General Market

Report – Guidelines for the 2018 Budget – Section III – A8-0060/2017 – Committee on Budgets

on general guidelines for the preparation of the 2018 budget, Section III – Commission

(2016/2323(BUD))

The European Parliament,

–  having regard to Article 314 of the Treaty on the Functioning of the European Union,

–  having regard to Article 106a of the Treaty establishing the European Atomic Energy Community,

–  having regard to Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020(1),

–  having regard to the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management(2) (hereinafter ‘the Interinstitutional Agreement’),

–  having regard to Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002(3),

–  having regard to Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union(4),

–  having regard to the general budget of the European Union for the financial year 2017(5) and the joint statements agreed between Parliament, the Council and the Commission annexed thereto,

–  having regard to the Council conclusions of 21 February 2017 on the 2018 budget guidelines (6522/2017),

–  having regard to Rule 86a of its Rules of Procedure,

–  having regard to the report of the Committee on Budgets (A8-0060/2017),

A.  whereas 2018 will mark the fifth year of the 2014-2020 multiannual financial framework (MFF);

B.  whereas the internal economic and social context as well as external challenges and political uncertainties are likely to uphold the pressure on the 2018 EU budget;

C.  whereas the budgetary reaction to immediate challenges and crises must go hand in hand with sustainable answers that invest in the Union’s common future;

A budget for sustainable growth, jobs and security

1.  Welcomes the important role played by the EU budget in delivering concrete answers to the challenges the EU is facing; stresses that decent, quality and stable jobs, particularly for young people, economic growth and socio-economic convergence, migration, security and tackling populism, as well as climate change, are the main concerns at EU level and that the EU budget remains part of the solution to these issues; stresses that solidarity must remain an underlying principle of the EU budget; underlines that only a strong and targeted EU budget with genuine European added value will benefit all Member States and EU citizens alike; expects the Commission to put forward a draft 2018 budget that enables the EU to continue to generate prosperity through growth and jobs and ensures the safety of its citizens;

2.  Believes that, while maintaining budget discipline, the EU budget must be equipped with the tools to enable it to respond to multiple crises simultaneously, a certain level of flexibility thus being required; is of the opinion that, while growth and jobs continue to remain the core priorities of the EU budget, obtaining sustainable progress and development in these fields has to be accomplished in parallel to addressing EU citizens’ concerns regarding safety and security; reiterates its call for thematic concentration when setting priorities for the 2018 EU budget;

Research, infrastructure and SMEs as key enablers of growth and jobs

3.  Underlines that enhancing the competitiveness of the EU economy, infrastructure, well-funded research, support for developing skills and the continued commitment of the EU to strengthening investment are key to ensuring economic growth and job creation; believes that the creation of socially and environmentally sustainable and well-paid jobs must be one of the main priorities of the EU budget; argues that jobs are created mainly by the private sector, and that adequate budgetary support therefore needs to be devoted to boosting investment in both private and public sectors, with special attention to SMEs; consequently underlines the importance of Heading 1a, which delivers real added value for European citizens and businesses, and calls for an appropriate level of funding for this heading to be ensured;

4.  Stresses that investment in research and innovation, including support for start-ups, represents a precondition for achieving genuine competitiveness in the EU and for ensuring an innovative and competitive EU economy on a global level; regrets the fact that, as a result of an inadequate EU funding in the field of research and innovation there is an alarmingly low success rate for applications, and that several high-quality projects in the field of research and innovation are being left without EU funding; notes that many interested parties, including SMEs, are being deterred from submitting Horizon 2020 project proposals; calls in this respect for an appropriate level of appropriations to be ensured for Horizon 2020, while continuing with its simplification agenda; underlines that an enhanced budget for Horizon 2020 should not be at the expense of other research programmes;

5.  Recognises the fact that SMEs remain the backbone of the European economy and will continue to play a decisive role in creating jobs and growth across the EU; considers also that SMEs are the main source of job creation and therefore need an appropriate access to finance; calls in this respect for COSME appropriations to be increased, taking into account the success of this programme; stresses the importance of strengthening the COSME programme in the new MFF in order to provide SMEs with more substantial support from the EU; believes that establishing synergies with other financial instruments would lead to better results;

6.  Strongly supports the further development and enhancement of interoperability of European infrastructure networks; considers that the financing of the Connecting Europe Facility (CEF) is vital to achieving these objectives, and calls on the Commission to ensure an appropriate level of funding in 2018;

7.  Underlines the important role and potential of the European Fund for Strategic Investments (EFSI) in reducing the investment gap which still exists in Europe, and recognises the positive results achieved so far; welcomes also the Commission proposal for extending the EFSI until 2020, which should aim to further improve its functioning, including application of the additionality principle and of geographical balance, for which further efforts are needed; underlines that the selection of projects financed through EFSI should be based on quality and demand-driven; welcomes the Commission’s intention to reinforce the role of the European Investment Advisory Hub in terms of providing more targeted local technical assistance across the EU and also to enhance geographical balance; also calls on the Commission to regularly analyse the added value of EFSI through impact assessment of the effects of the fund;

Education and youth employment – prerequisites for the success of the younger generation

8.  Considers education to be a prerequisite for sustainable, well-paid and stable jobs; underlines the importance of mobility as a means of enabling young Europeans to take advantage of people’s variety of skills while expanding opportunities for education, training and employment; welcomes in this respect the role played by Erasmus+ in facilitating the intra-European mobility of young students, apprentices and volunteers; believes that, especially in times of rising nationalism and populism, it is important to facilitate natural interaction between different European nations and cultures in order to enhance European consciousness and identity; calls, in this context, for the funding for the Erasmus+ programme to be further increased in 2018;

9.  Underlines that youth unemployment is one of the main concerns at European level, having a particularly high social impact, especially in the Union’s poorest regions, and that it puts at risk an entire generation of young Europeans, undermining long-term economic growth; stresses that, as part of the conciliation agreement for the 2017 EU budget, an allocation of EUR 500 million will be granted to the Youth Employment Initiative (YEI), through an amending budget in 2017; considers YEI to be a fundamental contribution to the Union’s priority objective of jobs and growth, and remains firmly committed to securing adequate funding for fighting youth unemployment and continuing YEI up to the end of the current MFF, while at the same time improving its functioning and implementation; stresses in this respect the importance of the EU Youth Strategy;

10.  Takes positive note of the proposal to launch an ‘18th Birthday Interrail Pass for Europe’; underlines that this project has the potential to boost European consciousness and identity; stresses, however, that the project should not be financed at the expense of other successful EU programmes, notably in the field of youth and culture, and should be as socially inclusive as possible and contain provisions for including residents of Europe’s peripheral islands; asks the Commission to assess the potential cost and funding sources of this initiative and put forward relevant proposals;

Traditional EU budget priorities as investment policies

11.  Strongly supports regional policy as one of the main investment instruments of the EU budget ensuring economic, social and territorial cohesion; underlines that this policy generates growth and jobs in all Member States; is concerned, however, at the unacceptable delays in implementation of operational programmes at EU level under the current MFF, which have led so far to lower investment that has failed to contribute sufficiently to growth and job creation or to reducing economic, social and territorial disparities within and between European regions; calls on the Commission to identify the causes of the delays and on the Member States to cooperate in order to tackle them, in particular so as to ensure that the designation of managing, auditing and certifying authorities is concluded and implementation is sharply accelerated;

12.  Recognises the importance of the European agricultural sector in maintaining food security and managing biodiversity in the EU; expresses its full support for the farmers affected by the Russian embargo, avian flu, the dairy sector crisis and the meat crisis; calls on the Commission, therefore, to continue to support farmers across Europe in coping with unexpected market volatility and in securing safe and quality food supplies; requests that suitable attention be paid to small-scale farming and fisheries;

Internal challenges

13.  Is convinced that, under the current circumstances, the EU budget has proven to be insufficient to deal with the effects of the migratory and refugee crisis and corresponding humanitarian challenges or with the challenges in the security area such as increasing international terrorism; underlines that, on this basis, a sustainable solution must be found to this issue, as it has been demonstrated by the repeated mobilisation of special instruments such as the flexibility instrument that the EU budget was not initially designed to address crises of such magnitude; points out that a coherent strategy for tackling the migratory and refugee crisis, including clear, measurable and comprehensible objectives, has to be adopted; recalls, however, that the need to mobilise supplementary means to face these challenges should not take precedence over other important Union policies, for example in the field of jobs and growth;

