April 7th, 2000

SPEECH TO THE HERITAGE FOUNDATION, WASHINGTON D.C.

INTRODUCTION

It is a great pleasure to be back in Washington D.C. for Tartan Day and a particular privilege to have been invited here, to The Heritage Foundation, to participate in your debate on the future of Europe.

WILLIAM WALLACE

700 years ago, Scotland was under occupation by the English. William Wallace, later to be memorably played by the diminutive Australian Mel Gibson in the film 'Braveheart', had mounted a guerrilla campaign and defeated a large English army at the Battle of Stirling Bridge in 1297. The English commander, Hugh de Cressingham, was skinned and turned into a saddlebag, proving that even the English have their uses! Of course, this defeat prompted Edward I to invade Scotland, where he subsequently crushed all Scottish resistance and forced Wallace to flee to the European Continent. When he returned in 1305, he was betrayed, captured by the English and hanged, drawn and quartered in London.

Robert the Bruce at the Battle of Bannockburn again comprehensively defeated the English in 1314, but Edward II refused to recognise Scotland's independence, nor would the Pope. This led to the signing of the Declaration of Arbroath on April 6th. 1320, sealed by most of the nobles of Scotland, which asserted Scotland's sovereignty over English territorial claims and which, of course, was echoed in your own American Declaration of Independence.

Scotland had its own parliament until 1707, when the Union of the Parliaments of Scotland and England took place and we had to wait almost another 300 years before we established a Scottish Parliament once again. But it is now firmly ensconced in Edinburgh and the Scottish Conservative Party has just successfully elected a new MP to it, winning an historic victory in the West Coast town of Ayr. In fact this was our first by-election victory in Scotland in 33 years and signals a revival of Tory fortunes.

SCOTLAND'S ROLE IN THE UNITED KINGDOM

So Scotland has once again got its own Parliament. But it is a devolved Parliament within the Union of the United Kingdom and as a member of the Scottish Conservative and Unionist Party, I am keenly aware of the advantages we gain as Scots, by remaining part of the British family. I have no truck with independence.

The United Kingdom has a unique place in the world's affairs. Our country is a member of NATO, the European Union, the WEU, the Commonwealth, the G8 group of leading industrial nations, and a Permanent Member of the UN Security Council. No other state occupies all these positions. In UK defence terms Scotland is a vitally important part of the integrated national defence structure and as such, plays an influential role in NATO's forward defence strategy.

The strength of Britain's place in the world and the strength of Scotland's place in Britain come from our sense of common purpose in these matters. That is why I do not wish to see the SNP use the Scottish Parliament as a Trojan Horse for independence. That is why I feel it is important to emphasise Conservative support for the Scottish Parliament and our determination to make it work for the benefit of the people of Scotland. However, we must at the same time deal with the question of how we will seek to maintain national unity within a plurinational context.

You see, in Scotland we face an identity crisis. Are we Scottish...are we British or are we European? I want every Scot to feel able to say with pride "I am a Scot, but I am also British and European." We must press home the idea of plural identities and urge the people of Scotland not to forget the benefits of our union with the rest of the UK and with the other 14 member states of the EU. We are Scottish, British and European and it is within that trinity that our interests as citizens are best served.

THE EUROPEAN ELECTIONS - JUNE 1999

So it is against this background that I stood for election to the European Parliament, gaining a seat in the elections of June 1999. I am a convinced European. I firmly believe that the great principles of European integration have provided the nations of Europe with a bulwark against war and made the EU into one of the world's most formidable trading blocs with fifteen Member States and a population of 380 million. The EU now represents the world's largest group of affluent consumers and, with enlargement, will soon have a larger GDP than the US.

Although it is not yet a year since the Euro elections, it seems like a lifetime already! I thought that my background of thirty years political experience in Scotland would mean that I would hit the ground running in Brussels and Strasbourg. I certainly hit the ground, but I sometimes feel as if my feet are sticking out of a large hole, kicking feebly in the air. It has been a sharp learning curve.

