EUROPEAN UNION WORLD

EU Trade Scheme will help world's poorest countries

European Union - Generalised Scheme of Preferences (GSP)

Asia, Latin America, and generalized preferences

Britain, on joining the Community, managed to secure satisfactory terms for Commonwealth countries from Africa, the Caribbean, and the Pacific. But no special arrangement was agreed for the Asian members of the Commonwealth-India, Pakistan (which then included Bangladesh), Sri Lanka, Malaysia, Hong Kong, and Singapore-most of whose exports had entered Britain tariff-free under Commonwealth preference. The damage was limited, however, because in 1971 the Community was among the first to adopt a Generalized System of Preferences (GSP), according preferential entry to imports from almost all Third World countries that did not already benefit from the Lome Convention or the Mediterranean agreements; and this reduced the discrimination against most Asian and Latin American countries. The system was less favourable than it may sound because for ‘sensitive’ (that is, the more competitive) products there were quotas limiting the preferences to quantities fixed in advance for each product and each member state. But the generalized preferences nevertheless helped to strengthen links with less-developed countries.

While the margins of preference that the GSP affords less-developed countries have declined along with the reduction of the general level of tariffs, their links with the EU through its aid programmes have become increasingly important. These amount to some €10 billion a year, including both humanitarian aid and the development aid for ACP countries and the ENP. The Union has also concluded bilateral trade and cooperation agreements to strengthen its links with major developing countries, including India, Mexico, and Brazil; it has agreements with regional groups such as ASEAN (the Association of South-East Asian Nations); and since Portugal and Spain joined the Community in 1986, their special links with Latin America have been added to those of other member states in Africa and Asia.

While the economic impact of the agreements, preferences, and aid can hardly be measured and may not have been very great, the Union has gained political credit which may be of help in the future development of its relationships with Asian, African, and Latin American countries.

Money

Whereas its common tariff had made the Union a trading power equivalent to the US, before the euro it had no monetary instrument that could become the equal of the dollar in the international monetary system. The challenge to American hegemony was one of the motives behind the long-standing French support for a single currency. The fluctuations of dollar exchange rates were uncomfortable for other member states too. The dollar’s weakness first disrupted the attempt to create a single currency in the early 1970s, then spurred Europeans into taking the first major step of monetary integration with the establishment of the European Monetary System in 1979. In the 1980s the US policy of high interest rates, designed to counter inflation, provoked a debt crisis in many developing countries, restricting their development for up to a decade.

So the Union has not yet made full use of the opportunity that the euro offers to replace American hegemony with a more equal relationship, such as the common commercial policy has long since done with respect to trade.

Security: peacekeeping and climate change

American hegemony in defence will, however, remain unchallenged for as long ahead as can be contemplated. Not only would Europeans have to undertake vast expenditure in any attempt to become independent of American strategic power, but the force thus acquired would also have to be controlled by a solidly established democratic European state with a number of years of reliable decision-taking behind it. So Europeans continue to depend on NATO’s American-led strategic shield; and their efforts  in the field of defence will be mainly to contribute to peacekeeping and peacemaking, particularly in actions sponsored by the United Nations. For defence of the Union’s territory against major threats, Europeans will continue to depend on American protection.

It would be unwise to assume that such protection would never be needed, in what is becoming a multipolar world in strategic as well as economic terms, and where a growing number of states have weapons of mass destruction. Military threats to the Union’s interests could, moreover, emerge with which the Americans may be unable or unwilling to deal. So the Union is likely to continue building its defence capacity as well as to keep the alliance in repair, while at the same time using its soft power to further the development of a safer world.

The Union did the development of its military activities without much delay, following the internal divisions during the build-up to the American intervention in Iraq.

