Blair Urges Embrace of Europe, Blasts Failures of Past UK Policies

Week of December 3, 2001
Snapshot from the Field

Start of Euro Push?

Blair Urges Embrace of Europe,
Blasts Failures of Past UK Policies

By JACK LYNE
Site Selection Executive Editor of Interactive Publishing

BIRMINGHAM, England -- In a speech ripe with potential site selection ramifications, British Prime Minister Tony Blair recently urged his nation to substantially strengthen its connection with Europe. Many observers, in fact, interpreted Blair's strongly worded remarks as the opening salvo in a campaign for UK membership in the European Monetary Union (EMU).

"We vacated a decisive role in shaping the single currency, its timing, the Maastricht
convergence criteria and the European Central Bank," Blair (pictured above)
said in his speech to the European Research Institute in Birmingham.

Britain has a "history of missed opportunities" in Europe, Blair asserted in a speech to the European Research Institute in Birmingham. One of those missed opportunities, he asserted, was the nation's failure to participate in shaping the European Union's monetary policy.
"We vacated a decisive role in shaping the single currency, its timing, the Maastricht convergence criteria and the European Central Bank," Blair noted. "We will not have influence if we only ever see Europe as in opposition to Britain," he said.
The UK, Denmark and Sweden are the only three of the EU's 15 member nations that have chosen to remain outside the EMU. A strategy of locating within "the euro zone" has driven a number of corporate site selections. The most high profile of those moves was Toyota's 1997 decision to site a US$1.6 billion European auto production facility in EMU member France rather than in the UK.
The Euro has been the EU's official currency since 1999. During the interim, however, old national currencies have continued to circulate, providing a period of adjustment. On Jan. 1, 2002, however, euro notes and coins will make their official debut as legal tender.
Many in Britain have long vocally opposed the UK's joining the EMU. Perhaps cognizant of that fact, Blair reiterated his government's long-standing conditions for euro adoption. Britain, he said, would join the EMU only if five key economic criteria are met and the UK electorate approves the move in a referendum. (The full text of Blair's speech is available online at www.number-10.gov.uk).

'We Squandered Our Sovereignty'

Even with that hedge on EMU membership, though, Blair's speech strongly lambasted past UK policies toward Europe. He traced in detail a rocky relationship spanning 50-plus years.
"The tragedy for British politics and for Britain is that too many politicians have consistently failed . . . to appreciate the reality of European integration, and in so doing they have failed Britain's interests," Blair said. "When we isolated ourselves in the past, we squandered our sovereignty, leaving us sole masters of a shrinking sphere of influence. . . . We must be whole-hearted, not half-hearted, partners in Europe. . . . Britain has no economic future outside Europe."
Blair maintained, however, that a more proactive role doesn't mean abandoning sovereignty. "Sovereignty has to be deployed for national advantage," he said. "It is true that British governments have shared sovereignty over some decisions. But we have retained control over our immigration policy and national border controls, our tax, defense and foreign policies, and will continue to do so. . . .
"We have a vision for Europe: as a union of nations working more closely together, not a federal superstate submerging national identity," he continued. "It is the right vision for Europe. Let us have the confidence to go out and win support for it."

Critic: 'Back to Boom and Bust'

Reactions to Blair's speech covered a broad gamut, most centered on the euro.
"We do not have to join the euro to be a constructive and influential member of the EU," responded Ian Davidson, a Labor Party member of Parliament. "Locking into the euro would lead to a loss of economic control and take us back to boom and bust, which we've worked so hard to overcome."
On the other hand, John Edmonds, general secretary of the UK's 700,000-member GMB union, called the speech a "positive statement" that "clearly shows that [EMU membership] is a matter of when and not if."
Blair didn't go far enough, contended Matthew Taylor, a Liberal Democrat member of Parliament. Putting off pushing for the euro is costing the UK jobs, he charged. Blair "must show a firm lead and set a date for a referendum," Taylor said.

"Locking into the euro would lead to a loss of economic control and take us back to boom and bust, which we've worked so hard to overcome," said Ian Davidson (pictured above), a Labor Party member of Parliament.

Blair made no mention of a referendum date in his Birmingham speech. Reportedly, Roger Liddle, Blair's chief EU policy adviser, recently told Labor Party members of Parliament that the government was leaning toward a spring 2003 euro referendum. Liddle, however, has since denied making the statement.
Blair won't likely push hard for EMU membership until he senses sufficient support for a yes vote. Cultivating that support, however, may not be easy. Recent polls show that some 70 percent of Britons favor keeping the pound. EMU supporters are hoping that Britons' experience with the euro during the summer 2002 holidays will calm concerns.

Some Firms Restive, But UK
Still No. 1 for European FDI

The EU's emergence prompted many companies to consolidate many European operations into regional centers. And the common currency's introduction prompted some firms to increasingly locate within the euro zone, seeking advantages such as pricing transparency.
More recent EMU concerns, though, have centered on the euro's weakness against the pound. (Late last week, one pound converted to 1.6 euros.)
As a result, Toyota last year told its UK suppliers to settle all bills using the euro. GMB's Edmonds called the decision "further evidence that business as a whole is moving towards the euro."

The UK, Denmark and Sweden (coded in light blue in the map above) are the only three
of the EU's 15 member nations that have opted out of the European common currency.

Companies with UK operations have also been restive regarding the euro question.
"Toyota's vote for France [for its auto plant] is a palpable expression of investors' increasing disaffection with non-euro economies," Ernst & Young International Location Advisory Services Director Barry Bright noted last year. "Nissan in the UK's Northeast has already voiced reservations about the UK's non-euro participation. BMW, which highlighted the negative effect on its business of the high pound throughout the Rover debacle, also referred to its need for stability of costs within its supply chain."
Nonetheless, the UK clearly remains Europe's No. 1 destination for foreign direct investment (FDI). Site Selection's recent European report ("Europe's 2000 Facilities Race: UK Remains No. 1") found that that the UK landed 575 FDI projects in 2000 - a 13 percent increase from 1999 and a whopping 26 percent of all European FDI projects recorded by Ernst & Young's European Investment Monitor.
Nonetheless, Blair seemed resolute about remaking the UK's relationship with Europe.
"Compromises are usually easier than bold gestures," he said in Birmingham. "And yet without imagining the future and preparing for it, today's leaders quickly become yesterday's men, clutching at irrelevant assumptions and forgotten shibboleths."

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