My previous occupation as a public affairs consultant took me to Brussels and Strasbourg many times and I felt that I was familiar with the institutions of the parliament and indeed, with many of its members. However, everything is new. We are in a new building in Brussels, which only opened two years ago, and a brand new building in Strasbourg, which opened for the first time only following the June elections last year.

The New European Parliament

60% of the MEPs are new. The ruling group is new. For the first time in twenty years the centre-right EPP/ED Group ousted the socialists, winning 233 seats to their 180. So we have a new Conservative President of the Parliament, Nicole Fontaine, from France, a new EPP Group Chairman - Hans-Gert Poeterring - from our sister party the CDU in Germany, and a plethora of new committee chairmen and group office bearers. The new building we are occupying is quite seriously massive. It is fifteen stories high and covers an entire street, almost half a mile in length. One Dutch MEP was reprimanded for using his bike to cycle between committee meetings! It cost a staggering $1.25 billion.

The Strasbourg Parliament

As if one massive parliamentary edifice was not enough, the European Parliament has got to have two. One week in every four we decamp from Brussels and make our temporary home in Strasbourg, in Alsace, where the French continue to insist we meet. Indeed, the French use their veto to ensure that any vote to centralise activities in Brussels is effectively blocked.

So in Strasbourg too we have a brand new Parliament. This one only opened following the elections last year and cost a bargain basement $600 million. The building looks like a dismantled CD player from the outside and inside it is a shambles. Apart from the MEPs, nothing else works! The lifts frequently malfunction, the offices are too small, and the layout of the building is impossible to comprehend. The plenary chamber, on the other hand, is really impressive. It is the biggest room in the whole of Europe. I need binoculars to see the President sitting on her platform at the front of the huge hemicycle.

You may ask why we need two parliaments. I frequently ask myself this question. Particularly when I see the tin trunks, which sit outside the door of every MEP's office - 626 of them, filled with their working committee papers.

Twelve times a year, I see these trunks loaded by an army of porters onto a convoy of lorries, to be trundled across Europe from Brussels to Strasbourg, where they remain for 3 or 4 days before being loaded up and trundled back to Brussels again, at a cost of $150 million a year just for the transport expenses alone. I ask myself why the EU, which preaches efficiency to us all, allows this outrage to continue?

And I see the battalions of staff employed by the Parliament, now numbering 4000 and the teams of translators and interpreters who cost $350 million per year to translate every spoken word into the 11 official EU languages, consuming tens of thousands of tonnes of paper in the process and I ask myself why, particularly when we are about to enlarge the EU, we allow this tower of Babel to grow?

And I see the 20,000 civil servants employed by the commission, forming a centralist imperial administration based on the old French, Napoleonic system, un-accountable and remote from the lives of ordinary people, treating us like subjects rather than citizens, and I ask myself why we permit these people to pay only a flat rate 10% income tax on their gigantic salaries?

Reform of the Parliament

So reform is overdue. Following the Amsterdam Summit and after the mass resignation of the last European Commission amid allegations of corruption and sleaze, major new powers were given to the Parliament. We now enjoy co-decision-making powers in many areas of our work. In the past, draft legislation would emerge from the Council of Ministers and the European Commission, and the Parliament would have the opportunity only to adopt it or reject it outright.

Now, the elected members of Parliament take part in the legislative process, drawing up the legislation, line by line, in a tri-partite consultation process with the Council and Commission. This means that the political makeup of the Parliament is of greater importance than ever before.

As a British Conservative, I believe those global issues, such as trade, agriculture, environmental protection, transport and energy networks, must properly be dealt with on an EU-wide basis. The movement of people and goods, the international fight against crime and terrorism, these are matters, which are most appropriately handled at the top of the EU pyramid in Brussels, as laid down in the Maastricht Treaty. However, the Maastricht Treaty also embraced the principle of subsidiarity and I believe that in this respect, Europe is failing.

