Tal
Svensk-amerikanska handelskammaren i Washington D.C., USA 28 februari 2007
Sten Tolgfors, Handelsminister

Sten Tolgfors anförande på svensk-amerikanska handelskammaren i Washington D.C.

European and American Competitiveness in a globalised world

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Ladies and gentlemen, it is a great privilege to be here at the Swedish-American Chamber of Commerce.

Today I will speak about the changing landscape of globalisation and how we in Europe are trying to adapt to meet the challenges, and prepare ourselves to take advantage of the opportunities.

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First an historical perspective:
The Vikings traded in all the known world a thousand years ago. They traded - and raided - in what was to become Russia and Iceland. They came here to America, which they called Vinland. And they went east to what is now Turkey. Apart from their violent past, they were first and foremost tradesmen.

European cultures share a trading tradition dating back thousands of years (Greeks, Romans, Vikings). The Swedish company Stora Kopparberg is the oldest limited company in the world, founded in 1288. Sweden was a major exporter of copper already in the 15th century, and in the 18th century we traded with China. Swedish companies, like Ericsson, were producing outside their home market already at the beginning of the 20th century. Ericsson has been active in Asia for 100 years and prior to the Russian revolution they had a major production plant in St Petersburg.

Sweden is totally dependent on exports. European countries with small home markets have always needed to internationalise in order to survive. According to McKinsey, Switzerland, Sweden and the Benelux countries have the highest proportion of big international companies in relation to their population.

I am a friend of the market economy and private ownership, I dislike market distortions. I believe that natural and self created comparative advantages should be allowed to allocate resources in the most effective way. This is why I declare myself to be a free trader.

I am also a multilateralist and a friend of the United States. I firmly believe in a strong transatlantic link. And I also believe in our common values of democracy and a free economy. It is clear to me that we need to work together to promote economic growth and competitiveness on a global level.

When my government won the election in Sweden last September, we declared our wish to focus more on our relationship with the US. We will seek to do this both bilaterally and through our membership in the European Union.

Why are stronger ties so important?

The first reason is quite simple. We are historically connected. In 1638, Sweden established the colony New Sweden in what is now Delaware. And since then there are countless examples of close ties due to extensive travel and cultural exchanges between our two countries. And this is not forgetting the 10 million Americans of Swedish descent.

Secondly, we have strong commercial ties. The US is one of Sweden's top-two export markets. Swedish exports to the US are greater than our total exports to Asia and the Middle East combined.

200 000 Americans work in Swedish-owned companies such as Volvo, Ericson, IKEA and fast growing service companies such as Securitas.

Between 1995 and 2005 Swedish exports of goods to the US increased in volume by 9.5 percent on average each year. In the first three quarters of 2006 the US was the tenth largest supplier of goods to Sweden - that is 25 percent more than China and 61% more than Japan.

Since 1997, the US has held the largest aggregated amount of Swedish FDI of all countries. FDI totalled 37.3 billion US-dollars in 2001.

Thirdly, The EU and the US represent the world's two largest trading blocs. Our combined economies generate a total of 57 percent of world GDP. This is more than 40 percent of world trade.

Fourthly Stronger cooperation with the United States is of great importance when facing the global challenges of today. Shared values and interests will enable us to work for the development of freedom and prosperity on a global level. International trade is an efficient tool to this end.

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Free trade is a cornerstone of Swedish foreign and business policy. It is also the basis of our domestic economic policy. Swedish prosperity is built on international trade and the ability of our companies to compete in global markets. Exports and imports combined correspond to about 90 percent of GDP.

We need to take on the challenges of globalisation by increasing our own competitiveness. Building barriers will only reduce our competitiveness and ability to prosper in the long run. The sometimes negative effects of globalisation, for instance a factory closing down and production moving abroad, can cause anxieties. And we need to do a number of things to deal with this.

We can't compete with low wages. We must compete with the quality of our goods and services. We must move up in value added in our production when the BRIC-economies compete with low cost production. We have to compete with a well educated labour force, resources for research and development, well organised production, leadership and communication.

