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Prime Minister's Office

Workshop on small states

Opening Address by
Prime Minister Mr. Halldór Ásgrímsson

Why small states must think big

Workshop on small states, Reykjavik, 17 September 2004

The conventional wisdom in international relations theory is that small states have small interests.

Small states have small resources and use the little leverage they can muster to advance their cause on a very few issues

- Perhaps only one issue.

According to this conventional wisdom, small states should concentrate their limited efforts on a single issue and on their closest environment.

This model may have been true for Iceland once.

I doubt that it is true any more.

Let me tell you why.

Iceland, like some other highly developed small states, relies greatly on international trade. You may not all realise this, but Iceland is near the top of the list of countries in the world in terms of the importance of international trade for the economy.

Some larger states or trade blocks of larger states may perhaps afford to isolate themselves. In some countries there is talk of the necessity of trade barriers and even isolation these days. The fact is that large states may be able to afford isolationist action or a while because of the size of their economy. Despite some economic setbacks this can bring these states can very well survive on their own.

Iceland, on the other hand, cannot afford to isolate itself and build barriers towards the rest of the world. We cannot cut down international relations. Those who claim that Iceland should reduce its efforts abroad seem to have a limited understanding of what has made Iceland a rich and open society.

What first and foremost makes Iceland a success is the mindset of the Icelandic people. The ambition to be free and to make use of that freedom.

Dr. Bjarni Benediksson, the late Prime Minister of Iceland said:

A man who is not free is not only limited by his own weaknesses but also by the weaknesses of those who decide his fate.

We are free and we are only limited by our own weaknesses. No weakness is as pervasive as the weakness of the mind.

Therefore I urge you not to listen only to those who claim we are too small to have international aspirations. That we are too small to make an impact. There are those who insist we should not use our freedom to take active part in international relations. What they are really saying is that we are too small to be free. That we are not able to decide our own faith.

Another Icelandic Minister, Mr. Eysteinn Jónsson, said:

Freedom is the most powerful energy source of small states.

The real danger to Icelandic sovereignty does not come from the large states. It comes from within. It comes from the weakness of the mind and the lack of ambition of those who believe that we are a microstate. Those who believe that we should not use our freedom to have an international presence.

These people, who want to cut down on international relations, come from all walks of life and from all political parties.

Are these the people with a vision for the future? The people who say that we should give less to development aid? That we are too small and too poor to give starving children food? Is it true? Are we too small to contribute to international organizations that make shelter for refugees? Are we too small to go to other countries and make agreements on free trade, investments and taxation? Can we not afford the air ticket? Are we too small to establish embassies that service Icelandic businesses?

Well, if we believe that we are small and insignificant then we will quickly become small and insignificant.

Many Icelandic businesses have healthy ambitions. They are not limited by the weakness of the mind or the complex of the small. The world is their stage.

Those Icelandic businesses that have established themselves abroad are the ones that give the greatest return on investment at the moment.

The Icelandic government must have ambitions at least equal to those of the Icelandic businesses. If Iceland decides to be a microstate at the same time as the businesses have international ambitions - then the businesses will simply leave this country. They will establish themselves within an economy where the ambitions of the government match their own.

If we believe that we are small and insignificant, then we will become small and insignificant.

The manager of one of the most forward looking businesses in Iceland said at a conference the other day that the Icelandic Foreign Service is more effective in its assistance to businesses than the Danish Foreign Service. We must keep it like that.

Businesses can establish themselves anywhere and the Icelandic authorities must remain competitive.

What made Iceland successful?

So, what is it that made Iceland strong and prosperous? Can the Icelandic success in any way be a model for other small nations?

It is easy to overlook and forget that not long ago Iceland was colony and one of the poorest populations in Europe. Bluntly speaking, we were basically a development country that had been by-passed by the industrial revolution.

Now we are one of the richest nations in the world.

The most important factor that contributed to this change is the fact that Iceland early on gained control over its resources and was able to manage them successfully.

Control over the fishing resources was the most important factor in building an independent and prosperous state. It is in this context, that the academia and everybody else must realize that Iceland cannot and will not give away control over this vital resource.

Iceland changed from being a poor colony just a few decades ago to become an independent and prosperous state. It established control over the fishing resources and build its wealth on that basis.

It should not be difficult to understand that Iceland cannot hand over the control over the fishing resources to the EU - or to anyone else for that matter.

A second element that has contributed to the Icelandic success is the fact that Iceland quickly became an active part on the international scene and sought to do trade with a great variety of nations.

A typical pattern for small states is that they depend upon trade with one or two partners, often the old colonial power. Iceland managed to break away from this pattern and market its products all over Europe and around the world.