We are still suffering from the hangover of twenty years of socialism with a leftist agenda which wishes to see a further deepening of the EU as well as widening. Although the EPP/ED is the largest group in the Parliament, we still require the support of the Liberals if we are to win an outright majority over the massed ranks of socialists, Greens, communists and fellow travellers. Often the Liberals would rather vote with the socialists than support us and, sadly, all too often, members of our own EPP/ED group, beguiled by the dream of a federalist Europe, allow the left to win the day.

So, while Tony Blair claims that New Labour is moving away from heavy-handed intervention and regulation, his MEP's and their socialist allies in the European Parliament, vote for more red tape, more state intervention and against increased labour market flexibility. The socialist vision for Europe is for more harmonisation, deeper integration and a "one-size-fits-all" approach, which is shared by Lionel Jospin, Gerhard Schröder and, of course, Romano Prodi. Such policies simply pile burdens on business and industry, destroying, rather than creating jobs.

So it was that at the recent Lisbon summit, there were misguided calls for more worker participation in company management and an outright ban on company mergers which do not comply with strict EU legislation. The focus of the Lisbon summit was on the development of e-commerce and the opportunities for the EU in the new information driven technology sector. However, instead of advocating an environment in which e-commerce could flourish un-fettered, we heard the usual tired, old calls for more market intervention and regulation. This is hardly surprising, coming from a Council of Ministers where 12 of the fifteen Member States are dominated by left-wing governments. But it is sad to hear echoes of such policies within the European Parliament.

THE BANANA WAR

A recent example of this was the latest debate on the notorious banana war between the EU and the US. Having agreed to set up the WTO, the EU has continued blatantly to break its rules on tariff barriers and market access for non-African/Caribbean bananas. This resulted finally in the US introducing punitive import tariffs on a whole range of un-related imports from the EU, in an attempt to claw back $200 million in lost trade.

I had to lobby furiously in the Senate last April in all-party delegation from Scotland, to get the 100% tariff on Scottish cashmere lifted, as it was threatening the entire future of this tiny industry and 4000 jobs in a remote part of rural Scotland. Happily, we were successful, but many other companies throughout the EU are still suffering 100% tariffs on their exports to the US and only last week, Ecuador announced that it will also seek WTO consent to claw back $200 million in reparations, thus escalating the whole problem.

Faced with this mounting crisis, the European Commission drew up a compromise proposal which sought to meet the requirements of the WTO, while also safeguarding the interests of the Community and ACP banana producers. However, the leftists, who regard the US as an international bully in all trade matters, drew together all their allies and out-voted the centre right, effectively maintaining the status quo. Although this proposal has still to be debated in the full plenary session of the House, it does not augur well for an early resolution to the banana war or for the future of EU/US trade relations.

In Europe but not run by Europe

There is far too much legislation going through the House. Romano Prodi, the new Commission President, admits that it is the busiest legislative programme in the history of the European Parliament. More than 600 pieces of draft legislation are in the pipeline, leading many Europeans, particularly in the United Kingdom, to believe that there is too much red tape, too much bureaucracy and too much interference from Brussels. The British Conservatives swept the board at the elections in June last year, campaigning under the slogan "In Europe, but not run by Europe." We want a smaller, more efficient Commission, doing fewer things and doing them better. We want the principle of subsidiarity to be paramount, with many more matters being dealt with at Member State level, rather than in Brussels and Strasbourg. Above all, we want more flexibility.

Enlargement

Let me explain. There are two key issues under discussion in the European Parliament just now - enlargement and the reform of the institutions and mechanisms of the European Union to accommodate that enlargement.

