These young Bengalis are not just motivated by regional passions. Everywhere in the developing world people are sitting up and taking notice of the Chinese juggernaut. As a model for development it is a source of inspiration, its giddy growth rates of over 8% a year lifting millions of people out of poverty.

But even more exciting is the prospect of a new superpower that might challenge US hegemony and the American way of doing things. In a paper for the Foreign Policy Centre, Joshua Ramo, a former foreign editor at Time who is based in China, laid out the elements of a new “Beijing consensus”, which he sees as a direct challenge to the “Washington consensus” that defined attitudes towards the development debate in the 1990s. Beijing is “driven not by a desire to make bankers happy, but by the more fundamental urge for equitable, high-quality growth”, he wrote.

China treats the ideas of privatisation and free trade with caution rather than pursuing them with zeal; the country is defined by its ruthless willingness to innovate and experiment and has created a series of “special economic zones” to test out new ideas. Its foreign policy is driven by a lively defence of national borders and interests (see its attitude towards Taiwan) and an increasing commitment to multilateral institutions such as the United Nations, which it hopes will pin the US down. Together these policies have allowed China to grow without surrendering its independence to such financial institutions as the World Bank and IMF, global companies, or the Bush administration.

This recipe for success is so intoxicating that, on visits to countries as diverse as Iran and South Africa, I have been drawn into discussions about the “Chinese model of development”. China’s model is seducing leaders in countries as different as Vietnam (which is taking business tips from the thoughts of the former Chinese president Jiang Zemin), Brazil (which is sending study teams to Beijing), and India (Ramgopal Agarwala, an eminent sociologist, observed: “China’s experiment should be the most admired in human history. China has its own path.”).

Few in the west have picked up on this excitement, because they have looked at China’s power simply by measuring the size of its economy or the technology of its army. But by focusing on Chinese hard power (its ability to use military force or economic might to get its way) people are missing the extraordinary rise of the country’s “soft power” – the ability of its ideas and values to shape the world. It is an unwritten rule in the minds of the west that though China might become wealthy, it is western values and culture that will continue to define the rules of the world.

That is already changing. For the first time there is an emerging pole that is strong enough to change the way things are done on the global stage. Japan was too small and inward-looking; India is too protectionist; Russia too weak. As China emerges as a superpower, it is desperately trying to present itself as a force for good in the world. The past few years have seen a successful Olympic bid, the creation of an English language international TV channel, a series of high-level visits by President Hu Jintao and Prime Minister Wen Jiabao to key countries, and a concerted attempt to befriend not just China’s neighbours but other countries as far afield as Africa and Latin America. Two centuries ago Napoleon warned China was a “sleeping giant” that “once awake would astonish the world”. That prediction looks like it is about to be fulfilled.

Rise of the east

The Chinese president, Hu Jintao, laid down a marker for the world in April when he outlined China’s ambitions in a speech to the Boao Forum for Asia. “We will quadruple the 2,000 GDP to $4 trillion with a per capita GDP of $3,000, and further develop the economy, improve democracy, advance science and education, enrich culture, foster greater social harmony and upgrade the texture of life for the people,” he said.

Some in America responded positively to the remarks – former president George Bush Sr said China’s peaceful rise was “very reassuring and very, very important to the Asian horizon and Asia’s landscape” – but there are many in America who are disquieted by China’s rise. Its military expenditure is rising, though it will still not compete with US defence spending and it has become increasingly bullish over Taiwan. In July, Jiang Zemin – the former president who heads China’s armed forces – said China would have recovered the island by 2020.

His remarks coincided with military exercises involving 18,000 troops, designed to demonstrate China’s air superiority in the Taiwan Strait. It is also seeking to compete in space: Luan Enjie, the head of the national space programme, said last November that China intends to land a man on the moon by 2020.

One motor of China’s growth is its increasing population but with such rapid expansion come problems. Some relate to China’s programme of population planning. The one-child policy has created a shortage of female babies, and the government has admitted that by 2020 China might have as many as 40 million single men, which could pose a threat to social stability.

Published in The Guardian on 11 September 2004, http://www.guardian.co.uk

President Fox was pleased for a variety of reasons. No doubt he was hopeful that the creation of legal migration routes into the US could put a break on the daily battle witnessed on the infamous US-Mexican border. And like Bush, he is approaching an election year and saw this as a political opportunity, not least among Mexican-Californians or Texans who, by law, are eligible to vote in Mexican elections. But his pleasure was also the result of hard economics. For many years Mexican governments have taken advantage of the job-creating opportunities which its geography affords, establishing tax free industrial zones for US companies and lobbying the US government for the inclusion of the free movement of people within the terms of the NAFTA agreement. Ultimately, Mexico’s leaders have started to accept that the US job market is the most important pressure valve for Mexico’s job starved economy.

While brain drains are undoubtedly a serious concern for many developing countries, particularly in Africa where HIV and conflict compound skill shortages, the export of people is today written into the development plans of a number of poor countries. The reason for this is mainly that, as in the case of Mexico, job generation is a serious problem for developing countries, even in countries which have high economic growth rates. In addition, in the context of shrinking aid budgets and declining levels of foreign direct investment, capital starved developing countries today depend heavily on the $60billion annual remittance transfer from the developed to the developing world. Many developing countries would therefore be looking on jealously at Fox’s great opportunity.

The Philippines is a market leader in ‘diaspora driven development’. 8% of the country’s population resides elsewhere and 17% of Filipino households receive money from abroad. These figures are high but not unusual. 14% of Ecuadorians and 28% of people in El Salvador are remittance receivers. But what is more surprising is that most of this migration is the product of a government plan.

What is exceptional however is that the Filipino migration plan is a closely managed affair based on three core principles. Firstly, the government sets the terms of these movements. Whether it is nurses or nannies, the state pays to train a surplus of top-class professionals groomed for the international job market and targeted at sectors where there is specific demand.

