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President Ilves at CSIS Statesmen's Forum, Washington, 27 June 2007

27.06.2007

President Toomas Hendrik Ilves spoke at the Center for Strategic & International Studies (CSIS) as part of its Statesmen's Forum series. President Ilves spoke about the definition of "New Europe" and then answered questions on a number of topics, including energy and cybersecurity. Zbigniew Brzezinski, a trustee and counselor at CSIS, introduced the president.

Listen to the speech on the CSIS webpage.

I’ll probably disappoint some of you here that I’m actually not going to talk very much about Russia because in fact the interests of Estonia are very much more in Europe and in the West and in the transatlantic relationship than they are in constantly having to deal with these other issues that, well, they won’t go away, but they are not intellectually very interesting and they are not politically very interesting except as tactical defence issues.

But other than that, really the real interests of Estonia, the real interests of the West have to do with where Europe is going, and that is what I want to concentrate on today.

The title of my talk today is, “New Europe in the New Europe,” which I think has many meanings, which is why I gave it that title. The new members of the European Union, long before they became members, were characterized in ways that we have never asked to be characterized. On the one hand, the U.S. secretary of Defence thought we would be the new vanguard of a muscular pro-American European Union. On the other hand, when we did support the United States, European leaders said we were badly brought up children who didn’t know when to shut up.

And in Russia I think the new Europe in both the sense of the new members as well as the Europe that we see today is understood as poorly as it was a long time ago. But there are even greater generalizations, the kind we see in some U.S. newspapers who have an obsession with the EU being something it is not, a failure, ineffectual and doomed to collapse, and the kind we see in some parts of the British press where the new Europe, large Europe is considered a looming Orwellian super state not with black U.N. helicopters ready to swoop down on John Bull, but that is only because the colors of the choppers have not yet been determined.

As always simplistic generalizations are wrong but heuristically allow us to put our finger on something that we sense is there. As it is all more complex, I would try, rather than to draw in broad outline changes in Europe that have taken place after such a profound change: the collapse of the wall, followed a decade-and-a-half later by admitting 12 new members, totally over 110 million new citizens, which is almost a 30-percent increase in population of the European Union. I’ll just try to focus on a few elements and then look at what the problems are that we face.

Each country of course is unique so please forgive me my own broad generalization. However, there are certain fundamental truths that are true about the new Europe in the sense that Secretary of Defence Rumsfeld characterized them. First of all, the new members do not have the almost knee-jerk anti-Americanism that had become – comme il faut – if not de rigueur – for those who wish to be salonfähig since the late 1960s in much of Western Europe.

But this should not be surprising given the differences in the positions of Western Europe and the U.S. in the Cold War. Let us recall that when Poland came under martial law, a German chancellor praised General Jaruzelski as a true Polish patriot. When Ronald Reagan called the Soviet Union the evil empire, most of us silly bumpkins with empirical knowledge of how the Soviet Union operated thought it was an accurate description of the state of affairs. So there are fundamental differences in the way East Europeans, the new members of the EU and NATO see both the United States and the way they see at least the Soviet Union.

But this also will change and is changing. Young people who have grown up without communism, and they are today in their early ’20s, and if you think back, well, people don’t really remember much about the time when they were three or four, we are already looking at people who are a quarter-of-a-century old who really have no idea about what their parents lived under, and like most children, or young adults, think that whatever their parents are talking about is completely wrong so that we see that even young people in Eastern Europe are beginning to mimic their anti-globalization counterparts.

New Europeans I predict will follow the same path of development in the next 30 years as the generation of Western Europeans who followed those people in Western Europe who had fond memories of the Berlin airlift, who appreciated the United States for the Marshall Plan and for the behavior of the liberating GIs after World War II. That is that things will change.

Secondly, the new Europeans are more capitalist. Many of our countries have flat-rate income taxes whose main benefit, by the way, is mainly increasing compliance payment. We’re more free-trade oriented than some of the old Europeans. We believe in competition. And perhaps especially importantly that free movement of capital, which is a fundamental part of the European Union, results in major distortions if you also don’t have free movement of services or free movement of labor. If you’re American and don’t follow these issues, I won’t get into it and perhaps answer them, but free movement of labor and free movement of services is something that is part of the – those are the fundamental freedoms in the European Union but they are incomplete while we do have complete movement of capital and this puts the new members at a considerable disadvantage.

And third, we do have a different attitude towards Russia. Again, this will change. In some quarters it has already changed, but empirical experience with that empire means that new Europeans do see developments in our East. In ways that those with a romanticised view of mass deportations, Gulags, the KGB, long lines to buy shoes or a Trabant do not. We see things differently.

