Günter Verheugen: Japan will benefit from the enlarged Union

Minister, Distinguished Guests, Ladies and Gentlemen,

Japan is a major political and economic partner of the European Union. It is the Union's second largest trading partner. Together, we account for some 40% of world GDP and almost 30% of world trade. We have a common responsibility to make a substantial contribution to global governance in the world.

The European Union is about to enlarge to 25 Member States next year. Some more candidates are waiting. An enormous challenge and an enormous chance for stability and growth. I have noted with satisfaction the considerable interest in Japan on EU enlargement. This was one of the important items discussed during the EU-Japan Summit 4 months ago in Athens.

With a prospect of 4,5% yearly growth over the next decade, the 10 acceding countries provide one of the soundest investment climates in emerging markets. The benefit of stability of market access and competitive exposure in an EU-25 internal market generates a pro-growth environment.

Being the responsible EU-Commissioner for steering this complex process of enlargement, it is an honour and my great pleasure to address such a distinguished audience today and to present the European Union's perspective on EU enlargement. And the opportunities it entails, both in political and economic terms, for our major partners in the world such as Japan.

I would like to extend a warm thank you to the prestigious Waseda University for hosting today's seminar, and to all those who have contributed to sponsor this event. I would like to thank in particular the Japanese government for its support, and thank the Minister for European Affairs from Poland, Mrs Danuta Hübner, for joining us in this conference.

Historic enlargement well on track

Ladies and Gentlemen,

In little more than 7 months 10 new Member States are expected to join the European Union, which will then count 25 Members. The European enlargement will raise the EU-population by 75 million to some 450 million inhabitants and will create the biggest internal market world-wide. Never before have so many accessions taken place simultaneously and never before have preparations for accession involved such a sweeping transformation of the Candidate's Countries own economies and societies. And never before, accession was so well prepared as this time.

The accession timetable is well on track. We have already successfully crossed the threshold of the accession negotiations. We have wrapped up the outcome of these negotiations in the Treaty of Accession, signed this year in Athens, in a highly symbolic ceremony connecting Europe's past with its future. We are drawing closer and closer to the goal of membership, as the process of ratification advances smoothly in the old and new member states.

Where referenda have been organised in the acceding countries, popular vote has put their seal of approval to the accession. The most recent referenda, in Estonia and Latvia, showed overwhelming support for EU membership. This clearly proves that the attractiveness of European integration for the young democracies in Central and Eastern Europe is as strong as ever before. In the existing member states, the ratification process is on track and will be completed in time before 1st May 2004, the date of accession.

The political significance of this enlargement for Europe and its people is, without any doubt, momentous. The objective is nothing less than to create a Europe that is free, democratic and peaceful. The whole of Europe, and not only part of it.

Until the fall of communism, Europe was cut in half. Walls and barriers, like the Berlin Wall, mutual suspicion and the threat of war separated the countries behind the Iron Curtain from the rest. It was not before 1989 that the European Union got the unique chance to put all this behind and to re-unite an artificially divided continent.

There was no way that Europe could let this opportunity pass. Solidarity vis-à-vis countries with shared historic and cultural roots made it imperative for the EU member states to come to the assistance of their neighbours. Peace and stability would not only heal the wounds that years of isolation and mistrust had inflicted on European societies. Peace and stability would also fuel economic development and would maximise prosperity for all.

The offer of EU membership to Central and Eastern European countries was instrumental in achieving these goals. In order to be part of the EU family, root and branch reform of antiquated economic and political structures was a prerequisite. Once these structures had been replaced, the foundations for peace, stability and prosperity for the whole of Europe were set.

This process from its outset needed guidance and was orientated at a clear framework of accession conditions and a concrete list of political and economic criteria determined by the European Union in 1993. The acceding countries have undertaken enormous efforts to succeed in this gigantic transformation process.

They have privatised industries and banks, liberalised markets and prices, set up new administrations to ensure fair competition and oversee market rules. They have reformed their judicial systems and adopted the complete EU legal framework. Today, the degree of privatisation in the banking sector in the Czech Republic is higher than in Germany, energy markets in Poland are more liberalised than in some existing Member States.

While negotiations with Bulgaria and Romania still continue and the decisions whether to start negotiations with Turkey will be taken next year, these 10 countries that will join the Union next year are completing their preparations for accession. They have developed into stable democracies. Conflicts between neighbours, border disputes and minority problems have been settled. The transformation into functional market economies is largely complete, and economic reforms are giving rise to competitive structures.

Nevertheless I will not pretend that everything is perfect. In a number of cases the reforms of the civil service and the judiciary must continue. The battle against corruption is not yet over. Industrial restructuring needs to be completed. And all commitments given in the negotiations, ranging from compliance with hygiene standards in slaughterhouses to the computerisation of customs must be fully implemented.

In this respect the Accession Treaty has taken an additional precaution in the form of a close and comprehensive monitoring process. The purpose is to follow closely the situation on the ground and to give early warning when corrective action must be taken.

But the Accession Treaty has also smoothed the introduction of the new Members into EU standards. It has provided for a phasing-in period in areas, such as environment or energy, where the need for heavy investment made compliance with the EU acquis from day one an unrealistic proposition.