I am a firm believer in the concept of enlargement and I believe that we have a moral duty to reinstate the countries of Central and Eastern Europe within a reunited European continent. With numerous conflicts and tensions in areas immediately bordering and even within the European continent itself, the rapid enlargement of the EU must be a top priority. Only enlargement can ensure, by means of economic and political co-operation, the peace, stability and prosperity of the region through shared democratic systems and values.

Countries such as Poland, the Czech Republic and Hungary were historically and culturally an integral part of the Euro-Atlantic community, until ripped apart by the post-war Soviet empire and isolated by the Cold War. For these Central and Eastern European states, accession to the EU means closing the chapter of history which was opened at Yalta. However, we must not allow these countries to swap one system of centralised, bureaucratic control for another.

That is why I was somewhat alarmed to read Romano Prodi's recent vision statement in which he set out the European Commission's strategic objectives for the next five years. In that document entitled "Shaping the New Europe" he stated that the Commission would be the driving force in a Europe of 500 million citizens, concentrating on its "core functions of policy conception, political initiative, enforcing Community law, monitoring social and economic developments, stimulation, negotiation and where necessary, legislation." He went on to say that stability in an enlarged union could only be achieved "by building a co-ordinated foreign and security policy and developing a coherent policy of co-operation with our neighbours. It can work provided everyone knows exactly who is in charge," he concluded.

What Mr Prodi means by this is that he wants to be in charge. He said recently that every day, his Commission is becoming more and more like a Government of Europe. His vision is of the un-elected and unaccountable members of the Commission acting as his Cabinet, with him as the President of a Europe widened to embrace up to thirty Member States and deepened to have an integrated fiscal system, a common currency, a single judicial system and a European army. The last time Europe enjoyed such harmony, Julius Caesar was in charge!

Enlargement means that another ten countries will join the existing fifteen Member States within the next decade, many of them becoming full members in less than five years' time. The countries lining up to join are Poland, The Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Rumania and Bulgaria. Other countries on the waiting list for EU membership include Turkey, Cyprus and Malta.

Of course there are legitimate fears that the accession states, when they become full members of the EU, will absorb all of the grants and subsidies which we currently enjoy in the UK through structural funding. People are concerned that our markets will be undercut and that a flood of cheap imports and cheap labour from the East will destroy jobs. However, the economics of enlargement must be put in perspective.

It is worth remembering, for instance, that the first five countries to join the EU will increase the current population by more than 30% while only increasing GDP by around 6%. The scale of the challenge is therefore significant. However, just as our grants and subsidies will drift from the west to the east to bring the accession states up to our standard of living, so will demand for goods and services flow from the east to the west. The opportunities for selling goods, services and intellectual property in a new community of 500 million people will be profound. Indeed, if enlargement is to be an economic success and not simply a drain on our resources, trade and an expanded market must be the way forward.

The Single Currency

I am a great believer in the Common Market as a vast trading area, in which Britain and the other Member States can buy and sell goods free from bureaucratic regulations and controls. However, the mad headlong rush into European Monetary Union could be laying the foundations of an enormous economic disaster and that is why British Conservatives are opposed to joining EMU within the lifetime of the next Westminster Parliament, or, in other words, at least for the next seven years.

With eleven rather ill-assorted countries in the EU, now embarked on one of the riskiest and most appallingly complex economic and political experiments of all time, at the exact moment in history when the world economy decided to explode in a spectacular firework display of chaotic proportions, stretching from Vladivostok to Venezuela, it seems to me that staying out of the single currency for the next 7 years is the right policy.

No wonder the Euro has continued to fall inexorably against the £ and the $, having now fallen below parity with the $ and lost over 17% in value against the £. Far from being the strong and stable currency we were promised, the Euro has proved to be a weak and unstable currency.

There are two key economic objections, which convince me that signing up to the single currency would be wrong at the present time. The first is the "separate cycles" argument which points out that the UK economy is almost always out of sync with the French and German economies and more often in sync with the US. So, when an interest rate cut would be good for the UK, it is often the case that an interest rate rise would be good for Germany and France, or vice versa. This is largely because the UK is, like the US, an oil-producing nation. It is also because the UK has more overseas investment, out-with the EU, than any other EU Member State.