In 2003, the European Council unanimously approved an EU strategy to strengthen security around the Union and in the international order. In 2004, the NATO force in Bosnia was replaced by the EU force of 7,000 troops, with NATO assets and capabilities; and smaller but significant operations were undertaken in Georgia, Macedonia, and the Democratic Republic of Congo-the latter a precursor of the project for establishing battle groups which was launched in the same year. By 2006, the Union sent a peacekeeping force of some 8,000 troops to Lebanon after the war there between Hezbollah and Israel. Since 2008, the EU has also provided substantial resources to combating piracy in Somalia with its Atalanta mission.

Thus the Union continued creating a significant capacity for military contributions to peacekeeping and peacemaking, which is its capacity to contribute to the civilian elements of peacekeeping, together with its experience in assisting the building of democratic states. One example, which can follow directly from a successful military mission, is the police missions, such as the Union has provided in Bosnia, where in 2003 it took over from a UN Police Task Force, followed by others in Macedonia, Democratic Republic of Congo, and Palestinian Territories. More broadly, it has much experience of assisting with the development of political, judicial, and administrative institutions, and the structures of civil society, particularly among Central and East European states preparing themselves for accession, as well as in the West Balkans and farther afield; and this has great potential importance for wider application in a world in which failed or failing states can be a serious security risk, while solidly based democracies can contribute much to stable international relations.

The environment is also a vital aspect of security, with climate change among the gravest threats to the welfare, and perhaps the lives, of the world’s people; and the Union has made the major contribution to international efforts to deal with it. In 1986, when it had become evident that chlorofluorocarbons (CFCs) could destroy the ozone layer and thus endanger life on Earth, the EC succeeded in breaking a deadlock in negotiations for the Montreal Protocol to the UN Framework Convention on Climate Change (UNFCCC), thus halting the degradation. Then in 1997 the Union played the leading part in the negotiations for the UNFCCC’s Kyoto Protocol to stem the emissions of carbon dioxide and other greenhouse gases, which are generating a potentially disastrous degree of global warming. Despite intractable American resistance to targets as well as to the assistance required by developing countries for the necessary technological transformation, the EU ensured that there was agreement on the target of cutting emission by 8 per cent below 1990 emissions by 2012. It also secured sufficient ratification's, in the teeth of energetic American opposition, for the Protocol to enter into force in February 2005; and the final ratification required was that of Russia, which appears to have been encouraged by the Union’s use of an instrument of its common commercial policy, as the EU almost simultaneously reciprocated with its formal acceptance of Russia’s coveted entry into the WTO.

Having concluded that global emissions need to be cut by 60 per cent by mid-century and adopted that target for its own emissions, the EU has a compelling interest in securing similar commitments from as many states as possible. While progress on this front has stalled since the 2009 Copenhagen summit, the Union remains at the forefront of international efforts.

The Union’s role in the world

Too much American hegemony is dangerous for Americans as well as for others. Overwhelming power can lead to rash decisions; and the burden is too great for one country to carry alone. China seems likely to catch up with the US during the first half of this century as a military as well as economic power, with unpredictable consequences; and India may well follow. But the EU has the potential to be, much sooner, at least an equal partner with the US with respect to the economy, the environment, and soft security, though not defence.

Indeed, the Eu's long-standing parity with the US in the world trading system has shown what can be done when sufficiently effective institutions dispose of a common instrument.

The euro offers a basis for a similar performance in the international monetary system, if the institutions for external monetary policy are adequately reformed. For action on global climate change the Union should be able, again with some strengthening of its institutions, to maintain its leading role.

Much accomplished . . . but what next?

The European Union has come a long way since the process of its construction was launched by the Schuman Declaration in 1950. War has indeed become unthinkable among the member states, which now include most European countries. The preceding texts have shown how institutions, powers, and policies have been put in place to deal with matters beyond the reach of governments of the individual states. But they have also shown that the Union needs further reform if it is to promote the interests of its people adequately in an increasingly problematic world. Now we can try to sum up what has been done and venture some thoughts about the future.

Do the powers and instruments match the aims?