I don’t mean to be flippant. I think there is a very fundamental truth in the fact that if you have risen up against Russian-imposed power in Poznan, in Berlin, in Budapest and Prague, and later in Vilnius, and Riga, and Tallinn, that you will have a different view of what it is about than the countries in Western Europe, none of whom have experience against an uprising against totalitarian rule. In fact, the only uprising against Nazi rule took place in Poland.

I think there is a fundamental difference between East Europeans and West Europeans in terms of the experience of finally being so desperate that you stand up and make a fight. And I think that is part of the psyche of Eastern Europe that doesn’t find an acceptance in an area that wants to have a somewhat – I wouldn’t want to use the word “appeasement-minded” but certainly an accommodationist view of totalitarian rule.

And these are big differences and these will affect the way I think Europe will develop, but not in a simplistic way that sees East Europeans as little children that are badly brought up or that sees East Europeans simply as people who are pro-American because pro-Americanism will change, the views in Russia will change, the views on capitalism will change, and we see them already changing.

The question that I want to ask is how Europe with these new members and these new impulses will be able to compete in the world. If we look at the long-term trends in globalization, Europeans need to be very grateful for Monnet and Delors for creating the single market back when globalization was not a phenomenon because it is what has allowed individuals of European nations to keep themselves competitive on the global market.

Openness within Europe, opening up to the competitive pressures within Europe has been the driver of European competitors worldwide. But I don’t think this is enough. We need more courage. We need more of a vision in Europe and an understanding of where the world will be in 25 years because even the economic powerhouse that is Germany today will be dwarfed by a rising India and a China.

Today, an EU of half a billion can still with its quality of life, level of education and innovation compete with the 300 million in the U.S. and a China or an India. But when we think about the fact that India, with its billion-300 has already – in India 8 percent of the population leads a middle-class existence, that is a mere 100 million. There are more people living in India today in 2007 – who have a middle-class existence than there are in Germany.

And I don’t think people in Europe I would say – we in Europe have realized that fundamental truth, and that this is not – when we look at the internecine fighting over how Europe is developing – discussions of large countries and small countries, we all forget that the largest country in Europe today is actually not very large when we look at what is already going on in China, what is going on in India, and that in 25 years, the EU itself will barely be struggling to be big.

Current thinking in the European Union is not a cause for optimism for two reasons. One is the failure of our own well-intentioned program for developing innovation and competitiveness, the Lisbon agenda, and second, the increasing turn towards protectionism inside the EU towards increasing nationalism, towards promoting a so-called national champion, something that I’m sure Monnet and Delors would be quite upset about.

Allow me to address these issues in turn. Back when my own country had emerged from 50 years of Soviet-imposed backwardness, I despaired over how long it would take to build the infrastructure necessary for Estonia to compete. Fortunately in a completely different area, the new infrastructure of information technology, Estonia discovered it could play on a level playing field. Investment by both public and private sectors in information technology allowed my country to reach by the middle ’90s a level about the EU average and by the turn of the century, a level in government services in some sectors such as banking, a level enjoyed only by a few countries in Europe.

By next year, the entire country should be covered by WiMAX or Wi-Fi so everyone can get online anywhere. Clearly a small and once-developmentally challenged post-Soviet country can overcome seeming obstacles. But I fear that in the larger EU, this may not be a welcome development. Increasing government efficiency means a smaller, leaner, public sector.

So too in banking. Since the late 1990s, 97 percent of all bank transactions in my country take place over the Internet. This means we need fewer tellers, fewer branch offices. Large numbers of workers became redundant. Had we not experienced the long period of expansion of eight, nine, 10, and last year, 11 percent, we probably would have had difficulty. The emphasis that my country placed on IT paid off, allowing it to be more competitive, but this is not enough, and it’s not enough for other countries simply to do this as well.

We could partially offset our small size by having IT liberate people from tasks computers can do better anyway, but this is not sustainable if we ourselves do not begin to produce innovations. For even Estonia, like what will follow with some of the other new members of the EU, we can no longer count on low-cost labor for competitive advantage. We need to generate new technologies; we need to innovate for which we need a much more – much better education for our technical intelligentsia. And this is an area where all of Europe is clearly falling way behind, both China and India, as well of course as the United States.

In Europe, in my country, as well as in Europe, we are falling behind in innovations. We are lacking the courage to take the steps necessary to promote innovation. As I mentioned, the Lisbon agenda is something which is not going anywhere in time. This is all exacerbated by a brain drain from Europe to the United States, which produces most of the Ph.D.s for development and technology.

