Speech SIEPS annual conference, Stockholm 03 September 2008
Cecilia Malmström, Minister for EU Affairs

Speech at the SIEPS annual conference

Global challenges to development:
The EU's role in a changing world economy.

Ladies and Gentlemen!
Thank you for giving me this opportunity to once again address the annual conference of SIEPS.

Since some time now, we are experiencing a period of fast and worldwide changes in economic activities and trade patterns - a period of fast growing markets and new investors in research and developments, changing the roles between the "old" and the "new" actors on the global market. Or to put it in figures: The share of total world export from the developing countries, including emerging countries like China, India and Brazil has increased from 22 per cent in 1980 to 32 per cent today and is expected to reach an estimated share of 45 per cent in 2030. Globalisation of research and technology is accelerating and countries like China and India are increasingly exporting not only labour-intensive manufacturing goods but also high-tech goods and attract increasing amounts of R&D investments.

Today there are more Internet users in China than in the United States. These world-wide changes are understood as a threat by many people in Europe. The way I see it, they are opportunities! Hundreds of millions of people have escaped poverty and are now able to buy food as well as mobile telephone services, increasing our prosperity.

Through history economic development and welfare in Europe and elsewhere, have been built on trade and economic integration between regions and countries. This has been true in the past and will remain true in the future. Increased economic integration in combination with a rapid development of communications technology brings new markets, competitors and trade partners closer. It means enormous opportunities in terms of business activities and economic development. It offers better possibilities to tackle common global challenges rising from climate change, poverty and instability in the world. But it also means increased pressure on markets, companies and individuals to adapt to changes and new demands.

Consequently, globalisation has moved into the very heart of the EU policy agenda during recent years, but also into the consciousness among people, raising both hope and fears.

As a result, we can see a growing defensive attitude towards globalisation and an alarming tendency towards protectionism in the debate as well as in policy making. This is worrying.

An open, dynamic and competitive economy means changes calling for adjustment by businesses and individuals. Even though the long term gains from globalisation far exceed the costs, these costs can hit hard on individuals, employees, companies and regions in a short term perspective. The ongoing discussion on Social Europe gives the impression that we have the choice of protecting our economies and jobs from global competition by striking a balance between economic growth and social objectives. But let's make it clear. Today around 18 million Europeans are in fact unemployed and some 90 million are inactive and not part of work life. We can not safeguard Europe's social model without sustainable growth and long term sound public finances, but also equally true, we can not ensure sustainable growth without a well functioning social model promoting an employable and well educated labour force as well as providing support and new opportunities for those in need. Let me quote the Swedish minister of Labour Mr Littorin, "Social Europe starts with a job!"

Sweden's ambition is for the EU to be the world's most important open economy. Openness leads to mutual economic growth and prosperity. It is good for businesses, for competition and for consumers. Access to third countries' markets enhances European growth. Openness to competition from abroad spurs Europe's industry to strengthen innovation and productivity, leading to higher growth and more jobs, not only in Europe but also globally.

Lisbon Strategy

The European strategy for growth and jobs, the so called Lisbon strategy has been and should remain a key instrument for Europe to respond to globalisation. The Lisbon strategy is about creating conditions for sustainable growth and prosperity for the citizens of Europe by promoting open and dynamic markets, investing in human capital, promoting a more dynamic and innovative business climate and increasing labour supply and employment but also to secure energy supply and fight climate changes. We need to do this together, the successes and shortcomings of economic and structural reforms in one member state are no longer only an issue of national concern.

In many respects the strategy has been successful, reflecting the challenges that Europe faced in 2000. The relaunch of the Lisbon Strategy in the spring of 2005 gave new impetuous to the strategy and a new more efficient procedure to implement and follow up the results of the strategy. Major reforms and decisions have been taken, both on EU and national level to improve the internal market, to increase competition and to modernise the labour markets in the member states. For the last two years more than 6 million jobs have been created. The strategy has also provided a forum for EU to discuss and formulate common challenges and policy approach, as well as to exchange good practice and experiences.

But I would not be honest if I didn't admit that the results have been mixed and left room for disappointments and criticism. Especially during the first years of the strategy, the EU and the member states showed limited progress due to lack of political commitments and ownership as well as slow implementation in the national policy. The results are uneven and fragmented between policy areas and between member states. In the complexity of the strategy, it is easy to get lost among sub-targets and indicators, mixing up goals and means. Policy makers tend to use one target as an excuse for not taking onboard another and sometimes fall for the temptation to choose an easier short term route instead of a tougher but long term sustainable solution.