The Union has been able to achieve its aims where it has the powers and instruments as well as the institutions with which to act. The powers and instruments can be legislative, such as the framework for the single market; fiscal, as with the budget or the common external tariff; or financial, as with the aid programmes, the European Investment Bank, and most importantly the single currency.

Cooperation based on the powers and instruments of member states can be useful, but would not achieve much without the hard core of common powers and instruments. The single market legislation provides a framework for economic strength and prosperity, even if it remains incomplete in some significant sectors and will need further development to cater adequately for the new economy including e-commerce and information technology; and, for member states that have adopted the euro, the single currency completes the single market in the monetary domain.

The budget has transferred resources to sectors deemed to require support, originally to agriculture but increasingly to less-developed regions and member states. While the agricultural budget has generated conflict, the structural funds to assist development of poorer regions have been more generally favoured; and the enlargement to Central and Eastern Europe reinforces the case for larger funds.

Thus the Union has many of the necessary powers in the economic field. The same can be said of the environment, where the most pressing need is to strengthen both internal and external action to limit the damage from climate change.

Social policy as embodied in the welfare state belongs largely, following the principle of subsidiarity, to the member states. That principle justifies Union involvement in some employment-related aspects of social policy, such as the prevention of social dumping by undercutting standards of health and safety at work. There is a grey area, including elements of social security and hours of work, where there is conflict between those who want to establish Union-wide standards and those who consider that differences rooted in differing social cultures should not be disturbed. Disagreements remain; but the latter view has gained ground.

While the economic and environmental aims and powers were promoted by interest groups as well as federalists, as was the free movement of workers across the internal frontiers, it was the federal idea that lay behind free movement for all within the Union, which has been accepted, apart from transitional derogation relating to new member states, by all save Denmark, Ireland, and the UK. But all participate in measures to combat cross-frontier crime.

In the field of its external relations, the Union’s powers have been designed to defend and promote common interests, which include stability in the international economic and political system. The most potent instrument is the offer of accession, hence of participation in the Union’s institutions and powers as a whole. But this is available only for European states; other means have to be used to advance the Union’s interests in the rest of the world.

The powers over external trade, together with the instrument of the common external tariff, have enabled the Union to serve its interest in liberal international trade as well as to turn what was American hegemony in this field into EU-US partnership. The protectionist common agricultural policy, working in the opposite direction, marred relations with many trading partners. Reforms to correct this distortion have taken far too long, but are being accomplished by stages. A combination of preferential arrangements and aid has strengthened links with most Third World countries.

Along with this influence in the world trading system, the Union has used its environmental powers to play the leading part in international negotiations to protect the ozone layer and limit the damage from climate change.

With the euro the Union has a powerful instrument to wield in the international monetary system. But until it has resolved both its internal governance and the basic political and economic challenges posed by the Euro zone crisis, its potential, which could convert American hegemony into partnership in this field too, is not likely to be realized.

For defence, American military dominance remains a fact which the Eu's incremental approach to military integration is not designed to challenge, though it serves increasingly useful purposes. It is in the civil domain that the Union can complement American power, with civilian aspects of peacekeeping and, much more substantially, through its contribution to European and world stability in the economic, environmental, and political fields. The Union is uniquely placed to ease the transition from global American hegemony to a multipolar world, in which Euro-American partnership can play an essential part. The Union needs some new powers to accomplish this, together with further reform of the institutions to enable it to use the powers to good effect.

The institutions: how effective? How democratic?

Eurosceptics tend to regard ‘closer integration’ as undesirable without distinguishing between transfer of powers to the Union and reform of its institutions. But these are two very different questions. The transfer of powers is justified only where the Union can serve the citizens in ways that individual member states cannot; and the Union already has many of the powers indicated by the subsidiarity principle except in the field of defence. Once powers have been transferred, however, they will not serve the citizens’ interests well enough unless they are wielded by effective and democratic Union institutions. The political institutions require a context of the rule of law, which is ensured by the Court of Justice in matters of Union competence; and this has brought fundamental change in the relations among member states.