14.  Welcomes the role played by instruments such as the Internal Security Fund (ISF) and the Asylum, Migration and Integration Fund (AMIF) in addressing the effects of the migratory and refugee crisis and corresponding humanitarian challenges, and calls for adequate budgeting in the coming years for these funds; reiterates the importance of the principle of burden-sharing among Member States in financing the efforts needed to adequately provide for refugees; welcomes also the role of the EU agencies in the area of justice and home affairs, such as Europol, the European Border and Coast Guard, EASO, Eurojust, the Agency for Fundamental Rights and eu-LISA, and calls, in this context, for their mandate to be executed on the basis of enhanced budgeting and staffing; is convinced that the EU needs to invest more in the strengthening and the management of its borders, enhancing cooperation between law enforcement agencies and national authorities and fighting terrorism, radicalisation and serious and organised crime by improving integration measures and practices, ensuring the interoperability of information systems, and guaranteeing sound return operations for those not entitled to international protection while fully respecting the principle of non-refoulement;

15.  Underlines that the current budget of the ISF (approximately EUR 700 million in commitments) is not sufficient for tackling the security challenges stemming from international terrorism; calls, therefore, for reinforced financial resources for bringing the security infrastructure up to a more adequate and modern level;

16.  Recalls the importance of European agencies in ensuring the implementation of the European legislative priorities and thereby accomplishing EU policy objectives, such as those related to competitiveness, growth, employment and to managing the current migration and refugee crisis; insists, therefore, that adequate financial and human resources be provided for both administrative and operational expenditure in order to allow the agencies to fulfil their assigned tasks and deliver the best possible results; with regard to the increases in staffing and appropriations for agencies since the 2014 budget, underlines the fact that these are regarded as part of new policy developments and legislation which do not enter in the calculation of the 5 % staff reduction target; stresses, therefore, that the 2018 budget should not foresee any further reductions in the European agencies’ establishment plans beyond the 5 % agreed on for each institution and body of the European Union in the framework of the Interinstitutional Agreement;

17.  Strongly supports initiatives in the field of defence research aimed at encouraging better cooperation between Member States and achieving synergy effects in the area of defence; stresses, however, that this activity should be endowed with fresh resources, as it is a new political initiative with a significant impact on the EU budget; calls, moreover, for the exploration of all possibilities for the financing of a defence research programme with a dedicated budget within the next MFF; recalls that, while the provisions enshrined in the Treaties must be respected, strengthened cooperation in the field of defence is a necessary option in order to meet the security challenges that the EU is facing, which are generated by prolonged instability in the Union’s neighbourhood and uncertainty regarding the commitment of certain of the EU’s partners to the objectives of NATO; underlines, furthermore, the need for improved competitiveness and innovation in the European defence industry that can contribute to stimulating growth and job creation; calls on the Member States to ensure adequate budgeting in order to tackle external challenges in a more congruent way; takes note of the establishment of the European Defence Fund, with its research and capability windows;

18.  Underlines that the EU budget must support the fulfilment of the objectives of the Paris Agreement and the EU’s own long-term climate goals by achieving the 20 % climate spending target in the 2014-2020 MFF; notes with concern that the EU’s 2020 biodiversity targets will not be met without substantial additional efforts; stresses, therefore, the importance of mainstreaming biodiversity protection across the EU budget, with particular focus on the LIFE programme and the Natura 2000 network;

External challenges

19.  Reaffirms its conviction that in order to tackle the root causes of the current migratory and refugee crisis and the corresponding humanitarian challenges, the EU needs to step up its role through investment in the countries of origin of the migratory flows; calls on the Commission in this regard to design a roadmap to tackle the migratory crisis in an effective way; stresses that greater strategic adjustment of all instruments of development policy is needed to ensure steady economic and social development while not undermining the implementation of the existing external policies; notes that investment in infrastructure, housing, education and medical services and support for SMEs, with a particular focus on job creation, social protection and inclusion, are part of the solution for tackling the root causes of migration; welcomes, therefore, as part of the solution to these challenges, the External Investment Plan (EIP), as a coherent and coordinated framework for promoting investment in Africa and in the Neighbourhood countries, keeping in mind that it needs to be fully aligned with and contribute to the achievement of the Sustainable Development Goals; expects that the EIP will promote sustainable development without compromising human rights, climate change mitigation or good governance, and that transparent management of the European Fund for Sustainable Development and its projects will be ensured;

20.  Notes that the current trend on the Commission’s part to resort to satellite budgetary mechanisms such as the Facility for Refugees in Turkey, trust funds and other similar instruments has not proved a success in all cases; is concerned that the establishment of financial instruments outside the Union budget undermines the transparent management of the budget and hampers the right of Parliament to exercise effective scrutiny of expenditure; maintains, therefore, its position that the ad hoc external financial instruments which have emerged in recent years must be incorporated into the EU budget, with Parliament having full scrutiny over the implementation of these instruments; stresses, however, that these instruments should not be financed at the expense of other existing external instruments; takes note of the divergence between Member States’ promises and their actual contribution to these funds, and urges the Member States to stand by their promises to match the contributions of the EU;

21.  Underlines that one of the conditions for preserving stability and prosperity in the EU is a stable EU neighbourhood; calls on the Commission, therefore, to ensure that priority is given to investment in the EU Neighbourhood in order to support efforts to tackle the main issues that this area is facing, namely the migratory and refugee crisis and corresponding humanitarian challenges in the Southern Neighbourhood, and Russian aggression in the Eastern Neighbourhood; reiterates that supporting countries which are implementing association agreements with the EU is pivotal to facilitating political and economic reforms, but stresses that such support should apply as long as those countries meet the eligibility criteria, especially as regards the rule of law and enforcing democratic institutions;

Sufficient payment appropriations resulting in increased credibility for the EU

22.  Reiterates its previous calls for providing the EU budget with an adequate level of payment appropriations in order to allow it to fulfil its main purpose as an investment budget; is convinced that this role cannot be fulfilled if the EU fails to deliver on its commitments and thus endangers its credibility;

23.  Stresses that delays in the implementation of the 2014-2020 programmes under shared management led to a drop in payment claims for 2016 and 2017; is particularly concerned at the possible reconstitution of a backlog of unpaid bills towards the end of the current MFF period, and recalls the unprecedented level of EUR 24.7 billion reached at the end of 2014; welcomes the fact that the Commission, on the occasion of the MFF mid-term revision, provided for the first time a payment forecast until 2020, but stresses that this needs to be duly updated every year, in order to allow the budgetary authority to take the necessary measures in time;

24.  Underlines that, despite a final agreement on the MFF mid-term revision not yet having been reached, several positive elements of the revision that are currently under negotiation – notably in terms of increased flexibility – might prove to be instrumental in preventing and responding to a future payment crisis; believes that if the implementation of cohesion policy were to accelerate as anticipated the increased flexibility might be needed already next year, in order to ensure an adequate level of payment appropriations in the EU budget in response, and to avoid the accumulation of unpaid bills under cohesion policy at the end of the year;

25.  Reiterates its long-standing position that the payments of special instruments (the Flexibility Instrument, the EU Solidarity Fund, the European Globalisation Adjustment Fund and the Emergency Aid Reserve) must be counted over and above the MFF payment ceiling, as is the case for commitments; underlines, in the context of the ongoing MFF mid-term revision, the potential progress achieved on the issue of budgeting the payments of the MFF special instruments with the revision of the 2014 Contingency Margin decision, even if the matter was not unequivocally resolved;

Looking forward

26.  Underlines that according to the MFF regulation, the Commission will put forward by the end of 2017 its proposals for the post-2020 MFF, which should take into account the decision of the United Kingdom to leave the EU which will impact on the post-2020 MFF; stresses that this decision makes it impossible to proceed with business as usual; attaches the utmost importance to the process leading up to the establishment of the new financial framework and a reformed and more efficient EU budget, and expects this to be commensurate to the challenges the Union is facing and to the commitments it has already entered into; calls for a swift and positive conclusion to the ongoing mid-term MFF revision that can ensure both the necessary adjustment of the current financial framework and the degree of additional flexibility of the EU budget that is indispensable for attaining the Union’s objectives;

