Günter Verheugen
Vice-President of the European Commission responsible for Enterprise and Industry

Strategies for EU-Japan Economic Partnership

Residence fo the Japanese Ambassador, Mr. Kazuo Asakai
Brussels, 1 March 2005

Ambassador Asakai,

Excellencies, Distinguished Guests,

Ladies and Gentlemen,

The year 2005 is the "EU-Japan Year of People to People Exchanges" ; a most welcomed initiative to encourage and promote face to face contacts between our peoples in order to promote better mutual understanding and deeper cooperation.

I am particularly pleased about Ambassador Asakai's kind invitation that allows me to inform you face to face and first hand about the centre piece of the Commission's objectives for the next five years: its Growth and Jobs Strategy for Europe, the so-called "renewed Lisbon strategy".

Before I turn to this project let me underline the very good climate of co-operation that has been built up over the years between Japan and the EU. Since back in 1991 where the EU-Japan Political Declaration was put into place in Tokyo, EU-Japan relations have developed steadily on all fronts. Mutual links have grown across the whole spectrum of relations, political co-operation, trade and investment and business collaboration. Japan and the EU play a key role in an increasingly global world and in seeking and implementing enhanced common political leadership. We are both committed to solving global problems through a co-operative and consensual approach. The 10 year EU-Japan Action Plan agreed in 2001 provides us with an excellent basis to broaden the field for our bilateral activities and to steer our relationship.

The very fruitful co-operation established between the Ministry for Economy, Trade and Industry (METI) and the Commission's Directorate General Enterprise and Industry has helped a lot to work together to face a mutual challenge: how to foster competitiveness while maintaining our common model of sustainable development and social responsibility. But we can and need to build on our existing co-operation to further develop it, for the benefit of our stakeholders.

We have established a successful industrial policy dialogue . We have useful exchanges on overall competitiveness issues and our experts have entered into vivid dialogues on a number of important and future-oriented issues as for example on biotechnologies.

But I believe we can go further.

We need to explore the possibility of defining a more focussed regulatory dialogue, well in advance of the formal adoption of new pieces of legislation. Such a dialogue will not replace the Regulatory Reform Dialogue that is taking place this week in Brussels: this regular forum will continue to deal with existing regulations. A pre-emptive work, based on transparency and co-operation between our regulators could avoid regulatory divergences before they appear. The improved and a priori dialogue I am suggesting would help us preventing trade irritants which are often caused by the implementation of divergent regulations. A major contribution of this new Regulatory Dialogue could be the promotion of better and harmonised technical regulations and standards between the EU and Japan.

I also would like to stress the very valuable role of the EU-Japan Business Dialogue Round Table.

The Round Table is a tangible and visible example of our cooperation. It needs to continue to support the Japanese Government and the European Commission by providing them with information, analysis and recommendations based on concrete business experiences. The Round Table helps to prepare the ground for the development of closer links between businesses from Japan and Europe. Its contribution is instrumental in fostering two way investments in both regions.

I intend to be closely associated in the work of the Round Table and I am planning to attend its next meeting mid-2005. I know that our respective administrations are already working on the follow-up report of the 2004 recommendations put forward by our business communities. I look forward to hearing their recommendations.

Some words finally about the EU-Japan Centre for Industrial Cooperation .

This unique "joint venture" between our services is instrumental in supporting business investments in Europe and Japan. The Centre's European office here in Brussels started for example last year a very successful information service for Japanese companies in the EU. I welcome the agreement reached last summer between Minister Nakagawa and my predecessor, Commissioner Liikanen, to provide more financial support to some of the cooperation and training programmes carried out by the Centre. This is fully in line with the 2005 EU-Japan people to people exchanges initiative I mentioned at the beginning.

Ladies and Gentlemen,

The European Union can look back on a quite remarkable economic and social development over the last decades. The Union has created a Single Market. We possess with the Euro a single currency that consolidates economic stability and deepens the potential of economic integration. We have consolidated a fair participative social model. Since the 1st of May 2004 25 nations are united together in a unique political Union of stable and democratic countries.

But the European Union is confronted with new challenges. These spread from a major demographic change with low birth rates and ageing populations, the search for efficiency in the education and research sectors to the trends of delocalisation or the rise of new competitors. As we have entered the 21st Century, our economy no longer seems in full swing. In some EU Member States we are losing, not creating jobs. The gap in terms of growth to the US is starting to widen. At the same time, economies like India and China are growing 4 to 5 times as fast as the EU.

Five years ago in March 2000 the European Union launched an agenda for reform, called the "Lisbon Strategy" which had the objective to make Europe by 2010 the most competitive and dynamic knowledge-based economy in the world. Five years later the reform record is mixed. This is not just the result of difficult economic conditions since the Lisbon strategy was put in place. There are many reasons for this. Co-ordination of the whole process has not been sufficient. We can point to the unclear objectives of the strategy. Lisbon covered too many things. The complexity of the process is one key reason as to why the results are not at the level of our ambitions. There is also little awareness and ownership of the Lisbon process. The net result is that we have witnessed a worsening of our competitiveness over the last years. We cannot continue this way. The prosperity of this and future generations depends upon it.

