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Speech by The Rt. Hon. Sir Malcom Rifkind, KCMG QC

The Rt. Hon. Sir Malcom Rifkind, KCMG QC

On: When Bush comes to shove; the Second Term

1st December 2004

“The Community is in great flux. Since the Stuttgart summit of last June we have had negotiations proceeding through the Athens summit, through the Brussels summit and which seem likely to continue to the summit at Fontainebleau in June of this year. Many people have allowed recent events to lead to a certain degree of depression about the European Community. They have said: “Isn’t this sad and depressing? Here we have a Community which seems unable to resolve its internal problems. We have had, for several years now, these constant negotiations for which different people blame different government. Is there no end to this? Is this not totally contrary to the ideals and aspirations of the founding fathers of the Community, who saw Europe working together, reaching agreement, producing closer and closer integration over time?”

The disappointment that many must feel is understandable, but not their depression. Because those who allow themselves to be depressed have wrongly interpreted the scale and nature of the problem. What we are seeing in Western Europe is something  which, by any historical standard, is an extraordinary development: a number of nation states, virtually all with a long history of independent national sovereignty and with a substantial history of political conflict with each other, have eschewed violence as a means of resolving their mutual difficulties and problems have, through the creation of a Community, sought to deal with these problems rebound the table. The ten years of out won membership, or the 25-odd years of the existence of the Community, are an infinitesimal period in the history of Europe. It would have been remarkable if the historical, social, cultural, and other differences between the member states had been capable of resolution in that time, simply through a spirit of goodwill and mutual compromise. It is true that in the immediate aftermath of the war, and in the very early years of the Community, there may have been a greater sprit of goodwill and compromise than we see today. But that was at least in part an emotional consequence of the war-time experience. It was, perhaps, inevitable for all the member states that it would give way, over time, to a more sober realisation of national interest and of the problems of European integration.

Yet the achievements of the Community are remarkable. They deserve to be a source of continuing inspiration and enthusiasm rather than of depression. First of all, we have the very fact that over the period of its existence the Community has survived. It is remarkable that a supernational grouping consisting of such old enemies as France and Germany, not to mention the other states of the Community, has been able, despite a number of crises, to survive as a Community and as a working Community. Secondly, it is remarkable that over that time there has actually been progress, however slow and painful. Each month and each year has eventually brought agreement on major issues of European integration. We saw this, for example, with the Common Fisheries Policy – a problem that had a defied solution for a number of years. Eventually we achieved a successful conclusion. In recent months similar progress has been made on aspects of the internal market within the Community.

But that is not the only progress we see. We also see a more interesting and more remarkable phenomenon in the continuing enlargement of the Community. As countries like Greece, Spain, and Portugal have thrown off temporary dictatorships – sometimes very long-standing temporary dictatorships – almost their first act has been to apply for membership of the Community. In part this has reflected economic imperatives. But in part, too, participation in a democratic European Community has been sought as a means of strengthening their own democratic foundations. And that is one of the most significant things about the European Community. It genuinely is democratic. There are many international organisations around the world. But it is difficult to think of other organisations which can claim to consist entirely of democratic states. The United Nations clearly has many members which none of us would recognise as democratic. Most other regional groupings or other international organisations include both democratic and totalitarian states. What is peculiar about the European Community, and what is often not realised or appreciated, is that it consists solely of Parliamentary democracies: or real, active, vibrant Parliamentary democracies. Indeed, one of the fundamental objections to East European countries ever joining the Community, if they ever wished to, would be that in the absence of a democratic political system within those countries, membership could no t be compatible with the full development of the Community.

A few years ago – a relatively short period – the Community took what I believe was a momentous decision, a fundamental decision, to create a directly elected European Parliament. For the first time not only in the history of Europe but in the history of the world, we have created a multinational Parliament whose members are chosen by the franchise of ordinary people each with a single vote, throughout the counties of the Community. It is an achievement which has not been given sufficient weight. Essentially, there are many sources of optimism, and proper optimism and enthusiasm, about the Community. If the problems that we are going through at the moment are difficult, that may be a cause for disappointment, but not for depression.

I turn to these problems, because clearly they are with us and it is right to pay some attention to them. The Athens summit was a failure. There is no doubt about that: little progress, if any, was achieved. But it is not fair to make a similar diagnosis on the subsequent summit at Brussels. Because although there was not the breakthrough on the overall package that we would have liked to have seen, substantial progress was achieved on a very large part of what has become known as the post – Stuttgart agenda: the overall issues which the Community are concerned with.