27.  Underlines that the predictability and long-term sustainability of the EU budget is a prerequisite for a strong and stable European Union; stresses the need to align the duration of the MFF with the political cycles of both Parliament and the Commission; draws attention to the fact that the UK’s withdrawal from the EU will provide an opportunity to address the long-standing issues which have prevented the EU budget from reaching its real potential, especially as regards the revenue side, in order to phase out all rebates and correction mechanisms; reaffirms its position in favour of an in-depth reform of EU own resources, and welcomes in this respect the presentation of the final report of the High-Level Group on Own Resources (HLGOR); invites all involved parties to draw the appropriate conclusions from this report and to analyse the feasibility of implementing the recommendations of the HLGOR that would help make the EU budget more stable, simple, autonomous, fair and predictable; expects that any new own resources should lead to a reduction in Member States’ GNI contributions; welcomes the conclusion of the HLGOR regarding the fact that the EU budget needs to focus on areas bringing the highest European added value and regarding the ‘juste retour’ approach, which should end, as it has been shown by the report that all Member States benefit from the EU budget, irrespective of their ‘net balance’;

28.  Encourages the Commission to continue developing and implementing the ‘EU budget focused on results’ strategy; underlines, in this regard, the importance of simplifying rules, streamlining the monitoring process and developing relevant performance indicators;

29.  Stresses that the principle of gender equality should be mainstreamed, wherever possible, as a horizontal policy objective in all titles of the EU budget;

30.  Stresses the importance of Parliament being fully involved in all budget-related matters, as the sole institution democratically elected by EU citizens;

31.  Calls on the Council to live up to its political statements and cooperate to ensure that the EU is equipped with an adequate budget;

32.  Instructs its President to forward this resolution to the Council, the Commission and the Court of Auditors.

(1)

OJ L 347, 20.12.2013, p. 884.

(2)

OJ C 373, 20.12.2013, p. 1.

(3)

OJ L 298, 26.10.2012, p. 1.

(4)

OJ L 168, 7.6.2014, p. 105.)

(5)

OJ L 51, 28.2.2017, p. 1.

General Market

Report – Guidelines for the 2018 Budget – Section III – A8-0060/2017 – Committee on Budgets

on general guidelines for the preparation of the 2018 budget, Section III – Commission

(2016/2323(BUD))

The European Parliament,

–  having regard to Article 314 of the Treaty on the Functioning of the European Union,

–  having regard to Article 106a of the Treaty establishing the European Atomic Energy Community,

–  having regard to Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020(1),

–  having regard to the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management(2) (hereinafter ‘the Interinstitutional Agreement’),

–  having regard to Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002(3),

–  having regard to Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union(4),

–  having regard to the general budget of the European Union for the financial year 2017(5) and the joint statements agreed between Parliament, the Council and the Commission annexed thereto,

–  having regard to the Council conclusions of 21 February 2017 on the 2018 budget guidelines (6522/2017),

–  having regard to Rule 86a of its Rules of Procedure,

–  having regard to the report of the Committee on Budgets (A8-0060/2017),

A.  whereas 2018 will mark the fifth year of the 2014-2020 multiannual financial framework (MFF);

B.  whereas the internal economic and social context as well as external challenges and political uncertainties are likely to uphold the pressure on the 2018 EU budget;

C.  whereas the budgetary reaction to immediate challenges and crises must go hand in hand with sustainable answers that invest in the Union’s common future;

A budget for sustainable growth, jobs and security

1.  Welcomes the important role played by the EU budget in delivering concrete answers to the challenges the EU is facing; stresses that decent, quality and stable jobs, particularly for young people, economic growth and socio-economic convergence, migration, security and tackling populism, as well as climate change, are the main concerns at EU level and that the EU budget remains part of the solution to these issues; stresses that solidarity must remain an underlying principle of the EU budget; underlines that only a strong and targeted EU budget with genuine European added value will benefit all Member States and EU citizens alike; expects the Commission to put forward a draft 2018 budget that enables the EU to continue to generate prosperity through growth and jobs and ensures the safety of its citizens;

2.  Believes that, while maintaining budget discipline, the EU budget must be equipped with the tools to enable it to respond to multiple crises simultaneously, a certain level of flexibility thus being required; is of the opinion that, while growth and jobs continue to remain the core priorities of the EU budget, obtaining sustainable progress and development in these fields has to be accomplished in parallel to addressing EU citizens’ concerns regarding safety and security; reiterates its call for thematic concentration when setting priorities for the 2018 EU budget;

Research, infrastructure and SMEs as key enablers of growth and jobs

3.  Underlines that enhancing the competitiveness of the EU economy, infrastructure, well-funded research, support for developing skills and the continued commitment of the EU to strengthening investment are key to ensuring economic growth and job creation; believes that the creation of socially and environmentally sustainable and well-paid jobs must be one of the main priorities of the EU budget; argues that jobs are created mainly by the private sector, and that adequate budgetary support therefore needs to be devoted to boosting investment in both private and public sectors, with special attention to SMEs; consequently underlines the importance of Heading 1a, which delivers real added value for European citizens and businesses, and calls for an appropriate level of funding for this heading to be ensured;

4.  Stresses that investment in research and innovation, including support for start-ups, represents a precondition for achieving genuine competitiveness in the EU and for ensuring an innovative and competitive EU economy on a global level; regrets the fact that, as a result of an inadequate EU funding in the field of research and innovation there is an alarmingly low success rate for applications, and that several high-quality projects in the field of research and innovation are being left without EU funding; notes that many interested parties, including SMEs, are being deterred from submitting Horizon 2020 project proposals; calls in this respect for an appropriate level of appropriations to be ensured for Horizon 2020, while continuing with its simplification agenda; underlines that an enhanced budget for Horizon 2020 should not be at the expense of other research programmes;

5.  Recognises the fact that SMEs remain the backbone of the European economy and will continue to play a decisive role in creating jobs and growth across the EU; considers also that SMEs are the main source of job creation and therefore need an appropriate access to finance; calls in this respect for COSME appropriations to be increased, taking into account the success of this programme; stresses the importance of strengthening the COSME programme in the new MFF in order to provide SMEs with more substantial support from the EU; believes that establishing synergies with other financial instruments would lead to better results;

6.  Strongly supports the further development and enhancement of interoperability of European infrastructure networks; considers that the financing of the Connecting Europe Facility (CEF) is vital to achieving these objectives, and calls on the Commission to ensure an appropriate level of funding in 2018;

7.  Underlines the important role and potential of the European Fund for Strategic Investments (EFSI) in reducing the investment gap which still exists in Europe, and recognises the positive results achieved so far; welcomes also the Commission proposal for extending the EFSI until 2020, which should aim to further improve its functioning, including application of the additionality principle and of geographical balance, for which further efforts are needed; underlines that the selection of projects financed through EFSI should be based on quality and demand-driven; welcomes the Commission’s intention to reinforce the role of the European Investment Advisory Hub in terms of providing more targeted local technical assistance across the EU and also to enhance geographical balance; also calls on the Commission to regularly analyse the added value of EFSI through impact assessment of the effects of the fund;

Education and youth employment – prerequisites for the success of the younger generation

8.  Considers education to be a prerequisite for sustainable, well-paid and stable jobs; underlines the importance of mobility as a means of enabling young Europeans to take advantage of people’s variety of skills while expanding opportunities for education, training and employment; welcomes in this respect the role played by Erasmus+ in facilitating the intra-European mobility of young students, apprentices and volunteers; believes that, especially in times of rising nationalism and populism, it is important to facilitate natural interaction between different European nations and cultures in order to enhance European consciousness and identity; calls, in this context, for the funding for the Erasmus+ programme to be further increased in 2018;

9.  Underlines that youth unemployment is one of the main concerns at European level, having a particularly high social impact, especially in the Union’s poorest regions, and that it puts at risk an entire generation of young Europeans, undermining long-term economic growth; stresses that, as part of the conciliation agreement for the 2017 EU budget, an allocation of EUR 500 million will be granted to the Youth Employment Initiative (YEI), through an amending budget in 2017; considers YEI to be a fundamental contribution to the Union’s priority objective of jobs and growth, and remains firmly committed to securing adequate funding for fighting youth unemployment and continuing YEI up to the end of the current MFF, while at the same time improving its functioning and implementation; stresses in this respect the importance of the EU Youth Strategy;

10.  Takes positive note of the proposal to launch an ‘18th Birthday Interrail Pass for Europe’; underlines that this project has the potential to boost European consciousness and identity; stresses, however, that the project should not be financed at the expense of other successful EU programmes, notably in the field of youth and culture, and should be as socially inclusive as possible and contain provisions for including residents of Europe’s peripheral islands; asks the Commission to assess the potential cost and funding sources of this initiative and put forward relevant proposals;

