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The European Policy Centre held a Dialogue on 5 February to consider the "Convention and trade policy: reforming Article 133 to strengthen the Union?" The panel, chaired by EPC Director, Stanley Crossick, comprised Pascal Lamy, European Commissioner for Trade and Nick Clegg, MEP, Trade & Industry Spokesman of the Liberal Democrat Group in the European Parliament.

Summary

Article 133 of the European Community Treaty, which governs external EU commercial policy, must be reformed to adjust to new political and economic realities. The Constitutional Convention must turn its attention to reforming EU trade policy when drafting a new constitutional treaty. This could be done by strengthening the current Article 133. Despite the success of EU trade policy, the Union's international profile has been hampered by the failure to extend the full application of this article to trade in services and intangibles. The European Parliament should be given the right of democratic scrutiny on major trade agreements.

Trade policy and foreign policy

Pascal Lamy said that the European Convention had to focus on the way the EU conducted its trade policy in the drafting of the new European Constitution. He stressed that international trade relations will underpin the EU's future foreign affairs ambitions. Based on an analysis of the facts, he said it was now time to perform an acid test on what works and what does not work for Europe. The Commissioner pointed out that while the Union was recognised as being one of the world's key players in trade matters and a clear equal to the United States, the same could not be said for foreign and security policy, which simply did not work. As trade had been successful in increasing the international profile of the Union, it would be a serious mistake to leave it out of the debate on Europe's future, the Commissioner added, but the way trade policy was conducted needed to be reformed.

The Commissioner pointed to his so-called "Golden Triangle" as the secret of trade policy success. This combined the political will to work together with a relatively efficient and balanced decision-making mechanism. Both had led over time to a shared ideological platform on opening markets within a rules-based system. A clear division of work had developed over time with the Member States remaining in charge of most of policy implementation, while the Commission had the sole right to propose to open negotiations. "The Council decides whether to open negotiations, the Commission negotiates and the Council then approves the result by qualified majority voting (QMV)." Although this had been successful, the system was not perfect and concrete improvements were possible, said the Commissioner.

Democratic Legitimacy

Legitimacy was one issue that should have been resolved a long time ago. This did not come at the cost of efficiency. Having the full backing of the directly elected representatives of 350 and soon 450 million inhabitants clearly reinforced his position. The problem with the institutional machinery was the absence of a role for the European Parliament, said the Commissioner. He described this situation as "absolutely abnormal", pointing out that trade was the only common policy without any role in the Treaty for the Parliament. The current political agreement to consult MEPs was too weak, he said, and the opposite of the US approach where trade was a competence of the Congress. The Commission would continue the fight for what it did not obtain during the intergovernmental conference in Nice, a greater role for the European Parliament. It would push in the Convention and the next IGC for a clear involvement of the Parliament in trade matters, as well as for the application of co-decision for internal laws.

The Commissioner indicated that a second problem was how to keep an efficient decision-making system in a reunified Europe of 25 or 30 Member States. The key point was to make sure that QMV rather than unanimity applied to the entire trade policy. We still live with out-dated rules made at the time when trade was about goods, while it was now more about intangibles, he said. QMV was a way to prevent the paralysis of the system and get rid of the unjustified veto, he explained. It was even more important in trade because Member States could not act alone. The situation was different from single market issues where paralysis at Union level meant that the decision-making remained at national level. In trade, paralysis at Union level meant paralysis for all. He pointed out that QMV was the best protection for smaller countries to resist blackmail by bigger ones.

If we were serious about promoting a European way in world affairs then experience showed that the current intergovernmental system did not work and that the only way forward was to apply the Community method, said the Commissioner. "Do we want to remain a political dwarf, a payer and not a player?" he concluded.

Moving from unanimity in trade policy decisions

Nick Clegg put forward a strong case for increased democratic scrutiny by the European Parliament on major trade agreements. EU trade policy was currently overshadowed by two paradoxes, he explained. Firstly, the Union's overwhelmingly success in global trade issues was despite the absence of accountable legitimacy. What had become the EU's most effective and powerful policy area was still accompanied by technical obfuscation and a marked lack of democratic practice he said.

The second paradox concerned the Convention. Although the "European ship" seemed to be surging forward and gaining ever more powers, it had still left the issue of the democratisation of trade policy to one side. Members of the Convention seemed to find the sexy debate on whether Mr or Mrs CFSP was to be double-hatted or not so enticing that they didn't bother to look at something which was of concrete and urgent importance, he added.

He underlined the Commissioner's view that elements of trade policy still subject to unanimous voting in the Council had to be removed. This state of affairs continued only because highly territorially-minded trade departments in national capitals were worried about their loss of powers, said the MEP.