One of the major areas in which progress has been made is with regard to the need for a system of controlling agricultural and other expenditure. Because agriculture represents some two-thirds of all the expenditure of the Community, it is impossible to contemplate the control of the expenditure of the Community as a whole without controlling that. Now it should not be difficult in theory to reach agreement on the need to control expenditure. After all, the Community consists of ten nation states, all of whom, irrespective of their political complexion, have national governments who see it as a major obligation to control the expenditure of their own national treasuries. It would be inconceivable in a national sense to argue for uncontrolled expenditure or for a system whereby no serious attempt was made to ensure that the spending in a given year related to what the country itself could afford, or what was available. What has been ironic is that although that is a principle which has never in recent years been controversial in the national level, it took an awful lot of arguing and persuasion to get that message accepted by the Community of Ten.  Indeed, it took the factual economic circumstances of the Community. And the reason was quite simple. Although the expenditure of the Community was growing very rapidly, the burden of financing that expenditure did not, and does not, fall equally among the member states. Of the ten member’s states, only two – the United Kingdom and West Germany – were and are the net contributors to the Community, and the other eight are net beneficiaries. It is not too hard to see why there was not great enthusiasm from the majority of member states for any effective method of control. In a sense one cannot blame them; human nature being what it is, if you are not yourself contributing in a material way, the attractions of controlling expenditure are not so obvious.

What has changed the situation is the imminent exhaustion of the Community’s present resources. I mentioned in a recent debate in the House of Commons on this subject that the difficulties of controlling Community expenditure had been once likened to the remark that Errol Flynn made about his own life: his most difficult problem, he said, had been that of reconciling next income with gross habits. That is a description that could accurately be made of some of the more profligate tendencies within the Community, and it is something we have been trying to come to terms with. At the Brussels summit, important progress was made in decreeing that, for the future, revenue should determine expenditure and not the other way round. It was agreed that at the beginning of each year the Community must determine what it had to spend, and then hold to that. And it was agreed that the budgetary procedure of the Community had to be adjusted to ensure that this essential discipline was actually transmitted into practice.

The major problem that remains outstanding of course is what is called the budgetary imbalance problem, which is a polite euphemism for the problem that Britain, in particular, has been drawing to the attention of the Community for some time. Occasionally out critics suggest to us that what we are seeking in the Community is non-communautaire because it amounts to a  juste retour; the implication being that we are seeking a situation where Britain gets back form the Community exactly what it puts in. If that was what we were seeking then the criticism would be valid. But it never has been, nor is it. Such a mechanism is probably unobtainable in any case. What we are seeking is a system which takes into account the relative prosperity of each member state of the Community in determining what their maximum net contribution should be. The problem at the moment is that not only are Britain and West Germany the sole net contributors, but if there was any increase in the own resources of the Community, which is what the other member states wish, then there would be an open ended burden on these two countries to finance that increased expenditure. Now it simply is not realistic or practical to expect it of any other country. Why has Britain rather than West Germany been making the most running in this issue? The reason is quite simple: West Germany is the most prosperous member of the Community, so whatever system is applied it is bound to remain the largest net contributor. But even the West Germans have made it clear that they would like to see some ceiling on their maximum potential contribution, and one can understand why they say that.

As to the unfairness that the present system produces, there is one point which is very persuasive. Spain and Portugal are applying to join the Community.   If they join, which we all hope they will, Portugal will not only be the poorest member by far of all the 12 states of the enlarged community, but it will also, if obliged to adhere to the existing financial rules of the Community, have the dubious privilege of joining Britain and West Germany in becoming the third net contributor.  We would reach an absurd situation in which Portugal would, in effect, be subsidising Denmark, Belgium, or the Netherlands – countries infinitely richer than itself. This would not happen because anyone wanted it, but because Portugal is traditionally a net importer of a large proportion of its foodstuffs from outside the Community and the present budget mechanism penalises such countries. Now clearly this is not going to be allowed to happen. Everyone accepts that special provision would have to be made for Portugal. But the very fact that the rules would have to be changed to prevent it illustrates how arbitrary and artificial existing arrangements are.

