Sarkozy urges debate on EU trade preference

STRASBOURG, France, Nov 13 (Reuters) The European Union must debate ways of giving preferential treatment to domestic businesses to protect its economy from globalisation, French President Nicolas Sarkozy said on Tuesday.

''The word 'protection' must not be forbidden in European democracy,'' Sarkozy told the European Parliament in his first visit to the assembly since becoming president.

''We must be able to debate what could be a true system of community preferences. We should be able to do as much to protect ourselves as others do,'' he said, noting that Europe's trading rivals reserved parts of their public markets for home-grown small firms, and supported their farming sectors.

Sarkozy also called for greater efforts to build an independent European defence capability and modernise the Atlantic Alliance, saying France would propose an initiative on the matter during its EU presidency next year.

''Europe does not want protectionism, but it must insist on reciprocity. Europe does not want protectionism but it has the duty to ensure its own energy and food independence,'' he said.

Community preference was a doctrine applied at the birth of the EU's Common Agricultural Policy in the 1960s but has been overtaken by world trade liberalisation. The European Court of Justice ruled in the 1990s that it had no basis in EU law.

Sarkozy said last month's agreement on an EU reform treaty to replace the bloc's defunct constitution, defeated in French and Dutch referendums in 2005, had enabled the 27-nation bloc to overcome a longstanding institutional deadlock.

But he said leaders must address public concerns over ''globalisation and the commercialisation of the world'' to overcome a deep crisis of confidence in Europe.

''The institutional issue has been settled. Now we must settle the political issues. They must be raised without fear and debated without taboo,'' he said, urging discussion in areas spanning monetary, tax, trade, industrial and other policies.

''If other countries have a foreign exchange policy, why should Europe not?'' he asked, saying without naming the European Central Bank that institution's must not mistake independence for ''total irresponsibility''.

Addressing EU lawmakers on a day when France faced a new wave of disruptive transport strikes against his plans to phase out special retirement benefits for train drivers, Sarkozy vowed he would not be blown off course.

''The French people approved these reforms. I told them everything before the election so I could do it all afterwards.

I will carry out these reforms to the end. Nothing will blow me off course,'' he said.

REUTERS BJR RN1740