The Treaty of Lisbon: Implications for EU trade policy

15 December 2009

The Treaty of Lisbon (ToL) entered into force on 1st December 2009.  This article first summarises the three main changes the new treaty brings about with respect to external trade and then considers how these might affect African, Caribbean and Pacific (ACP) states.  As much depends on how the ToL is implemented, the real implications for the ACP must remain speculative at this stage, but ACP policy makers should probably think more about the role of the European Parliament and what their interests are in a common EU investment policy.

Clarification of EU competence

The ToL (Art 207)[1] streamlines EU trade policy by confirming that all key aspects of external trade including all services[2], trade related intellectual property rights and, most importantly, foreign direct investment (FDI) will henceforth come under exclusive EU competence.  Exclusive competence means the formal basis for decision making is qualified majority voting.  It also means that mixed agreements (those parts of agreements that include EU and Member State competence) will become marginal.

The extension of exclusive competence to FDI means that the EU can now negotiate comprehensive agreements covering trade and investment.  In the short term existing bilateral investment treaties (BITs) between the EU Member States and third countries are likely to be grandfathered and thus remain valid. But the EU can be expected to aim to develop a model EU investment agreement for application in future free trade agreements (FTAs) or EU bilateral investment treaties (BITs).

An increased role for the European Parliament (EP)

The formal position of the EP in EU external trade policy is enhanced in three main ways. First, Article 207(2) means the Council will now have to share powers under the Ordinary Legislative Procedure (equivalent to the old co-decision making) to adopt measures that define the framework for implementing the common commercial policy (i.e. EU legislation concerning external trade) with the EP.  Up to now, the Council has determined EU regulations implementing trade such as anti-dumping rules.  From now on autonomous trade measures such as Generalised System of Preference (GSP) rules will therefore be adopted jointly by the EP and Council.  The EP does not, however, have any direct role in implementing trade instruments. This will remain primarily a duty of the European Commission, but with the Council and possibly the EP exercising some control.  Exactly how the Council will control the European Commission in the implementation of trade instruments remains to be decided.

Second, Art 207 enhances the ability of the EP to influence the Commission during trade negotiations.  The International Trade Committee (INTA) of the EP will be provided with information on the same terms as the Council's Trade Policy Committee (the former Art 133 Committee).  The latter appears, however, to retain more power in that it will also assist the Commission, whereas the Commission is only required to report to the INTA committee.  The ToL does not grant the EP powers to authorise the EU to engage in trade negotiations.  Arts 207 (3) (ex Art 133) and 218 (2) ToL (ex Article 300 TEC) clearly state that the Council, on the proposal from the Commission, retains power to authorise the opening of negotiations.  Therefore, in contrast to the role of the US Congress, the EP is not empowered to authorise and thus set the objectives of trade negotiations.  The EP is, however, seeking a greater say in shaping the negotiating aims by setting some preconditions for its ultimate consent.  This is likely to feature in the new Inter-Institutional Framework Agreement that will have to be adopted post ToL.

Third, the ToL enhances the EP's role in ratifying trade agreements.  Arts 218 (6) (a) (v) adds a further criterion requiring the EP to grant its consent (previously assent) if an agreement covers fields to which OLP applies.  As trade is now covered by the OLP, this appears to confirm that the EP must give its consent before all trade agreements are adopted.

Inclusion of trade under the common external action of the Union

Article 205 brings EU trade policy into the common EU external action, together with development, environmental and foreign policy, as well as humanitarian assistance. The aim here is to promote greater coherence across the range of EU external policies.  Article 218 (3), which provides a common basis for negotiating all external policies, gives the Council the authority to nominate either the Commission or the High Representative of the Union for Foreign Affairs and Security Policy (HRFSP) as EU negotiator.  In practice the HRFSP is likely to negotiate foreign policy issues and the Commission to continue to negotiate trade agreements.  It is noteworthy that the trade officials who hold the EU's institutional memory and expertise on the substance of trade policy will remain in DG Trade and not move to the European External Action Service (EEAS) that will serve the HRFSP.

Implications for ACP states

In the short term there are unlikely to be radical changes that affect ACP states.  The confirmation of the EP's powers to grant ‘consent' for all trade agreements does not really change much since the EP would in any case have been asked to ratify EPAs, as well as any Doha Development Agenda (DDA) agreement.  But henceforth the EP will also share powers with the Council when it comes to any changes in autonomous trade policy instruments, including the GSP.

There are three areas when it comes to the impact of the ToL on decision making: the degree to which the INTA Committee becomes an integral part of the EU trade policy process, the arrangements for implementing EU trade law, and whether the amalgamation of trade with development, environment and foreign policy contributes to coherence across these policies.

In the medium term ACP governments will have to recognise, more than some have perhaps in the past, that they will have to work with all three EU institutions that shape trade policy: the European Commission, the Council and the European Parliament. Another medium term development to watch is work on a model EU investment agreement.

Author: Steve Woolcock is Professor and Head of the International Trade Policy Unit at the London School of Economics and Political Science (LSE). He can be contacted at : s.b.woolcock@lse.ac.uk

[1] References to treaty articles which can be found in ‘Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union'  Official Journal C 115 9 May 2008.

[2] There remains scope for member states to have recourse to unanimity in decision making when agreements ‘risk prejudicing the Union's linguistic and cultural diversity' or ‘seriously disturbing the national organisation of such services and prejudicing the responsibility of Member States to deliver them.'

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