our Eastern andSouthern neighbours that are not destined to access theEU (Russia, Southern Mediterranean countries). Thequestion of boundaries must be addressed not in termsof a 'Fortress Europe', but through the offer of a ren-ovated partnership, which would be at the same timemore generous economically and more demanding interms of democracy and the fight against corruption.With Southern Mediterranean countries, this partner-ship should function on an equal representation basisand aim at the eventual creation of a Mediterraneanworld community.


In the next few years the German SocialDemocracy must resolutely seek the furtherdevelopment of the social dimension ofEuropean integration.

‘Tired of globalisation’ was the headline on thecover of The Economist dated 5 November2005. This was a reflection of the fact that, in

the more highly developed economies at least, the eco-nomic euphoria of recent years is visibly waning. Thedream - of using new information and communica-tions technologies, the free movement of goods andfinance and the removal of tariff and non-tariff barri-ers to trade to enhance people's prosperity - is leavingan increasingly stale aftertaste. The processes universal-ly known as globalisation are producing fear, not confi-dence, in people. In addition, more and more people inpositions of political responsibility are becoming awarethat the regulatory capacities of modern welfare statesare subject to increasing restrictions. This need nothave, but can clearly be seen to have, a negative impacton interaction among the forces in society in the indi-vidual member states of the European Union.

One of the SPD's election pledges in the 2005Bundestag election campaign was, as it says in the man-ifesto, to "manage in a humane way" the effects ofglobalisation. In other words: politicians must seek toanalyse the mechanisms of globalisation and find waysto separate the positive effects from the negative ones.In this context, every measure must be examined interms of its ability to improve people's opportunities inlife.

The future of the European Union, too, is closelylinked with the question of the extent to which it is ableto understand the challenges and opportunities inher-ent in globalisation and to turn them into practical pol-itics. Gerhard Schröder is right when he warns: "All toooften people regard the regulations of the internal mar-ket not as a shield against expanding globalisation, but

as quite the opposite: the internal market is viewed asthe vanguard, by some even as the Trojan horse, ofintensifying competition." (Die Zeit, No. 43/2005)

Neglect of social aspects puts the wholeEuropean Union project at risk

An analysis of the social dimension of the Europeanintegration process shows that the social question hasnot played an equal role in practical politics - no matterwhat may be claimed to the contrary. Whereas the strat-egy proclaimed at the outset was "peace through inte-gration", this has since the 1970s/1980s been joined bythe "economic success through integration" slogan.The challenges posed by the disappearance of theBlocs at the beginning of the 1990s again reinforcedthis approach. It is clear today that at least in one aspectthe competition theorists have prevailed over the advo-cates of harmonisation insofar as the primacy of neo-liberal thinking has indeed triumphed: economic catch-ing-up must take priority over social catching-up.Exacerbated by the negative repercussions of globalisa-tion and eastern enlargement, this inexcusable neglectof the social dimension is now demanding its price.

This is demonstrated by the increasing failures of cur-rent European policy: the outcome of the referenda onthe constitution in the founding members France andthe Netherlands, the failure to reach agreement on thefinancial perspective at the June 2005 summit, the bit-ter dispute over the Services Directive, or the decided-ly low-key start of what had originally been heralded asa promising new orientation of the Lisbon agenda forgrowth and employment.

On closer inspection, it becomes clear that the crisis theEuropean Union is widely held to be in is the result notleast of the neglect of the social dimension atEuropean level. It is rooted in the citizens' fears of joblosses, a fall in prosperity and social exclusion, and their


Danger for EuropeGarrelt Duin is a Member of the German Bundestag andChairman of the Social Democratic Party of Germany in

Lower Saxony

Martin Schwanholz is a Member of the German Bundestagand a member of its Committee on the Affairs of the

European Union

With the assistance of Victoria Krummel

Garrelt Duin Martin Schwanholz

feeling that these fears are not being taken seriously bythe acting political elites. The current debates we arehaving about the European Union are not so muchconcerned with fundamental issues of political integra-tion, but rather with the sense and impact of Europeaneconomic integration against the backdrop of globali-sation.Thus the decisive concerns of those who opposed theconstitution were not so much to do with the treaty'senvisaged changes to the institutional make-up of theEuropean Union or the need for a Common Foreignand Security Policy and for joint solutions, for instanceon immigration policy and combating terrorism.Rather, the rejection of the constitution was over-whelmingly a reflection of the loss of confidence in themantra-like appeals for liberalisation and promises ofprosperity constantly repeated by the political leaders.Whereas the citizens' latent disaffection with Europehad previously manifested itself most obviously in theongoing decline in turn-out for elections to theEuropean Parliament, there is now the danger of openresistance to policies made in Brussels and ultimately ofthe erosion of the entire European project.

In the fierce debates on the Services Directive, theCommission failed to recognise and to develop solu-tions to the potential undesirable social and ecologicalrepercussions of the liberalisation it favoured on thebasis of the country-of-origin principle. Here, theanswer lies neither in the forced opening of the servic-es market nor in the closure of the domestic market tothe allegedly cheap Polish plumber supposedly workingto lower standards, to use a favourite stereotype of thecritics of this directive.

In member states with high unemployment rates, suchas Germany and France, attitudes to the new Centraland Eastern European members are shaped by theexpectation of further increasing pressure on thedomestic labour markets. The perceived threat to wel-fare and livelihoods is a further factor.

In addition, there is the unending stream of reports ofcompanies relocating to Central and Eastern Europedespite above-average revenues (e.g. Otis), the break-ing-up of well-placed companies by financial investors(e.g. Grohe), waves of redundancies despite high prof-its (e.g. Deutsche Post) and company closures toremove competitors (e.g. NorskHydro). Against thisbackground, statements about how the increase in mar-ket-motivated direct investment by German companiesand financial institutions in other member states of theEuropean Union helps to secure jobs here at home tooare not really much comfort.

For many decades the European integration projectderived its legitimacy from securing and increasing theprosperity which it gave the citizens of its memberstates. Against the backdrop of globalisation and theresulting increased pressure of competition on theEuropean economies, this source of legitimacy is van-ishing. In a European Union in which over 19 million

people are without jobs and whose states are demand-ing welfare and financial cutbacks from their citizens,the people rightly expect answers and solutions. In theworst case the European Union is perceived as the van-guard of a globalisation whose sole objective is toenforce pure market economics according to the neo-liberal creed. On the other hand, there is simultaneous-ly the idea that Europe should be a bulwark providingprotection against the effects of globalisation. Bothviews are misleading. For in the best case the EuropeanUnion will develop into an area in which the advantagesof globalisation benefit everyone and the negativeaspects are countered with safeguard mechanisms.

Challenges to a social democratic European policy

The challenge to social democratic policy in Europemust therefore be: "shape globalisation in a social way".The task of policy-makers is to regulate the creationand distribution of potential profits so as to reach allsections of the population if at all possible. The nega-tive repercussions of globalisation, such as job insecu-rity, the increased risk of poverty and the risk of socialexclusion, are after all the result not of the process perse, but of the lack of an international regulatory frame-work and the weakening of national regulatory mecha-nisms. Accordingly, the framework conditions must atlast be shaped at national, European and global level.To this end, social democracy must establish itself inthe member states and at European level as a forcewhich does not sacrifice social solidarity to a blind racefor competitiveness. It must tackle the question of howto protect those people who are among the losersunder globalisation, and of what demands must bemade of these people and how they can be assisted intheir individual efforts to adapt. At the same time, itcannot and must not join the ranks of left- and right-wing deniers of reality who propagate protectionism,closed borders and renationalisation as suitable instru-ments to protect against the negative effects of global-isation.

This does not mean that the social security systems inthe member states have to be harmonised. The ECTreaty rightly denies the European Union the necessarycompetences, and given the varying framework condi-tions and traditions, it would be hard to do so anyway.Nevertheless, social democrats must continue to fightfor minimum welfare standards in Europe. The AgencyWorkers' Directive and the Working Time Directivemust reflect this. Nor has the last word been spoken onthe Services Directive, even if the advocates of thecountry-of-origin principle have just gained a victoryover the social democrat rapporteur in the lead InternalMarket Committee of the European Parliament.

With regard to the Lisbon strategy, it remains to beseen whether Commission President Barroso will keephis word as regards his vehement denial that the newLisbon agenda prioritises competitiveness at theexpense of the social dimension. Like Poul NyrupRasmussen in the most recent edition of "Social


Europe", we urge that the European social models,aimed at social compensation, be recognised as anadvantage of Europe as a business location. TheLisbon strategy certainly does not advocate the end ofthe welfare state. On the contrary, it calls for it to bemodernised as an efficient, proactive state. It mustensure that its citizens have equal access to the bestpossible education and can participate in lifelong learn-ing. It must actively promote research and developmentwith huge amounts of investment. It must create theenvironment not only for more jobs, but for betterjobs. Concepts such as "Flexicurity", which has beensuccessfully implemented in Denmark, and which com-bine high demands on workers' flexibility and initiativewith a high level of social security, may serve as mod-els. Rather than unhelpful promises of full employ-ment, frequently found in the Commission's publica-tions, social democratic policies must reveal ways tointegrate long-term unemployed with no hope of find-ing jobs liable to social security contributions into soci-ety, for instance through community employment.

Social democratic policy on Europe must be vigorous-ly committed to bringing about an end to the ruinoustax-cutting competition which has been intensified bythe accession of countries such as Slovakia and Estoniawith their low flat-tax rates. The harmonisation of theassessment basis for company taxation and the intro-duction of minimum tax rates belong on the Europeanagenda. If countries with low tax rates also benefitfrom European structural and regional policy funding,that is an injustice for which there can be no convinc-ing justification and which ultimately will seriouslyendanger the fragile intra-European solidarity. Thisapproach must also be reflected in the new rules onstate aids and on the structural funds. For instance,there should be no possibility of granting assistance tocompanies which relocate in and outside the EuropeanUnion or which threaten to do so. Relocations must notbe subsidised.

The aim must be to work with the trade unions to pre-vent workers from being played off against each otherwithin the European Union. This is a major challengefor the trade unions and for their associations atEuropean level. To date, the Europeanisation of thetrade unions has not been a great success. The tradeunions in the more highly developed economies in par-ticular must at last realise that a purely national view-point will in the end weaken them. Specifically, thismeans that there must be a marked increase in fundingon the part of the trade unions. A proactive campaignto establish the social responsibility of policy-makersand the business sector must continue, across the EU.The social dialogue with the European employers' asso-ciations, which has been ongoing since 1985 but hashad only rudimentary success so far, could be one ofthe instruments for this. The enforcement of high stan-dards regarding employee participation in Europe-widecompanies points in the right direction.