Creation of the European internal market has been a continuous process. It has been steadily enlarged and economic integration has been deepened ever since its beginnings 50 years ago. It has been enlarged from 6 to 29 countries. It has almost 600 million consumers, and 25 million companies. In short, the internal market is the most significant economic area in the world.

(The most important part of the internal market is the aquis communautaire - that is a common set of rules. Businesses do not have to adapt to 29 different national legislations. If they have problems, there is a common system for redress and a European Court of Justice. A common market and common rules equal transparency and in the end openness.)

We can't demand openness from others if we have barriers of our own. We need to make sure that Europe's own market stays open. In a global economy Europe needs imports as well as exports. Protectionism only raises prices for consumers and businesses and limits choice. Openness to global trade and investment also exposes the domestic economy to competition and rewards innovation. In order to be active in new markets abroad, Europe must reject protectionism at home.

An important task for any Government is to help create favourable conditions for doing business both at home and abroad - not least for small and medium-sized enterprises.

Barriers still exist between Europe and the United States. Today, it is not primarily tariffs that constitute these barriers between us. Instead we have non-tariff barriers in the regulatory field that, in my view, border on protectionism.

(The Transatlantic Economic Initiative was launched at the EU-US Summit in 2005. It aims to remove some of the remaining barriers in the transatlantic market.) Sweden strongly welcomes the initiative of the German EU presidency to focus on these issues.

My visit to the US this week is primarily because of the negotiations in the Doha Development Round in the World Trade Organization (WTO). The successful completion of the Doha Round is in my view the most critical question for the world economy right now.

We have only a small window of opportunity to get a breakthrough in the negotiations this spring.

There's a lot to gain. A recent study by the Swedish National Board of Trade suggest that we stand to gain 117 billion USD/year on a global level.

There's a lot to loose if we fail to take advantage of this window of opportunity. Not only will we sustain welfare losses, but the multilateral trading system as such will loose credibility.

Further negotiations could most likely not resume until after the next American presidential election. This means we are looking at maybe 2009 or even 2010 before serious negotiations can take place again - depending on how long it takes for a new administration to be put into place and to get a TPA (trade promotion authority).

Given what is already on the table, the Doha-round would be the biggest liberalisation of global trade in history. It involves deeply restructuring farm support in the developed world and opening markets in agriculture, manufacturings and services.

The industrialized countries have a lot to gain from the Doha-round. But developing countries have even more to gain from freer trade and market access. The Doha Round is also an opportunity to integrate growing economies like China and Brazil into the multilateral system.

Everyone has to give up something in order for all the pieces of the puzzle to fall into place. This is what I have tried to emphasise in my talks with key players in international trade - such as WTO Director General Pascal Lamy, with EU Trade Commissioner Peter Mandelson, and the French Minister for Trade Mrs. Lagarde - in the past months.

And this is what I will say when I meet with USTR, Susan Schwab and members of Congress this week.

Only openness and the rejection of protectionism can secure freedom and prosperity.

Agriculture cannot be allowed to be a deal breaker. (The agricultural sector represents less than 8 percent of world trade. If the developed world opens its markets to agricultural goods it will have an enormous impact on the economies of the developing world. Mainly because this is where they have a comparative advantage.)

We need also to put emphasis on our offensive interests, such as industrial goods and trade in services. These are the areas where our economies have the most to gain. To give just one example; recent studies show that 65 percent of Swedish welfare gains from a successful Doha round will come from liberalisation of trade in industrial goods.

It is my belief that we all share the responsibility to defend free markets and the multilateral trading system. Free trade can never be taken for granted. That is why the business community must also play its part. As leading business people, all of you here today can help to this end. You can talk to your representatives in Congress, to fellow businessmen and women and to opinion leaders. Who better than entrepreneurs and businessmen and women to make sure politicians understand what is at stake.

But the window of opportunity is rapidly closing with the President's Trade Promotion Authority expiring in June. We need a breakthrough this spring. We have to have all the major players moving in concert to achieve an extension of the President's TPA.

Thank you.