Traditional EU budget priorities as investment policies

11.  Strongly supports regional policy as one of the main investment instruments of the EU budget ensuring economic, social and territorial cohesion; underlines that this policy generates growth and jobs in all Member States; is concerned, however, at the unacceptable delays in implementation of operational programmes at EU level under the current MFF, which have led so far to lower investment that has failed to contribute sufficiently to growth and job creation or to reducing economic, social and territorial disparities within and between European regions; calls on the Commission to identify the causes of the delays and on the Member States to cooperate in order to tackle them, in particular so as to ensure that the designation of managing, auditing and certifying authorities is concluded and implementation is sharply accelerated;

12.  Recognises the importance of the European agricultural sector in maintaining food security and managing biodiversity in the EU; expresses its full support for the farmers affected by the Russian embargo, avian flu, the dairy sector crisis and the meat crisis; calls on the Commission, therefore, to continue to support farmers across Europe in coping with unexpected market volatility and in securing safe and quality food supplies; requests that suitable attention be paid to small-scale farming and fisheries;

Internal challenges

13.  Is convinced that, under the current circumstances, the EU budget has proven to be insufficient to deal with the effects of the migratory and refugee crisis and corresponding humanitarian challenges or with the challenges in the security area such as increasing international terrorism; underlines that, on this basis, a sustainable solution must be found to this issue, as it has been demonstrated by the repeated mobilisation of special instruments such as the flexibility instrument that the EU budget was not initially designed to address crises of such magnitude; points out that a coherent strategy for tackling the migratory and refugee crisis, including clear, measurable and comprehensible objectives, has to be adopted; recalls, however, that the need to mobilise supplementary means to face these challenges should not take precedence over other important Union policies, for example in the field of jobs and growth;

14.  Welcomes the role played by instruments such as the Internal Security Fund (ISF) and the Asylum, Migration and Integration Fund (AMIF) in addressing the effects of the migratory and refugee crisis and corresponding humanitarian challenges, and calls for adequate budgeting in the coming years for these funds; reiterates the importance of the principle of burden-sharing among Member States in financing the efforts needed to adequately provide for refugees; welcomes also the role of the EU agencies in the area of justice and home affairs, such as Europol, the European Border and Coast Guard, EASO, Eurojust, the Agency for Fundamental Rights and eu-LISA, and calls, in this context, for their mandate to be executed on the basis of enhanced budgeting and staffing; is convinced that the EU needs to invest more in the strengthening and the management of its borders, enhancing cooperation between law enforcement agencies and national authorities and fighting terrorism, radicalisation and serious and organised crime by improving integration measures and practices, ensuring the interoperability of information systems, and guaranteeing sound return operations for those not entitled to international protection while fully respecting the principle of non-refoulement;

15.  Underlines that the current budget of the ISF (approximately EUR 700 million in commitments) is not sufficient for tackling the security challenges stemming from international terrorism; calls, therefore, for reinforced financial resources for bringing the security infrastructure up to a more adequate and modern level;

16.  Recalls the importance of European agencies in ensuring the implementation of the European legislative priorities and thereby accomplishing EU policy objectives, such as those related to competitiveness, growth, employment and to managing the current migration and refugee crisis; insists, therefore, that adequate financial and human resources be provided for both administrative and operational expenditure in order to allow the agencies to fulfil their assigned tasks and deliver the best possible results; with regard to the increases in staffing and appropriations for agencies since the 2014 budget, underlines the fact that these are regarded as part of new policy developments and legislation which do not enter in the calculation of the 5 % staff reduction target; stresses, therefore, that the 2018 budget should not foresee any further reductions in the European agencies’ establishment plans beyond the 5 % agreed on for each institution and body of the European Union in the framework of the Interinstitutional Agreement;

17.  Strongly supports initiatives in the field of defence research aimed at encouraging better cooperation between Member States and achieving synergy effects in the area of defence; stresses, however, that this activity should be endowed with fresh resources, as it is a new political initiative with a significant impact on the EU budget; calls, moreover, for the exploration of all possibilities for the financing of a defence research programme with a dedicated budget within the next MFF; recalls that, while the provisions enshrined in the Treaties must be respected, strengthened cooperation in the field of defence is a necessary option in order to meet the security challenges that the EU is facing, which are generated by prolonged instability in the Union’s neighbourhood and uncertainty regarding the commitment of certain of the EU’s partners to the objectives of NATO; underlines, furthermore, the need for improved competitiveness and innovation in the European defence industry that can contribute to stimulating growth and job creation; calls on the Member States to ensure adequate budgeting in order to tackle external challenges in a more congruent way; takes note of the establishment of the European Defence Fund, with its research and capability windows;

18.  Underlines that the EU budget must support the fulfilment of the objectives of the Paris Agreement and the EU’s own long-term climate goals by achieving the 20 % climate spending target in the 2014-2020 MFF; notes with concern that the EU’s 2020 biodiversity targets will not be met without substantial additional efforts; stresses, therefore, the importance of mainstreaming biodiversity protection across the EU budget, with particular focus on the LIFE programme and the Natura 2000 network;

External challenges

19.  Reaffirms its conviction that in order to tackle the root causes of the current migratory and refugee crisis and the corresponding humanitarian challenges, the EU needs to step up its role through investment in the countries of origin of the migratory flows; calls on the Commission in this regard to design a roadmap to tackle the migratory crisis in an effective way; stresses that greater strategic adjustment of all instruments of development policy is needed to ensure steady economic and social development while not undermining the implementation of the existing external policies; notes that investment in infrastructure, housing, education and medical services and support for SMEs, with a particular focus on job creation, social protection and inclusion, are part of the solution for tackling the root causes of migration; welcomes, therefore, as part of the solution to these challenges, the External Investment Plan (EIP), as a coherent and coordinated framework for promoting investment in Africa and in the Neighbourhood countries, keeping in mind that it needs to be fully aligned with and contribute to the achievement of the Sustainable Development Goals; expects that the EIP will promote sustainable development without compromising human rights, climate change mitigation or good governance, and that transparent management of the European Fund for Sustainable Development and its projects will be ensured;

20.  Notes that the current trend on the Commission’s part to resort to satellite budgetary mechanisms such as the Facility for Refugees in Turkey, trust funds and other similar instruments has not proved a success in all cases; is concerned that the establishment of financial instruments outside the Union budget undermines the transparent management of the budget and hampers the right of Parliament to exercise effective scrutiny of expenditure; maintains, therefore, its position that the ad hoc external financial instruments which have emerged in recent years must be incorporated into the EU budget, with Parliament having full scrutiny over the implementation of these instruments; stresses, however, that these instruments should not be financed at the expense of other existing external instruments; takes note of the divergence between Member States’ promises and their actual contribution to these funds, and urges the Member States to stand by their promises to match the contributions of the EU;

21.  Underlines that one of the conditions for preserving stability and prosperity in the EU is a stable EU neighbourhood; calls on the Commission, therefore, to ensure that priority is given to investment in the EU Neighbourhood in order to support efforts to tackle the main issues that this area is facing, namely the migratory and refugee crisis and corresponding humanitarian challenges in the Southern Neighbourhood, and Russian aggression in the Eastern Neighbourhood; reiterates that supporting countries which are implementing association agreements with the EU is pivotal to facilitating political and economic reforms, but stresses that such support should apply as long as those countries meet the eligibility criteria, especially as regards the rule of law and enforcing democratic institutions;

Sufficient payment appropriations resulting in increased credibility for the EU

22.  Reiterates its previous calls for providing the EU budget with an adequate level of payment appropriations in order to allow it to fulfil its main purpose as an investment budget; is convinced that this role cannot be fulfilled if the EU fails to deliver on its commitments and thus endangers its credibility;

23.  Stresses that delays in the implementation of the 2014-2020 programmes under shared management led to a drop in payment claims for 2016 and 2017; is particularly concerned at the possible reconstitution of a backlog of unpaid bills towards the end of the current MFF period, and recalls the unprecedented level of EUR 24.7 billion reached at the end of 2014; welcomes the fact that the Commission, on the occasion of the MFF mid-term revision, provided for the first time a payment forecast until 2020, but stresses that this needs to be duly updated every year, in order to allow the budgetary authority to take the necessary measures in time;

24.  Underlines that, despite a final agreement on the MFF mid-term revision not yet having been reached, several positive elements of the revision that are currently under negotiation – notably in terms of increased flexibility – might prove to be instrumental in preventing and responding to a future payment crisis; believes that if the implementation of cohesion policy were to accelerate as anticipated the increased flexibility might be needed already next year, in order to ensure an adequate level of payment appropriations in the EU budget in response, and to avoid the accumulation of unpaid bills under cohesion policy at the end of the year;

