"Transatlantic relations in the Pacific century"
An Address by Alan Seatter, Director, European Commission Directorate-General for External Relations
to the New Zealand Institute for International Relations
22 April 2009
(L-R) MFAT Deputy Secretary Peter Hamilton shakes hands with EC Director Alan Seatter during recent NZ visit |
Introduction
I'd like to thank the New Zealand Institute for International Affairs for the opportunity of having this discussion today. I am honoured to be in such distinguished company. The bureaucratic side of diplomacy can be sometimes strangely closed to new ideas. So, as a public servant, it's a luxury to be able to take time to benefit from the ideas of thinkers and professionals in international relations. Especially if - once in a lifetime - I can combine it with the pleasure of coming to New Zealand to do so.
My objective today is not to give you the standard view from the European Commission, but I'd like to offer you some remarks for discussion. The idea I'd like to put to you today is that the transatlantic alliance is relevant for the Pacific century because it deals with global issues. Neither the EU nor the US on their own can deal with these problems. But this idea has a second strand - even together, the EU and the US can't do it - we need to reach out and include. The economic crisis seems to have a capacity to mobilise. That's an idea I would like to develop.
With Obama, the tone has changed
The Obama administration is three months old. What can we say so far? First of all, the tone has changed. On international affairs, beyond the US neighbourhood, first contacts were made with Asia and important things were said in Japan, China and Korea. In Europe the Obama team avoided the caviar receptions at Davos and chose the Munich Security conference, where the change in tone was clear. Second, they have announced a change of political direction on important issues - on Guantanamo, climate change, the economy. And a change of emphasis on Iraq and Afghanistan.
And government is back
How have political commentators summarized these changes ? To put it simply - government is back. Not in a party political way. Not big government. Nor socialism. But responsible government. In areas like energy, the economy, health, a recognition that government has to take responsibility to make markets work better and respond to public demand. In Brussels, we might say " the European model is no longer a total insult in Washington".
Public opinion has responded positively to these initiatives on both sides of the Atlantic . There are massive expectations. I'd like to ask "how should the EU respond and take up these challenges?".
What relevance for transatlantic relations in today's world ?
But before doing that, one might ask : who cares about the Atlantic when the world is entering the Pacific century? There are two things I would say about that.
First of all, there's nothing new about the Pacific Century - in the eighteenth century, China and India produced half of world GDP. I guess we just didn't know it at the time. In the literature of the time, Europe regarded Chinese economy and society as the "pinnacle of success". You might say that we're beginning to return to a more normal balance in world affairs. The Atlantic focus of world affairs has been something of an exception.
Second, the importance of the transatlantic economy in the world may be changing but it's substantial. It accounts of 60% of world GDP and $2billion a day in trade. In the past decade, the US has invested more in Belgium than in China. EU investments in China are lower than in Michigan. The stock of US investment in the EU is 3 times larger than in the whole of Asia.
All this has meant that the transatlantic economy was the engine of globalisation in the twentieth century.
And the transatlantic military alliance through NATO has contributed to peace and security well beyond the borders of its members.
So even at the outset of the Pacific century, the Atlantic alliance plays its part.
I'd like to make two general points about EU-US relations, and then offer you some remarks on specific priorities for the transatlantic alliance. I will try to focus on the ones that seem relevant New Zealand and for the new actors in the Pacific Century.
At a time when the political prospect for EU-US cooperation is at its best for some decades, the economic prospect is at its worst since the EU was founded.
It's almost impossible to say anything sensible about the financial crisis : things are deteriorating too fast. This week, your statement might be right, but next week, you'll almost certainly be wrong. Risk is at a premium. The only certainty is uncertainty. Maybe 50 million people will lose their jobs this year. When you're worried about losing your job, who cares about climate change? Or development ? Or crisis spots far away ? That's a real challenge for political leaders to turn around.
