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    <TITLE>Prime Minister Tiit V&auml;hi: Shaping Post-Cold War Structures: An
    Estonian View</TITLE>
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    <CENTER><FONT COLOR="#000000"><FONT SIZE="+4">Shaping Post-Cold War
    Structures: An Estonian View</FONT></FONT></CENTER>
    <CENTER><FONT COLOR="#000000"><FONT SIZE="+3">Prime Minister Tiit V&auml;hi</FONT></FONT></CENTER>
    
    <P><FONT SIZE="+1">&nbsp;</FONT> </P>
    <CENTER></CENTER>
    <CENTER><B><FONT COLOR="#000000"><FONT SIZE="+1"><FONT SIZE="+3"></FONT>FUNDAMENTAL
    ISSUES IN THE ENLARGEMENT</FONT></FONT></B> <FONT COLOR="#000000"><B><FONT SIZE="+1">OF
    WESTERN INSTITUTIONS</FONT></B><FONT SIZE="+0"></FONT></FONT></CENTER>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">I would like to focus on some of
      the more fundamental issues that underlie the general debate over the
      enlargement of Western institutions. Much of the ongoing discussion
      concerning enlargement in newspaper columns and the corridors of power
      overlooks three points: first, that the post-Cold War world is not static
      but highly dynamic; second, that things do not only change, but they
      change fast; and third, that the time to consolidate gains is now, before
      the chance to shape the course of events slips away.</FONT></FONT> </P>
    <CENTER></CENTER>
    <CENTER><B><FONT COLOR="#000000"><FONT SIZE="+1">THE POST-COLD WAR WORLD</FONT></FONT></B></CENTER>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">The city of Dresden, the site of
      this year's NATO Workshop, fittingly reminds us of where we are today. A
      little more than five years ago, in a still divided Germany, Dresden was
      one of the centers where the ripples of discontent first became public.
      These ripples became waves, which in turn swelled into a great tide that
      swept away the Berlin Wall, ultimately signaling the end of an era of
      division and domination.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">In our own case, the tide
      reached us two years later, when the aborted coup attempt in Moscow
      finally opened the way to fully reinstate our independence. Regardless of
      when the change occurred in various countries, the essential point is that
      we can no longer afford to fixate on 1989 or 1991, as though time has not
      moved on since then.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">Time has moved on, and at a
      tremendous pace. Estonia is a case in point. Four years ago, our economy
      was so tightly intertwined with that of the Soviet Union that many
      observers, both in the East and in the West, said that independence was
      not economically viable. Today, we have managed to shake off the vestiges
      of a command economy to the point of earning praise as one of the models
      of free-market reforms in the former East.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">I assure you that under my
      government, which has been in the driver's seat in Estonia since the
      middle of April, these free-market policies must and will continue. They
      have proven to be the only way to improve living conditions for our
      residents and have led to descriptions of Estonia such as that coined by
      Newsweek magazine as &quot;The Little Country That Could,&icirc; or, as
      others have said, as a kind of &quot;Wirtschaftswunder&quot; of the
      nineties.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">Our free-market policies have
      been rather successful. Four years ago, about 95% of our trade went East;
      today, the bulk of our foreign trade--some 62% of imports and 47.7% of
      exports--is with European Union countries. We have used a few foreign
      loans, not to prop up the economy but for capital investments, in keeping
      with our continuing policy of &quot;trade, not aid.&quot; We continue, of
      course, our efforts to increase exports, and they are growing. Foreign
      investments continue to double every six months, to the point that Estonia
      ranks third in direct foreign investments in Central Europe, just behind
      Hungary and the Czech Republic. Our currency is among the most stable in
      Scandinavia, and our foreign currency reserves have more than tripled
      since our national currency, the Kroon, was introduced during my first
      tenure as Prime Minister in 1992. We have balanced a state budget and have
      actual growth in the GDP. Our flat 26% income tax and full repatriation of
      profits for foreigners doing business in Estonia make us increasingly
      attractive to investors.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">Our progress in rebuilding
      democracy has been no less remarkable. In 1992, under my first government,
      we wrote and passed by referendum a new constitution to assure that
      Estonia would be a state based on the rule of law. During the nearly four
      years since we reestablished independence, we have succeeded in recreating
      state institutions responsive to the public and answerable to the
      constitution.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">That these efforts have paid off
      was demonstrated in March, when we conducted free and fair post-communist
      elections. The people voted overwhelmingly for staying the course of
      free-market reforms, but with greater attention paid to helping those
      sectors of society that need more assistance in adjusting to the new
      system. I am proud to say that no extremist groups, either from the Left