25.  Reiterates its long-standing position that the payments of special instruments (the Flexibility Instrument, the EU Solidarity Fund, the European Globalisation Adjustment Fund and the Emergency Aid Reserve) must be counted over and above the MFF payment ceiling, as is the case for commitments; underlines, in the context of the ongoing MFF mid-term revision, the potential progress achieved on the issue of budgeting the payments of the MFF special instruments with the revision of the 2014 Contingency Margin decision, even if the matter was not unequivocally resolved;

Looking forward

26.  Underlines that according to the MFF regulation, the Commission will put forward by the end of 2017 its proposals for the post-2020 MFF, which should take into account the decision of the United Kingdom to leave the EU which will impact on the post-2020 MFF; stresses that this decision makes it impossible to proceed with business as usual; attaches the utmost importance to the process leading up to the establishment of the new financial framework and a reformed and more efficient EU budget, and expects this to be commensurate to the challenges the Union is facing and to the commitments it has already entered into; calls for a swift and positive conclusion to the ongoing mid-term MFF revision that can ensure both the necessary adjustment of the current financial framework and the degree of additional flexibility of the EU budget that is indispensable for attaining the Union’s objectives;

27.  Underlines that the predictability and long-term sustainability of the EU budget is a prerequisite for a strong and stable European Union; stresses the need to align the duration of the MFF with the political cycles of both Parliament and the Commission; draws attention to the fact that the UK’s withdrawal from the EU will provide an opportunity to address the long-standing issues which have prevented the EU budget from reaching its real potential, especially as regards the revenue side, in order to phase out all rebates and correction mechanisms; reaffirms its position in favour of an in-depth reform of EU own resources, and welcomes in this respect the presentation of the final report of the High-Level Group on Own Resources (HLGOR); invites all involved parties to draw the appropriate conclusions from this report and to analyse the feasibility of implementing the recommendations of the HLGOR that would help make the EU budget more stable, simple, autonomous, fair and predictable; expects that any new own resources should lead to a reduction in Member States’ GNI contributions; welcomes the conclusion of the HLGOR regarding the fact that the EU budget needs to focus on areas bringing the highest European added value and regarding the ‘juste retour’ approach, which should end, as it has been shown by the report that all Member States benefit from the EU budget, irrespective of their ‘net balance’;

28.  Encourages the Commission to continue developing and implementing the ‘EU budget focused on results’ strategy; underlines, in this regard, the importance of simplifying rules, streamlining the monitoring process and developing relevant performance indicators;

29.  Stresses that the principle of gender equality should be mainstreamed, wherever possible, as a horizontal policy objective in all titles of the EU budget;

30.  Stresses the importance of Parliament being fully involved in all budget-related matters, as the sole institution democratically elected by EU citizens;

31.  Calls on the Council to live up to its political statements and cooperate to ensure that the EU is equipped with an adequate budget;

32.  Instructs its President to forward this resolution to the Council, the Commission and the Court of Auditors.

(1)

OJ L 347, 20.12.2013, p. 884.

(2)

OJ C 373, 20.12.2013, p. 1.

(3)

OJ L 298, 26.10.2012, p. 1.

(4)

OJ L 168, 7.6.2014, p. 105.)

(5)

OJ L 51, 28.2.2017, p. 1.

General Market

What a Trump v China trade war looks like from Australia

What a Trump v China trade war looks like from Australia

  • Economist Tim Harcourt believes US President Donald Trump will stick to Twitter rhetoric and avoid a trade war with China. Photo: Lee Besford

    Economist Tim Harcourt believes US President Donald Trump will stick to Twitter rhetoric and avoid a trade war with China. Photo: Lee Besford

  • Trade Minister Steve Ciobo told audiences in New York this week that Australia would continue to trade with China. Photo: Alex Ellinghausen

    Trade Minister Steve Ciobo told audiences in New York this week that Australia would continue to trade with China. Photo: Alex Ellinghausen

 A trade war between the United States and China could boost Australia’s exports, local economists predict.

China is likely to retaliate to any trade barriers imposed by the Trump administration by switching supply of US products, including meat, coal and agricultural items, to other sources including Australia.

“Of any Western nation in the world, we may be the best placed,” former Austrade chief economist Tim Harcourt, a fellow at the UNSW Australia business school, said.

Comments by US President Donald Trump’s spokesman Sean Spicer that the US was considering a 20 per cent tariff on imports from the US’ third largest trading partner Mexico have sharpened focus on Mr Trump’s election pledge to hit imports from its second-largest trading partner, China, with high tariffs.

Beijing has prepared a plan of retaliation to any US move, and it could include reducing imports of American aircraft from Boeing and agricultural products, or targeting US companies with tax investigations and anti-competition probes, according to The New York Times and Bloomberg reports citing unnamed Chinese officials.

Deputy director of the Australia-China Relations Institute at the University of Technology Sydney, James Laurenceson, said

China was likely to retaliate through strategic government buying decisions, choosing the European aircraft supplier Airbus over Boeing, for example. But the US was also likely to “get the reputation as an unreliable supplier” prompting Chinese companies to buy elsewhere, including Australia.

“Its not just state-owned airline companies making buying decisions,” he said. “You can be sure Chinese consumers would not be happy with the US and may start to switch to Australian beef not US beef.”

Data presented to the US Congress’ US-China Economic and Security Review Commission on Friday showed direct investment by Chinese companies in the US tripled to $US46 billion in 2016 and was dominated by private companies such as computer maker Lenovo, and focused on real estate, IT, hotels and entertainment.

The two biggest Chinese investors, HNA and Wanda, have recently also made forays into Australia.

HNA, which owns Hilton Hotels worldwide, took a 13 per cent stake in Virgin Australia last year. Wanda owns cinema chain Hoyts and property developments on the Gold Coast and at Circular Quay.

Mr Harcourt predicted Mr Trump would stick to Twitter to cajole US companies to move their supply chains back to the United States instead of starting a trade war with China, or blocking off Chinese investment.

“It is mainly rhetoric,” he said. “Trade policy comes from Congress, rhetoric comes from the White House.”

The threat of China reducing its holdings of American bonds – making it harder for Mr Trump to fund his plans to rebuild American infrastructure – was raised as a possibility by prominent Chinese foreign policy analyst Yan Xuetong, dean of the Institute of International Relations at Tsinghua University, this week.

China is the second largest holder of US treasury bonds, behind Japan.

China’s $US3 trillion foreign currency reserve fell in the past six months as its central bank sought to prop up the yuan, but remained “enormous”, Mr Laurenceson said.

“It is a scare tactic,” he said. “They would be shooting themselves in the foot. They buy US government bonds because it is stable.”

Mr Harcourt said: “They could do it, but it would hurt their own financial position doing that… The great hope of globalisation was that countries would be so bound together they would never start a trade war.”

The story What a Trump v China trade war looks like from Australia first appeared on The Sydney Morning Herald.

General Market

Press Releases: U.S.-Vietnam: A Partnership That Will Endure

SECRETARY KERRY: President Dung, thank you very, very much for that introduction. Xin Chao Viet Nam. (Applause.)

I want to thank Party Secretary Dinh La Thang, and the People’s Committee Chairman Nguyen Thanh Phong. I’m very, very grateful for your welcome. I’m honored to be here, And I’m very pleased to be here in a building the president just told me was built by USAID money in 1967. So this shows you what is important and what can be done.

I want to welcome all of you today, and I’m very, very grateful that we have such outstanding partners in sustaining and strengthening the relationship between the United States and Vietnam. In that effort, a lot of you — I look out and I see some very young faces who are students here, many of you born long after conflict between the United States and Vietnam. For Vietnamese, you call it the American War and we call it the Vietnam War, but in the end it was a war, and it took a great cost of life and treasure on everybody’s side.

We have moved so far beyond that now. But I want you to know it wasn’t easy, it wasn’t automatic. It didn’t just happen. It happened through the hard work and the vision of a lot of people who believed in the possibility of peace and the possibility of working together, the possibility of making the past the past, even as we honor it. But also understand mistakes that were made, and understand the causes.

I want to thank some very special people who are here with me who helped in that journey. It would not have happened without them. And particularly I want to thank a woman who worked for me in the United States Senate, who shared the same vision. She is here somewhere, I don’t see her. Oh, there she is. She knows who I’m talking about right away. She waves. (Laughter.) Nancy Stetson, ladies and gentlemen. Thank you. (Applause.)