Secondly, migrants spend at home. Visa card schemes, advantageous exchange rates, as well as tax-free investment plans and duty free shopping are government sponsored programmes introduced to ensure that none of the Filipino migrant earnings are lost to rich economies. Migrants are even celebrated at their own national holiday, in which 20 awards are handed out to the migrant workers who have sent back the most.

Thirdly, migrants return and to guarantee this perks such as training schemes are offered under contract and families at home are taken care of on the understanding that people return after a period abroad.

Other countries are following in these footsteps. For example, in 2002 the Indian BJP government introduced a dual nationality scheme as an attempt to ensure that the wealth of the colossal Indian diaspora could be tapped into. And at an international level, a coalition including several Latin American countries, Egypt, China, India, Philippines and Thailand is today lobbying hard at the WTO for the approval of the GATS (General Agreement of Trade in Services) Mode 4.

However, ‘diapora driven development’ strategies are undoubtedly a risky option for developing countries and much stands in the way of making this a sustainable solution to important development problems. The possibility of economic downturn and growing concerns about security are no doubt putting pressures on developed country governments. In the EU these concerns are accompanied by ongoing debates surrounding the unsustainable strains on welfare systems and the impact which migrant workers can have on social cohesion, particularly in the face of widespread hostility towards newcomers.

However, development agencies and NGOs need to start developing strategies which compliment the efforts by developing country government. The European development community has been so slow off the mark when it comes to migration and development. While in the US, development agencies (such as USAID) and research organisations (such as the Centre for Global Development) have well-established programmes of research on the linkages between migration and development, in Europe we continue to frame our ideas around the notion that development is a tool for ‘controlling’ migration, rather than part and parcel of the same effort. This became most evident in 2001 when Tony Blair and Spanish Prime Minister Jose Maria Aznar went as far as proposing that the European countries should withdraw aid from countries that did not stem the outflow of illegal migrants.

If anything, the development community should respond to anti-migration lobbies which have been making huge capital out brain drain and other debates of this kind. To quote from one of Britain’s most virulent migration-sceptics: “Immigration is a very ineffective development policy … because it removes a stabilising middle class, removes wealth-creating and tax-paying professional and entrepreneurial classes, and it sustains dictatorial regimes by removing awkward dissidents.” While true to some extent, most development experts would agree that the links between migration and development are not black and white.

While migration is clearly a consequence of underdevelopment and economic stagnation, the cases of Mexico and the Philippines show that managed effectively it could also be part of the cure. But in order for this to happen, both host and exporting countries need manage it effectively. Firstly, without secure residence rights and work permits, migrants are unable to contribute to development because they cannot move back and forth. Furthermore, illegal migrants are less likely to invest or mobilise the resources needed at home because they run the risk of being traced.

Secondly, development plans need to factor in migration. In the same way that European governments want to manage immigration, countries like Ghana, Jamaica or India need to ensure that emigration is sustainable and moulded to their needs. They need to be able to ensure that key sectors such as health and education don’t suffer and that they are gaining maximum benefit from the migrants who are leaving, targeting Western needs as well as ensuring that links with home are facilitated. This is particularly important at a time when rich countries are busy developing scheme to attract skilled migrants, to the detriment of the unskilled. Countries like the UK government could consider covering the cost of training schemes in the developing world for IT, construction and health workers, all of which would help ease pressures at home and compliment other development aims.

Finally, we need to formalise our relationships with migrant communities. While some efforts are being made to tap into the flow of remittances and ensure that these are being spent productively, these large resource functions mostly informally. While migrants are rightly suspicious of ‘officials’ and resist attempts to ‘officialise’ funds, they would undoubtedly be more cooperative should official channels help ease the burden of commercial money transfer companies which can take up to 20% commissions.

Yet, in spite of the importance of the referendum result, the government and its allies in the Liberal Democrats and the Conservative party have kept their heads well down. It is legitimate for the government to argue that the referendum should be delayed until after the next general election, given that the election is likely to take place in the early summer of 2005. But a conspiracy of silence by the pro-Europeans can only play into the hands of opponents. Supporters need to act now.

The first detailed survey of public opinion since the referendum was announced, carried out by Mori for the Foreign Policy Centre and published today*, shows that the anti-constitution camp is well ahead. The Mori poll found only 31 per cent in favour of the UK adopting the constitutional treaty. However, it demonstrates that, contrary to the pessimism of many commentators, the Yes camp could win.

The key finding of the survey is the public uncertainty. Only 35 per cent have made up their minds. A large chunk of the electorate could shift their position, according to their view of whether a European constitution was good or bad for the UK. If one adds these “waverers” to those already in favour, they make up 54 per cent of the voters. In addition, a significant number, about one-fifth, are “don’t knows”. So there is everything to play for.

But if the Yes camp is to exploit the fluidity of opinion, it needs to seize the initiative. Crucial for a Yes result will be a well planned, powerfully sustained campaign. To a considerable extent, the No camp can afford to rest on their laurels. The pro-constitutionalists must start making up ground early.

The campaign will have to be broad-based and able to appeal across party lines. The Mori survey shows conclusively that neither Tony Blair nor the Labour party can win the vote on their own. Of course, it will be necessary to mobilise the support of Labour voters who are now split narrowly against adopting the constitution. Fortunately, most of the Labour opponents are “waverers”, who are likely to be persuaded by a Labour cabinet campaign that must be spearheaded by Gordon Brown, the chancellor, John Prescott, deputy prime minister, and Jack Straw, foreign secretary, as well as Mr Blair. But if vital Liberal and Tory “waverers” are to be won over, the Yes campaign will also need the active support of Charles Kennedy, leader of the Liberal Democrats, and pro-European Tories such as Kenneth Clarke, Michael Heseltine and Christopher Patten.

The Yes campaign will need to be conducted at different levels to succeed. In spite of the barrage of propaganda in the Eurosceptic press, half of respondents to the Mori poll are still in favour of British membership of the EU, compared with 41 per cent against. It will therefore be helpful to remind voters of the advantages a Yes vote would bring to Britain’s position in Europe, as well as the disadvantages of a No vote, including the possible threat to membership. However, it would be unwise to overstate the membership issue or to rely solely on strategic arguments. Details of the treaty also need to be disseminated and explained.

