BUILDING POLITICAL AND ECONOMIC RELATIONS WITH THE NEW DEMOCRACIES
The keyword of the last few years has certainly been the word "change", or even "revolution". The framework in which the countries of Europe are placed and in many cases the countries themselves have changed almost beyond recognition. This process is not yet over. Rather, I would say that the hardest part for many is still to come.
Change is always difficult, even a change for the better. The change that has happened -- the great liberation from the strait-jacket of communism, both politically and economically -- is much sought-after outcome, the realisation of many dreams.
Having said this I must add, however, that it is already clear that there will be no quick, smooth and problem-free transition. Many of the difficulties of the transition have turned out to be much beyond our expectations. We all shall now have to struggle to consolidate the gains of the recent revolution.
The old Europe was characterised by ideological and economic division as well as political and military tension between the two power blocs. The division was deeper in some areas. The tension was sometimes more acute, sometimes eased by détente between the parties. The two sides were suspicious of each other and ready for the worst. In fact, it is a tribute to the realism on both sides -- realism based on the ominous spectre of mutually assured destruction — that the worst never came to
The collapse of the ideological base of communism, as well as the economic impasse and the growing expectations, led to the disappearance of the old system. All of a sudden, many countries found themselves in a sort of vacuum -- entirely new structures had to be looked for so that the societies could continue functioning.
Of course, the situation varies a great deal from country to country. In some, European traditions of democracy and market economy still existed. In others, these traditions were non-existent, weak or badly distorted. Many of the old structures collapsed and little was left to build upon.
The optimism that prevailed a couple of years ago has been replaced by a growing fear that while ideological and military division has gone, a new economic gap between Europe's rich and poor will emerge - and risks becoming of long duration.
Therefore, there is no reason to gloat on the ruins of an unsuccesful historical experiment, let alone isolate those who were on the wrong side, but try to create a new dialogue and cooperation on the basis of genuine equality.
Political and economic relations go hand in hand and cannot really be separated from each other. Without the foundation of the rule of law, without the foundation of democratic structures and practices, it is unlikely that a well-working economy can be built. Conversely, it is very difficult to build democratic structures and practices if you are in dire economic need.
The new democracies are faced with an extremely complicated and arduous process. There are no precedents nor guidebooks on the transition from a command economy into a market economy. Somehow, along with the euphoria of a new opening we seem to suffer, as has been said, from the illusion that because the new
democracies were bad at socialism, they will be very gifted within a market economy. The logic does not hold or does not even exist.
Unfortunately, we must confess that the new democracies are to varying degrees in an economic mess. The situation is perhaps worst in Russia where -- we should give credit where it is due — valiant efforts are being made, but improvement seems to be extremely slow. Meanwhile, unemployment and various social problems are on the increase, conversion efforts are not yet bearing much fruit.
We must only hope that the relative stability that has so far existed can be maintained in view of the fact that the economic underpinning of democracy will take a much longer time than we perhaps thought in the beginning of the process. The reason is clear and we should be open about it: a lengthy economic morass will jeopardise the political process; turning back on that score would certainly have a negative influence on international relations and even the security of Europe.
With these frightening prospects in mind, what can the older democracies do? Certainly, we should not give up, even if the task ahead for the new democracies and for all of us seems huge. And perhaps the first thing to realise is that it is surely a task for all of us. I know that many Western countries are in economic difficulties themselves, my own country being a prime example, but that is no excuse: we cannot wash our hands of the problem.
What I have said reflects my conviction that the reconstruction of Eastern Europe is in our own political interest and also in our economic interest when we think along a somewhat longer time-span. It is almost banal, but still just as true, to remind ourselves of the immense markets that one day will bring their contribution to all countries of Europe, both as markets for exports and as sources of supply. The prospects for a growing pan-European economy are not immediate, but they are there. An improved economy, in turn, will undoubtedly lead one day to an improved environment as well as nuclear safety. All that will alleviate the unrest felt in some of the new democracies and melt away the possible reasons that could give cause for migration. We should do our best to bring such a day as early as possible.
To help the new democracies in their immediate distress, a vast programme of aid and credits is necessary. The burden will be shared but the bulk of it will fall on the shoulders of industrialised countries in Europe. Needless to say, this programme of aid will need the backing of the electorates in the older democracies, which, in turn, means that the new democracies are expected to commit themselves to a credible development towards a market economy. This is especially true during the current turbulence of Western economies.
However, we all know that aid is just a stopgap. What is more important for the future is the introduction and inclusion of the new democracies into the economic cooperation that has during the years and decades developed between the older democracies. The new democracies must become part of the economic integration process.
This works on two levels. On the level of companies, this type of pan-European integration is already common. Western European companies invest in the new democracies where the labour costs are so far minimal compared to the West. As long as the economic reasoning points to profits, we need not be worried of the future of this type of activity. We must of course promote circumstances which make investments possible. Investments, in turn, serve as a valuable source of know-how and technical assistance on the road to market economy.
But then I come to the real challenge that the Western countries are faced with. In order to make use of this opportunity and to give the new democracies its benefits, frontiers and barriers to trade must be lowered. The new democracies must be allowed to market their products in the West.
