House of Commons Foreign Affairs Committee
The future of the European Union: UK Government policy
First Report of Session 2013–14
Volume II Volume II: Oral and Written evidence
Ordered by the House of Commons to be printed 21 May 2013
HC 87-II [Incorporating HC 115-i-iv, from Session 2012-13 Published on 11 June 2013 by authority of the House of Commons London: The Stationery Office Limited £22.00
The Foreign Affairs Committee
The Foreign Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Foreign and Commonwealth Office and its associated agencies.
Current membership Richard Ottaway (Conservative, Croydon South) (Chair) Rt Hon Bob Ainsworth (Labour, Coventry North East) Mr John Baron (Conservative, Basildon and Billericay) Rt Hon Sir Menzies Campbell (Liberal Democrat, North East Fife) Rt Hon Ann Clwyd (Labour, Cynon Valley) Mike Gapes (Labour/Co-op, Ilford South) Mark Hendrick (Labour/Co-op, Preston Sandra Osborne (Labour, Ayr, Carrick and Cumnock) Andrew Rosindell (Conservative, Romford) Mr Frank Roy (Labour, Motherwell and Wishaw) Rt Hon Sir John Stanley (Conservative, Tonbridge and Malling) Rory Stewart (Conservative, Penrith and The Border)
The following Members were also members of the Committee during the parliament:
Rt Hon Bob Ainsworth (Labour, Coventry North East) Emma Reynolds (Labour, Wolverhampton North East) Mr Dave Watts (Labour, St Helens North)
Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.
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Committee staff The current staff of the Committee are Kenneth Fox (Clerk), Peter McGrath (Second Clerk), Zoe Oliver-Watts (Senior Committee Specialist), Dr Brigid Fowler (Committee Specialist), Louise Glen (Senior Committee Assistant), Vanessa Hallinan (Committee Assistant), and Alex Paterson (Media Officer).
Contacts All correspondence should be addressed to the Clerk of the Foreign Affairs Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 6105; the Committee’s email address is [email protected].
The future of the European Union: UK Government policy
Witnesses
Tuesday 26 June 2012 Page
Sir Howard Davies, Professor of Practice, Paris Institute of Political Studies Ev 1
Tuesday 10 July 2012
Charles Grant, Director, Centre for European Reform Ev 10
Mats Persson, Director, Open Europe Ev 15
Michiel van Hulten, Independent consultant and former MEP Ev 20
Tuesday 11 September 2012
Professor Patrick Minford CBE, Professor of Applied Economics, Cardiff Business School Ev 26
Wednesday 6 February 2013
Rt Hon William Hague MP, First Secretary of State and Secretary of State for Foreign and Commonwealth Affairs, Simon Manley CMG, Director, Europe, Foreign and Commonwealth Office, and Sir Jon Cunliffe CB, UK Permanent Representative to the EU Ev 34
The future of the European Union: UK Government policy
List of written evidence 1 Dr Jóhanna Jónsdóttir, European Free Trade Association (EFTA) Secretariat Ev 51 2 Mrs Anne Palmer, JP (retired) Ev 55 3 Dr Martyn Bond, Royal Holloway University of London Ev 57 4 Sir Colin Budd KCMG Ev 60 5 Jean-Claude Piris Ev 63 6 Sir Michael Franklin KCB, CMG Ev 66 7 The Church of England, The Archbishops’ Council Ev 67 8 Professor Clive H. Church, Dr Paolo Dardanelli and Sean Mueller, Centre for Swiss Politics, University of Kent Ev 70 9 Civitatis International Ev 74 10 Graham Avery CMG Ev 77 11 Foreign and Commonwealth Office Ev 79; 83; 85 12 Nigel Farage MEP on behalf of the UK Independence Party (UKIP) Ev 99 13 Scotch Whisky Association (SWA) Ev 103 14 Liberal Democrat European Parliamentary Party Ev 107 15 Professor Michael Dougan and Dr Michael Gordon, Liverpool Law School, University of Liverpool Ev 110; 113 16 Open Europe Ev 114 17 Ruth Lea, Arbuthnot Banking Group Ev 120 18 TheCityUK Ev 123 19 Professor Richard G. Whitman, University of Kent and Chatham House, and Thomas Raines, Chatham House Ev 126 20 Professor René Schwok and Cenni Najy, University of Geneva Ev 128 21 Liberal Democrat Parliamentary Party Committee on International Affairs Ev 135 22 Professor Richard Rose FBA, University of Strathclyde and European University Institute Ev 143 23 Professor David Phinnemore, Queen’s University Belfast Ev 147 24 Dr Robin Niblett, Director, Chatham House Ev 150 25 Brendan Donnelly, Director, Federal Trust Ev 154 26 European Movement Ev 156 27 Maurice Fraser, European Institute, London School of Economics and Political Science (LSE) and Chatham House Ev 157 28 Nucleus Ev 161 29 Sir Peter Marshall KCMG, CVO Ev 165; 170 30 Professor Pauline Schnapper, Sorbonne Nouvelle University, Paris Ev 172 31 Business for New Europe (BNE) Ev 173 32 Lord Howell of Guildford Ev 177 33 Frank Vibert, Department of Government, London School of Economics and Political Science (LSE) Ev 180 34 Dr Simon Usherwood, School of Politics, University of Surrey Ev 184 35 Erna Hjaltested, European Free Trade Association (EFTA) Secretariat Ev 185 36 Dr Richard Corbett, Member of the Cabinet of Herman Van Rompuy, President of the European Council Ev 185
The future of the European Union: UK Government policy
37 HE Laetitia van den Assum, Ambassador of the Kingdom of the Netherlands Ev 189 38 VoteWatch Europe Ev 189
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Foreign Affairs Committee: Evidence Ev 1
Oral evidence
Taken before the Foreign Affairs Committee on Tuesday 26 June 2012
Members present: Richard Ottaway (Chair)
Bob Ainsworth Mark Hendrick Mr John Baron Andrew Rosindell Sir Menzies Campbell Mr Frank Roy Ann Clwyd Sir John Stanley Mike Gapes Rory Stewart ______
Examination of Witness
Witness: Sir Howard Davies, Professor of Practice, Paris Institute of Political Studies, gave evidence.
Q1 Chair: Sir Howard, welcome. Thank you very involves some complicated balancing acts, and it will much for coming along, it is very much appreciated. require the Government to be prepared to facilitate Members of the public, we are now switching from moves by the rest of the eurozone that we might not our report on the Commonwealth to our first evidence wish to be engaged in. So it will require us to be session for the inquiry into the future of the UK constructive in helping them to solve their problems, Government’s European Union policy. The witness is in return for remaining as associated as we can be Sir Howard Davies, who has huge experience in UK with the single market. economic policy and the international financial sector. Sir Howard, may I start proceedings with a fairly Q2 Chair: Thank you. You remember that all this broad question? What do you think should happen, in arose out of the December 2011 summit and the so far as the Government’s relations with the EU are exercise of the veto, because Britain was not offered concerned, and what do you think will happen? the safeguards that it requested from the EU. What is Sir Howard Davies: Gosh, I thought I was talking the significance of these safeguards to Britain? about the Commonwealth. I had better change tack! Exactly how important are they to us? Is there any I begin, Chair, by thanking you for the invitation to room for manoeuvre? come and by getting any statements of conflict of Sir Howard Davies: If I might question slightly your interest out of the way. I am advertised as Professor premise, Chair, I am not sure that all this did arise of Sciences Po, which is exactly what I do, and I teach because of what happened at the December summit courses on financial regulation and central banking. I actually. This is a long-running problem of a flawed am also a non-executive director of the Prudential and structure of the eurozone that is being worked out. of Morgan Stanley in New York, and I am an adviser When the eurozone was constructed, it was thought to the Government of Singapore Investment that a monetary union could be established, with a Corporation and to the Chinese banking and securities single currency and a single central bank, but with regulators—but I do not speak for any of them, of only a light-touch fiscal union in the form of the course. stability and growth pact. For a while, in benign As far as what I think should happen, my view— economic and financial conditions, that appeared to coming at this from the perspective of someone who be working. But, when stresses emerged—arising not has been involved primarily in the financial sector in originally from the eurozone—it became clear that recent years—is, I hope, that we can remain a full there was a flaw at the heart of the single currency member of the single market, because that is in our zone in that there was no ability to transfer resources national interest. I fear that if we were not, we could from the centre to the periphery and peripheral see quite a lot of businesses choose to put themselves governments and their banks, which are locked in a somewhere else. However, I do not think that if we loveless embrace to try to support each other without are not in the euro we should take part in what is the ability to draw on resources elsewhere. That is the being called a banking union—we might come on to underlying dynamic. talk about what that means—because that banking The December summit, which was an attempt to put union does arise from the tensions in the eurozone together the outlines of a fiscal framework for the in particular, which, while they affect us, we are not single currency, was one step along the way. At the centrally engaged in. I think it will be quite difficult moment, that does not look hugely significant. As for to achieve continued full membership of the single the safeguards we asked for, interestingly, people did financial market without any discrimination against us not quite understand at the time in Europe where this if we do not move towards the banking union. It will was leading. Curiously, if you look back at those require considerable skill in negotiating that. That is safeguards—I have read the letter the Chancellor what I hope will happen. wrote to you about it—actually we were then putting As to what I think will happen, well, I think that will in requests that were appropriate more to the banking happen, but it will be quite difficult, because it union now. I do not think that many of our partners cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
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26 June 2012 Sir Howard Davies saw the logic of asking for these protections in That is the bit that people are attempting to put in relation to the single financial market on the back of place this week. It is a short-term crisis management a treaty about fiscal union. Those safeguards are more response, but I completely agree that, in the longer relevant today when, this week as we understand it, term, it is the divergences in competitiveness that have they are talking about a banking union. Something created the major internal balance of payments crises, along those lines would be quite useful. We perhaps and those will require structural reform. have not started our negotiation on this at the right time or quite in the right way, but some of the Q5 Mr Baron: Do you not agree, though, that an substance of those safeguards is rather important. element of time has been bought with the £1 trillion of loans to the banks, but that what the markets urgently Q3 Chair: Yes. The first one is unanimity and the require is a very strong signal that the eurozone gets transfer of powers relating to the prudential the message about the need for greater supervision of credit institutions and other financial competitiveness? At the moment, as we see with institutions or financial market participants. Do you Spanish bond yields and so on, the feeling is, certainly think that that was an unreasonable request? from the market’s point of view, that all these mini Sir Howard Davies: We are not going to get that summits to save the euro—we must have had more because there are various ways in which the eurozone than 20 of them now—are nothing more than sticking can construct a single European prudential supervisor, plasters, and that you need seriously to send out a which we can have nothing to do with, frankly. If they signal that you are going to address the structural decide to go for the European Central Bank as the imbalances and the supply side need for reforms to prudential supervisor, which is likely, you can extend kick-start a more growth-oriented response. article 127 of the Maastricht1 treaty quite easily to Sir Howard Davies: I think that will help the mood cover for it in prudential supervision. I am not aware music, but I don’t honestly think that it is what the that we could do much about that. markets want. I think that what they want is some guarantee that if they keep their money in Spanish and Q4 Mr Baron: Sir Howard, welcome. Can I suggest Italian banks, they might get it back. Competitiveness to you that what has complicated the issue this time reforms and supply side reforms in the long term are round is that we have a recession that is a not going to give them that assurance. What they are deleveraging recession rather than a destocking looking for is a central European institution— recession—it has been built on debt. Although I agree probably the European stability mechanism—that puts with you that the processes and safeguards were not capital into those banks directly and not via a put into place sufficiently well enough when the EU sovereign which itself is fiscally challenged. was born, we all know that you cannot have monetary union without fiscal union. What seems to be Q6 Mark Hendrick: The last time we sat at a table happening here is that the eurozone leaders are together, Sir Howard, was in 1998 when I was a shuffling the debt around the system between bank Member of the European Parliament and its Economic and Government, but no amount of shuffling can and Monetary Affairs Committee. At the time, we conceal or erode its scale. What really needs to talked about the convergence criteria, which led to the happen is for sweeping supply-side reforms to be stability and growth pact, which you have just said introduced that would create a better growth was a fairly light-touch approach to creating some environment. That is the best way in the longer stability. Do you think that if the stability and growth term—the more sustainable way—of closing the gap pact had been enforced strictly, with penalties, and between what governments earn and what they spend. that if all the member states of the eurozone at the Do you agree with that? time had been far more disciplined, the financial crisis Sir Howard Davies: I agree with that. The problem is and the eurozone crisis could have been avoided? that we may not get to the long term if we do not do Sir Howard Davies: I actually don’t think that. I think some of the other things as well. Whatever package it would have been somewhat less extreme. On the emerges in the European Union, a programme of different countries in the eurozone and how they have supply side reform, particularly in countries like Spain got into difficulty, you might argue that case in and Italy, is absolutely crucial. relation to Greece, because it clearly did run On your first point about shuffling the debt, you are extravagant deficits and conceal them, but it is hard to correct to point to that, but the difficulty is that, unless argue that case in relation to, for example, Ireland or some kind of additional capacity is brought into Spain, where the leverage—the debt—was really in countries like Spain and Italy, this pack of cards will the private sector and associated with a large property ultimately collapse. That is why some form of boom, which itself was fuelled by the fact that they mutually guaranteed borrowing is required. The then had much lower interest rates than before, as a Germans have baulked at the idea of eurobonds, so result of joining the single currency. There, the fiscal another sideways route into this is some kind of stability and growth pact would have constrained banking union, where you have mutual guarantees government debt to some degree, but actually, between the deposit guarantee schemes of banks in government debt was not particularly the problem in Europe to create the comfort to avoid bank runs in Spain, and it certainly wasn’t the problem in Ireland, these countries, and some kind of resolution authority which had a surplus running up to the crisis. that allows central European institutions to lend I think it was not the only point, so the need to address directly to banks rather than via their government. the financial sector issues is just as important as the 1 Witness correction: Lisbon treaty intended need to address the fiscal union. 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Foreign Affairs Committee: Evidence Ev 3
26 June 2012 Sir Howard Davies in which Ireland and Spain should, in retrospect, have your question, on its face I would say that it would dealt with their problem was by increasing capital not be a good thing because I do not think there is requirements on banks and restricting banks’ lending much chance of our being in the eurozone within five to risky property development, because they clearly years and there would therefore have to be some other had a property bubble to a massive degree. That can negotiation about how we were going to be affected best be addressed by tightening up capital by fiscal rules that were essentially constructed from requirements in banks, rather than simply by interest a eurozone perspective and got folded into the treaty. rates. That is the macro-prudential mechanism that We would then need another negotiation about how people now talk about in the jargon. they affected us and what kind of opt-out we would I think that we are going forward. You need to look have. I have to say, Mr Gapes, that at the moment the at fiscal reforms, but you also need to look at financial position is not stable—neither the position within the sector reforms, to allow different countries to be able eurozone nor the relationship between the UK and the to respond to different financial circumstances where eurozone. This is highly unstable and an awful lot of the single interest rate and single currency may affect things will have to happen between now and when them in very different ways. that five-year period arises.
Q7 Chair: What was your sense of the reaction, Q10 Mike Gapes: Could this be the breaking point particularly in the financial sector, to the use of the for the UK’s relationship with the rest of the veto? Were financial institutions pleased? Were they European Union? horrified? Sir Howard Davies: Yes, I think it could be. You Sir Howard Davies: I think they were quite nervous might argue that the breaking point was when we about the implications because they see a continued decided not to go into the euro, whereas everybody set of negotiations about the regulation of financial else pretty much is still a “pre-in”—they still believe markets in Europe. On the whole, they think that the that, or are saying that, they will go in, although we British Government and a few others of a liberal could argue about the Swedes. That was a key persuasion—I mean small “l”, although, of course, decision, and I have always thought that we also large “L” here—see the best guarantee of a pro- underestimated the integrationist dynamic created by competition framework of regulation as one over the single currency. It is not just another technical which the British Government exercise a degree of thing such as another directive in the single market; it influence. Also, the British Government understands is a fundamental change that creates a mindset in the financial markets because of the City of London. So other countries that they will do what is necessary to they were nervous about whether the veto would defend the currency. result in a diminution of British influence in those If that means doing things that they would otherwise decisions. At the moment, it is a little bit early to say not be very enthusiastic about—such as guaranteeing whether it has or not, but that was the principal each other’s banks, etcetera—they will do it, because reaction. the alternative looks much worse. An integrationist, “ever closer union” dynamic has been in play within Q8 Chair: You have just pre-empted my next the eurozone, going much more rapidly than it is for question. Do you think that we are in a stronger or us. The question is whether we can negotiate a stable weaker position? Do you think we have lost any relationship between the eurozone, with its tendency influence as a result of the use of the veto? towards increasing integration, and the UK retaining Sir Howard Davies: We are probably not in a stronger the key elements of our relationship with the single position; actually, it would be hard to argue that we financial market. That should be our negotiating were because we asked for a set of assurances and objective, I think. played our cards and did not take any tricks. That does We are not in a particularly strong negotiating not seem a great way to start. As to whether it is likely position, I would say, in trying to achieve that and to be a long-running disadvantage, I have to say that, therefore a constructive approach, recognising the from where I currently sit and the people I currently problems of the eurozone, encouraging it to solve talk to, that fuss in the middle of the night in them and saying that we are prepared to do what we December has almost vanished—receded into the can and be as obliging as we can, short of writing a mists. There have been several summits and crises cheque, seems to me to be the tone that we should since and there will be several more, too, so I do not be adopting. think that it is looming as large in the minds of other decision makers as perhaps it does here. Q11 Mike Gapes: So, in essence, do you support the incorporation of this treaty into the EU treaties? Q9 Mike Gapes: Nevertheless, the stability, co- Sir Howard Davies: I am not sure in what position I ordination and governance treaty is due to come into would be supporting that, or not, because I am not a effect on 1 January or earlier if 12 states ratify it. voter in a eurozone country. I think it is logical. Within five years, the intention is that it should be incorporated as part of the European Union treaties. Q12 Mike Gapes: Could I put it a different way? What is your view? Would that be a good or bad thing Some of our witnesses have suggested that we should for the UK? How should we respond to it at that time? vehemently oppose this because it is not in Britain’s Sir Howard Davies: I think more about what is going interest; others think it is necessary for the future to happen between now and Friday than I do about stability of the European Union. What side do you what is going to happen in five years’ time. To answer come down on? cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
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26 June 2012 Sir Howard Davies
Sir Howard Davies: I think I would say that it is particularly felt by the Balkan countries—Estonia, necessary for the future stability of the eurozone, Lithuania and Latvia—because of their— probably. I cannot quite see that the eurozone can Sir Howard Davies: “Baltic,” you mean. continue to exist on the basis of intergovernmental Sir Menzies Campbell: “Baltic” is what I said. agreements. I think that will have to be anchored back Sir Howard Davies: You said “Balkan.” into the treaty. As for whether it is good for the UK, Sir Menzies Campbell: I beg your pardon. that depends on what kind of deal we can negotiate Sir Howard Davies: These “Bal”s are difficult. for our relationship with the eurozone. Q16 Sir Menzies Campbell: There is a world of Q13 Sir John Stanley: Sir Howard, our Committee’s difference because of their proximity to Russia and particular focus is, of course, the Foreign and the occasions when political pressure at least is Commonwealth Office. I wonder if you could tell us sometimes exerted against them. your view, given the European situation that we face Sir Howard Davies: Yes, you are taking me a bit out today, of the imperatives, the policy priorities, as far of my comfort zone, Sir Ming. I would have thought as the Foreign Office is concerned in dealing with our the Baltics attach very high importance to NATO and present position vis-à-vis the EU. not just to the European Union, although they see their Sir Howard Davies: Sir John, I left the Foreign Office membership of the European Union as anchoring them 36 years ago, so I may be slightly out of touch on more firmly in NATO than they otherwise would be. quite how the Foreign Office operates. I think that the approach needs to be to work with the grain of those Q17 Sir Menzies Campbell: Perhaps I could briefly people who believe that there is advantage in UK take you back to your comfort zone. You set out very membership of the broader EU, even if the question eloquently, if I may say so, what the United of our euro membership is deferred sine die. I think Kingdom’s objectives ought to be in relation to a more that there are two important areas where that is true. integrated eurozone. What do you think our chances First, there is the single market. There are countries are of achieving that agreement which you referred that recognise the UK’s importance in having pushed to? What would be the consequences if we did not forward a broadly free-trade, pro-competition and pro- achieve it? competitiveness agenda. We tend to be supportive of Sir Howard Davies: I am a perennial optimist and I that and are good at structural reform. As Mr Baron think that there are certainly people in the European was saying, that is going to be an important theme. Central Bank, the single market directorates of the Secondly, there is foreign and defence policy, where, Commission and in the three European regulators who bluntly, if the UK is not involved, there isn’t much do appreciate that the UK, with the presence of the foreign and defence policy for the European Union. financial markets in London and our understanding of There are countries, including Germany, but also a lot these things, is a very important part of the debate. of countries in the east, that regard it as really rather There have been areas where I know we have been important that we are kept on board for all those making constructive suggestions about how the future aspects of policy in which our weight and strategic regulation of the eurozone can be developed. As long interests in the world are of great significance to the as we adopt a constructive approach, there is a European Union. reasonable chance that we can stay closely engaged. If So I think we need to keep working on those other we get into a confrontational mode with the eurozone, dossiers, which are positive for us and are where other where they perceive us as being obstructive of things people see our value, and do the best we can in the that they absolutely know they have to do in their much more difficult areas where the construction of national interests, then there is a risk that, in the single the eurozone demands integration that we do not want market dimension, we find ourselves dealing with a or, indeed, need. eurozone bloc which has a guaranteed majority in approving directives, improving relations and Q14 Sir Menzies Campbell: To pick up on that last approving the rule books below these directives which point, it is not the United Kingdom alone, but the the three authorities are supposed to be producing. We United Kingdom together with France that gives would find ourselves in a position where we were not credibility in the area of defence and security. Would really being debated with—because they discussed it you agree that that argues for close co-operation with all beforehand and voted in favour—and some of the French on defence issues? those rules could effectively be discriminatory. We Sir Howard Davies: Yes, I agree. Perhaps I was have already seen the ECB suggesting that any euro eliding a point in my answer to Sir John in the sense transactions with one leg in the eurozone must be that I think there are a lot of other countries in Europe cleared by an entity in the eurozone. The UK is taking that would not like European foreign and defence it to court, but it is one swallow that is an policy to be entirely driven by the French. A Franco- uncomfortable sign of summer. We could find a lot British approach, as the two countries with the ability more of that. If we did, the foreign-owned firms based and the willingness to project military power, is in London for their pan-European activity might well regarded by others as being likely to produce a better decide to shift it. They might at least decide to shift outcome. But, yes, as far as we can agree with the the balance of their activity. French, I think we should do so. Most of the American banks, and indeed the Swiss and French banks, have the majority of their capital Q15 Sir Menzies Campbell: That desirability of markets activity based in London and they operate Anglo-French co-operation on defence, which is from here. If they thought that their trading based out cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