At present a major disadvantage for the Yes campaign is the widespread ignorance about the European constitutional treaty in particular and the EU in general. This allows the Eurosceptic press to print scare stories and misinformation – such as claims that the constitution will be a threat to national identity or lead to a European super state. The public is entitled to demand that the government publishes a summary of the treaty, which should be available in every post office. This should work to the benefit of the Yes camp; Mori shows that the more people know about the EU, the more likely they are to support the constitution.

The passage of the necessary legislation for a referendum during the autumn and winter ought to be a signal for a concerted effort to explain the advantages of the constitutional treaty. A failure to act by pro-Europeans risks allowing opinion against the constitution to become set in stone, making a Yes victory more difficult.

Lord Radice is a board member of Britain in Europe.

Published in The Financial Times on 6 September 2004, http://www.ft.com

In America “outsourcing” has turned into one of the central political issues of the presidential campaign. Recent months have seen the sharpest ever drop in support for free trade; abuse heaped on Bush’s ‘pro-outsourcing’ economic advisor and the introduction of a ban on the outsourcing of government work to non-Americans. Even the US’s membership to NAFTA and support for the WTO are currently being questioned partly as a result. Meanwhile, outsourcing shines as the most treasured jewel in India’s new crown. Some analysts are even going as far as assigning outsourcing the power of not only “doing for India what manufacturing did for China” but of seeing it as a force in defeating conservatism, decreasing ethnic tensions and even transforming gender relations in Indian households.

Outsourcing is not a development magic bullet and the jobs generated represent just a drop in the ocean for a job starved economy like India. Moreover, Americans are right to point out that the outsourcing frenzy may have created a globalised mirage which hides the fact that India is a very reluctant liberaliser. Internet use may be growing at 136% per year but with average agricultural tariffs standing at 112% (compared to an average of 12% in the US) India is still one of the most protectionist countries in the world.

Even so, outsourcing has undoubtedly had an important effect on Indian national morale and its global outlook. The fact that Indian firms such as Tata, Infosys and Wipro are today global entities which are actively courted by giants like IBM, American Express and Citigroup is a source of national pride and has played an important role in driving investment-led growth. Furthermore, even though the lion’s share of jobs will be going to India, its outsourcing success story is becoming an icon for much of the developing world. Service providers are also emerging in countries as varied as Bangladesh, Brazil, China, the Philippines, Romania, Russia, Singapore, Thailand, Venezuela and Viet Nam. And other countries are joining the queue: the South African government recently issued reports urging businesses not to miss the boat on offshoring; even Rwanda and Uganda have produced strategies to promote local SMEs in low-skill sectors such as transcription and data input.

The momentum that has gathered behind outsourcing therefore raises the stakes in terms of our economic relations with the developing world. Taking this lifeline away, particularly at a time when the developed nations are bitter about our failure to live up to promises on agriculture at Cancun, could have dire consequences adding to the litany of accusations which are currently driving globalisation-sceptic agendas in countries like India where economic nationalism is never far from the surface. In the words of Sunil Mehta, vice president of the leading Indian IT body NASSCOM: “Developed economies should be wary of the way in which their actions get interpreted in India. Globalisation is still a new concept in the popular imagination and antipathy for foreign companies and investors could easily be whipped up by politicians with populist agendas.”

Importantly, the offshoring row could fuel further impatience with multilateral trade liberalisation and the WTO among free traders who are becoming frustrated with the lack of progress on the negotiating table. Trade experts like Jagdish Bhawati have already warned of the danger that developing countries today would rather avoid becoming embroiled in the costly and tortuous processes of the WTO. So-called ‘can do’ nations naturally prefer the easy option of bilateral trade agreements, even if in so doing they deny themselves the ability to hold their partners to account. This impatience is likely to become even more intense when it comes to trade in services. The problems in resolving agricultural disputes is dwarfed by the challenges facing the General Agreement in Trade in Services (commonly referred to as GATS), which is likely to become more acute as the number of ‘tradable’ services increases due to advances in technology and business models.

Offshoring has opened a new front in debates about the world trade. However, the defence cannot be left to economists alone. Leaders in the developed nations, particularly the US, need to look at the international implications of their paranoia about jobs disappearing “off-shore”. Ignoring the advice of economic advisors and announcing, for example, blanket bans on the outsourcing of government contracts, while raising cheers at home, will further sour our relations with much of the rest of the world and the health of the multilateral system.

The international spread of democracy began in the 1970s but came to an end in the 1990s. Why? Because with the cold war over, America’s moral mission is no longer so clear.

In 1940, faced with the threat of Hitler’s Germany, Franklin D Roosevelt called on the United States to be “the great arsenal of democracy”. The context has changed, but the evangelical spirit remains. Indeed, the agenda has been widened, particularly under the aegis of the neoconservative movement, to encompass the aggressive promotion and protection of democracy.

The philosophy is boldly optimistic. It asserts that democracy is a universal value that the west should use its position of power to spread. George W Bush and Tony Blair are both believers and they have linked the war on terror directly to the wider case for democratising the Middle East. As Blair asserted in his address to the US Congress last year: “We promised Iraq democratic government. We will deliver it.” Critics argue that democracy cannot simply be “delivered” and that such declarations smack of imperial hubris. While the optimists are right that democracy can be exported, they fail to grasp that the task is more complex now than in previous eras as force becomes increasingly inadequate.

There is much to support Bush and Blair’s passionately held optimism. Democracy can and has been exported in the past, beginning with its spread from Athens to other city states around the Aegean basin – “like frogs around a pond”, as Plato eloquently described them. More recently, Freedom House, a non-partisan organisation that evaluates the state of liberty within nations, has praised the 20th century as the “century of democracy” due to democracy’s unprecedented expansion across the planet. The Freedom House figures show that, at the turn of the millennium, more than half the world’s population, living in 120 states, enjoyed regular access to the ballot box.

