The Essential Guide to the European Union RUTH LEA CENTRE FOR POLICY STUDIES 2004 THE AUTHOR RUTH LEA is Director of the Centre for Policy Studies. She is on the University of London Council and is a Governor of the London School of Economics. She has served on the Council of the Royal Economic Society, the National Consumer Council, the Nurses’ Pay Review Body, the ONS Statistics Advisory Committee, the ESRC Research Priorities Board and the Retail Prices Advisory Committee. She is the author of many papers including The Price of the Profligate Chancellor, Education and training: a business blueprint for reform, Healthcare in the UK: the need for reform, CAP: a catalogue of failure, The Work-Life balance…and all that and Red tape in workplace. She was Head of the Policy Unit at the Institute of Directors (IoD) between 1995 and 2003. Prior to the IoD, she was the Economics Editor at ITN, was Chief Economist at Mitsubishi Bank and Chief UK Economist at Lehman Brothers. She also spent 16 years in the Civil Service in the Treasury, the Department of Trade and Industry and the Central Statistical Office. The aim of the Centre for Policy Studies is to develop and promote policies that provide freedom and encouragement for individuals to pursue the aspirations they have for themselves and their families, within the security and obligations of a stable and law- abiding nation. The views expressed in our publications are, however, the sole responsibility of the authors. Contributions are chosen for their value in informing public debate and should not be taken as representing a corporate view of the CPS or of its Directors. The CPS values its independence and does not carry on activities with the intention of affecting public support for any registered political party or for candidates at election, or to influence voters in a referendum. ISBN No. 1 903219 73 6 Centre for Policy Studies, May 2004 57 Tufton Street, London SW1P 3QL Printed by The Chameleon Press, 139 Molesley Avenue, London KT8 2RY CONTENTS Chapter 1 Introduction and summary 1 1.1 Introduction 1 1.2 The EU and its treaties: a brief history 2 1.3 The EU’s institutions and law 4 1.4 The EU’s competences: introduction 5 1.5 The EU budget and economic and monetary union 5 1.6 Trade, the internal market, social policy and related issues 5 1.7 Agriculture and fisheries, environment and regional policy 7 1.8 Justice, aid and foreign and security policy 8 1.9 Future developments: inc. the draft European Constitution 9 1.10 Britain and Europe: a dishonest debate 12 Chapter 2 The EU and its treaties: a brief history 14 2.1 Introduction 14 2.2.1 The 1940s and 1950s: introduction 15 2.2.2 Origins and the ECSC (1951) 15 2.2.3 The Treaty of Rome (1957): the EEC 16 2.3.1 The 1960s: introduction 17 2.3.2 Developments in the EEC and de Gaulle 18 2.3.3 Britain applies – twice 19 2.4.1 The 1970s: introduction 19 2.4.2 Policy developments: 1970s 20 2.4.3 Enlargement: the UK joins (1973) 21 2.4.4 The British referendum (1975) 22 2.5.1 The 1980s: introduction 22 2.5.2 Budget issues: 1980s 23 2.5.3 The Single Market and the Single European Act (1986) 24 2.5.4 Economic and Monetary Union: 1980s developments 24 2.5.5 Social policy: 1980s developments 25 2.5.6 Enlargement and related issues: 1980s 25 2.6.1 The 1990s: introduction 25 2.6.2 The Maastricht Treaty (1992) 26 2.6.3 The Treaty of Amsterdam (1997) 28 2.6.4 Budget issues including mismanagement: 1990s 29 2.6.5 EMU and the euro 29 2.6.6 Social policy: 1990s developments 30 2.6.7 Enlargement and related issues: 1990s 30 2.7.1 The 2000s: introduction 31 2.7.2 The Treaty of Nice (2001) 32 2.7.3 Policy developments: 2000s 33 2.7.4 Enlargement: 2000s 33 Chapter 3 The EU’s institutions and law 39 3.1 Introduction 39 3.2.1 The main institutions: introduction 39 3.2.2 The European Commission 40 3.2.3 The Council of Ministers 41 3.2.4 European Council 42 3.2.5 The European Parliament 43 3.2.6 The Court of Justice 44 3.2.7 The Court of Auditors 45 3.3.1 Advisory committees: introduction 45 3.3.2 The Economic and Social Committee 45 3.3.3 The Committee of the Regions 46 3.4.1 Other EU institutions 46 3.4.2 The European Investment Bank 46 3.4.3 The European Central Bank 47 3.4.4 The European Ombudsman 48 3.4.5 Decentralised EU agencies 48 3.5 EU law 49 3.6.1 The EU: a single “European State”? 