The Council, however, is not effective enough where the unanimity rule prevails, as was demonstrated by the inadequacy of single market legislation before qualified majority voting was applied. It has become more effective now that QMV applies to the large majority of legislative acts as well as the whole of the budget; and unanimity and enhanced cooperation remain practical procedures where the Union depends on the use of member states’ instruments, as in the field of defence. But in line with the growth in the number of member states, there must be increasing doubts about the Union’s capacity to act where unanimity still applies, for example with treaties of association and accession, nominations to some major posts in the institutions, and international agreements on exchange rate arrangements.

The Commission has substantial powers to fulfill its functions as the Union’s executive, though its role in ensuring that member states do in fact carry out the administration that is delegated to them by the Union is not strong enough, and too much intervention by the Council and its network of committees in the execution of Union decisions hampers the Commission’s effectiveness. The Commission’s own administrative culture had also become a serious weakness, but the reforms effected after the European Parliament secured the Commission’s resignation in March 1999 brought substantial improvement.

The part the Parliament then played in ensuring the Commission’s resignation showed how democratic control can contribute to effectiveness. However, the Parliament’s powers are still constrained by the treaties. While the Lisbon Treaty did make co-decision into (literally) the Ordinary Legislative Procedure, reflecting its general application, there still remain assorted Special Legislative Procedures; for so long as this remains the case, the Union will be neglecting an essential means of securing citizens’ support. Even with their strengthened rights under the Lisbon Treaty, citizens still lack meaningful connection with the Union; and it would be unwise to ignore the track record of representative democracy as a major element in citizenship. So long as citizens do not see the Parliament as an equal of the Council, they are not likely to regard it as a sufficiently important channel of representation. The Council, representing the states, is an essential part of the Union’s legislature too. But despite the progress in holding legislative sessions in public, it remains at the centre of an opaque system of quasi-diplomatic negotiation. Representation in a powerful house of the citizens may well be a condition of their support for the Union over the longer term.

The success of the provision for gender equality at work shows how citizens’ rights can also generate support for the Union. The incorporation of the Charter of Fundamental Rights and the looming accession of the Union to the European Convention on Human Rights provide some positives. But most important of all for the citizens will be the Union’s general effectiveness in doing things that are necessary for them. It must be seen to be doing such things at a time when it confronts major challenges, both internally and in the world at large.

Flexible versus federal

The word ‘flexible’ is used approvingly in much British discourse on Europe to denote both the avoidance of excessive regulation in the economy and, politically, an aversion to proposals, apart from completion of the single market, for common instruments and legally binding commitments such as characterized the European Community pillar of the Union.

Flexibility in the economic sense has been successful in the development of the swiftly changing contemporary economy; and this has been increasingly recognized in the EU. But flexibility in the political sense is not appropriate for matters which the individual states are unable to handle effectively. The recent challenges to some of the fundamental principles of the Union, including free movement and non-discrimination on the basis of nationality, have demonstrated the need for collective action, the better to protect the rights of all members.

A vital challenge for the longer term is also to ensure that European enterprises will be among the leaders in technological development; and in some sectors such as aircraft and satellites, this requires large and long-term investments of public money. A common European effort is needed to support such projects, which are too large for single European governments; and in so far as some member states are not ready to participate, there can be structured enhanced cooperation among those that are.

The Euro zone crisis has demonstrated very vividly the extent to which national economies are deeply interlinked and interdependent. Thus the ability of the Euro zone to find lasting solutions to its problems is of interest not only to its members, but also to all other EU member states, and beyond.

One of the more difficult messages that have needed to be communicated in the UK is precisely that it is neither possible nor desirable to stand on the sidelines of events and urge others to do something. This is undoubtedly true in economic matters, although it does present many complications in both political and legal terms. As the Fiscal Compact negotiations showed, even if a state is not a signatory, it still needs to be involved in some form. More generally, the Compact also showed that sometimes some member states will want to move ahead of others.