The end of the cold war is frequently identified as the most significant turning point yet. Two major consequences are commonly cited. The first is summed up in Francis Fukuyama’s now infamous 1989 article “The End of History?”: the belief that the real victory of the cold war was ideological and that democracy finally stands peerless on the world stage after despatching the last of its rivals. He writes: “What we are witnessing is . . . the end of history as such: that is, the end point of mankind’s ideological evolution and the universalisation of western liberal democracy as the final form of human government.”

The second consequence relates explicitly to power. The fall of the Soviet bloc left a world with just one economic and military superpower. As Blair and others have put it, a “unipolar world” emerged. Indeed, many commentators have suggested that the US is so dominant that it deserves the new title of “hyperpower”. Far from hyperbole, the term is an expression of the unique historical position that America holds as the first truly global hegemon. As the neo-con Robert Kagan argues, now that the “lingering mirage of European global power” appears to be fading, there is no remaining counterbalance to the United States. In the Pentagon’s own words, from the 2002 US National Security Strategy: “Our forces will be strong enough to dissuade potential adversaries from pursuing a military build-up in hopes of surpassing, or equalling, the power of the United States.”

Thus, the events of 1989 led to a conjunction of power and ideological imperative that many see as irresistible. Recent works such as Niall Ferguson’s Colossus illustrate the point. Ferguson notes the successful democratisation of Germany and Japan after the Second World War as a simple prelude to his main argument. He claims the US should now look to carve a worldwide democratic empire from rogue regimes and failed states. Optimists and neo-cons are more confident than ever that democracy can be spread and that the process can be galvanised with an even greater application of force.

Ironically, however, this has become more contentious since 1989. The long-term strategic challenges thrown up by the conclusion of the cold war have been obscured by the sheer number of democracies established during and immediately after it. Freedom House statistics show that although the “third wave” of democratisation (which began in 1974) was the most prolific in history, the total number of democratic nation states has remained virtually unchanged since 1995. In other words, the spread of democracy has faltered in the unipolar world.

The optimist’s approach is deeply myopic. Its singular focus on delivering democracy causes it to ignore the attitudes and beliefs of the intended recipients. This is a critical oversight, because even in its most minimal, Schumpeterian sense, democracy requires the active support of those who are being governed. Mahatma Gandhi once said that “the spirit of democracy cannot be imposed from without. It must come from within”, and without the democratic spirit its formal structures alone are like castles of sand. From Germany in the 1930s to Pakistan in 1999, this has been proven time and again. This is vital now because the democratic spirit – or “hearts and minds”, as it has been rebranded in the lexicon of the war on terror – is suddenly proving elusive.

The problem lies with the unparalleled concentration of what Joseph Nye calls “hard power” (military and economic), which is proving extremely difficult to reconcile with the promotion of “soft” democratic values. This is not just to repeat the oft-quoted and benign point that imposing freedom is an oxymoron. That has always been so and has proven less problematic in practice than in principle. Rather, it is that, in the new world order, the US is suffering a chronic deficit of legitimacy in the eyes of those it claims to be seeking to help. Its power has become an albatross around the neck of the US and its allies.

The reasons are not hard to find, nor, in principle, are the solutions. At the most basic level, hard power is unavoidably threatening, arousing suspicion and fear. Realpolitik, the canon of thought founded on Thucydides, Macchiavelli and Hobbes, may be overly cynical for some, but the suspicion that power, ultimately, will always be used for self-interest still resonates strongly. As Thucydides put it: “Right . . . is only in question between equals in power, while the strong do what they can and the weak suffer what they must.”

US and other western leaders frequently emphasise the primacy of values and ideals in their foreign policy – Bush constantly refers to “freedom”, “liberty” and “democracy”, for example. Yet such words ring hollow, for it is impossible to ignore the mighty iron fist inside the velvet glove.

Indeed, whereas it could once have been claimed that “moralpolitik” and realpolitik were closely aligned, the unipolar world has driven a wedge between them. Face to face with an aggressive and authoritarian Soviet Union, it was easier to believe that advancing US and western interests was equivalent to advancing the world’s interests. As Robert Cooper argues, “the cold war is one of those . . . wars in which both values and survival were at stake” and, as such, it validated the widespread use of hard power. Now that survival is no longer at stake and there is no remaining “other” or counterbalance, military intervention has become a choice rather than a necessity. Consequently, its legitimacy is less self-evident and its ethics hold greater importance than in previous eras.

In this context, even perceived duplicity can seriously undermine the moral authority that America and the west need to win hearts and minds. At worst, whole peoples can turn against democracy’s star-spangled champion if the Pentagon is seen to pursue its own interests at the expense of others. In practice, the war on terror has demonstrated both the central relation of morality to contemporary foreign policy and the problems caused by failing to establish a wide base of legitimacy. Bush’s and Blair’s governments have acted basely on any number of issues: using flawed and “sexed-up” intelligence, double standards over human rights abuses in Guantanamo Bay and Abu Ghraib jail, flouting international law and sidelining the United Nations, not to mention accusations over annexing Middle Eastern oil. The result has been relentless opposition to the US and the “coalition of the willing”.

Antagonism is not confined to any minority group that can easily be labelled radical or extremist. When the survey group Zogby International asked a sample of the Iraqi population last year whether, over the next five years, “the US would help or hurt Iraq”, half thought it would hurt while only a third thought it would help. Contrast this with corresponding figures of 7.5 per cent “hurt” and 61 per cent “help” for Saudi Arabia and the lack of trust is put into sharp relief. Basic distrust and outright hostility in Iraq and Afghanistan are turning hearts and minds firmly against the US. It is not surprising, therefore, that when the same survey inquired about democracy in Iraq, 51 per cent viewed it with suspicion, and said it was a “western way of doing things and will not work here”.