Another linked aspect is the issue of education. We see with many old colonies that their students seek their education in the old colonial powers. This is not the case with Iceland. Even if the greatest number of students attends universities in the Scandinavian countries, a large proportion also studies in the United States, in Britain, in Germany, France and elsewhere. We welcome Icelanders that go abroad to study. Their experience and education is valuable and brings us forward.

A third important element in the Icelandic success has to do with respect for the language and culture. You may think that this is strange - would it not be better to speak a language that is shared by more people?

I am convinced that the fact that Icelanders are proud of their language, heritage and history has contributed greatly to our success. We are not shy to present our interests in the international forum and we are not afraid to take actions and lead the way, as with the expansion of the fishing zone and with the recognition of the independence of the Baltic States. We truly feel that we have the same rights and the same call for recognition as any other state in the world. This feeling is the basis of our success.

Yet another important element is our participation in international organizations. I could take countless examples. Let me just mention one. Our participation in the Small Islands Developing States in the UN was essential to gaining support and understanding for the so-called Icelandic solution in the Kyoto Protocol. The Icelandic initiative, which was supported by the group and others affected by it, ensures that Iceland has the necessary possibilities to develop its energy industries within the obligations taken over with Kyoto. This is of great importance for economic development of small states.

Most newly independent states go through similar development in international relations. First come the bilateral connections, and then participation in international organizations. Iceland had the good fortune to be an active part in international organizations quite early. We became members of NATO, the UN and the OECD as well as partners in the Nordic cooperation. Few people fully grasp the importance of our participation in OECD for example. It has helped us a in our strive to become a highly developed economy. Often international cooperation has pushed us forwards towards liberalization of the economy. Sometimes it has been difficult but in time everybody has come to realize the benefits of greater liberalization of the economy.

In short, Icelanders have managed to create for them selves a global business environment full of opportunities.

This has not happened without an effort or without expenses as some people seem to think.

Negotiations on the EEA Agreement. Negotiations on a number of free trade agreements. Negotiations on a number of bilateral agreements. Negotiations on air traffic agreements. Negotiations on mutual investment agreements, on taxation agreements on agreements related to tourism.

I could go on and on.

Some people seem to think that the public sector does not create anything.

The fact is that international cooperation - the deals that we have done - has opened up the world for Icelandic businesses, for Icelandic workers and for Icelandic students.

We have changed our embassies into effective service organizations for business and individuals.

We are lucky to have businessmen that look beyond the horizon and harvest opportunities around the globe.

But we are also lucky to have diplomats that are in close cooperation with our business community, with our art community and with the local communities around the country.

Icelandic efforts abroad are not simply concentrated around fisheries. We have much wider interest than that.

Not many people grasp the great growth and diversification that has happened over the course of just a few years.

Growth in the pharmaceutical business.

Growth in energy.

Growth in biotechnology.

Growth in financial services.

Iceland now has a greater number of large airplanes than countries that are ten times our size.

No, although we may be small we do not have small interests and we do not concentrate on a single issue.

We see that some of the fastest growing and most profitable companies in Iceland have opened offices abroad. Not only in the Nordic States. Not only in Europe and in the United States but also in South -America and in Asia.

Why not conduct business over the telephone and through e-mails? This I hear often these days not least about the Foreign Service.

The truth is that all this helps but you still need to be visible and to meet people face to face in order to create opportunities and to make the most of them.

Before I end, I would like to mention the issue of development aid and peace keeping. As you are aware, Iceland has through the years contributed less to development aid than other rich countries. This is changing. We have increased our efforts in multilateral aid as wellasin bilateral aid. We will continue to do so. We have also established a presence in peacekeeping operations and sent people for example to Kosovo and Afghanistan.

Let me make quite clear. We do not intend to gain from increased development aid. The only reason for our development aid is to help people that are less fortunate than we are. We want to increase our ties with Africa and to increase our efforts there. This is important to this government and it is important to me.

We may be a small state but we are not too small to care about others and we are not too small to make an effort.

These efforts as well as active work in International organizations are essential in order to maintain and strengthen the position of Iceland in the world.

A few years ago, when Iceland took over the chairmanship of EFTA for the first time, there was serious doubts to whether the small Icelandic Foreign Service would be able to manage this. Now, it does not even make the news when we chair EFTA, it is routine. In the last few years Iceland has not only chaired the EEA cooperation but also the Council of Europe and the Arctic Council. Icelandic diplomats chair important parts of the WTO negotiations and have a central role in FAO, OECD and the UN. Next year we will chair the Baltic Sea Council and, as you know, we have aspirations to take a seat in the United Nations Security Council.

All this work is essential to defending the interests of Iceland. There is an ideological tug of war which continues in Iceland, between those that embrace only the past and demand to see Iceland as an isolated micro-state, and those who believe that in order to defend our interest in modern times - we need to be a state among states - not a micro state that has nothing to offer to others.

We are a small state, that is true, but we are not a microstate.

There is a difference.

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