To be fair to the Community, there already has been a large measure of agreement on what a new system must involve. There is now unanimity, which there certainly was not up until twelve months ago, that any new system must take into account the relative prosperity; of member states, and that when a country has reached a given level of contribution then it should be able to reduce its contributions to the Community for the bulk of any excess over that limit. What there is not yet agreement on is how the existing burden should be measured. The dispute that led to the partial breakdown of the Brussels summit was a gap of some 250 million acceptable and what the other nine countries argued was the maximum available. That figure is important, not so much for the particular year to which it relates, but because whatever figure is chosen will set the parameters of the formula on which the rebates for future years will be calculated.

The United Kingdom believes the remaining gap can be bridged. But we also believe that for that to be achieved there has to be further compromise by all member states of the Community. At the moment the other member states are saying they have gone as far as they are prepared to go and any further movement must come form the United Kingdom and from the United Kingdom alone. We do not believe that is a very positive or helpful position to take. No more than if Britain was saying, “we have going as far as we possibly can, and any further movement must come entirely from the others”. We would be rightly criticised for our rigidity if that was the position that we were taking. But we are not taking that position. We believe there has to be movement all round, and as soon as there is this outstanding problem will be resolved. We would like it to be resolved as soon as possible. There need be no reason to wait for the Fontainebleau summit. We would be very happy to reach agreement at once. But if others won’t make the further movement that is required, then we are prepared to wait for as long as may be necessary to achieve a settlement which we can comment to Parliament and which we believe will be fair for the United Kingdom and for the Community as a whole.

We are very anxious indeed to see once and for all an end to this particular difficulty, not simply because it is inexpressibly tedious, but because the Community has been diverted form its development by these financial issues. We want to see the Community giving far more attention to important areas where greater integration could be of enormous benefit to the peoples of Europe as a whole. We often talk about the common market, but the sad truth is that, apart from agriculture, there is very little of a common market between the member states of the Community. You recall how the French lorry drivers were able to show in the most graphic and dramatic fashion the extent to which frontier controls and restrictions still exist within the European Community which ostensibly has abandoned all tariffs and controls on the free movement of goods within its boundaries. Britain is to the forefront of those who are arguing for an enormous simplification of the administrative procedures that cause delay and unnecessary expense to the movement of goods throughout the member states of the Community. We wish to see also a substantial liberalisation of the present restrictions on a common market in services. We have got a common market on trade insofar as there are no tariffs, but the existing controls and restrictions on service industries, on insurance for example, on air transport, on road haulage quotas, and other matters of that kind, are enormous and are not consistent with the principles of what a common market and a Community ought to represent.

These proposals all involved a measure of harmonisation between member states. But what we strongly believe in the United Kingdom is that if we are considering proposals for harmonisation, the proper test to apply is not simply whether harmonisation will be achieved by a particular proposal, but whether the effect of harmonisation would be to the benefit of the peoples of the Community. Because harmonisation for its own sake, frankly, is not something which appeals to us. It may look good on someone’s chart. It may be an attractive component to someone’s grand design or marvellous blueprint, but we believe that the real business of building Europe should only take place in those areas where integration, where harmonisation, where common standards will be of obvious benefit to ordinary people, to consumers, to businessmen, to employees, and to others who will clearly benefit as a result of them. If they won’t – if all we do is remove some of the local or regional identities, or national identities that are part of people’s culture and tradition – then, frankly, we will only create hostility to the Community by insisting on such changes for their own sake. But where we are able to demonstrate that harmonisation will actually benefit people, and the onus must be on those who wish to press for that, then it seems something which can commend the support and enthusiasm of the public.

There are a whole series of ways in which the Community ideal can be realised. We have, for example, sought the early accession of Spain and Portugal because we believe that when democratic European states express a wish to join the democratic European Community then that is something to which we should give every encouragement.

The British Government’s view and the British public’s view is not one of questioning the principle of our participation in the Community.

We believe as strongly as any that Western Europe’s future is tied up with the success of the European Community. But it must be a Community in which the financial burdens are shared more equally, in which the problem of the production of surpluses that are wasteful to the Community and enormously expensive to its public has been satisfactorily resolved – did you know for example that the weight to milk produced this year in the Community is going to be greater than the weight of steel produced in the same Community? That is an illustration of the scale of the problem. What we want is to create a sound economic base, and a sound political base, for the Community, so that its future can match the aspirations of its founders.”