This abrupt confrontation with reality shows that addressing such views has become essential. Blair’s simplistic emphasis on delivering democracy needs to be underpinned by a more complex philosophy that recognises the necessity of fostering trust and belief in democratic values from within.

Fundamentally, hearts and minds must be converted before the architecture of government can be. Less direct methods will have the greater effect. In particular, increased familiarity and exchange between cultures, virtually guaranteed by globalisation, are likely to be central. First and foremost, however, genuine fears, especially those surrounding US and western imperialism, must be allayed. As Tom Bentley and Ian Hargreaves put it in The Moral Universe: “When we say that . . . just wars based upon values have superseded wars based upon territorial and resource interest, we still have a great deal to prove.”

The US is no Gulliver in Lilliput, but Swift’s satire does illustrate the uneasy relationships that accompany greatly magnified power differentials. Similarly, though the birth of a unipolar world has augmented the US’s position as the arsenal of democracy, it has also profoundly changed the way the US relates to the rest of the world. The struggle for hard power has been won decisively. The more immediate and subtle battle now facing the exporters of democracy is for the hearts and minds of those they seek to help.

James Page, a recent Leeds University graduate and a Demos researcher, is the winner of the Webb Essay Prize 2004, awarded by the Foreign Policy Centre in association with the New Statesman and the Webb Memorial Trust. The subject was: “Can democracy be exported?” The judges were Ahdaf Soueif, novelist; Mike O’Brien MP, minister of state, Foreign Office and Department of Trade and Industry; Ann Clwyd, Labour MP; Sir Menzies Campbell MP, Liberal Democrat shadow foreign secretary; Zainab Bangura, women’s activist; Richard Rawes of the Webb Memorial Trust; and Peter Wilby, NS editor

If you have any comments on this article please e-mail james.page@demos.co.uk

Published in The New Statesman on 13 December 2004, http://www.newstatesman.com

The top two items on the agenda of the European Council, when it meets in Brussels on 17-18 June will, of course, be the European Constitutional Treaty and the nomination of a new President of the Commission. If they have any time left over from these two tasks, they could do worse than devoting it to a serious discussion of the EU’s future financing.

In the period up to the end of 2006, this has been determined by the Financial perspectives agreed at the Berlin summit in 1999. This set an annual limit of expenditure of 1.27 per cent of GNP, which has been comfortably adhered too so far, including in the budget appropriations made for the next two years.

In February, the Commission published its proposals for new perspectives for the seven-year period, 2007-13. These were fashioned around three priorities – the achievement of the Lisbon agenda to make Europe the world’s most competitive economy (on which progress so far has been disappointing), the completion of an “area of freedom, justice and security”, and the projection of Europe as an effective “global partner”.

A slightly reduced annual expenditure limit of 1.24 per cent of GNP was proposed, with projected spending averaging out at 1.14 per cent per year. Even before the Commission had produced its proposals, a pre-emptive strike was launched by seven member states which are substantial net contributors to EU funds.

A letter, which looked as though it had been drafted within the UK Treasury, but was signed by the heads of government of France, Germany, the Netherlands, Sweden, Denmark and Austria, as well as Tony Blair, was despatched to Romano Prodi. It demanded that average expenditure “should not exceed 1.0% of gross national income”.

This would effectively freeze spending at existing levels, and would prevent EU activities benefiting from future growth in the European economy. The seven leaders claim to be “deeply committed to the principle of European solidarity, and to the maintenance of cohesion in the enlarged Union”.

They make no effort, however to explain how the greatly enhanced responsibilities of the Union, notably concerning enlargement, the Lisbon agenda and the European Security and Defence Policy – all of which they had approved – could be met, without a drastic reduction of current activities.

The only justification offered in the letter was that member states had recently been cutting back on their own budgets, and that “our citizens will not understand if the EU-budget were exempt from this consolidation process”. This argument was recently blown sky-high by Philippe Maystadt, the President of the European Investment Bank (EIB), and previously a highly-regarded Belgian finance minister.

In a lecture last month to the Centre for European Policy Studies (CEPS), he pointed out that the EU budget increased by 8.2 per cent during the period 1996-2002, while national budgets in the 15 member states grew by no less than 22.9 per cent. It is very much to be hoped that Maystadt’s lecture will be published, as it is by far the most thoughtful and constructive commentary on the Commission’s proposals yet to appear.

It is difficult to escape the conclusion that the letter was based, not on any detailed consideration of the Union’s financial needs, but on a crude desire to cut back on their own national contributions.

This view is understandable, as some (but not all) of the seven countries are currently paying more than what might be regarded as their ‘fair share’. Germany, for example, long the milch-cow of the EU, has been feeling the pinch since reunification left it with a massive bill to upgrade the economy and environment of its own eastern Länder, while it is no longer one of the wealthier member states.

Yet, on a per capita basis, it is far from being the biggest single net contributor (see table). That honour now belongs to the Netherlands, whose citizens contribute almost twice as much per head as any others, while the Germans are only the fifth largest contributors, just ahead of the British, who benefit from the rebates they have received since 1984.

If governments could be assured that they were not being asked to make a disproportionate contribution, they might be more willing to consider the financial perspectives on their merits. The Commission therefore proposes – not for the first time – a new mechanism for the “correction of budgetary imbalances”.

This would have to replace (or incorporate) the present specific arrangement for Britain, which successive British governments have declared to be non-negotiable, though they insist that they would not in principle oppose comparable arrangements for individual member states which found themselves in difficulties.

This would not be a starter, however, as the Union will not again commit itself to inflexible arrangements, not subject to a time-frame, or provision for amendment in the light of changing circumstances.

That the British would have to receivea roughly equivalent amount to the present, at least initially, is evident, as without the rebate they would become the largest single net contributor, while being far from the most prosperous nation. But, in the long run, it would surely be counter-productive of them to continue to veto any proposed change, especially as all the new member states are required to contribute to the rebates under the present arrangements.