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26 June 2012 Sir Howard Davies of their London offices was going to be discriminated our relationship with the EU to have a trade and co- against because it had to be routed through a euro operation grouping but without political union? subsidiary, etc, then at some point they might say: Sir Howard Davies: I am afraid that I am a sort of “We will have to reconsider where we put our practical fellow, and I always like to ask myself, people”. There are firms already asking themselves “What do I actually mean by that? What is it that I about the viability of London. This question was am going to end up with specifically?” My fear is that asked when the euro was constructed in the first place a dynamic that says, “Well, we’re off, unless we can and because of the single market dimension we were do this, this and this”, might just result in a long, sad roughly able to reassure people that it did not matter; farewell, where quite a lot of British economic they could do a lot of euro business and be based in interests fall by the wayside. London. If we get into a position where we are in a I am not very enthusiastic about these sorts of grand confrontational mode and not influencing the future, gestures. I certainly do not think that we are in a then that balance of argument could shift. That would particularly strong position, because at the moment, be unfortunate, in my view. the preoccupation in the eurozone—you can see this by the plethora of summits to which we are not Q18 Andrew Rosindell: Sir Howard, it is fascinating invited—is in solving that problem. If we come along to hear your reflections, especially when you spoke at that particular moment and say, “By the way, about the dynamic for integration being much greater you’ve not got to solve just that problem, you’ve got than people had expected. Do you therefore agree with to solve our problem, because we want a complete me that Lady Thatcher’s warnings were right 20 renegotiation”, I think this is not going to be a good years ago? place to start. Sir Howard Davies: I am trying to recall all the things I do not disagree with the idea that it looks as if we that Lady Thatcher warned me about. Over a decade are, to some degree, diverging, but I fear that the there were many of them. It seems to me that in this notion that we have a good negotiating position at this country we have never taken as seriously as we should point to renegotiate our relationship with the EU and the phrase “ever-closer Union” in the original Treaty end up in a place that is very happy for us is pretty of Rome. Most people in other European countries do risky. regard that as a general direction. They do not always know what they mean by it, but they regard it as a Q20 Rory Stewart: What do you think the time sign that this is the way that Europe is going. When frame will be for the moment at which we find the the single currency was introduced, I remember being UK and Denmark being the only countries outside the involved in debates in the European Monetary eurozone? What is your best guess? Are we looking at five years, 10 years or 20 years? Institute. At the time I was deputy governor of the Sir Howard Davies: My best guess would be a Bank of England, and I used to have to go to those, reasonably long time frame. The inclination will be— where we were constructing the single currency. Some certainly, the Central Bank will take this view—that people did say, “Surely we are going to need more it will not be keen to admit any new members unless fiscal co-ordination.” The answer typically given was, they meet absolutely, rigorously and strictly every “Look, the way Europe proceeds is, we make a great possible criterion. Whereas we know that in the past, leap forward in one area and then we do all the things the rules were bent to admit Italy, Belgium and that are necessary. We retrofit it with all the things Greece, that will not happen again. People will that you really should have done in the first place.” perceive the risks of that as being very severe. That The single market was like that. It began as a kind of will mean that whatever new fiscal arrangements aspiration for free trade, and that was followed by 142 emerge, people will have to meet those and show that directives, which were not what people thought at they can meet them over a long period. Their currency the time. alignment will have to have been achieved for a long What is now happening is that the European Union is period and their banking systems will have to be having to retrofit the single currency with all the bits hunky-dory. My feeling is that it will be quite a long that arguably should have been put in place in the first time, so more in the 10-year or 20-year time frame place, but which create a new dynamic. That is the than the five-year time frame. way Europe works. In this country, unfortunately, we tend not to see it that way. We tend to see it as a series Q21 Rory Stewart: Is Britain not facing almost a of discrete transactions, where we look at each of tragic choice that, increasingly, as more countries them one by one and ask, “Does this make sense or move into the eurozone, the European Union not?” In many places in Europe, people do not think increasingly looks like the eurozone? Being in the EU in that way. I was at a conference in Poland the other but not in the eurozone will become an ever more day. I talked about the eurozone, and I asked one of uncomfortable situation for us, for a whole series of the Polish economic advisers what his view about it reasons. You have talked about banking reform, but now was. He said, “We still want to get on this boat, simply in terms of people’s attitudes in the eurozone, even if it is sinking.” will they not increasingly begin to behave as though the EU is the eurozone? What on earth do we do as a Q19 Andrew Rosindell: Based on that, as we have country to make contingency plans for that situation? got ourselves into such a muddle over membership of Sir Howard Davies: It is a reasonable hypothesis. I the EU, and as it has very little public support, isn’t it suppose the counter-view that one might advance is time, as Lord Owen has suggested, that we change that, at the moment, there is quite a bit of variable cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
Ev 6 Foreign Affairs Committee: Evidence
26 June 2012 Sir Howard Davies geometry in the European Union. There is Schengen, Le Figaro last week—“Look, we understand what you which some people are in and some are not. Some are have to do. You need to do all these things”, that is a in the eurozone, and some are not. There are free- good posture to take, because that is realistic, and it movement things, some of which we are in while is what they have to do. other people are not, in relation to new members. Coming back to your previous question in a sense, I There is defence co-operation, which is stronger in agree with you that this could mean a coalescing in some areas. There is the notion of reinforced co- the eurozone, which is a bit uncomfortable for us. operation, which we are involved in, and some are However, of a lot of relatively unattractive outcomes, not. that one is better than the collapse of the eurozone, It is probably in our interests to try and argue that it which would be economically disastrous for us and is possible to construct a Europe of concentric circles, might carry the additional risk that we were perceived variable geometry or whatever, and that that is not just somehow to be responsible for it. That would put us because we are terribly troublesome and would like in a very poor position. an opt-out, but because it is a realistic way of running Europe for a decent period to come. A lot of people Q23 Mr Baron: May I, if you do not mind Sir will not be able to get into these stricter criteria of the Howard, pursue that line of questioning? I think that European Union. any reasonable assessment of the eurozone crisis If you say to me, “In 30 years’ time, can I see this would lead to the conclusion that it was because being stable?”, possibly I would agree with you, but governments, particularly in the south, borrowed far for quite a period, there will be, as a practical matter, too much, beyond their means and at artificially low a Europe of variable geometry. Therefore, rather than interest rates, and went on a spending binge. taking a confrontational approach and saying, “We’re Conspiratorial theories about New York and London going to take our bat and ball home unless you agree would, I think, be given short shrift. this, this and this”, we should be saying, “Look, we May I come back to your point about the general are faced with this complicated picture. The eurozone direction of the EU? You said, “ever-closer union”. has not worked precisely as intended. One or two There is this feeling that there is, certainly within the people may drop out”—my hunch is that the Greeks eurozone, a wish to get ever closer. You have talked may well leave the eurozone at some point, or may be about the Polish attitude of wanting to jump on a boat forced to. Therefore, it is not just “us and them” on even if it is sinking, and so on. But may I be devil’s this particular issue. We are going to be facing a advocate, and suggest to you that the number one variable geometry Europe, and we should all try to priority should be economic growth within the construct ways in which we can live as comfortably eurozone, but that that has singularly failed? We see as we can in this house, even if we are no longer growth rates continuing to fall behind other areas of allowed in the dining room. the global economy. The only country within the That would be a better way of looking at it, rather eurozone, to my knowledge, that has gained a market than seeing it as an opportunity to get some stuff back, share in the past 10 to 15 years has been Germany, which I do not think is going to be particularly good. but that has been on the back of a strong manufacturing base and an artificially low currency— Q22 Rory Stewart: In terms of UK foreign policy, normally the two do not go hand in hand, in the is it really responsible of us to press for closer fiscal normal economic world. union? Presumably, there are two possibilities: either May I therefore suggest to you that if you look at the it works really well, in which case Britain ends up 80-plus currency unions that have fractured since the with the potential risks and problems associated with second world war, in the vast majority of them—I a very coherent, powerful, unified economy and state struggle to think of the exception—the countries structure on its borders. Alternatively, it does not work involved have benefited from the break-up of that well—in other words, we push them into a situation currency union? Even when you talk about bond in which, over the next five or 10 years, there are default, if you take the Asian crisis in ’97, three years exactly the kind of tensions that Eurosceptics imagine later GDP growth was higher than at the start of the are implicit in any kind of move towards more of a crisis, when it came to bond default. Do you think we super-state. Neither of those is very good for Britain. are right to be pushing down the road of closer fiscal Neither a super-strong unified eurozone, nor a weak, union—saving the euro—when all the evidence is that fragmented, unstable eurozone is in the UK’s it is curtailing growth and, in some countries, causing national interests. a democratic deficit? Sir Howard Davies: I think the worst possible Sir Howard Davies: There is a lot in that question. outcome—it is always good to look at those—is that First, on the cause of the crisis, I think, as I have said, the eurozone collapses and we get blamed. That would that it was not just government borrowing. In some be the worst outcome and it is not completely countries it was private sector borrowing, so I do not ridiculous. You can hear a lot of French rhetoric, as I completely accept that diagnosis. I have written a frequently do, saying, “The crisis really came from book about the causes of the crisis, which identifies London and New York. It is an Anglo-Saxon crisis, 38 different causes, so perhaps we could spend two or which we are having to deal with.” If we were then three minutes on each of them—is that okay? perceived as having been obstructionist in terms of the Mr Baron: To be fair, Sir Howard, I did not say eurozone doing what it needed to in order to try and government borrowing, I said country borrowing. strengthen, that would be a really bad outcome. So, Sir Howard Davies: Okay, not just governments. In when the Chancellor says—he wrote a good article in that case, I am with you. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
Foreign Affairs Committee: Evidence Ev 7
26 June 2012 Sir Howard Davies
As for whether it would be better just to call it quits, whether Spain has a fundamental competitiveness I guess that my conclusion on that would be that it problem. It was engaging in some sort of catch-up. would not. I would take a slightly different view about Spain has quite a sizeable export sector. Again, there Greece. I have to say that I cannot see a way out for is a property bubble, and massive deleveraging is Greece, and that might be true for Cyprus—I don’t going on. You need to look country by country at what know. The indebtedness is too high, and I think that the problem is and what the best outcome would be. it will have to default and then, whether it would As I say, I am not totally opposing your way of recover better within the eurozone or outside, is a thinking about this. Indeed, I think, if I looked at moot point. I think it would probably be better that Greece, I would get to your position. I would say, it recovered outside the eurozone. I follow your line “Actually, that is probably the better outcome for of argument. them.” I do not think that I would get to that position There are two worrying things: first is the sheer scale if I looked at Ireland or Spain. of recession that you might generate as a result of the grinding of gears change in the currency zone would Q25 Mr Baron: Can I move us on briefly to produce. You might say that that is a transitional regulation. We come back to the supply side story phase, but I think that it could be a very painful again. In my constituency, I have a disproportionate transition. Secondly—this is a political point, which number of SMEs. Their main gripe is not bank again is beyond my normal area of expertise—I worry lending but the weight of regulation that they are hit a lot about who the political inheritors of a collapse with, which can disproportionately affect small of the eurozone would be. In France, the key businesses. Some 90% of regulation emanates from opponents of the euro are the National Front, and we Brussels. I am interested to know whether you feel have seen some exotic—let’s put it that way—political that the business case for membership of the EU is forces emerging in Greece, which are the ones that are still valid, particularly when it comes to small opposed to it. We might find the political businesses. We look at other areas of the world that consequences of a break-up of the eurozone in some are growing at much faster rates that are not burdened of these countries to be ones that we would not like by so much regulation, yet it feels as though Brussels the look of, and that is what frightens a lot of people and the eurozone still do not have the key message in the eurozone. that in the longer term, if you want to bring down unemployment, you have to allow your businesses to Q24 Mr Baron: Do you not agree, though, that we breathe and thrive. They are finding it increasingly are already seeing that? Take the Greek extremist difficult to do that under this weight of regulation that parties. They are not necessarily against the euro; they emanates from Brussels. are against the austerity packages involved. There is, Sir Howard Davies: I think that I look at the world I think, a valid concern that there is a democratic slightly differently. We are part of it. Political choices deficit out there, that the austerity packages, in many have been made by governments in this country and respects, are making matters worse because they are in the rest of Europe to produce this. I also look creating this spiral of cuts and further missing of around at other countries such as Australia and targets when it comes to deficits and so forth. That Canada and I do not find a highly deregulated is causing a real problem in the eurozone. What is economy. I think that they are regulated as heavily as desperately required is what economic history would we are. Then you have to say, “What would you do if suggest has happened. When countries leave such a you left?” Then your question would be, “Do you union, yes there is short-term pain, but growth wish to stay with complete access to the rest of the ultimately picks up much faster than would have European market?” If you do, you have to meet most otherwise been the case. Economic history is littered of the standards—environmental, quality control and with those examples. I put it back to you that the everything—anyway, which is what the Norwegians austerity packages on their own are simply making and the Swiss have to do. It is not clear to me either matters worse. History suggests that what we should that it is Brussels doing it—it is us—or that it is much be doing is making strong contingency plans for the more regulated than other parts of the world. If we break-up. Yes, there will be short-term pain, but, as look at Australia, there is no way we are more history shows us, once you have got through that pain, regulated than Australia. You could not find a more growth is much better and unemployment comes regulated country. Whether we would escape anyway down. seems to me to be a moot point. Sir Howard Davies: These are imponderables really. I can understand your point, except that if you default Q26 Mr Baron: But do you not accept that roughly and leave the eurozone, the austerity package that you 90% of regulation—a very high proportion anyway— have now will be nothing compared with the austerity emanates from Brussels? Do you have a tendency then package that you will have to have then in order to to—I will not say gold plate because it is a bit of a re-enter international capital markets. Secondly, you cliché—enact those regulations? The gripe from small need to look country by country at what the problem businesses is regulation. really is. In Ireland, it is not fundamentally a problem Sir Howard Davies: I am sure that it is right that 90% of competitiveness. It has quite a significant trade emerges from Brussels, but that is because we—I surplus. It had a property bubble and a bust banking mean we collectively and I include our Government— system, which is a completely different diagnosis have agreed to expand Community competences in a from the diagnosis in Greece, which has a whole number of areas. There is much less UK fundamental competitiveness problem. I am not sure regulation than there was because we have agreed cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
Ev 8 Foreign Affairs Committee: Evidence
26 June 2012 Sir Howard Davies
Community competences in a lot of areas. That in that the rest of Europe would have to wrap their arms itself does not seem to be a significant point. around the rest. What I do not think you could possibly do is say, “Well, goodbye to Greece today, Q27 Mr Baron: I have a final question. Do you think now let’s see what happens”, because if you did that that there is a case for Britain to look closely at a free you would have a highly disorderly break-up, which trade agreement, or a relationship similar to that of would be catastrophic. Switzerland or other countries that have access to So, to my mind—this is just my way of thinking about markets—okay, they may have less say in how those it—Greece stays in or not, and if Greece goes that markets are formulated, but they have access to has to be the moment when effectively there is some them—but do not have to sign up to this general, ever- mutually guaranteed borrowing and the rest are closer political union that can also have an impact on protected, with a firewall erected around the rest, economic regulation? I ask that question because because otherwise it would be too disorderly. those countries seem to thrive. As for the impact of Greece going on future Sir Howard Davies: I would, on the whole, say that membership, I think that it will cause people to think that would be a risky thing to do, and I think that it’s twice, but I think that most of them still want to join. a different position when you have never been in than However, what Greece going will do, as I said earlier when you are in, because your economic structure has briefly, is to cause the European Commission and the developed in a different way. If you look at the Swiss, Central Bank to erect the barriers to new entrants for example, the big parts of the Swiss banks—I am somewhat higher than they have been in the past, so sorry to use the financial sector as an example, but that you will absolutely have to meet the criteria and that is what I know about—are based in London for have met them for some time before you get in. their access to the EU, as a matter of fact. As to whether it is helpful to think of that as two-tier, So I think that we would run some risks in attempting personally I prefer to think of it as variable geometry. to disengage to that degree. And also I would attach You will have some countries that are in things and quite high importance to things like co-operation on some countries that are not, and some countries that foreign policy and defence policy, which I think are are on a flight path to join and some countries that are good things from the UK point of view, but admittedly further down that flight path. Therefore, rather than that is a matter of taste. And yet if you then say that, saying, “All countries are equal, but some are more in order to off-set the economic disadvantages, we equal than others”, we would say that there is an would want an agreement that allows us complete evolution here, which is taking different forms at access, then you go back to the regulation that you different speeds in different places. Looking forward started with, because they will not allow you to have as far as I can reasonably see—about 10 or 20 years, that access if you do not follow regulation that is which will be long enough for me—that is the way I equal. see Europe. I don’t think everybody will be in the So, personally I do not think that there is an easy kind eurozone. of Swiss option. I would also point out to you that actually Switzerland is not a deregulated country in Q29 Mark Hendrick: Do you see it as an any way and in the financial area there is something impossibility that Britain could acquire the status that called the Swiss finish, which is actually over and Mr Baron talked about, of almost being like a member above our capital requirements; the Swiss have higher of the EEA or EFTA? capital requirements than we have. Sir Howard Davies: I think it is not impossible. If we approach this as “Take it or leave it; we want a Q28 Mark Hendrick: Coming back to some of the renegotiation—otherwise we’re going to take our bat things that you said earlier, Sir Howard, you and ball home,” I think we could find people saying, mentioned this idea of an even closer union and you said that we must not underestimate the degree to “Well, okay, do so, and let’s renegotiate,” but I do which European countries want to integrate and stay not personally think that would be the best way of together. But then you conceded that you saw a approaching what is a very difficult situation—and possibility that Greece may come out of the eurozone, not, by any means, of our making, most of it. I don’t given what is happening at the moment. Do you think that would be a good way of doing it. I think foresee the possibility at all—you have mentioned we will get a better outcome for the UK if we adopt a looking country by country—of a core of countries more co-operative and collaborative approach to this. providing a very, very strong eurozone area and perhaps other countries that, after the Greeks go, may Q30 Chair: Sir Howard, thank you very much. That be driven out, because of the size of their debts and exhausts our questions. Have we asked you the right the problems they face, effectively making a two-tier questions? Is there any point you would like to make, Europe and one that has a fairly strict group of that perhaps we have not touched on? countries inside the eurozone and others that Sir Howard Davies: If I could just be slightly specific incrementally have fallen off along the way? on the financial thing, because that’s what is Sir Howard Davies: This is partly a tactical issue and happening now. I think, if I may say so, that your partly a strategic issue. I think the tactical issue is that inquiry is quite timely, because the first example of if the Greeks cannot make it, because they cannot what we’ve been talking about, of coalescing in the meet the austerity programmes or whatever and they eurozone, leaving us on the outside, is going to be the go towards the exit, what would have to happen to idea of a banking union. I think what will be proposed prevent real mayhem in financial markets would be will be a linking together of the deposit guarantee cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:22] Job: 022929 Unit: PG01 Source: /MILES/PKU/INPUT/022929/022929_o001_th_HC 115-i - Sir Howard Davies - Corrected TEMPLATE 26-06-12.xml
Foreign Affairs Committee: Evidence Ev 9
26 June 2012 Sir Howard Davies scheme, with some kind of mutual guarantees of, and that what goes on in the eurozone is tucked between them. underneath that, so that we don’t find ourselves in There will be a new, pan-European supervisor, in the purely an ante-room of the single financial market. real sense of a supervisor that actually does the That negotiation is going on more or less as we speak, supervision from day to day, not just the European and I think that is how we should approach that Banking Authority, which writes some rule books. particular problem. It will be an interesting example, There will be a resolution authority as well, probably if we can negotiate it, of how we might approach the European stability mechanism; i.e. something that some of the other difficult issues that will come down can provide capital to a failing bank on a pan- the track. European basis, with a pan-European guarantee. I think something like that will now emerge. I think the Q31 Chair: So are you saying that it is important that supervisor will probably be the European Central we are a part of the banking union? Bank, because I think it is easier to do that than to do Sir Howard Davies: No. I don’t think we can be part the European Banking Authority, which, after all, is of the banking union in the sense of the eurozone, based in London—so that would be slightly odd—but, because that involves mutual guarantees and the also, is really a large committee; or that was its origin. European Central Bank, which we are not a full Therefore, we will have to decide how we deal with member of; but I think what we should ensure is that that. I think what we should then do is to ask for some we retain market access for banks based here, even if things which are related to the Prime Minister’s red we are not in the banking union. lines in December but are somewhat different, and Chair: That may be easier said than done. express them in a more constructive way. We should Thank you very much indeed, Sir Howard. Your try to ensure that the European Banking Authority evidence is much appreciated. remains the entity that writes the rules in the single market area for banking, which we are a full member cobber Pack: U PL: COE1 [SE] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 10 Foreign Affairs Committee: Evidence
Tuesday 10 July 2012
Members present: Richard Ottaway (Chair)
Mr John Baron Andrew Rosindell Sir Menzies Campbell Mr Frank Roy Ann Clwyd Sir John Stanley Mike Gapes Rory Stewart ______
Examination of Witness
Witness: Charles Grant, Director, Centre for European Reform, gave evidence.