No doubt this will be difficult. One needs only to look at the progress so far. In the various commercial or free trade agreements that have so far been made with the new democracies, the tendency has been to carefully exclude many of the most competitive products of the new democracies. Nevertheless, free trade, I believe, is the way forward.
We in the older democracies must understand that the comparative advantage of the new democracies lies for the time being in the cheaper cost of labour. What this means in plain language is that we cannot avoid the negative effects of this competition on the employment and level of income of our own workforces. The economic differences will be evened out through competition, which will in the longer run be beneficial to the economic development for all of Europe. In Western Europe this is also going to lead to rapid structural change toward higher technology and more capital-intensive production.
While concluding free trade agreements, a multilateral dimension should be taken into account; otherwise, many obstacles for company-level integration remain. Similarly, free trade should prevail also among the new democracies, not only in their relations to the EC or EFTA.
In addition to the establishment of free trade conditions, the integration between new and older democracies will spread into other areas as well. For many countries in transition, the ultimate goal is full membership in the European Communities. This, however, is only possible when the economies of Eastern Europe become able to operate in the Community environment. Every effort should be made to help them in this process.
The economic base is a necessary and the most important factor for the building of a secure and prosperous Europe. It would be a mistake of historic proportions to let the political divisions of the old Europe be replaced by a yawning gap between rich and poor Europeans. Finland, for one, would feel very uncomfortable sitting next to this fault-line.
I referred earlier to the collapse of the ideological base of one side in the divided Europe. Military division came to an end, and major war between European states seems remote. However, Europe is still faced with problems of insecurity and instability.
Against this background it is very understandable that the newly independent countries began a search for new security structures to respond to their concerns. Yet it is clear that such structures are not readily available. The attainment of real security is a multi-faceted thing, involving not only a military component but also an economic capacity as well as a stable society with high standards in human and minority rights.
Many of these countries saw in NATO an opportunity to secure their position, both in terms of military security and as a symbol of the deep-going change that had taken place. Consequently, they approached NATO, and some have not hidden their goal of becoming members.
NATO itself, on the other hand, was and still is faced with a problem: what does a military alliance stand for when a potential enemy is no longer there? It has also been compelled to look for a new role which would give it more political content, weighing carefully its position as well as its tasks and commitments in the aftermath of the cold war.
I shall not in this context go deeper into that question, except for the short-term solution found for the new democracies: the establishment of a new cooperation council, NACC, for the orderly dismantling of the heritage of the cold war. The new body aims at securing the implementation of the treaty on conventional armed forces and it is now active in e.g. the promotion of efforts to convert the military-industrial capabilities of the new democracies to civilian use. At the same time, military doctrines are rethought to correspond to the requirements of democratic societies.
The Conference on Security and Cooperation, the CSCE, does not provide collective security in the same way as military alliances. Instead, it is being developed towards a comprehensive crisis prevention and management mechanism. I am ready to admit that the CSCE cannot yet pretend to be the ideal actor for a European crisis or conflict. At the same time I feel, especially in view of the progress achieved in the Helsinki summit, that the elements are now in place. It is especially important that in CSCE peace-keeping activities the political control stays with the CSCE although other organisations may also have to provide necessary resources. It is also worth noting that the CSCE is recognised to be a regional arrangement according to the United Nations Charter. For its part it thus contributes to the worldwide collective security system of the UN.
The CSCE can now also provide all participating states a forum for arms control and disarmament as well as confidence- and security-building, either a general one or one following a regional approach. Further, the implementation of the commitments given in the CSCE concerning the so-called human dimension will most likely gain in importance. Neither should we in the CSCE context forget the economic and environmental questions. We should pay special attention to the development of
infrastructures on a multilateral pan-European basis. A framework for the comprehensive assessment of these questions is provided by the CSCE Economic Forum.
The security and defence dimension of the European Communities, or rather the European Union in accordance with the Maastricht Treaty, is yet to be developed. The Western European Union, a long dormant organisation, is now more active with a view to becoming the defence component of the European Union and at the
same time to strengthening the European pillar of NATO.
The Council of Europe has also actively moved to incorporate the new democracies in its membership and cooperation. It has proved indispensable in its own fields of expertise in order to provide support for the development of the legal and democratic framework for these nations. In my opinion, the activities of the Council of Europe should be expanded to new areas, where we would utilize the excellent democratic decision-making structures of that organization.
For the time being, there is no single instrument that could respond to all the political and security needs of the new democracies but rather a yet-to-be-perfected security architecture. There is even a danger of confusion and overlap, not to speak of wasted effort and money. Because of this, it is all the more important that a clear coordination is established. In my opinion, the organisation best suited for a clearing-house role would be the CSCE.
We all realise that shaping a new Europe without political or economic boundaries is a long process. It will probably require a work of a generation if not more, and a lot of patience is needed.
In some or the new democracies, the old ways of thinking still persist. Illusions abound on both sides. However, we must hold fast to our dream.
We will need to work from the bottom up while at the same time do away with the obstacles that hinder this work. We must realise that it will be costly - to those of us in the West as well - and the rewards will be slow in coming. But ultimately, I am convinced, the new Europe will be worth our efforts.
Thank you, Mr. Chairman.