Ladies and gentlemen,

The present enlargement was driven by moral force, by political and strategic considerations. It was the EU's response, long overdue, to the tragic events of the 20th century. It was a bid for peace though integration, for stability through understanding and co-operation. These dividends are so clear and invaluable that it is not an exaggeration to call this enlargement truly "historic".

The enlarged Union: a dynamic partner

Some are asking themselves, whether such an enormous enlargement would affect Europe's capacity to act. Will an enlarged Union be able to function efficiently? To take decisions in time? Will the Union remain innovative and dynamic? Or will enlargement weaken the Union? Will it become a complicated partner?

My view is clear. The European Union will continue to remain a reliable partner. The bigger and more united Europe becomes, the greater its global interest will be. And Europe continues to pursue ambitious policy goals. Without going into details I would just draw your attention to the following areas:

• A Constitutional Treaty that will replace the founding Treaties of the European Union. Preparations are well advanced. A Convention composed of representatives of Governments and Parliaments has adopted a draft Constitution this summer. Governments will now have a final look in an Inter Governmental Conference before the Treaty will be signed by the 25 Member States in May 2004. This Constitution will reinforce the European Institutions, simplify decision-making procedures, strengthen the European Parliament and incorporate fundamental citizen's rights.

• A strong common currency. The Euro has proven its strength on the international financial markets. The stability and growth pact remains a solid base to guarantee sound public finances, and Member States are bound to respect its rules. New Member States have no opt out. They will participate in the EU's economic policy co-ordination and surveillance rules from the date of accession. But they will need to achieve a high degree of sustainable convergence, assessed against the convergence criteria of the Treaty, before they will enter the Eurozone.

• The implementation of the Lisbon Strategy. At the Lisbon Summit in 2000, the Union set itself the objective of becoming the most competitive and dynamic knowledge based economy in the world by 2010, capable of sustained economic growth and better employment. Much has already been achieved by opening up energy markets, modernising competition policy and putting in place an integrated Europe-wide financial market. But the Union will need to intensify the pace of reform and to advance the Lisbon agenda of social, economic and environmental renewal.

• A new Neighbourhood Policy. The Union has only recently proposed to provide a framework for developing the relationship with the neighbours of the enlarged Union. It is based on shared values of liberty, democracy, respect for human rights and fundamental freedom the very principles on which the Union is founded.

As I have assumed only recently the responsibility within the European Commission for further developing and implementing this new policy concept, I will make a few more remarks on this last point.

The "Wider Europe" concept seeks to put forward a response to the questions posed by proximity and neighbourhood, distinct from EU accession. It concerns our neighbours in Eastern Europe and the Southern Mediterranean, from Russia and Ukraine to Egypt and Morocco. It aims to develop new, sophisticated ways to share with our neighbours the stability, security and prosperity we have created within the enlarged Union. It seeks to do so through a differentiated approach to each individual partner country concerned.

In practical terms we will work with our neighbours towards creating the conditions for the free movement of goods, services, capital and persons. To strengthen the co-operation in the fight against common threats, to strengthen our co-operation in conflict prevention and crisis management; to integrate transport, energy and telecommunication networks and to create a wider research area; to promote human rights, step up dialogue between cultures and stimulate people-to-people contacts.

To achieve these objectives, we want to develop with each country an agreed action plan, which sets out the path we intend to pursue together. Of course, sharing prosperity means calling on our neighbours to make progress towards the high standards we have set ourselves within the European Union. This refers to human rights, the rule of law as well us the regulatory framework of the internal market. Economic rules and regulatory structures need to be aligned to the acquis in order for markets to inter-connect. The offer therefore is to achieve closer economic relations with the EU in exchange for better political and economic governance.

This time more than ever enlarging the European Union has to be seen in the broader context of Europe's interaction and Europe's co-operation with its partners in the world, in particular in North America and Asia. Especially, if we have a closer look at current realities and recent developments in international politics, it seems obvious that many are waiting for a Europe to wield greater clout in world affairs.

Europe is not standing around empty-handed. It is by far the biggest donor in international development policy. Europe is a world leader when it comes to implementing global environmental objectives like the Kyoto Protocol. Europe has gone furthest towards opening up its markets to the world's poorest countries. Europe is the world's strongest trading power. It is the world's major source of outward investment. It is also, incidentally, the largest source of Foreign Direct Investment in Japan. And Europe has most experience in stabilising and democratising countries and systems threatened by internal collapse.

But Europe needs to translate its achievements into an effective European contribution to global governance. And this can only be achieved in close co-operation with our major partners. If we look for example at the US's current priorities, there is nothing objectionable about its goals: fighting terrorism, eliminating weapons of mass destruction and taming countries with a growing propensity for aggression.

However, an exclusively military approach to terrorism will not work. It is the causes, which have to be addressed. This involves fighting poverty, a rigorous policy of human rights, world-wide social justice, addressing the destructive forces of economic globalisation and managing environmental risks. And more than anything else the rule of law must be the foundation of global governance.

