First, it must be understood that the quest for competitiveness can only succeed if it takes the form of a collective effort whose sole purpose is to boost the economy’s value added. Without the latter, higher wages and profits cannot be paid. It cannot be an exercise in which one of the parties attempts to crowd out the other. It is clear, therefore, that a more focused social dialogue is needed that takes a stronger leadership role in identifying the policies and measures needed to improve Malta’s international competitiveness and to ensure their implementation. Second, there is absolutely no guarantee that the standard of living the country has been enjoying so far can be maintained in the face of increasing global competition. The threats that Malta is facing cannot be simply wished away or averted through quick fixes. What is required is a more flexible and  BIS Review 32/2005  3  cost-conscious attitude towards work practices and the setting of generally higher standards of performance across the board. Third, we must accept that subsidies, transfers and services provided for free by Government do not come at zero cost, but must be paid for through resources generated by the economy. Their provision at zero cost often induces excess demand and waste, and imposes unacceptable burdens on the productive sectors of the economy, thereby compromising their competitiveness and the very generation of income through which such benefits must be financed.
These developments cannot fail to have an impact on the Maltese economy given its small size and openness and its position as a price taker in international trade. While exporters are experiencing acute competitive pressures, the magnitude of this challenge from abroad, and the threat it represents for employment levels, has not, however, been adequately reflected in the results of the high-level social dialogue taking place in the country. It is in part for this reason that Malta appears less prepared than its competitors to face international competition. Against this background I shall review some of the more important changes brought about by EU membership and the attendant opportunities for Malta. Subsequently, I shall analyse the current economic performance in terms of the country’s ability to adjust to, and capitalise on, the new operating environment. Finally, I shall outline some policy orientations that could be useful in facing up to this challenge. The consequences of EU membership The main consequences of EU accession for Malta can be broadly categorised under five headings.