And Virginia Foote. Where is Virginia? Where is Ginny? Somewhere here. Ginny, thank you so much for your great work. (Applause.)

Tom Vallely, who is an incredible worker. He has had the brilliant vision of the university. Tom Vallely, thank you. (Applause.)

Ambassador David Thorne, who also was here when Ho Chi Minh City went by another name. Ambassador Thorne, thank you.

Professor Ed Miller of Dartmouth College, who has studied and written about that period, and is contributing significantly to everybody’s understanding of it.

I also want to thank the leadership, the faculty, and the students of Ho Chi Minh University of Education and Technology. This is a wonderful place for me for me to be able to come today to think about the future of our bilateral ties. Now, I know this school is already famous for its partnerships with American companies, its hands-on learning, and its laboratories that have pioneered new developments in electrical engineering, mechanics, and innovation. I am convinced there is enough youthful energy here in this auditorium today to help turn my hair brown again. (Laughter.) I can’t thank you enough, all of you, for being part of this building of a relationship between two nations.

Now I want to recognize another person who works every single day at doing that. He is our outstanding ambassador here in Vietnam, Ambassador Ted Osius. I thank you, Ted, very much. (Applause.) This is not a new thing for Ted Osius. He was part of the team that opened up our embassy in Hanoi in 1996, and then he opened the consulate here in Ho Chi Minh City the following year. And as ambassador, he has made an impact on everything, from boosting trade to investing in and promoting health cooperation, cleaning up dioxin contamination at Da Nang, to partnering on climate change and working on our Lower Mekong Initiative. So I hope everybody here will join me in saying a special thank you to Ambassador Osius for his leadership in helping us to move beyond the past differences in pursuit of future progress. Ted, we’re very proud of you. Thank you very much. (Applause.)

Now, as all of you know, I have been privileged to see and to play a role in this transformation in our relations firsthand. Many years ago, when I was serving here, I managed to grab a moment of a pass, of a moment of a three-day pass, in order to leave the rivers and the canals of the Mekong Delta, and come to then-Saigon and have a few meetings, and have a chance to see my friends who were here, and to have a little bit of a rest.

And during that period of time, one of everybody’s favorite places to go was one of the few big hotels in the city — was the rooftop of the Rex Hotel. And I want you to know that, from that rooftop, you could look out in the evening and you could feel and see some of the war unfolding around you. You’d see flares being dropped by airplanes, lighting up the sky in the night. And you’d even see tracers going in both directions of people who were engaged in warfare. It was an eerie, eerie feeling, I want you to know. Sort of like being in this cocoon of calm, just for a moment, amid the chaos of war in a country that, tragically, had been immersed in conflict of one sort or another for more than 20 years.

Obviously, now this is a changed city and it’s a changed country. Your foreign minister years ago, Nguyen Co Thach, used to say to me, “We have to get to the day when we think of Vietnam not as a war, but as a country.” And there is no question in my mind that has happened, and it’s happened a number of years ago. We are beyond that. The bustling Nguyen Hue, the pedestrian street that attracts thousands every day, the roads that are filled with motorbikes and filled with energy, people having to get somewhere as quick as they can, every form of commerce — as I was driving in here I saw a big air conditioning unit being held by somebody on the back seat while somebody else was driving the motorbike. It’s a sense of urgency and a sense of energy that is absolutely captivating. And you see it from the computer monitors to the smart phones. Nobody here is preoccupied with the past.

And it is very important for people all over the world to understand that, because this is a model. This is a great example of what people can do when you share a bigger vision about life, about possibilities. I don’t have to tell any of you that today’s Vietnam has one of the most vibrant and energetic economies on the face of the planet. And the transformation that has taken place here explains or helps to explain why this is my 37th trip to the Asia-Pacific as America’s Secretary of State. Obviously, not all of them here to Vietnam, but a lot of them here to Vietnam. Thirty-seven trips, folks, in the last four years.

And I have returned again and again for a simple reason, because the United States of America under President Obama made it clear we were going to reach out to Asia, we were going to rebalance Asia. And, as a Pacific nation, which we are, too, the United States cares about what is happening here, and we want to continue to build a stronger and stronger partnership between our countries. We take our interests here very seriously.

Now, those interests include, first of all, the opportunity to create sustainable economic growth through the expansion of trade and the support for pro-innovation initiatives. I was just with — well, I’ll come back to that in a minute. I’ll wait for that.

Second, we encourage regional security cooperation to uphold the rule of law, including in the South China Sea, and to defend against threats like violent extremism and nuclear proliferation.

Third, we want to join the Asia Pacific in powering a clean energy revolution that will curb climate change while simultaneously jump-starting economies around the world. And finally, we encourage respect for human rights in Vietnam and the region, just as we do everywhere across the globe. Why? Because countries that defend the fundamental freedoms are more likely, not less, to have economies that innovate, diversify, and grow. And, by the way, those countries also generally have greater stability.

Now, it is in that spirit that I returned to Vietnam now to emphasize the shift in our administrations in Washington is not going to alter or fundamentally undermine the commitment of the United States to the prosperity and the stability and security of the Asia-Pacific. And the reason for that is basic. Our friendship doesn’t depend on individuals or personalities, one president or the other, one party or the other. Our friendship is rooted in interests that we share and in the things that we agree upon about the future. And they are many.

Now, it’s no secret that the future of the Trans Pacific Partnership itself, as it is called, is uncertain. I acknowledge that, yes. But it is not yet clear what path the incoming U.S. administration is going to pursue. And many people in the United States may share with a lot of people elsewhere in the world a sense of anxiety about anything related to trade. It can be unsettling. And there — I understand personally, for millions of Americans and for people in other parts of the world, trade is seen as a proxy for the underlying forces that are shaping and reshaping the evolution of new technologies and the increased mobility of labor and capital.

If you put these forces together, they spell globalization. And that is transforming many workplaces, and it giving birth to industries that were unimagined even a few years ago. Nobody would have imagined half the things we’re doing. I see some of you holding up these little rectangular instruments you keep in your hands, smartphones, and you’re taking photographs. When did we start doing that? Ten years ago? I mean this is an extraordinary evolution.

In my country and many others in the industrialized world, we know that we have to do much more in order to address the concerns of people who feel some of the dislocation of the transformation taking place at a more rapid pace. But remember something, my friends. All of history has been filled with this process of change.

Go back to the Industrial Revolution. When we started to stop spinning textiles the way that people had done it for years on a loom, all by themselves, and we began to automate it, and all of a sudden people moved to new jobs, and people got wealthier, and the standard of living went up, and people earned more money. But sometimes, if it’s not managed well, that transformation can be met with legitimate anxiety and even potential loss. And it is up to people in government to make sure they are addressing those concerns.

Now, I can’t predict what the new administration is absolutely going to do with respect to trade, but I can absolutely tell you that the fundamental reasons for the TPP haven’t changed. The fundamental need of countries to be able to sell their goods to other countries hasn’t changed. And the United States of America cannot grow and get stronger unless we too are able to sell goods to the other 95 percent of the customers in the world.

So, as a nation, we’re going to have to recognize that the primary reason that old jobs disappear is technology. It’s not trade itself. And it’s certainly not trade agreements. And that you can see documented through history. In fact, today, experts will tell you that 85 percent — or maybe slightly higher — of the job transition and loss that takes place is due to technology.

Now, when machines do more, productivity generally goes up, and the demand for labor begins to shift to other places, other industries. That’s one of the reasons why, if you engage in protectionist policy, it isn’t going to work. We’ve been through that before in history. It brought a depression.

So we are going to have some very important choices to make, the United States, Europe, Asia, Vietnam, individual countries. We’re going to have to work through how TPP is going to be worked out in a way that works for everybody, and how to advance our economic and our strategic relationships with partners in this region, so that the momentum of the last few years is not lost.

Now, Vietnam will also will have choices to make. And as you think about them, I hope you are going to agree with me that the values that are embedded in TPP, the fundamental value, a rules-based approach to economic relations, higher standards on labor, on the environment, safeguards against corruption, these values are consistent with Vietnam’s interests and the demands of the Vietnamese people themselves for good government and for economic opportunity. I will tell you, even if you didn’t have TPP, every one of the values I just described would be worth holding onto.

