So BIS Review 29/1998 ˝  -2-  that although we know that in principle at the macro-economic level free trade and competition are a powerful positive sum game - and although we have seen it clearly enough in practice - there are always likely to be visible - and vocal - losers. And that is bound to provoke outbursts of popular resistance. Against that background establishing and maintaining free trade to the extent that that has been achieved in the EU is in itself a remarkable achievement. But the EU has already in many areas gone well beyond just free trade, in establishing the single market. That involves more than the free movement of goods and services within Europe. It involves also the free movement of both labour and capital, as well as supporting European legislation to avoid market distortions from, for example, state aids, or government procurement, or restrictive practices within the private sector. This further pooling of sovereignty has essentially the same purpose - it is designed to reinforce the macro-economic benefits from free trade and competition and act as a stimulus to growth and employment by allocating resources still more effectively based on comparative advantage, enabling savings to flow to where they can be most productively invested and production to be located where it can be most effectively carried on to satisfy consumer demand. The advent of the euro represents a massive new step in the same direction.
The Government is committed to this course as a matter of national economic self interest. But these same policies are calculated, too, to make us a more prosperous and active trading partner for Europe as a whole, and to ensure that we do not have any avoidable disruptive effect on the policies or on the economy of the euro participants. More than this they are calculated to foster sustainable economic convergence as the necessary precursor to our eventual adherence to the euro club. But thirdly - and of particular relevance to this conference - we can contribute, directly and positively, to the strength of the euro through the City of London’s financial markets. The potential benefits to Europe of the euro derive importantly, as I have said, from the exchange rate certainty which it will provide across the euro area; they derive importantly, too, from the greater transparency and liquidity and competition of unified financial markets in the euro-denominated instruments rather than the fragmented markets denominated in the various national currencies that we have now. Providing transparent and liquid, competitive, innovative and well-regulated financial markets is one of the things which the City of London does particularly well.