This is why the new Commission is proposing a new start and I would like to develop this issue at some length tonight as it is dear to me heart.

The new Agenda for Europe which the Commission proposes focuses on three crucial elements: competitiveness, growth and jobs .

We need to improve competitiveness, we need to be more productive and we need to get more people into jobs. At the same time we need to defend our vision of society, a society that provides a high level of welfare for the present and future generations. We need to better anticipate and manage changes in the global world.

Let me be very explicit: Competitiveness is the key!

We need to accept competition as the basic rule for the market place. It implies that you fully support the idea of open and free markets. It implies also a restrictive understanding of the role of public authorities. They have to create the right framework conditions which will encourage entrepreneurship, give businesses legal certainty and predictability, organise a level playing field and vigorously enforce competition rules.

In addition we need to focus our efforts on growth and jobs through fewer and clearer priorities in a number of core areas and by speeding up a number of reforms.

This new approach is fully in line with the overarching principle of sustainable development. The strong attention we give to competitiveness, growth and jobs does not mean that we give less priority to environmental or social concerns. On the contrary: a satisfactory and sustainable social and environmental policy is inevitably linked to growth, employment and productivity.

The renewed process that President Barroso and myself presented early February is based on three pillars.

First Europe's action needs more focus . We must concentrate all our efforts on delivering the policies that will have the greatest impact. This means keeping existing promises, building on the reforms already underway in every Member State and launching new action where it is needed to keep us on target. It requires from the Commission to be rigorous in setting priorities.

Second, we have to mobilise support for change . Establishing broad and effective ownership of the Lisbon goals is the best way to ensure words are turned into deeds. Everyone with a stake in the agenda's success must be involved in delivering the reforms. They must become part of the national political debate in the Member States and also at the local level.

Third, we need to simplify and streamline the delivery mechanism. This means clarify who does what, simplify reporting and backing up the delivery through Union and National Action Programmes. There should be a partnership building on an integrated set of guidelines to frame Member States action, backed by only one report at EU level and only one report at national level.

In order to implement these goals we propose an Action plan covering a limited number of essential actions around three themes:

• Making Europe a more attractive place to invest and work
• Raising our capacity to grow through knowledge and innovation, and
• Creating more and better jobs.

Making Europe a more attractive place to invest and work requires the right framework conditions.

It means inter alia extending and deepening our internal market. Timely and correct implementation of EU legislation is a prerequisite. The powerful stimulus that the Single Market has provided for growth is still not fully exploited. Commitments to open markets in key areas like financial services, transport and energy markets have yet to be delivered. The absence of a fully functioning internal market for services constitutes a considerable brake on EU's economic potential.

In addition better regulation will be one of my main priorities for the years to come: indeed, businesses operating in Europe must be granted a regulatory environment free of unnecessary, burdensome or unfavourable legislation. Reducing the burden of regulation is especially important for small and medium-sized enterprises. We must bear in mind the consequences of new legislation for European business. A good way to do this is to extend the use of impact assessment when defining new regulations. All future important Commission proposals will have to pass an impact assessment including a competitiveness test. Not to legislate could also be an equally valid solution in many cases.

As a second driver of our new agenda, we must find better ways to stimulate innovation and entrepreneurship in Europe. Japan and the U.S. are making steady progress in their innovation performance. Sadly, Europe as a whole is not, even if the widening of the overall innovation gap masks some important differences in the innovation performance of EU Member States.

Research and Development is important for innovation. The target of spending 3% of our GDP on research and development deserves our full commitment. It is also necessary to concentrate on the rapid adoption of the forthcoming 7th Framework Programme for Research. There is also a strong need to stimulate entrepreneurship in Europe. There are just too many obstacles to becoming an entrepreneur or starting a business. The legal framework needs to become more user-friendly. We must value those who are prepared to take risks.

The third driver of growth and employment is about creating more and better jobs. We need to attach paramount importance to reduce youth unemployment and to modernise our social protection systems. We have also to increase the adaptability of workers and enterprises and the flexibility of labour markets through removing obstacles to labour mobility.

Mr Ambassador,

Ladies and Gentlemen,

In three weeks time Heads of States and Governments will decide on the new agenda for Europe. The responsibilities for this agenda lie both with the EU institutions and the Member States. But we should be clear: most of the reforms called for will have to be implemented by actions on national level in the Member States. That is why the partnership is so important. We need to have a strong common understanding on where we want to go and how to arrive there in time.

The agreed new agenda will be an efficient instrument for supporting the necessary reform efforts in Member States. This is also why national ownership plays such a crucial role with the involvement of social partners and other stakeholders.

The Lisbon mid-term review sets out a fresh and energetic approach on how Europe can meet the new challenges.

I am confident that many of the forthcoming reform actions guided by this new approach will also be beneficial to our bilateral relations and to Japanese investment in Europe. I have noticed with great interest the comprehensive economic reform agenda initiated in Japan by Prime Minister Koizumi. Europe and Japan need to answer similar challenges and we both need to give our respective economy the chance that it deserves.

I am committed to engage myself in a strong and continuous dialogue with you in order to make our co-operation work and grow. Thank you very much for your kind attention!