Another field requiring action is the international finan-

cial markets. The total volume of worldwide transac-tions is 1.9 trillion US dollars per day of trading.Approximately 3 to 5 percent of this refers to trade ingoods and services. The rest is purely speculative.International agreements must at last be concluded ontaxing purely speculative financial transfers in the coun-try of origin. The modern banking sector's informationand communications systems have long provided themeans for this. Further, the European Union can play apioneering role and create transparency regardinghedge funds and private equity funds. It would be con-ceivable, for example, to prescribe equity quotas forthese funds in order to make it more difficult for themto leverage company takeovers. The European Union,given its responsibility for the free movement of capi-tal, would certainly have the possibility of legislating inthis field, for instance with a directive on the control ofprivate equity funds.

At the European level the negotiations on the medium-term EU budget offer a chance to exert pressure. Forexample, sometime in the foreseeable future at least, allEuropean subsidies need to be reviewed, including the2002 compromise on the Common Agricultural Policy.The effect of the cohesion and structural funds mustbe critically examined. Not because there is a lack ofwillingness to show solidarity with the structurallyweakest regions, but because doubts about the efficien-cy of redistribution at European level are permissible.The globalisation fund again suggested by Barroso suf-fers, not only from fundamental problems with imple-mentation, but also from the fact that its volume - 500million euro per year - is much too small to have anyreally relevant economic impact, as well as placing anadditional burden on net contributors. The EuropeanUnion's strength does not lie in the creation of evermore new funds or in the redistribution of ever largeramounts of money. Instead, the Community shouldtake more action in the regulatory sphere, while keep-ing in mind the social dimension of the single market.In light of its existing legislative competences and theopen method of coordination in the field of employ-ment and social policy, it has the necessary instrumentsat its disposal. What the Commission and the nationalgovernments lack, in contrast to the EuropeanParliament, is the political will. Social democratic poli-cy on Europe will have to do much more here in thefuture.

Europe as an opportunity

Only a transnational power with the stature of theEuropean Union can influence the contours and courseof globalisation. There is no other association of statesin the world in which economic integration has beenfollowed by such a high degree of political integration.The unique supranational framework for action and theunparalleled close cooperation among member states inall policy spheres offer ideal conditions for shaping theglobalisation process in a social way and gearing ittowards social inclusion, as demanded at global level inthe February 2004 report of the ILO World


Commission on the Social Dimension ofGlobalisation. Otherwise there is, in the long term, therisk of social unrest even on this most prosperous con-tinent. Recent events in the French suburbs have givenus a foretaste.

Europe must persuade its citizens that it is betterequipped to meet the challenges of globalisation thanits individual member states. European integration canonly be successfully continued if its social dimension isat last imbued with life and dynamism. Herein lie boththe responsibility of social democratic European poli-cy and its big chance. And herein lies also the chancefor the European Union.


The UK Presidency regards the future of a SocialEurope as a vital debate - which is why we made it a keypart (for the first time) of the Informal Heads ofGovernment meeting - before which we consulted thesocial partners at a Tripartite Social Summit in London.

I was recently in Brussels, speaking at the Summit com-memorating the 20th anniversary of the social dialogue,which was begun at Val Duchesse by Jacques Delors. Inthe 20 years since then, the iron curtain has been torndown - and the East and West have come together inan enlarged European Union of 25 nations, embracing450 million citizens, with widely different economic,social, cultural and political traditions. Twenty yearsago, there were just 10 member states of the EU, and itwas easier to pursue a Europe based on conformity andconvergence. A single currency, a singlemarket, a single set of social standards - allthis was easier to plan and deliver, thoughof course there were still huge difficulties.

But today the issues facing Europe are farmore complex and will not respond to aone-size-fits-all approach. Our policiesmust cope with uneven levels of growth,prosperity, social structures and social jus-tice within member states and across theEuropean Union. The richest EU regionby GDP per head - Inner London - isnearly 10 times richer than the poorestregion which is in Poland. Average incomes in theLänder of Eastern Germany are still 40% belowincomes in Western Germany - 16 years after reunifica-tion. And in England, there is a gap in GDP of £29 bil-lion between our Northern and Southern regions, theresult of decades of industrial change.

John Monks has pointed out that "Enlargement is fur-ther increasing the diversity within and among sys-tems." We need to take that into account where weagree we need Europe-wide solutions to competitive-ness and social justice challenges. John has pointed outthat a huge single European market "will be charac-terised by the free movement of capital, of goods, ofservices, and after the transitional arrangements lapse,of workers too". And he asks some challenging ques-tions - "How will workers who use their right to freemovement be treated outside their home country?Which labour laws affect workers moving countries,and under which agreements, do people operate? Andhow do companies behave when operating outsidetheir home environment?"

When a Latvian seaman works in Britain, can employ-ers pay him Latvian wages with Latvian conditions? Adentist from Poland now earns £50,000 in Englandcompared to £8,000 back home. We have got a lot ofdifficult work in progress on the social agenda - theWorking Time Directive, the Services Directive.Recently the former Prime Minister of Poland - MarekBelka - said to me that the former Communist coun-tries are in many ways more free enterprise than theformer West - and they find arguments about socialmobility more of an ideological debate than a matter ofpracticalities.

As well as the challenge and opportunity of enlarge-ment Europeans also face rapid and unprecedentedchange in the global economy. There has been tremen-dous growth in China, who are now members of theWorld Trade Organisation, and are applying to the EUfor market economy status. And there has been remark-able economic progress in India, which is producing

250,000 science and IT graduates aloneevery year. China and India are compet-ing in high value goods, demandingadvanced skills and technology.

In the face of this remarkable change, wecannot be passive bystanders, waiting forthe world to give us a break - because itwill not. And, with 450 million people,and nearly a fifth of the world economy,we should have the confidence to com-pete. We have got the scale, the expertise,the ability and the culture to succeed.The European Union can play a major

role in shaping the world and adjusting to its challenges.We can respond more effectively to world economicchange through the strength of our common endeav-our. In doing so, we must reject the false idea that wehave to choose between a free market Europe and aSocial Europe which is somehow intrinsically econom-ically unsustainable.

For socialists, the European vision must include thecreation of full employment. That means we have tomaximise economic prosperity and social justice. Theyare 2 sides of the same coin and together they lead usto full employment. That is the position of the BritishLabour Government. Europe's economic and socialprogress in the last 150 years has been built on increas-ing value, inventing technology, and investing in skillsso that we can afford to offer our people a better qual-ity of life. We cannot succeed in the future by drivingwages, standards and security down to the lowest glob-al levels. A sweatshop Europe is not the answer to apost-industrial world.But neither can we sit down and let economic changewash over us, powerless to respond to global change


By John PrescottDeputy Prime Minister of the United Kingdom

A New Social Europe

because we cannot face up to the reforms which arenecessary. For example, we should agree a EuropeanUnion budget that gives a greater priority to investmentwhich strengthens Europe's ability to meet global eco-nomic change. It cannot be right that 3 billion peoplelive on less than $2 a day - while each European cowgets $2.50 a day in subsidy. I would rather spend lessmoney on cows and invest more in people. And whilethe priority should be how to deal with the science,skills and infrastructure challenges of global change,instead 55 per cent of the total European budget in2013 will be spent either on agriculture or on subsidiesfor the richest countries of the European Union.

As Tony Blair said to the European Parliament in June,Europe needs a modern financial framework to helpour cities and regions compete in a rapidly changingglobal economy - this is especially true for the 10 newmember states of the European Union. The Lisbonagenda showed us what we need to do. We need toinvest in full employment, in knowledge, research anddevelopment; in innovation; and in education and train-ing. But we all know that our collective response to theLisbon agenda for jobs and growth is currently notexpected to deliver what we have promised. Instead ofmoving towards the extra 20 million jobs to be createdby 2010 under the Lisbon agenda, Europe still has 20million people unemployed. According to Wim Kok'sreport, for the Lisbon agenda to work, we need todeliver on the commitments we have agreed to - forexample in the mid-term review of Lisbon last year.That means action at the European level - complete theSingle Market, reform product and capital markets.And actions by member states - taking the difficultdecisions on labour market and social policy reform,taking account of the national context.

The recent report by Andre Sapir for the ECOFINMinisterial Meeting said many of the current problemsof Europe stem from labour market and social policieswhich suited the social conditions of the 1950's and1960's - but which governments have been unwilling,or unable, to reform. Professor Sapir said that reform-ing these labour and social market policies at thenational level will help turn globalisation from a threatto more of an opportunity - enabling our economies tobe flexible enough to compete effectively, without los-ing the social standards which we all value.

But, in getting to grips with the Lisbon agenda, we haveto avoid the trap of thinking that common values, andcommon standards, of social justice and economicprogress mean the same policies and the same solutionsright across Europe. The Sapir report said that the ideaof a single European social model was "misleading,"reminding us that labour market and social reform poli-cies are determined at the national level. ProfessorSapir notes 4 European social models - the Nordic,Anglo-Saxon, Mediterranean and the Continental - andconcludes that in his view the Nordic and Anglo-Saxonmodels are sustainable.

We in Britain certainly resent the accusation from somequarters - even by some on the Left in Europe - thatour social model is an unregulated, free marketThatcherite Model. That is absolute rubbish. It is notjust inaccurate, it is insulting. We remember the 1960'sand 70's, when Labour Governments were unable tosecure long term stability and full employment becauseof failed government intervention, nationalisation ofindustries, protectionism, insufficient investment inpublic services, which ended up in a million unem-ployed, defeat at the ballot box and 18 years ofThatcherite government.

And it was the Thatcher Model that rejected the veryconcept of society, created mass unemployment ofover 3 million people in a boom bust economy, andmassively reduced investment in our public services,with millions thrown into poverty. That ThatcheriteModel failed Britain and was totally rejected by the elec-torate. Labour was elected to rebuild the British socialmodel. We have

created record levels of employment through thelargest jobs programme in Europevirtually abolished long term youth unemployment increased investment in our public services by morethan any other European country in the past 5 yearsintroduced Britain's first minimum wageregenerated our citieslifted almost a million children out of poverty, and 2million pensioners out of acute hardshipand we have embarked on the most radical extension ofchildcare, maternity and paternity rights in our coun-try's history.

Our approach has been endorsed by the British elec-torate in 3 massive general election victories.

