FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 27, 1998

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[Translation]

The Chairman (Mr. Bill Graham (Toronto-Centre—Rosedale, Lib.): It is with great pleasure that I welcome Mr. Delors, Former Chairman of the European Commission. The members of the committee may also be interested to know that during his career Mr. Delors has also been a member of the European Parliament. For those of us who are interested in intellectual life, I would also point out that he has also been a professor.

Mr. Delors, welcome. I believe that Mr. Juneau will introduce you shortly. Mr. Ambassador, welcome to the committee.

Mr. Jean-Pierre Juneau (Canadian Ambassador to the European Union): Thank you, Mr. Chairman.

Members of the committee, when I was asked to introduce Mr. Delors, my first reaction was to ask if it was really necessary. Mr. Delors has pursued an intellectual and political career that brought him to chair one of the most ambitious undertakings since the war, i.e. the building of a united, stable and prosperous Europe.

It is under his high intellectual and moral authority that the European Community has resolutely committed itself to the road to integration and it is under his direction that the basis for Economic Monetary Union, single currency and the broadening of the European Union have been placed.

We can say without hesitation that Mr. Delors has up to now been one of the most influential and most effective presidents of the European Commission. Under his presidency, from 1985 to 1995, we have seen the creation of a single market and the joining of Portugal, Spain, Austria, Finland and Sweden, we have seen the reunification of Germany and witnessed the signing of the Maastricht Treaty, which opened the way to the setting up of the European Monetary Union.

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But even more, Mr. Delors has been a visionary who has been able to inspire and mobilize the European partners around a true societal project that takes into account the aspirations of European citizens. Mr. Delors' influence is far from over. It has just been suggested that he preside over the deliberations of a think tank responsible for studying and recommending institutional reforms essential to the proper working of an Europe ready to welcome new members. That, it seems to me, is one of the rare candidacies that now has the unanimous consent of the European partners.

I would feel remiss if I did not remind you that Mr. Delors is a sincere friend of Canada's. In 1981, a few months after President François Mitterrand took power and while he was a member of Prime minister Mauroy's first cabinet as Minister of Finance and the Economy, Mr. Delors came to Canada to participate in the first G-7 summit that Canada had the honour to host.

Afterwards, he had occasion to return to Canada a few times as president of the European Commission to participate in the summit between Canada and the Union in the context of the Transatlantic Declaration of 1990.

Finally, it is to Mr. Delors initiative that we owe the creation of the Jean-Monnet chair at the Université de Montréal, the first chair ever created outside the European continent.

Members of the committee, I am very pleased to welcome with you Chairman Jacques Delors, to whom I now yield the floor.

Mr. Jacques Delors (Chairman of the UNESCO'S International Committee on Education for the 21st Century and Former Chairman of the European Commission): Mr. Chairman, members of the committee, it is a great honour for me to be received in your Parliament and to be able to discuss with you the issues surrounding the building of Europe and the relations between the European Union and Canada. As requested by your Chairman, I will try to introduce the debate in a ten-minute time limit, but nothing beats discussion.

European construction will soon be 50 years old. During these 50 years from dynamic growth to crisis, from crisis to stagnation, from stagnation again to dynamic growth, so therefore with highs and lows, European construction has continued apace. It is a unique enterprise in history because it invites sovereign states to share together part of their sovereignty. It is an experience that is always discussed and challenged because since the beginning those who prefer a European federal approach and those who want an intergovernmental approach, in other words those who want one entity where all decisions are taken unanimously, have opposed each other.

It is also an original institution in its structures: two executives, the council of Ministers and the Commission; two legislatures: the European Parliament and the Council of Ministers; one judiciary: the Court of Justice.

The institutional system called the "community method" was invented with the first European treaty, the European Coal and Steel Community. Currently, it is not comparable to anything, either in the United States or the existing federal states or to the theories of Montesquieu. and often the European or foreign observer is a bit nonplussed faced with this institutional structure.

