Your Excellencies, Distinguished guests, Ladies and Gentlemen, My name is Tommy Kullberg and I am the Chairman of EBC, the European Business Council and the European Chamber of Commerce in Japan.
I am delighted to join you today in celebrating the launch of the third European Union Institute in Japan and honoring Waseda University for managing such an illustrious programme. I thought this would be a good opportunity to share with you what we learned from one of the EU's most successful strategic projects: the creation of the Single Market. I'd also like to offer some ideas on how this learning might be applied in the EU's relationship with Japan, to the benefit of both business and consumers.
So let's have a look at the Single Market project. From the beginning, EU Member States calculated that their economies would benefit if they could abolish the obstacles to mutual trade. They were right. In the ten years since the first Single Market programme ended, in 1993, at least two-and-a-half million extra jobs were created in the EU. The increase in wealth in those ten years was nearly 900 billion euro (117 trillion yen). And all because of the Internal Market. So how did we do it?
Let's start with the free movement of goods, one of the pillars of the Single Market. Achieving it meant getting rid of all the physical barriers to the movement of goods across borders between the EU Member States. So, all the customs posts had to be removed. Fortunately, when they went, so did a lot of bureaucracy. This had remarkable results for government, business and consumers. Costs fell. And competition increased as companies found new markets abroad, meaning that consumers had access to an improved range of products. Those of us who remember when every Member State had its own rules, and when businesses incurred endless expense modifying products to meet their different requirements, cannot deny the advantages of now having just one set of rules to focus on accepted and enforced in 27 different countries, across a market of more than 480 million people. Almost 4 times of Japan!
Now coming to free movements of services. The services industry in Europe is vast, diverse and complicated, so establishing common rules and addressing all the possible barriers to cross-border trade was bound to take time. Anyhow, the EU Services Directive will be transposed into law by the end of this year. It will mean that EU service companies will have the right to establish themselves in other Member States, and to provide services on the territory of a Member State in which they are not established. There is specific legislation to reinforce these rights in areas such as financial services, telecommunications, broadcasting and the recognition of professional qualifications. It's not just the service companies that will benefit from this: because the service providers will become more competitive and all their customers - business, government and consumers - will reap the rewards.
The same can be said for capital - not the easiest area to regulate, but the free movement of capital is crucial to the EU Single Market being able to function properly, both in terms of facilitating trade across borders and the free movement of workers. The EU legislation aims to ensure that consumers have a wider choice of financial products - such as loans, insurance, saving plans and pensions - which they will be able to buy from anywhere in Europe, and will also make it easier and cheaper for companies to borrow money, bringing down the cost of capital, goods and services for everybody.
Finally, let's get to free movement of people. As many companies can testify, the ability to move personnel easily from one place to another can be important, in some cases absolutely critical, to the success of an operation. Happily, with just a few temporary exceptions, EU citizens are now able to travel freely and settle in any Member State without foregoing welfare protection, to study there, to seek work there or practice their profession or set up a business, and ultimately to retire.
You can see from all this that the EU Single Market brings enormous benefits. It has made the market place more dynamic, increased competition and stimulated companies to become more competitive. This has made us think! If lowering the barriers to trade could be so helpful to the EU Member States, then why not also to Japan?
In Japan we have a much lower level of Foreign Direct Investment than any other comparable economy. As we all know: FDI enriches an economy: foreign firms offer new management skills, marketing methods, and business approaches and, equally important, access to fresh R&D and capital. More FDI means more competition stimulating domestic companies to become more innovative. Yet efforts by Japanese governments to pass legislation encouraging foreign investments have been largely unsuccessful. It seems that many domestic companies remain fearful of foreign take-overs and have argued for regulative obstacles to what could, in fact, be the means to their own survival.
We believe that it is time for change. And the model adopted by the EU Member States, lowering barriers to trade and fostering economic integration, could provide part of the answer. So we suggest that the EU and Japan should work together, over time, to extend the Single Market concept to their own trade relationship, focusing on achieving the benefits of much closer cooperation in the economic arena.In fact, we are proposing working together towards what we call an "Economic Integration Agreement" - EI. The size of our combined economies, accounting for 40% of global GDP, means that each offers huge potential to the other. But our economic and trade relationship suffers from endless, unresolved differences in respective rules and regulations. The time is right to work together to create a new, shared approach. What could this mean?
Well, to start freeing up the movement of goods between the EU and Japan, work could focus on achieving mutual acceptance of product standards and certification schemes, and developing common approaches to customs duties, import and export taxes. Success would mean that both EU and Japan would gain from reduced administrative costs. Consumers would get faster access to new products, without compromising on safety. It would also boost competition, and by doing so, improve the competitiveness of domestic industries. The EU and Japan could also work together towards establishing common competition rules, and common standards for service providers, in the financial, insurance, legal, telecom, and construction sectors. There are also strong arguments for working towards the free movement of capital between the EU and Japan. This would mean getting to grips with tax issues, and eliminating double taxation and withholding taxes on dividends, royalties and interest. Finally, of course, any attempt at achieving greater economic integration between the EU and Japan would depend on making it easier for people to move between the two.
But before we give up and put this all in the "too difficult" box, let's just remember why this proposal is on the table. The Single Market concept has been proven to increase prosperity and jobs. The combined economic strength of the European Union and Japan, their shared outlooks and their interest in fostering competitiveness make them ideal partners to work together on a solution. So let's not dismiss the proposal just because it's difficult. Extending the Single Market concept to the EU-Japan trade relationship could work, and it would give a much-needed boost to trade, to employment, to business and to consumers. An EU-Japan Economic Integration Agreement, that builds on and complements existing multilateral trade agreements, could also pave the way for future rules and standards for use in markets across the world. If we have learned our lessons well, we could make this happen.
The current economic crisis is a wake-up call for action. We have the means and opportunity to make things much, much better. Honestly, what are we waiting for? Thank you very much for having your attention!