At the same time in Europe we are – including my own country, we are averse to immigration. Our children increasingly choose not to study math, science, or engineering, and we are choosing to close ourselves off from competition, and not only in goods but even services. And I think the services area is one – as I mentioned earlier, is one where we especially need to move much further. This was a real fight between new and old Europe last year. Old Europe does not want to have competition and services; new Europe does.

To show you the difference, when I moved to a new apartment in Tallinn, I called up my phone company and I said that I needed a new computer connection. They said, well, we can come at 2 o’clock, 4 o’clock or 5:30, which time should we come. When I was elected to the European Parliament and I moved to Brussels, after seven weeks, I called my landlord. I said I haven’t gotten – there is no response on my request for an Internet connection, and her first sentence was, it’s only seven weeks... And then the next thing, which is for anyone who has had to deal with life in the communist bloc, she said, but I know someone on the inside...

This is not a sustainable situation if Europe wants to maintain its competitiveness. And I have consulted with various Estonian diplomats in Europe, and my surveys show that this is not an unusual response in much of what Donald Rumsfeld did call old Europe.

It’s unfortunate that he called it old or new Europe because when it comes to competition in the global arena, there is no old or new Europe, there is only the European Union. And if this is what Europe is about, this kind of ability to compete, we’re all in trouble. Competition or its lack within – or the lack of competition has security implications as well. France, Germany, and unfortunately my own government – since I have no executive authority; I can only talk – are opposed to liberalization of the EU energy market. European countries don’t want competition.

We all want our companies to be shielded from competition, which may be domestically an understandable reaction. But if one of our largest sources of energy is a self-proclaimed energy superpower, which explicitly uses energy as a foreign policy tool, which, to quote Viktor Chernomyrdin from a mere year ago in May 2006, if the Ukrainians only adopted a less pro-Western position we would sell them gas for much less money means that we are beholden when it comes to energy in ways that we simply cannot allow to be if we want to maintain our democratic institutions.

It is not possible for Europe to continue in a way that we say we will not allow competition in energy, which means that we will therefore not develop a common energy policy the way that Europe has a common trade policy in which you have one Mr. Mandelson who comes and argues with – well, it was Robert Zoellick, but anyway – argues with USTR and argues with someone else, but in fact represents the full force of 500 million Europeans, but at the same time, something as vital as energy security, we allow ourselves to be salami-tactics where divide et imperia works exactly the way it worked in the time of Julius Caesar.

So if we don’t get an energy commissioner, which you won’t get, if we can continue the way we are, we are going to be in trouble for – let’s face it, as I said, when it comes to energy negotiations, even Germany is a small country.

So I won’t go on with this, but I think this is a serious issue that may bore many Americans, but I do think it is in the interest of the United States to see a strong Europe with a liberalized economy.

Where do we go in the future from a European perspective? Koreans and Japanese enjoy greater rates of Internetization than most of Europe with far cheaper rates of streaming, with Asia and the U.S. producing, and in the U.S. case, educating and hiring from elsewhere far more engineers, scientists, and mathematicians, we in Europe do our best to make sure we don’t have free movement of services. We worry about our lack of engineers but do little to promote science education. And ultimately when we see that we have difficulty competing, resort to – we resort to protectionism. And in one of the most important sectors for economic growth, energy, we are beholden to a foreign power that explicitly uses its energy for foreign policy goals.

This does not look good. All of this will lead to a gradual decline of Europe and European competitiveness in a global economy unless of course we do something about it. We do need a constitutional treaty. It is not – though many U.S. newspapers like to make fun of the constitutional treaty because it doesn’t look like the U.S. Constitution, is much longer, is more cumbersome, yes, but unless we streamline our decisionmaking policies in the European Union, we’re not going to go far.

Without the treaty, our current foundering and inability to come up with effective policies will lead to a disillusionment with the European Union, which is given – globalization will be even more difficult for us. Globalization, once again to quote Donald Rumsfeld, in this case is a known unknown. I think he was really – all of the people who criticized him for that statement had no clue about engineering. There are known unknowns and there are unknown unknowns.

He is really right about it. We know what the known unknowns are and those are scary enough we haven’t even started thinking bout the unknown unknowns.

So I think the new Europe, we should all agree, is not a new Europe that includes 12 members, 10 of whom used to be in the communist bloc and who liked the United States more and who like Russia less than the old Europe. The new Europe is something completely different. It involves 27 member states who are trying to figure out where they are going and are not always making the right decisions. And I’m glad to say that I have only mentioned Russia once today, but I’m sure you will manage to change that with your questions. Thank you very much.