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If I talked about it a little today, it is because in the heavy program facing the European Union, next to the implementation of the Economic Monetary Union, is the broadening, the necessity of defining the political and institutional framework for an Europe that has 15 members today but may have 26 or even 30 tomorrow.

Those are the three main areas of work facing Europe today. I must add that there is a fourth one that interests you greatly. It is another aspect of the implementation of the Maastricht Treaty, on foreign policy and common security. From that point of view there has not been much progress and I may have the opportunity, if you are interested, to explain why. You may know that since the speed-over effect has made Europe move forward since 1985, since the implementation of the Single Market, then of the Single European Act, then of the financial constitution that allowed the implementation of the new policies under the Single Market and then the Economic Monetary Union. Some said yes to the Economic Monetary Union, but under the condition that there be a political Europe. To translate this political Europe into the relevant chapters of the Maastricht Treaty, they inserted the beginnings of a definition of European citizenship, clauses that would ensure the security of all citizens and finally the famous foreign policy and common security clauses that are slow to see the light of day.

As for the Economic Monetary Union, observers looked on with a certain amount of admiration as 11 member nations were able to meet the treaty's criteria, i.e. to clean up their finances and reduce their public debt when conditions were not favourable in Europe. Some of us feared that the persistence of significant unemployment and the weakness in growth provide either political or social arguments to those who consider such a situation unsatisfactory. Such was not the case and some countries such as Italy have made an unexpected, almost miraculous rebound. Therefore the Economic Monetary Union will see the day. I believe we will have to save the conditions under which it can succeed for the question period.

The second big problem is widening. We have to welcome, and we want and are happy to welcome, because it is the European reunion, 10 countries from Eastern and Central Europe that have been separated from us by a tragic decree from history. Their entry into the European Union creates many problems.

The first is the problem of numbers. How do we live, decide and act at 26?

Then there is a political problem. In the union, we can only accept countries that have a pluralist democracy and respect human rights, whose economy is open to the outside and whose economic and financial legislation is in accord with the main rules that make a united market work. In addition, these countries are late in terms of economic development compared to the European Union. To give you two numbers, if the average European development is 100, the average of the 10 countries applying is 30, in other words less than a third of the development level of countries already members of the European Union. You will therefore understand that a transition period of pre-membership was useful, necessary and indispensable. In fact, since 1990, we have started the PHARE programs to help these countries and we will put in more and more of the necessary human financial resources.

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The third question is that of constitutional reform, of which ambassador Juneau spoke briefly. How do we make this union of 26 work when already, at 15, we say it is too bureaucratic, not efficient enough, not transparent enough and lacking in democratic responsibility? I must say quite honestly to our Canadian friends that even if we had stayed at 15, an adjustment and a reform of our institutions were necessary, a fortiori if we are 26.

This question is so complex that the heads of governments are considering asking a think tank to clear the way so that they can see more clearly in a complex process that goes from the preparation of the decision to its implementation, including the decision-making process itself. The entire process must be reviewed so that everyone understands, from the citizens of the European Union, but also the partners in the European Union, the logic of this or that decision or behaviour. That is why this decision is extraordinarily complex and I believe it will always be one of the most difficult to deal with.

Europe is currently at a crossroads, between the optimists that believe that the Economic Monetary Union is not only the crowning of economic integration but will also be the launching point of a political Europe—in other words, in fact always the gear for the launching of a strong federal institution, such as the Central European Bank, that will not only create the necessity for a political power—and that those who think that it is not automatic and that politics must be treated as such, especially since European construction has now penetrated into the lives of citizens. There is not a single European to whom we do not speak to one day or another, who either in his or her professional or private life, or in his or her life as a consumer, about the legislation or the European constraints. Politics is therefore present, and politics is still the art of explaining to the people, of asking for an opinion and then getting them to share common objectives. This democratic deficit therefore exists.