Similarly, the present net beneficiaries (particularly the Irish whose per capita GNP is now well above the EU average) should bow to the inevitable and agree to a gradual redirection of structural fund money towards the poorer nations in the east.

All this will take a lot of hard bargaining, which is likely to continue right up to the deadline for decision at the end of 2005. It would help to clear the air if the summiteers agreed to a full and frank exchange of views next week before the detailed negotiation gets under way.

Who loses, who gains?

Net per capita contributors to EU budget, 2002

Country (Euros)
1 Netherlands (-189)
2 Luxembourg (-107)
3 Belgium (-101)
4 Sweden (-96)
5 Germany (-74)
6 U.K. (-69)
7 Italy (-58)
8 Denmark (-49)
9 France (-38)
10 Austria (-33)
11 Finland (-1)
12 Spain (+226)
13 Portugal (+274)
14 Greece (+325)
15 Ireland (+373)

The European Office of Amnesty International has already made its own assessment. “Is the EU now more free, secure and just as a result of the Tampere Agenda?” it asked in a report published last month. It considered the two dominant elements of the Tampere agenda – asylum and immigration, and judicial co-operation in criminal matters – and its verdict, from a human rights point of view, is “generally negative”.

On asylum, it says that “The Tampere commitment to ‘full and inclusive application of the Geneva Convention’ has evaporated. The determination to provide security is neither matched by effective co-operation nor balanced with essential safeguards … The vision of the Area of Freedom, Security and Justice has turned out to be a parallel universe to the daily reality experienced by asylum seekers, illegal immigrants, suspects in police stations and defendants in courts”.

Much of the fault for the EU’s failure to translate its good intentions into effective action is attributed to the impact of September 11. Counter-terrorism has replaced human rights as the driving force for legislative action. The quick agreement, at an emergency summit on 21 September 2001, to speed up a European Arrest Warrant, is described as “a huge leap forward in the development of a European judicial space”. So far, however, its effect has been disappointing, not least because of the failure to buttress it, as originally promised, with adequate human rights safeguards.

The warrant was due to come into effect on 1 January 2004, but in a number of countries, Amnesty reports, “implementation has been mired in difficulties in national parliaments due to lack of trust in the standards of criminal justice in other member states and the lack of common standards in the application of basic procedural safeguards in criminal proceedings”. Italy has still not obtained parliamentary authority to go ahead.

Potentially, the arrest warrant could be an important weapon in the fight against international and organised crime, the trafficking in human beings and terrorism, which constitute, in themselves, a grave threat to human rights. “However”, Amnesty concludes, “the effective application of the European Arrest Warrant requires the European Union to establish and maintain high standards across the EU in order to breed genuine mutual trust between independent judicial authorities.”

I asked Dick Oosting, the Dutch head of Amnesty’s EU office, where the blame lay for the EU’s failure to live up to the hopes raised at Tampere. He was quick to absolve the European Parliament, and – largely – the Commission, which leaves the Council of Ministers and the member states (or some of them) as the main suspects.

It is the EP which has taken the lead in monitoring human rights, getting the Commission to establish a network of national experts to report on the situation in each member state. Organised by a Belgian human rights expert, Olivier de Schoutter, it has formed the basis for annual reports which have drawn attention to human rights breaches in member states.

Oosting has repeatedly attempted to get the EU to act on the basis of major reports Amnesty has itself issued over the past years, including on Spain, Greece and Portugal, but without success. “These are the letters I never get a reply to”, he told me. He also accuses EU governments of “double standards” in their response to reports presented at Geneva to the UN High Commission for Human Rights. One of these by Theo Van Boven, the UN’s Special Rapporteur on Torture, strongly criticised Spain for its conduct in the Basque country.

The Spanish government reacted angrily, and even attacked Van Boven’s integrity. Delegates from Norway, Canada and New Zealand rallied to Van Boven’s defence, but not a word was spoken by representatives of any other EU country.

The Commission, prompted by the Justice and Home Affairs Commissioner, António Vitorino, who unfortunately will not be eligible for reappointment due to the nomination of his compatriot, José Manuel Durão Barroso, as the incoming President, has backed the initiatives of the Parliament, and last October adopted a communication with proposals on how the Council of Ministers should apply the hitherto dormant Article 7 of the Treaty on European Union.

This Article, subsequently strengthened by the Nice Treaty, empowers the Council to act in the event of either a “clear risk of a serious breach by a member state” of its human rights obligations, or of “a serious and persistent breach” which has already occurred.

Nine months later the Council of Ministers has still not got round to considering this communication. A check-list of actions which the Dutch presidency should take, published by Amnesty on 1 July and entitled Closing the gap between rhetoric and practice, gives a high priority to bringing it forward for decision by the Council.

Equally urgent, in Amnesty’s view, is to follow up the surprise decision taken by the European Council last December to establish an EU human rights agency, based in Vienna. The presidency should work with the Commission to prepare a firm proposal defining the scope and powers of the new body, which Amnesty believes, should be firmly focused on monitoring human rights within the EU rather than attempting a global role.

The Amnesty document also draws attention to what it describes as “the systematic discrimination and social exclusion of Roma”, and calls for the adoption of an EU strategy to counter it. It is important, says Oosting, that the new member states, whose human rights record was subject to scrutiny during the accession negotiations, should get the message that the EU is equally concerned to ensure the highest standards from its existing members.

Throughout the history of the EU, Dutch governments have been in the forefront of those fighting to defend and extend human rights and to combat racism and xenophobia. In the recent past, they have faced a certain backlash, manifested by the electoral success of the Pim Fortuyn movement, and have undoubtedly been tempted to trim.

Now is the time for Jan Peter Balkenende’s government to demonstrate to its EU partners that its determination has not faltered and that the Union should prepare to live up to the high ideals enshrined in its past declarations, and in its new constitution.