Mr Clegg also highlighted the political importance of communicating discussions on trade to the public. Any normal human being was not from "planet trade" and found it too obscure, he argued. This led to ill-informed and polarised public debate.

The MEP chose to focus mainly on the fact that it was Parliament's right to veto significant multilateral trade agreements reached on behalf of the Union by the Commission. He stressed that this was nothing new, as the European Parliament had in fact been given the right of assent after the Uruguay trade round in 1993. This was because of the creation, at that time, of the World Trade Organisation and the European Treaty required parliamentary assent when international agreements had institutional or budgetary implications. This situation, however, was unique and might not be repeated in the next trade round in 2004. It was therefore necessary to make the power of assent apply to Article 133 agreements, argued Mr Clegg. This would enhance legitimacy without sacrificing efficiency. The Commission would still be given a free hand to negotiate but in the knowledge that a parliamentary "sword of Damocles" was hanging over the process, a precise copy of the US model, he said.

Referring to the argument of some EU Member States that US trade policy was erratic and driven by irrational political winds, he said that this was what democracy was all about. The US arrangement was far superior because it was exposed to democratic forces. This would be key in tackling the intense debate over globalisation. If parliamentarians did not circulate among their constituents to explain the issue better, then campaign groups would fill the vacuum with alarmist nonsense.

Discussion

The question was asked whether Commissioner Lamy would be willing to take as proactive a role as a US President to involve parliamentarians in trade decisions. The example was used of President Clinton calling individual congressmen to ensure their vote for China's entry to the WTO.

In terms of accountability, the Commissioner replied yes. When issues had a lot of political importance then elected representatives must represent the views of society, he said. The only problem with the US Congress was that it had the right of initiative, which could lead to bad legislation, but nobody was proposing to give this right to the European Parliament, he added. The problem with Europe was that it still believed trade agreements were treaties and that treaty-making was the "prerogative of the king".

A contribution from the floor defended the role of national governments in keeping the debate on trade issues alive. There had been massive efforts by ministers to build support for the trade agenda in their own Member States. National parliaments also provided democratic consultation and scrutiny of government decisions. He added that UK Trade Minister, Patricia Hewitt, held the view that the role of the European Parliament should be revised at the next IGC and that complicated issues on trade in goods and services would have to be addressed.

Nick Clegg agreed that ministers and MPs were caught up in the debate but argued that they had been slow to understand that most issues were subject to EU-level governance. The world had moved on, he said, and now that national politicians did not have exclusive control over these issues, they should be concerned about parliamentary control at the EU level. "I totally accept that this control should be selective and targeted. We have never asked to micromanage EU trade policy," he said.

Commissioner Lamy added that the high level of democratic scrutiny in Westminster was not mirrored in other Member States. The way forward and the setting of competences must be kept simple, he said.

Another question asked what the Commissioner viewed as internal and external competences and what should be subject to QMV. Replying, the Commissioner said that unanimity would just not be possible after enlargement. If one state could use its leverage on trade decisions then we are lost, he stressed. Mr Clegg added that there was nothing rational about what was still subject to unanimity and it was only because individual Member States shouted so loudly on particular issues.

The Commissioner was asked whether the EU should have more competence to solve export problems on phytosanitary issues. This was an important question, replied Commissioner Lamy as it formed big part of how EU trade policy was perceived by the rest of the world. It was seen to be liberated in many areas, but at the same time inventing new substitute barriers on things like consumer protection and health. The competence of the Union on phytosanitary issues needed to be streamlined as there were differences in interpretation of the current legislation, he added. Mr Clegg said that this issue was one of the most controversial in trade policy. It would not be unjustified for developing countries to think that developed countries were using it for protectionist purposes. However, for the EU to have a more consistent approach, this would require a level of control by the Commission that could not be politically tolerated.

In response to a question on the Lisbon agenda to make Europe the world's most dynamic and competitive knowledge-based economy by 2010, the Commissioner said that, despite current difficulties, he was optimistic in the same way as he had been about achieving the single market when those targets had first been set.

Nick Clegg on the other hand argued that the goals would not be met. It was an illusion to think that targets set could be legislated for at an EU level. The vast bulk of the changes that had to be made were through microeconomic and structural reforms at a national level and here the picture was more pessimistic.

Conclusion

Summing up, Stanley Crossick said that EU trade policy was clearly a phenomenal success but that Article 133 of the Treaty had to be updated to reflect today's political and economic reality. The strength of the EU in all areas of external policy depended greatly on its strength as a trade block. The single market required a single trade policy, he said, and in order to achieve this, the European Commission should be given an exclusive mandate on trade across the board, QMV should be used in all cases, and the European Parliament must have the right of assent.