The other crossroad is between two concepts of Europe, and Europe has not chosen. One is Europe space, which means that all that we can do when we are 26 or 30 strong, is to have a vast economic space based on the free movement of goods, services, capital and, we hope, people—which is always more difficult—accompanied by a few flanking policies and no more. The other, which I would call Europe power, if I may be excused for summarizing, is a view of political men and women or of countries who want to come out of the political decline that has affected it since the War of 1914-18 and rediscover not only the ability to defend its interest but also to spread its values and to contribute to the organization of the world of tomorrow, which, as we all know, given globalization and interdependencies, will have to find new rules, different rules than those that lead to the creation of the United Nations and the institutions of Bretton Woods.

That is the choice that will underlie the political institutional framework that Europeans will finally choose. It is the question that scares Europeans the most, because they know that on that point, there is no reconciliation of viewpoints, quite the contrary.

That, quite frankly, Mr. Chairman, is what I wanted to tell you about the deceptions brought to the point of view of foreign policy and common security, the extraordinary qualitative leap represented by the Economic Monetary Union, our enthusiasm to reunite Europe, the two strong Europes having a common history, diverse but convergent cultures and about the political choice behind those institutions. Thank you very much, Mr. Chairman.

The Chairman: Thank you very much, Mr. Chairman.

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[English]

I think, members, we should keep our questions to five minutes. Mr. Delors is only able to stay here until 3.15, as I understand it, so it gives us 35 minutes. We may be able to get a couple of tours in if we do five minutes each.

Mr. Mills.

Mr. Bob Mills (Red Deer, Ref.): I have a fairly diverse range of questions. It might be easiest if I simply ask three or four questions, and then maybe you can kind of put those together, if that's all right.

First of all, out of the G-8 summit that was just held, we seem to see quite a resistance by the European Union members to enact any sanctions or cooperate very much in terms of the situation with India, Pakistan, and China. I wondered about the European Union's perspective in terms of the reasons behind that.

Second, some North Americans and western Canadians see the European Union as a group where a highly subsidized commodity is put on the market and is a real competition to the North American farmer, as with oats right now, for example, and I'm sure it happens in other areas. I wonder about the level of cooperation possible due to things like that. Again, I don't expect you to get into the agricultural subsidy issue, but how can we answer our constituents about that kind of situation?

And then I have kind of a general overall question. As someone who's been interested in history for a long time, and European history, I suppose, particularly through school, I wonder how it's possible for a group of such diversified, nationalistic people from the past to actually work together to have an economic union. I can sort of understand that, perhaps. Then you talk about a political union, and then possibly of a security and foreign affairs component. I guess I'm just baffled about how that's possible—to maintain your nationalism and still be part of that one-government, one-system kind of thing. I just don't know how that's possible.

The Chairman: You have five minutes. You'd better stop there.

Mr. Bob Mills: Yes. Now you can answer that in two minutes.

[Translation]

Mr. Jacques Delors: As for your first question, honorable member, it meets with the difficulty of having a common foreign policy.

You have been struck by the examples of China, Pakistan and other countries. However, for traditional and geopolitical reasons, our 15 countries do not have convergent points of view. That explains why a common foreign policy has difficulty getting off the ground. They often reach a common position, which is expressed as a wish, but when it comes to moving from a common position to sanctions, the differences between the member countries surface, or it is a question of opportunity. In short, this only illustrates the fact that the Economic Monetary Union got off the ground far more quickly than foreign policy or common security.

On your second question regarding agriculture, the two agricultures are different. Therefore we cannot ask many European countries, including Germany and France, to adopt the American or Canadian agricultural policies. For us there are problems related to fighting desert encroachment, to our concern about encouraging rural development and a certain equilibrium between city and country.

