Speech by
Ambassador Ole E. Moesby
Governor for Denmark

At the Governors' Seminar: A Road Map for Asia's Economic Cooperation and Integration

3 May 2005
Istanbul, Turkey

Mr President, ladies and gentlemen,

I have been invited to talk about Europe's experience of economic integration. I will focus on the European Union.

The European Union was created in the aftermath of the Second World War and under the shadow of the Iron Curtain. At a time where creating strong economic and political bonds were seen as crucial to heal the wounds and prevent war from happening again.

The European Union started back in 1951 with the European Coal and Steel Community. The turning point came in 1957 with the establishment of the European Economic Community. There were only six members back in the 1950's. Today we are 25 - and likely to be even more in the future.

The European countries are very different from each other. We each have our own separate history and specific cultural background, we speak 21 different languages - and we have fought countless wars against each other in the past.

Economic integration is an area where the European Union has gained a certain expertise over the years. What have we done? What are the major achievements?

We launched a Common Agricultural Policy, a Customs Union and a Common External Trade Policy in 1957. The next major step was the Single Market initiated in 1985. An internal market with very few barriers to free trade and the movement of goods, services, capital and people. The single market has brought direct and concrete benefits to the European citizens. It has enhanced European competitiveness vis-à-vis other trading partners. The objective being to achieve what the economists call increasing returns to scale - increasing profit margins, making financial resources available for Research & Development. There is a direct line from the Single Market to what is now called the Lissabon process to strengthen European efforts in R&D aiming at improving competitiveness. One illustration of the benefits produced by the Single Market: The low-cost revolution in the airline industry has happened largely thanks to EU legislation liberalising the European air space. EasyJet, Ryanair and other low-cost carriers have taken advantage of the new rules from Brussels and offered EU citizens the chance to visit Rome, Paris or Copenhagen at much lower fares.

Next step was the creation of an economic and monetary union and the launch of the single currency - the euro - in 1999. In due time we will see a more efficient European capital market reducing capital costs for investment. And the EURO has already carved out for itself a position, broad and robust, as an international currency.

The European Union is about much more than just economic cooperation and accelerating economic growth.

Let me mention the Erasmus programme that has promoted a substantiel interchange of students among the European universities. In one or two decades most of Europe's leaders be it in politics, economics, business, culture will have studied in more than one European Country. The impact will be tremendous and shape a whole new attitude to Europe and European identity.

Along the road Europeans have discussed whether to deepen the integration or whether to enlarge. The answer has been: Both. The deepening has provided the economic strength and conveyed the political support for the enlargement. Denmark itself has felt the benefits of entering the EU after 1973. Next came Greece, Spain and Portugal in the first half of 1980s. All of them wished to shore up support for their new born democracies after years with dictatorship. But also to gain economic benefits. Benefits that have indeed materialised as figures for GNP per capita clearly show. To a large extent due to EU membership transferring funds from the social fund and the regional fund and making them more attractive for international investors. Ten Central- and Eastern European countries became members of the EU in 2004. These ten countries had prepared for membership since 1990 and almost all the adjustments required was done before they entered. That is why, to the surprise of many people, the enlargement has gone smoothly. If you look at the growth rates for these countries for the last 5 to 10 years the benefits of European integration is glaringly obvious. At the same time it means that we now have a united Europe for the first time. A Europe based upon the same political system and economic model.

What lessons can be learned from the EU endeavours with economic integration? What are the key ingredients?

First of all: Political will! Decisive policy-making! And a focus on concrete results! Despite all our differences - we want to integrate. We want to build a common framework where decisions are based on what is best for Europe as such. When we decided to create common policies in 1957 we also decided to create common institutions. And we agreed to make further integration the aim of our economic cooperation. We have launched a programme of "deep integration". And we have had the political will to stick to the original intention. Making it the starting point for all the decisions that have been taken in the subsequent years to complete the Single Market and make the single currency a reality.

Second, institutions matter! We would never have been able to come this far without strong supra-national institutions. A Council of ministers - representing the member states, a Parliament - directly elected by the people, a Commission - the executive body, a Court of Justice and a Central Bank.