Now of course the whole concept of convergence was to ensure that these differing economic cycles throughout the EU could be harmonised and synchronised.

The trouble is, could we be sure that when we achieve the necessary convergence criteria and find ourselves in sync with our EU neighbours, it is not simply because our paths have crossed as one economy heads up while another heads down?

The second economic argument involves the 'Asymmetric shock'. This is the scenario where a specific set of negative economic circumstances affects a single Member State, such as the collapse of the Russian economy and the particular impact that had on Germany, or the current inflationary trend evident in Ireland where they are in danger of entering a boom and bust cycle.

In cases like this, the rules of the single currency prevent a Member State taking unilateral action involving interest rates. Only the ECB can take such action and it will not increase or decrease rates for the whole of Europe, predicated on the circumstances of a single country….unless, perhaps, the country involved was France or Germany!

Indeed, the US economy is often cited as an example of how a single currency can work across a vast population and a huge landmass. Those who cite the $ conveniently forget two things. Firstly, the $ is under-pinned by a system of federal taxation and secondly, the mobility of labour in the US is greatly helped by the fact that nearly everyone speaks English.

It is in recognition of the fact that the Euro cannot be expected to succeed in an enlarged Europe of 500 million people, that is driving the federalists to insist on a system of harmonised taxation across the whole EU. I regard such policies with mounting dismay. Once a country surrenders the right to set interest rates and determine taxes, it loses control of its core economic functions and it effectively loses the right to call itself an independent nation state.

Surrendering such sovereignty to un-elected and unaccountable bureaucrats in Brussels is not an option I could ever support. Future generations may find themselves trapped in a European Federal Superstate, which discriminates economically against their country, but over which they would have limited or no democratic control. Such a system would court disaster. Bad economics equals bad politics. Secessionist movements and breakaway groups would be formed, demanding independence from Europe. The legacy we may leave to future generations could be a legacy of conflict, rather than of peace and stability.

So the challenge which confronts Conservatives in the months ahead is the fight to preserve our independence as a nation, to preserve the union which forms the bedrock of our political philosophy and to preserve the right to control our own economic destiny in a reformed European Union.

Reforming the EU institutions

The European institutions - the Commission, the Council of Ministers, the Presidency, the European Parliament and the Court of Justice, were designed to serve the six founding members of the EEC. They are now struggling to serve the current 15 Member States and they would certainly be entirely inadequate in their present form to serve an enlarged EU. They have an old and stale odour about them.

The post-war passion has disappeared; the drive to create a competitive single market to stand alongside, or even dominate other economic super powers, has run into the sands of over-weaning bureaucracy, national double-dealing and corruption. The low turn-out for the European elections in June 1999 and the almost universal mutterings against the interference of Europe in the daily lives of its citizens, shows that at best, the bulk of the continent's population support the European; project in name only. Even in those Member States, which enjoyed the munificence of structural funding, such as Spain, Portugal, Greece and Ireland, there is a dawning realisation that henceforth, such blessings are likely to be re-directed towards the new applicant states of the Baltic and Eastern Europe. As a consequence, there are growing signs of disenchantment with the whole concept of enlargement in these countries.

Reforming the Commission

So, major reform of the institutions is necessary. The Commission needs to be smaller and more effective. It is clearly impossible to promise a Commissioner for every Member State in future. A two-tier system of Commissioner will have to be introduced, with Deputy Commissioners serving their apprenticeship alongside full Commissioners. The powers of the Commission also need to be re-defined. Contrary to the wishes of Mr Prodi, I do not agree that the Commission, as an un-elected body, should have the power to initiate legislation.