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We are simply trying to find a solution that does not translate into unfair competition from an export point of view. However, outside of exports, we want to remain the masters of our destiny and be able and keep our small farmers in the country because they are essential to maintaining our land and to maintain a balance in countries such as France that have only 100 inhabitants per square kilometre and that would therefore be threatened if we adopted an American-style policy. One-fourth of the French territory would be threatened by depopulation. However, we recognize that in order to do this we have to find a coherent solution regarding exports. We started with the Uruguay Round and we are prepared to continue in this vein. Quite simply, it is very difficult. For example, I was explaining to an American President, a number of years ago, that my grandfather was a farmer. He had five hectares. That's the measure in Canada also, isn't it?

Mr. Jean-Pierre Juneau: Yes.

Mr. Jacques Delors: Good. He had five hectares and seven children. I was explaining to him what follows, that it was necessary for one of the children to keep the farm, etc. That American President told me: "But five hectare, that's smaller than my garden". That is a joking illustration of differing but understandable approaches.

We also have these problems because in the East-German territories, where property was collectively held under the Communist regime, there are properties of 2,000 hectares. The Germans would like us to provide help to maintain these very large properties. We say that there must be a ceiling on the help and that it must be aimed at maintenance agriculture and the producers of specific products, but no more.

As for your third question, which is quite broad, I believe that European countries suffer from two ills. On the one hand, citizens are less patriotic than when their country was threatened. It is a simple remark but one that everyone can understand. On the other hand, democracy has faded because of the power of the media and of polls—in France. There are polls every day—and also because of globalization since those who are responsible for our countries, whether they be politicians, economists or union leaders, think in global terms—how could they do otherwise—whereas citizens think in local terms. And, of course, demagogues who show globalization to be evil have a field day.

Therefore, to resolve the issue of reconciling the European Union's progress and maintaining national vitality, we have to attack the internal ills of democracy and take precautions on a European scale. There, obviously, there are differing points of view. I will only give you mine.

For me, the federal approach is technically the best because it allows citizens to know who does what, who is responsible for this issue and who is responsible for that issue. Up to now, the fact that Europe is building itself has meant that we have been talking of Education Europe and Culture Europe. That makes no sense to me. Personally, if I had to design the constitution of Europe tomorrow, I would say that health, social security, education and culture belong to the countries and that ministers of education can get together to exchange ideas, talk about their good practices, but no more. So for me, the federal approach is the best.

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Unfortunately, the terms "federalism", "federation" or even "federal approach" scares people in Great Britain, for historical reasons, and in France where there is a battle between the federalists on one side and intergovernmentalists on the other. So today we can't use that word; that's too bad. We cannot have a quiet, scientific discussion. It's a word that is considered vulgar in a way. Nevertheless, we will have to talk about it again some day if we want to talk about institutional techniques that allow for both efficiency and the strengthening of democratic responsibility.

The Chairman: Thank you very much.

Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): Thank you very much, Mr. Delors, for those very enriching words that allow us to share you knowledge and learn a lot.

I will ask my questions quickly because I am sure the answers will be very interesting.

I would first like to ask you about the Multilateral Investment Agreement. You expressed some opinions about that at the Montreal summit. The Canadian government and we, the Bloc Québécois, agree with delaying this multilateral agreement sponsored by the World Trade Organization. I would like to hear you talk about that. I know that you are opposed to the agreement in the current context, but what improvements would you propose so that we can agree to it?

As for my second question, I am convinced that you have a lot of experience and that I will not put you ill at ease if I talk to you about the Canadian political situation between Quebec and Canada, but I raise it because we talk very much about large political structures. We sovereignists often have it shoved under our noses that our project is somewhat paradoxical in an era of large political aggregates such as the European Union. But it is useful to recall that such aggregates are made up of sovereign states that decide together to share. Allow me to quote what you said at the beginning of our discussion, when you spoke of "sovereign countries that share the exercise of part of their sovereignty"

In your view, would there not be reason for Quebec and Canada to go and study your political reality, perhaps not to copy it, but to be inspired by it in order to solve our current problems, and to go and study these exchanges between sovereign countries?

