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Monday, June 09, 2008

why there is no veto on trade

In an effort to buy up the votes of the Irish farmers, Brian Cowen promised to "veto" any world trade deal that threatened to cut their spending. Various Irish journos got in touch to ask whether that would even be possible under the Lisbon Treaty.

Its a complicated issue, but here is our view:


As a leader in Le Monde noted on Friday, Cowen’s pledge to veto the Doha round to protect Irish farmers is nothing but an “empty promise”, because “an EU member state does not have a veto right in agriculture.”

What’s absolutely clear (and not disputed) is that core trade policy is made by majority vote. Everything to do with trade in goods and almost all services are just straightforwardly a majority vote (apart from audiovisual, education and health services, and Foreign Direct Investment). The treaty brings in QMV on FDI too, and gets rid of the few remaining exemptions in services.

The European Commission notes that the treaty “will extend the scope of the trade policy to include all foreign direct investments and makes it clearly an exclusive
competence of the Union.”

Under current arrangements, in some fields both the member states and the EU can negotiate trade deals, allowing member states to have their own trade agreements alongside those of the EU as a whole. For example, various EU member states have signed a number of Bilateral Investment Treaties with other countries around the world. Exclusive competence in this area would make such bilateral agreements impossible.

To make the point clear, the Lisbon Treaty deletes the clause in the existing treaty (Article 133.5 TEC) which states that EU trade policies “shall not affect the rights of the Member States to maintain and conclude agreements with third countries”.

Trade in health and education services, currently decided by unanimity, would also be affected – under the new treaty the EU would have the same powers over these
issues that it has over trade in goods.

The only remaining opportunities to appeal to unanimity under the Lisbon Treaty are these:

“in the field of trade in cultural and audiovisual services, where these risk prejudicing the Union’s cultural and linguistic diversity”


“in the field of social, educational and health services, where these agreements risk seriously disturbing the national organisation of such services”

In my view this is not even an emergency brake. Unless you can prove (to the ECJ) that a trade deal which includes a health or education services element would “seriously disturb the national organisation” of those services then the default position is a decision by QMV. In other words, if you wanted to stop a QMV decision then you would have to take a massive and potentially humiliating gamble on an appeal to the ECJ – you can’t even pull an “emergency brake” in the council here.

The Commission (in their retraction of what Europe Direct previously said) said that “The new treaty would remove some of these exceptions, making more coherent and homogeneous the Union's common commercial policy (Article 207 (1) TFEU). However, the requirement for unanimity for agreements in the areas of certain key services (e.g. cultural and audiovisual, social, education and health), intellectual property rights enforcement and investment will remain in certain circumstances (Article 207 (4), second and third paragraphs, TFEU).” [my bold]

This is the nub of our disagreement. I don’t think saying that “In certain circumstances” you could appeal to the ECJ is really the same as there being a “veto” at all.

Moreover, it is not clear that any WTO deal that might emerge from Doha would even include a deal on such services, which the Commission rather blandly assumes. These would be the most controversial elements of any trade deal – and Doha is moving towards a more cut down deal for goods trade rather than an all encompassing affair like the Uruguay round which launched TRIPS and did a lot on services.

So the few remaining tethers that stop trade deals from being an exclusive community competence are being cut away with Lisbon. And it isn’t even clear that the next likely contents of the next WTO round will require unanimity - even under the current rules.


Of course, in reality the obstacle to a WTO deal is nothing to do with there being one member state "vetoing" an ambitious offer from the EU - but a whole raft of protectionist member states with more than enough clout to block progress.


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