Ladies and gentlemen, I noticed that the title of my talk today was "The U.K.-U.S. Global Partnership," but what I want to do today is to test a thesis with you. This thesis is that the prospects for a global partnership between the U.K. and the U.S. are better at the outset of 1998 than they have been for a very long time indeed. I say this advisedly, in the knowledge that we have had many chapters in our history since 1945 when we have worked very closely together. This is why we have this wonderful prospect.

First of all I must make a declaration of interest. You will have heard that I was Press Secretary to a conservative Prime Minister, John Major, and here I am British Ambassador in the United States for a Labour Prime Minister. Many American friends have asked how I have managed that. The answer is that in the British foreign service we have a system of career ambassadors. We do not a have a single political appointee who is an ambassador in the British foreign service. So I come to you today as a career diplomat and not a political appointee.

Why I am making this point is because I need to explain to you how things have changed in Britain since I was last here in the United States. I left the soil of the U.S. at the end of 1993. I returned on Halloween 1997 with my wife—and there have been very big changes in Britain in that period. When I left the U.S. at the end of 1993, the position of government in London politically was not particularly strong. John Major had been elected in 1992 with a rather small majority (just over twenty) and throughout the tenure of his premiership, that majority was whittled away, usually by the forces of nature, until by the time the election took place in May 1997, his majority had disappeared altogether. For a long period of his premiership, the U.K. economy was in recession and we were suffering from a very high unemployment.

Today in the U.K., and I stress that I am not making a party political point, but I am describing the facts as they are, we have a government in London which has a very strong political base. Tony Blair won the election on 1 May 1997 with a majority of 179 seats in the House of Commons, which makes him virtually invulnerable to the kinds of rebellions within his own party from which John Major suffered and which severely circumscribed his margin of maneuver. Secondly, we are sitting on top of one of the most successful economic periods that Britain has enjoyed since World War II. We are well out of recession. We have an unemployment rate in the U.K. which is not as good as here in Southern California, it is just a little bit above the average for the United States as a whole, but it is probably half the rate that you will find either in France or Germany, our main European continental partners and rivals. We have a strong political situation running for us. We have a strong economic situation running for us. What does this do? It gives a government the self-confidence to act decisively, not only in the domestic field, but also in the area of foreign and European policy. This is very important because we are now embarking on a six- month period when we occupy the presidency of the European Union. Let me say a bit more, however, about Britain before I go on to Europe, the United States and the world.

There is a wind of change blowing through Britain and through British political life. It is not just a question of "rebranding," as some of you will have seen. It is not just a question of new Labour, new Britain, not just a question of "cool Britannia." But what we are striving to do in the U.K. is to strike a balance between our heritage (of which we are justifiably proud), our history (the kinds of things that draw the tourists to London), and that which is modern, cutting-edge of industry and society and technology in Britain, because perhaps in the last few years we have let our heritage overshadow our achievements in modern life at the end of the twentieth century. That is one of the things that Tony Blair is seeking to project in Europe and in the world: the real face of modern Britain, alongside its heritage.

This is not just rhetoric and hot air, but—and those of you who know Britain know that I speak the truth—we are now a nation which stands at the cutting-edge of information technology, of financial services, of aerospace, of pharmaceuticals, of entertainment, of telecommunications, and in areas of public policy such as deregulation and introducing flexible labor markets so that we can spread employment and productivity and growth. It is a striking feature of the British economy that our non-wage labor costs are probably one-half of those that you will find in Germany or some of the other continental countries. So new Britain is a modern Britain, and it is a politically and economically successful Britain. That means that it continues to be a very fine place for foreign investors to put their money. The new Labour government is determined to continue the record of its conservative predecessors and attract foreign investors into my country.

I am pleased to say that the U.S. continues to be the biggest foreign direct investor in the U.K. In Britain, we have about forty percent of all of your investment in the European Union. Perhaps one thing you did not know is that the U.K. is the largest single foreign investor in the United States. That is the position today and that has been the position for many years. We ourselves have invested in your country something in the region of $140 billion, which generates probably 1.5 million jobs for American workers. I am told that the figure for California is probably 100,000 [people] who depend directly on British investment in your state. This is a fantastic record. It underpins the strength of the U.K.-U.S. relationship.