My third question is on the free trade zones that seem to be increasing more and more. There has been talk of a transatlantic free trade zone between the European Union and the United States. I know there have been problems and that there is to be a meeting with some members of the Council of Europe here, in the fall, about a Canada-European Union free trade zone. I would like to hear you speak about that.

My fourth and last question, if you have time to answer it, is about the role of parliamentarians in this era of globalization. You have talked about the role of the media and the role of the economy. We simple parliamentarians, what should be our role in this era of globalization? Thank you.

The Chairman: I would ask you to answer in one minute, Mr. Delors.

Mr. Jacques Delors: In four minutes.

Mr. Benoît Sauvageau: One minute per question.

Mr. Jacques Delors: In regards to the MIA, I am critical of both the methodology and the substance. I am critical of the methodology because the discussions were held in secret and did not even allow people with a certain economic and political competence to understand what was going on. I am critical of the substance because although there can be free trade of goods and services between countries of unequal power, we must be careful, in the matter of investments, to avoid creating oligopolistic solutions that would allow one power to impose its views. This is particularly true in the cultural area because I believe we are moving towards a more and more interdependent world and towards greater aggregates—which is already a great transition with the second question—, each natural community must maintain its roots. Men and women in the 21st century will still need to be rooted, to know where they come from, to share with others from the same roots a certain culture and certain traditions; that will not prevent, on the other hand, an attempt to understand what is going on at a higher level. One cannot make an ordinary citizen a sort of virtual citizen of the global world.

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This brings me to your second question, which can also be a question of words. Personally, to try and dissipate the fear of those who fear a loss of sovereignty or the disappearance of a nation, I use the desirable formula of "federation of nation- states", which in my mind means that the French remain French while having a sense of belonging to a collective adventure called Europe and knowing who does what. I always come back to this point because I think that regional groupings are risk-absorbers for globalization and that to be alone, France with its 60 million inhabitants, Portugal with its 8 million or Quebec with its 6 or 7 million, would not be viable. The maneuvering room has become too narrow. Hence the necessity for groupings. Some already exist. It's yours, and perhaps it needs to be adjusted. Some are being created. It's ours. Believe me, the smaller the country's population, the more this is true.

Your third question was on the free trade zone between the United States and the European Union. As a citizen, I will tell you that I am against this initiative because there is so much ambiguity in the relationships between the United States and the European Union that there needs to be a political discussion before anything else. If I had the power, I would tell the Americans: "What are our common objectives and what are the values we want to defend in the world? What are the criteria for a possible intervention in a conflict or to protect a minority? What is the role of Europe in the Atlantic Alliance and its defence? In my opinion, these questions are more important than the creation of a great transatlantic market. The great transatlantic market is flawed because it never raises the political issue with the Americans and secondly, on an intellectual level, it makes us believe that free trade solves problems that are not economic but political. Finally, if I had to make a proposal to the Americans, according to my conduct when I was Chairman of the Commission, I would have made it to Canada at the same time.

Your fourth question was on the role of parliamentarians. It is essential. I have indicated the distance between the global and the local. What's in the middle? The parliamentarians and the large union and professional organizations. If we reduce the role of parliamentarians and other mediators because of the media, then democracy is in peril because we will have democracy by opinion, which is subject to the whims of opinion. That's why I believe the role of Parliament is more and more important to express the concerns and needs of citizens, and, in return, to explain the facts to citizens so that they become more interested in moving towards participatory democracy.

I say that even more because I believe that in our country Parliament does not play the role I wish it would. The role of parliamentarians is indispensable. They are elected, they must be accountable, but they must also explain. They are teachers, teachers of democracy.

The Chairman: Thank you.

Mr. Harvey.

Mr. André Harvey (Chicoutimi, PC): Thank you very much, Mr. Delors, for having taken a few minutes to discuss with us these questions that are important both for Europe and for us.

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You said that Europe was a great economic power but a midget politically. However, your efforts have been focused primarily on economic integration and work in the political arena comes later. I would like your point of view on this priority which seems to be somewhat contradictory with your statement.

