Examination of Witnesses (Questions 317
- 319)
MONDAY 15 OCTOBER 2007
Mr Peter D Sutherland
Q317 Chairman: Good afternoon.
Mr Sutherland, thank you for coming here today. I believe you
have an opening statement to make.
Mr Sutherland: First of all, thank for the opportunity
to speak to this Committee. Secondly, I intend to make a brief
opening statement which probably goes beyond the specific remit
of this discussion but pertains to Britain and its place in Europe.
When I joined the Commission in 1985 it was already ordained that
the Single Market would be the major objective of that first Delors
Commission and the United Kingdom had played a significant role
in creating that dynamic. It was sustained when I was Commissioner
for Competition which I suppose was the second leg to the Internal
Market driver, the main one in my view being led by Lord Cockfield.
The objective was supported by the United Kingdom throughout.
However, it became apparent to me during that time that the ambivalences
of the United Kingdom about Europe which I believe have undermined
the legitimate objectives was self-evident. I recall in the period
of about 1988 when we used for the first time a provision—Article
90 of the old Treaty of Rome, which allowed us to take on national
monopolies which were obstructing competition—we brought
our first case which was really a test case on the issue of telecoms
to stop the then prohibitive laws in a number of Member States
which stopped the selling of terminals and modems in shops other
than those run by the national PTTs. We issued a directive (that
is about the only case apart from one agricultural instance I
think where the Commission itself issued a directive) prohibiting
this. We were immediately turned on by a number of Member States,
prominent amongst whom, if I recall correctly, were the Germans
and the French who issued proceedings against me and other members
of the Commission. I remember coming to London and speaking to
the relevant minister here. He started the meeting by congratulating
me on what we had done, an objective of British policy he said.
I said, "Thank you very much, I take it you will be coming
to the European Court to support us in what we did". He said
he would have to think about that. He thought about it for about
a week or a fortnight and then he came back to me and said, "We
cannot". I asked, "Why not?" and said "We
would be supporting the Commission". I said, "Who do
you think is doing this business of creating an Internal Market
except the Commission and how do you think it can be enforced
other than through the law?" Walter Hallstein, the first
of two the great presidents of the European Commission, once made
the point that we do not have divisions, all we have is the rule
of law. I said, "If you do not stand for the rule of law
how can you get to the objective?" He said, "There you
are". So we were sued. I would not be telling you this story
were it not for the fact that three years later we won the case
anyway. You would not be talking about much of the Internal Market
if we had not won the case. We might have been greatly assisted
had the United Kingdom lived up to the position that it has so
fervently and genuinely articulated, being the only major member
state of the European Union that has consistently believed in
the liberalisation of the Internal Market. However, words and
deeds sometimes part company. To me the current debate about the
Reform Treaty is indicative of this ambivalence. I find it very
hard to understand how, for example in the Reform Treaty, that
the United Kingdom of all countries wanted the deletion of a provision
that signalled the supremacy of European law. Are we living in
a world of make-believe? Surely Britain which in many instances
through utterances by the law lords and others have recognised
that supremacy of European law would wish to have this clearly
included in the law of every country in the European Union. Of
course we were told that it already is so we do not care that
it is out. Of course we also know why it was taken out: pure cosmetics,
that is why it was taken out, because of fear of a debate that
people simply are not conducting on the basis of realities but
rather on the basis of using the Reform Treaty as a surrogate
for an attack on the whole European Union. They are using the
Reform Treaty because they are afraid—as some of your witnesses
might be afraid—to context membership itself of the European
Union. Incidentally, one thing that is now permitted expressly
by the provisions of the Reform Treaty itself, is the withdrawal
and renegotiation. I find it terrible that the United Kingdom's
role and responsibility, which has been so crucial in developing
the most essential element of the dynamic of the European integration
process in recent years, has been damaged by an ambivalence about
the basic institutional mechanisms which are necessary to make
it work. I can understand saying that we do not want foreign policy.
I think it is wrong, but I can understand it at least. I can understand
even saying that we do not want Justice and Home Affairs; I do
not agree with that either but I can understand it. But to undermine
the very legal provisions that are at the essence of the one policy
that everybody in this House as I understand it basically agrees
with, and to do it in such an overt manner and a manner which
has not been criticised as far as I can very much publicly (for
example, in removing that provision) is to me something that is
very difficult to understand. As an Irishman I find it difficult
to be so critical in a parliament to which I hold great esteem
and which has been a home of democracy and support for principles
of the liberal market economy that I greatly believe in, I find
this very depressing. I wanted to say that at the outset. I find
this debate and the hectoring stridency of the debate which is
currently taking place also very depressing because the Single
Market which, as I say, the United Kingdom was the first and main
propounder of, has been an enormous success. It is not perfect—we
have issues and energy—but we have largely driven (since
1989 in the teeth of ferocious opposition from most countries
other than the UK which had already done the deeds which were
necessary to achieve the functioning of the Internal Market) from
a situation where virtually every country in the European Union
had, as its major utilities, nationalised companies with national
monopolies. We have moved to a situation where virtually everywhere—airlines,
telecoms—there is competition fully reigning across borders;
banks all over the European Union denationalised. The Landesbank
in recent years, one of the last redoubts of the banking system
which was going through a constant battle, fought against by various
people that I admire like Helmut Kohl and the Commission tried
to do something about it, but the Commission drove it through
and the Landesbank and so on, like everywhere else, have become
part of a competitive system which has been remarkably successful.
