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Common commitment Jim Murphy MP, Minister for Europe, looks at how strong, effective action is breaking down the trade barriers between the US and Europe

The current international financial instability calls out not for a new era of protectionism, but better international management. Most of all, we need to keep up our commitment to open markets.

The UK economy is one of the most resilient in the world – and the bedrock of our strength is that our economy is open. Periods of slowdown can create political temptations for economic protectionism. But Europe and the US must resist this, and instead show world leadership by continuing on a path of openness – to each other and towards the rest of the world.

We hear a lot about the emerging power of China and India. While it’s undeniable that the growth in their manufacturing sector has impacted on both the EU and the US, we should not fall into the trap of considering either country as a threat to our economic interests. Greater global growth and higher global wealth will benefit us all. In five years, we estimate that about 200 million people in China and India will enjoy the same income as a middle-class European. We can benefit from this along with them.

Looked at from this perspective, the importance of ensuring that the Doha trade round has a strong development flavor – that it can lift millions out of entrenched poverty – makes sense not just for developing countries, but for us too. If the global economy gets bigger, we will gain along with everyone else.

So achieving an ambitious pro-development outcome to the negotiations as soon as possible remains our top objective. Not just because this will bring significant benefits to developing and developed countries alike, but also because it will provide a stronger platform on which to build further bilateral as well as multilateral liberalization. Failure would be in no-one’s interests over time and would risk a rise in protectionism which could be difficult to reverse. A risk that we cannot afford to take.

Notwithstanding the indisputable fact that the world’s economy is becoming increasingly multipolar, neither the US nor the EU should underestimate their significance in the global economic order. US-EU trade is worth e620bn annually – that’s 40% of world trade in total. Our combined GDP constitutes around 60% of world trade. Investment flows across the Atlantic create 14 million jobs a year.

This strong trading relationship gives the EU and the US an unrivaled ability to press for a strong multilateral order based on common trade rules, co-operation and economic openness. If nothing else, the economic challenges we face now underline that the decisions made by the US administration effect not just us here in Europe, but also others across the globe.

2007 was an important year in two ways. In the EU, we saw a commitment to market-led economic policies and, following the EU-US Summit in April, we saw strong, effective action to break down trade barriers between the US and Europe.

In particular, the launch of the Transatlantic Economic Council to address the remaining EU-US barriers to trade, investment and growth is a welcome development. We very much hope this will build real momentum and produce significant benefits in itself, as well as sending a strong signal to others about the need for open markets and regulation that facilitates sustainable business.

The EU’s internal economic debate is often painted as a straightforward choice between Anglo-Saxon liberalism and continental state intervention. Of course it’s not that clear- cut. This debate – between protecting jobs and industries and opening up to external factors – is carried out all around the world, including the US itself.

The EU and US have a strong trading relationship

The UK has always pressed for openness. It’s part of our tradition, from Adam Smith onwards. But our statistics show that this approach also works for a modern economy. Britain is the favored location for inward investment in Europe. Globally, we are the second-largest recipient of FDI after the US. We are home to eight out of 10 of the world’s largest consulting firms and four out of six of the world’s largest law firms. We are the largest investment banking centre in Europe – with more foreign banks than New York.

We have the highest number of leading MBA courses in Europe with three of the top 10 universities in the world here in the UK. We have 60% of Europe’s R&D spend on the pharmaceutical sector and with just 1% of the global population, we account for 5.5% of world research. So we have pressed for an open, competitive, outward-looking Europe from the base of our own successful economy. More and more European countries are calling for the same thing: flexible, market-led policies with a light regulatory touch.

The single market is a unique thing. It’s arguably been the greatest achievement of European co-operation. But it isn’t some post-modern cathedral to be admired. It needs to adapt and respond to a more competitive global backdrop. In 2008, we will see further action to cut back European red tape. We will rigorously implement the Services Directive and we will continue to strive towards full-market opening in our network industries – focusing on telecoms and energy. The message for American businessmen and women is: don’t come over here to admire the Single market, as if it were a contemporary monument.

President Bush and Chancellor Merkel, acting as President of the European Council, breathed real life into the principles of transatlantic economic integration during last year’s Summit. Increasingly, the problem in maximizing our trade relationship hasn’t been formal trade tariffs, but other barriers – frequently gaps or differences in regulations. The OECD estimated that addressing these issues could lead to benefits of up to 3.5% of GDP per capita. So it is worth pushing for some action. Both sides come to the negotiating table with a wish list, and negotiations are being carried out – at senior level – with delivery in mind.

We’ve already seen some results – progress on recognizing the equivalence of accounting and auditing standards. Work has begun on patents and in a number of sectors, such as pharmaceuticals and cosmetics, to remove some of these regulatory burdens. The Open Skies aviation deal will generate more than $20bn of benefits for consumers and create 80,000 jobs in the US. This work, a structured dialogue based on sharing our wealth, will continue in 2008. And I hope that we will see some direct gains through more trade between the US and the EU.

The UK is the favored destination for inward investment in Europe

And of course, we are keen for Britain’s portion of EU-US trade to grow as well. And while the US business community in Britain has the advantage of our shared language, we understand that what counts most is a strong, investment-friendly economy, which is precisely what we have in Britain. The proof lies in the numbers – at the end of 2006, the stock of US direct investment in the UK was worth approximately $355.4bn.

It’s an exciting time for business communities in the US, the UK and across the EU, to take advantage of an intensified political dialogue aimed at making it easier for us all to trade. I hope many of you will find new opportunities to do business with us. You will certainly receive a warm welcome in the UK.

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