Serbia-Montenegro has slipped disastrously behind the other four West Balkan states which were recognised as potential members of the Union a couple of years ago. Since then three of them (Croatia, Macedonia and Albania) have either signed, or are currently negotiating, a Stabilisation and Association Agreement (SAA), while Bosnia-Herzegovina is participating in a feasibility study which should lead on to such an agreement, the essential first step on the probably lengthy road to membership negotiations. .

Serbia-Montenegro, the largest and most populous of the states, has not even reached the feasibility study stage yet, and is sadly stuck at the end of the queue. There have been two main reasons for this. One is its failure, so far, to co-operate fully with the International Criminal Tribunal for the Former Yugoslavia (ICTY), whose chief prosecutor, Carla del Ponte, was on hand in Luxembourg on Monday to give an up-to-date report to the Foreign Ministers.

Equally to blame has been the virtual non-operation of the institutions of the state union between Serbia and Montenegro, with whom the EU was expecting to negotiate. The state union will remain, at least theoretically, in force until February 2006, after which the question of independence for Montenegro may be considered.

The EU does not want to wait until then before meaningful negotiations towards an SAA can get under way. On Monday it decided on a new twin-track policy, under which while it will still hope to deal with the state union on issues which clearly fall within its competence, the EU will talk separately to the governments of the two republics on those areas – including notably, trade and the internal market – which are, in practice, under their control

The new EU initiative may well have been prompted by the encouraging development of the election, in July, of Boris Tadic, who was in Brussels last week, as President of Serbia. Although he has few executive powers, he is an influential figure who is an outspoken advocate of full co-operation with the ICTY, political and economic liberalism and working closely with the EU

His election should act as a spur to the chronically hesitant Serbian Prime Minister, Vojislav Kostunica, to give a more decisive lead to his government. Better still it could encourage him to reinforce it by bringing in the Democratic Party (DS), of the assassinated Premier Zoran Djindzic, which is now led by Tadic.

The DS has been in opposition since March, when Kostunica finally succeeded in forming his government, three months after last December’s parliamentary elections. Although there was a clear majority in the Parliament for democratic reform, long-standing personality differences between Kostunica and Djindjic’s supporters got into the way of forming a coalition which included both their parties.

Instead, Kostunica even considered forming a coalition with the ultra-nationalist Serbian Radical party (SRS), of indicted war criminal Vojislav Seselj, which is the largest party in Parliament. Now led by Tomislav Nikolic, since Seselj surrendered himself to the ICTY, the SRS was effectively vetoed by other potential partners.

So, Kostunica ended up with a minority government, formed by his own Democratic Party of Serbia (DSS), and three smaller parties, the Serbian Renewal Movement (SPO) of Foreign Minister Vuk Draskovic, the New Serbia Party (NS) of Minister Velimir Ilic and the obscurely named G17+ party of Deputy Premier Miroljub Labus.

Ludicrously, this government has had to rely on parliamentary support form Milosevic’s Socialist Party of Serbia (SPS) to maintain itself in power, and – partly in consequence – its legislative record has since been distinctly patchy.

Fortuitously, an opportunity may soon exist for the reconstruction of the government. Within the past two weeks, Tadic has twice called on Kosovar Serbs to use their votes in the elections, on 23 October, for a parliamentary assembly, which many of their leaders had been determined to boycott since the ugly incidents of ethnic cleansing by Kosovar Albanians last March.

This was brave move by Tadic, who has since been widely demonised, and the Radicals have tabled a motion in the Serbian Parliament to remove him from the presidency. The SRS has now declared that it will back the Radicals’ initiative, thereby emphasising just how unreliable a source of support it is for the government.

If Kostunica, who ultimately if reluctantly threw his support to Tadic in the second round of the presidential election, enabling him to overhaul Nikolic who had led on the first ballot, can now bring himself to include the DS in his team, he will provide himself with a parliamentary majority and a much firmer base for pursuing his reform programme.

This would send an encouraging message to the international community, at a time when donor help is beginning to dry up, and private foreign investment is increasingly hard to come by. It will need to be backed up, however, by a number of other crucial steps.

Most urgent is the need to provide full-hearted co-operation with the Hague Court, stepping up the drive to find Radko Mladic, who is widely believed to be living in Serbia (while Radovan Karajic is more likely to be in the Serbian Republic of Bosnia), and handing over three other generals who have recently been indicted.

Equally important is to reform the judiciary and the media to make them functional and independent, and to provide increased security for national minorities, including Hungarians in Vojvodina who have recently complained of increasing harassment by Serbs, though Tadic claimed during his visit to Brussels that the incidents had been exaggerated.

Serbia – and Kostunica’s government in particular, may now be at a crossroads. If it seizes the opportunities open to it, Tadic’s claim, made last week to European Voice, that it was a “realistic expectation” that Serbia could join the EU by 2012, could prove justified. If not, his country faces a long period of isolation and further decline.

The Beauty Queen’s Guide to World Peace isn’t the kind of primer that will fly off the shelves before Spring Break on an average US campus. There are no potted descriptions of the UN or handy definitions of the caliphate that will help those perfect 10s look particularly smart. Instead, there are over 300 pages that more resemble a freewheeling dinner party conversation than a reference guide. Plesch will clunkily change gear from defending the UN mandate for the Second World War to outlining the risks of Japanese/North-Korean conflict via a lengthy disquisition on the ills of shareholder privilege. He’ll cut to Oliver Cromwell and the shortcoming of royalist histories before unveiling a grandiose plan for world government. This is security issues at their most elastic. Perhaps Plesch should write more – for there are at least three good pamphlets – on terrorism, corporate law and democratic reform – awkwardly yoked together here.

These days author Dan Plesch he is more likely to be seen consorting with retired Generals on BBC 24 than unfurling his CND banner, but he still retains the high-octane mixture of terrifying fact and dark prediction that he learned as an anti-nuclear campaigner in the early eighties. Refreshingly, he rehearses the power of nuclear weapons and the horrors of a nuclear winter – familiar enough for those of us brought up with When the Wind Blows and Greenham Common protests but probably unknown to a whole new political generation who can’t remember Thatcher. But elsewhere he rides fast and loose with descriptions of the apocalypse: a future war in the Gulf “could result in the near collapse of the industrialised economies”, while nanotechnology “might turn the world into grey sludge”, quite aside from those nukes. There is no room here for whiggish claims that that billions are being swept out of poverty by economic growth, or that the world is far less dangerous than when rival superpowers faced each other in Berlin.