I would also like to ask you if it is possible, in the mid- term, during the coming months or years, to arrive at an agreement that respects what you consider national jurisdictions, among others the environment, health, culture, and citizen's rights in general. What kind of timeframe do you foresee?

Following up on my colleague Mr. Sauvageau's question, I would like to come back to the fact that Europe is a federation of nation- states. To my mind, sovereignty is very relative. In that spirit, given the world that is to come, should we attach as much importance to our national sovereignties as to political and economic integration if we want to preserve peace and defend the interests of our countrymen? Thank you.

Mr. Jacques Delors: In fact, the answer to the first question is fairly simple. For 50 years the project of the fathers of Europe has always been political. Just look at the statements of Jean Monnet, Robert Schuman, Chancellor Adenauer, Gasperi and Spaak. They had three objectives: no more war between us, ever, allow Europe to catch up economically vis-à-vis the United States and give Europe the means to keep a certain place in the world. Those were their objectives, which are all political. They tried many times to advance them through politics; they always failed. In 1954, they proposed a European defence community that was refused by France. In 1962, France's five partners proposed a political Europe of a federal nature. In 1963, France proposed, under the Fouchet plan, an organization that was of intergovernmental inspiration; the others refused.

We therefore arrived at a point where only the economy allowed us to put forth the idea, perhaps false, that the economy would bring along the politics. That's what Mrs. Thatcher was criticizing when she said: "You are trying to bring in Europe through the back door". That was it. It is true that we are now at a time when the economic wheels are inevitably meshing with the political ones. Politics can be built because the power or the strength of the economic interests requires politics—that may be the case with the Economic Monetary Union—, or it may lead to a perception that we have common interests to defend in matters of foreign policy. That is the perception that does not exist yet. That is why I spoke of an economic giant and a political midget.

The clauses of the treaty exist and are insufficient, but it doesn't exist yet. As for the rest, some sorting needs to be done to separate European and national areas of jurisdiction, and what we call shared jurisdiction in the federal states. I favour limiting to Europe the area of shared jurisdiction, otherwise there will be endless disputes. Some clarification work will need to be done.

For example the Maastricht Treaty has a chapter on health. A not very competent person might think that health is Europe; that's absurd. That does not stop us from cooperating on health. For example, I took the initiative of asking a group of oncologists to study the causes and dissemination of cancer throughout Europe. Afterwards, that was very useful to each government. We did not take any measures, except one: we proposed that tobacco advertising be banned. The other measures were national.

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On the other hand, the environment knows no frontiers. We cannot tolerate that one of the member countries not take the same precautions as the others.

Finally, you tell me that sovereignty is relative. You are quite right: sovereignty is relative, but it is a question of words. If the European construct did not exist, a Frenchman would realize that France's maneuvering room was limited in the world as it exists. So there is nominal sovereignty and real sovereignty.

If therefore, in certain areas, by transferring sovereignty to Europe, or better—I prefer this way of saying it—by exercising common sovereignty, we find that manoeuvering room again, that's a good thing. But this must not go hand in hand with a sense of detachment from our sense of belonging to our country, which is affective, historical and rooted. So one can therefore accept sovereignty transfers and be attached to one's country. I believe that that is what is difficult to explain to Europeans and to everyone. It's an almost impossible conciliation, but it has to be done.

The Chairman: Thank you very much.

[English]

Perhaps I could pick up a couple of points raised by my colleagues, Mr. Delors.

When some of us were in Europe recently, we met with Mr. Tietmayer, and he told us that in his view, like Mrs. Thatcher's view of Europe by the back door, the monetary union would in fact create the conditions that would require the political integration and the institutional renovation you have described as being necessary. Do you believe that to be the case—that in fact the monetary union will require the political integration to follow at a faster rate than it otherwise would have? It was his suggestion that the Germans were pushing for the monetary union because they believed it would bring with it the political institutional changes that were necessary to adapt to that. That would be my first question.