There are more American banks in London than there are in New York City. There are actually more German banks in London than there are in Frankfurt. There is a message for our European partners as well as our American friends. The new government in London does not claim all of the credit for this economic success. As you know, restructuring in Britain has been a work in process and in progress since Mrs. Thatcher was Prime Minister, but we are now witnessing a new stage in the British revolution, with new ideas and a new agenda sweeping through British politics, British economy, British society with a specific objective of making Britain at the outset of the new millennium the European success story. As those of you who follow British affairs would have noticed, one of the things that has happened is that, in the few months that it has been in power, the new government has moved with extraordinary speed to make its campaign pledges reality.

In a matter of six months, we have introduced one of the most profound constitutional reforms seen in three hundred years. Through the means of two referendums, we are going to give Scotland its own parliament, we are going to give Wales its own assembly, and if the talks on Northern Ireland prosper, we will see a devolved assembly in Northern Ireland as well. So the face of Britain, which has been as you know it since 1707, will become something new: a more regionalized, a decentralized nation. That will be one of its features at the start of the new millennium. In the area of economic policy, we have given the Bank of England operational independence for the first time since its creation in the seventeenth century. We have embarked on a radical process of welfare reform and, if I can quote from a speech that Tony Blair [recently] gave, this encapsulates what we are striving to do: "Let me first state clearly the vision of the new British government: it is to find a new way, a third way, between unbridled individualism and laissez-faire on the one hand; and old-style government intervention, the corporatism of 1960s social democracy, on the other. To find the route to social justice in a modern age. Traditional goals; modern means."

Now the government has also moved very fast to transform our relationship with our partners in Europe, in particular in the European Union. As you know, when one says Europe in the U.K., strong emotions can be aroused. I think I ought to tell you a parable to underline this point. Some people were asked once in a poll among European countries what their vision of heaven was. They said heaven is a place where the cooks are French, the policeman are British, the lovers are Italian, and the whole thing is organized by the Germans. Then there was a second question, as a follow-up, which was what is your vision of hell. The poll came out with hell defined as a place where the cooks were British, the policemen were French, the lovers were German, and the whole thing was organized by the Italians.

But on a more serious note, the Blair government has transformed the relationship with the European Union. Why? Because we are determined to be a committed and effective member of the European family. We believe that Britain's natural status and position is as a leading European power. And we are determined to have not only a strong voice in Europe, but [we believe] that Europe should have a strong voice in the world. We have now this six-month period while we occupy the presidency. This means that we are responsible for the day-to-day business of the European Union. This is going to be a period marked by two really fundamental events in the history of the European Union, which are also relevant to the United States. First of all, under our presidency we will start the negotiations which will enlarge the European Union from the present membership of fifteen to a membership of twenty-one, an historical step forward which moves in parallel with the expansion of NATO to spread security, prosperity and stability to those countries which once fell behind the Iron Curtain. Second, under our stewardship, we will launch the single currency, the third stage of economic and monetary union, the so-called Euro.

Now let me say something to you about Britain and the single currency: the previous government was largely hostile to this great project. The Tony Blair government is strongly committed to the successful launch of the single currency. We want it to succeed and we are determined to do what we can during our presidency to ensure that happens. Probably in May, about eleven countries of the European Union will decide to enter the Euro-zone in the first wave. It will come into force 1 January 1999 and then European citizens will actually have Euro notes and coins in their hands as of 1 January 2002. That is the intention. The United Kingdom has taken the decision not to participate in the first wave for strongly pragmatic and economic reasons, namely that our economic cycle is at the moment out of sync with the economic cycle of most of our European partners. We are two years further out of recession. In a sense, we are living the consequences of our relative economic success compared with our European partners and, if we were to go in on the first wave, I think we would find a disequilibrium between our progress down the path of the economic cycle compared with that of our European partners that would be extremely disruptive. But if the single currency proves to be a success, if the economic arguments are overwhelming, the Prime Minister repeated again that we would then recommend to the British people early in the life of the next parliament that Britain should join the single currency.

