Speech Helsinki 03 March 2008
Cecilia Malmström, Minister for EU Affairs

Speech at the conference A Nordic-American dialogue

Thank you for inviting me to this event, it is indeed a great honour to be here. The question raised for the discussion here is "demographic change and Globalisation - is the European Union ready to face the challenges". My answer is - We'd better be!

Two major challenges - What do they look like?

Today around 18 million Europeans are in fact unemployed and some 90 million are inactive and thus not part of the work life. That means that one out of three of the population in working age is not working. That is off course a personal tragedy for the individual, but also a general economic problem for the society as a whole. At the same time we know that the population of Europe will most likely decrease and get older. The working age population is expected to fall by 16 per cent, or 48 million people, between now and 2050. The population aged 65 and over is likely to rise sharply. This means that Europe will go from having four people of working age for every elderly citizen today to a ratio of two to one by 2050, thus putting substantial pressure on the social welfare systems in the member states. This will of course have major consequences for the stability of public finances and the economic development.

Right now, we are all experiencing a unique period of fast and worldwide changes in economic activities and trade patterns. 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, but also increased pressure on markets, companies and individuals to adapt to changes and new demands.

The European answer is the Lisbon strategy

The answer of the EU to globalisation and demographic change writes The European strategy for growth and jobs - the so called Lisbon strategy. The common challenges from globalisation and aging population were the rationale behind the decision taken by the heads of States and Government's in Lisbon 2000 on a joint strategy for growth and jobs.

The Lisbon strategy is about creating conditions for sustainable growth and prosperity for the citizens of Europe by creating 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. Not a small task!

Are we successful? - Too slow and a tendency to protectionism

Has the Lisbon strategy been successful? I would like to say both yes and no. The strategy has undoubtedly created a forum for the EU to discuss and formulate common challenges and policy approach, to exchange good practice and experiences. Major steps have been taken to improve the internal market, increase competition and modernise the labour markets.

But the implementation of reforms are too slow, the results are uneven and much more needs to be done.

We have the ambition and we have the right instruments but we lack action. It is not only a question of setting the diagnosis and describing the right medicine. The patient must take the medicine as well. Today we can see a tendency of reform fatigue and, an even more serious problem, an increased tendency towards protectionism.

Nordic countries - good examples?

The challenge for Europe is to reap the benefits of globalisation, increased international trade and competition by promoting openness and improve our ability to embrace those changes. Here the Nordic countries can serve as good examples for Europe with an economic structure that combines free trade, open well functioning markets, high investment in R&D and education with a modern welfare system providing security and facilitating transition from one job to another. It has not only improved the dynamism of the economy but also strengthened the sense of security and a promoted a more positive attitude towards globalisation among the citizens.

The way for Europe

Throughout the history economic development and welfare in Europe, and elsewhere, have been built on trade and economic integration between countries. This will be true also for the future. We must welcome increased international trade, new markets and trade partners as opportunities not as threats. All evidence shows that 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.

The internal market in the EU with the movement of people, goods, services and capital is one of the greatest achievements of the European Union and without doubt our most valuable competitive advantage in a global world. It's an important driving force for growth and jobs. The fundamental principles of the Internal Market lay a solid foundation for further trade liberalisation in a global context. The Internal Market rules can be an inspiration for trade arrangements and provide a model for free movement globally.

But the internal market can not be taken for granted. The functioning of the Single Market must be considerably improved. There are still barriers to the four basic freedoms and new ones continuously arise.
We need to further improve the conditions for European enterprises including better regulation, good governance, sound and free competition, functioning venture capital markets and commercialising of results of research and innovation.

Europe must pursue reforms of the labour markets and the welfare systems to strengthen the incentives to work and provide people with opportunities and skills to adapt to changes and facilitate their return to paid work. Reforms in national policies in the member states need to enhance employability and remove barriers to the labour market. And we need to create favourable conditions for people to work longer. Pension systems must be reformed so that it is profitable to stay in the labour market also after the age of 65 (and even younger in some EU countries!) . It is important that we recognise that there is no inherent conflict between creating the best conditions for economic growth, employment and an inclusive society. These three are mutually supportive.

Ageing and globalisation both require Europe to making full use of the labour force potential as well as increase productivity growth through investment in innovation and skills, underpinned by competitive business environments. It is vital for economic growth and prosperity to gain a high standard of education and research. A well-educated labour force and high quality in higher education lays the ground for future research and development and thereby creates growth and prosperity. But, globalisation of research and technology is accelerating and Europe can not afford to lag behind. Emerging 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. Europe is increasingly dependent on knowledge rich, high-tech goods and services, and need to sustain a competitive edge in knowledge and innovation.

Immigration - one of the answers

To be able to fully address the needs of the demographic ageing of our population the EU needs to, at a full extent, use the labour force in the European Union - young people, women, immigrants and elderly. It is only by using the existing human capital, and by investing in and high-quality education and skills policies throughout the lifecycle, that Europe can meet the challenges of demographic change.

One complementary solution to serve the needs of the demographic ageing of our population is legal migration. We must not build walls around Europe. The scale and scope of international migration, as well as the complexity of migration issues, has grown substantially in recent years. The need to develop innovative ways to maximize the positive effects of legal migration for the benefit of all is thus more important than ever.

We urgently need to facilitate the growth of the European labour force by opening up the Union for legal migration from third countries. here I think we can learn a lot from US experiences. Having said that, it is clear that labour migration is not the only solution. And migration has obviously many other positive effects than just being a regulator of the labour market.

Migrants can contribute to making our economies more diverse and vibrant. Moreover, by offering expanded opportunities for legal migration, the EU can become a credible counterpart and we can promote closer relations between the EU and third countries. It is only through the formation of real partnerships and mutual understanding between the EU and its partner countries that efforts to facilitate legal migration will succeed.

When the heads of state of the EU launched the Lisbon Strategy the goals were set to 2010. Well, we are almost there and it is clear that although we achieved a lot, there is still a long way to go. A new Lisbon Strategy must be sharper and focus even more on the important challenges of demographic change and globalisation. It will have to include further reforms of the labour market, investments in research and life long learning, promoting entrepreneurship and focusing on job creation, employability and pension reforms. Remaining barriers on the internal market must be abolished. A European-wide framework for legal migration must also be part of the future strategy. And last but not least, we must make sure that our countries and markets are open to trade and exchange. The increasing tendencies of protectionism must be fought. Globalisation is not a zero-sum game. It is only through openness and cooperation that we can grow stronger together.