Hewitt issues protectionism warning

EU leaders will discuss economic reform at Barcelona

By Ollie Stone-Lee BBC News Online political staff

European countries must not retreat into protectionism during tough times but must push even harder for economic reform, Trade Secretary Patricia Hewitt has warned.

Her warning comes as European Union leaders prepare for their summit in Barcelona later this month, which will focus on the economic reform agenda.

We need to recognise that the case of economic reform is stronger and more urgent in difficult times

Patricia Hewitt
Trade Secretary

In the speech at a Foreign Policy Centre seminar, shortly before the US announced the imposition of tariffs on steel imports, Ms Hewitt stressed the need to liberalise key markets and to get more labour flexibility.

The prize, she said, was 20m new jobs in Europe by 2010 with prosperity increasing by the equivalent of £5,000 for every European citizen.

Fears of faltering

Ahead of the summit, Tony Blair has faced criticism for making agreements with right-wing Italian Prime Minister Silvio Berlusconi over the drive for more free-market economics.

But former Foreign Secretary Lord Owen told the seminar such alliances with Italy and Spain were "extremely sensible".

Hewitt says there are real prizes for reform

Ms Hewitt stressed the importance of carrying forward at Barcelona the economic reform agenda set at the 2000 Lisbon Summit.

There were real fears among business leaders and investors that the programme of change had faltered in recent months, she explained.

Ms Hewitt continued: "The crucial thing is that when times are tough we should not give in to the instinct to batten down the hatches, retreat to protect and wait until the good times return."

She argued governments should resist calls for them to bail out loss making companies.

"We need to recognise that the case of economic reform is stronger and more urgent in difficult times."

There had been setbacks, such as on liberalising energy markets, making the process of getting European patents faster and agreeing new directives on company takeovers.

Ambitions

But there had been real progress since Lisbon too, including the creation of 5m jobs and getting internet access into every European school.

The Lisbon summit set an ambition of making the EU the world's most competitive knowledge driven economy.

Blair came under fire for seeming to ally with Berlusconi

"If we achieve that ambition we will have 20m more Europeans in work by the end of the decade," she said.

And if American levels of productivity could be matched, Europe's wealth and prosperity would rise by 40% - £5,000 for every citizen.

Among the priorities for change, added Ms Hewitt, was giving state aid less often but more effectively, opening up energy markets and cutting red tape - something the government has been accused by the Conservatives of increasing.

Lord Owen support Mr Blair's moves to build alliances with Spain and Italy, although he suggested elections in Germany and France could prove a barrier to securing change.

Tough comparisons

But the former minister said the British government, which last week published its plans for European economic reform, could have been bolder.

Lord Owen pressed the government to campaign for "tough benchmarks" so Britain and European countries could compare themselves with each other and with the world's best.

"The more I live within the market economy, the more I have become convinced that the great danger is to compare yourself to yourself and not to compare yourself to the competition."

Liberal Democrat MEP Chris Huhne also argued poor performing countries should be "named and shamed".

'Model for EU'

But senior Downing Street adviser Roger Liddle earlier told the seminar having league tables could might be counter-productive because it could lead to rows between EU nations.

The European Commission needed to strike a balance, although such tables should be used more, said Mr Liddle.

He argued the way the economic reform process was being now being pursued was a "model of governance in Europe".

That meant the European Council of Ministers set the agenda and strategy while the independent body of the Commission got on with implementing that plan in "everyone's interests".