The Council and the Parliament take the decisions on major legislation and policies. Obviously, the Council has always been a key body in the EU cooperation. And the Parliament is becoming increasingly important.

The Commission is one of the more novel institutions. It prepares and enforces the policies. It has been granted with an independent "right of initiative" - meaning that it has a right of its own to propose new initiatives. The Commission has used this right to push the integration agenda. Most of the ground-work in preparing and implementing the European Single Market was done by the Commission. It came up with the outline and drafted an enormous amount of legislation to clear the barriers to free trade and free movement within the Union.

Of course the member states will always have the last say on what direction European integration is going to take. But the institutions and the powers conferred on them are a crucial driving force behind European integration.

A word about sovereignty. People often speak about the member countries abandoning sovereignty. This is wrong. The member states transfer sovereignty to exercise it in common with adjacent countries pursuing identical political objectives inside the same social and economic framework.

Third, but not least: Every member state must benefit from the integration process! Economic and social cohesion is a key priority. The European Union transfers considerable resources from the richer to the poorer regions in the Union through Regional Structural Funds. It is crucial that the less fortunate regions are brought up to speed as fast as possible.

This is fundamental in making the Single Market work in practice. Significant disparities in the levels of development between the regions would distort the inter-regional cooperation.

And jeopardize the integration process.

The Regional Structural Funds are an expression of financial solidarity between the members of the European. But it is also a powerful force for economic integration.

However, European integration is not only about economic cooperation. The vision - the driving force behind the European Union - is a peaceful and united Europe based on a set of shared values.

Economic cooperation in itself is not sufficient to ensure genuine integration. The values are the glue that binds us together. Democracy, the rule of law, human rights, market economy and gender equality are basics in a free market and in a welfare society. These principles opened the door for the enlargement with the Central- and Eastern European countries. They were laid down by the European Council in Copenhagen in June 1993 and are accordingly known as the Copenhagen criteria. We see good governance a precondition. Our endeavours are not - as we see it - likely to have a lasting effect, if we do not respect these values.

With the new Constitutional Treaty we will get a Treaty that put the values on paper. And we will get a framework that ensures that the Union can continue to be dynamic in its decision making even with 25 or more members. One of the most interesting new paragraphs deals with distribution of competences and acknowledgement of respective identities between the EU and its member states. The blurring of competences has often created tensions and explains in the eye of some observers the scepticism often voiced by a part of the European population towards further integration.

Next step is the ratification of the Treaty. A number of countries in the Union will consult their citizens in a referendum before doing. Denmark is one of them.

We do not want growth and prosperity at the price of a fragmented society. A society where the poor and the vulnerable are left behind!

This is probably the most important feature of European integration. We genuinely believe that sustainable economic growth depends on a strong institutional framework that caters for the people. The strong and the poor and the vulnerable alike! As stated by Jean Monnet, one of the founding fathers of the European Union: "Nothing is possible without the people, nothing can last without institutions".

In Asia, the history is different. Your motivation for embarking on economic integration has a different starting point. We have all been awed by the economic miracle that has taken place in Asia.

You have already embarked on a number of integration processes. The ASEAN collaboration is a promising example. And the collaboration within the East Asian Community (EAC) - the ASEAN Plus Three, or even Plus Four. New structures for cooperation and dialogue have been set up. Steps are being taken to create the largest free trade zone, the world has ever seen.

The Action Plan for the ASEAN Security Forum is an important step forward. Its focus on democratisation, human rights and good governance could be the beginning of a common framework that caters for the people in the region.

This century could well turn out as the Asian century. It will require a strong political commitment to economic integration. Asia may not have the same ambitions as the European Union. And of course not all that has been achieved in the EU is directly applicable to Asia. But Asia will need to develop ways of interacting that spur collaboration rather than competition between countries. Close cooperation is the key to sustainable economic growth. Maximising the benefits of globalisation and minimising the downsides.

All Asian powers have a responsibility in this regard. Their cooperation patterns have a decisive effect on the rest of the region - and the rest of the world. The whole region will benefit if they collaborate and the whole region will suffer if they decide on a competitive approach.

As a European I wish that Asia will be as successful as Europe has been in its endeavour to find an Asian model for integration.

Thank you.