51 3.6.2 Footnote: the EU’s “legal personality” and “constitution” 52 Chapter 4 Introduction to the EU’s competences 56 4.1 Introduction 56 4.2 A plethora of regulations 56 Chapter 5 The EU budget and economic and monetary policy 59 5.1 Introduction 59 5.2 The EU budget 59 5.3.1 Economic and monetary policy: introduction 62 5.3.2 A brief history of the euro 62 5.3.3 The euro: a political project 63 5.3.4 British membership: “not for the foreseeable future” 65 Chapter 6 Trade, the internal market, social policy and related issues 67 6.1 Introduction 67 6.2.1 Customs union and external trade policy 67 6.2.2 Footnote on GATT and the WTO 69 6.3.1 The internal market: introduction 69 6.3.2 The SEA and the Single Market Programme 70 6.3.3 The internal market: further developments 72 6.3.4 The internal market: overall assessment 74 6.4.1 Taxation: introduction 76 6.4.2 Indirect taxes 77 6.4.3 Business taxes 77 6.4.4 Savings taxes 78 6.5 Competition policy 78 6.6 Industrial policy: enterprise, the information society & research 80 6.7.1 Employment and social policy: introduction 81 6.7.2 The 1950s and 1960s 81 6.7.3 The 1970s 82 6.7.4 The 1980s 82 6.7.5 The 1990s 83 6.7.6 The 2000s 83 6.7.7 Footnote: pensions 84 6.8 Energy 84 6.9 Transport 85 6.10 Health and consumer protection 85 6.11 Education and culture 86 Chapter 7 Agriculture and fisheries, environment and regional policy 91 7.1 Introduction 91 7.2.1 The Common Agricultural Policy (CAP): introduction 91 7.2.2 CAP: a brief description 91 7.2.3 CAP: “a catalogue of failure” 92 7.3.1 The Common Fisheries Policy (CFP): introduction 93 7.3.2 CFP: the 1970s 94 7.3.3 CFP: the 1980s 94 7.3.4 CFP: the 1990s 95 7.3.5 CFP: the 2000s and the future 95 7.4.1 Environment: introduction 96 7.4.2 A brief history 96 7.4.3 Legislation 97 7.4.4 Some final remarks 98 7.5.1 Regional policy: introduction 98 7.5.2 A brief history and aims 98 7.5.3 The structural funds 100 7.5.4 The impact of enlargement 102 Chapter 8 Justice, aid and foreign and security policy 105 8.1 Introduction 105 8.2.1 Freedom, Security and Justice: introduction 105 8.2.2 Brief history 105 8.2.3 Freedom, Security and Justice: a checklist 107 8.3 Development and aid 109 8.4 Common Foreign and Security Policy 111 Chapter 9 Future developments: inc. the draft European Constitution 116 9.1 Introduction 116 9.2.1 Introduction to the draft Constitution 116 9.2.2 The draft Constitution: key Articles 118 9.2.3 Footnote: comparison with Philadelphia 118 9.3.1 The draft Constitution’s main provisions: introduction 118 9.3.2 Constitutional implications of the Constitution 120 9.3.3 Institutional changes 120 9.3.4 Extensions of powers 121 9.3.5 Competences: a checklist 122 9.4 The UK Government’s White Paper 125 9.5.1 A referendum on the Constitution 127 9.5.2 Options for the UK 128 9.6 A Europe of the Regions 128 9.7.1 Europe’s economic prospects 130 9.7.2 And the UK? 132 Annex 1A: Key dates 137 Annex 1B: Glossary of terms 146 Annex 2A: The Treaties 159 Annex 2B: Additional information for chapter 2 166 Annex 3: Additional information for chapter 3 167 Annex 4: Additional information for chapter 4 177 Annex 5: Additional information for chapter 5 181 Annex 6: Additional information for chapter 6 182 Annex 7: Additional information for chapter 7 187 Annex 8: Additional information for chapter 8 189 Annex 9: Additional information for chapter 9 190 CHAPTER ONE INTRODUCTION AND SUMMARY 1.1 Introduction Lord Palmerston, with characteristic levity, had once said that only three men in Europe had ever understood [the Schleswig-Holstein question], and of these the Prince Consort was dead, a Danish Statesman (unnamed) was in an asylum, and he himself had forgotten it. In R W Seton-Watson, Britain in Europe 1789-1914, 1937 This introductory guide explains the main aspects of the European Union (EU or “Union”) up to and including the draft European Constitution (or “Constitution”). The guide emphasises the economic and business aspects, but other issues are covered – albeit in less detail.1, 2, 3 The EU is a vast and confusing topic (making the Schleswig-Holstein question look relatively straightforward).