Towards a New Transatlantic Relationship: The European Union and the United States – A Canadian Perspective

July 8, 2005

Good afternoon, ladies and gentlemen.

Our topic, Towards a New Transatlantic Relationship presents us with a mighty challenge, as immense as it is complex.  As I will explain in my brief introductory remarks, it is vital that the relationship be strong and that it evolve.  Global peace, security and prosperity depend on it.

We have been asked to focus on the European Union and the United States and I will do so but first let me explain why a Canadian perspective is important.  Very simply, Canada is a transatlantic partner of Europe.  Our founding peoples were British and French as are my country’s two official languages.  More than 1 million Canadian soldiers have served in European wars and over the past century Canada’s contribution in blood and treasure to the liberalization of Europeans from tyranny ranks, given our size, among the highest of all the allies.

Add to this the enormity of the Canada-United States economic relationship and you will understand why I am here.  Canada-United States trade last year almost matched that of the United States and the combined 25 member states of the European Union.  We are the largest foreign supplier of energy to the United States and through NORAD share in a unique North American defence alliance.

The European Union, the United States and Canada, in other words, are more than historic allies – in today’s world, we share a partnership that is in many respects unique.

Now on to the topic at hand and let me make four points.  First, I would argue that the relationship between the European Union and the United States overall is sound and, as I predicted at the time, it has survived the trauma of the Iraq war.

The economic relationship in terms of trade and investment continues to be the largest in the world and while there are differences, some of them significant, I believe that no two regions of the world can claim the same degree of convergence on the defining issues of values, freedom-based ideologies and security.  Consider for example the responses yesterday on the part of the North American and European G8 leaders to the diabolical terrorist atrocities in London.

Second, it is plain for all to see that the European Union and the United States have had some sharp disagreements: for example, on the Kyoto Protocol, the International Criminal Court, the Comprehensive Test Ban Treaty, the Anti-Ballistic Missile Treaty, the death penalty and the prisoners at Guantánamo Bay.  On the other hand, we should also recognize the important examples of cooperation such as the joint commitment to expand NATO eastward.  And keep in mind that NATO members agreed on military interventions to drive Iraq out of Kuwait in 1991, to restore order in Bosnia in 1995 and to rescue the Kosovars in 1999.  After 9/11, there was cooperation in the sharing of intelligence and anti-terrorist policing as well as in the reconstruction of Afghanistan after the ouster of the Taliban.

Cooperation continues today with respect to Iran, North Korea and the Israeli-Palestinian conflict.  In recent years, it is Iraq that stands out as the most disturbing failure in American and continental European cooperation.  American writer Robert Kagan’s explanation is that Europeans are from Venus and Americans from Mars.  I believe the issue is more complex than that and in part is rooted in widespread discomfort with the pre-eminent superpower status of the United States, not to mention America’s adoption of the doctrine of pre-emption.  Suffice it to say that the differences between the United States and the European Union on issues of foreign policy and military strategy, while disruptive, are manageable and in some respects quite healthy.

My third point is in the area of economics and on the so-called “competitiveness” of Europe.  As Martin Wolf, Wim Kok and Adair Turner pointed out yesterday and as did the opening panel this morning, there continues to be a divergence in transatlantic economic performance and there appears to be a clear consensus as to why.  My only serious quibble is that not enough attention was given yesterday or today to the role of tax policy in the spurring of innovation and job creation.

Clearly, Europe’s North American partners strongly favour a prosperous Europe with an effective single market, solid fiscal foundations and productive and innovative enterprises and workers.

Indeed, while the great European project is looked upon with suspicion by some neo-conservatives on my side of the Atlantic, the United States and Canada continue to favour deeper integration and wider expansion of the European Union.  I will not deny that the recent rejection by France and the Netherlands of the European Constitution was greeted with some elements of schadenfreude in both the United States and Canada.  But mistakenly in my view given that many of those who voted “no” were anti-globalists, anti-market leftists, populists, nationalists and nostalgics.  These voices will not deliver Europe to higher levels of productivity and job creation – quite the opposite.

As a strong supporter personally of the grand European project, I have only one overriding concern about its evolution.  In the relentless push towards deeper integration, I believe that the importance of “subsidiarity” as a guiding principle has been lost.  In part, the skepticism about an ever-deeper Union is rooted in the fear that sensible forms of autonomy are being sacrificed at the high altar of “one size fits all” in Brussels.

Before going on to my fourth and final point, I cannot resist a comment about the boiling debate here in Europe between the advocates of so called “Anglo Saxon liberalism” and the continental vision for a “social Europe”.  In my view this is a false debate.  The reality is that vibrant, responsible market economics are the best guarantee of a strong social  future.  The  quicker that Europeans come to terms with this reality the quicker we will see bursts in badly needed productivity improvements especially in the core economies of France, Germany and Italy.

As my fourth and concluding point, I would argue that North America and Europe need each other more now than at any time since the collapse of the Soviet Union.  My reasons are as follows.

The global economy needs fixing and that will not happen without North American and European cooperation.  The Bank of International Settlements identified the problem areas in its report little more than a week ago: lax budgetary policies, notably in the United States; official interest rates worldwide that are near zero in real terms; weak demand; rigged exchange rates, especially in Asia; an absence of structural reforms particularly in the eurozone; and a United States external account that is “on an unsustainable trajectory”.

The global trading system also needs fixing and here again North American and European cooperation is imperative.  The prospects for the Doha Round are dim, resistance against phasing out of farm subsidies remains deeply entrenched, and protectionist sentiment is swelling in both the European Union and the United States.

As we will discuss in detail tomorrow, the rapid emergence of China and to some extent India as political and economic powerhouses is beginning to transform global trade, investment and production patterns.  On both sides of the Atlantic, these developments are breeding fear, paranoia and even the early stages of xenophobia.  Accommodating these changes in a peaceful, constructive manner must be one of the highest transatlantic priorities.  Seeking to isolate the emerging Asian giants is not a sensible option.  Moreover, it will not work.

The template for global economic liberalization on a wide range of issues depends to a considerable degree on real progress and best practices being set by the United States and the European Union and by business leadership on both sides of the Atlantic.  Priorities include improved regulatory cooperation, liberalized capital markets, better protection of intellectual property rights and vigorous action against counterfeiting and piracy.  I am sure that we all agree that progress on these fronts could be faster.
 
Defusing Muslim extremism must remain a joint priority for both the United States and the European Union.  This must involve close cooperation in seeking a permanent resolution of the Israeli- Palestinian conflict, pacifying and rebuilding Afghanistan and Iraq, and promoting real change throughout the Middle East.

Also, Europe and America must do much more together to deal with non-democratic regimes pursuing nuclear armaments.  While the United States, China, Japan, Russia and South Korea are taking the lead on the North Korean front, leading European states are in the forefront of negotiations with Iran.  There cannot afford to be a European/American schism on Iran.

Finally, as we were reminded by the atrocities in London yesterday – and mindful of 9/11, Madrid, Bali and other tragedies, the war against terror must be united, resourceful and sustained.  Here the leadership of the United States and the European Union is indispensable and there is an urgent need for closer transatlantic coordination.

Ladies and gentleman, these in brief are my thoughts.  Let me say how much I look forward to our discussion.