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

Working together to boost trade

7th EU-Russia Industrialists' Round Table
London, 3 October 2005

Mr Khristenko,

Mr Härmälä, Mr Chubais,

Ladies and Gentlemen,

Thank you for inviting me here today to address the EU-Russia Industrialists' Round Table.

Today - the 3rd of October, has a special significance for me, as a German. It is the day on which we celebrate the unification of Germany - one of the most significant events in Europe in the last 60 years. And yet German unification was only a part of the massive changes that our continent has experienced in the last few decades. Since the enlargement of the EU to 25 Member States in May 2004, we can now truly begin to believe that the old barriers across Europe have fallen.

I strongly believe that we are not yet at the end of this process and that the future for Europe lies in closer and closer economic ties with its neighbours with all the mutual benefits that this brings. Russia, as one of the EU's largest trading partners and our biggest neighbour, should be at the centre of those future plans for integration.

For me, the significance of the 4 common spaces which the EU and Russia agreed to develop at the last Summit on 10 May is that they mark the next stage on the way to a common European future. The Common Economic Space in particular - once realised - will be a major step forward in creating an open and integrated market between the EU and Russia. The aim is to enable you and your companies to do business more easily, to increase our mutual trade and investment, and thereby enhance the competitiveness of the EU and Russian economies. The Common Economic Space should be a win-win scenario for Russian and EU industry alike.

One of the most important steps towards a more integrated market between us will be Russia's accession to the WTO. I hope this will happen sooner rather later - although there is still a lot of hard work to do. But to achieve better economic integration it is not enough simply to liberalise trade.

For one thing, we need to address the investment situation. Russia is a buoyant economy and attracts considerable interest from investors, yet it still lags far behind other destinations for foreign direct investment. This is unfortunate because one of the main challenges for the Russia economy is to move from reliance on exports of natural resources to a more diversified economy where the manufacturing base has been restructured and where the services sector is fully developed. Foreign investment is especially useful for a transfer of technology and ideas. So the low levels of investment remain a serious problem for Russia to address. Recent surveys have highlighted the overall lack of legal certainty, combined with the level of corruption as among the more important deterrents to investment. Also attempts to keep foreign investment out of certain sectors and blocking foreign investment when it is seen as 'unwelcome' does not send the right signal either.

It is in all our interests that we translate the words in the Common Economic Space roadmap into real action. This means real dialogue at all levels, real co-operation on joint projects and real solutions to the problems faced by industry on both sides.

A major strength of the Round Table is that it brings together businesses and entrepreneurs from both sides. Not trade associations or lobby groups, but individual businesses from the EU that trade in Russia, and Russian businesses that trade in the EU. This gives you a unique knowledge and experience and enables you to highlight priorities for action in way that others cannot.

I am sure that this year's Round Table will already go some way to providing concrete and practical suggestions that will enable us to advance our work on creating the Common Economic Space.

But I would now like to turn to something much more specific. In the area for which I am responsible in the Commission, enterprise and industry, we have already taken some practical steps - together with our Russian colleagues - to put the roadmap into practice. We are about to launch a regulatory dialogue on industrial products and a dialogue on industrial and enterprise policy. I think these parts of the roadmap are at the heart of the IRT's interests.

The EU and Russia have agreed for many years that a high level of legislative approximation and a shared approach to regulation can facilitate the free circulation of goods and enhance our economic relations. In practice, though, to be honest, not much has happened.

The roadmap sets down ambitious objectives, not only for the EU and Russia to talk to each other about technical regulations, standards and conformity assessment, but actually to work towards regulatory convergence. This will require close cooperation and a practical mechanism for dialogue.

So, working closely with our Russian colleagues in the Ministry of Industry and Energy, we have agreed terms of reference for establishing a dialogue whose main objective will be to promote the harmonisation of technical regulations on industrial products. There will be a consultation mechanism, aiming at the improvement of transparency and trust among our regulators and at the prevention of trade disputes. Work will focus on a number of agreed priority sectors: ICT, radio and telecommunications, textiles, pharmaceuticals, and the automotive and forestry industries.

The idea is that this dialogue will allow us to identify problematic issues - where our legislation diverges - and work towards practical solutions.

Secondly, we are planning to launch a more strategic dialogue on entreprise and industrial policy. Here, the aim is to improve the administrative, regulatory and investment environment for companies, to exchange information on economic issues and policies, to focus on the needs of SMEs and to develop joint programmes of co-operation. Again we have identified certain priority sectors - automotive, textiles, metallurgical sector and SMEs.

You will see that several of the sectors we have identified in these dialogues are reflected in the Task Forces of the IRT. Other sectors are not. It is of course entirely a matter for you as to how you respond to this but it may be worth considering how to involve all the sectors that will be the subject of the new dialogues.

We need the input of industry to identify the issues and realistic solutions. We intend to make sure that industry is represented in the dialogues and we hope that the IRT can provide us with the input we need.

To conclude, Ladies and Gentlemen,

I have great hopes for the Common Economic Space. I would like to see both the EU and Russia develop a working relationship which would strengthen economic links across the European continent.

I have great hopes too for the IRT, as partners to government in this new relationship. It was a good decision to hold this event back-to-back with the Summit tomorrow so that your voice can be heard by our political leaders.

I look forward to hearing your comments and ideas.

Thank you for your attention.