European Union Essay, Research Paper

The Delegation of Trade Authority in the EU

Even though, for the past several decades, member states of the European Union (EU) have been derelict with their power to act as independent players in international trade negotiations, they have recently begun to recapture some of their lost trade sovereignty. (Kennett 1996) Neither the European Court of Justice 1994?s opinion, nor the 1997 formal reform of trade policy process at Amsterdam delegated full negotiating power to the Commission over the so-called, new trade issues of services and intellectual property. Instead the member states accepted a hybrid form of decision-making to enable impromptu, rather than a structural, per se, delegation of jurisdiction. As such, this shows a shift in the perceived trade-off between economic interests and ideological prejudice on the part of key member states.

The question now arises as to who speaks for Europe? History has shown that there has been a sharp difference between political and economic realms in regard to Europe. In terms of international politics, member states speak for themselves. Yet, in contrast to the international political scene, international trade in the European Community was granted exclusive competence. (Weiler 1991) Whether it is through bilateral, regional or multilateral trade negotiations, Europe communally speaks with one voice and more importantly negotiates through one agent, that being the European Commission.

It seems as though the ?single voice? regarding trade policy is more crucial now, more than ever, for Europe. The end of the cold war accelerated the shift of the focal point of competition from security to economics. Economic competition on a global scale is not based on market dynamics, but on the capacity of the states to utilize their own markets as effective negotiating pieces in global trade wars. Meanwhile, trade matters are becoming more political with the blurring of foreign policy and commercial tools in the manner of diplomacy. The new trade agenda touches upon the areas that are part of the domestic social fabric and they then therefore are most sensitive to external interference.

As the longest and deepest integrated policy in the EU, external trade composes a critical test for the impending debate over the apportioning of power between the center and the states. The idea of ?common voice?, ?common interest? and ?common destiny? are in and of themselves linked. Therefore, whether a policy entity can project congruity of purpose externally is a key test of the degree of integration between its constituting elements. (Denza 1996) Above all, the debate over trade authority has been a reflection and a test of a larger ideological battle over European integration. The member states? position over this issue has been a function of both their distinct trade interests and their ideological propensities regarding sovereignty transfers. The weight between these two motivations has shifted in the past decade, for both structural and conjunctural reasons. This has reflected itself in a shift between economic and sovereignty concerns over the years.

Since the signing of the Treaty of Rome, European integration has consistently been that of progressive expansionism of over an even broader range of policy areas, from research and development to the environment to the Single European Act in 1986 to the Maastricht Treaty in 1991. Nonetheless, most of these areas have not been fully transferred to the level of the EC. Conversely, a few policies have been under Community amenability from the beginning.

When it came to trade, the Treaty of Rome was a revolutionary document. It not only contained broad injunctions for achieving free trade internally, but it also granted the new supranational entity an external personality with the authority to elaborate, negotiate and enforce all aspects of trade relations with the rest of the world. (Devuyst 1995) In practice though this was done through the establishment of a common commercial policy based upon three principles. A common external tarrif, common trade agreements with third countries and the uniform application of trade instruments across member states, made up these three principles. Due to two central rationales the founding member states began to delegate trade on a collective level. Firstly, the history of trade policy in advanced industrial democracies, like the United States, showed that such delegation helped insulate the policy-making process from domestic pressures, which in turn promoted a more liberal international trade order. The second rationale was, a single voice in trade policy was expected to facilitate the conclusion of trade agreements with third countries and increase external influence.

Until the Amsterdam Summit the Treaty of Rome?s original wording, which granted the Community exclusive competence in trade policy, remained unchanged. (Devuyst 1992) The provisions determining the trade policy-making process delegated authority from the individual states and their parliaments to the assembly of European states, acting collectively through the Council of Ministers. This approach can be understood in classical principal-agent terms, where the member states, as principals, have delegated their authority to conclude trade agreements to the European Community, acting as the agent. (Pollack 1995) It is apparent through this approach that the member states represent the ultimate authority.

The conduct of trade policy in practice reveals a second level of delegation. In this instance the principal was the Council of Ministers, to the agents, which is the European Commission. The Commission then proceeds to elaborate proposals for the initiation and content of international trade negotiations. The Committee, which is made up of senior civil servants and trade experts from other states as well as Commission representatives, examines and amends Commission proposals on a consensual basis, before transmitting them to the Committee of Permanent Representatives (COREPER). These proposals subsequently make their way to the General Affairs Council, which in turn hands out a negotiating mandate to the Commission. In theory the mandate is agreed upon on a qualified majority basis. Though, in practice, member states have always managed to reach consensus on a common text at this stage of the process, much like most other policy making in the EU. Commission officials, which represent the EU under the authority of the Commissioner in charge of external economic affairs conduct international trade negotiations, within the limits set by the Council?s mandate. Member states are allowed to observe but not speak in GATT plenary sessions. At the conclusion of the negotiations, the Council approves or rejects the trade agreement. The European Parliament has little say in this process; it is informed on an informal basis and is consulted upon by before ratification.

There are two inherent questions which emerge from this delegation of authority, firstly, how much control does each state retain over trade policy and how much control do the member states, as a collective, retain over its conduct by the Commission.

In regard to the original question of who speaks for Europe, there need not be an assumption that the answer is unequivocally linked to the technical issue of competence. In terms of competence, we refer to mandate, representation and ratification. There must be a distinction between four stages in the negotiation of international agreements: (1) the design of a negotiating mandate; (2) representation of parties during negotiations; (3) ratification of the agreement once negotiated; (4) implementation and enforcement of the agreement once it has been brought into force. Whether the Community is perceived to speak with ?one voice?, as stated before, is most relevant during the negotiating but is also affected by shared expectations about the ratification stage.