I say this knowing that this region will have alternatives. There are countries that are willing to make a quick deal without insisting on high standards. And that may seem more convenient to a few people in the short run. But I got to tell you something. Embracing the standards I talked about a moment ago, about the environment, about workers, about better standards of working, about government that works for you, not against you, those things are still essential if Vietnam is going to meet its stated ambition, which is to raise the upper-middle income status of this country by 2035. And that can only happen through reforms that solidify rule of law, that encourage innovation, that unleash entrepreneurial energy. So I hope you will continue down that path and I hope you will partner with the countries that encourage it.

Now, these principles that I just talked about are at the heart of President Obama’s rebalance policy, and we have been pursuing them with allies and partners throughout this region, including the Asia-Pacific Economic Cooperation meeting in Lima last November. And I’ve got news for you. We will continue to pursue them as part of the agenda that Hanoi has set for APEC in 2017. These values are central, also, to many of our bilateral relationships, including America’s increasingly close and multi-faceted engagement with your country, with Vietnam.

Now, as you know, for me and for my generation, on both sides of the Pacific, this relationship has an unforgettable and very personal dimension. I have traveled to this country many times. As a Senator, and more recently as Secretary of State, I visited with government officials at every level, business people, students, entrepreneurs, religious leaders, and with civil society activists. And every time I return, I am reminded that perhaps the one thing that doesn’t change in this country is the demand for change. And it is defined by innovation in nearly every single sector and industry, change driven by a population, you, that is young, creative, ambitious, and increasingly voicing a diversity of opinions, change that is demonstrated by the emergence of a dynamic and diversified marketplace. And yet, for all of the change, this remains a country that is always proud of its traditions, proud of its culture and its history, and especially its independence.

This past October, in Washington, I had the privilege of hosting one of your senior leaders, Dinh The Huynh. And together, we reflected on what we have seen from our distinct vantage points over the past half a century. Hard to believe, half a century. He and I both fought in the war. We both lost close friends. And we both saw our countries divided by conflict. For many Americans, particularly Vietnamese Americans, the divisions, the fissures that were created by that war have been very slow to heal. But in speaking with Ambassador Osius and others, I hear that many who have opposed closer ties with Vietnam are now increasingly ready to engage. And that’s exciting.

I want to be clear that the process of reconciliation and restoring diplomatic ties, as I mentioned earlier, was absolutely not about forgetting. If we forget, either of us, we cease to honor those who deserved honor on all sides of the war, people who served their nation, people who thought they were patriotic and were patriotic because they served their nation. If we forget, we cease to learn from history. And the tragedy of what happened in Vietnam and in Laos and Cambodia should always remain in front of us as a reminder of what war inflicts.

But — and it’s a big but — neither should we allow ourselves to become prisoners of the past. And we haven’t. That’s why we’re moving today. That’s why I’m able to be here to speak to you like this today. Just consider how far we have come since the restoration of our diplomatic ties.

Twenty years ago, there were fewer than 60,000 American visitors to Vietnam each year. Today, more than half a million and growing. Twenty years ago, annual bilateral trade in goods between our countries was $451 million. Today, it’s more than 45 billion.

Twenty years ago, there were fewer than 800 Vietnamese students studying in the United States. Today, more than 21,000 students from Vietnam are studying at U.S. colleges and universities.

For two decades after the war, we moved from conflict to normalization. For two decades after normalization, we have moved in the direction of partnership and cooperation. And as we prepare for the decades to come, our focus is entirely on the future, on deepening our comprehensive partnership, broadening the bilateral agenda that we have developed, including education, climate change, science, health, Internet, human rights, and military-to- military contacts.

Now, on the economic front, Vietnam is the fastest-growing market for U.S. exports in the entire world. Regardless of what happens on TPP, Vietnam’s commitment to reform will only deepen its integration into global markets and it will enable Vietnam to promote even greater entrepreneurship and innovation. And that’s what I know all of you want, that’s what you need. And today, when I met with your prime minister, the prime minister, as we talked about the possibilities of this new university, the Fulbright University, he said we want to develop that. And one of the reasons we want to do it is because we want it in addition to this university to be adding to the start-ups in our country, to become an incubator of innovation and of new industry.

We are determined to expand our partnership on energy, trade, and investment. And just this past May, Boeing and Vietjet signed an $11 billion deal to sell 100 new Boeing airplanes to Vietnam. That’s the largest single commercial airplane purchase in Vietnamese aviation history. General Electric and Vietnam have signed an agreement to develop one gigawatt of electricity by 2025, enough to supply power to 1.8 million homes.

Now, the true measure of our partnership is not just whether our economies grow. It is also how they grow. I never thought, when I was patrolling the Mekong nearly 50 years ago, that I would one day be involved in a plan to try to help save the river. Tomorrow, I will go to Ca Mau and I will travel by boat to two former sites where I was during the war. I will talk to local environmental experts about clean energy development and energy efficiency. I will also talk about decisions on infrastructure, including dams that have to be made carefully. Vietnam is downstream, obviously. What Laos does, what Cambodia does, what Thailand does, what China does are critical to the future of Vietnam, and there has to be an understanding of that. And these things can only be worked at, pushed through the multilateral institutions that we support today.

Local farmers and fisherpeople have depended on these waters for centuries. And they depend on them today. You depend on them today. Many of the children of Vietnam will depend on them in the future. But that’s why we have a stake in mitigating the extractive activities, such as damming and overfishing, and logging, and pollution, and harmful agricultural practices. It’s why, together with our partners in the Lower Mekong Initiative, the United States and Vietnam are working to improve this country’s capacity to cope with potential floods.

Now, we are also focusing assistance on strengthening institutions and incentives for clean energy and the development of sustainable infrastructure, sustainable water projects, and better governance, and ecosystem resource management.

Environmental challenges in the Mekong Delta are especially acute because they overlap with the issue of food security, and that is an urgent challenge that Vietnam understands as well as anybody. That’s why, together with other APEC economies, we worked very closely last year to launch a new, multi-year initiative in order to strengthen cooperation on food security and climate change all across the Asia-Pacific region. And Vietnam has played a key role in the Global Alliance on Climate Smart Agriculture, and Vietnam is making this issue a top priority under its APEC agenda.

Now, let me just say one thing that is very important. I shared this with your vice foreign minister and with your prime minister today. I am going to share it with you now. Vietnam is currently, because of your need to grow your economy, making decisions to build new power plants because you have to power more electricity for companies and for homes, as they grow. But the current plan, which we talked about today, has maybe 19 or more coal-fired power plants that are going to be built.

Now, I just have to share with you coal is the dirtiest fuel in the world. And we can’t afford to be building power plants on coal all around the world, because we will undo all the good we are trying to do to reduce the human-made emissions that are contributing to climate change. And if we have any prayer of saving the planet, literally, preventing sea-level rise, preventing greater flooding, preventing more storm damage, and so forth, we need to move faster. We have to move to other energy sources, including nuclear and sustainable alternative — wind, biomass. Natural gas is even cleaner, obviously, 50 percent cleaner or so. And you have an opportunity to get natural gas.

But here is the problem. When some people look at the price of coal, they say, hey, it’s cheaper. I got to do it, because my economy needs it. No, no, no, no, no. That’s wrong, my friends. It’s not cheaper, not when you consider the damage to the environment, not when you consider the hospital bills for young kids who have to go to the hospital because of air quality that is not clean, not when you look at the damage done by major floods and fires and droughts, and the change in agriculture in the world.

We spent $27 billion last year just to clean up after the storms of last year. More money than ever before on those storms. And it’s going to get worse. We have storms that are supposed to happen once every 500 years or 1,000 years now happening every year. And floods, the same thing. So I urge Vietnam to become one of the leaders in the world to say we’re going to make the better choice. Because, in the end, it’s cheaper. Per kilowatt hour, it’s cheaper.

Now, I am also pleased to announce today that the State Department intends to fund a new partnership between Massachusetts Institute of Technology, MIT, and Can Tho University. And this partnership is going to help Vietnam to develop expertise in cutting-edge agricultural technology for growing food more efficiently and with greater resilience to the impacts of climate change. And together with Vietnam we hope to showcase this experimental technology to the rest of the region, to the rest of the world, and eventually we’d like to make it available for the economies of developing countries all around the world.

Now, we’re also working together on other projects in the academic arena. And the reason is straightforward: Because we want to encourage real economic opportunity for all of the Vietnamese people, a free market, a free marketplace of ideas. They have to go hand in hand. Free market, but a free marketplace of ideas to take advantage of that free market. And that starts with what’s happening right here: education. The single smartest investment that we could all make is in — is an investment in you, in the next generation.