Q32 Chair: I welcome members of the public to this from the bits of EU policy that they do not like— second evidence session of the Committee’s inquiry whether it is fish, agriculture, social, or whatever— into the future of the EU and UK Government policy. because our leverage is very low, and if we wanted It allows us to question directors of two of the UK’s such opt-outs, others would too. It would not be in the most influential EU-focused think-tanks and, from the British interest to allow other countries to opt out of Netherlands, the author of one of several proposals bits of the single market. I have talked to other currently being floated for fundamental governments about that, and I think that the British rearrangements of the EU. Our first witness is Charles are under an illusion if they believe that a special set Grant, the Director of the Centre for European of arrangements is available to us. I think we are in a Reform. Mr Grant, welcome, and thank you very weaker position than we imagine in asking for such much for coming. Would you like to make any arrangements. Those are the two opening points I opening remarks? wished to make. Charles Grant: I would like to make a couple of opening comments. One is to try to dispel what I think Q33 Chair: Can I start by asking about the UK’s is becoming received wisdom on one issue; the other influence, and then about its relationship? You is to question what is also becoming received wisdom described the December 2011 Council as a disaster. in many British political circles. The first one is the Can you give any concrete examples of where you assumption that if the eurozone integrates think we have lost influence since then? significantly, that, by definition, fundamentally Charles Grant: I did describe it as a disaster, and it changes Britain’s own relationship with the European may well turn out to be. I agree that in the short Union. People from all political parties seem to accept term—the six months since then—it has not proved to that as a given, but I would question it. I would argue be particularly harmful, as far as I can see. It created that if France and Germany choose to integrate their a lot of ill will towards us, which undermines us in economic policies, and if Spain is banned from certain ways. However, it has not been as bad as I borrowing more than 1% budget deficit every year, thought it would be, because in the subsequent that does not necessarily change Britain’s relationship, negotiation of the fiscal compact, although the British in terms of the single market. I agree that it might, if are not part of it, other EU countries, notably the integrated eurozone caucus had a unified position Germany, fought hard against French wishes to ensure on many issues, such as financial regulation. That that the Commission would play a very big role in the would affect Britain, but in my view, that danger is new arrangements of the fiscal compact. Although it most likely if Britain blocks future attempts to amend is outside the EU, it is intimately linked to the EU the EU treaties that would facilitate eurozone systems, which is good for the single market and good integration, and perhaps we can talk about that later. for British interests. I do not think the way that the It seems that that would spur eurozone countries to go outside of the EU’s structures, and it would lead to fiscal compact has so far turned out—of course, it has them caucusing, making it much harder for the British not even been ratified yet—is particularly harmful to to influence what they do in the eurozone. It could British interests. So, what happened in December lead to quite a profound change in the relationship, upset and annoyed people, and we may need their namely through a loss of British influence. goodwill at various points in the future, but I cannot My second point is more fundamental. The give you a precise example of British interests being Government certainly seem to be moving towards a damaged yet because of it. view—I have heard some people in the Labour party say similar things, and Mr Persson, who you are going Q34 Chair: You have downgraded the assessment to see later, says this as well—that what Britain should of disaster. do is get a better deal. It should go to its partners and Charles Grant: Yes. try to get a deal that effectively opts out of what some people regard as the sillier things that the EU does, Q35 Chair: Do you feel that we need to be at the perhaps then putting it to the people in a referendum, table for every discussion that is going on in the EU? or not. However, my contention is that it is not Charles Grant: I think we probably need to be at the feasible, as far as I can see, to assume that the British table in most discussions when they are about can negotiate special treatment, in terms of opt-outs economics. Whatever the eurozone does in future in cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 11
10 July 2012 Charles Grant terms of financial regulation and economic policy co- background is that the Germans have often had a ordination, although we will not be part of these new similar view to us, things have got worse in the last binding arrangements, particularly those limiting six months. This is partly in answer to your first fiscal policy, we should have a voice and be in the question about December. I spend time in Berlin room, perhaps without a vote, just to express our talking to quite senior advisers in the German views, because our economy is big and important in government and they are very fed up with us. They the overall EU economy. As we are the host to are annoyed that we are a distraction. When they are Europe’s largest set of financial markets, we’ve got trying to sort out the serious business of the eurozone to have a voice. The British Government’s objectives crisis, we sometimes lecture them in a patronising should be to be present in the room with the right to tone from the sidelines. speak, certainly when financial issues are discussed, We criticise them—in my personal view a lot of that but I would say whenever economic issues are criticism of the way they handled the eurozone crisis discussed. is correct—but when we criticise them from the sidelines we are not, as they perceive it, being very Q36 Chair: You said that if Europe went to an inner constructive. Then we come along and say that we core it would make the EU “less congenial”—that was want to redefine Britain’s relationship with the EU, the phrase you used. In that case do you think that we possibly opting out of certain things. This does not are right to be encouraging the development of such create a lot of good will. I have noticed in the last six an inner core? months, since December, a greater degree of Charles Grant: Yes, because my starting point is that frustration with the British. Just one example: there the break-up of the euro would be very damaging to has been a sort of gentleman’s agreement that the the European economy and pretty damaging to the British will never be outvoted on financial services British economy, indeed the world economy. I hope legislation. It is majority voting and we could be, but the euro’s break-up can be avoided. None of us knows we have never been outvoted on a key issue, just like if it can be. The best way to avoid its break-up is the Germans have never been outvoted, I think, on for the eurozone countries to integrate more in their their car industry and the French on farming. I have economic policies and probably that means some now heard it said in Berlin: “We are so fed up with more political integration as well. As I think I have the British, why should we do them these favours and said, it is true that it makes the EU less congenial to give them special dispensations? Maybe it is time that the British because they have tended to see the we outvoted them.” That gives you a flavour of the economics of the EU as the main reason for being in increasing frustration with the British that I perceive it. However, my line would be that as long as the in Berlin. integrating eurozone does not inflict its centralisation of economic policy-making on countries outside the Q38 Sir Menzies Campbell: Might I take you back euro, such as Britain, it need not harm our interests at to your opening statement to see if I understand all. As I said before, we need to have a voice in the completely one of the points you made? Excuse me if room, but also—and we shall probably come on to I put it in more pejorative terms than those you chose. this—we need to find ways of influencing the outcome Would I be right to infer that it is your opinion that of the eurozone discussions to make sure that the more obstructive generally the United Kingdom whatever decisions they take are relatively congenial might be in the European Union, the more likely it is for the British. Perhaps we can talk about how Britain that it will encourage integration on various levels should influence the discussions. among other members of the European Union, which either excludes the United Kingdom, or is against Q37 Chair: Do you think we have more in common United Kingdom interests? with Germany than we hitherto expected? One of the Charles Grant: Yes. My view is that the British being surprises to me has been that we often seem to have difficult cannot stop them integrating if they wish to common ground in groping our way forward with integrate, but it pushes them down a path that is less Germany. That rather surprised me. Does that good for our interests. That path is being outside the surprise you? EU, setting up new intergovernmental structures, as Charles Grant: No, because we have always had they did with the fiscal compact. Although as I said common ground with the Germans in certain respects. previously, the Commission does play a rather large They have always been relatively free trade oriented; role in the fiscal compact, that was not how the French they have always believed in a rules-based system of intended it to be. The French initial view of that fiscal EU governance; and they have always wanted a compact was of a very intergovernmental body relatively outward-looking EU. They have been a bit dominated by the big member states, because the less protectionist in their instincts than the French, but French have quite a negative view of the Commission. what so many countries say to me, especially the What I picked up in Germany recently is a fear that smaller ones when I talked to them recently is: “Why when there are new treaty changes on the agenda, as is Britain either leaving the EU or at least being less there may well be for the banking union, for example, influential in the EU?” We are forcing the Germans to Germans fear that the British will come along, as they work much more closely with the French, faute de did in December, and say, “No, you can’t have this mieux, and there is a risk that the Germans will done through the EU.” The Germans will reluctantly become less free trade oriented, because of the go outside the EU as they did before. They point out diminished British voice in the European Union. On that if you go outside the EU with a banking union your point about having a similar view, while the you risk fragmenting the single financial market, and cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 12 Foreign Affairs Committee: Evidence
10 July 2012 Charles Grant that could be quite harmful for British interests. It will relations with Sweden, which is good, but I don’t certainly cause great annoyance. think we have done this with enough countries.
Q39 Sir Menzies Campbell: Mention of the fiscal Q41 Sir Menzies Campbell: My last question could compact takes me neatly to my next question. Have almost be one for a PhD thesis, but perhaps you will you conducted any analysis as to why it was that all be as economical as you can with the answer. Why of the non-eurozone countries, with the exception of should the United Kingdom remain a member of the the UK, were willing to sign up to the fiscal compact? European Union? Charles Grant: Ultimately, just the Czechs stood by Charles Grant: The short answer to that question is us, though in December they appeared to be on the that if we left the EU we would not have full access other side. A lot of British officials were quite to the single market. We would face tariffs and non- surprised that most of the countries outside the euro tariff barriers. If we went for the Norwegian option, did not want to be associated with the UK in resisting we would not be able to shape the rules of the single the fiscal compact treaty. Perhaps that is a measure markets. Being a full rule-making member of the of how, even before the December summit, Britain’s single market is profoundly in Britain’s interests. That standing and reputation had fallen. We think in this is the main thing. country that the central Europeans are our friends Secondly, global trade, global economic issues, free because we helped to get them into the EU, we let in trade agreements and climate change talks. If we are their labourers and so on. Actually, in recent years, part of the EU and influencing the EU’s position, we our standing has really declined in central Europe, are one of the big boys, or big people, and we can because we are perceived as so peculiar, so on the really influence the result. Thirdly, foreign policy. We edge, that those countries, sometimes reluctantly, have are, for all our problems, one of the most influential decided that Germany in particular, and France and players in foreign policy on Iran, Syria, Russia and Germany more generally, are where they need to be. China. We can and sometimes do help to set the One of your other witnesses, Howard Davies, quoted agenda. As part of a big bloc, we have more influence. a Polish official saying, “We can see the eurozone ship If we want to open up Chinese markets, it is much is sinking, but we want to jump on to it anyway.” I better to be part of the EU in doing so. have heard Polish officials say the same thing. That is Finally, enlargement, which is perhaps the EU’s the view: most of the countries outside the euro want greatest success, spreading democracy, stability, to join it in the long run. They think that Germany is security and prosperity across much of the continent. the power that matters in Europe. They don’t want to If we stay in the EU, we can continue to push for annoy Germany too much; they think they need to enlargement. Obviously, we would not have that be in Germany’s camp; and the British are seen as ability if we left the EU. increasingly marginal. Q42 Mr Baron: I completely agree with what you Q40 Sir Menzies Campbell: One way to deal with have said. We have not put enough diplomatic the perception that you have observed is diplomatic resource into the EU. There is an attempt by the effort. What is your view of the quality of British Government to catch up, but there is a long way to diplomatic effort in the EU in recent years? I don’t go. However, I accept what you say. just mean the quality of the permanent representative in Brussels. I mean generally, within the EU and, if May I come back to the question asked earlier about you like, intergovernmentally with countries that are where our long-term interests lie? One could paint the members of the EU. opposite picture to what you have described. We have Charles Grant: Obviously, our diplomats are had 40 years of ever-closer union in the EU. The generally very good at their job. My criticism would treaty of Rome embodied the principle of that ever- be this: if you want to influence outcomes in the EU closer union. We have had Governments and Prime you need friends and allies, and we haven’t always Ministers talk about clawing back powers before, but been very good at making those friends and allies. it has never transpired. What we have in front of us Successive Governments, Labour and Conservative, now is a eurozone crisis. I think most would agree have to their credit understood the importance of that if the euro is going to succeed, at its core there France and Germany. Gordon Brown’s and David will be some sort of fiscal union and compact. Even Cameron’s Governments have paid attention to France now, although that is not due to come into effect until and Germany, as they should, but we haven’t paid the spring, most of the core countries—Germany, enough attention to some of the smaller countries, France and Holland—are already in contravention of particularly the central Europeans. that fiscal compact if one looks at the figures. We have natural allies in the Netherlands and the In your view, would it be impossible for Britain to Nordic countries and, arguably, central Europe where adopt a relationship similar to that of, say, Norway we haven’t cultivated. Not enough junior Ministers go and Switzerland, with a relationship based on trade and visit those countries to get to know their opposite rather than on ever-closer political union? After all, numbers. Not enough senior officials go to them, these countries seem to be growing faster than the EU. while the French and the Germans send their Their currencies are certainly stronger. Their finances Ministers and officials all the time to those countries. are in better shape. Despite their position, they are We haven’t invested to a sufficient degree in the long- embracing more trade outside the EU at a faster rate term relationships that we should have. Obviously, than Britain in faster-growing parts of the world. Do right now the current Government have pretty good you see that as an impossibility? cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 13
10 July 2012 Charles Grant
Charles Grant: I do not see either model working for Charles Grant: No, I agree that it is hugely important, Britain. The recent research published by Open which is why I mentioned it in my opening remarks. Europe, which is generally regarded as a Eurosceptic In order to change the treaties you, of course, need think-tank, points out that neither the Norwegian nor unanimity. In my conversations with governments— the Swiss option would be very good for us. The worst and reports of other people’s conversations with the would be the Norwegian option, whereby you have to EU governments—I have heard of one government accept the rules of the single market without having a possibly considering that it might agree to grant vote in setting them, which would surely be Britain some sort of opt-out. I have heard that one inconceivable for the City of London. Also, Norway Dutch politician has said that. has to pay into the EU budget, although it is not in One is not enough for unanimity. You would need the EU. 27—or 28 with Croatia joining—to say this. It would Switzerland, I suppose, is perhaps a less bad option, not be in their interests to grant it. The French are because you can negotiate a bilateral deal that suits great believers in social Europe—for better or for Switzerland, but of course the Swiss do not take part worse. They would say that if Britain was allowed to in much of the services that the EU does, so financial opt out of the 48-hour working week, information and services is not included. If we went for a Swiss model, consultation and the rather small number of measures London would not remain the centre of Europe’s that had been passed under what used to be called the financial services markets. We would lose that, or part social chapter, that would lead to what they call social of that. I do not see either as being a particularly dumping. Companies would relocate from France to appropriate model for Britain. Britain attracted by the relatively weak social The other point I would make is that neither legislation. So the French have no incentive to allow Switzerland nor Norway is a middle-sized power with us to opt out of social policy. Many other countries— global interests, which wants to try and influence the at least half or two thirds—would agree with the world around it. The fact that they are not part of EU French on that. foreign policy making is not a big problem for them. The leverage we do have, I guess, is that we pay net If Britain gave up being a member of the EU, as I said into the EU budget roughly £9 billion1 a year. That before, we would lose the ability to shape and set the is significant, but not overwhelming given the size of global agenda with like-minded countries that share the EU budget overall. They would lose that if we left many of our interests and most of our values. the EU, although, of course, if we went for a Norwegian status, we would still pay something net Q43 Mr Baron: Let us put Norway and Switzerland into the budget.2 When I talk to governments, they to one side. You have touched on the possibility— basically say, “Why should we give Britain a special remote though you thought it would be of us deal?” If we allow the British to opt out of the things succeeding—of repatriating powers to the UK. Can that they do not like, such as social policy, the French you just go into a little more detail as to why—this, will try to opt out of the EU rules that prevent you after all, is what the British Government have stated keeping out Chinese shoe exports and the Germans is their intent—you think that would be such a hard will try to opt out of the rules that ban them from pounding? Why do you think we could not achieve subsidising their coal industry. Everybody has this, given particularly—I would put one point in our bugbears and things about the EU that they do not favour—the balance of trade with the EU, which is like. It is essentially a package deal and you have to strongly in their favour? It is in their interests to make accept the rough with the smooth, except for the euro sure that they do try to accommodate the British at and Schengen, which are slightly different and we the end of the day, because it is a very large have been allowed to opt out of. marketplace for them and the balance of trade is very I do not wish to imply that nothing should be reformed much in their favour. in the EU, that everything is fine and the difficulties I Charles Grant: I disagree on that last point. The EU have described mean you should not try to reform it. is a much more significant market for the UK than the My think-tank is called the Centre for European UK is for the EU. About half our exports go to the Reform because we believe that a lot of things need EU. I do not have the exact figure for non-British EU changing. My argument would be to try to change exports to the UK, but it is much lower than that. If them from the inside. On agricultural policy, sure, let’s there was a sort of stand-off on trade and people build up alliances and make that a priority in the started putting up tariffs, we would lose much more coming budget talks and try to get it changed in ways than they would. I do not regard it as harmful that we that suit Britain. It has, of course, been reformed have a trade deficit with the European Union. Trade dramatically over the years—not enough—but it has deficits are only harmful if they are unsustainable. If not been a British Government priority to reform it, you have a capital account surplus and foreign which I regret. investment and so on it makes up for that trade deficit. In terms of economics, it is not a bad idea at all to Q45 Mike Gapes: May I take you back to your have a trade deficit. earlier remarks about the fiscal compact? That is an intergovernmental agreement. You hinted at the Q44 Mr Baron: We can perhaps disagree about the frustrations that that mechanism has caused, but I balance of trade, but what about on that central point would like you to be more explicit. Does this indicate of why you think it would be so difficult to reclaim 1 Witness correction: £7 billion powers back from the EU? That is important because 2 Witness clarification: the UK would still pay about half as it is the Government’s stated position. much into the budget as it does today. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 14 Foreign Affairs Committee: Evidence
10 July 2012 Charles Grant that it is now politically impossible to get unanimous Q47 Mike Gapes: Are the Government, as far as you European Union treaty change and that this will be are aware, doing anything to facilitate that? Behind the model for the future? the scenes, are they trying to nod and wink that, Charles Grant: I do not think so, although in a way actually, a deal is possible on a limited—what you that is a question for British politicians to answer refer to as “crumbs”—basis? because unanimous treaty change requires a British Charles Grant: I have not picked up any information signature and passage through the House of that the Government are nodding and winking along Commons. You are professional politicians, and I am those lines. My guess is that the Government have not not. You can judge whether the House of Commons yet decided what they would ask for, but I am not a is likely to pass a new EU treaty, but I think there will member of the Government, so I am not the best be new EU treaties. As I said, there will probably be person to ask? several treaties for banking union and other changes that emerge in the coming years. Most countries will Q48 Ann Clwyd: You mentioned your regret that sign these treaties. I do not think it is impossible to reform of agricultural policy has not been given get unanimity. The Germans, as I said before, are greater priority. Of course, such reform has been given worried about the British. The British are the only considerable priority by previous Governments, albeit country likely not to sign such a treaty at the moment. in the face of great opposition from the French and Things may change after the next Italian elections, or the Germans. Is there any indication that their whatever, but at the moment that seems to be the case. opposition to reforming the CAP is weakening in any Britain is the country that others are worrying about, way, or does their opposition still remain as resolute? and it is we, rather than anybody else, who will drive Would a British Government not just be hitting their the other EU countries to push ahead with head against a brick wall? intergovernmental mechanisms outside the EU. Charles Grant: The EU is fairly evenly divided on this. There are perhaps more countries that are in Q46 Mike Gapes: The Prime Minister has said favour of reform, but the French, the Spanish, the Irish explicitly in recent articles, including his Sunday and the Poles are among those who are strongly Telegraph remarks, that he desires to repatriate against. powers. Is there a possible quid pro quo if that comes I disagree slightly with your analysis of previous to a head at the same time as some possible treaty British Governments. If I was being very cynical, I change? Is it possible to sequence that? Given your would say that for 20 or 30 years British Governments answer just now to Mr Baron, are you aware of any of left and right have pretended to want radical reform support for that view within member states of the of the CAP and the French have pretended to want to European Union that might be prepared to give us a get rid of the British rebate. The reality, however, is little bit, almost as a face-saver to the Prime Minister, that the British have preferred to hang on to the rebate, while getting their big treaty change? because the Treasury calculates that it is better for the Charles Grant: That is a very good question. As I British taxpayer to keep the rebate and not worry too said before, I do not see our partners being willing to much about CAP reform, and the French have wanted offer significant opt-outs from EU policies. However, to protect the CAP. So I do not think that it actually they might be able to offer us something that could be has been a really big priority, and I think that we could called a deal to allow Mr Cameron to say that he has have made it a bigger priority, but the Treasury has a piece of paper and that it is a good piece of paper. very strong views that what matters most is the British For example, as you know, in 2014 the British net contribution to the EU. Of course, if you did Government has to take the JHA decision on whether achieve radical CAP reform, the rebate becomes less to accept ECJ purview over the acquis communautaire necessary, because one of the reasons that you need in justice and home affairs. Under the Lisbon treaty, the rebate is because the CAP is unfair to Britain. Britain can choose to opt out of all that acquis communautaire and JHA, including the arrest warrant, Q49 Rory Stewart: I think your theory is very Europol, Eurojust, and so on. Whether that is a good convincing, but the problem is that it seems from the idea, we can discuss, but that could be one element of outside as though, broadly speaking, British people it. There could be an agreement on the working time have been dissatisfied for 30 years. It is not just that directive, which is not about treaty change but about somehow British politicians are being irresponsible. It a particular piece of law. A few other bits and pieces is reflecting a genuine disquiet. It is therefore very could be dressed up in a package deal that Mr difficult to imagine in the long term the British Cameron could come back and present as an population really accepting the kind of model that you achievement. I think some of my Eurosceptic friends are presenting, which is that we are in a straitjacket, may not be satisfied with that as it would not that we do not really have any choice, that our best significantly change Britain’s relationship with the option is to remain in, that we do not have much EU, except perhaps on the JHA point. I think our movement and that we might get a few crumbs off the partners, for peace of mind and for allowing them to table. If that is the case, will there not eventually be a focus on what they think is important, would give us point at which we regretfully have to recognise that a few crumbs like that, but not the significant opt- somehow this is a relationship that does not quite outs from EU policies that, as I understand it, many work? Even if in an ideal world it should work, Conservatives, although perhaps not all of them, wish something about British national identity or British on farming, fish, social policy, and so on. public opinion is not going to be comfortable over the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 15
10 July 2012 Charles Grant next 20 or 30 years with the sort of philosophy that would decide which bits of the single market we were you are advocating. allowed access to in return for accepting all the Charles Grant: That is an interesting point. Yes, I regulations applying to that bit of the single market. would not be at all surprised if Britain leaves the EU, While that was happening, the impact on the British say, before the end of the next Parliament. I would economy would be quite dire. I would imagine that a regret that, but there seems to be a bit of momentum lot of people would be moving their headquarters out in that direction. However, public opinion can surely of Britain, particularly in financial services. A lot of be shaped and led by intelligent people, whether the car industry may also choose to relocate. There business leaders or politicians. Are you going to go would be economic problems while that was back to your constituents in the north-west and give a happening. The quicker it would be, the better, but I speech in the marketplace on the economic benefits of have not thought greatly about that. EU membership? How many business leaders have May I make a last comment? Going back to one of yet woken up to the fact that Britain could leave the the earlier questions, Britain needs to think carefully. EU? I happen to know personally that a number of Whether it is a full member of the EU, a half member, them are just waking up to this fact and they are very a quarter member or a three-quarters member, it needs concerned. You may see some of them explaining that to think about how it influences the outcome of Britain should stay in the EU because of what they decision making in the EU. It has not paid enough and I perceive as the economic benefits, but it has not attention to that. We briefly touched on the need for happened yet. friends and allies, which is important and is up to I think that public opinion is going in the direction Ministers and officials to pursue. Two other things that you suggest towards accepting some sort of matter in order to increase our influence in the EU: withdrawal, but when people think about the stakes the first of these is the tone of our comments and the involved, I hope that they change their minds. It is up language we use. If it is seen to be constructive rather to responsible politicians, business leaders and, than snide that makes a huge difference as to whether indeed, journalists to explain the facts. The case for we are seen to be a trusted and desirable partner or a staying in the EU is quite complicated and not very pain in the neck. The final thing is policies. If we easy to explain in 20 seconds in the pub. The case for come up with good, constructive policies for getting out of the EU is rather simpler and easy to reforming the EU so that it works better—whether it explain in 20 seconds at the pub. is on agriculture, the regional funds, energy markets or liberalising services market, which, in my view, Q50 Sir Menzies Campbell: Following on from that should be the number one priority for the EU right question and answer, have you given any now—and try to corral others to help us push them, consideration to the process of withdrawal, how long we will be seen to be constructive and we will have it might take and how difficult or easy it might be good will. In that way, when we have problems that to negotiate? need to be sorted out, people will help us sort them Charles Grant: I have not given a lot of consideration out and look after our interests. to that, but obviously one of the virtues of the Lisbon Chair: On that glass-half-full note, we will end. treaty is that it contains a clause setting out a Thank you very much, Mr Grant. Your contribution is procedure for withdrawal. It would obviously be a much appreciated. bilateral negotiation whereby Britain and our partners
Examination of Witness
Witness: Mats Persson, Director, Open Europe, gave evidence.