In the transatlantic context, the EU as such concentrates on areas where it has added value
The rich network of relations between individual Member States and the US constitutes the backbone of the transatlantic relationship. And NATO is seen as the most important institution for security. So what has the EU to offer in this context ? We try to focus on issues where we can bring something to the table - where we have added value through Member States acting together. It's easier for our Member States to do this now - Bush is no longer an excuse for the EU to duck the issue of engaging with the US .
Let me turn now to some priorities within the transatlantic relationship that are relevant for our other partners.
Economic crisis - responsible government is back
What do people expect from transatlantic cooperation on the economic crisis ? Some recent opinion polls have highlighted that the number 1 issue for EU-US cooperation is the economy - maybe one can say 'Economic security first'.
Some stories that have emerged during the current crisis were not encouraging. This is partly because it has all happened before. Some thirty years ago at university, I remember a visiting fellow - a journalist on the Financial Times - telling the stories of the Savings and Loan crises. Subsequently we heard of the company in Texas with $2billion loans, 96% of which were delinquent, and 6 Learjets on the runway.
On some days before the crisis, there were reports that 90% of the trading on the stock market was in fact being done by computers using special models. Ordinary people were shocked. Perhaps economists were reassured that machines would reduce the risk of irrational trading by humans following the herd instinct. Especially when these models had been developed by people who were given the Nobel prize. These models did take account of risk of financial collapse : but they predicted that this risk would occur once in every 4 million years. At first sight, the thought occurred to me that we were safe for another 3,999,998 years, but coming to my senses I realised that it was just another sign that markets were dysfunctional.
Public opinion expects governments to deal with this. To lead a new form of regulation of the financial markets. In New Zealand, this has been much less of an issue than in Europe, but with our experience of tackling this across 27 Member States, the EU has added value to offer, including in learning from the mistakes we made.
The new development in all this is the extension of the cosy club of the G7 outwards. For the first time, the top table was opened to countries from all continents in the world. The crisis has helped mobilise in a way that many thought impossible only a year ago.
There are plenty of reasons to mobilize for : for example, it is not sustainable for China, still one of the world's poorer economies, to consume less than 40% of its income, and export capital to the rest of the world. Moving from that position means that China has a massive challenge - a challenge which involves providing for proper social insurance; and at the same time reforming the way the financial sector and the productive sector interact. And in the markets, the cost of insuring against a US default in the next 5 years is now $55 per $10.000 investment - compared with $8 a year ago. The markets may be crazy, but these figures mean that we're still in trouble.
Dealing with this in the G20 context should help ensure that a deal to correct the financial imbalances between the US and China will take into account the interests of the wider world. But, in turn, Europe will need to face up to the challenge of what is perceived as its over-representation in these bodies.
What about economic security for the developing world? As the two largest providers of assistance in the world, the EU and US have added value in development. Can we get a partnership with the US to tackle the global economic divide? Are we ready for a Transatlantic initiative - for development in Africa? or a Transpacific initiative to address threats to security, including from climate change ? joint projects for dealing with security and development issues in crisis areas ?
Action on the Doha development agenda would be worth more than development spending itself. Current tariff levels are lower than those Doha would allow. But setting limits means that Doha is an insurance policy against protectionism.
Climate and energy security : can green technologies help square the circle ?
I've already asked how can we invest in beating climate change when everyone's worried about losing their jobs? One way of squaring this circle is through clean technologies - Mr Obama's 'green jobs'. The UN estimates the potential as 1 million new green jobs per year up to 2020. The most successful examples of these are in the EU - in Germany, in Spain, in Denmark. We have something to offer.
But green jobs need investment. And the private sector will only invest if it has the right signal. In our view, the right signal comes from a carbon market. That's the only way there will be sustainable investments in clean technologies - because they are profitable. Squaring the circle means setting the right kind of target. Not ambitious enough means that we won't get the investment needed to create green jobs. We need to work to agree the type of cap and trade we need, and spread it across the Atlantic ; and then persuading others in the OECD to come on board and create a true global carbon market. Some actions we could take now, such as energy efficiency in buildings, are already profitable at a zero price for carbon. At $25-30 per ton, clean coal technologies for power stations become profitable, for example. A bit more than that and we can retro-fit existing power plants with those technologies and do it profitably. These prices are not that far above current levels.