Though a political radical in the tradition of George Mombiot and Naomi Klein, his worries about military interventions to protect human rights (“virtue runs amok”) and defence of traditional state sovereignty is a conservative vision that could have come from the curled lips of Alan Clark. Plesch seems here unwilling to engage with the difficulties of whether states forfeit the rights to sovereignty when they mistreat their populations. And he assumes that our biggest dangers will come from nuclear wars between strong states: he has little to say on the arguably greater danger that weak states (particularly in sub-Saharan Africa) will collapse. But if the shape is amorphous, then, like the best teachers, Plesch has a rich fund of memorable quotes and insights. Any book that tells the story of how a startled Yeltsin was awakened with a false report that the US had launched missiles at Russia in 1995 is worth the cover-price, regardless of your waist measurements.

Rob Blackhurst is Editorial Director of the Foreign Policy Centre

He argued with great force, and not a little bluster, that the ceiling of expenditure should be set at one per cent of Gross National Income (gni) of the Union, compared to 1.24 per cent as proposed by the Commission and the existing level (never reached) of 1.27 per cent. He went on to insist that there was no question of re-negotiating the rebate which Britain has enjoyed since 1984, and that the case for it was as strong as ever.

Brown received a much more encouraging response to his first argument than to his second. In addition to the five countries (France, Germany, the Netherlands, Sweden and Austria), whose leaders joined Tony Blair in writing a letter to Romano Prodi backing a limit of one per cent, both Italy and Denmark made sympathetic noises, while Finland and Cyprus appeared open-minded.

On his plea to retain the British rebate unamended, Brown was greeted with a deafening silence. No vote was taken, but if it had it would surely have been 24-1.

Instead, the ministers concentrated on giving their first reactions to the Commission proposal, tabled in July, of a generalised corrective mechanism (GCM), to compensate not only the United Kingdom, but other member states deemed to be carrying more than their ‘fair share’ of the burden.

The proposal is that any member state whose net contribution would exceed 0.35 per cent of its gni should have its excess payments refunded at a rate of 66 per cent. The total refund volume would be limited to a maximum of 7.5 billion euros a year.

This limitation would effectively mean that the total cost of such a GCM would be little more than that of continuing the unique British rebate. In effect, the British share would be what was left after other rebated states had been compensated – perhaps half of what it could expect to receive under the present arrangements.

The Commission advances a strong case that circumstances have changed substantially since 1984, when the terms of the British rebate were agreed at the Fontainebleau summit. At that time, Britain was the poorest of the six member states which were then net contributors, with a gni only 90.6 per cent of the EU average.

By 2003, the situation had been transformed with the British gni rising to 111.2 per cent of the EU average (measured in terms of purchasing power parities), making her the second most prosperous of the then 15 member states, after Luxembourg.

The table shows the Commission estimates of what the average yearly contributions of the ten leading net contributors would be during the period of 2007-2013, under its proposals, which include provision for a gradual phasing out of the British rebate. These show that, in per capita terms, Britain would come equal third with Sweden, behind the Netherlands and Germany, but would still pay substantially more than France and Italy, countries which British officials have categorised as roughly equal economies, and which have been notable under-payers in the past.

In the discussion at the Ecofin meeting, not all the 25 member states expressed an opinion on the proposed GCM. Nine countries – the Netherlands, Austria, Sweden, Belgium, Greece, Italy, Ireland, Slovakia and Slovenia came down in favour of the Commission proposal, though reserving their position on the details.

Eight others – Denmark, Spain, Finland, Portugal, Poland, Hungary, Lithuania, Portugal and Cyprus – were critical, but also made it clear that they were opposed to continuing the British rebate.

This was only a preliminary discussion, and it is likely that many member states will shift their position as the debate develops. Both the Commission and the Council hopes that agreement will be reached by the end of the Luxembourg presidency next June. This is partly because the chair is then taken over by Britain, the country least well placed to propose a compromise solution.

The final deadline, therefore, is likely to be during the Austrian presidency in the first half of 2006, which will end only six months before the 2007-2013 spending period begins.

In the meantime, the British look like being stuck with a completely unrealistic negotiating position. On the one hand, Gordon Brown and other British ministers constantly boast of the success of their economic policies, and the statistics bear out that during the past seven years Britain has out-performed the EU average on nearly every economic indicator. On the other, they deny the natural consequence of this – that Britain has succeeded in catching up or over-taking almost all of its continental rivals.

In these circumstances, it makes no sense for British ministers to deny the evidence of what has happened. A far smarter move would be to accept in principle the case for a GCM, but to negotiate hard on the details to ensure that the UK got as large a slice of the cake as possible.

Two ways of achieving this would be to reduce the threshold of 0.35% of gni, to 0.3 or even 0.25, or to remove or increase the proposed ceiling of 7.5 billion euros. If Britain does not change its tactics soon, it will face the almost certain probability of having to make a humiliating climb-down at the 11th hour or face universal condemnation for the failure to agree on the financial perspectives for the next seven-year period.

Who would pay the most?

Average Percentage shares of national gni, 2007-2013

Net contributors
Without rebate With British rebate With GCM
Netherlands
0.55 0.56 0.50
Germany
0.52 0.54 0.49
Sweden
0.47 0.50 0.46
United Kingdom
0.62 0.25 0.46
Austria
0.37 0.38 0.41
Italy
0.29 0.41 0.36
Cyprus
0.28 0.37 0.34
France
0.27 0.37 0.34
Denmark
0.20 0.31 0.26
Finland
0.14 0.25 0.20

Source: European Commission