However, the target date of the Lisbon Strategy, 2010, is rapidly coming closer and even though major progress have been achieved, it is clear that most targets of the strategy will not be met. Much more needs to be done to respond to the challenges of the next decade.

This breaking point of the strategy will therefore offer an important opportunity to invigorate the strategy, to rethink aims and priorities, develop the strong parts of the strategy and improve the weak parts based on the experiences from the last 10 years. This was also recognised by the European Council in March this year when the heads of state and government stressed that "a continued EU-level commitment to structural reforms and sustainable development and social cohesion will be necessary after 2010" and "invited the Commission, the Council and the National Lisbon coordinators to start reflecting on the future of the Lisbon strategy in the post 2010 period".

Ladies and Gentlemen!
To my mind, Europe needs a more focused strategy, a strategy that consists of coherent reforms and measures paving the way for smart growth, combining long term growth and full employment with an eco-efficient economy. It needs a strategy which increases the ability of Europe to anticipate, embrace and adapt to the challenges ahead by:

- reaping the benefit from globalisation, expanding new markets and competitors. Europe must stay at the cutting edge of global competition, research and innovation.

- decoupling economic development from climate deterioration, by transforming Europe to an eco-efficient economy.

- and finally, increasing labour supply and hours worked in order safeguard our social model meanwhile ensuring sound and sustainable public finances.

How do we do this? Well we need to find a proactive policy for internal and external openness. We need to continue developing the internal market to ensure free movement of labour, goods, services and capital. The single market is without doubt one of the greatest achievements of the European Union. But we must also find a policy for openness that increases our access to third countries markets and theirs to ours - we must suppress the belief that we can solve our problems by raising barriers towards the outside world.

Furthermore we need to make crucial reforms to the labour market and the welfare systems to strengthen the incentives to work and to provide people with the opportunities and skills to adapt to changes and facilitate their return to paid work.

We need to make Europe a global leader in developing a climate and environmentally sustainable society. A progressive and coherent policy within the EU to safeguard sustainable environmental development, a sustainable energy supply and tackle climate change is crucial for long term growth and quality of life in the Member States but will also to set the standards globally. To reduce green house gas emissions and adaptation to climate change includes various actions that need to be taken by all countries. It calls for a strong commitment from the EU to take significant steps to promote research and development of new energy sources and new technology as well as facilitate transition to a more energy efficient society.

And finally, we need investment in human capital. Ageing and globalisation both require Europe to make full use of the labour force potential as well as increase productivity growth through investment in knowledge and skills. High standard of education and research as well as a coherent policy for labour immigration will be necessary if Europe is to cope with its demographic challenges.

Presidency 2009

It will certainly be an important task for the Swedish presidency in autumn of 2009 to bring forward the discussion on the growth strategy for the next decade and pave the way for at renew and revitalized strategy in the run up of the spring council in 2010.

- We will work for a strategy for transforming Europe to an eco-efficient economy with focus on crucial structural reforms.
- We will work for an open free trade policy.
- We will press forward the work to further develop and deepen the internal market and further exploiting the services sector's growth potential.
- We will pursue the work to reduce the administrative burden and work for better regulation.
- We will put the matter of labour supply high on the EU agenda and intensify the discussion on the reforms needed - both on national and EU level - to combat labour market exclusion and increase participation and labour supply in a time of aging population.
- We will put efforts to devote resources to research, innovation, better education and training systems and to develop the European Research Area.
- We will work to adapt the EU budget to new demands and priorities, better reflecting today's objectives of the Union and the true European added value of common action based on the principles subsidiarity, proportionality and sound financial management.

I would like to finish my contribution to this debate by pointing at the fact that that many citizens, in Sweden and in other Member States, see the EU as something distant, complicated and bureaucratic, something that has nothing to do with them. The Lisbon Strategy is, as I see it, an important example of the opposite: EU cooperation which is about creating new opportunities and greater freedom of choice for its citizens, and by that also greater security and welfare. We must now carefully evaluate what we have achieved and learn the lessons for the coming ten years. I am convinced that the future economic development and prosperity of Europe depends on how well we together in the EU can respond to the opportunities and challenges and present clear and decisive policy directions for the future.

Thank you for your kind attention!