My second question is when we were at the WTO recently, Mr. Castro spoke, and spoke about the fact that the United States, by virtue of the single universal currency, dominates world markets and perhaps enriches itself at the expense of other countries. He therefore ended part of his speech by saying if Europe creates the European currency as an alternative to the dollar, vive l'Euro.

Do you see the European currency unit as an alternative world currency to the dollar? Do you see that as perhaps a problem in terms of fragmenting marketplaces, if in fact that takes place?

My third question would be more philosophical, following up on the question of Mr. Sauvageau about the role of parliamentarians. Again at the WTO, there was a small movement of NGOs to suggest that ultimately the WTO will require a parliamentary structure, building on the model of the European Union Parliament, on the grounds that without it there would be a democratic deficit in the WTO that will be one you had to address in the process of economic union in Europe.

From your European experience, for a group as large as the GATT, with about 140 members, and when we bring in China and Russia, and with all its problems—do you think there is any likelihood of a parliamentary assembly having any effect, if one were to work on that notion?

[Translation]

Mr. Jacques Delors: From a strictly economic point of view, we could have a single market with the four freedoms—circulation, people, goods and services, and capital—without having a single currency. But if we do not have a single currency, there are two hypotheses. Either there is nothing, and then monetary dumping is a factor in a zone where all exchange obstacles have been eliminated. We had an example in 1992. It was a bad time for us. The pound sterling, the Italian lira and the Spanish peseta were devalued. The result was significant changes in foreign trade.

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As a result, some believe that to perfect a single market we need a single currency. There is another solution, mind you, that has been useful to us: it's the creation of a European monetary system, what I would call a relatively fixed exchange zone since the currencies could vary within a range of 2.5 per cent on each side of par.

So in terms of orderly conditions for a single market, the best solution is a single currency, then a new European monetary system and finally the total freedom of floating exchange rates, but then it becomes very difficult to maintain a single market. There can be retaliatory measures or protestations from a country. That is the economic aspect of the Economic Monetary Union.

However, as you have underlined, the creation of the Economic Monetary Union had a strong political motivation. What was it? Since we were forced to build Europe through the economy, the Economic Monetary Union, as I said earlier, was the crowning achievement of economic integration, but after a step forward in politics. The Economic Monetary Union is based on the one hand on a federal banking system: a central European bank at the top and national banks, and in front economic union, in other words the necessary coordination of economic policies.

The treaty says that each year the European Council, the meeting of heads of state and of government, decides the broad common economic orientations. What are we doing when we do that, if not politics? So there is politics in the noble sense of the word in the Economic Monetary Union.

To be quite honest, I must add that Europe is not easy to build and that it is obvious that the fall of the Berlin Wall has made Germany's partners fearful that a reunified Germany would split away from Europe. From that point of view, in the years 1989-91, the Economic Monetary Union seemed to the French, the Italians and Benelux a means of linking Germany to Europe permanently. So politics played a role twice, in the conception of the project itself and in a circumstantial manner to push the project at a given moment in history.

Second question: will the euro become an alternative to the dollar? Certainly. Already, in fact, the Bank of China has announced that it will convert part of its dollar reserves into euros. The euro is called upon to become a great reserve currency, a currency of payment more important that the Deutsche Mark is today. If memory serves, dollar transactions account for about 50 per cent of international trade and Deutsche Mark transactions for 15 per cent. We can therefore expect that the euro will one day represent 30 to 40 per cent of world trade. And finally—and this will grow—a great investment currency. But what Europeans have to know is that the day the euro moves from the status of a single currency to a reserve currency, that means there are obligations. As a result, there will have to be constant arbitration between the external and internal impacts of monetary policy. As a result, the benign neglect of the dollar will be over. The dollar will also have to take that into account. At the moment, we are suffering the after-effects on the dollar without being able to do anything, especially since the United States budget is once again in a state of quasi-equilibrium reduces the pressure we can put on the United States, for example by not subscribing to Treasury Bills. Therefore that is no longer the case today.

