Trade policy making process

Prior to the 2009 Lisbon Treaty trade policy making under the CCP operated on the basis of what was known as the Community method. This has now been superseded by the Ordinary Legislative Procedure (OLP).²⁶ Prior to the start of trade negotiations the Commission first consults the member states, the European Parliament, various expert panels, and societal interest groups including business and

26 The major change which this has entailed has been the granting of joint decision making power over trade policy to the European Parliament.

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industry organizations.²⁷ Based upon these consultations a draft negotiating mandate is prepared which is discussed by the Trade Policy Committee (TPC).²⁸ Council authorization is currently primarily dependent upon a qualified majority vote (QMV) but it is generally preferred to establish a consensus as opposed to relying on an actual vote. ²⁹ The European Parliament (EP) plays no role in authorizing negotiations. It may only issue reports and recommendations in relation to proposed agreements. The Commission itself then leads the negotiations although it is required that regular consultation takes place between the Commission and the Council’s TPC. The Commission must now also report regularly to the EP’s International Trade Committee (INTA) during negotiations.

Once negotiations have been successfully concluded the final decision on whether or not to adopt an agreement rests with the Council where again although a QMV is generally required, it is preferred to work on the basis of consensus. In this regard Woolcock (2010: 8) states that ‘the established rules of the game in trade policy have been that the Council works until an agreement is reached that all can accept.’ Under the terms of the Lisbon Treaty the European Parliament must now also authorize all new agreements presented to it by the Commission.³⁰ The increased participation of the Parliament has had important implications for EU trade policy in that domestic interest groups can now seek to channel their influence through Parliamentary representatives in addition to directing lobbying directly towards the member state governments and the Commission (Woolcock, 2011: 8).

The delegation of authority from the member states to the Commission has proceeded in an iterative fashion as various treaties have updated the CCP and the extension of QMV has served to mitigate extreme positions and may be considered to have strengthened the Commission’s hand in trade negotiations (Nicolaïdis and Meunier 2002: 175; Meunier 2005: 8–9; Woolcock 2005: 247; Zimmermann 2007:

163). The 1987 SEA involved an important shift in decision making power. Prior to

27 In most cases, the Commission also engages in informal dialogue with prospective partners regarding the content of a proposed agreement. This is known as a scoping exercise.

28 This was known as the Article 133 Committee prior to the implementation of the Lisbon Treaty.

29 Prior to the Lisbon Treaty, agreements including issues such as services liberalization and intellectual property rights were officially subject to a unanimous vote and member state approval as they did not fall under exclusive EU competence .

30 Prior to the Lisbon Treaty the EP did have to approve certain trade agreements if they entailed budgetary implications or institutional creation. In practice this applied to bilateral and interregional PTAs as opposed to multilateral WTO agreements.

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this the ratification of external trade agreements depended upon a unanimous vote within the Council which effectively meant that each member state could exercise veto power. In relation to this Meunier (2000: 109) states that ‘when each member state possesses the power of veto, whether at the outset or at the ratification stage, the common position eventually reached is the lowest common denominator.’ The SEA implemented QMV for agreements covering trade in goods and therefore resulted in a considerable transfer of responsibility over trade policy making from the national level and meant that member states had lost their veto power over many trade issues. The Uruguay round of GATT negotiations broadened the multilateral agenda to include issues such as services and intellectual property rights (IPR);

however, there was disagreement between the Commission and the member states regarding competency over these areas.³¹ The 1997 Treaty of Amsterdam formally delegated responsibility to the Commission to negotiate agreements on services and IPR. The ratification of such agreements, however, still required a unanimous Council vote as well as the approval of the member states. The 2001 Nice Treaty modified this by only requiring a QMV Council vote for agreements covering these areas. Finally under the terms of the 2009 Lisbon Treaty exclusive competence was granted to the EU over not only services and IPR but also Foreign Direct Investment (FDI). Unanimous voting within the Council now only takes place in very limited specific circumstances.³² And a simple majority vote is taken in the European Parliament in place of individual voting within each national parliament.³³ A key issue to consider at this point is how the EU institutional environment as described above affects trade policy decision making.

A first perspective is that increased delegation has meant that, given the long running impasse in multilateral negotiations, the Commission has sought to further increase

31 This resulted in the issue being brought before the European Court of Justice. The Court decided that the under the existing framework the Commission and the member states shared competence over these new areas on the liberalization agenda (Young, 2007).