During the two decades following the Treaty of Rome, the Commission successfully negotiated on behalf of its members two major trade rounds under GATT, as well as countless bilateral trade agreements. (Devuyst 1995) When the new issues, such as intellectual property, crept up into the international trade agenda in the ?80?s, the foundations of the Community?s trade competence began to get questioned. Due to the expansion of the world trade agenda onto policies traditionally not considered at the ?border?, but rather, ?inside the state?, forced an explicit internal EU debate on the issue of competence. Additionally, the Uruguay round was designed to introduce new issues to hand, such as intellectual property and trade related investment measures including services. These services ranged from the telecommunication infrastructure to professional accreditation and banking, these areas which had in the past fallen under domestic jurisdiction and where concerns about externalities, consumer protection and the public goods were generally more acute than for trade in goods. Therefore, the issue of trade delegation came to be framed as follows, who, of the member states or Commission, was responsible for negotiating these new issues depended on one?s interpretation of the term trade policy, which was used in the Treaty of Rome. A political compromise seemed necessary, the Ministeral declaration launching the Uruguay Round at Punta del Este in 1986 was approved both by the Council and by member governments, postponing the question of competence until the end of the round. (Arnall 1996) Regardless of what the outcome was to be, the fact remained that there would be unity of representation throughout the negotiations.

The temporary delegation deal did not go smoothly throughout the round. The long-standing dispute over competence crystallized over the EC-US ?Blair House Agreement? on agriculture, negotiated by an autonomous Commission in 1992 after many years of deadlock. Yet, once the US negotiators leaked details of the agreement, France declared its absolute opposition and in turn rallied the support of several other states including, Germany. The French Prime Minister vowed to fight not only the content of the agreement but the institutional conditions under which it had been reached. In addition, the Prime Minister told the EU Commission in 1993 that they do not trust Britian, and that the British role was that of servant to the Council. Although, after much negotiating, diplomacy and difficult exchanges, the agreement was renegotiated with concessions to France?s position. Nonetheless, the Blair House crisis represented something of much more significance; it represented a turning point in the delegation of negotiation of authority to supranational representatives.

The next issue regarding the Round was debate amongst member states as to whether or not they should sign the Final Act individually or let the Commission do it on their behalf. They eventually came up with an EU Compromise; whereby, Greece, the Council President and External Trade Commissioner Leon Brittian, signed the Act in 1994 on behalf of the Community, while representatives of each member state signed in the name of their respective governments. In a mixed batch sort of way the individual member states asserted their competence symbolically, while not requiring parliamentary ratification.

Additionally, one of the Uruguay Round?s outcomes was the formal placement of GATT under the umbrella of the then new World Trade Organization (WTO). The question of membership then caused an unavoidable legal challenge for the EC, even though the rest of the world left it up to the Europeans to decide how it would be settled. The EC never formally substituted the member states in GATT, whose creation proceeded the creation of the Community. Since the GATT was only a proverbial agreement with signatories but no members, because the question of membership had never arisen. (Denza, 1996) Therefore, for all intents and purposes the EC, represented by the Commission, had been accepted by the other GATT partners as one of them. More so though is the fact that formally replacing the states by the EC would have a cost, since the individual voting rights of the member states in GATT would give way to a more revolutionary, single vote.

The creation of the WTO, with a broader trade agenda than GATT, forced the issue of trade authority to the forefront. (Devuyst 1995) Several of the member states were reluctant to give up entire sections of their trade policy; they insisted on being granted their own individual competencies, with respect to the new issues of intellectual property and the such, arguing that these were not covered under the original Treaty of Rome.

The bottom line remains that these member states picked their sides regarding the competence debate as a function of their personal preferences on the lines of two dimensions- economic and ideological preferences. Regarding the economic front, greater competitiveness in these new areas called for liberal trade policies, which, in turn, seemed best served by a Community exclusive trade competence, while on the ideological front, a country?s position is determined by a combination of its overall attitude towards delegation of sovereignty at the EU level, and by its degree of trust in the Commission. If, a states preferences are aligned similarly along both dimensions it is easy to predict its side in the debate over competence. A state that is both uncompetitive and sovereignty-conscious will opt for restriction of the Community?s external trade competence, and vice versa. If a states preferences contradict each other along these two dimensions, then its side in the competence debate will be determined by their relative weight.

Member states who are opposed to exclusive competence fall under three broad categories. It is fair to say that France was at the helm of the sovereignty camp for ideological reasons, attributed to the fact of its strong support for aggressive liberalization during the Round and its high competitiveness when it came to services. Similarly, it is hard to understand why England joined this sovereignty camp for reasons other than the ideological. Britian had traditionally been one of the most liberal states in the EU, often battling against other countries veto?s when it came to liberalization, especially in the industries of financial and telecommunication services. Germany on the other hand fits into the second category of states falling into the anti-exclusive competence c amp for both economic and ideological reasons. More than any other EU state Germany?s regulators were highly protective of their powers. As well, during the ?90?s the trade ministry had not been converted to the free trade gospel in the area of telecommunications and banking. Ironically enough these are areas which had not been liberalized yet internally and did not seem competitive internationally. Nonetheless Germany was adapting to changes in the world economy with increasing competitive service industries. Therefore, it was above all else on ideological grounds that Germany was resisting transfer of sovereignty. Finally, there were those countries which were motivated by sectored concerns. Portgual, for instance opposed the Commision because of its handling of textile issues during the Uruguay Round.

On the other side of the spectrum, irrespectively of their economic competitiveness in services, countries such as Italy, Belgium and Ireland, with traditional pro-integration stances, backed the Commission fixedly. These countries recognized that without the negotiating umbrella of the whole Community, they would always be at the mercy of the EU?s big trade partners