Q51 Chair: Our second witness is Mats Persson, the European Reform, the Fresh Start group and Open director of Open Europe. Would you say that you are Europe? on the other side of the coin from Mr Grant, to whom Mats Persson: In the last year or so, we have you have been listening for the last few minutes? produced a series of reports going through individual Mats Persson: There are a lot of sides to that coin policy areas, and proposed various reforms that should these days. That is one of the interesting things with be taking place in those areas—in some cases, reforms the eurozone crisis; it has shaken things up a bit. I do within the areas and in other cases, reforms involving not think that you can any longer define the debate a redistribution of powers between Brussels and the as being in two camps—anti or pro—particularly in UK. The reports have been discussed in various APPG Britain. I think that debate has been concluded. meetings. It has been an extremely useful forum for discussions. A lot of good ideas have been coming out On the other side of the coin, I would say that I take of that process and that does help the debate. a different approach to some of these issues, but I still think that the UK has a future in Europe. Like Charles Q53 Mr Roy: Tell me about the actual relationship and a lot of others in this debate, we are very keen to between them. Open Europe is obviously the find a model that works for Britain and for Europe. secretariat for one of them. Mats Persson: For the APPG, yes. We are involved Q52 Mr Roy: Can you explain the relationship in setting up and providing the content for the between the All-Party Parliamentary Group for meetings. We give a presentation of the recent report, cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 16 Foreign Affairs Committee: Evidence
10 July 2012 Mats Persson alongside other experts in that particular policy area, Could you substantiate that? What evidence is there? ranging from across society and the think-tank That was not quite the evidence we heard earlier. community, and MPs and peers attend those meetings. Mats Persson: No, I said I think there is a risk and the risk is unknown. It is quite difficult to substantiate Q54 Mr Roy: What involvement has there been at the moment There are few examples of it that we between the Government, the FCO, the all-party can point to, going back in time. It is quite interesting parliamentary group and the Tory MP group? because that also raised the question people asked Mats Persson: It has been a very constructive almost all the time about loss of British influence. dialogue. Obviously, we have been working They have a perpetual worry about Britain losing independently, and all our material has been produced influence in Europe. It is time for those people also to in a strictly independent capacity. Naturally, as you point to concrete examples of where influence is being would expect in these kinds of questions, there has lost. It is quite interesting and it is the right question, been a lot of dialogue and good interaction. I would for example following the December veto. not say that all of what we have done has the support While we would argue that the veto was not ideal in of the Government, but there is a general interest from many ways, the kind of reaction that we saw the Government in what we have done. following the veto was in some cases almost hysterical—that Britain was now definitely on its way Q55 Mr Roy: What influence does Open Europe out of the European Union. That reaction was very have on the Government? much overstated and exaggerated. Mats Persson: Hopefully, the right influence. I would say that the risk of colonisation of European Mr Roy: That is a hope or an expectation. I am asking institutions for the purpose of pursuing the eurozone about the reality. agenda, to which British interests are secondary, is Mats Persson: Quite. If I may beat my own drum for unknown, but it is a real risk. That is all I can say. If a bit, I think we have managed to take the debate you look at the creation of a banking union in forward, in the sense that we have tried to stake out a particular, that is where you have that risk coming to way between the status quo and full withdrawal. What the fore. we produced over the last year has illustrated why such a third way, if you will, is fully possible. Q61 Rory Stewart: We have tried before, obviously in December, to try to get concessions in exchange for Q56 Mr Roy: So has the relationship changed in the supporting treaty change and we failed. What makes last three years between Government and yourselves you think that we are likely to be able to achieve and these organisations? concessions in the future when we come to treaty Mats Persson: I do not quite understand the question. change? We have become more influential, which is a good Mats Persson: There are a number of factors. At the thing for us and for Britain and Europe. most fundamental level, I disagree with Charles and Mr Roy: That remains to be seen. Thank you very others who say that negotiation is a kind of path much. towards Britain leaving altogether. I would reverse that and say that the status quo is the biggest threat to Q57 Chair: On the point just raised a second ago by UK withdrawal, because, as you pointed out earlier, Mr Roy, the Fresh Start group is publishing a green British public opinion is becoming increasingly paper later today. sceptical to the current arrangements, having started from an already sceptical base. So without some Mats Persson: That is correct. changes in substance to the basic membership terms, Britain is on its way out of the European Union. Q58 Chair: William Hague is attending. Have you I would say that you need to revise the UK’s EU been involved in preparing that green paper? membership in order to save it, so I disagree Mats Persson: It draws quite heavily from ideas that fundamentally with that point. That is where it we have produced and our proposals and reports over becomes interesting because, sure enough, if you go the past year. to national capitals and say: “Britain wants x, y and Chair: That is a yes. z”, of course people in that national capital will say: Mats Persson: If you read the actual paper, you will “No, we won’t give it to you.” That is for your see a lot of references to Open Europe. That is just a negotiations. I do not know of any government who fact. It has been a good two-way process. would say: “Yes, of course. Reduce your budget contributions. Increase the effect of your rebate.” This Q59 Chair: There is no reason why you should not is subject to negotiations. have been involved. A similar thing is the idea that you will want to reduce Mats Persson: No. It has been, and it has been quite the costs and maximise the benefits of EU extraordinary in the sense that it has whetted the membership. I do not know of a single government appetite among MPs to look into these questions as who go to their electorate and say, “Look, we want to well. It has worked out really well. maximise the cost and minimise the benefits of EU Chair: All dialogue is welcome. Rory. membership.” Of course you want to maximise the benefits and reduce the costs—that goes with the Q60 Rory Stewart: You listened to Mr Grant’s territory; it is what you are elected for. Any presentation. I believe that you have suggested that government will say, “From our point of view, we there is a colonisation of the EU by eurozone interests. want to keep the costs to a minimum and maximise cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 17
10 July 2012 Mats Persson benefits.” Britain must do the same. If Britain goes to There is a range of different pragmatic solutions. the negotiating table and says, “This is what we need Those are three examples that you could get to stay in the European Union over a longer period of reasonably soon. time”, I think they will get concessions. The second point I want to make quickly is that it is Q64 Rory Stewart: Finally, you understand this stuff interesting to note Germany’s position in this and the much better than I, but apparently the enhanced co- position of some non-eurozone countries, such as operation procedure can only be used to reinforce the Sweden and Denmark. I think that while a lot of these integration process. Will you explain how it could be countries will not like Britain renegotiating, what they used by some member states to repatriate powers? fear more is Britain leaving the EU altogether. If we Mats Persson: That would require a treaty change, an learned anything from the last EU summit, it was that institutional change, but you could also use the Angela Merkel is now somewhat vulnerable to a principle of that mechanism to allow powers to flow in Mediterranean bloc. She is much more alone in the the other direction. That would simply involve treaty eurozone 17 than in the EU 27, and she needs Britain change, where you say, “A limited number of member there to counter-balance a potentially quite protectionist Mediterranean bloc. She will want states could pursue powers back over this section of Britain inside and will therefore be willing to give the treaties.” I think that would be institutionally concessions. possible. Of course, it would require a treaty change, but I think that those are the kinds of ideas that we Q62 Rory Stewart: Just to pin this down more have to work with. specifically, Charles was essentially saying that all you could ever get were breadcrumbs. You might get Q65 Chair: Just to pick up on an issue raised by Mr some concessions on the working time directive, or Stewart, you mentioned structural funds as something JHA, on which we have an opt-out under Lisbon, but that you may get. Would that require treaty change? any idea that you might get something substantial is Mats Persson: No. misleading. Presumably, you disagree with that. Mats Persson: Yes, I disagree. Q66 Chair: Would the single market safeguards require treaty change? Q63 Rory Stewart: Can you give some concrete Mats Persson: Possibly. examples of what we might get? Mats Persson: Structural funds: if you pitch that Q67 Chair: Would you get unanimity on that? correctly, there is no reason why you would not be Mats Persson: I think you could—if it is presented able to do something with structural funds. Out of 27 and communicated in the right way, unlike the member states, 23 would benefit from having December demands leading up to the December veto, structural funds limited to richer member states only. and if it is prepared and the right lines are built around It is a win-win situation. For the other four, which it, you could achieve that and get unanimity. Again, if happen to be the poorest Mediterranean countries, you the options are between the UK starting to fall out can have an alternative arrangement that makes the altogether or some concessions with Britain remaining structural funds much more targeted than they are at inside, I think the Germans, Swedes, Danes and others the moment. will play ball. Roughly 30% of structural funds in Spain still go towards infrastructure. Spain needs a lot of things, but Q68 Mr Baron: more roads and railways are not one of them. There Mr Persson, I have one question to is a win-win on structural funds, for example. We also follow on from what Mr Stewart asked you about the mentioned the 2014 JHA choice: Britain can do that repatriation of powers. I share your greater optimism unilaterally without changing common treaties, and than Mr Grant’s that it is achievable—after all, that is then it can opt back into individual pieces of the Government’s stated position—but I believe that regulation or law on a case-by-case basis. one day, we will have to have a referendum in this Those are two, and I think a third that you could country. I believe we could legislate now for a potentially get is a single market safeguard, working referendum in the next Parliament, and I am not alone with non-eurozone countries. A range of different in my party in believing that. Would a referendum on pragmatic solutions can be explored because here, the statute book now increase the bargaining power of Britain is not alone; there are a lot of non-eurozone a Prime Minister trying to repatriate powers or not? countries. We all talk to European governments and Mats Persson: I am somewhat agnostic on that we know what they say—“Britain should not be question. To me, it is very difficult to tell whether it getting concessions. However, we are very keen for would help or not. In theory, if you come to the single market not to be undermined.” negotiations with a strict negotiation mandate from If you have a single market safeguard that works for home, that helps, but it could also create various all non-eurozone countries, Britain can get that as problems, of course. The question is what exactly well, and that would be very meaningful. Let’s say your mandate involves. I must say that I am going to that you would be able to refer a proposal to the ride the fence slightly on that one. I think the European Council where unanimity applies if non- referendum will probably have to happen sooner or eurozone countries see it as undermining the single later, because there is so much political momentum market, as involving eurozone caucusing or as being behind it, but at what point you call it is a difficult discriminatory against non-eurozone countries. one. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 18 Foreign Affairs Committee: Evidence
10 July 2012 Mats Persson
Q69 Mr Baron: Surely you call it after you have Q76 Mike Gapes: But you’re not giving me any tried to claw back powers. countries that do support it. Mats Persson: Yes, you would probably have to have Mats Persson: Do you want to get down to policy a validating referendum. Otherwise, it would be a bit areas? This is what needs to happen. We need to go like holding a referendum on who we want to win from this abstract concept— Wimbledon, which is a bit difficult. Sir Menzies Campbell: Not at all. Q77 Mike Gapes: I am asking you to answer the Mats Persson: In terms of the sequencing of a question I have asked. Is there any other European referendum, there are two ways to do it. Either you Union country, at present, that is supporting the have a validating referendum with some sort of position that the British Government are putting mandate preceding it, perhaps in an election forward? manifesto, or you can do a two-stage type of thing, Mats Persson: On the single market safeguards, as I where you have a three-way first, and the two first said, I think there is support from non-eurozone ones come up against each other in a second countries, in principle. referendum, perhaps following negotiations. That could be another interesting option to explore. It Q78 Mike Gapes: But you are not naming any. would be unconventional for this country, but it could Mats Persson: Sweden and Denmark. be a potential way of doing it. So I think there are a couple ways of doing that, which have to be looked Q79 Mike Gapes: They explicitly support the British at and explored in detail, but in terms of legislating Government position? for it now, I am not sure. Obviously, I like the drive Mats Persson: They will support measures to prevent and enthusiasm for reform. the single market from being undermined, yes. Of course they will. They are as worried as anyone else Q70 Mike Gapes: To follow up on what Rory that the single market might be undermined. Actually, Stewart asked you, you seemed to imply that there the Germans, if you put it to them correctly, might was support in other European countries for the support the undermining of the single market, for fear British Government agenda. Can you specify which of being pushed into the arms of the Mediterranean countries? bloc. Mats Persson: I am not saying there is support for the Structural funds are a tricky one, because Hollande British Government agenda; I am saying it is subject has changed the rules of the game a bit, but I think, to negotiations. in principle, go and talk to Swedish Ministers. They would love to repatriate the structural funds. Q71 Mike Gapes: So you accept that at present, The Czechs have sided with the UK Government on there is no support in other European Union countries the fiscal treaty. You can look at some other things. If for the position that the British Government are you look at the EU patent, for example, which taking? involves more of Europe and is a very important step, Mats Persson: I accept that if you go to Paris, they the British Government received a lot of support for will of course tell you that— that. How many countries have signed up to the budget freeze that they have called for—10 or 11? Q72 Mike Gapes: I am not talking about Paris. I am Hollande may have withdrawn his signature; we are talking about other European countries—let’s say not sure. central Europe, southern Europe and the Baltic states. I can go down the list. It depends on how you frame Is there any support there for the British Government the issue. If you say, “The British Government want position? this, this, this and this—just accept it,” they will say, Mats Persson: Define “the British Government “No, of course we don’t accept it.” You need to frame position”. it in the right way and start to negotiate. That is how the EU works—by compromise and negotiation. Q73 Mike Gapes: As expressed by David Cameron at this moment. Q80 Sir Menzies Campbell: What is the difference Mats Persson: To repatriate powers? between you and the previous witness, then? Mike Gapes: Exactly. Mats Persson: I am Swedish. Mats Persson: He has not done anything yet. Sir Menzies Campbell: That is obvious, but— Chair: Order. I call Ann Clwyd. Q74 Mike Gapes: As expressed, for example, in Mats Persson: I am sure Charles has a lot of things recent articles in The Daily Telegraph, or the well- to say about it, but the difference is that, again, I see known position of the British Government. Is there the status quo as the threat in relation to UK any support in other European Union states, at withdrawal. I want to revise the UK’s EU membership present, for that position? terms in order to save them. I think that is very Mats Persson: If they can avoid negotiations, they straightforward. We are willing to take concrete steps will do it. to achieve that. We think sometimes you have to go into negotiations in quite a tough way. You have to do Q75 Mike Gapes: So the answer is no? it in a shrewd and smart way. You have to negotiate Mats Persson: The answer is that if the option is and be willing to play hardball sometimes to get between Britain withdrawing and Britain something back. renegotiating, I think there will be support. Sir Menzies Campbell: And— cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 19
10 July 2012 Mats Persson
Chair: Order. I call Ann Clwyd. press compared with other countries. Stories from the European Parliament fill the front pages of French Q81 Ann Clwyd: You seem very confident about newspapers and German newspapers; they very rarely talking about British public opinion. I do not know appear on the front pages of British newspapers. how you gauge that. Is it through opinion polls? How Mats Persson: You know what? I will actually take can you speak for British public opinion? issue with that. We go through the European press Mats Persson: I would not dare to say that I can speak every morning, in 12 or 13 different languages and it for British public opinion. Are you saying that British is quite interesting that the UK media has had a lot of public opinion is less or more sceptical than what I— coverage of Europe over the past two and a half years compared with a lot of other European countries. Go Q82 Ann Clwyd: You were suggesting they were to my native country, Sweden, and there is much less more sceptical. coverage—at least, there used to be before the Mats Persson: Most public opinion polls would put eurozone crisis—of Europe than here in Britain. The British public opinion in the strongly sceptical camp. German media are very interesting, because naturally they will have a lot of coverage of the EFSF, the ESM, Q83 Ann Clwyd: But wouldn’t you say that the TARGET2, SMP and so forth and so on. British public know even less about the European If you talk about the public not understanding the Union now than they did when we had the first direct eurozone crisis, with respect, politicians have not done elections to the EU, in 1979? I was a Euro MP at that a particularly good job of getting on top of that either, time, and the British public knew very little about the so I would be a bit cautious about that. I hear what way the EU worked. I suggest to you that they know you are saying, but I think that in the British media, even less now—first, because of the system of election in terms of the cumulative coverage, there has actually to the European Parliament. MEPs have less contact been quite a bit. However, I agree that they should do with their electorates than they did initially, in 1979, more to cover the European institutions. because of the system of election. At the end of the day, I still think that, even if the Mats Persson: So you are saying that there is a British public was absolutely 100% on top of correlation between ignorance and Euroscepticism. comitology, for example—if they knew exactly what that involved—that would not change one bit of their Q84 Ann Clwyd: I’m asking you. Euroscepticism; it would probably make them more Mats Persson: I don’t think there is. I think there can Eurosceptic, because comitology is a wholly be, but one does not flow automatically from the other. undemocratic process, but that is for a different day. I That reminds me a bit of what I heard an MEP say in agree that there are, of course, areas of EU the EU ACTA debate. She was saying, “Yes, there is membership that are beneficial, and perhaps the UK a lot of campaigning against this EU ACTA treaty, but media could do a better job of covering them, but I as MEPs, our role is not only to legislate for citizens. would still not count on the British public becoming Because they’re busy with other things, we also have less Eurosceptic. to think for them.” Q87 Ann Clwyd: Finally, can I ask you about two Q85 Ann Clwyd: Yes, but I am saying that you have possible risks that might arise through the repatriation less contact with them now because of the system of of certain powers: first, that other member states election. It was only comparatively recently—I think would raise their own demands and the EU would it was at the last election—that in Britain we went to effectively unravel; and secondly, that the UK might the list system. Now, people have bigger electorates damage its reputation for adhering to international and are therefore more remote from their electorates treaty obligations? How would you assess those than they were previously. I do not know whether that is your experience. issues? Mats Persson: Possibly. I think that could be a factor. Mats Persson: Both of those are valid points, and they I do not necessarily see how it would have a major have to be acknowledged. I would say that, on the impact on the British public’s Euroscepticism, though, first one, it is true that a sort of tit for tat game may because that goes deeper than just the electoral be triggered. The big risk there is, of course—this is arrangement of the day. I think that runs very deep. where I agree with the risk, at least—that the French You are looking at quite strong historical and cultural will start to talk about watering down state-aid rules, forces that make Britain as Eurosceptic as it is. The which would not be good for Britain. Against that, point you raise may have something to do with it, but you have to consider what the options are. at the end of the day, Britain is a Eurosceptic nation, If you do not actually do something to revise UK whether we like it or not, and it will remain so for a membership terms and change the basic EU structure, very long time. then it may unravel anyway. Is there anyone who thinks that the one-size-fits-all principle is still a solid Q86 Ann Clwyd: I am trying to suggest to you that overarching principle for European co-operation? We there is considerable ignorance about the EU. have seen, with the eurozone crisis, that you probably Everybody now knows about the eurozone—I would need a more flexible model if this is going to work. I say that comparatively few people understand it—but, actually think that that flexibility may prevent the EU in general, people do not hear enough about what goes from unravelling, and if you negotiate in the right on in the European Parliament and what subjects are way, you may not have that tit for tat that a lot of discussed, because of lack of coverage in the British people are warning against. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 20 Foreign Affairs Committee: Evidence
10 July 2012 Mats Persson
On the second one, I do not think that that will Mats Persson: That would be a very good start. damage the UK’s credibility, because if it negotiates Unfortunately, it would require a treaty change, but it properly, then it would not break treaty obligations; it would still be a very good place to start. would just renegotiate a treaty, which happens from Chair: And we would have a common electric plug time to time. There is nothing unusual about throughout Europe. Ming, did you want to make renegotiating a treaty. At the end of the day, the EU another point? cannot be the end of history. We cannot possibly have Sir Menzies Campbell: No; the moment has gone. discovered the end of history with the European Union moving only in one direction perpetually. We Q89 Chair: Thank you very much, indeed, for cannot have that philosophical discovery right at our coming. We appreciate your views and we look doorstep. Just like a lot of other international forward to keeping in touch with you. arrangements throughout history, the European Union Mats Persson: Thank you so much. Thanks for needs to be subject to change and institutional change, having me. including with a two-way street when it comes to powers.
Q88 Ann Clwyd: And perhaps with the European Parliament meeting in one place of work.
Examination of Witness
Witness: Michiel van Hulten, independent consultant, Brussels, and former MEP, gave evidence.