To me, therefore, we have achieved a situation which is truly
remarkable. The Single Market, obviously has now move from mass
manufacturing primarily into services far more than it did in
the past and clearly there are areas where much more could be
done, for example in the energy sector. The unbundling issue is
one where I absolutely agree with the view which is being expressed
by the Commission. We also have problems clearly in the area of
national monopolies in the same sector but to point to that as
one of the problems, if one ignored the rest, would be a clear
imbalance in the analysis of what has been achieved because what
has been achieved, I think, is phenomenal. Any fair analysis of
where we have come from and got to proves that to be the case.
The key driver behind the creation of the Internal Market was
economic, a recognition that competition was vital if European
industry was to have any chance of surviving and I include the
UK in this because we work far fewer hours than anybody else,
we have a bigger demographic problem than anybody else, we have
an issue with productivity against many other parts of the world.
The only chance we have is by developing real competition and
the best resources and manpower and ability that we have and we
can only get that through competition across borders. You will
not get that without law. Where we have got to would not have
happened without sharing sovereignty. So attacking the very concept
of sharing sovereignty or the supranational power of the European
Court of Justice is attacking the basic essence of what the European
Union is about and has achieved. That to me is the key issue.
Chairman: Excellent, thank you. Lord
Dykes?
Q318 Lord Dykes: From my own
point of view I would describe your remarks as a breath of fresh
air and I only hope that other people will hear and read what
you say on many occasions in the future and take up some of your
arguments even more. I remember by the way that when we were talking
some time ago at a last meeting the Sutherland Report was published
in 1992 about how the European Single Market was going after bringing
in by law in the Single Act and what was going to happen. Of course
the self-confidence of the Commission was very low in those days
because of these unfair attacks. You said by implication that
the Commission has done very well in more recent times and indeed
we have recently the mobile phone example where they have done
very good work, strongly supported by this Committee. Do you feel
the situation now is much better or is it still being undermined
by the nationalism in some Member States like Britain where governments
foolishly put domestic politics as a priority before the real,
good interests of ourselves and the rest of Europe? By the way,
one of my favourite themes of course is the other tragedy for
us in not having joined what is now becoming the most usedcurrency
world in the world, the Euro. How do you feel about those things?
Mr Sutherland: You had better not start me on
the Euro or I am afraid we will never finish. On the question
of economic nationalism I would first of all say that it is no
flattery to say that the country that one has least criticism
of in terms of economic nationalism in my view, of the larger
countries, is probably this one. I am not complaining about that.
There is evidence of economic nationalism which we can talk about
if you would wish to do so in other places, but there is nothing
new in that. That economic nationalism has been part and parcel
of many European countries' state-ism. I would say that it is
evident everywhere but it has changed a little bit because even
in the articulation of some of the positions in the other larger
Member States—I should say in France in particular—the
argument about national champions has been couched in phrases
which at least recognises the European nature of the champion
rather than the national nature of the champion. Whether that
is a reflection of the real issue driving the comment in the first
instance or not remains to be seen but the debate has moved to
being a debate about European champions rather than national champions.
However, the issue is a very real one I agree. I do not think
it is much worse or much better than it was many years ago. I
think in reality it is probably much better because public markets
now at the end of the day win. The real world—other than
in cases which are a hundred per cent owned by the state which
are a diminishing number of industries in Europe—will direct
the liberalisation process through the functioning of capital
markets and in particular equity capital markets, but also debt
markets because the actual cost of raising finance will be dependent.
Q319 Lord Dykes: Can you just
say a quick word on the Euro?
Mr Sutherland: I believe that Britain should
have joined the Euro. I think it is something that is not going
to happen in foreseeable future. The debate seems to have moved
on but I still think it would have been the right decision had
Britain joined the Euro and I think interest rates throughout
the period between then and now, following the example of comparison
between the two, would have been much lower for the average British
person. I think it would have been much more interesting from
the point of view of inward investment and I think it would have
been a better choice to make. However, I think that that debate
is probably a debate for another day and perhaps a date some distance
into the future.
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