It is because of this latter attitude that the European Union in future should and will more intensively raise its voice on international level. This can only entail real impact if based on a stable, viable relationship with major partners such as the United States and Japan. A successful European integration, a stable and strong European Union is the strategic interest of our global partners. It provides a sound basis to share burdens and tasks after having agreed on common aims and proceedings to follow.

The enlarged Union and Japan: a future for intensive co-operation

The strategic partnership between Japan and the EU, as designed in the bilateral Action Plan, of 2001 will be more rewarding with a stronger partner, reinforced through enlargement. Japan and the EU both play a key role in an increasingly global world and in seeking and implementing enhanced common political leadership.

Enlargement brings new chances and opportunities which Europe is ready to share with its partners. By its enlargement the EU will, after all, add a population and a current GDP increase that is equivalent to more than half of Japan's population and close to 10% of Japan's GDP. The acceding countries have successfully completed their transformation into functioning market economies. Economic analysts agree on the prospect for strong yearly growth rates in the acceding countries for the next decade, estimated around 4,5%. due to a stable investment climate and the need for consumption and infrastructure investment.

The EU will continue to support its new members in their efforts to ensure sustained growth. During the accession negotiations the Union agreed to provide for the years 2004 to 2006 alone more than 20 billion € for infrastructure investments in the new Member States. This type of structural policy to support regions in need will continue beyond the year 2006, based on a new financial framework for the post 2006 period.

The potential for growth is an opportunity for the current EU Member States, but also for Japan. Japan will benefit from the largest single market and a simplified and enhanced access to the acceding countries' market. More stability and prosperity in Eastern Europe will mean more exports and business with these countries.

The enlarged EU will account for some 19% of world trade, 46% of world outward FDIs and 24% of inward FDIs. As of the day of accession the new Member States will adopt internal market rules and benefit from free movement of goods, services, persons and capital, the basic factors of production.

EU-Enlargement will also extend the EU's trade policy regime to the new Member States. A single set of trade rules, a single tariff and a single set of administrative procedures will apply. This will greatly simplify the dealings that Japan's companies have within Europe. Moreover, enlargement will bring a range of immediate and tangible economic benefits to Japan, as all acceding countries will adopt the same open standard of treatment of third countries, applied in the EU.

For trade in industrial goods, the new Member States will have to adopt the Common Customs Tariff upon accession. This will mean on average a significant decrease in the tariffs applied. The average weighted industrial tariffs of the acceding countries will decrease from around 9% on average to the 3,6% average applied by the EU. Thus, third countries' business will benefit from extensively lower tariffs in their trade with new Member States as a result of enlargement.

In the case of services, third countries' services providers will benefit from the implementation of the single market in acceding countries. They will get the same treatment there as in the rest of the EU. As regards technical regulations, the "one standard for all" principle of the single market will be extended to the acceding countries. This has obvious advantages for Japan's supply exports.

Japanese companies were - and hopefully remain - active as investors in the acceding countries. The long run catch-up growth in the Member States will continue to be a major stimulus for FDI. Recent figures for 2002 confirm this tendency. While 2002 saw a sharp decrease in world FDI, investment flows into the acceding countries, increased by 2%.

With 75 million additional consumers, above trend growth, and a stable legal and institutional framework, the new Member States will be the most attractive emerging economies in the world to invest in. I am convinced that Japan has much to gain in further increasing its presence on the new market. I would like to encourage you therefore to be even more engaged in this dynamic region.

All new EU-Members will be able to participate in the useful co-ordination mechanisms provided by the yearly EU/Japan Summits. This will reinforce mutual knowledge and confidence. The EU/Japan Action Plan agreed at the EU/Japan Summit in Brussels two years ago, provides for an excellent basis to broaden the field for our bilateral activities. I should recall that in Athens the leaders of Japan and the EU clearly reiterated their commitment to initiate common undertakings and to support international measures for the establishment of democracy, the rule of law, good governance and the promotion of economic perspectives in international relations.

Let me make a final point: I am quite encouraged by a recent opinion poll in the EU Member States, where 82% believe that enlargement will result in a cultural enrichment of Europe. Such openness would also indicate that the EU is prepared to further intensify its relations with third countries.

One of our objectives in our bilateral relations discussed at the last Summit meeting in May focuses on "bringing together people and cultures". And in this regard we are proud that we will soon be able to partner Japan as an enlarged EU with ten additional members, each bringing with them their distinctive culture, language and tradition. The EU/Japan initiative to make 2005 the year for "people-to-people exchanges" will be a perfectly timed opportunity for Japanese people to explore a culturally more diverse and enriched European Union.

Ladies and gentlemen, distinguished audience,

Europe is finalising a historic transformation. It will draw a final line under the many wrongs of the past century. It will give Europe a new face and a stronger place in the world. I have noted with great sympathy and satisfaction that developments in Europe receive such considerable attention here in Japan. Together we have a joint responsibility to promote democracy, to ensure stability and to intensify economic exchange. We need to work together to make use of our opportunities to ensure sustainable growth and prosperity. We need to work together to make the world a safer place.

Thank you for your attention.