Lord Leon Brittan says his interest in politics began as a 10-year-old boy in England. “In 1949, I went to Normandy, and it was dire,” he has been quoted as saying. “There were beat-up Citroens, stinking loos, and no sanitation. Britain was miles ahead. Then I returned in the ’50s, and we’d been leapfrogged. I thought, “We won the war. What’s happened to [Britain]? I wanted to do something about it.”

In the interview that follows, Lord Brittan draws on his broad experience in international politics to argue that we should all remain optimistic about the future of free trade and globalization, despite the terrorist attacks that have created so much uncertainty and set so many nerves on edge. He says that Europe will soon develop a security force that, while not quite an army, will take on many international peacekeeping roles. He also lays out a vision of how European economies will continue to integrate with each other. He then makes some shrewd guesses about where the opportunities for business will be.
 

CONTEXT: There has been considerable concern that the terrorist attacks on Sept. 11 may act as a drag on the movement toward a more integrated, international economy. The rationale is that companies will have to spend more on security and backup plans. Employees will spend more time idling in airports when traveling. And companies may be more nervous about doing business in foreign countries.

How big a setback do you think Sept. 11 was?

LORD LEON BRITTAN: I don’t think Sept. 11 is going to be a major setback at all. In some respects, I think the contrary.

That’s because the shock of Sept. 11 was certainly one of the factors that led to the launch of the Doha round of trade negotiations. This round will let countries pick up where they left off when talks got stuck in Seattle in 1999.

The talks in Seattle were disrupted by demonstrations, but I think the groups doing the protesting have taken a bit of a knock as a result of Sept. 11. Whether they’ll recover or whether the change is permanent, I wouldn’t like to say. But, for the moment, their influence has diminished.

There are perfectly legitimate points to be made in relationship to the environment, just as there are perfectly sensible points about the need to ensure that developing countries have a stake in the world trading system. Those points should now get a reasonable hearing. But the extreme groups are discredited because we’ve seen what extremism can lead to.

In the past, the propensity was for regional agreements to proliferate. If you couldn’t lower trade barriers globally, you did it regionally. That was healthy, but a broader, multilateral agreement on trade is key, and we now have a reasonable chance of achieving that.

It’s too early to speculate on precisely what will come from these talks, but there is a very comprehensive agenda. I hope there will be extensive liberalization in trade in goods and services as well as an agreement on investment and competition.

CONTEXT: Looking at Europe in particular, how do you see the unification of the economies progressing?

LORD BRITTAN: One has to remember how it all started. After World War II, a small number of visionaries were determined to ensure that war, in particular war between France and Germany, could never occur again. They knew from the experience between the First and Second World Wars, when there were any number of treaties and other agreements, that just making a political agreement wouldn’t work. They arrived at the idea of yoking together the economies, which started with coal and steel and then broadened out. The plan was a brilliant success politically and a brilliant success economically.

Success led to greater ambition. Some had the ambition of creating a United States of Europe. A Common Market was created, and this led to a common currency, the euro, plus a focus on social issues—the environment, opportunities for women, all sorts of things. There also was to be the beginning of a Europe-wide security policy.

I don’t think you’re going to see a European army in the sense that there’s a German army or a French army or an American army, but I hope you will see a rapid reaction force that will be able to take on certain tasks that the U.S., for example, does not want to do. We ought to be able for certain tasks to look after ourselves in Europe. Obviously, each country continues to have its particular interests, but there has tended to be a more common approach to problems in most parts of the world.

Now we’re the victims of our success. We face this huge challenge of taking in the former Communist countries, and other ones such as Malta and Cyprus.

All the efforts will culminate in the new treaty-making conference in 2004.

CONTEXT: Do you see the U.K. participating in the euro?

LORD BRITTAN: I very much hope so. If Britain does not join, Britain will be increasingly isolated from the rest of Europe, will be a semidetached member of the European Union, and will lose considerable economic benefits.

At the moment, if you follow the polls, there’s a majority against it, but I think that’s a soft majority. Given leadership and a vigorous campaign, people are capable of being persuaded of the merits of the euro.

CONTEXT: Where do you see new business opportunities as Europe becomes more unified?

LORD BRITTAN: Because trade barriers have steadily come down, I can’t see totally new areas where barriers can come down and new things can happen. It’s really going to be more of the same, but there is still plenty of room for going further down the old liberalization route.

The one exception is the liberalization of energy. We have liberalized telecommunications, we’ve liberalized air transport, but energy is still only just beginning to be freed of heavy government control. So that’s a sector where there are enormous opportunities.

There are also opportunities in the financial-services sector, where we have taken considerable steps toward liberalization but where there is a new thrust, the Financial Services Action Plan, which is designed to establish a fully integrated financial-services market by 2005 and which is being given top priority. There will be opportunities as well in developing e-commerce.

CONTEXT: There was a lot of speculation three years ago about how there would be a lot of consolidation across national borders, in particular among financial-services companies. We’ve seen some of that. Do you think we’re likely to see quite a bit more?

LORD BRITTAN: We’ve seen a lot of corporate restructuring since the creation of the euro. Companies thinking about buying a business in another euro-zone country no longer need to worry about exchange rates. If you imagine what it would be like for New York and Connecticut to have different currencies, you can imagine the outdated complexities created under the old system.

Removing that exchange-rate risk has also led to considerable restructuring within companies.

The restructuring, however, has quite a long way to go.

We’re also seeing indirect consequences of the euro. For instance, for the past 16 or so years the Germans have been trying to remove the tax hit that comes when a company disposes of a holding it has in another. They’ve finally succeeded. Therefore, there will be a lot of companies getting rid of holdings that they have no real need to own.

Phase One of the euro was financial restructuring: instituting sound financial policies that ended high interest rates and high inflation. That phase meant a revolution in public finances in countries such as Italy and Spain and Greece and Portugal. The alternative drugs have been removed: the drug of devaluation, the drug of high budget deficits. Those are not available to countries anymore. They have to face up to their real problems.

Phase Two is now this whole business of corporate restructuring.

Phase Three is going to be the restructuring of other aspects of the European economy, most notably increasing the flexibility that companies have in dealing with their labor forces. There are all kinds of pressures because of the transparency that the common currency creates. You can see much more clearly what’s happening in other countries. If one country finds itself in a less advantageous position, the pressures to change will be quite considerable. I do not think it will be enforced change, and there’s a difference between competition and harmonization—while countries will compete with each other, they won’t all adopt the same policies. Nor should they.

CONTEXT: Do you believe the euro is living up to expectations?

LORD BRITTAN: Very much so. Its implementation was heralded as being the greatest single task of a civilian kind undertaken in Europe since the Second World War. I think that’s true. I also think it has been a formidable success.

I appreciate that all the more, coming from England, where there were so many doomsayers who thought the euro would be a disaster. Even more remarkable than the technical aspects of the euro’s implementation has been the public acceptance of it, even in countries that weren’t quite so enthusiastic. Very quickly, people have really become quite happy with it.