Yes, it has sometimes been controversial over inBrussels, for example in the case of the Working TimeDirective - though I note that those economies thathave intervened to control working hours have actuallycreated fewer jobs than those with greater flexibilities.Our model has done a lot since 1997 in Britain to cre-ate jobs, prosperity and social justice in the UK. It hasworked for us, but our approach may not always workelsewhere. Each country has to make choices on theseissues.

We start from different places and there are variousways of achieving the objective of economic prosperi-ty and social justice. But with 20 million unemployed,nearly half of them more for than a year; productivityrates falling behind; underinvestment in skills, researchand development; one thing is clear: the people ofEurope do not want an endless debate on which socialmodel works best. They want a job. They want the skillsto compete. They want equality, flexibility and choice inthe workplace. And they want a society which offersthem security and respect.

So today our challenge is ensuring that our common


values of economic prosperity and social progressdeliver full employment, social convergence, sustain-able growth, decent public services, a better quality oflife, in the face of remorseless, relentless global compe-tition. This is our common ambition - but we should beflexible and realistic about how we get there. We havedifferent social models but common values of eco-nomic prosperity and social justice - protecting our cit-izens, tackling deprivation and disadvantage, andinvolving people in the decisions which affect theirlives.

We know that, without sufficient growth in oureconomies, we cannot achieve our social justice objec-tives. And without convincing our people that we arecommitted to social justice, we will not get them to facethe changes needed to deliver economic growth. Yes,we want a Social Europe, but we want a Social Europethat works. So let us bring our social models into the21st century and help our people live successfully in aglobal economy.

The debate about the future of the European socialmodel is not about abandoning the principles we holddear. We can increase employment, improve productiv-ity, invest in skills and deliver social justice for all ourpeople. We know how to do it - let us implement theLisbon agenda to increase jobs and growth. And let usget our economic framework right so that we promotestability, flexibility and enterprise. As socialists, we aredetermined to deliver full employment, and makingthat commitment a reality must be at the heart ofeverything we do.


New Labour hasbecome the mostformidable elec-

tion winning machine onthe left in Europe withthe exception of theSwedes. It has done soagainst a ConservativeParty widely held to be

'the greatest election winning machine in history'.Three straight victories, the first two off the Richterscale of landslides - the last a healthy 67 seat majority.Along the way it has nurtured one of the strongesteconomies in Europe, ploughed record investment intoschools and hospitals, introduced a minimum wage anda new constitutional settlement that has seen powersdevolved to Scotland, Wales and London. What isthere not to learn?

Before an attempt is made to answer the question it isprobably helpful to explain where I am coming from. Iwas an early and fulsome advocate of all things NewLabour. I came to this view after a familiar journey formany in the Labour Party from a largely amorphousand romantic left position that became defined as the'soft' left to differentiate it from 'hard' leftNeanderthals. In the 1980s this soft left wereKinnockites, in the 1990s many, but not all, becameBlairites. The driving force became a desperate desireto win. After a fourth election defeat in 1992 those stillon this journey would do pretty much anything to win.Another defeat would have left Labour broken forgood. As it turned out, the 1992 election was a goodone to lose. The Tories collapsed under the twin pres-sures of sleaze and economic incompetence after BlackWednesday when Britain crashed out of the ERM. SoTony Blair inherited two things; first a party that woulddo anything he asked of it such was the overwhelmingdesire to get back into office and second a ConservativeParty that itself had become a broken electoral force.Tony Blair is a uniquely gifted political leader whoseabilities have seen him overcome many seeminglyimpossible odds. But the fact is that any half decentLabour leader would have won the 1997 general elec-tion.

That was then. Now I believe there are fundamentallessons to be learnt about the systematic failings ofNew Labour and that unless these are learnt quickly theparty's period in office will be defined by Iraq, it will failto reach anything like the potential and hope that wasinvested in it to shift Britain to the left in the wayThatcher shifted it to the right, even more worrying itwill leave behind a more unequal and less democraticcountry and the Labour Party itself will be left in thesame state as the Tories in 1997 - out of office with arump membership incapable of renewing itself. Thehopes and dreams of a generation of clever and ambi-tious left politicians will have been squandered in theface of an electorate that will rightly claim that they hadprovided the mandate and the money for more. Sowhy is this a possible future melt-down scenario forNew Labour and therefore what lessons can be learntby sister parties? To understand we have to go back toget to grips with what makes New Labour tick beforeassessing the problems of Labour's period in office todate.

Understanding New Labour

There are two abiding influences on the direction andbehaviour of New Labour - the specific conditions ofits creation and its genesis as the latest incarnation ofLabourism. The first relates to the influence ofThatcherism, the second to Labour's original birth atthe hands of the unions and the centralising and statistforces which were then forming the Zeitgeist. Thecombination of the two has skewed New Labour's abil-ity to establish and renew itself in the tradition ofEuropean social democracy.

New Labour was born in an era of supreme politicalpessimism that outweighed the profound optimism ofits first successful election night on 1st May 1997. Onthat glorious early summer morning - when the scale ofvictory became apparent - anything it seemed was pos-sible. Sadly though the die had already been cast. Thepoints of continuity with Thatcherism where to proveto be more telling than the points of rupture. Not onlyhad Labour been in the wilderness throughout the1980s but in that period had witnessed the failure ofthe French socialists to go it alone and then seen theremnants of the 'hard' left crumble with the Wall in1989. Also during that time Democrat hopefuls in the


What can theEuropean left learnfrom New Labour?

Neal LawsonChairman of Compass

USA had been not just vanquished but humiliated atthe hands of a rampant Republican party.

By the mid 1990s Labour was not just prepared to sellits soul to get elected it had forgotten what its soul wasfor. In Britain the forces of globalisation combinedwith the march of Thatcherism which had torn downthe remnants of post-war collectivism through privati-sation and the crushing of corporatism - or as wewould now say social partnership. In this barren landthe left was not just desperate to win but had lost theconfidence and wherewithal to believe a left projectworthy of the name was still feasible. Some doubtedwhether it is was even desirable.

New Labour became not simply the continuation ofThatcherism - but in effect Thatcherism with a humanface. The limited break with neo-liberalism, describedbrilliantly by Stuart Hall (in the Soundings articleLabour's Double Shuffle, Issue 24, Autumn 2003,Lawrence and Wishart) and by Alan Finalyson (MakingSense of New Labour, 2003, Lawrence and Wishart)was based on Thatcherism's inability to mobilise thecountry in the face of the global market challenge. Shewas a moderniser but her ideology stopped her frommodernising far enough. The project for New Labourwas to use the infrastructure of the state to better equipindividuals to survive and thrive in a global economy.So the mantra of 'education, education, education' wascentral because this was the means by which we wouldhave the ability to compete. Meanwhile the welfare sys-tem would be re-oriented to make it compatible withthe demands of global markets - becoming both a sys-tem to bring people back into work while being openedup to commercial forces that would make it more 'effi-cient' and provide a new market for business to earnprofits. Crucially the state would no longer be the safe-ty net, the support structure for the needy and unfortu-nate - but the agency to prepare people physically andemotionally for the rigours of market competition.

The speech that Tony Blair made to the Labour confer-ence in Brighton in September this year was the mostcoherent restatement of this active use of the state toenable Britain and its people to cope with the demandsof the global economy. Thatcherism would never haveused the state in this interventionist way - hidebound byideology the market would never have been given thesupport it needed to succeed. This was the NewLabour or Neo-Labour project.

If New Labour was one response to the forces of cap-italist development what it failed to respond to was itsown 'Labourist' history and character. The BritishLabour Party is unique amongst the European left inthat is was a creation of the trade union movement. Itsfocus was therefore always the improvement of wageearners conditions within the economic system ratherthan its transformation to an alternative society. Thisalongside with the strong tradition of paternalisticFabiansim and Britain's heavy and concentrated indus-trialisation combined to create a very top down and

centralised view of change-making and governance.The Labour Party is tribal, often arrogant, statist andcentralising. Perhaps the best term for this 'Labourism'is parliamentary Leninism. Its early separation fromthe Liberals and the eclipsing of once strong coopera-tive and mutual traditions meant that by the late twen-tieth century is was out of step with a more decen-tralised and less deferential world.

Sadly, despite early promise, New Labour failed to riditself of this Labourist culture and even deepened itbecause of an anxiety that so few in the party reallyunderstood what the 'project' was all about and there-fore could not be trusted. So powers were centralisedeven more tightly around the Prime Ministers office -who became in effect not just PM but Secretary of Satefor Education and Foreign Secretary. Gordon Brownran not just the Treasury but pensions and transport.Turf battles have been fought out over trade and indus-try and health. Targets, control and initiatives from thecentre have dominated over empowered local govern-ment despite the more consistent funding councilshave enjoyed.

Finally though, New Labour is still a 'Labour Party'. Itis paid for by the unions and gains legitimacy from itsmembers (although a diminishing number of them).New Labour has had to respond to the demands oftrade unionists and activists. Hence policies like theminimum wage, tax credits and employment protectionlegislation - although nothing is allowed to stand in theway of ultimate control from the centre of re-orienta-tion to the demands of the global economy.

So New Labour is a strange combination of enlight-ened neo-liberalism, old Labourism and still live socialdemocratic impulses towards equality. It makes for arich mixture which naturally leaves most commenta-tors, party activists and European partners reeling withconfusion and explains the emphasis on media 'spin' topaper over the very deep cracks and inconsistencies atthe heart of the project.

A glass half full or half empty?

Defenders of New Labour, and there are still some,will of course point to the many successes of theadministration - most of which I have already men-tioned. It is not to say that life under a Labour govern-ment is worse than it would have been if the Tories hadwon. It is to say that the failure to break with eitherLabourism or Thatcherism confines New Labour to apast, present and future that it is difficult for othersocial democrats to learn effective lessons from. If thedefinition of a successful social democratic govern-ment is the creation of a more equal and more demo-cratic society then New Labour fails on both counts.The government's own figures show that Britain is amore unequal country than it was in 1997. Turnout atgeneral elections has plummeted to around 60%. Thisis not of course the only measure of the democratichealth of a country and turnout is falling across the


world - just nowhere as fast as in Britain under NewLabour. The belief in formal politics as a means tomake a better world is shrinking rapidly just when thedemands for democratic action are growing. In essencethe reasons for failure go back to the creation of NewLabour and the unwillingness to differentiate itself suf-ficiently with Thatcherism or do politics differentlyfrom the old top-down centralism of the past.