Squaring the circle means that we will all have to compromise. We need to avoid 'green protectionism'. The US and others may have to accept some features of our system. And the EU will have to face up to the problem of persuading China, India and Indonesia to join.
Let me turn finally to examples in foreign policy. In terms of European security, our immediate interests are in our Neighbourhood to the East and South. After all, last year saw war break out between 2 States in the OSCE. But it's our neighbourhood, and the EU has to take more responsibility for that. So I won't go into those issues in the transatlantic context. Similarly for our relations with Russia . That is first and foremost a question for ourselves, before we address the issue of EU-US cooperation. On an issue like engaging with the Islamic world , Europe has something to offer from our Mediterranean experience - but it is what the US does itself in the Middle East and Iran , with or without the EU, that will be crucial.
The issue I will take is Afghanistan. In the EU's meeting with President Obama on 6 April, he explained the new objectives the US has, and what he expects from us and others. Our member states have tended to deal with this issue in NATO up to now. But it is clear that the issues will need to be dealt with in the EU as well.
Afghanistan - can we go from 'more for more' to 'better for better' ?
In her hearings Hillary Clinton called for 'more for more'. Secretary Gates recognizes that there can be no purely military solution. We are right to say that public opinion will not accept propping up a corrupt regime with taxpayers money while our soldiers are getting killed. Even if we, with Japan, are supporting the salaries of 60,000 police; and succeeding in ridding some provinces of drugs with the alternative livelihoods scheme; or establishing 20% of primary health care in the country. So maybe we need to move from 'more for more' to 'better for better'. A comprehensive concept for dealing with the problem demands we face up to the issue of how to solve the grey area between the civilian and the military. How to integrate security with development ? To accept the loss of decision-making power that comes with greater international coordination? For the EU to work more closely with NATO?
Those are some examples where EU added value may have a role to play to respond to public expectations of a stronger transatlantic partnership.
There are other global issues where the EU's role is much less obvious, but nevertheless useful. Take non-proliferation : we have a programme worth €300million to deal with proliferation of nuclear and other weapons. Support for countries to detect trafficking in WMD material; for border and customs controls; for the IAEA fuel bank. New Zealand is organizing a workshop in Vanuatu soon on those issues, with our support. Or our action in 80 countries around the world to build up capacity to deal with threats from terrorism or cyber-attack. Capacity to detect suspicious financial transactions; to support law enforcement agencies; to address radicalisation and recruitment. This is the boring side of supporting a new international framework for WMD or counter-terrorism. But if we aren't doing it, who is ?
So I finally mentioned the word - boring. It's good that the EU is boring. Some years ago we were killing each other. And we dragged young men and women from across the world into the carnage. It will soon be Anzac day. Anzac day means never forget day. It means never again day. I'm sometimes asked why I work for the EU. The reason is simple : my grandfather fought at the battle of the Somme; my father was in the Middle East and Burma. When they voted in my country's referendum on EU membership, they voted yes for Europe. Since the war, we've had peace and prosperity to a degree never known before in history. This is a debt I couldn't repay even after a hundred years working for the EU. So that's why I come in to work every day. Even on the dark days when nothing works, when we run into brick walls, when we can't get 27 Member States to agree.
Looking ahead, this year is a year of change for the EU. The elections to our Parliament will set off the process. There will be a new Commission. And there is a real prospect of the Lisbon treaty entering into force. As a public servant, Parliament is my master. But as a voter, I look forward to the elections with hope. Maybe the EU's global priorities will not be a top issue for the campaign. But we hope that in the new Parliament there will continue to be strong political leadership to advance a new agenda for EU-US cooperation and beyond the Atlantic to the new players in the Pacific century.