Europe. [We hope for] a greater emphasis on Europe and a very strong determination to be effective within Europe. What does this mean for Britain's relationship with the United States? General DeGaulle always used to say to us that we had to choose between our European vocation and our Atlantic vocation. I must say to you that this is a choice that we in Britain reject utterly. We believe there is no choice to be made between having a European vocation and an Atlantic vocation. Indeed in our view, the more effective we are in the European Union, the greater our clout in the European Union, the more effective we are as a partner to the United States. We regard this not as a zero-sum game, but as relationships which are mutually reinforcing. Strong in Europe—effective in Washington. Effective in Washington—strong in Europe. That is the equation, and that is our approach, so I would not like any of you to leave this room today believing that because we now have a government in the U.K. which is much more committed to the European Union than its predecessors, that this is a government which has a weaker commitment to the partnership with the United States. On the contrary, Tony Blair made it quite clear to me personally before I left for Washington that he regarded the partnership with the United States as being one of the keystones of British foreign policy. I am pleased to say that Tony Blair will himself be coming to Washington on 4 February to pay an official visit. No doubt, in many ways while he is in the nation's capital, he will with his own actions and words demonstrate very clearly what I just said.

If we have this strong partnership, if we are determined to make the European Union work more effectively with the United States in the next six months, what must we actually work on? I am not going to go into a great tour of the world's trouble spots, nor go into any great detail, but let me suggest to you what the agenda is. First of all, we must deal with the problem of Iraq, of Saddam Hussein's apparent refusal to comply with U.N. Security Council resolutions. I am not certain what is going to happen in the present phase of this problem. [When] the head of the U.N. Inspection Team, Richard Butler, reports to the United Nations, we will hear what he has to say. All I can say to you is that the analysis of the British and American governments as to what should be done is very close indeed. We react instinctively and politically and intellectually very similarly to the challenge that Saddam presents. All I can say to you today is that it is not acceptable to the British government that the Iraqi regime should itself try to establish conditions under which inspectors should work. The key point here is observance of the U.N. Security Council resolutions and we, like you, would prefer to settle this matter politically and diplomatically. But all options are open in this matter and that includes the military.

We are going to have to handle the relationship with Iran. Here there are some differences of view between the administration and the British government about the Iran-Libya sanctions act, which we do not like because it is an exercise in extraterritorial power. We and you stand foursquare together in our determination to curb any ambitions on Iran's part to develop weapons of mass destruction. And, of course, we stand foursquare with you in our determination to stem terrorism.

We need to work on Bosnia. What happens after the mandate for the present U.S.-European contingent expires in mid-1998? Here, once again, I hope that the partnership that has characterized the effort in Bosnia over the last few years will continue and that Congress will see the wisdom of so doing. We are prepared to play our share in this. We are the largest European contributors of troops in Bosnia: five percent of the British Army is there. We are prepared to play our part and we really hope that once again in Bosnia we will be standing shoulder-to-shoulder with our American friends.

We need to work on the expansion of NATO. For the new Labour government, NATO is as important a cornerstone of our security as it always has been. We believe in strong defense. We believe in the United States' commitment to Europe. We are glad you are there and we want you to stay there. It is still a very important alliance.

We need to work on the great global issues of the day, [such as] the environment. We need to work together on the Asian financial crisis, as we have been. Last, but not least, and this is not an international problem, we hope to continue to work very closely with you, as with the Irish government, on settling the long-running conflict in Northern Ireland where, despite the killings and the assassinations of the last few days, we hope to keep the peace process on the road and to dare to hope that we might bring this terrible conflict to a successful conclusion by the deadline that Tony Blair has set in May 1998.

Let me end on a heritage note, as Britain can never resist. I take you back to 1604 to Sir Henry Wotton, a distinguished British statesman who went on to marry the Queen of Bohemia. (God knows where they met!) Sir Henry wrote a letter to a friend, Christopher Fleckamore, and in this letter, he defined diplomacy, he defined an ambassador, "as an honest man sent to lie abroad for the good of his country." Ladies and gentlemen, all I can say to you is that I am looking forward, with my wife, to four years of lying abroad in Washington.