John Prescott, Labour's Deputy Leader, once describedthe intent of the New Labour mission with great suc-cinctness and clarity as 'traditional values in a modernsetting'. Because of the powerful grip of Labourismand Thatcherism New Labour is neither sufficientlytrue to its traditional values of equality, liberty and sol-idarity nor is it facing up to the reality of its modernsetting which demands politics is about winning powerto give it away and trusting the people.

The illegitimacy of the war in Iraq and the failure tobring order to a country hamstrung by extremists willdog New Labour until a resolution to the emerging civilwar is found. Most people in Britain now believe thatany resolution must be predicated on the withdrawal oftroops. But if Iraq serves as a lesson of internationalinterventionist failure there are other two other big les-sons to be learnt by the European left from NewLabour's period in office.

The first is that political leadership is about just that -leadership. Even in the most difficult circumstancesthe left, which by definition must always be dissatisfiedand eager to usher in a better world, must create theconditions in which it can overcome the forces of reac-tion and not just appease them. Two issues stand outwith regard to New Labour. The first is redistribution.Gordon Brown has channelled funds in recordamounts to the poor. But is has been achieved bystealth and the complexity of the tax credit system.Only once for the 2001 election campaign did Labouropenly campaign for increased taxes - and only then inan opaque fashion. New Labour has never attempted tochallenge and change the public consensus establishedunder Thatcher that people rather than the state couldbest spend their money. It places a glass ceiling on ouraspirations to attempt further redistribution - despitethe fact that we have not redistributed at a rate to stopthe widening gap between rich and poor.

The second example of timidity is Europe. Blair is aninstinctive cultural European and always saw the virtuesof a single currency. At the beginning of his first termhe could have taken Britain into the single currency butalways ran scared of the euro-sceptic national press.This shift away from a central belief has continuedthroughout its years in office leaving Labour talkingabout opt-outs and red-lines - and not how Europe canbe used as a vehicle for social democratic advance.New Labour has effectively shut the door for good onthe single currency and was relieved that the constitu-tion bit the dust earlier this year. Its Presidency of the

EU has yielded little by way of a blueprint for thefuture.

The limitations and contradications of New Labour isrooted in inversion of social democracy. Social democ-racy was always the social, economic and politicalmeans by which people could make themselves themaster of the market. Clearly this required all sorts ofcompromises, negotiations, failures, set backs and vic-tories. But the intent was always clear - labour was tomange capitalism for social ends. New Labour invertsthis principle. The forces of global capitalism, theywould have it, are impossible for us to confront, regu-late, steer or face down. Instead, against this unstop-pable and benign force the best we can do is equip ourpeople by making them more competitive than thelabour forces of other countries. So people become notthe masters of the market but their slaves by meetingthe demands of global markets. Too often thisapproach leads to a race to the bottom as workers atGate Gourmet found this summer when they were allsacked in an attempt to bring in low wage workers fromEastern Europe. The New Labour claim that socialjustice can only be secured by economic efficiency isvery often wrong.

It is this failure of imagination and social democraticintent that has seen Labour's membership plummetingto fewer than 200,000, which means that over half ofthe membership have left since 1997 and leaves theparty perilously close to the point of collapse.

If not New Labour then what?

While the future of the left rests on the values of thepast it will not be built on the methods of the past.New Labour was one response to the challenge of leftmodernisation. Unfortunately in too many respect itwas the wrong response. If Labour's recent historywas defined by a prioritisation of principle over powerin the 1980s, the reverse is proving to be the case now.The challenge is to find a sustainable point of balancebetween power and principle by rejecting the sterileextremes of both. New Labour's electorate strategywas to reconnect with the centre-ground of Britain butunlike Thatcherism was never prepared to drag it to anew centre based this time on left beliefs. As discussedabove, for New Labour this was neither feasible nor forsome desirable. There are two gambles that can bemade by the left - that progress can be made by stealth,through centralisation and taking wearing the cloths ofyour opponent or the progressive gamble that giventime, space and support people will make more deci-sions that are just, fair and cooperative rather than self-ish and individualistic. New Labour bet heavily on theformer.

A modern left has to be established for the principlesof equality, liberty and solidarity. But the means mustadapt and where necessary subvert the cultural and eco-nomic forces of globalisation and welcome that


process because it provides the ultimate level playingfield in which cowboy capitalism cannot flee to findfresh workers to exploit as labour markets increasinglybecome regulated.

In a world increasingly defined by decentralisation andthe end of deference a new left must place itselfsquarely on the terrain of autonomy through self-man-agement. This demands the creation of new forms ofcollectivism and equality not as and end in itself but ameans to achieve meaningful freedom. It is a socialdemocracy that places at least as much emphasis on thedemocracy side of the equation as the social side butrecognises the symbiosis between the two.

I genuinely and perhaps naively believed New Labourwas going to be a social democratic force that was proEurope, in favour of a new politics, dedicated to thedevelopment of community over markets, alive to thepotential of social partnership, as tough on the causesof crime as the crime itself and continually prepared tointervene to stop the excesses of capitalism as its waswith the early utilities tax. These are all the things it saidit was going to be. I was wrong to believe it. But thepoint is not to feel betrayed as this just passes the blameonto leaders. The lesson for the democratic left inBritain and across Europe is not oppositionalism butinstead to assemble the ideas and polices and build theorganisations and alliances to ensure leaders are morelikely to take us in the direction of a modern socialdemocracy.


Neal Lawson is chair of the democratic left pressure group Compass (www.compassonline.org.uk) which hasrecently published a pamphlet on the virtues of the Swedish model of social democracy and is currently under-taking a year long process of writing a manifesto for the democratic left. He is also editor of the Labour jour-nal Renewal (www.renewal.org.uk) - the latest issue of which focuses on the future of a left orientated Europe.He can be contacted at [email protected] and would like to hear from European politicians andactivists who may share the focus of Compass on building a radical social democracy.

http://www.renewal.org.uk

http://www.compassonline.org.uk

We are still pushing forward on approval of the amendedServices Directive to guarantee competition and high socialand environmental standards (with a legal framework forpublic services alongside) and of the Working Time Directiveto create flexibility and prevent exploitation of people at work.

In this context, we are continuing our work on two majorthemes:

• follow up to our conferences on the future of services inEurope and, of course, all the people who deliver thoseservices

• an event in May, with key speakers, on the whole area ofdecent work in the global economy

Watch out for details of these and other activities through2006 promoting debate on the main issues affecting allEuropeans (full details will be posted on our websitewww.socialistgroup.org).

People’s real hopes and ambitions for the future must be at thecore of Europe’s continuous development. We will work to

promote discussions in new European Forums across the EUwhere people can air their thoughts about Europe’s role in the

world and pulling together the power of all its member countries tonegotiate on the world stage.

2006 – WHAT’S IN STORE IN THIS, THE YEAR OF MOBILITY FOR WORKERS...

Our 2006 work will continue to strengthenboth our European market and the solidarity,inclusivity, social justice, pluralism and culturaldiversity that are close to our hearts. We willalso promote peace, security, a good qualityof life and a healthy environment for all,building on our strengths and acting togetherto win new trust in the European dream.

The quality of people’s working lives is a key issue which cuts acrossall Socialist Group work. As European parliamentarians, yes, we knowabout mobility of workers, having three workplaces, so we are wellaware that there’s a balance to be struck between too much and toolittle mobility.

www.socialistgroup.org

EW_PSE_Group dec 12/12/05 12:52 Page 1

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The challenges for industrialpolicy

The challenges for industrialpolicy are clear: first, globali-sation is here and will stay.

The EU cannot turn back theclock. Global production networksare reducing costs and increasingflexibility. In particular, the Asian

emerging market economies are today taking their placeand fully participate in global markets. The increasinginternationalisation offers enormous opportunities, butnaturally also intensified competition for the EU as alocation for investment, production, and R&D spen-ding. Of course, the path to globalisation is not easy.Adjustment to structural change means managing soci-al burdens and coping with job losses in the regions

affected through the creation of new and lasting pro-duction and employment opportunities, which is easiersaid than done.However, on the whole, globalisation brings strongbenefits for Europe. As the EU is the biggest tradingbloc in the world, a large proportion of working placesdepends on the EU`s trade performance and openmarkets. Secondly, the nature of manufacturing pro-duction continues to change profoundly. Fast technolo-gical changes are taking place across the globe. In manyindustries, traditional manufacturing methods of massproduction are being replaced by more adaptable pro-duction runs, using intelligent and multi-task producti-on equipment. Global production networks are puttinga premium on reducing costs and increasing flexibility.In spite of these challenges, there are good reasons tobe confident about EU manufacturing industry's placein the world and its future. Commission analyses showthat EU industry has not by and far performed as badlyas often publicly presumed. Instead, a majority of indi-vidual EU manufacturing sectors have performed wellin comparison with their counterparts in other indu-strialised economies. Important EU manufacturing sec-tors such as pharmaceuticals, the mechanical enginee-ring, chemicals, and motor vehicles sectors have revea-led a substantial comparative advantage and record

trade surpluses against the rest of the world.Nevertheless, there is no reason to become compla-cent. The industrial structure of the EU economy as awhole makes it less than ideally positioned to face theongoing globalisation process. There is clearly a pro-ductivity growth differential between the EU and otherindustrialised economies, particularly the US. To someextent this is due to an industrial composition effect:the ICT-producing sector is one of the growth enginesof the US economy, while in the EU its share of thewhole economy is still bigger as its growth. Anotherworrying factor is that EU trade is still concentrated onsectors with medium-high technologies and low tointermediate labour skills. That makes the EU particu-larly vulnerable to the competition with China, Asiaand other emerging countries. Moreover there is alsoincreasing international competition for R&D spen-ding. Today the EU is not competitive enough as a loca-tion for research. Both the US and Japan are attractingmore international R&D expenditure than the EU. Inaddition further countries such as China and India arebecoming important locations for new R&D invest-ments. The US has also been more successful than theEU in attracting researchers and highly skilled staff.These trends are a matter of considerable concern in sofar as they lead to a loss of R&D investment andresearchers from the EU, which puts sustainablegrowth and jobs in the EU at risk.

The New Industrial Policy

How should the EU react to these challenges and con-cerns? The EU does not believe in the fairy tale of a so-called 'Europe of services' since the growing businessservice sector is based on industry and would look badwithout. Both working places in industry and in ser-vices would be endangered if the EU does not care fora strong and competitive European industry. Thereforethe European answer is clear: a competitive Europe,providing sustainable growth and more and better jobsneeds a sound industry that is competitive. Whileaccepting competition as the rule of the game of amarket economy that has been established globally, theEU has to strive towards excellence as the only road towin the game. To that end the Commission has sugge-sted to pursuit a comprehensive, coherent and modernindustrial policy, which is an important pillar in the newPartnership for Growth and Jobs.