32 A unanimous vote in the Council is now only required under three circumstances: 1) where commitments on cultural/audiovisual services risk undermining the EU’s cultural and linguistic diversity; 2) where commitments on social, educational or health services risk seriously disturbing the national organization of these services and impeding member governments' ability to deliver them; 3)where unanimity is required for the adoption of internal rules.

33 Prior to the Lisbon treaty each member state parliament was required to approve so called

‘mixed-competence’ agreements which included provisions over which the member states and the EU shared competence. The only remaining areas of mixed competence are those relating to non-trade-related intellectual property rights and issues linked to transport policy.

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its competence in a functional sense by proposing agreements with as broad a range of partners as possible and by seeking to incorporate provisions on a wide range of trade and trade related issues in proposed agreements (Aggarwal and Fogarty, 2004b:

10-11; Meunier, 2007: 908). The extension of greater responsibility over many aspects of trade policy to the Commission since the 1990s has indeed coincided with both a greater number of PTAs being pursued as well as increased attempts to utilize trade policy as a mechanism for the fulfilment of a broader range of objectives.

Peterson and Bomberg (1999: 104) argue for example that during the 1990s agreements with partners in different regions were championed by the various Commissioners in the external relations directorates as a way of increasing their own competences.

While the Commission does not have the final say on trade agreements the most logical manner in which it can extend its own bureaucratic competence is by seeking to launch as many negotiations as possible and attempting to iteratively broaden the range of issues which these agreements address. Where interregional PTA negotiations have not succeeded therefore the logic is that it has been increasingly in the Commission’s interest to launch bilateral level negotiations in order to maintain momentum. It should also be emphasized that the Commission alone holds the power to propose a trade negotiating mandate and this agenda setting capability may be considered to endow it with great leverage over trade policy making (Garrett and Tsebelis, 1997; Kerremans, 1996; Pollack, 1997).

The broadening of the EU trade policy agenda and the extension of competence to the Community level has, however, created obstacles as well as opportunities for new trade agreements. Elsig (2002: 205) points out that the ‘CCP has often been characterized as a stronghold of the Community, yet a continuous reluctance on the part of the member states to grant the Commission the necessary autonomy to negotiate on behalf of the EC has been noticeable since the very beginning.’

Especially as more sensitive issues such as services and investment have been brought under exclusive EU competence, the friction between the domestic and supranational level has intensified. As the trade agenda has evolved to include new issues, which go beyond the flow of goods across borders, ‘difficulties to delineate responsibilities became more acute given that this new trade agenda now involves

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key policy areas deeply rooted in the domestic policy-making processes’ (Jordana and Bianculli, 2007: 393).

Despite the fact that institutional changes in terms of trade policy making have shifted greater levels of competence over trade policy to the Community level, many new trade issues provoke strong domestic political economy responses and as a result trade policy has become more controversial and politicized in recent years (Brülhart and Matthews, 2007: 922). In trade negotiations at all levels domestic political constraints have in many cases hindered the EU’s ability to accede to the demands of its negotiating partners in this regard. A key demand of developing countries has been for the reduction of EU agricultural subsidies in return for the opening of services and procurement markets. Despite an overt desire to achieve such market opening the Commission has generally been unwilling to make concessions which would result in agreements being rejected by the Council and the Parliament. In the same manner the Commission will not present agreements for ratification which do not meet the deep WTO-plus liberalization commitments demanded under the Global Europe strategy. Domestic interest groups enjoy liberal access to the EU institutions and the Commission in fact actively seeks out input from these groups as part of the policymaking process in order to craft agreements which will be deemed acceptable at the ratification stage (De Bièvre and Dür, 2005;

Gerlach, 2006).

The extent to which the domestic political economy constraints faced by the Commission can serve to impede the conclusion of interregional AAs will be discussed in detail in the case study chapters. In addition, it has become apparent that it is in bilateral level negotiations with individual countries that the EU finds it has the greatest leverage to achieve its objectives while having to make the minimal level of concessions in return. From this perspective bilateral PTAs have increasingly come under consideration in response to demands from domestic interest groups rather than simply as a result of independent Commission preferences for such agreements.