But Europeans have to know that there will be difficult choices to make between measures that will favour world monetary stability but that might—for example, if there is an increase in interest rates—be contrary to Europe's domestic interests. But we cannot exercise a bit of leadership without having both the advantages and inconveniences.

• 1615

Finally, the third question. If I understood correctly, you believe that in tomorrow's world there will be forms of expression other than the traditional ones and that they will have to be organized one way or another and that therefore not everything will be a question of power, that civil society can be made a part of it. An average country like Canada has been able to take a positive initiative with anti-personnel mines because it had the support of public opinion. Personally, I signed petitions, etc.

I agree that to avoid the domination of a power and of money you need to diversify the means of mobilizing public opinion and the non-governmental organizations to try to get people to evolve towards a better world. I believe it is an enormous field opening before us and that we will have to deal with, right now, by thinking of the reforming the great international institutions.

The Chairman: Thank you. I believe we have three minutes left. Mrs. Debien, I yield the floor to you for these few minutes.

Mr. Jacques Delors: You are disadvantaged there.

Mrs. Maud Debien (Laval East, BQ): Mr. Delors, you just spoke to us about the advantages of the euro. Many analysts wonder about what is called the asymmetric shock and the macro-economic costs that could result from it. It also seems that the 15 countries have not foreseen mechanisms to prevent that shock. I would like to hear your opinion about that.

Mr. Jacques Delors: It is obvious that the lasting success of the Economic Monetary Union depends on the ability of the Union as such to face up to either a symmetric shock that affects all countries simultaneously, such as a brutal recession, or an asymmetric shock, in other words a country that, given its economic structures, is particularly affected, or a country facing a serious social crisis.

The treaty contains clauses that allow the European Commission to intervene in such cases and to ask the Committee of Ministers to take the necessary measures. Will these measures, which are part of the treaty, be sufficient? I do not believe so. But when something happens, we will see. I believe that one day we will move to an increase in the European budget, which currently has a ceiling of 1.27 per cent of the gross national product, or we will round it off with a punctual reserve or through the possibility of borrowing to help that country, or by increasing the budget.

But the question will come up. I do not agree with the euro-optimists that the convergence of the economies is such that an asymmetric shock is no longer possible. I don't believe it. I gave you the example of a social crisis in a country: the economy is paralyzed, three weeks of strike. Do we say to that country: "Are you badly managed"? No, because if they have a fever we will catch it too.

So interdependent solidarity requires that we intervene in one way or another. I believe that slowly we will have to strengthen the economic pot of the Economic Monetary Union.

Mrs. Maud Debien: If I understand you correctly, we will be able to resolve this kind of crisis through visible or invisible transfer payments to the country in crisis.

Mr. Jacques Delors: There can be many ways, but in general it ends with the possibility of either increasing temporarily the budget deficit of that particular country beyond existing criteria or by the possibility of giving that country the necessary resources to face a difficult time. I believe solidarity exists. It existed before, when I was Minister of Finance and had inherited an inflation rate of 19 per cent. I had to try to reduce that inflation rate. But at one time people looked at that inflation rate and the fund was subject to speculation. The European Community came to our help with a $3 billion loan, that allowed us to implement our policy and to demonstrate the credibility of that policy. So that already existed then. Unfortunately, that does not exist in Asia and that explains the aggravation of the Asiatic crisis.

• 1620

The Chairman: Thank you very much. It is exactly 2:20 p.m. Speaking for the members of the committee, I thank you once again for meeting us, Mr. Delors. I remember the memoirs of Jean Monnet where he said: "We are not coalescing states we are uniting people".

I believe you have are the one who has lived a great deal of this adventure and I thank you for coming and sharing your opinions and your experience with us today.

The meeting is adjourned. Our next meeting will start tomorrow morning at 9 a.m.