The debate in the UK about withdrawal from the Union has largely been one built on a lack of knowledge and understanding about both the operation of the EU and the nature of global interconnection. Even if the UK did leave, it would still find itself neighbouring a Union that bought British goods and services, but in which the British government no longer had an institutional voice (and vote). Moreover, the UK’s current position as a desirable entry point to the EU for third countries’ businesses would also be undermined. Seen as such, constructive engagement would offer much more likelihood of an acceptable policy mix than would a metaphorical throwing up of the hands.

A large part of the divergence between the approaches of the British and of most other member states has stemmed from the differing experiences in World War Two, which was more traumatic for most of the continental nations. So while much of the progress in building the Union has had economic motives, it was a profound desire to consolidate peace and security that underlay the major shifts towards the sharing of sovereignty, such as the European Coal and Steel Community, and the Treaties of Rome and Maastricht. The British accepted the merits of economic integration but resisted the sharing of sovereignty, accepting only what was required to participate in the large market or to avoid losing too much political influence.

But governments and large numbers of citizens throughout the Union, including the British, are conscious of the many and various sources of insecurity in the world, and share the desire for progress towards a safer more effective multilateral system. So they may also be able to accept the implication of such sharing of sovereignty as may be necessary in order to enhance sufficiently the Union’s capacity for action towards that end. Its military capabilities for peacekeeping are growing; and while it is not likely to become a great military power, it can become the world’s principal peacemaker across an impressive range of soft power. It can enhance its contribution to prosperity and stability in the global economy in the fields of trade, aid, and external monetary policy; it can help, as it has shown in the West Balkans and elsewhere, to build and sustain viable democratic states; and it has led the world in action to prevent ruinous climate change. It could moreover do much, as a very great civilian power, to ease the transition to a world in which the United States will be joined by China, then India, as very great powers in the military sense too; and it can help them and others to develop an increasingly effective United Nations.

There is a wide consensus among member states, not least the UK, about the validity of such aims. But there has not been agreement on how to apply the Union’s full weight in achieving them. A major difficulty has been the reluctance of many, again not least the British, to accept the allocation of resources to the Union and to strengthen its institutions in ways that could make it sufficiently effective; and this implies the acceptance of an adequate core of legally binding commitments and common instruments, with institutional reform to make the Union properly effective and democratic.

The word ‘federal’ is a convenient and accurate abbreviation for the words following ‘core of’ in the preceding sentence, whether or not such commitments, instruments, and reformed institutions lead eventually to a federation. The word is less important than what it represents.

Its use, if properly defined, would, however, clarify thinking as well as facilitate communication with those who use it. A rose by any other name would smell as sweet. But it is better to give the rose a name consisting of one word rather than seventeen.

The British, as much as other Europeans, sense their exposure to the mounting sources of insecurity in the world today. So Britain should be able to play a fully constructive part in supporting reforms of the Union’s existing powers and institutions that would enable it to realize its great potential influence towards creating a safer and more prosperous world who manage a dominant currency have to choose between dealing with a domestic problem and taking account of the impact on other economies that are influenced by their choice, they naturally choose their domestic interests. Europeans experienced this in the 1990s when high undercutting standards of health and safety German interest rates, designed to control inflation following German unification, exacerbated recession in other countries influenced by the dominant Deutschmark; and this gave added edge to their support for the single currency, with a monetary policy tailored to the needs of the participants as a whole. While that remedy is not available to deal with the dollar’s dominance in the world system, the euro has developed into a significant countervailing monetary power, the Eurozone crisis notwithstanding.

Thus the euro is another source of money with a different economic cycle, which can counteract the dollar’s influence when it works against other countries’ interests. This has been limited by main factors. There is still an unclear arrangement for conducting external monetary policy, the responsibility being divided between the European Central Bank and the Council of finance ministers.