The good news is that’s exactly the path that Vietnam and the United States are on right now. The Institute of International Education, Arizona State University, Harvard Medical School, the University of Hawaii all have partnerships with institutions in Vietnam, and several involve participation by the private sector.

In addition, Indiana University, which has something to do here, has created “Vietnam Initiative,” a think tank promoting collaborative work on public policy issues in this country. And the University of California at Berkeley has established the Journal of Vietnamese Studies, which publishes original research on Vietnamese history, politics, culture, and society. We are starting to get really integrated. And all of that is just the beginning of what can happen.

Earlier this year, together with my friend Tom Vallely, who I mentioned earlier from Harvard University, and others, I was very proud to help support the establishment of Fulbright University Vietnam in Ho Chi Minh City. I have discussed this university idea often with government officials here. This is a country that places a very high value on learning. You always have.

When I first came back in the early 1990s, 1991, I went for a walk early in the morning in Hanoi. And this little girl was walking out in the park with her mother. And she came up to me. She must have been age six or seven. And she said, “Hello, how are you,” in English. I was amazed. She spoke the most perfect English. And within — for several years I stayed in touch. When I came back her family came and we said hello at the city hall in Hanoi.

Now, the students of your country are like that, they’re optimistic. You’re optimistic. You’re eager to make the most of the talents and skills. And you’re also capable of looking out, not just inside. Looking out.

I want to emphasize my confidence that Fulbright University Vietnam is going to be an extraordinary institution of higher learning, a world-class facility marked by academic freedom, meritocracy, transparency, and equal access. And yet it will still be deeply rooted in Vietnam’s rich culture.

Now, just a few moments ago I presented a very important statement of intent by the United States Overseas Private Investment Corporation, who have committed in the letter to fund the construction of Fulbright University Vietnam’s new campus. And this letter of intent underscores our commitment to Fulbright University Vietnam’s future. I was delighted to present that to its President, Dam Bich Thuy, and I’m very, very glad that — there she is, right here. Why don’t you stand up and let everybody say how terrific it is you will be university — there you are. (Applause.)

And the Corporation’s Asia-Pacific Managing Director was also part of this transfer. Geoffrey Tan is here. Geoffrey, where are you? Right there. Stand up. And he’s our man from Asia from the — (applause) — OPIC, and we’re very grateful for OPIC being willing to do this.

So, folks, we’re really close to making this university a reality, the breaking of ground. They’re hiring people, they’re already looking at the architects. It’s coming together. And designing the campus. And later this year — this year — we’ll break ground, not far from where we are today. It’s going to be a game-changer, a positive game-changer for the future economic development, for the future innovation, and the future entrepreneurial activity of Vietnam.

Now, working together on education offers a lot of other opportunities for celebration. For more than 35 years, the Peace Corps has sent the best and brightest Americans abroad on behalf of the United States to help partner with some of the toughest challenges and increasing mutual understanding between countries. In May of this last year, we reached an agreement to establish the first Peace Corps program in Vietnam. And I look forward to the day soon when a new generation of American volunteers deepen the friendship between our countries and our people.

Two decades ago, when the United States and Vietnam normalized relations, we might have been able to foresee somewhere out in the future that our countries would eventually cooperate on education or economic matters. But something far less predictable is now the new normal: we are coordinating on security issues, as well.

For example, Vietnam is a partner in America’s Global Peace Operations Initiative. Last year, Vietnam began contributing to UN peacekeeping operations in a small way, but it began it, and with plans to send engineering, medical personnel, and other specialized units in the near future.

We are expanding our collaboration on humanitarian assistance and disaster assistance delivery. We are also increasing our support for military education and training, particularly for Vietnam’s coast guard, and we remain committed to helping Vietnam strengthen its maritime security capabilities.

Now, as we reflect on these growing areas of common concern and joint action, I absolutely have no doubt that the U.S.-Vietnam relationship is becoming increasingly a strategic one as we work to advance the rules-based order throughout all of the Asia-Pacific.

Now, this can certainly be seen in our governments’ shared interest in freedom of navigation and the peaceful resolution of disputes in the South China Sea. The United States has made it clear that we do not favor one set of claims over another, but we do support a process through which any disputes can be solved peacefully, in accordance with international law. International law treats all of our countries equally. It does not recognize spheres of influence or the right of nations to impose their will on a smaller nation simply because they can, because they’re big.

We believe in all the countries in the region – whether big or small – and that they should refrain from provocative acts that add to tensions or might lead to further militarization of the area. And we oppose coercion or the threat of force by any state to assert its claims over another, we will, I am confident, with the next administration continue to adhere to — with the same good faith to the policy that I just articulated.

Now, finally, even as we focus on the future, we continue our joint recovery operations in an effort to answer every question that we can regarding the fate of Vietnamese who may still be missing and families that still don’t have answers from the war, as well as Americans. This is a quest that has been a hallmark of our bilateral cooperation for as long as there have been any leads that we could pursue. And I’m very proud of that.

I want you to know that, in all the several thousands of years of warfare and of people in conflict, never in all of human history has as much effort gone into a cooperative effort between two countries to try to account for their missing or dead in the course of a war as Vietnam and the United States have pursued together. And we can both be unbelievably proud of that.

Now, we also know that many Vietnamese are — many more than there are of Americans — remain unaccounted for from those conflict years, so we are prepared to be as helpful as we can in order to help resolve any of those cases.

And we’ve also reached a milestone in our effort to reclaim, the earth of Vietnam that was contaminated with dioxin in the vicinity of the Da Nang Air Base, and to find and remove explosives that remain from the war. And we are continuing to do that with respect to other areas now, also.

So there is no question that, even as we do this, we do have some differences. You know that and I know that. The good news is that we’ve learned how to talk about them frankly, regularly, and productively. And I have made clear, President Obama has made clear we support the right of individuals to speak their mind and to worship and to travel and to acquire and share knowledge and information, and to take part in the decisions that affect their lives. We think that’s an inalienable right, and we speak about it.

Every country and culture is unique, but the idea of freedom is actually universally recognized, and it is rooted in the fundamental human need to be afforded dignity and to be treated with respect. I think that need actually can be seen here in Vietnam today in the widespread use of social media, the popular movement towards greater support for worker rights, the broadening of civil society, the demand for religious liberty, and the steps that your government just took recently through your national assembly to pass a law regarding belief and religion. So you’re moving, you’re embracing this. There is much more that needs to be done, yes. I hope your society will continue to move in that direction.

I just leave you with this thought. On Hanoi’s Temple of Literature, there is an inscription that reads, “Heaven has ushered in an era of renewal.” The theme of renewal lies at the heart of our relationship, at the heart of everything I just talked about. Fifty years ago, hundreds of thousands of Americans were fighting in the fields, the forests, the mountains, the waterways of Vietnam. Today, hundreds of thousands of Americans are visiting your shops, your hotels, your markets, your shrines.

Historically, the United States has been known as the most optimistic and forward-looking nation on earth. Yet today, surveys show that no nation is more hopeful or confident about the future than Vietnam.

Now, I have spent the majority of my life in public service. I have been told over and over again that certain things could not be done, or that this or that was somehow an objective beyond reach, that some goals were impossible. Well, this will be my last speech in Asia, certainly, and my — probably next-to-last speech as Secretary of State. But over the years I will share with you I have come to know a lot of Vietnamese quite well. And I think one of the reasons that we’ve gotten along is that we don’t like being told, either of us, that certain things cannot be done, or that some goals are impossible.

And I want you to recall that the great American world champion boxer, Muhammad Ali, attracted a lot of controversy back in the 1960s, when he opposed U.S. involvement in the war in Southeast Asia. He also said this: “Impossible is just a big word thrown around by small men who find it easier to live in the world that they’ve been given than to explore the power that they have to change it. Impossible is not a fact,” he said. “It’s an opinion. Impossible is not a declaration. It’s a dare.”

The relationship between our two countries is built around that kind of daring. And together, Americans and Vietnamese chose to exercise the powers that we have been given to make the future better than the past. And let me tell you something. I am so glad that we did.

So, my final visit to Vietnam and Southeast Asia as Secretary of State, but I guarantee you, as a private citizen I will be back. And then, for as long as I am able, I intend to remain committed to the growth of a warm and mutually beneficial relationship between our peoples.

I thank you very much for your hospitality, for the contributions many of you have made, to the accomplishments that I have discussed today. Hen gap lai. Thank you. (Applause.)