Based on a detailed analysis of 27 manufacturing sec-tors the Commission has suggested implementing a tai-lor made industrial policy that takes into account theparticularities of the sectors as well as problems ofhorizontal nature. Therefore the Commission willlaunch a number of sector initiatives, for sectors suchas pharmaceuticals, defence, space or information-technologies and chemicals to discuss the challenges


A New Industrial Policy for Europeby Günter Verheugen

EU Commissioner for Enterprise & Industry

The EU does not believe inthe fairy tale of a so-called

‘Europe of services’

and framework conditions for sustainable growth andemployment for the coming 10 to 15 years togetherwith the main stakeholders, industry, trade unions, themember countries and the European Parliament, inorder to anticipate threats and to elaborate 'a masterplan' to improve the general framework conditions forthe relevant sector.Since some challenges however are common to manysectors such issues will be addressed on a cross-secto-ral base. Intellectual property rights (IPR) are a keyissue for many sectors, some of them related to theregulatory framework (EU Patent), others in awarenessbuilding for SMEs or in the fight against counterfeitingand piracy. Therefore an initiative for the better protec-tion of IPR will be launched. The interaction of ener-gy and environmental policies (energy prices, energy-efficiency, and climate change) is also a priority formany industrial sectors, which the Commission wantsto address actively through creating a high-level groupfor the 'competitiveness, energy and environment'. Ithas also turned out that the EU must become moreactive towards important trade partners such as the USand China and work on further improving marketaccess for European industry.

As the textile crisis showed, it would be irresponsiblenot to look rationally into the real competitivenesssituation of an industry and to retain a wrong sense ofsecurity. Globalisation does not call for 'business asusual' but for structural change and constant innovati-on as the promising way to success.

In this context the Commission has also analysed aphenomenon of concern to many people: the issue ofrelocation. As a result there seems to be a gap betweenperception and reality. Generally the EU is not sub-stantially losing to cheap wage countries such as Indiaor China and the US and the European markets areattractive places for investment in industry. After allmanufacturing has been involved in the process of glo-balisation for many decades, with the overwhelmingmajority of manufacturing foreign direct investmentgoing to industrialised countries. The United Statesalone receives nearly one third of EU manufacturingoutflows. The EU-15 outflows towards the new mem-ber states have stabilised at about 13% of total EU-15FDI outflows. Investment flows towards China havecertainly increased a great deal since the 1999-2000s,but represented in 2003 only 3.8% of all outflows. Theshare of India is even lower. Another perception, thatthe increasing internationalisation costs our industry asubstantial numbers of jobs, does not match the fin-dings of numerous studies either. One of them show-ed that relocation and outsourcing represent 7.2% ofplanned job reductions in total and 8% of cases ofrestructuring. In short, relocation does not seem to bethe job killer number one. It is the permanent processof restructuring that affects employment, since job los-ses and job creation do not happen at the same time, atthe same place and in the same area where the employ-ment situation has been negatively affected.Undeniably, structural change can pose local and secto-

ral problems and particularly impact upon lower skilledworkers that should be helped to cope with the conse-quences of industrial restructuring. These costs arevery often concentrated in some sectors and some regi-ons. This is for example the case of the fashion anddesign industries. The production in these sectorsremaining in the EU has refocused itself on higher-value and higher quality products, having undergone alargely successful process of structural adjustment. Thegroup of sectors concerned with structural changesalso includes some parts of the food, machinery, andelectrical equipment industries, some non-ferrousmetals industries, and business services.The EU has its role to play and to assist in coping withnegative effects of structural change. Instead of simplyaccompanying structural change the anticipation ofchallenges and threats ahead becomes increasinglyimportant to avoid dramatic situations. To that end theEU proposes amongst other issues a more stringent useof EU structure to foster innovation and competitive-ness. In this context, the Commission has also propo-sed a so-called globalisation fund at the HamptonCourt informal European Summit, which was taken upin the UK proposal for the next financial framework2007-2013.

Last but not least better regulation matters. To makethe EU the most competitive place for jobs and invest-ment, a modern legislation is needed at all levels, whichis as transparent and easy to apply as possible andwhich avoids unnecessary bureaucracy. Better legislati-on will be an important contribution for improving theframework conditions for many sectors of theEuropean industry and the Commission has alreadytabled an ambitious working programme on the simpli-fication of existing legislation for the coming 3 years.

The is no reason for pessimism with regard to the futu-re of industry in Europe and the European industry isprobably in a better shape than many people's impres-sion. There is much to do however, to tackle the chal-lenges of globalisation and rapid technological changein view of maintaining a modern, future-oriented andinnovative industrial base in the EU which will remainan important job provider. The Commission's newindustrial policy is a concrete outline of work to achie-ve this.


Freedom is a grand con-cept and there is muchtalk of it in Germany at

present. For social democrats,freedom - flanked by justice andsolidarity - is the supreme basicvalue. The fact that freedom iscurrently on the lips of politici-ans of all hues should put us onour toes. Even the FederalChancellor made it the key issue

in her government policy statement.

For many people of my generation - particularly thosewho were born and brought up in the old FederalRepublic - ‘freedom’ was taken for granted. Over timeit degenerated into a hackneyed concept and was left tothe advertising industry to exploit at will. 'Freedom'

thus became a brand attribute for credit cards andcheap flights.

In the meantime our society has begun a new quest formeaning and fundamental values; the time has come toretrieve the concept of freedom from the world ofmarketing and put it back into the political debate. Theformation of a grand coalition will not hinder this newquest. On the contrary, it is likely to expedite it. Inessence, any debate on the concept of 'freedom' revol-ves around the classical distinction made by the philo-sopher, Isaiah Berlin, between negative freedom (thefreedom from something) and positive freedom (thefreedom to do something).

In line with the teachings of Friedrich August vonHayek, economic liberals are quite content with negati-ve freedom. Guido Westerwelle talks a great deal aboutfreedom - as chairman of the Free Democratic Partythat is part of his job description. In his reply to theChancellor he equated tax increases with a lack of free-dom. For him freedom means radical denationalizationand the release of homo economicus from all socialcommitments. Freedom is thus reduced to freedom ofeconomic pursuit.

By contrast, Udo Di Fabio, a conservative judge at theConstitutional Court, stresses in his much-acclaimedbook Die Kultur der Freiheit (The Culture ofFreedom) that freedom is inconceivable without socialties and obligations. The position he adopts is thus anti-thetical to socially irresponsible ultra-liberalism. So far,so good. At the same time, however, he considers thatfree individuals should do something and give some-thing before they start asking society for something.That sounds good, too, but while Di Fabio's point maybe significant it ignores the social and very practicalprerequisites for freedom.

The realisation that individual freedom is cruciallyimportant but that it depends on certain social andpolitical conditions is one of the fundamental tenets ofsocial democracy. In his farewell speech as SPD chair-man Willy Brandt remarked: "If I had to state what,apart from peace, is more important to me than any-thing else I would say without any ifs or buts: freedom.Freedom for many, not for the few. Freedom of cons-cience and speech. Freedom from need and fear, too".For him freedom was by no means controlled happi-ness but the release of the creative skills invested inman.

It is not least the political left that has achieved a gooddeal in releasing those creative skills. That everybodycan find their place in society through their own effortsand that everybody has the theoretical opportunity tolive their life according to their own designs is a veryrecent development in the history of mankind. It pre-sumes equal freedoms for women and men and thechance to overcome social barriers. One of the mainconcerns driving social democrats has always been togive people opportunities and not to pigeonhole themfor the rest of their lives on account of their social ori-gins.

How free is our society then? A young person living onincome support in the second generation and growingup in a residential ghetto somewhere in the suburbswithout acquiring any school-leaving qualifications orfinding a trainee position can do as he pleases withinthe bounds of the law. But is such a person free? Intheory, nobody will stop him learning new things andstanding on his own two feet. But in real life - which iswhat politics should be about - this young person hasvirtually no chance if he is not systematically pushedand encouraged. Or to take a different example: A busi-nessman is not free to fire his employees as he thinksfit. Laws and contracts prevent him from doing so andthus limit his negative freedom. Would society be freerif he could hire and fire at will?

It is no accident that freedom is given pride of place inthe code of basic social democratic values. It includes


The Freedom We Meanby Hubertus HeilGerman MP &

SPD General Secretary

One of the main concerns drivingsocial democrats has always been to

give people opportunities

negative freedom, in other words the freedom fromfear, need, paternalism, bureaucracy and discriminati-on. But it also includes positive freedom, in otherwords the freedom to seize the opportunities life offersand act on one's own responsibility.

Social democrats do not place blind faith in the state.For us, as for others, restrictive and unnecessary redtape and excessive calls for statistics and reports do notrank amongst our political objectives. We know that,for the sake of the country's future, we need both adynamic economy, a civic society based on the princi-ple of solidarity and a state that is capable of taking therequisite action. The latter serves not merely to providethe economy and society with public goods that themarket alone cannot supply. In a democracy a functio-ning state is essential to ensure that the strength of thelaw prevails and not the law of the strong.

We social democrats want people to be emancipatedand capable of mature judgement. Free people areinformed; they face up to reality, represent their inte-rests and act in a responsible manner on their ownbehalf and that of others. This emancipatory potentialthat is inherent in freedom does not develop of its ownaccord. Enabling it to blossom is an active and conscio-us social achievement. Those who talk of freedomtoday should not forget to mention responsibility.Human rights and human duties apply here in a com-prehensive sense. Those who derive advantage fromtheir income or wealth have a duty to make an appro-priate contribution to the well-being of all.

This is what distinguishes our concept of freedomfrom that of the economic liberals, who see positivefreedom as posing a threat to negative freedom andthus cannot redeem the promise of freedom for a largenumber of people. A policy of freedom presumes thecapacity to exercise freedom. It must place its faith inequal opportunities for the future, guarantee socialrights and reinforce social standards and values. Thisstems from the realisation that one's own freedom isalways that of others, too.


Although an essentialstrategic resource, theenlargement of the

European Union is now rea-ching its limit, presentingwith increasing clarity andinevitability both an inclusiveand an exclusive aspect: itaims no longer solely at shif-ting the EU's space, but atestablishing a boundary. At

present, we can see that to the East, this boundary has goneon to include the space of the former Soviet Union in addi-tion to the Baltic States, and all the way to Ukraine, excludingRussia. As far as the EU's architecture is concerned, this isfully understandable. But Russia then becomes an essentialtest for EU's future foreign policy - much more than the'politics of proximity' would appear to predict.