Q90 Chair: Our third witness this morning is Michiel to which it signed up almost forty years ago. That is van Hulten. Mr van Hulten, you have been listening to why at the European Council in December last year it the last two witnesses. Would you say that you bring a proved remarkably easy for the rest of the European third dimension to the debate? You have over the Union to move ahead without the UK. This was not years floated a number of different ideas for just a major policy disagreement. I think it was the restructuring of Europe. Do you consider yourself an culmination of years of frustration about a member alternative to the two points of view we have state which professes to want to be at the heart of listened to? Europe but in reality does not subscribe to some of the Michiel van Hulten: First of all, thank you very much core objectives pursued by the other member states. for inviting me. I am Dutch, but I was largely UK If this was the only challenge facing the EU, the educated, and my wife is British, so I feel a great deal solution would be easy. The UK and the EU could of affinity with this country, and the discussion you each go their separate ways, and everybody would be are having. I would consider my ideas a little far- happy. The reality, however, I think, is that several fetched compared with the two previous speakers, so other forces are threatening to pull the EU as a whole I hope you will allow me to make some brief apart. The most obvious one is the current euro-crisis, introductory comments to set them in context. which pits members against non-members—but, even Chair: Of course. more significantly, northern members against southern Michiel van Hulten: The first thing I want to say is members. All across Europe people are losing faith in that throughout my career I have worked closely with the European project, because it imposes too much British colleagues—first in the European Parliament austerity, because it costs them too much money, and then later in two think tanks, Policy Network and because it is undemocratic and because it is the European Council on Foreign Relations. What bureaucratic, as they see it. struck me as a student when I was at the LSE, and I think the EU project is deadlocked and in danger of what I still find striking today, is that British collapse. Seen from the continent, the UK now looks individuals and ideas play such a central role in the likely to leave at some point in the next decade, but debate about the future of Europe. It is one of the members of the eurozone themselves cannot agree on great ironies of European history that the member a viable way forward either. The debate between them state which I think has been consistently the most is getting increasingly acrimonious. The accession of critical of the European project, and where some of Turkey has been put on hold because of our internal the most outlandish and outrageous myths about difficulties within the EU. Popular support for the EU Brussels are sometimes peddled, is also the one which and its policies is at an all-time low, not just in the contributes some of the most thoughtful, constructive UK but across Europe. If nothing is done, the most and frankly necessary ideas about how the European likely outcome, I think, is that member states will Union should evolve. I think your inquiry attests to leave the EU one by one, some voluntarily, some that. against their will, all as a result of the political and The intriguing question to me, when I was thinking institutional gridlock that we are facing today within about this testimony, was why these ideas find so little the existing treaty framework. support among countries and people on the continent. I think that to allow the European project to fail at I think the simple answer is because the UK has never this juncture in history would be madness, and a truly, fully become a member of the European club. It Europe without the UK would be unthinkable. There has always been at best half-hearted about the project are clearly important issues on which Europeans cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 21
10 July 2012 Michiel van Hulten fundamentally disagree, but there are also many— reasons why countries are members of this particular many more, I would say—objectives which we share: area is that there is no support in those countries for the commitment to the continued stability and security a system based on qualified majority decision-making. of our continent; increased prosperity by reducing I also think that in this particular area, democratic barriers to trade and promoting free competition; control should be exercised by national Parliaments strengthening Europe’s ability to make its voice heard rather than by an overarching European Parliament, in the world; and addressing cross-border global because again, I do not think that there is the support problems effectively. and legitimacy for it. This body would operate as the I am convinced that a durable solution to the current global trade negotiator for the body as a whole. Of crisis is possible, and it will require at least two course it would have to reach decisions internally. things: first, a fundamental redesign of the architecture In my view, the countries that operate in the second, of European co-operation to remove the destructive more integrated layer would effectively operate as one tension currently tearing it apart. Rather than creating country, so a little bit like the United States within a two-speed Europe—as Joschka Fischer, the former NAFTA. Effectively, you would have maybe four, five German Foreign Minister, has called it, a vanguard or six voting entities within this larger area, one of and a rearguard—or gradually forcing countries out which is a European economic and political union of the existing EU framework, we should replace the consisting of those countries that decided to pool their existing EU with a wider Europe organisation focused sovereignty and go for a fully fledged federal system on regional security and global trade, and a second with a federal Parliament and Government, which body with a separate decision-making structure to decides by qualified majority on its internal policies. bring together those countries whose economies are so aligned and intertwined that it no longer makes Q92 Mr Baron: Can I suggest to you a scenario? sense to have independent fiscal and economic The eurozone crisis has yet to fully play out. There is policies. I call that a two-layered Europe, and I have a question mark as to whether the euro can survive. set out, in an article for the ECFR, what the broad Some would suggest that no amount of moving this outlines of that would be. huge amount of debt around the system from bank to The second thing that I think is required is a popular government and back again can conceal or erode its mandate. Solving the euro crisis and building a new scale. Okay, a little bit of financial repression and architecture will need thorough public debate and austerity will help, but you still have this enormous approval in national referendums. We need to learn debt that needs dealing with. One day, there has to be the lessons of the last 20 years, in particular—I say a day of reckoning, and we are seeing Spanish bond this as a Dutchman—the lessons of the 2005 yields above 7%. It may come about of its own constitutional debacle, as well as the current euro inclination, mightn’t it? If you do see an implosion crisis. Only by giving people in every country a real and the eurozone breaks up and perhaps even say can we build a new framework that can withstand threatens the very existence of the euro even among the test of time. This process should proceed on an the hard core, how does your two-tier approach fit into opt-in basis, which is that member states can opt or that sort of scenario, a scenario which the markets are refuse to join, but they cannot block other countries increasingly suggesting is likely to happen? from moving ahead. Michiel van Hulten: When I first wrote my article Finally, Europe needs to find a new way of dealing about this around half a year ago, I thought that the with the tensions that are causing it to break up, not integrated core could consist of the 17 eurozone by creating various types of second-rate membership countries. That is very unrealistic right now. At the or by forcing countries out, but by recasting the entire time my main question mark was over Greece. Now European edifice in such a way that all current it is clear that Spain and Italy are also in serious members can stay and new ones can join. trouble. The main thing that I want to get away from with the approach that I am suggesting, which I Q91 Mr Baron: Mr van Hulten, for many of us who described earlier as farfetched because it is obviously disagreed with the concept of the euro from the start, an incredible undertaking to rewrite the entire one sensed that in order to make monetary union institutional framework of Europe, is the situation we work, you needed a fiscal union, and fiscal union is a are in now where countries are classified as either very short step towards political union. I have a lot of good or bad, based on their attitude to European sympathy with regards to the two-tier suggestion that integration or their economic situation. If we don’t you have proposed—two-tier rather than two-speed. deal with those huge tensions we face a much bigger Two-speed implies that you are all aiming off at the crisis than if we address them now. For some countries same destination and you are just going to take that may mean that they will have to start at a position different times to get there. A two-tier recognises the that is back to where they were several years ago, i.e. inherent contradiction at the heart of the euro. Could prior to joining the euro. It will be easier to secure you set out your proposal for the two-tier structure in support in countries like my own, the Netherlands, a little more detail? How would it be funded? Would and Germany for a frame-work where we start out the outer core be a genuine free trade area? Who with a smaller eurozone core that can later be would have responsibility for external trade? expanded rather than trying to sustain the present Michiel van Hulten: In my article I called the outer system, which I think is unsustainable. area the European area of freedom, security and prosperity. This area should be based on the principle Q93 Mr Baron: Your suggestion has traction in the of unanimity, in recognition of the fact that one of the sense that it addresses the fundamental contradiction cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 22 Foreign Affairs Committee: Evidence
10 July 2012 Michiel van Hulten that exists at the heart of the EU, not just the eurozone recently, and we are seeing it now with the positive at the moment. But what support are you seeing for role played in the Syria crisis, so that is why it is this idea? Have you had any suggestion of support incredibly important to make sure that the UK remains from other EU countries and politicians? Is this a core partner in Europe in the field of foreign policy, gaining traction generally? How likely is it to as well as in other areas. transpire? The fact that economic policy will then to a large Michiel van Hulten: I think that the kind of idea I extent be divorced from foreign policy is, I think, a am discussing is being discussed in various forms. I handicap. There are no two ways about that. But what mentioned Joschka Fischer. He talked about the idea I am hopeful of is that by removing the constant of a two-tier Europe. Jean-Claude Piris, the former tensions and the ill will that exist at the moment from head of the Council’s legal service whose written the discussions on core economic integration, it will evidence you have taken, suggested something be easier for countries to move forward on issues such similar. Charles Grant told me on the way in that as foreign policy, where those tensions do not exist in David Owen has written a book in which he suggests the same way. something similar as well. The idea of creating a new type of framework is gaining traction. What I do not Q95 Mike Gapes: May I take you back to the actual think is gaining traction—at least I have not heard it mechanics of how your idea would work? What you from anyone else—is the idea that we need to replace are proposing would be fine if we were in 1947 and the whole EU. The reason I say this is that the EU were trying to create European architecture, but the right now has so much baggage in terms of its fact is that European architecture already exists and reputation and institutions. Ms Clwyd mentioned the you cannot bring down the whole edifice. What seat of the European Parliament, which is a good possible interest is there for major European Union example. I think that restarting the process and dealing countries—let’s say Italy or Spain—to destroy a with some of the concerns that people have today and structure in which they can see considerable benefits putting those into a new framework is the right way in the hope of creating some alternative structures in forward rather than trying to tinker with an existing which they might be less influential or might well be treaty. We are going to open up a whole Pandora’s economically worse off? I just cannot see how that is box. We were discussing before the question of going to happen. Are you suggesting that you repatriation of powers and what the UK can achieve. establish one structure while the other still exists, and It is very clear that almost every member state has its you run the two in parallel? I cannot see how that own gripes and wish list in relation to the European would be particularly useful, in terms of costs and Union. Trying to achieve that by changing the existing efficiency, and ministerial or civil service time. treaties, which require unanimity, is almost Michiel van Hulten: Of course, you are right. It is a impossible. If you move to a new treaty negotiation blue-skies blueprint, but 10 years ago who would have based on opt-in, as was the case for the fiscal treaty, thought that today we would have a fiscal treaty not without giving member states veto power, it becomes involving the UK? No one would have predicted the much easier. crisis we are facing today, and we are finding inventive solutions to the problems that we are facing. Q94 Sir John Stanley: The UK is in a nearly unique The main point of my proposal—my idea—is to get a position in Europe. Along with France she is one of point across, and the point is that we should stop the five members of the Security Council of the UN playing a blame game in which we say that the and in terms of involvement in international defence problems of the European Union are due to certain and military operations, apart from France, she is unmatched in terms of capability and reach compared countries behaving in a certain way. That is the danger with other EU countries. Against that nearly unique at the moment. We are descending into acrimony and position of the United Kingdom, what is your finger-pointing, and we have to acknowledge the fact response to the view that if the UK formed part of an that there are certain inherent truths such as that there outer layer—or second division, however you would is and always has been a huge debate about Europe in like to term it—she would suffer the worst of all the United Kingdom, and that there are huge possible worlds by having significantly reduced economic problems in southern Europe, and growing political influence in the EU while at the same time problems in other member states. If we play a blame having much greater vulnerability to the inner core, in game, those problems are going to get worse. terms of her financial, economic and commercial We need to think about the objectives, about what we position? are trying to pursue, what things we agree on, what Michiel van Hulten: It is obviously not an ideal the major European and international goals are, and scenario. The idea of having a two-layer Europe is, in how we can best make an architecture to fit that. It is a way, second best from an ideal perspective. Ideally, absolutely right that it is going to be a challenge but, we would have 27 member states that all shared the given what we have done since December, I think it same outlook, were all happy to welcome Turkey into is possible. the European Union, and could all agree on the policies. We are starting from a second-best position. Q96 Andrew Rosindell: Thank you for coming But this is one of the reasons why I am also saying today, and thank you for your reports, which contain that we cannot afford to lose the UK, because of the some very interesting information. What I would like UK’s enormous importance in foreign policy and to focus on is how you feel the UK is viewed by the defence. We have seen that with the Libya crisis rest of the EU. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 23
10 July 2012 Michiel van Hulten
We have been told by successive governments— governments or populations of other member states in Foreign Secretaries and Ministers for Europe—that giving the UK a competitive advantage. Britain punches above its weight, that we have greater influence than we really should have because we are Q98 Chair: Is it fair to describe what you are putting Britain. Is that really true, or is it just a smokescreen forward as a slightly academic approach? David Owen to tie us in to the ongoing integration within Europe? put forward the idea of—“two tiers” is the wrong If we were not there, how would that affect Europe or phrase—an inner and outer core. If you are having the development of the EU? trouble getting the repatriation of a power or Michiel van Hulten: I think it is true to say from my something like that, how on earth are you going to limited experience—I started following this up close get unanimity on the complete rejigging of the whole when I came to Brussels as a Council Secretariat European Union? official—that Britain does punch above its weight, or Michiel van Hulten: I agree that it is a slightly at least did until the December meeting of the academic approach, although I think that it is getting European Council. That is partly to do with the less academic by the day. The bigger the problems are country’s size and global importance, but it is also to getting in the EU as a whole, the more there is a need do with the fact that the UK has always had the best for a fundamental discussion. I do not think that the civil servants and has always been the best prepared UK will get very far with demands for repatriation. at meetings. It has had some of the best debates Where I think that the UK could play a constructive about Europe. role is by arguing that the current architecture is no The fact that there is such a debate about Europe in longer working and that we all need to think about this country, between those who favour further replacing or reforming it to take out the tensions and integration and those who favour the opposite, has the the problems that we are facing. There are not many added benefit of ensuring that whatever policy the allies for repatriation. There are a lot of allies in many Government come up with has been thoroughly tested. member states, including the Netherlands, in the sense Other governments do not have that advantage when of people who think that the EU at the moment is going to Brussels. broken and needs to be fixed. If the UK can become Things have changed in the past few months and a leader of those countries, of those people, I think Charles Grant was right to say in his testimony that that a lot can be achieved. there has not been a measurable impact in terms of lost votes or lost decisions since that has happened, Q99 Chair: Can you think of any EU member who but there is a feeling that patience has run out and is attracted to the idea of a two-tier or outer layer of Europe? people are no longer willing to listen to the UK in the Michiel van Hulten: I think it is attractive to the same way as before. countries that are moving ahead now, the strong Under the Labour Government, there was a feeling eurozone countries, because it will make life easier that things were improving, the rhetoric was changing for them to design their own policy. I have no idea and the UK was speaking more like the other whether— European countries, but if you look at the voting behaviour and the developments since then, the reality Q100 Chair: They are the inner layer. is that in substance not that much has changed. Michiel van Hulten: That is right. I imagine it could also be interesting—I do not know this—for the EFTA Q97 Andrew Rosindell: If patience is running out countries, because they are now in a situation in which and people are no longer necessarily prepared to listen they, as has been said before, have simply to to Britain in the way that they might have done under implement the rules that are decided in Brussels. If the previous Labour Government—and, probably, the we can create a new architecture where they also are previous Conservative Government—do you think our given a decision-making role within the system they EU colleagues would therefore acknowledge that a are a part of, that would be attractive to them. different type of relationship may be the solution for Britain? Would that be acceptable to them, or would Q101 Mr Baron: I was going to question you further they try to make it difficult for that to happen, to keep on your thoughts about repatriation, but you have us tied in? made it clear that you think we stand very little chance Michiel van Hulten: A lot of people are prepared to of repatriating powers. That leads me to ask whether acknowledge that we need a different type of you think we should play a slightly hardball game to relationship, but I do not think that they would see try and achieve our objective of repatriating powers, that as facilitating a number of the demands that the which would certainly ease the Government’s UK Government are making about the repatriation of position. It certainly chimes with what the British powers. I do not think that people are prepared to give public want. the UK the membership rights of the EU on lesser or Allied to that, to what extent do you think that a easier terms than the rest of the European Union. referendum, perhaps some years away in the next If the UK wants to discuss its withdrawal from the Parliament, could help the Government to achieve EU, member states will have to discuss that, but it is that, if at all? There is a significant body of opinion, not realistic to think that, in certain key areas where certainly within the Conservative party, that believes competition is effective and progress has been hard we should legislate now, in this Parliament, and have fought, such as the working time directive or other the referendum in the next Parliament, which would social measures, you will find support among the give us time to play out the eurozone crisis and give cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
Ev 24 Foreign Affairs Committee: Evidence
10 July 2012 Michiel van Hulten time for the Government to try to claw back some saying, “You guys move ahead. We’re not going to be powers. Whether it is successful or not, only time will part of this.” Inevitably, that changes the nature of the tell. We could have an informed debate as to what the game and the relations. exact question should be—whether it is in or out, or Even from a personal point of view, we see that. When something else. leaders walk into the European Council chamber at Michiel van Hulten: Playing softball on repatriation the beginning of meetings, you see the way that is certainly not going to get anywhere. Hardball is the people greet each other and who has the tête à tête. only way, but of course the consequence of that may You can see that there is a different dynamic going be that the answer in the end is no, at which point the on, so, of course, it has had an impact. The UK still UK would have no option but to leave the European has voting weight in the Council of Ministers; that Union. does not change. The UK still has allies in key policy areas. It still has disagreements in key policy areas. In Q102 Mr Baron: Can I question that? That would the practicalities of the day-to-day work of the not necessarily be the case. You could have hardball Council of Ministers, the difference, at least so far, is and fail. The decision would not be to leave. The very small. decision would surely be to have a referendum to give choice to the British people, having tried your level Q105 Chair: Mr van Hulten, can you let us have a best to repatriate powers. copy of your report, VoteWatch Europe? It makes for Let us agree with your and Mr Grant’s scenario that rather interesting reading. Where there are league it will be almost impossible to repatriate powers, tables, the UK is either at the very top or the very despite the best of intentions. If we get to the point bottom, depending which way the question is framed. where we have tried and failed, or we have had a few Do you think that that tells us anything about the UK’s crumbs but nothing significant, is that not the point at relationship with the rest of Europe? which to have a referendum? Would legislating in this Michiel van Hulten: Yes. As I have said, I am Parliament help to arm the Government in their speaking in a personal capacity, but, on this issue, the negotiations in trying to claw back those powers? secretariat has asked me to say something on behalf Michiel van Hulten: I do not think European partners of VoteWatch, and I am authorised to do so. You have will be impressed by the threat, if you like, of a the data tables that go with this report, and I have referendum. The debate has been going on too long brought sufficient copies. VoteWatch is an for that. It is obviously not for me to say whether the organisation that monitors decision making in the EU UK should hold a referendum, but I have said in general terms that I think that we are at a point in institutions. Until now, we have only covered the European integration where we need a new popular European Parliament—that was since 2009. As of mandate—not just in the UK, but in every EU yesterday, we also cover voting in the Council of country—because we have made some major changes. Ministers. Basically, we show how member states The EU effectively started out as an international have voted, how often they are in a minority and how organisation like the UN. It is now, I would say, a often they are on the winning side. quasi-federal government, and yet the peoples of One difference between the Council of Ministers and Europe have never been asked and have never the Parliament is that the Council only ever votes in properly debated whether that is what they want. I favour. The reason for that is that if the presidency think that, certainly in a lot of countries, if there is a establishes that there is not sufficient support for a proper debate, that is what they will choose to do, so proposal, the proposal is not put to the vote. So it is a I am confident in advocating that. But I am also slightly odd situation when you compare this with the confident that if we do not have a popular mandate, European Parliament. the EU is simply not going to function. I do not think I make that caveat, because as you will see in the it is optional. I think it is something we have to do if figures that you have in front of you, the UK, in the we are going to— last three years, has backed 90% of EU legislation. That may come as a surprise to some people, but you Q103 Mr Baron: Very finally, a referendum in need to factor in the fact that proposals that the UK perhaps a few years’ time, once the eurozone crisis and other countries oppose and for which there was a has played out, is the right thing to do, if only to blocking minority are not covered by our data, renew the popular mandate. because that information is not made public by the Michiel van Hulten: Speaking for Europe as a whole, Council. I think we need to weather and solve the current crisis. What the data show is that you can look at it from We need to agree on new terms of engagement and a two different perspectives. From the UK perspective, new structure, and that new structure then needs to be the UK votes in favour of 90% of European legislation put to the people for a vote to get their approval. that comes before it in the Council, so it is a good European; 90% is very close to 100%. If you look at Q104 Mr Roy: Just a couple of points. Has the UK the votes that were contested—all votes where at least lost any power to influence since December last year? one country voted against—you see that the UK is in Has a perceived hardball attitude actually worked to a minority 29% of the time. What that shows is that our benefit? the UK, broadly speaking, is supportive of most Michiel van Hulten: I can only talk about proposals, but stands out when compared with other atmospherics. In the atmospherics, the UK has lost member states as the country that votes against most influence. The December decision was perceived as often and by quite a big margin. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG02 Source: /MILES/PKU/INPUT/022929/022929_o002_th_ - Corrected TEMPLATE.xml
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10 July 2012 Michiel van Hulten
Q106 Mike Gapes: On that point, could you also say When I was analysing the data ahead of this meeting, that although other countries might have been inclined I was particularly interested to know whether there to express their reservations, there is a cultural thing had been a change in the last three years. Obviously, here in that when we have a reservation, the British you had a change of Government in 2010, so the first attitude is that we are more prepared to register that year of our data covers the Labour Government. The fact? Even though other countries know what the second two years cover the current Government. outcome will be, they are more willing to go along Interestingly, and somewhat to my surprise, there is with it, even though they have reservations. not that much of a change. If you look at the first year Michiel van Hulten: Yes. One of the chief authors of under the Labour Government, the UK voted against, the report is Sara Hagemann from the LSE, who is or abstained, on 10.7% of votes. Under the current vice-chair of VoteWatch. That is exactly the point she Government, it is 8.1%. If anything, the current made to me before this meeting. She said that some Government are slightly more pro-European from the countries, and the UK in particular, strategically vote point of view of these statistics than the previous one. no to make the point that they are opposed, whereas Chair: On that cheerful note, we will end. Mr van other countries may vote in favour despite the fact that Hulten, thank you very much indeed. That was really they are opposed because they want to show that they helpful and an interesting contrast with our previous are good Europeans. That is absolutely true. speakers. cobber Pack: U PL: COE1 [SE] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
Ev 26 Foreign Affairs Committee: Evidence
Tuesday 11 September 2012
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Mr Frank Roy Mr John Baron Sir John Stanley Sir Menzies Campbell Rory Stewart Ann Clwyd ______
Examination of Witness
Witness: Professor Patrick Minford CBE, Professor of Applied Economics, Cardiff Business School, gave evidence.
