The Republic can teach the rest of the world a lot about how a small country can be an influential player in the world economy and at the same time benefit from being part of the European Union, ambassador John Bruton, head of the European Union's delegation to the US, said.

Speaking yesterday at a lunch in Dublin hosted by the American Chamber of Commerce, the former taoiseach said that by opening up its workforce to other members of the EU, Ireland's economy had benefited significantly.

Following the accession of 10 new countries to the EU in May 2004, Ireland was one of only three nations to open its borders to workers from the new member states.

Mr Bruton said that without these new workers, house prices in Ireland would be twice the price they are now, because of the large numbers that are employed in the construction industry, and shop prices would be about 20 per cent higher.

"I think other countries should look at us and use us as an example," said Mr Bruton, adding that even though Ireland was a small country, it still had an important role to play in the EU and in the world because of its strong relations with the US.

"Being in the EU has liberated us from dependency on one market," he said. "[ It has] liberated us from insular thinking and enabled Ireland to take its place among the nations of the world as a shaper of that world, not as a fugitive in that world."

Mr Bruton also spoke of the important relationship between the EU and the US, saying that by working together the two unions can bring about significant change. "If the EU and US agree, other countries follow," he said.

However, he also emphasised the importance of the EU remaining united.

"If we approach the US separately, only two or three EU countries would be taken seriously, and the rest of us would count for little," he said. "Together, as 25, we will be taken seriously, including small countries like Ireland."

Also speaking at the lunch, Dr Fraser Logue, president of the American chamber, emphasised the important relationship between the US and Ireland, but urged businesses not to rest on their laurels.

He said it was essential that the Irish economic environment remained attractive to foreign businesses, something that would become increasingly difficult with increased competition from eastern European countries which, with their low-cost environments, were very attractive to foreign investors.