At present, Russia is not an international political priority forany of the leading global players, nor does it truly play thisrole, although claiming it. It is a country largely dependenton Western financial, commercial, and technological resour-ces for its economic rebirth, and partnership with the EUplays a leading role from this standpoint. Its ruling class -and still more, its public opinion - continues to claim aEuropean identity, without renouncing a statist and geopoli-tical dimension distinct from the EU. Moscow no longerpresents a threat to Europe, and Western intervention in theformer Yugoslavia cast light on Russia's weak reaction to acrisis that directly implicated long-standing traditions of itsrole in international affairs. In Central Eastern Europe, thelimits of Moscow's influence - harshly underlined by therecent events in Ukraine - are clear enough as not to warrantfurther comment. In brief, Russia is much less important toEurope than Europe is to Russia. After all, the reality that weare getting used to - a reality taken for granted from ourstandpoint, but unheard of for those with memories of thelast century - is one of an inward-looking Russia presentingno challenge at all. All this has allowed us to understate theimportance of its distance-taking from Europe, which appe-ars to be the result of the concrete modes of EU's expansi-

on process.The European agenda was effectively influenced by Polandand the Baltic States through the design of establishing theEU's eastern boundary in the most exclusive terms. This is adesign that takes Russia's civil and political incongruity forgranted, and thus does not concern itself so much with fee-ding it, by fostering the growing divergence between thelegitimate Europeanist aspirations of the former Sovietcountries on the one hand, and the post-imperial frustrati-ons of the Russian Federation on the other. But here a para-dox is created. The promise of democracy and well-beingaccompanying European expansion does not only not invol-ve Russia - and is being made while Russia is taking a diffe-rent road - but may even be seen as a factor contributing towhat is perceived as Russian involution. There is room fordoubt as to whether or not this is in the EU's true interest.There is a great difference between bordering on a Russiasufficiently prosperous and cooperative, more reliable as aconstitutional state, and unleashed from its imperial herita-ge, or on a Russia oscillating between instrumentalised part-nerships, a sense of exclusion, and post-imperial national-ism.The summit between Bush and Putin held in Bratislava thispast February provided a glimpse of America's changingattitude towards the democratic quality of its Russian part-ner, appearing to herald a foreign policy motif for theAmerican President's second administration and an additio-nal challenge for the EU. It remains to be seen whether theEU will be able to meet this challenge. For the time being, itmay easily be seen that neither Putin's meetings with Chiracand Schröder in March nor the summit between the EU andRussia in May 2005 produced a high-profile strategy. Thus,the main change commanding our attention is rather Putin'sattitude. In Bratislava, and even more recently, he has pre-sented commitment to democracy as an irreversible choicelinked to his country's vital interests. He has not raised thetraditional argument of non-interference in internal affairs.Instead, Putin has insisted that democracy must be adaptedto the various national situations, alluding to Russia's inclina-tion to privilege order and state prestige over any manifesta-tion of disintegration and disorder. He thus invoked thelegitimacy of his own centralising action, which is at thesame time a clear rejection of any universalist democraticthrust. It is likely that this response by Putin bears out thosewho maintain that public pressure, like that adopted byBush, can achieve the opposite effect. But the point is thatPutin's words mark a limit to Russia's strategic partnershipwith the West, as apparently inaugurated after 9/11. Now,not only the foreign policy adopted by Putin in the post-Soviet area and the Middle East, but also his claim of legiti-


Putin’s Russia. Love andhatred towards the EU

by Silvio PonsDirector of the Gramsci Foundation

Putin has insisted that democracy must be adapted tothe various national situations

macy for an authoritarian democracy, show the prevalentlyinstrumental nature of Russian policy towards the West.Consequently, Russia poses a thrust towards multipolarismas based upon political and cultural diversity and uponpower politics - potentially incompatible with the multilate-ralist perspective that is the very heart of EU's internationalrole. The relative activism of Russian policy towards Chinaand India (and more recently even towards Turkey) must beseen in this light, which is to say as the search for convergingthrusts rather than strategic alliances. The development ofinternational politics after 9/11 has made an essential con-tribution to this development in Putin's policy. On the onehand, the militarising trend of the 'war on terrorism' in Iraqhas boosted Putin's desire to internationalise the war inChechnya, legitimising Russia's military methods. From thisstandpoint, the alliance with Chirac and Schröder had nostable political significance other than reinforcing a multipo-lar vision implicitly more radical than the neo-Gaullist posi-tion. On the other hand, the wave of democracy in thecountries of the former Soviet Union took place preciselywhile Russia was limiting the range of its political reforms,also as a consequence of the Chechen scourge and its resul-ting terrorism. These two ele-ments show a significant con-vergence that fits into a lon-ger-term process.Currently, two essentialaspects of Russia's transitionare nearing achievement. Thefirst is the birth of a strongpower, which has put an endto the weakness of the institu-tion of the presidency sincethe time of its establishment -and has directed all its energies towards keeping theFederation from falling apart. The second is the sterilisationof what little political pluralism and parliamentary democra-cy existed after the collapse of the USSR. In truth, the con-solidation of the presidency is not merely the affirmation ofpersonal power, but reflects a restoration of the state's aut-hority after a period of perilous disintegration. But the pointis that Putin appears to offer a solution different from thatof his predecessors: abandoning the attempt to yoke theintroduction of the market to a radical reform of the politi-cal system, and, instead, restoring the state's authority.In this sense, the rise of Putin put an end to a phase inRussian history that had been opened by Gorbachev, whilethe recurring comparisons in the Russian press between thefigure of the President and that of Andropov are less super-ficial than one may think - and they do not refer merely tothe common link of the KGB. Market authoritarianism andthe affirmed continuity of the state (which does not evenrefrain from re-evaluating Stalin in a nationalist/patrioticvein) are presented as ingredients of Russia's internationalintegration achieved without westernisation. This is theambiguous basis on which Putin has reconstituted an inter-national role for the country, putting an end to the Yeltsinera's oscillation between cooperation and competition withthe West. Today, the idea of integration between Russia andEurope promoted by Putin goes no further than a highlyselective and conditional involvement.Russia's ambivalence in its relationship with Europe is a cli-

ché of historical and political discourse. The liberal philoso-pher Isaiah Berlin, deeply steeped in Russian culture, spokeof Russia's 'peculiar amalgam of love and hatred' towardsEurope, but firmly believed in its essentially westward-lea-ning character. On the other hand, Russian historian MikhailGefter believed that Russia's place 'in the orbit' of Europeanexpansion could not eliminate a deeper truth: Russia washistorically 'the threshold and the limit' of this expansion.These views appear to translate quite clearly into the contra-dictory reality of our time; and yet, they remain unresolved.Putin's 'controlled democracy' may be considered a Russianinternal issue to be criticised, but one essentially withoutimplications for Europe, or even seen in a positive light as asource of the country's stability. In turn, Russia's multipolarthrust may be deemed too weak to truly influence the inter-national system, or alternatively, a useful buffer of anti-Americanism. But taken together, these two factors outlinea perspective that brings us face to face with all the problemsinherent to the main challenge of our times: the difficultrelationship between security and the expansion of demo-cracy.


The idea of integration betweenRussia and Europe promoted by

Putin goes no further than ahighly selective and conditional

involvement

The PES Group position in the run-up to Hong Kong

For the Socialist Group, the EU's guiding objectives adopted in November 2005 ahead of HongKong had to be:

- resolute support for a multilateral trade system which puts trade at the service of sustainable development, full employment and the effective management of globalisation for the benefit ofall;

- a successful conclusion to the Doha Development Agenda (DDA), in the interests of global economic recovery and jobs and the future of multilateralism;

- a genuine "pro-development" outcome, which will contribute to poverty reduction;- aligning the EU's negotiating stance more closely to our citizens' priorities - including the

highest social and environmental standards, and managing and reforming globalisation;- ensuring coherence in the policies of the WTO and other international organisations, in the

service of the UN's Millennium Development Goals.

Developed countries must deliver on the promise that this round is fundamentally and centrallyabout development. It would be a mistake to believe that this means industrialised countries mustforego their own interests. For three reasons, neither trade nor development is a zero-sum game:

- a true development round would be a huge step towards a more stable, democratic, prosperousand secure world; poverty and underdevelopment are breeding grounds for the most potent threats to Europe's security and stability;

- the biggest beneficiaries of more open EU markets are EU citizens;- greater prosperity in Africa, Latin America and Asia also means stronger markets for our future

exports.

In its own interests, as well as those of the developing world, Europe should have few higher foreignpolicy priorities than the fight against poverty and underdevelopment.

Agriculture

The success of the agricultural negotiations is an important prerequisite for the overall success of theDoha Round, in view of the priorities of the developing countries, and the steps that must be taken,not only by the EU but by all developed countries. The issues at stake include a substantial reductionin trade-distorting domestic support and a phasing out of all export subsidies. All forms of export sup-

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Hong Kong: Time to Deliver onTrade and Development

The WTO's Hong Kong Summit was one of the key events in ayear in which world leaders committed themselves to a major

breakthrough in the global effort to combat poverty. Areformed world trade system should play its part in that effort.

Harlem Désir, Vice-President of the Socialist Group in the European ParliamentErika Mann, PES Group Co-ordinator in the Committee on International Trade

Erika MannHarlem Désir

port should be phased out within 5 years in all developed countries, including hidden support in the US,Canada, Australia and New Zealand through export credits, food aid, export trading enterprises. A sig-nificant improvement in market access for poor countries attempting to export into the developedworld has to be achieved. All developed countries should, by 2010, also follow the EU's lead in granting free market access to the products of LDCs (Least Developed Countries).

The new mechanisms of the reformed CAP and the EU's multi-functional and sustainable agriculturalmodel must be maintained. The EU must have the right to provide non-trade distorting policies andmeasures related for example to environmental, rural development or animal welfare goals through poli-cies which qualify for the "green box" and which are totally decoupled from production.

There should also be as much opening as possible of developed country markets to developing coun-try exporters, including the elimination of tariff peaks and tariff escalation, but with a realistictimetable, to allow for an orderly transition.

Measures regarding export subsidies, domestic aids and market access should be applied in parallel byall developed-country WTO members.