Q107 Chair: I welcome members of the public to process in the eurozone, and that is the background to this third evidence session for the Committee’s inquiry our policy actions. into the Future of the European Union: UK Government policy. It will allow the Committee to Q108 Chair: Do you think anyone has got a plan? Is question one of the most prominent economists there anyone out there at the moment with vision who advocating British withdrawal from the EU. Professor can see the way through, or are we stumbling through Minford, welcome. I hope that that does not pre-empt from meeting to meeting? anything that you were going to say. Your position on Professor Minford: I think the vision is to have this is well known and long standing, and you have institutions in place that will make the eurozone argued it many times, so to ask you the question function better. As everybody knows, to make a “What should happen?” will perhaps not take us much currency union work, you really need to be part of a further, but what do you think will happen? How do fiscal union where there are sufficient shock absorbers you see this playing out over the next months and in place to keep the currency working in the face of years? quite sharp shocks. So they have to construct a fiscal Professor Minford: The first point I would make is union, effectively, in order to make the currency union that a lot of people commenting from here on what is work. That will require a lot of institutions in place to going on in Europe have a different viewpoint from make it work as if it were a nation state run by a fiscal the people in Europe who are participating in the union. That will take time. whole process. We here tend to overestimate the chances of the euro breaking up. The countries that Q109 Mr Ainsworth: When the Prime Minister cast are most likely to leave in the first instance—say, his veto in December, were you cheering? What do Greece or Portugal—are absolutely determined to stay you think it achieved? in for political reasons. They see a leaving of the euro Professor Minford: I don’t think it achieved anything as effectively putting them at risk of leaving Europe, in objective concrete terms, but it gave a signal that so they are determined not to leave. At the same time, we had a position and were not necessarily going to the other members of the eurozone are extremely keen go along with things that would be against our interests. It achieved something in that sense. It to keep the euro together because of the unpredictable communicated something, but I don’t think that it nature of the effects of a country leaving, in terms of achieved anything in concrete terms of institutional the general chaos of the break-up and the change. It gave out a signal and it started a process of contamination that could result from one country debate, particularly here, and it perhaps also created a leaving, in terms of risks of other countries leaving little awareness on the continent that we do have and the effects on government bond markets. interests at stake here. So I think that the first point I would like to make is that the eurozone is very likely, barring a complete Q110 Mr Ainsworth: I think you are right. It has shift in German opinion—essentially, whether exposed a position. We were pursuing a position of Germans decide that enough is enough and they leave, preventing the deepening of the institutions of the which I think is quite unlikely—to continue, and the European Union, because we were uncomfortable crisis will continue with it in an ongoing way as the with many of the consequences of that. We now new institutions that they will need to make the appear to have acquiesced to other people, because of eurozone work better in future are put into place. That the financial crisis, deepening those institutions could take five years or it could take 10 years to towards fiscal union with us on the outside. Therefore, happen. Meanwhile, the European Central Bank has people like you who believe that we should leave the made it clear that they are going to buy bonds European Union surely ought to be very happy with whenever crisis threatens, and I think that will happen. the fact that we effectively marginalised ourselves. I think that is the basic background to the situation; Are you not? this is not going to go away as an issue for us, in Professor Minford: Yes, I was happy with David terms of going back to some status quo ante where Cameron’s statement, because it registered the fact there was not a euro or where there was a much that we are unhappy about changes that might smaller eurozone. This is going to be a continuing undermine our concept of Europe and our cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE participation in Europe, which has always been on the not been what you would call a very free market basis that there would be competition and a single environment at all. market, that it would be an outward-looking Europe That has led to some quite considerable costs for us, and that it would not be a Europe that was highly anyway, being inside the European Union, which was centralised and regulated. the subject of my research some years back for the Of course, the sort of fiscal union institution building book on the trade arrangements, the regulatory that is going to happen is going to be threatening to arrangements and other issues of organisation in those concepts. It is going to be quite interventionist Europe. From my calculations, there was a very large in a variety of ways that are very hard to predict. cost-benefit deficit from being in the European Union, There is obviously going to be a lot of work targeting even before the recent developments. So yes, I think financial institutions that might be quite I agree with you that if these developments lead to uncomfortable for us as a major financial centre, and even more protectionism, more interference and more there could be a lot of protectionism, because of the regulation of areas that are inimical to our interests, need to make the peripheral countries that are we are in fact logically on the way out. struggling with the recession recover. That will lead towards more protectionist action. That is all very Q113 Mr Ainsworth: I don’t agree with you; I was uncomfortable for us and it was important for us to just asking the question. give a signal that we have considerable discomfort Professor Minford: No, I don’t suppose you do agree, with a lot of these things if we cannot be involved in but I am perfectly happy to answer your question. them. In fact, if they do spill over into affecting the Lots of people don’t agree with me. single market in those ways, it is obviously going to Chair: To one who might—John Baron. be a big problem for us. Q114 Mr Baron: I happen to be one of those who Q111 Mr Ainsworth: Yes, and we surely cannot would certainly sympathise with your view. Can I remain the pre-eminent financial centre of Europe develop your thinking with regard to the operation of within a more fiscally integrated eurozone with which the single market? I forget how many conferences and we want nothing to do. summits we have had to try to save the euro, but we Professor Minford: We are not really a financial must be heading towards 20 now. I think there is centre of Europe; we are a financial centre globally. growing consensus that you do not solve a debt crisis We are the pre-eminent global financial centre, and by piling on more debt, and all that seems to be our main competitor is, of course, New York. I do not happening is that the eurozone leaders seem to be know how much business is actually dependent on our shifting the debt around the system—between the being in the European Union—probably not a great bank and government and back again. deal, but it is very hard to quantify. The most We all know that growth is the best way of reducing important thing for us to be successful as a financial deficits. We are told by our own Government—when centre is to be well regulated as such. Clearly, if we we point this out to our own Front Bench and are inside an increasingly interfering European Government we are told that they are encouraged by Union—it is difficult to make a distinction between what they see—that there is a lot of deregulation what the eurozone does and what will happen in coming through, the penny has dropped and there is Europe, because under the single market there is going to be greater competitiveness. I sense from what qualified majority voting. So if things are brought in you are saying that you obviously disagree with that. for the majority of members in the eurozone and it is If anything, you are saying that there is a danger of then argued that they are not applying to us inside the even greater regulation, which completely contradicts wider European Union, there will be a strong what the Government is telling us in the House of argument for the single market to bring through those Commons. What would you say to that? eurozone regulations, so that we are not out of line Professor Minford: I think one has to make a with the rest of the European market. It is very hard distinction between what the Government is now to keep what will happen in the eurozone apart from saying it would like to do in terms of national policy what is going to happen in the European Union, and the regulation coming from Europe. That is a because the single market—largely because of Mrs clear distinction. My fear is that we are going to see Thatcher’s prosecution of that case—was brought in a lot more regulation coming from Europe, with qualified majority voting, which puts us in a very particularly in financial affairs. One of the things that weak position if we are in a minority. I think is really needed domestically is to create once again a competitive banking system that is not over- Q112 Mr Ainsworth: So we are on the way out? regulated and prevented from lending. One thing that Professor Minford: I think this is really the logic of is holding back our recovery is the lack of lending, as what I have been trying to say; I think we are in a everyone can see. The lack of response to quantitative very difficult position. First of all, the way in which easing in the form of extra money being created by the European Union has developed economically has banks—that is the big thing that is missing. That is not been according to the concept that we had in mind coming, I think, from a big overreaction to the crisis when we pressed the single market on everybody. In in the form of massive re-regulation of the banking fact, the organisation of Europe has become rather system. I think that the penny is beginning to drop protectionist and not very competitive. It is much here that we need to get banking going. We need to more a zone in which regulation was put in place that ease up on the regulative thrust of the banks in the was in the interests of the dominant countries. It has interests of getting banks into the credit business cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
Ev 28 Foreign Affairs Committee: Evidence
11 September 2012 Professor Patrick Minford CBE vigorously again. The new proposal to have the lot of people do not understand this: they think that lending programme, with the cutting of the costs of somehow when you join the single market, this is a lending by the bank and the Government, is the first pro-free trade action. In fact, what happens is that we effort to roll back the freezing up of credit in this are joining a customs union. A customs union raises country. The big worry is that one of the things that prices inside the tariff wall of the European Union and will come out of the European move will be a lot of raises the prices of certain traded goods that it wishes very heavy regulation of the financial system. essentially to protect, and it keeps out competition from the rest of the world. Of course, if you are a Q115 Mr Baron: Can I suggest to you that although dominant producer of the things that are protected, the penny may be dropping here and that is very you do get a gain, because your fellow members welcome, the Government also seem to be saying that inside the European tariff wall have to buy from you they are encouraged by what they see on the at inflated prices. Now unfortunately, we don’t get any continent—that they do believe that the penny has gain from that because we are not a dominant dropped with the eurozone leaders themselves, that producer of these goods. So there is a general loss to they realise that greater competitiveness, and therefore everybody from the fact that prices are out of line growth, and being able better to compete with regions with world prices. Consumers are paying too much; outside the EU, is very much on the agenda? What producers are producing the wrong things that are you’re saying is that that is completely wrong, and if protected. You can, if you are a dominant producer anything, it’s going the other way. Are the inside this tariff wall, make a bit of a killing at the Government seeing something you’re not, or vice expense of your partners, but we are not in that versa? position. We also lose out from that because we are Professor Minford: What I was talking about not dominant producers. specifically just now was the financial— All round, not only do European citizens lose from Mr Baron: Can we pull it down to regulation? this protectionism generally, but we lose in particular Professor Minford: Talking about the other areas of quite substantially. I spent a lot of time in my book regulation, I think you’re right: there is a desire to do on the whole issue trying to quantify that. Of course, reforms, as they’re called on the continent, of the it is true that if you leave your protectionist labour market and to try to get more flexibility into organisation, the prices of the protected things fall. the economies and so forth. But as we see, it’s a very Consumers gain and certain producers lose. Of course, painful, long and drawn-out process, and it is not other producers gain, because they then get better making very rapid progress. There was quite a lot of profits at the expense of the sitting producers, who are reform in Germany—the so-called Hartz reforms of protected. Jobs are not lost; jobs are created overall, the labour market—which did lead to greater labour because you become a more competitive economy, market flexibility in Germany. But in these other producing the things that you are better at. Your countries there is not much sign of these reforms, consumers are better off, so there are generally good although Germany is backing them, actually incentives to work and so forth as a result of this move happening on the ground. Mr Monti is having a lot of towards free prices. The jobs that are lost in the trouble in Italy, there are a lot of difficulties in Spain protected sectors are offset by jobs that are created in with temporary contracts, and there is mass other sectors. There are more of them, in fact, because unemployment. All these things have for a long time you are a more competitive economy. The point about in Europe been given lip service—the idea that you being inside the European Union is exactly the are going to make labour markets more flexible; that opposite of what its defenders say. We lose from being you are going to deregulate them and have more in a protectionist organisation that distorts prices away competition. But they never seem to happen in the from world prices. end, because there are strong vested interests in all these countries opposing them; not least the union Q117 Mr Baron: If we were eventually to come to movement, but also business. A lot of businesses have the decision to leave the EU, by whatever means that very strong vested interests in the status quo, and they decision was taken, do you think there is scope to oppose these moves because they undermine their establish a free trade arrangement with the EU? One own position. So one shouldn’t think that because obviously wants good neighbourly relations. What is there is a lot of talk of this sort, suddenly, Europe is there scope to do? You have obviously examined the going to change. It isn’t. Swiss and Norwegian models. We are about to undertake visits to both countries as part of our Q116 Mr Baron: You mentioned in your opening inquiry and report. What would you advise us to look answers that you thought we’re in a very difficult for in this regard? situation; that, in your view, it reinforces the case that Professor Minford: One has to distinguish a situation we are heading towards the door, in many respects, where you become an independent country in the from the EU. Many would be concerned, if a question world trading environment and operate under world was put as to whether we should remain within the prices, in which case you sell anywhere at world EU, about the cost to jobs and all the rest of it, and prices, including the EU. Of course, what you lose is that we would suffer economically. Why do you think protective prices for particular products—in the car that’s not the case? industry for example. If we left the EU, we would Professor Minford: I think it is the opposite of the immediately join the world market in cars. One can case. We are suffering economically from being inside see that you need some transitional arrangements for the EU because it is a protectionist organisation. A the car industry, because there would be quite a big cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE transition from the protected status to the unprotected haven’t had an awful lot of allies. There has been very status where you were competing with cars from all little effectiveness in stopping it expanding. over the world and the prices would drop. I think, for practical reasons, transitional arrangements have to be Q120 Rory Stewart: What relationship would you considered. I imagine that there would be a particular like the UK to have with the European Union? What arrangement for cars and other particularly protected sort of model are you looking at? What seems industries that would suffer a big transitional loss. It plausible and what would be in the United is standard when you do reforms that have long-run Kingdom’s interests? consequences that are good that you have to have Professor Minford: I think it was a mistake to join, transitional arrangements. That would be the sort of and I think we should just leave. It is very thing to look at—particular interests that would suffer straightforward. I am perfectly sympathetic to the idea from loss of protection. of renegotiation. One could make a great laundry list A lot of people say that the Norwegian and Swiss of things you would like to change in your options are terrible, because you do not have any relationship, but you go to your partners and say, “I’ve influence over the regulations of the countries of the got this laundry list of renegotiation demands,” and European Union, but I always think that is a very odd they say, “Sorry, we are not going to co-operate. Why argument, because for any country you export to you should we? Why would it be in our interests to co- have no influence over their regulations or the operate in a set of renegotiation demands?” particular things that they want you to embody in your People say we could threaten to stop the institutional product if you sell it to them. That would be true of changes that are going on as a result of the eurozone any market we sold to. If we left the European Union, crisis. Of course, we can’t, because they could always we would have to sell to them on their terms, but it do it inside the eurozone as a separate arrangement. would be something that we routinely do. Then we cannot do anything about it, but we also cannot do anything about any consequential effects Q118 Rory Stewart: Maybe this is a slightly unfair through qualified majority voting in the single market. question, but what is your sense of why liberalisation I think we are powerless to use any leverage. We do in services in particular has not gone further in the not have any leverage over this that would give us the single market system? Why has the UK not been able scope to renegotiate. I don’t think the renegotiation to achieve its objectives? agenda is logical; it has no force. You cannot in Professor Minford: When you do liberalisation—for practice get a renegotiation. I think you have to say, example when the UK liberalised its economy in the “We’re leaving.” At which point, if you leave, you ’80s—you need a lot of ability to buy off losers. A simply repeal that treaty—the 1973 treaty; it is a one- good example is the housing market in 1988 when the line repeal, and you start again. You renegotiate housing reform Act effectively abolished the rent effectively, or negotiate, a completely fresh set of Acts, but sitting tenants were given the ability to carry relationships that are suitable. on as sitting tenants with their privileges until they That seems to me the logical way forward. We leave, left or died. That was an example of how to make we get a clean sheet of paper and we do things that some compensation to losers; you can get some are in our mutual interests, which we are free to do transitional arrangement where people who lose are anyway as an independent nation and should have willing to buy into the reforms. Similarly with done all along. privatisation, British Telecom workers were given share issues. You need to be able to compensate Q121 Sir John Stanley: I am not clear why you losers. believe it is such a hopeless task for the UK One of the big problems in the EU is that you cannot Government to freeze or possibly even cut the EU compensate losers, because the budget is so rigidly budget. There are quite a significant number of net allocated to different areas that there is no flexibility contributor countries, including big countries such as in the budget. For example, if China suddenly Germany, all of whom are facing very serious produces a new product that undermines the Italian budgetary restraints. Is it not a lack of determination, textile industry—the making of suits—there is no way and will in part, by the British Government that it has of compensating the suit-makers of Italy. not been able to mobilise sufficient power in Brussels What happens is that they come to the Council and with potential allies in this area to get the EU budget say there has to be an anti-dumping measure taken down? against the Chinese producers of suits. The more Professor Minford: I agree with what you said, that sensible outcome would be to have some transitional in principle it might seem so. Unfortunately, they are assistance to the Italian suit industry. The EU is very facing a eurozone crisis. If you are in a crisis, the last unable to do the sorts of things you need to be thing you want to do is cut back all the people who liberalising. are coping with the crisis. The European Commission is heavily involved in trying to get this crisis resolved. Q119 Rory Stewart: Could you also speculate on or It is quite a small outfit, actually. People often talk analyse the UK’s ability to control the EU budget? about how enormous the European Commission is; it How much influence has it had in Britain? What is is really very small, considering its huge going to happen going forward? responsibilities. Of course it delegates as much as it Professor Minford: I don’t think we have much can, but when you are in a crisis and you are control over it. We are one member among many. As institution building, they are going to say, “How can we have seen recently, we tried to stop it but we we resolve your crisis? You really have to pay for civil cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE servants.” It is a pretty difficult argument to answer. Q126 Sir Menzies Campbell: Which takes me The other countries involved, particularly as they are logically—at least I hope logically—to my next the ones that are in a crisis, are going to say, “Okay, question. How long would that transitional period take we need another Sir Humphrey and we need people in the event that the United Kingdom were to follow to work for him, because otherwise we are not going your approach and withdraw? to be able to resolve the crisis.” Professor Minford: For most transitional arrangements you need a decade. Something like a Q122 Sir John Stanley: But expenditure in the EU decade is the sort of way in which you could handle is not largely on the Commission. It is largely on all this sort of change. I would not put it any less than the other items—the common agricultural policy and that. It could be even more. But the point is that it is so on. That is where the great majority of the budget moving our economy in the direction that it gains expenditure goes. Why is it not possible for the British from. Obviously, you cannot do it too rapidly, because Government to mobilise those who are the net there is too much dislocation. contributors and produce a situation where we get a much more sensible budgetary outcome? Q127 Sir Menzies Campbell: I have one more rather Professor Minford: The budgetary actions are all more specific example. You mentioned the support subject to unanimity; it is not a single market thing. provided by the common agricultural policy. How far If you think about it, the French would veto any do questions of food security enter into calculations attempt to change the common agricultural policy; as to whether it would be better for agriculture to Portugal and Spain would veto any attempt to change cease to enjoy the kind of support that it receives in the regional policy, and so you go down the list. this country and elsewhere in the EU? Everybody has red lines that would lead to a veto, so Professor Minford: Obviously, people have raised you get to an impossibility situation with these things. food security from time to time. If there genuinely is a Obviously, everyone would like to make economies, security worry about supplies coming from unreliable but everyone has their red line—their own particular places and so forth, you can put in ad hoc controls, vested interest that is untouchable—and unanimity has quotas, or thresholds that protect you in those security to prevail. I do not think you have a process there that dimensions. Those are much less expensive than the can easily yield to the sorts of things that you are whole common agricultural policy. That would be the talking about. point I would make. If you have security issues, it is always better to pinpoint them and deal with them ad Q123 Sir Menzies Campbell: We have identified hoc—item by item. The food security issue is British manufactured cars and Italian manufactured probably quite a narrow one. I do not know how big suits as requiring transitional assistance. Is there any it is at all, but I am sure that you could identify the way of estimating what the transitional costs would things where you thought there was a food security be if the United Kingdom were to follow your issue and take much less expensive action to deal approach and withdraw from Europe? with it. Professor Minford: The point is that whenever you do reforms that have long-run benefits, which are what I have most focused on calculating, and which are Q128 Mr Roy: Because of its EU membership, does substantial in the case of leaving a protectionist the UK have less access to markets outside the EU organisation, something of the order of 3% of GDP is than it would have by negotiating alone? If so, could the sort of gain from moving to free trade. But of you give examples? course you are right; there are transitional Professor Minford: I am not sure that I am following dislocations. Those are not exactly costs; they are you exactly. simply transfers that have to be made. When an Mr Roy: If we left the EU and wanted to negotiate industry contracts and another industry expands, there alone in relation to trade— is a gain overall. There is a gain to the consumer. Professor Minford: With the EU? Mr Roy: No. Outwith the EU. What markets would Q124 Sir Menzies Campbell: But that doesn’t be available to us? happen overnight, as I think you will acknowledge. Professor Minford: Oh, I see. Well, the world market. Professor Minford: It doesn’t happen overnight, but Those markets are already available to us. The point the fact that it does not happen overnight just means about the EU is that it creates trade diversion to the that you don’t get the gain overnight. But there are EU relatively, because obviously if the prices of more gainers than losers. The point about transition certain products rise as a result of protection within costs is that they are essentially compensation costs. the EU, you divert output to the customs union. A They are not costs to the economy. You have to standard effect of customs unions is, of course, trade compensate the losers in order to not create social diversion. So if we left the EU, there would obviously dislocation. be no trade diversion incentive to the EU and our products would move to other markets, because they Q125 Sir Menzies Campbell: That comes from the would be relatively more attractive than the EU Government. That is public expenditure. market. Of course, the point is that our trade is already Professor Minford: It can come by simply having moving towards other markets, because they are faster transitional arrangements so that these things take growing. Trade with the EU has dropped substantially place over a period of time. That would be how you over the last four or five years since the crisis, and would manage it. trade with the rest of the world has expanded cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE substantially as a result of relative growth in Q134 Ann Clwyd: Do you really think it is feasible different markets. economically or politically to try to unpick the single market in the way you are suggesting? I was Q129 Mr Roy: Would there be cases whereby if we particularly interested in some of the things you want negotiated as a single entity, we would get a better to unpick, such as social legislation. Some of us think price, for example, than we would as a member of that social legislation is a good thing. I was an MEP the EU? when we had the big losses in the steel industry, for Professor Minford: We don’t negotiate; we simply example. We were criticised for not having a social sell into markets. Markets are fundamentally— net to assist people who were going to lose their jobs by the thousands because of the demise of the steel Q130 Mr Roy: Surely you negotiate. Surely that is and coal industries. Why do you particularly want to unpick social legislation? what selling is. It is a negotiation between buyer and seller. Professor Minford: I think we gave a lot of help to the coal and steel