Flexibility and Reform of the Council

The Council of Ministers will need to preserve unanimity in their decision-making process where any community decision involving increased regulation is under debate. To have more bureaucracy and more regulatory controls imposed on an enlarged EU simply by a qualified majority vote in Council would be quite unacceptable. The only way in which Britain should be persuaded to abandon its right of veto would be if a new policy of flexibility were to be introduced, effectively allowing Member States not to opt-in to policy decisions it would rather control at home.

In an enlarged Europe with half a billion citizens and a broader diversity of interests, objectives, sensibilities and priorities, a flexible, multi-speed approach to enhanced co-operation, will be the only way the system will work. Indeed, existing policies on EMU, Schengen and the Amsterdam Treaty's provisions on flexibility, perhaps foreshadowed this approach.

Globalisation and Governance

We are entering a period of enormous change and great challenges. The whole relationship between government, governance and the governed is changing. One of the driving forces in this process is, of course, globalisation and the Internet.

To ensure an open market between economies of the EU Member States, present and future, is no longer sufficient. All companies have to compete against each other in the global marketplace as well as in the European market. The exponential growth of the Internet is providing the citizens of the EU and the world, with on-line access to information, markets, products, services and finance.

McLuhan's vision of the Global Village is now with us. The merger between Time Warner and AOL has produced a global communications corporation of gigantic proportions. With a turnover of $350 billion, this giant exceeds the gross national product of a number of smaller EU Member States, including Austria, Belgium, Denmark, Holland and Sweden.

Within the next twenty years, I would predict that there will be no more than five volume motor manufacturers, two civil airframe constructors, three aero-engine manufacturers and four micro-chip makers in the world. The day of the Mega Corporation is upon us and governments must reform if they are survive and be relevant in the new era.

The individual customer or employee feels himself or herself to be about as remote from such giants as the individual citizen feels about the Euro capital in Brussels. Unless the political and commercial establishment start to address the issues of government and governance with some degree of urgency, the zephyr of protest which marked the WTO round in Seattle, may well become a hurricane of dissent.

In the era of post Cold War capitalist triumphalism, the global market appears to be impossible to regulate and impossible to stop. Many Europeans have long viewed the Coca-Cola culture with suspicion and now they see their worst nightmares coming to pass. They feel that little by little, step by step, we are losing those essential differences that are an indivisible part of our personal, local, regional and national identities.

Transatlantic Relations

I mentioned earlier the on-going dispute between the EU and US over bananas, but globalisation and the growth of e-commerce has placed further strains and tensions on the relationship between the European Union and the United States. During the Cold War some stability was maintained by the common external threat that bound the NATO allies together under US leadership. But in the past ten years, despite the fundamentally pro-European outlook of successive US administrations, relations have been deteriorating.

The collapse of the Soviet bloc has created uncertainty about NATO's future. Trade wars are worsening, in part because of a growing divergence of public attitudes on issues of food safety and the reliability of scientific advice. And sharp disagreements between France and the US are still able to poison the overall transatlantic relationship, for example on farm subsidies or the policies of the Middle East.

The socialist/federalist agenda, which seeks to broaden the scope of the Eurozone, and build a European defence capability, is regarded by some American policy-makers as a direct challenge to the dominance of the $ as the leading global currency and to future European commitment to NATO.

As Conservatives, we deplore the steady erosion of our special relationship with the United States. We offer a vision of a future where Britain can play to its strengths as a global trading nation in an expanded Europe of independent Nation-States. Nation States in which we can retain our cultural identity and in which, through subsidiarity and flexibility, citizens will feel engaged with the institutions of government and not remote from them.

Of course, as Conservatives, we want to develop trade and prosperity in Europe. Of course we want to co-operate with our European partners. But we also want to nurture our traditional links with the United States and with Asia and the Commonwealth. We want to be a focus for enterprise and investment. We want productivity, growth, wealth-creation and high employment. We want to be an offshore power-house, a beacon for free trade, democracy and liberal economics where the voice of the people is not lost in the maelstrom of globalisation.