Q Since coming to office in 2006, what changes, if any, has this [centre-right] government [led by Fredrik Reinfeldt] made in Sweden’s trade policy and priorities?
A This government believes that trade starts with a good general climate for small and medium-sized enterprises at home; backing the conditions for SMEs domestically will make them better prepared to go abroad. If they can do better abroad due to their business climate at home, it will also have a positive effect on job creation at home.
The second difference is that we strongly emphasise the need for a high level of competition in the domestic market. If companies are created in a market with high competition, they grow up being used to it, and when they do go abroad it will not be a shock to them.
The third [change] is that we reject the notion of politically decided promotion activities. The previous government made a habit of making political decisions on what country to go to, which sector of the economy to promote, even which companies to work with. We do not think that politicians should be the ones deciding which markets to be active in or which sectors our export-promotion activities should focus on. We think that should be decided by the companies and organisations together. We are more market-oriented than the last government.
Fourth, since our membership of the EU, not much had been done to promote the EU internal market as the home market of Swedish companies. SMEs still see Sweden as their home market, not the internal market. We are more pro-European in our general approach and try to promote seeing the whole EU internal market as a home market to SMEs. In that area there is still much to be done.
Perhaps a fifth [change] would be that we try to be very active in meeting all the major players in international trade in promoting Doha, for instance.
Q What can be expected in terms of tax reforms?
A By international comparison, I think our corporate taxes are not high. But Swedish taxation has been very high on labour. We are trying to promote further participation in the labour market by cutting down on income tax. In the long run, I think that will also be very important in creating savings available to start-up companies.
In Sweden, it has been a tradition that if you want to start a company, you go to a government authority to try to find the capital, because taxation for individuals on their income tax has been so high that it has been hard to save even small amounts. When we do cut down labour taxation and income tax, I hope it will promote private capital in the long run. We also abolished the wealth tax to free capital.
Q Invest in Sweden says it would like to see a 25% corporate tax rate. Is that not on the table?
A It is not on the table right now. What we need to do is increase supply in the labour market. We intend to put forward new proposals to do that during the coming years.
We are trying to strengthen the incentive to work and to start companies, to make it more profitable to work and return to the labour force from different subsidies, to increase companies’ demand for labour, to create a way back for people who have been out of the labour market for quite a few years – by cutting down social costs for companies employing a person that has been unemployed or on sick leave for a long time, for instance.
Q Do you feel that the government will be able push through these reforms? Is there a public mandate?
A Indeed. The difference between the last election campaign and any other was that the four non-socialist political parties got together a couple of years before the election and used a couple of years to negotiate a very ambitious reform agenda on all the major political fields. We could present that to the public well ahead of time, before the election. What we did and continue to do is all based on these reports prior to the election so that it is no surprise to anyone what we are doing right now. That has given us a powerful mandate to reform Sweden.
Q Coming back to the topic of trade, is the Doha Round dead or are you hopeful?
A It is not dead; it is at a critical stage but it is not dead. In fact, I think there is a greater possibility that it will succeed than it will not succeed. However, how you describe the present situation is also dependent on how badly you want it to succeed. We want it to succeed and our job is to emphasise the possibilities and the importance of the Round to succeed. Maybe some other actors are not as keen to see it succeed and they might emphasise the problems in the Round.
Right now, the US needs to be flexible on domestic support, the EU needs to be flexible on agricultural tariffs, and India and Brazil need to be flexible on quotas and we all need to be flexible at the same time. Time is starting to run out but I would hope for a breakthrough during June and I would hope for a completion of the Round within the first couple of months of next year.
What is interesting right now – when globalisation is transforming so many of our policies and so much of the world economy – is that it seems to me that the Swedish approach is the right one: we should meet globalisation with enhanced competitiveness at home when it comes to the business climate, to education, to research and development, to increasing the supply in the labour market and so on together with openness to other countries. To me, that is the outline of successful policy in a time so influenced by globalisation.
Q Do you share the concerns of many in the trade community over the possibility of a new era of protectionism?
A I do. Not so much in my country, though. To start with, anyone defending free trade needs to spend a lot of time reasoning about globalisation publicly and putting it into context. This is because if you live in a small town where a major factory is being closed down due to international competition, it would be a threat. I understand that. We need to point out that sometimes it is not in the news that 10 new SMEs are started up, perhaps in the same building even as the old factory, and they grow because they can reach a global market immediately. We are not losing jobs because of it.
Sweden’s wellbeing has always been based on international trade and it is today, too. Our export is increasing, not decreasing.
When you try to use protectionist measures, the first ones to lose out from it are consumers. Due to globalisation, we have seen an increase in real income in Europe because our consumers have access to cheaper products and we see low interest rates, and this is very important to families for all countries concerned.
One thing is for sure: if the Doha Development Round fails and we see protectionist policies in the US, EU or any country, it will hurt our economies and it will hurt our consumers.
Q Do you think Sweden understands that perhaps better than other countries?
A I know more about the Swedish opinion than about any other country, but in our political life, free trade in general has widespread support in the business society as well as the trade unions.
If you work for Ericsson, you know how important export is to Ericsson, if you work at Volvo or Scania or any major company, you know how important it is. Also, if you work for one of the many suppliers to Volvo cars, for instance, you know that what you produce locally will be part of the product that will be sold internationally. But we can do more at home, too, on this discussion.
I think that is a key issue for politicians in Europe and the US as well. If we describe globalisation as a threat, it will be perceived as a threat.