industries that, as a matter of fact, Professor Minford: No, you don’t negotiate; you had not got much to do with Europe—mainly through simply have most favoured nation treatment under the special grants to alleviate industrial problems. In World Trade Organisation. One thing that has Wales, for example, huge grants were made through happened in the last 20 or 30 years is the growth of the regional mechanisms. international institutions policing world trade. You do I think, therefore, that our social safety net was quite not go around negotiating; you simply go into a a good one. We had a system of benefits. The market and sell, as we already do all around the world. unemployment benefit system was a little bit too We do not sell only in the EU. We already have unconditional at that time; it had to be tightened up, arrangements— with Restart and so forth. Now we have the new unemployment benefit system, which is quite tightly Q131 Mr Roy: But with respect, you don’t go into a monitored. We had systems of benefits to help people new market and say, “Take it or leave it.” You do back to work, now called tax credits. In effect the negotiate. Surely, you negotiate. The United Kingdom system was quite a good one. It encouraged people to would not go into another country and say, “There it get back to work. is. Take it or leave it.” Surely you are not saying that. There are problems about some of the social Professor Minford: These are all voluntary contracts. legislation that has come out of Europe as a result of Are you saying that if we left the EU, there would us joining the social chapter. In 1997, when Labour somehow be a change in the commercial treatment of came in they decided to join the social chapter. I think the UK compared with— that was a big mistake because it has brought in a Mr Roy: That’s what I am asking. whole raft of very intrusive intervention in the labour Professor Minford: No, there wouldn’t be. Of course market, which has not particularly helped steelworkers not. Why would there be? We are treated the same or coal miners or anybody else displaced to get back way as any other country in world trade would be if into work. we left the EU. It would be against WTO regulations to do anything else. If a country levies tariffs against Q135 Ann Clwyd: There aren’t any more of those. you unilaterally, that is illegal under WTO Professor Minford: No, fortunately, because that all arrangements. That is one of the good things that have came later, but looking at the analogue after 1997, if emerged out of the last 30-odd years of the building we had had those sorts of problems, it would have of the World Trade Organisation environment. made it much more difficult to adjust in our labour market. If you look at the sort of problems that are Q132 Mr Roy: Could I take you to the mirror image occurring in places such as Spain and Portugal, with of that, which is the United Kingdom outside the very high levels of unemployment particularly among European Union and the European economic area the youth, it is not a good advertisement for social wishing to negotiate with the European Union? How legislation in the EU. do you think Britain would stand? Professor Minford: As I say, I think there would be Q136 Ann Clwyd: And the working time directive? particular areas such as the car industry where there Professor Minford: I think the working time directive would be a transitional agreement, because it is such is extremely intrusive and we spend all our time a hugely integrated industry inside Europe as a result avoiding it by one means or another. We have an of the way in which it has developed inside the interest in people working; people want to work. The customs union. I think there would be an agreement idea that this is something that, on health and safety within the car industry that would be sanctioned by grounds, you can impose on people seems not a very governments in effect to allow that to continue in serious idea. People have the chance to work. If they some way for a length of time. That sort of industry want to work, they can choose the hours they work would require a special arrangement. and presumably can judge their own health and safety accordingly, subject to normal health and safety Q133 Mr Frank Roy: Made by whom? regulations. Professor Minford: Made, I think, as a result of the negotiations that follow withdrawal, because Q137 Ann Clwyd: What sort of bargaining chip do everybody has quite a large interest in that industry. you think we have, if we want to pick and mix in cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE this way? We do not have very much influence in the Q140 Rory Stewart: I am still trying to understand European Union. the political implications of this talk of transitional Professor Minford: I completely agree with you. I do arrangements. Is it not conceivable that what you are not think that we have any influence. The so-called really talking about is the collapse of the entire UK renegotiation agenda seems totally hollow because we car industry and that when we leave the European have no bargaining power. That is why we should customs union and go directly into competition with simply leave and start again. Asian car manufacturers, this transitional arrangement is just a polite way of describing the wiping out of the Q138 Mr Ainsworth: The renegotiation agenda is manufacturing industry? How will that be explained to a public and a political class that are increasingly useless because we have no bargaining power. proud of our development in this kind of Therefore, we should leave. Having left, we would be manufacturing industry in Britain? able to negotiate for the car industry, for example, 10- Professor Minford: It is perfectly true that if you year transitional arrangements. How on earth will we remove protection of the sort that has been given be able to do that? Why would the German-dominated particularly to the car industry and other European Union agree to give us 10-year transitional manufacturing industries inside the protective wall, arrangements for the car industry? You acknowledged you will have a change in the situation facing that that we could not do it quicker. The shock would be industry, and you are going to have to run it down. It too great. What negotiating leverage would we have will be in your interests to do it, just as in the same for such transitional arrangements? way we ran down the coal and steel industries. Professor Minford: The car industry is highly These things happen as evolution takes place in your integrated, so it would be in the interests of those economy. In the long run they are in your interest, German dominant manufacturers to negotiate an but of course you have to deal with the compensation arrangement, since they have a lot of plants here. problems along the route. It won’t be a process that There is a huge cross-ownership within the industry can be entertained without some form of because it has been built up inside a protective wall compensation. As I said, reform always requires within the EU. Of course, if there were not a will compensation. You can’t do anything that involves to do that, we would obviously have to give some changing relative prices long term that doesn’t involve compensating payments ourselves to our end of the some form of compensation for political reasons. car industry. We could do that, because we would be gaining from the change in the structure of the Q141 Mr Baron: I suggest to you, and perhaps you economy. would agree, that there is a real risk that the EU will If, for some reason, there were no willingness by the continue to fall behind the rest of the world when it other countries’ car owners and governments to co- comes to market share, economic growth and so forth. operate in this and there were a faster run-down of our I would suggest this is an EU overburdened with car industry as a result of that lack of co-operation, we regulation and so forth. We talked about the social would have to compensate them in a way rather like chapter and the 48 hours. Do you see, in countries the steel and coal industry. Those were not economic where there is high unemployment particularly among industries. That is a quite good parallel. If you have the youth—the Mediterranean countries—any an industry that is not economic, it is your interests to political will there to try to get to grips with the dead run it down. Obviously, it would be nice if others weight of regulation, in order to free up markets and would co-operate in parallel in the run-down so that make themselves more competitive? I come back to it puts less of a cost on you but if, in the end, you my original question. Our own Government are saying have to do it yourself, you are still better off. that there is plenty of evidence that the penny is dropping. I question that; what do you see? Professor Minford: I question it, too. I’ve lived Q139 Mr Ainsworth: And we sell our goods in the through the Lisbon agenda and umpteen agendas from rest of the world, because the rest of the world is a Brussels. I’ve lost count of them all and all their free market. Would we be able to sell agricultural names. I remember the Lisbon agenda way back, and products or defence equipment to the United States in I’m sure Ann Clwyd remembers, too. We were told the free market that exists in the rest of the world? there was going to be all this reform; there wasn’t. Professor Minford: I do not know the particular There is enormous obstructionism and it is all products you are talking about, but we generally unfortunately buttressed by the social legislation in specialise in services. There seems to be no lack of a Europe. Europe is a great engine for creating market for our services. Indeed, the goods you are entitlement, essentially, and strengthening vested talking about are goods that we do not really interests, unfortunately. specialise in producing. The ones that we do specialise I am very sceptical that there will be much. Germany in producing, we seem to have no trouble selling. In is trying to enforce it through its austerity programme. fact, as I said, our exports to the rest of the world have It is basically saying, reform; austerity will continue been very dynamic in the last few years in the context and tighten if you do not reform. There is a sort of of the crisis. I do not recognise this great fear that process going on institutionally inside the eurozone somehow we cannot sell to the rest of the world. I do led by Germany to try to force the southern cone of not recognise it in terms of the industries in this the eurozone to reform in the way you talk about. country, which seem to sell very successfully to the Something will come out of that I should think, but I rest of the world. am not holding my breath. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG03 Source: /MILES/PKU/INPUT/022929/022929_o003_th_ - Corrected TEMPLATE.xml
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11 September 2012 Professor Patrick Minford CBE
These are very difficult markets to deal with because it would be possible to have a separate treaty. If we of the strength of vested interests and the way in were to play that card, what are we saying: “We put which these have been strengthened by the joining of you to the inconvenience of having a separate treaty, Europe. One of the ways in which these countries so please give us a whole shopping list of demands”? have benefited from joining Europe is in the strengthening of the support mechanisms that they Q143 Chair: It is quite an inconvenience to have two have had at hand to prevent these sorts of reforms. I separate treaties running in parallel but separate. don’t see them changing any time soon. Professor Minford: Yes. Well, there is an element of Of course, the latest remarks by Mr Draghi, saying leverage there. How big it is I don’t know, because it that he will save the euro anyway by buying all their depends how much is the inconvenience of a bonds, whatever they do, as has been noted by people separate treaty. in Germany, are reducing the stick that is being waved at them by Germany to get them to reform. I would Q144 Chair: This would be politics, wouldn’t it? be very sceptical that there would be anything very Professor Minford: This would be politics. I wouldn’t dramatic coming out of it. Something will happen in want to overplay it. For example, I don’t think it the end. There has to be something, but I think it will would make it easy for us to leave the social chapter. be very slow and there won’t be very much of it. It I don’t think it would make it possible for us to change will certainly take a long time. the arrangements under the single market in which we get over-regulated. I don’t see where this renegotiation Q142 Chair: Talking of sticks, you have argued this is going to go on really substantive things that are morning that we have no leverage when it comes to central to the structure of the EU. That is the problem renegotiation. The fiscal compact expressly says that I have. Once you mention the big areas that the EU is it hopes to be inserted into the EU treaties within five constructed on, I don’t see us getting out of them. years. That is the request. Is there not a political trade- Effectively, those are the ones where we are off there? Could we not say, “Look, you can have the experiencing the massive costs: regulation, trade, fiscal compact incorporated into the EU treaty, but social matters and so forth. here is our shopping list of repatriated powers”? Chair: Professor Minford, I am sure these arguments Professor Minford: I’ve thought about that quite a bit will run and run and that we will be talking about and have heard that argument quite a lot. It is not very this for several years to come. I thank you for your convincing. They can always turn around and say, “If contribution this morning and for the robust and you won’t co-operate we will do it in a separate articulate way in which you have expressed your treaty.” There are obviously certain inconveniences in views. doing it in a separate treaty within the eurozone. Professor Minford: Thank you. However, as I understand it you can make use within the eurozone of the EU civil service and so forth and cobber Pack: U PL: COE1 [SE] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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Wednesday 6 February 2013
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Mark Hendrick Mr John Baron Andrew Rosindell Sir Menzies Campbell Sir John Stanley Mike Gapes Rory Stewart ______
Examination of Witnesses
Witnesses: Rt Hon William Hague MP, First Secretary of State and Secretary of State for Foreign and Commonwealth Affairs, Sir Jon Cunliffe CB, UK Permanent Representative to the EU and Simon Manley CMG, Director, Europe, FCO.
Q145 Chair: I welcome members of the public to well as my speech in Berlin in October, which had this sitting of the Foreign Affairs Committee. This is many of the same themes. But the part of the speech the fourth, and is expected to be the final, evidence that was about what we will do after 2015 was the session of the Committee’s inquiry, “The future of the Prime Minister speaking as leader of the Conservative EU: UK Government policy”. Party. As you can imagine, on that part, the input from The Committee has been taking evidence since last the Foreign Office came from the Foreign Secretary, summer, and visited several European capitals during as I am the foreign affairs spokesman of the the autumn, but sensibly decided that it could not Conservative Party, as well as the Foreign Secretary conclude its inquiry until after the Prime Minister’s of the United Kingdom. Officials were not involved major speech on the EU, which he finally delivered in any of that part of the speech, but they were of on 23 January. Today is the first date since the Prime course able to give advice on those parts relevant to Minister’s speech when it has been possible for both and representing Government policy in this the Foreign Secretary and the Committee to meet. Government. Foreign Secretary, welcome. Mr Hague: Thank you. Q148 Chair: Did you warn him that the original date of the speech was the same day as the Elysée Treaty Q146 Chair: I also welcome Simon Manley, the meeting? director of the Europe desk in the Foreign Office, and Mr Hague: There was a range of dates for this speech. Sir Jon Cunliffe. Thank you very much for coming Since the Elysée Treaty meeting was taking place, in over from Brussels, Sir Jon—it is much appreciated. the end we chose one of the other dates: Friday 18 Foreign Secretary, I understand you would like to start January. Of course, as the Committee knows, the with an opening statement. Algerian hostage crisis intervened, so we moved it to Mr Hague: I wanted to say a few sentences very the Wednesday instead. briefly, Chair—I spoke at length in the House on this last week—just to welcome your inquiry. Q149 Chair: It is proposed that there will be an in/ As you know, the Prime Minister believes, as I do, out referendum. It will be drafted before the General that Europe faces greater changes now than at any Election and would take place after it, if there is a time since the fall of the Berlin Wall. We are Conservative Government. To what extent do you determined to seize the opportunities that those think the Foreign Office will be involved in the changes offer—that is what the Prime Minister’s drafting of the legislation over the next two years? speech was about. They are opportunities to reform Mr Hague: That is to be determined. The draft the European Union and our relationship with it in a legislation would be quite simple. I don’t think that way that is good for the EU and good for the United that involves a huge amount of official work. But we Kingdom as well. will involve the Foreign Office to the extent that is We are not in the business of ignoring the challenges appropriate in pre-election arrangements. Of course, ahead, but in the business of confronting them, and they will be required to work on arrangements in the we are going to play an active and influential role in event of any party winning the General Election. I shaping Europe to make it a driver for prosperity imagine that that will fit within that, but we will do again. The focus is on competitiveness, flexibility and that in an appropriate way. democratic accountability. I hope that that is an agenda that we will be able to take forward with the Q150 Chair: What are you asking your officials to Committee. work on, both in UKRep’s office and here? To what extent has the speech changed things? What is new Q147 Chair: Thank you. Can I start with the that you are asking your officials now to look at that Bloomberg speech? How much input did the Foreign they would not be doing if the speech had not taken Office have in that speech? place? Mr Hague: It depends on which part of the speech. Mr Hague: The officials are working on all the The speech was in part a reflection of the Coalition’s aspects of Government policy reflected in this speech priorities and beliefs about the European Union, as and all our other utterances and policies. As you cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG know, the European Council is taking place this Mr Hague: I am sure that the corporate memory does weekend. There will be negotiations on the go back that far, but in addition, my own personal Multiannual Financial Framework and discussions at memory just goes back that far, and I think we would the same Council on trade and, to some extent, on all have to agree that the circumstances of today are foreign policy. We are heavily engaged—last very different. Europe faces the triple challenge—the Thursday, I was at the Foreign Affairs Council in the triple crisis, if you like—that the Prime Minister was EU—on the full range of global issues that are describing: of the effect of the eurozone crisis on the discussed within the EU. We are very much engaged EU as a whole; of maintaining its competitiveness in in driving forward the single market. The key a global race that was not taking place in the same principles of the Prime Minister’s speech concerning way in the 1970s; and of a growing gap between the competitiveness and flexibility are absolutely ones EU’s institutions and the citizens of the EU member that officials are working on all the time. That is part states. These are all factors that are present today that of the Coalition Government’s approach. were not present in the 1970s. The Europe Union, or The implementation of the referendum commitment the EEC as it then was, was relatively new. Now it is the Prime Minister gave is for the Conservative Party, a mature institution facing these multiple crises, and a future Parliament and officials at that time, subject with other people advocating treaty change. That is to whoever are the Government in that time. in the so-called report of the four Presidents, it is in Commission President Barroso’s blueprint for the future—all of these call for treaty change for other Q151 Chair: So really, it hasn’t made much reasons. The environment, the scale of the crisis and difference. This is work you would have been doing the requirements of other nations to bring about anyway. change in the EU are all much more intense than in Mr Hague: The key difference in the Prime Minister’s the 1970s when it was simply a matter of a bilateral speech was a statement about how we will approach renegotiation. the future and shaping the debate for the future. It does not change the work of our officials on the single Q154 Sir Menzies Campbell: But I do not think that market, the Multiannual Financial Framework and the any of these other countries that you mention have fisheries policy, which the European Parliament has embarked upon a process which would lead to an in/ voted on earlier today, in a direction that we can out referendum. I do not hear that in France, for approve of—for a change. It does not change their example, or Germany, or among the Baltic states, or work on these things. anywhere else for that matter. Mr Hague: They have had referendums of course. Q152 Chair: You mentioned the Coalition. The There have been referendums in many other countries Liberal Democrats do not really support this proposal. on recent treaties over the last decade, when the Has that caused problems in preparing the policy? British people have been, in my view, wrongly denied Mr Hague: It is, of course, a hybrid speech, to use a a referendum. People in other countries have had the parliamentary term, although that is not unusual—it opportunity to give their judgement. would be normal in a single-party Government— closer to a general election. Of course, it is more likely Q155 Sir Menzies Campbell: But not on an in/out to arise in a coalition. In a mature democracy we all basis. understand that. It has not caused a difficulty Mr Hague: No, not on an in/out basis, but as you will preparing it; it does mean that discussions about what know, Sir Menzies, from campaigning for an in/out the Prime Minister is proposing to do after the 2015 referendum at the last General Election for the Liberal General Election are, of course, discussions among Democrat Party, there is a large body of opinion in members of the Conservative Party. That would not favour of that in the United Kingdom. be unusual. It would not be unusual if the Conservative Party was in government on its own for Q156 Sir Menzies Campbell: A comparison of us to do that about what we will do in the next manifestos would not take us very far. Can I ask about Parliament. the approach here, and which of these two approaches is the one that you think is correct? Is it right to say Q153 Sir Menzies Campbell: I was pleased to hear while the eurozone is in difficulty, “We would like to you begin by saying the Prime Minister’s commitment help, and by the way, when that process is taking was to reform, because I think that is a commitment place, there are a number of other things we want to that is pretty well shared on all sides of the House raise”? Or, is the position, “The eurozone is in trouble, of Commons. and we are not going to help unless you examine these May I ask you this question? Does the corporate other issues which we think are important”? The memory of the Foreign Office recall the circumstances reception that the British Government will get in which Harold Wilson in the early 1970s, along with depends on which of these it is. Which is the approach Jim Callaghan, went round the capitals of Europe that you think you are going to address? seeking renegotiation, came back and then, a bit like Mr Hague: I would characterise it much more as the the emperor’s clothes, had a very threadbare offering former of those two. To look at an example of that in to make. As a consequence, many people believed that practice, look at the recent negotiations concluded in the opportunity that had been taken was more of a December last year on the rules of the European device to deal with the internal difficulties of his own Banking Authority. This is a change that is part of party, than it was something in the public interest. the so-called banking union proposals in the EU. 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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG approach to that is that we are not going to block the Q161 Andrew Rosindell: Foreign Secretary, you changes that eurozone members want, but we do want said that the credibility of our legitimacy within the our own interests to be safeguarded, in this case in a EU is wafer thin. Do you agree that it has been wafer new way. So we asked for something that initially thin ever since we signed the Maastricht treaty quite a few Member States were not very enthusiastic without a referendum? about. Sir Jon might wish to add to that, as he was Mr Hague: There are many different types of wafers instrumental and part of the negotiations on this and on sale of different thinness. I do not know how we supported the Treasury team in doing so. define when wafer thinness arrives. It has diminished We asked for a new procedure, “You can have a over all of that time. We have seen a series of European Banking Authority that sets rules by the treaties—Amsterdam, Nice and, most importantly, normal qualified majority but we want, as well, a Lisbon—where there were widespread demands for a simple majority vote among the ins and the outs of referendum and it was not held. In the case of the eurozone, so that those out of the eurozone have Maastricht, of course, it was in the proposals of the their interests safeguarded.” That has been agreed in party that won the general election, that it would ratify the negotiations of December. Sir Jon, would you like that treaty. In the case of the Lisbon treaty, there was to elaborate on that? neither a general election nor a referendum for people Sir Jon Cunliffe: Once one set out the principle that to be able to give their views. That was very if a number of countries were coming together in a undermining of the democratic legitimacy of the EU single institution and that institution would be round in the United Kingdom. the table voting with all the votes of its members with a near automatic qualified majority, the point in Q162 Andrew Rosindell: We are all delighted that principle was that you had to reflect that somehow by there is going to be a referendum in four or five years’ changing the voting arrangements. There was a new time, Foreign Secretary. For it to be a meaningful reality being created by that particular proposal and a referendum is it right that the Government today number of changes were needed. Once the principle should be looking at alternatives, to be motoring to was agreed, then it was about the details. look at other alliances with perhaps the Commonwealth or other parts of the world we can Q157 Sir Menzies Campbell: That is an illustration trade and co-operate with? Are the Government going of co-operation. to make use of the next four years, so that when there Mr Hague: Yes, and hard negotiation. The two can is a referendum there is a clear alternative, and it is go together. not just a question of being in or completely out of everything? Mr Hague: Be clear that the Government’s objective, Q158 Sir Menzies Campbell: But ultimately co- as the Prime Minister has expressed it, is to succeed operation. in arriving at a new settlement and to be able to Mr Hague: Yes. campaign for Britain to stay in the European Union. On the question of other relationships in the world, as Q159 Sir Menzies Campbell: Do you think that that the Committee knows, a major part of our approach is embraced in the notion that if we don’t get what we to foreign policy is that we are building up relations want, we would leave? all around the world, some of them, in my view, long Mr Hague: That part of it is just democracy. The neglected. Indeed, last year for the first time in a long Prime Minister argued, correctly, in his speech that time a bigger share of Britain’s exports went to democratic consent has become wafer thin for the EU outside the European Union than inside. Inside in this country. I very much believe that to be true. I remains hugely important to us, but the balance has don’t think we can deny people for ever. I am not sure started to shift in that direction as the pattern of world anybody any more in the House of Commons is economic growth has changed. arguing that people can be denied for ever a say in We are shifting hundreds of diplomats into the Asia their future in the European Union. Therefore, it is Pacific and the Latin American regions, opening 20 better to lead that debate, confront that, shape that new embassies and consulates elsewhere in the world. and settle that. That is why the referendum pledge is We are giving greater importance to the important. It is not a threat; it is part of a vibrant, Commonwealth but I would not want the Committee robust democracy that we have in this country. to think that the Commonwealth is an alternative to the European Union. It has many great strengths and Q160 Sir Menzies Campbell: Is that the opportunities and more should be made of them but it interpretation that the Governments of France or is not and cannot become a single market, a trading Germany have put on this policy? bloc, a similarly united force on a variety of foreign Mr Hague: Governments around Europe have of policy issues as the European Union has become. We course reacted in a wide range of ways, as they did have to be realistic about that. even to the proposal we made about banking rules. Chancellor Merkel said clearly that we must always Q163 Andrew Rosindell: I turn briefly to the Prime discuss the interests of individual countries; we are