The EU and the adoption of Free Trade Agreements (FTAs): heading towards a vetocracy?

Symbolic One Against All All Against One Discussion

 by Francisco Pereira Coutinho, Professor at the NOVA Law School, UNL

Few would disagree that signing free trade agreements (FTAs) is one of the raisons d ´être of the European Union (EU). As the United Kingdom will probably discover after leaving the EU, the bargaining power of a State, even a member of the G8, is far inferior to that of the world largest economy, which is also the one that most imports, exports, receives and sends foreign direct investment. Ever since the Rome Treaty (1957) granted ius tractum to the European Economic Community, dozens of FTAs were adopted. The latter are pivotal to the European economy: around 31 million employments in the EU (1/7 of the total) depend, direct or indirectly, from the external trade.

The Lisbon Treaty broadened the legal capacity of the EU to adopt ‘new generation’ FTAs, which are trade agreements which contains, in addition to the classical provisions on the reduction of customs duties and of non-tariff barriers to trade in goods and services, provisions on various matters related to trade, such as intellectual property protection, investment, public procurement, competition and sustainable development (ECJ, Opinion 2/15, para. 17).

The Comprehensive Economic and Trade Agreement (CETA) is a ´new generation’ bilateral FTA that was signed on 30 October 2016 between Canada, of one part, and the EU and the Member States, of the other part. It is expected to increase EU-Canada trade in goods and services by 23% and boost EU GDP by about €12 billion a year.

FTAs have been concluded by the EU without raising particular media attention (v. g. the  EU-South Korea FTA), but the adoption of CETA – and particularly the TTIP (Transatlantic Free-Trade Agreement), an EU-US FTA that is currently under negotiation – is being ferociously questioned by anti-globalization movements. The CETA and the TTIP are said to foster the dilution of social, environmental and health standards, and of being a safe conduct for multinationals to escape the jurisdiction of national courts.

One of the main topics of contention regards the legal qualification of CETA. The European Commission contended that CETA is an agreement that falls within the sole competence of the EU, and therefore can be concluded by the EU alone with a third party. On June 28, 2017, the President of the European Commission informed the Heads of State and Government of the Member States that the Commission would request the approval of CETA as an EU-only agreement.

Such a proposal would confine national parliaments to a political control of the intervention of national governments in the Council. It thus came as no surprise that twenty-one representatives of national Parliaments declared, under the mechanism of political dialogue, that both the CETA and the TTIP include provisions that relate to domains that fall within the competences of the Member States and, for that reason, they have to be qualified as mixed agreements. The Ministers of Commerce of the Member States reached a similar conclusion on the Council meeting of May 13, 2016.

A mixed agreement is an international agreement that, for legal or political reasons, is concluded by the EU and by all or some of its Member States with third States and/or international organizations. They are a “pragmatic creature”  (AG Sharpston, C-240/09, para. 56) that allow foregoing legal questions related to the delimitation of external competences between the EU and the Member States, at the same time that secure the Member States more visibility in the international relations.

However, mixed agreements follow an intergovernmental decision method which determines, in the best case scenario, a substantial delay in their entry into force, and, in the worst, a veto to their approval that may damage the external image of the EU. While an EU-only agreement is usually concluded within a few months, after being approved by the European Parliament and the Council, the entry into force of a mixed agreement is conditioned on the conclusion of ratification processes in the Member States. This will entail approval by 38 national and regional parliaments, and in some Member States the submission of the international agreement to referendum (popular petitions calling for a referendum on CETA are already on the way in Austria and in the Netherlands).

On 5 July, 2017, the European Commission bowed to the pressure of the Member States and decided to qualify CETA as a mixed agreement, as this was the only path that could secure a fast signature and provisional entry into force of the agreement (point 2 of the proposal for a Council Decision on the signing on behalf of the European Union of the Comprehensive Economic and Trade Agreement between Canada of the one part, and the European Union and its Member States, of the other part).

The problem is that the “guardian of the Treaties” does not have any political leeway on the choice of the form of approval of CETA. This is a constitutional question related to the delimitation of competences between the European Union and the Member States. After the decision of the Court of Justice on the FTA negotiated between the EU and Singapore (Opinion 2/15), it became clear that CETA had to be approved as a “mix agreement”, as it includes matters, albeit of limited scope, that fall under shared competences between the EU and the Member States.

The ECJ´s Opinion 2/2015 also confirmed that the EU has a broad competence to negotiate and approve new generation FTAs as EU-only agreements. It is not however predicable that that will happen in contentious FTAs such as CETA or the TTIP. If the Member States agree on the need to ratify these agreements, it may suffice to request the Commission to include in them provisions that fall under the exclusive competences of the Member States or shared competences with the EU [Article 218 (4) TFEU], or simply approve them as “false mixed agreements” (agreements that fall under the exclusive competence of the EU, but for political reasons are approved as mixed agreements). Such an approval would require unanimity in the Council [Article 293 (1) TFUE], as it involves amending a Commission proposal, but risks creating an institutional conflict: the Commission may respond by using the “atom bomb” of withdrawing the proposal for an agreement.

Two recent examples show that the Union is transforming itself into a vetocracy in what regards the conclusion of international agreements: the first regarded the rejection in a referendum held in the Netherlands of the EU/Ukraine association agreement; the second was the threat to the signature of CETA made initially by Bulgaria and Romania and later by the Belgium regional parliament of Wallonia. The odds are up that the prophecy of Commissioner Mallström may well be fulfilled: “if we can’t make (a deal) with Canada, I’m not sure we can make (one) with the UK”; or, we may add, with the USA or any relevant State in current context of economic globalization.

Picture credits: Symbolic one against all… by Max Pixel.

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