Agricultural negotiations must aim for a substantial improvement in market access. There should bereductions in all forms of export subsidies with a view to progressive withdrawal, substantial reductionsin all domestic support with trade distorting effects, special and differential treatment for developingcountries, according to their development needs, including in food security and rural development mat-ters, and taking account of other non-trade considerations.

There must be a far-reaching solution to the problems of cotton and sugar, to ensure that developedcountry subsidies and tariffs do not destroy livelihoods in developing countries. On cotton, all exportrelated support for cotton production in developed countries and all distorting domestic support mustbe eliminated as rapidly as possible, certainly no later than 2010. Since the EU has already taken stepsto reform its cotton market the negotiations must require the USA, as by far the greatest source of tradedistortions in cotton, to eliminate market distortions by cutting production related support by 50% by2008, with substantial reductions thereafter.

Alongside these changes, there must be support programmes for structural reform for farmers andworkers in the EU cotton sector and development support measures for the developing countries.

Rational and concrete solutions should be found in the sugar sector to avoid market distortion througha global agreement to eliminate export subsidies as rapidly as possible and a gradual reduction in tariffsand domestic support. The EU must be prepared to provide adequate adjustment assistance not onlyto EU producers and refiners, but to workers and regions dependent on sugar production. ACP andLeast Developed Countries producers should benefit from more generous tariff quotas and adequateEU financial support.

The Luxembourg agreement of 26 June 2003 on CAP reform must be taken forward applying consistent principles in the sectors which have not yet been included in the 2003 - 2004 decisions andthe other developed countries must make equally ambitious agricultural concessions, in order to pre-pare the ground for the implementation of the agreement, supporting both the rural way of life andrural jobs. The erosion of trade preferences, notably those granted by the Cotonou Agreement and theGSP, must be dealt with.

The agricultural products and tariff measures that the European Union must negotiate with its tradepartners must be subject to social and environmental criteria which respect binding international con-ventions on social standards, management of natural resources and food safety. The European Unionmust be able to protect its most fragile agricultural sectors, in particular the fruit and vegetable sector.

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Non-agricultural market access (NAMA)

The EU's positions in the NAMA negotiations must reflect its commitment to a development round.It must take account of the needs, both of the poorest and of more advanced developing countries topromote industrialisation and economic diversification and to safeguard employment. Tariff measurescan have an important role to play in these processes. The formula adopted for tariff reduction must,therefore, respect the principle agreed in Doha of "less than full reciprocity". The agreement must allowdeveloping countries and LDCs some room for manoeuvre in their development strategies and mustnot undermine employment and economic diversification.

There must also be a significant reduction in trade barriers while calling upon the rapidly growing developing countries to assume their share of responsibility in ensuring the success of the round.

Finally, non-tariff barriers that often hinder access of poorer countries' products to developed coun-tries' markets should be eliminated to the extent possible and technical assistance should be offered, toimprove trade facilities.

Services

Public services cannot be treated just as a product traded on the free market. These services are not amatter solely of consumer choice, but also of basic human need. They should not be dismantled orundermined. The EU must honour its commitment to make neither offers nor requests in the areas ofpublic health and education. Services related to the fulfilment of people's basic needs, such as accessto water, sanitation and energy, or which play a key role in cultural identity, such as audio-visual servic-es, should not be threatened through GATS negotiations. Negotiations on services must be demystifiedthrough enabling full access to requests and offers for the European Parliament, national parliamentsand civil society as a whole - the full text of offers and requests should be made public at the time oftheir transmission.

A genuine development round?

The most important test of whether the Doha Round is genuinely a development round will be the out-come of negotiations on the three big dossiers of agriculture, NAMA and services. WTO rules on spe-cial and differential treatment should be strengthened. Developing countries argue that these havebeen largely ineffective. The position of industrialised countries is that no permanent exemptions fromWTO rules are possible and longer implementation periods are offered instead. WTO rules on intellec-tual property (TRIPS) also continue to pose many problems for developing countries. A permanentsolution on public health must be found and measures taken to ensure full implementation of thebreakthrough Doha agreement on TRIPS & public health. Developing countries also have a specialinterest in trade facilitation and technical assistance.

Flexibilities for developing countries, with a special focus on the LDCs, small and vulnerableeconomies, islands and land-locked countries, should be strengthened in all areas of the final Dohapackage. Although trade has positive effects, imbalanced trade relationships can also lead to economicdependency and a loss of a society's ability to govern its own affairs. WTO developing country mem-bers must be allowed to decide on their own trade liberalisation and must not be required to undertakemore than they can handle according to their level of development. Regarding agriculture negotiations,the WTO should introduce a "development box" for the least developed countries (LDC), so that theycan tackle food safety and rural employment. The EU must press hard to ensure that technical assis-tance and capacity building are adequately resourced. Measures should be agreed to promote South-South trade, in particular regional trade.

Trade, coupled with aid and debt relief, has an essential role to play in the achievement of theMillennium Goals. It is essential that trade measures are designed in a way that does not undermine theinternal development and poverty reduction strategies of the developing countries themselves.

The Socialist Group believes that the Hong Kong Summit must contribute to the Millennium Goal of

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increased development aid, by establishing a multilateral "aid for trade" facility for poor developingcountries. This should be in addition to, and not instead of, reform of trade rules to fully recognise theneeds of developing countries and there must be no conditions attached to the money.

After Hong Kong, what next?

WTO members gathered in Hong Kong with low expectations as talk of success and agreement hadbeen played down on all fronts. In the months leading up to Hong Kong, it had proved difficult to nar-row the gaps between the EU, the USA, the G20 group of mainly large developing countries and theG90, which unites LDCs, the African Union and the ACP/Cotonou countries.

In a move partly designed to ensure that the summit produced at least some tangible results, WTOnegotiators proposed a "development package", to be agreed in Hong Kong and implemented ahead ofthe completion of the round as a whole. Its key elements were to be:

- all developed countries should follow the EU example by giving LDCs duty and quota free market access on all products (except military products, under "everything but arms").

- a major commitment of funds to "aid for trade"- a solution to the cotton problem- strengthening of some aspects of special and differential treatment for developing countries

and LDCs.

In the course of the Ministerial, this proposal was eroded somewhat as the USA in particular, insistedon some exceptions to the duty free - quota free element. On cotton, there was a small step forward -with the principle of scrapping trade-distorting domestic subsidies agreed, although without atimetable. The aid for trade element remained, but there is a very real worry that this may be financedby diverting money away from existing development budgets.On the three big trade dossiers, the summit approved small steps towards a final agreement. Agreementwas reached to scrap agricultural export subsidies and to stop the abuse of food aid, state trading enter-prises and export credits - all by 2013. The developing countries regained some ground on NAMAthrough two victories:

- the Hong Kong declaration allows for different coefficients to be used to calculate the tariffcuts required of developed and developing countries, which will moderate the otherwise unfairimpact of the negotiating formula on the latter; and by leaving open the question of how manycoefficients there should be, the Hong Kong text allows developing countries to get closer to their preferred position that they should have more autonomy to decide individually what levelof market-opening to aim for;

- the text also establishes a link between the level of ambition on NAMA and the degree of agricultural market-opening, something for which poor countries had fought hard.On services, Hong Kong agreed a text which obliges all WTO members to participate, if so requested by another member, in plurilateral or sectoral negotiations, and includes language onthe scope of those negotiations more favourable to developed country interests.

On all the big trade dossiers, the texts agreed can best be seen as giving some new tactical gains, for thenegotiations still to come, to one group or another. Very crudely: tactical gains for agricultural exporterson the agriculture dossier; for developing countries on NAMA and for developed countries on servic-es. But all the big issues remain to be negotiated, and ground won or lost at Hong Kong can still bereconquered by the various participants. The bigger questions that remain are:

- whether, in the time available, negotiators can achieve a final deal.- and whether this will genuinely be a developing round.

Back in Brussels, the Socialist Group will be arguing for the European Parliament to step up substan-tially activities on the Doha Development Agenda (DDA), to ensure maximum public pressure on theEuropean Union's negotiators to ensure a positive answer to both of these questions.

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Special Supplement

1. Introduction

Over the next few years the European Union has a number of key questions relating to the westernBalkans that will have to be answered and that will not only be decisive for the political, economic andsocial development of that region, but will also be of the greatest importance for peace and stabilitywithin the Union.

Ever since the break-up of the former Yugoslavia, the European Union and its member states have,together with their international partners, made great efforts, militarily and financially, to bring an end toconflicts in the region and to support the development of new structures. Since 1999, programmes forreconstruction and stability in the region have been linked to a promise of future involvement of thecountries in the western Balkans in the policies and structures of the European Union.

At its meeting in Thessaloniki in June 2003, the European Council reiterated its determination to fullyand effectively support a European perspective for the western Balkan countries, which ultimately, oncethey meet the established criteria, will become an integral part of the Union. The "Thessaloniki Agendafor the western Balkans" and the Union's "Stabilisation and Association Process", create a Europeanframework for the western Balkan countries on the way to possible accession at some stage in the future.

Croatia is the first country in the Western Balkans, which has started the negotiations for accessiondirectly after the announcement by UN chief prosecutor Carla del Ponte that Croatia is "fully cooperat-ing" with the International Criminal Tribunal for the former Yugoslavia (ICTY). The Former YugoslavRepublic of Macedonia (FYROM) submitted its formal application for membership of the EuropeanUnion in March 2004 and tabled the necessary documents for this application on 14 February 2005. On9 November 2005 the European Commission proposed to accept FYROM as a candidate country. Butthe positive developments in these two countries do however not mean that the general perspective fora long lasting peace and stability in the region is already positive.

The International Commission on the Balkans says in its report "The Balkans in Europe's Future": Theregion is as close to failure as it is to success. For the moment, the wars are over, but the smell of vio-lence still hangs heavy in the air. The region's profile is bleak - a mixture of weak states and internation-al protectorates, where Europe has stationed almost half of its deployable forces. Economic growth inthese territories is low or non-existent; unemployment is high; corruption is pervasive; and the public ispessimistic and distrustful towards its nascent democratic institutions.

The European Union's commitment to a future for the western Balkans must not be seen as a rewardfor the achievements made so far. However, only the European Union can act as a real engine for changein this still vulnerable region with the power to lever reforms and the press for justice and reconciliation.

A European future for the Western Balkans

Socialist Group Special Supplement in Social Europe the journal of the european left December 2005 v

This region has the potential to be aprosperous part of a prosperous Europe

Giuliano Amato on the Balkans May 2005

Jan Marinus Wiersma Hannes Swoboda

Socialist Group Special Supplement in Social Europe the journal of the european left December 2005 vi

Only those countries willing and able to carry out reforms will become stable countries.