      or the Right, got into parliament. Just as important, Estonia's growing
      citizenry of Russian origin actively exercised the right to vote. In fact,
      the one Russian political party standing for elections was one of only
      seven parties to garner the minimum 5% to pass into parliament.</FONT></FONT>
    </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">This accomplishment pays tribute
      to our efforts toward building a fair and just nationality policy based on
      political participation for all who have demonstrated loyalty to the
      state. The cornerstone of this nationality policy is our citizenship law,
      which has been hailed as one of the most liberal in Europe.</FONT></FONT>
    </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">In March, while I was conducting
      talks toward forming my government, U.S. Vice President Al Gore visited
      Tallinn. While there, he too paid tribute to the success of our
      nationality policy by saying, &quot;History teaches us that national
      independence can in some places stimulate national chauvinism. Yet
      Estonia's fair implementation of its citizenship law and political
      participation of Estonian citizens of Russian origin show that Estonia is
      becoming a state rooted in law and tolerance, and based on modern civic
      values. In this demonstration of tolerance, Estonia is a model for the
      rest of the world.&quot;</FONT></FONT> </P>
    <CENTER></CENTER>
    <CENTER><B><FONT COLOR="#000000"><FONT SIZE="+1">THE FAST PACE OF CHANGE</FONT></FONT></B></CENTER>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">All of the changes I have just
      described illustrate my second point, which is that change has occurred
      rapidly. Perhaps the most recent graphic sign of this rapid change is
      Estonia's movement toward the European Union (EU). Last year, we concluded
      a very favorable Free Trade Agreement with the European Union that foresaw
      no transition period. I am proud to say that our Association Agreement
      with the European Union, which I signed last week in Luxembourg, is the
      first among those concluded between the EU and a Central European state
      that has no transition period.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">I have followed with great
      interest the press reactions to our European Agreement. Some observers,
      such as Michael St&uuml;rmer, who wrote on the topic in early June in the
      Financial Times, believe that our association with the EU poses a
      challenge to Russia, and thus we should slow down the entire integration
      process. I, however, tend to agree with the recent Wall Street Journal
      Europe, which noted that our association with the EU not only sends a
      strong signal that the Baltic States have taken their natural place in
      Europe, but also gives the EU a needed impetus to return to its core
      values.</FONT></FONT> </P>
    <CENTER></CENTER>
    <CENTER><B><FONT COLOR="#000000"><FONT SIZE="+1">NOW IS THE TIME TO
    CONSOLIDATE OUR GAINS</FONT></FONT></B></CENTER>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">This mention of core values
      leads me to my third point, which is that the time to consolidate the
      gains of 1989 and 1991 is now. The European Union and the Western European
      Union have understood this very well. I can assure you that the implicit
      security guarantees of association with the EU is certainly not lost on
      us.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">But much more can be done. Since
      the assumption is that the security of the Baltic States is in Europe's
      vital interest, it is in Europe's interest--and when I speak of Europe I
      am really speaking of the transatlantic relationship--to integrate the
      Baltic States into Western structures. It is absolutely fundamental to
      this argument that a gray zone, or a kind of &quot;no man's land,&quot; in
      Europe is an invitation for trouble.</FONT></FONT> </P>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">A colleague from another Central
      European country recently asked the rhetorical question: What do you do
      when you have a security vacuum? His answer was simple: You fill the
      vacuum with security. There are various ways to do so. One idea I have is
      to make greater use of confidence-building measures (CBMs), which is
      another name for transparency and openness. We need to go beyond measures
      such as the Conventional Forces in Europe Agreement to a full array of
      such means. Such CBMs would not only enhance security in our region, which
      is already on the front line of the European Union, but also strengthen
      security on the continent as a whole. It is important to remember that
      Baltic security is not what mathematicians call a constant-sum game, in
      which our closer relationship with Europe inevitably means a worsened
      relationship with Russia. On the contrary, our security would ultimately
      be good not only for Europe but for Russia as well.</FONT></FONT> </P>
    <CENTER></CENTER>
    <CENTER><B><FONT COLOR="#000000"><FONT SIZE="+1">CONCLUSION</FONT></FONT></B></CENTER>
    
    <P><FONT COLOR="#000000"><FONT SIZE="+0">Thus, we need to act now in
      order to maintain the ability to shape events, rather than to be shaped by
      them. Things change, and they change fast. We can help them move in the
      right direction only if we remain constantly engaged and keep our eye on
      the ball.</FONT></FONT> </P>
    
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