The European integration strategy with the potential of EU membership at the end of the process mustbe the ultimate incentive to reform. Reforms are undoubtedly necessary if there is to be lasting peaceand stability in the western Balkans, a European region which will soon be completely encircled by EUmember states.

2. Strict conditions

European Socialists and Social Democrats inside and outside the European Parliament have alwayssupported this strategy of achieving reforms by offering the possibility of closer and closer ties with theEuropean Union. It is in the interests of all European citizens to have peace and stability in the westernBalkans although we are under no allusions that for some countries the timescale is long and uncertain.

Whilst not erecting more barriers and obstacles, we must insist on the fulfilment of all the basic criteriabefore any further steps can be taken. Substantial progress must be made towards meeting the politicalaspects of the Copenhagen criteria before stability and association agreements can be concluded and fulladherence to and implementation of these criteria must be guaranteed before accession negotiations canbegin. For the countries in the western Balkans this means:

- unconditional co-operation with the International Criminal Tribunal for the former Yugoslavia (ICTY);

- respect for the rule of law and human rights;- respect for the rights of minorities and implementation of all relevant legislation including guar

antees for the return of refugees;- democratic and legitimate constitutions and institutions;- stepping up a proactive fight against crime, corruption, the trade in human beings, illegal arms

and illegal substances.

The Nice Treaty is not an acceptable basis for decisions on the accession of any more new memberstates. The European Union must put its own house in order before any final decisions can be taken onthe accession of any new member states.

3. A joint strategy for the whole region

Each country in the western Balkans must of course be judged on its own achievements but an overallstrategy with shared objectives for the whole of the region is needed. Respecting existing borders, thecountries of the western Balkans must learn to address common challenges together. Interdependenceis crucial to the future of the Balkans. These are small and for the most part unattractive markets whoseeconomic sustainability depends on the creation of a common economic area attractive to foreigninvestors. A regional approach is therefore a necessary precondition for development.

But a regional approach backed with European incentives must also deal with the on-going dreams ofgreater Albania and greater Serbia, must reduce ethnic inequalities and thereby pull the rug from underthe feet of those who would see instability and conflicts perpetuated within the region.

Regional development and investment programmes, joint education and employment initiatives, com-mon transport and tourism projects should eventually lead to the establishment of "membership-simi-lar" mechanisms: a joint Balkans customs union or joint participation in CFSP activities for example -well in advance of any possible EU membership.

4. Economic and Social Development

One of the features common to all the countries in the region is the rapid and solid growth experiencedin the years following the crises and turbulence of the 1990s. Annual real GDP growth in the region hasbeen above 4% since 2001 (5% in 2004). In 2004, for the fourth consecutive year, the economies of the

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countries of South East Europe grew faster, on average, than those of the new EU member states in centralEastern Europe and the Baltic. Growth in Albania has been particularly strong. Only the Former YugoslavRepublic of Macedonia has relative growth problems.

Yet this growth has not been translated into more and better jobs for the people of the region. Bosnia andHerzegovina, the Former Yugoslav Republic of Macedonia and, to a lesser extent, Serbia and Montenegro,still suffer from extremely high levels of unemployment - over 40% in Bosnia - Herzegovina and theFYROM and 30% in Serbia and Montenegro. Albania also has a relatively high rate of unemployment incomparison to the EU average although it has recently begun to decline.

A particularly worrying feature of unemployment in the region is that it is persistent and long-term hittingin particular young people, unskilled workers, people with disabilities and people with health problems,women with small children, members of some disadvantaged ethnic minorities (such as the Roma) and othervulnerable groups, such as the displaced, refugees and demobilised soldiers.

5. European Assistance to the western Balkans

Since the break-up of the former Yugoslavia, the European Union has given considerable support to overcoming the conflicts and to economic and social reconstruction in the region.

Between 1991 and 2004, the European Union committed € 6.8 billion to rebuilding the countries of the western Balkans. Current support for the western Balkans is provided through a mixture of instrumentswithin the framework of the Stabilisation and Association Process. New instruments must be developed withthe goal of future membership of the European Union in mind.

6. Croatia

Over the past few years, Croatia has shown positive political, social and economic development. It now hasestablished democratic institutions and its per capita GDP is well above the level of most of the new EUmember states.

At the end of 2004, the European Council decided to open accession negotiations with Croatia on conditionthat there is full cooperation with the ICTY in The Hague in bringing to trial indicted war criminals.Unfortunately this condition had not been met by the due date for the start of negotiations. Council decided to postpone talks until full co-operation had been guaranteed. Finally, on 3 October 2005, Croatia's accession negotiations were given the green light by the UN Chief Prosecutor who announced that, "for afew weeks now, Croatia has been cooperating fully with us and is doing everything it can to locate and arrestAnte Gotovina.".

We would urge Croatia to continue to cooperate fully with the ICTY and to make headway in returningrefugees and protecting of minority rights, the fight against crime and corruption, in improving its judicialprocedures and in making the negotiation process a success.

7. Former Yugoslav Republic of Macedonia (FYROM)

FYROM is perhaps the best example of a country where the incentive of European integration combinedwith an internal desire for peace has worked miracles. FYROM was able to prevent full-scale civil war througha process of negotiation supported by the EU and the United States.

The government presented in February its request for accession with the answers to 4,000 questions whichshould enable the European Commission to present its opinion on FYROM's readiness to start accessiontalks with the Union. FYROM is a modest but significant success story.

The Ohrid agreement on cooperation between ethnic Albanians and ethnic Macedonians has strengthenedboth FYROM's institutions and society as a whole. This agreement has been an instrument in overcoming

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internal conflicts and coupled with a determined approach to EU membership should have a powerfulsymbolic effect on the other countries in the region.

It should not be forgotten though that FYROM remains one of the poorest countries in Europe, inurgent need of economic growth and new jobs.

Hopefully the Commission will soon be in a position to give a positive opinion on FYROM's request tostart negotiations on the country's future accession to the European Union. During the negotiationprocess, FYROM must continue to give priority to meeting the basic conditions for membership of theUnion, notably the strengthening of the Ohrid agreement and thus the country's future stability. It isalso important that FYROM and Greece do everything they can to find a mutually acceptable solutionto the still unresolved problem of the country's name

8. Albania

Although Albania has recently benefited from positive economic growth, it remains one of the poorestcountries in Europe and economic progress has not led to comparable social progress. Respect for dem-ocratic institutions and procedures, for the rule of law and basic human rights and the fight against corruption and organised crime lag well behind the developments in some other countries in the region.

Although negotiations on a stabilisation and association agreement began in February 2003, a conclusionis still not within sight and is largely dependent on the capacity and commitment of the Albanian authorities to implement a number of key reforms. Particular attention must be paid to the fight againstcrime and corruption and the further development of a political culture rooted in political and social tol-erance.With the Socialist Party having lost the elections and its government responsibilities, it should - together with other progressive forces - take the opportunity to become the leading force for democrat-ic change and the modernisation of the political and social landscape in Albania.

9. Bosnia and Herzegovina

Since the Dayton Agreement brought an end to the most violent and barbaric civil war on the Europeancontinent in the past 50 years, Bosnia Herzegovina has existed as a protectorate; firstly of the interna-tional community and more recently of the European Union. Important steps have been taken in developing state institutions based on ethnic cooperation and fully-fledged constitutional institutions arebeginning to emerge. Involvement of the international community, in particular of the European Union,in the governing bodies of the country is waning. Key to the successful development of BosniaHerzegovina will be the support given to it by neighbouring countries and full respect of the basic prin-ciples of the Dayton Agreement.

A period of total independence and self-government is a pre-condition for any future accession to theEuropean Union. To that end, it would be helpful were conditions for negotiations on a stabilisation andassociation agreement with the European Union (reaching an agreement on police restructuring) to beachieved before the end of 2005 with a conclusion soon thereafter. In the framework of this agreement,priority must be given to scaling back the international presence in running Bosnia-Herzegovina's affairs.

10. Serbia and Montenegro, including Kosovo

The Federal Republic of Serbia and Montenegro has made economic and social progress and has takensteps forward in its co-operation with the International Criminal Tribunal for the former Yugoslavia.Recognising these achievements, the Council has decided to start negotiations with Serbia andMontenegro and the conclusion of a stabilisation and association agreement is the first step along thisroad. But there are still serious issues to be tackled with regard to the fight against corruption and organised crime.

The really big issue facing the country in the coming year is the question of separation and/or cooper-

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ation between Serbia and Montenegro on the one hand and a possible arrangement for the final statusof Kosovo on the other. Closely related to this question is the potential re-emergence of violent nation-alism. The Serbian authorities must guarantee the rights of all minorities in the country, including thepeople of Vojvodina.

Should a majority in Montenegro vote in the referendum for separation, people who wish to continuethe relationship with Serbia must be protected. New forms of co-operation between an independentMontenegro and Serbia would have to be created in such a way as to avoid any new tensions and conflict in the region. As far as Kosovo is concerned, it is clear that the status quo cannot be maintainedand that a return to the Milosevic era must be completely excluded.

The most probable and also most acceptable alternatives for Kosovo are the formation of anautonomous region within Serbia (everything but independence), or independence with internationallyassured guarantees of continued cooperation with Serbia and for the protection of the Serbian, Romaand other minorities in the region. Whatever agreement is reached, priority must be given to creating theconditions for a return of all refugees, the protection of minorities and the fight against crime and corruption in this vulnerable region.

11. Final concluding remarks

The Socialist Group in the European Parliament attaches great importance to the establishment of sus-tainable peace and on-going stability in the western Balkans. This would not only be good news for theregion but also for the whole of the European continent. The Group will continue to lend its full sup-port to the European integration strategy for the western Balkans in the framework of the ThessalonikiAgenda. The overall objective of this strategy must be to assist the countries of the region in fulfillingthe conditions for a step-by-step integration into the policies and the structures of the European Union.Priority must, in the first instance, be given to these countries that meet the political Copenhagen criteria. The European Union must, for its part, ensure that it has the capacity to absorb any new mem-ber states. The Nice Treaty is not an acceptable basis for further decisions on the accession of any newmember states.

We would like to express our special gratitude to Chloé Aublin whohelped a great deal in the development of this issue.

All the views expressed in the articles of this issue are those of theauthors and do not necessarily represent the views of Social EuropeForum.

All rights reservedSocial Europe Forum© 2005


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