of Minister’s speech. Did he consider the implications of course ready to discuss British wishes and eventually his proposals on not just England but the rest of the we must find a fair compromise. She reacted in a United Kingdom, particularly Scotland, which has its pragmatic way and that is true of many other own issues, Northern Ireland and Wales, but also European capitals. Gibraltar, which is a part of the European Union as cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG well, and whether the policy could have a knock-on actually a large part of our work and emphasis at the effect on the other British territories and moment. dependencies? Mr Hague: He delivered the speech as Prime Minister Q167 Sir Menzies Campbell: Is that discussion of the UK and as leader of the Conservative Party of between the EU and the United States rather than the United Kingdom and therefore was speaking for between the British Government and the United the whole of the United Kingdom. The UK’s States? relationship with the EU has complex effects on Mr Hague: The negotiation of such an agreement is overseas territories. Those effects would flow from between the EU and the United States. Trade, in this whatever decision we made here in the United respect, is a competence of the European Union. The Kingdom about our future in the European Union. political impetus to get it going, to generate Certainly the Scottish dimension is very important. I enthusiasm for it, to explain the case for it and to know this is something the Committee is looking at persuade the United States that it would be good for separately. Of course, there is to be a referendum in them as well—national governments have to play a Scotland in any case on the question of independence. big role in that, and we are doing so in the UK. I suppose, therefore, you could argue that the people Sir Jon Cunliffe: It will be on the agenda for the of Scotland will have, in effect, two referendums on European Council on Friday morning, and the aim their membership of the EU because voting to leave will be to push it even further and faster. the United Kingdom would almost certainly have the effect of leaving the European Union as well. Q168 Mark Hendrick: Foreign Secretary, if the Prime Minister had secured his requested safeguards Q164 Andrew Rosindell: Will the people of at the December 2011 European Council and the fiscal Gibraltar have the right to vote in the European compact had been enacted in amendments to the EU referendum as well? treaties, would that have triggered a referendum under Mr Hague: The normal rules of referendums apply as the European Union Act 2011? things stand. They, of course, vote in European Mr Hague: Since the fiscal compact relates to elections but not in a general election. There would responsibilities in the eurozone countries, it should not be the opportunity to amend those rules relating to a have implied any transfer of power or competence to referendum before we arrive at the referendum. the rest of the European Union. However, that is not just for Governments to define. It is open to judicial Q165 Andrew Rosindell: You intend to do that, review and it is up to Parliament to agree or not. That Foreign Secretary? would be my assessment. Mr Hague: I am happy, Mr Chairman, to look at suggestions which, I am sure, Mr Rosindell will be Q169 Mark Hendrick: In an EU treaty approval making. referendum held under the terms of the 2011 Act, Chair: He has never been slow at that. what would a no vote mean? Mr Hague: There are a variety of issues under the Q166 Sir Menzies Campbell: Referendums are a bit 2011 Act on which a referendum can be held. It could like London buses: you can’t get one for a moment be a new treaty that transfers some new power or and then suddenly two come along at the same time. competence to the EU. There is also the use of certain I want to go back to the point raised by Andrew provisions incorporated into the treaties by the Lisbon Rosindell about other relationships. In Munich at the treaty—some of the passerelle clauses—which could weekend there was a lot of speculation both inside be used without a new treaty under the provisions of and outside the conference about a free trade area Lisbon to transfer further powers to the EU, which relationship between the EU and North America. Is can trigger a referendum under the 2011 Act. that something which the British Government is In any of those things, a no vote would mean that the anxious to pursue at the moment? United Kingdom did not agree—it either did not ratify Mr Hague: Yes, and we expect shortly the report of a treaty in the first instance or would not cast its vote the high-level panel convened between the EU and the in favour of the use of a passerelle in the second case. United States on this subject. It is something I discussed on my visit to Washington last week. It is Q170 Mark Hendrick: Does that not mean, possibly, firmly on our agenda for initial talks with Secretary that the UK would be out of the EU? Kerry, as it has been between the Prime Minister and Mr Hague: No. People might argue—it depends on President Obama. This is part of our enthusiasm and the political debate at the time, of course—that a no the very hard work of our officials in post around the vote in a referendum on any individual issue raises world of implementing more free trade agreements that question, but it would not mean that in itself. around the world. Two years ago we concluded the one with South Korea. We have now reached political Q171 Mark Hendrick: So you are saying that the agreement on a free trade agreement with Singapore. status quo would be an option, even though all the We are close to concluding an agreement with other countries had ratified that treaty? Canada. It is estimated that an EU-United States free Mr Hague: Yes, of course. Treaties require unanimity trade agreement could add 2% to 3% to GDP on both and cannot come into force without the agreement of sides of the Atlantic. Tariff barriers are not high, but all the Member States. As the Committee knows, there non-tariff barriers are substantial, and removing those have been ‘no’ votes in other countries in referendums would have a very positive economic effect. This is on treaty changes. There was a no vote in France and cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Ev 38 Foreign Affairs Committee: Evidence
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG the Netherlands on the so-called European Mr Hague: That would be for our successors in the constitution. next Parliament to determine. The common sense basis would be to consider a new settlement between Q172 Mark Hendrick: The question was asked the EU and the UK in the round, in a single again and they said yes. referendum with a single vote. Of course, that is Mr Hague: In France they decided not to ask the entirely for the next Parliament to determine. question again on something very similar called the Lisbon Treaty, and in Ireland they asked the question Q176 Sir John Stanley: Foreign Secretary, before again and got a different answer. I would not volunteer you and your fellow Ministers made the policy to be the Minister who asked the British people the decision to have an in/out referendum in five years’ same question again. time, did you carry out an assessment of the inescapable business investment blight that such an Q173 Mark Hendrick: The legislation that you announcement would create? talked about for a post-2015 Conservative Mr Hague: As I said before, it is a Conservative party Government would introduce the in/out concept. commitment, not a coalition commitment or a Would it amend or repeal the 2011 Act, or neither? Government responsibility. Our view, based on talking Mr Hague: It would add to the 2011 Act, which I am to many international businesses, is that it does not pleased to say now has cross-party support and I hope, create a blight. In fact, we argue that, if anything, therefore, has entered into the unwritten constitution there will be less uncertainty with this approach, of the United Kingdom. I hope that the 2011 Act will compared with the approach of never ruling out a remain in force for the long term before, and indeed referendum, but not having one in the meantime. after, an in/out referendum, provided that the result of This is a way of confronting the situation and settling that referendum was to stay in the European Union. It the debate. Certainly, when I was talking to some is our assumption in the Conservative party—and this major investors in this country and in the United is a Conservative party proposal—that the 2011 Act States last week, I did not detect any change in their would remain after such a referendum. plans or any blighting from what we have proposed, which is, in any case, dependent on a range of factors: the business environment, the labour market and Q174 Mark Hendrick: Given that the 2011 Act is corporate taxation. It depends on quite a lot of things. fairly recent, and we are just at the beginning of 2013, why has the Prime Minister seen fit to introduce a Q177 Sir John Stanley: Foreign Secretary, what you referendum on a treaty that may or may not come after just said to the Committee is in direct contradiction the next general election and may involve transfers of with the reported comments of one of the most powers to the UK, rather than from the UK? successful and experienced British businessmen, Sir Mr Hague: It is a time of fairly momentous change Martin Sorrell. The day after the announcement was in the European Union—almost in any month, let made, he said this: “[Our] clients are worried. It’s this alone any year. There is a major crisis, as I described uncertainty. It’s very simple—let’s say you build a earlier, and as the Prime Minister described in his factory in the UK. The gestation period is two or three speech, in terms of the eurozone, and Europe’s years. You’ve got your factory up and running and competitiveness and democratic legitimacy. That has suddenly the UK pulls out. You’ve got tariffs, you’ve to be addressed. got trade barriers. Suddenly you’re outside Europe. We cannot say that the issue was addressed in its That will either suspend decisions or will move them entirety by the 2011 Act because the 2011 Act dealt elsewhere.” with a different thing. It dealt specifically with the That is a very significant statement. I would suggest concern that Mr Rosindell just raised—that a whole that that is mirrored by many other people in senior series of treaties have been passed without the British positions with decision-making capability about future people ever having their say. This proposal deals with investment in the UK. If that is the risk, how can this what happens in the future, and how we will shape policy possibly be squared with the Government’s and lead the debate in Europe and succeed in winning supposed priority of achieving economic growth? democratic consent for that. Mr Hague: There are many different quotes from business leaders. There are ones from business Q175 Sir Menzies Campbell: The terms of the 2011 organisations representing thousands of businesses Act are to the effect that if there is any transfer of rather than one business, including, for instance, the power from Westminster to Brussels, that would director general of the Institute of Directors, who says: trigger a referendum. Is there any risk that that “The British public, and many of our members, are statutory provision might have to be invoked at the sceptical about many of the institutions and practices same time as the proposal about an in/out referendum? of the EU. We need to put their doubts to rest.” The Assuming a negotiation, the view was taken by the CBI director general said: “The Prime Minister rightly Conservative Government that in return for what recognises the benefits of retaining membership of might be described as concessions there are some what must be a reformed EU and the CBI will work powers they are willing to transfer. Would that trigger closely with government to get the best deal for the statutory obligation in the 2011 Act or could the Britain.” The head of the British Chambers of whole thing be put into one package? Or might we, in Commerce said that “the Prime Minister’s the worst-case scenario, find ourselves with two determination to negotiate a new settlement for Britain referendums? is the right course of action.” I do not think individual cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG voices have the same weight as these huge business getting an EU-qualifying exam if there is a risk to his organisations. or her eligibility for a job in the institutions altogether? For that matter, why should anybody now Q178 Sir John Stanley: Yes, Foreign Secretary, but bother trying to become an MEP? you are bringing together two completely separate Mr Hague: There are many parts to that question. The issues. One is the issue of renegotiating for better European Parliament has considerable power. I just terms, which is unanimously agreed with and mentioned how, a few hours ago, they voted on the supported in the business community; the other is the fisheries policy, sharing competence with the quite separate issue of having stated that there is going European Council for the first time on fisheries. Their to be an in-or-out referendum in five years’ time. That powers have been extended—at the same time as their is a quite separate issue and raises quite different reputation and standing have fallen, on most surveys issues for the business community. of opinion, but there is an important job to be done in Mr Hague: Those issues go together, of course, the European Parliament. There is an important job to because any new settlement requires democratic be done in the European institutions. consent. That is our view. In this country, given the The Prime Minister set out the case, in his speech, failure to hold a referendum on a whole series of to improve the UK’s relationship with the EU and to previous treaties, I do not think that we could improve the whole position of the EU in the world— countenance, in our democracy, having a new remember, he was including the whole European settlement with the European Union without Union in the reforms that he was advocating, so that democratic consent—or, indeed, not having a new the EU can succeed and Britain can succeed within it settlement without democratic consent. This has to and so that he can argue in the future, in such a be faced. referendum, for Britain to stay in the European Union. One can argue, of course, on any basis, that any So I don’t think it should mean that people do not democratic uncertainty is something that disturbs contemplate a career in the European Union. businesses. You could argue that about a general Otherwise, one can make the same argument about election, but that does not stop us having them. any general election, as to why people should ever Equally, we need to hold a referendum on the pursue careers in any organisations that might change European Union, and many of the business as Governments change. organisations that I have quoted are supportive of that. We receive, and there is every sign that we are Q181 Mark Hendrick: Civil servants will still be continuing to receive—it has not changed in the past there in the next British Government, whether it is a few weeks—a huge proportion of the foreign direct Labour or Conservative Government. In the EU investment that comes into the European Union. though, is it not the case that Britain’s withdrawing would have huge implications for staffing from the Q179 Sir John Stanley: Foreign Secretary, do you UK? accept that there is a fundamental difference between Mr Hague: Yes, it would, but our intention is that we asking the British people whether or not they are are going to improve our settlement in the European happy with a new deal with Europe and asking them Union and campaign to keep Britain in the European whether they want to stay in Europe or to come out? Union. I am pleased to say we are achieving an Are they not fundamentally different, and is it not the increase in the number of people going into the case that what is being promised by the Conservative European institutions, including at the junior levels, leadership is an in-or-out referendum? as well as important positions within the European Mr Hague: It would be an in-or-out referendum, but External Action Service. I don’t expect that to change on the basis of an improved settlement with the as a result of the Prime Minister’s speech. European Union. In our view, that is the time to ask Mark Hendrick: Sir Jon, have you detected any that question. Some people would argue that we uncertainty, or people being a bit unnerved by the should ask that question now—Mr Baron has probably Prime Minister’s speech in UKREP? just been arguing that we should ask that question Sir Jon Cunliffe: On the question of young British now. people looking at careers in the European institutions, Mr Baron: Legislation in. the numbers who have become interested and applied Mr Hague: Our argument for asking it in the future have been going up in recent years because we have is that the changes taking place in Europe now are so been making a very substantial effort for that to fundamental—as a result of the eurozone crisis, the happen, and we have seen no sign of that changing. relationship between eurozone countries and other countries is changing in important ways—and that the Q182 Mark Hendrick: Finally, the possibility of an opportunity to improve the UK’s relationship with the in/out referendum in 2015 could affect the European Union is there, for all the reasons that I have Government’s ability to help secure a favourable described, but we should ask the in-or-out question at portfolio for a UK Commissioner. Is that not a a later stage, when we have a better idea of both those concern as well? things. That is why those things are linked. Mr Hague: Our ability to negotiate and succeed in the European Union depends on many factors. One is Q180 Mark Hendrick: The FCO has been trying to our ability to make alliances on particular subjects; encourage more British nationals to pursue careers in the Committee will have observed in the course of its EU institutions. Why should a young British person inquiry how we have done that on the multi-annual go to the considerable effort of learning languages and financial framework. Of course, we did that on the cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Ev 40 Foreign Affairs Committee: Evidence
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG change in the rules to the European Banking Authority in opinion polls in the UK. In the Conservative party, that I have just described. We do it on a daily basis we will be very proud and clear about making this on a vast range of subjects. As I mentioned, I attended case at the next general election, and I think it will be the Foreign Affairs Council of the EU last Thursday an important part of our case, but polls go up and in Brussels. There we are dealing with huge questions, down. Personally, I never show that much interest in such as policy towards Syria, the Iranian nuclear them. programme, and the EU military training mission to Mali. I did not detect any change in our ability to get Q187 Mike Gapes: Okay, we’ll see. Why did the our way, or difficulties on other subjects, as a result Prime Minister set the deadline of November 2017 for of our declaration about a referendum in the future. negotiating the new settlement and holding this in/ We are a major player in the European Union and we out referendum? make our alliances on a vast range of subjects. I do Mr Hague: Clearly, there has to be some time scale not believe our ability to do that will be diminished. for this. Not everybody who says they might support a referendum has a time scale, but then there are major Q183 Mark Hendrick: You are saying, then, that the problems with endless uncertainty about it. November Prime Minister’s speech has not got other European ’17 is halfway through the next Parliament. It is leaders or our partners in Europe worried at all. important, as people consider in a general election Mr Hague: I am saying that they want to work with what Government they want, for people to have a the United Kingdom. That is what so many of them reasonable idea of the time scale on which these said. The French Government, which clearly has very things will take place. The European Commission different views about the future development of talked about floating ideas about changes in the Europe, has said very clearly that they want to keep European Union around the time of the European the United Kingdom in the European Union. Now that elections next year. I referred earlier to the is very much the thrust of the comments of the Commission blueprint and the Four Presidents report, German Government. I will not go through all the lists which called for major treaty change in the coming of Ministers and political parties and media years, meaning in the next few years. If you think organisations around Europe, but they are all here, about it, there is a window between those elections in who have expressed either some understanding or 2014 and the French and German national elections in some sympathy with the Prime Minister’s speech, or 2017, which is really the window in which such treaty certainly expressed the hope that these sorts of change would be logically discussed. reforms and changes will take place for the benefit of the whole EU. The idea that there is a wall of hostility Q188 Mike Gapes: Clearly, if there is to be a to the ideas that we have put forward, I think would negotiation, it is going to take time. Isn’t there a case, be mistaken. and would the Government support the idea, that you Mark Hendrick: We’ll see. start talking about this treaty amendment process before the 2015 General Election, perhaps after the appointment of the new European Commission, which Q184 Mike Gapes: Foreign Secretary, you conceded I understand is in October 2014? You would get a that the Bloomberg speech was a hybrid, as you put year’s more negotiation, so you could make sure you it—some might say a curate’s egg—part governmental got your 2017 deadline. and part party political. Was it postponed from 2012 Mr Hague: If you look at the time scales for treaty to 2013 for governmental or party political reasons? changes on the Nice, Amsterdam and Lisbon treaties, Mr Hague: By the way, I wasn’t conceding a hybrid they always measured within—I am speaking off the speech; that was an inaccurate parliamentary remark cuff here—less than a year and a half or so, from about it, I think. Equally, I am not going to concede beginning to completion. Some of them were less than any postponement, because we did not fix any date in a year. That is the normal time scale for treaty change. 2012 for the speech and then postpone it. We welcome the idea that ideas about treaty change can be discussed from now on. We are putting our Q185 Mike Gapes: It was talked about in the media ideas. We are in favour of treaty change. We are at the for months that it was going to be before the end of stage, where the Prime Minister is setting out these the year. principles, of launching the discussion—launching the Mr Hague: I am not responsible for everything the debate—in Europe. The time to turn that into specific media say—or, thankfully, for very much of it. As the items for negotiation is clearly to be judged depending Committee will understand, we have quite a lot of on when that debate reaches the right point. It is also things going on, and therefore the Prime Minister gave a commitment for the Conservative party for after the this speech when there was a suitable gap between next general election. other events. Q189 Mike Gapes: So it is not anything to do with Q186 Mike Gapes: Did you expect to benefit from a the fact that you would not be able to get coalition poll surge and winning back support from UKIP as a agreement to start that negotiation before the general result of that speech? election. Mr Hague: This is a speech about the whole future Mr Hague: On any treaty change that begins before of Europe and the future of the UK. It doesn’t bear the general election, we will seek to proceed with any necessary relation to daily or weekly movements coalition agreement. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 41
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG
Q190 Mike Gapes: That is not what I asked. the negotiation on the fiscal compact treaty, which is Mr Hague: It is part of what you asked. The other why it went ahead with a British veto. From that, it part of what you asked, on the time scale for these seems highly unlikely that they would have agreed to things, is that the likely fulcrum of debate about treaty something more ambitious than those requirements. change is in the 2015 to 2017 period, which happens to coincide with the British people being able to say Q195 Mike Gapes: We went to Germany, France and in a general election what approach they would like. elsewhere to have meetings with other people in the past few months. It is quite clear that the enthusiasm Q191 Mike Gapes: The UK is going to take over the in some European Union countries for major treaty rotating presidency of the Council of Ministers on 1 change was stronger a year and a half or two years July 2017. Can we assume that the Prime Minister ago than it is now. And it is clear that we may well would wish to hold any in/out referendum before we be in a position where, as Mr Van Rompuy said take over that rotating presidency, rather than during recently, the European Union is not going to have a it? significant treaty change in the foreseeable future. Mr Hague: The timing of the referendum will depend, Wouldn’t it have been better to come forward with the of course, on when negotiations are completed. changes that you want at a time when there was more Therefore, the Prime Minister has made a enthusiasm, rather than having a situation where you commitment about the first half of the Parliament, may find that other countries say, “We are not which does not exclude the referendum being earlier interested in this,” and you won’t get what you want than the second half of 2017. anyway? Mr Hague: Again, there are two points on that. First, Q192 Mike Gapes: So it could be easier to have the I reiterate my last point in the previous answer. Since referendum before we take over the presidency so that those countries at that time—in relation to the fiscal the Prime Minister can triumphantly say, “We have compact treaty—were not prepared to agree to what had the referendum, we have won and now we have we regarded as a quite modest request, it is unlikely a lovely presidency,” rather than having a presidency that they would have agreed to changes encompassing that is overshadowed by, “Is he going to stay in or all the principles that the Prime Minister set out at leave? What are the British people going to vote?” that moment. More importantly, enthusiasm for treaty Mr Hague: That could happen, but I do not want to changes in the EU is not on a straight-line trajectory. say that we are jumping at that particular scenario. It will vary from one month to another. Often it changes in proportion to the extent of perceived crisis Q193 Mike Gapes: Have you thought about it? in the eurozone. Mr Hague: It will depend on the timing of the In addition to that consideration, there are ideas set negotiations. Therefore, yes, a referendum could be out in the Four Presidents report and the Commission held before the British presidency in the second half blueprint that involve treaty change. Added to that, we of 2017, but I would not exclude a referendum being have to have regard to how frequently treaty change held during the presidency. That would make for a has been contemplated in the EU over recent years. particularly memorable presidency, of course. All of those point to the opportunity for treaty change, but the opportunity to bring about the sorts of changes Q194 Mike Gapes: It would indeed. Can I take you that the Prime Minister was talking about was not back to the matter that was referred to earlier: walking there in December 2011. away from the Council in December 2011? It has been put to us that, actually, the best chance of negotiating Q196 Mike Gapes: A final question. Is the EU Act an EU treaty amendment in Britain’s interest was at that we have adopted in this country one of the factors that point, when other countries wanted something that makes other leading member states wary of going from a new treaty. Tactically, by walking away, the into an amendment to the EU treaties, on the basis opportunity has now gone because a structure has that there is a risk that there would then be a been established outside the treaties. How do you referendum that would reject it and stop the process? respond to that? Mr Hague: It is a democratic constraint on treaty Mr Hague: There are two points I would make in change, but we are not the only country. response. One is that we did not walk away. We vetoed it as a European treaty, so it is not part of the Q197 Mike Gapes: You accept that it is a possibility. EU treaties, but we certainly did not walk away from Mr Hague: It makes treaty change in this country, and the meeting, which the Prime Minister attended several other countries, which already have throughout and, indeed, as I remember it, he and I requirements for referendums on treaty changes, were in the building well after many others had left. subject to democratic consent. We are all The United Kingdom did not walk away, but we democratically elected politicians. We do not run ensured that the fiscal compact treaty is not part of the away from democratic verdicts. EU treaties as it stands today. On the question of whether there was an opportunity Q198 Mike Gapes: Democratic consent can also for a bigger negotiation, the Committee will recall that come through parliamentary democracy. we did put forward in those negotiations certain Mr Hague: It can, but in the case of the European requests for safeguarding the single market, Union, that parliamentary democracy has been particularly in financial services, and other countries unusually unresponsive to public concern. were not prepared to agree to those requests as part of Mike Gapes: We will have to differ on that. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Ev 42 Foreign Affairs Committee: Evidence
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG
Q199 Sir Menzies Campbell: I think we are right democracy to happen is an unacceptable risk. that until now in the history of the EC, and indeed the Otherwise, there are all kinds of things that we would EU, no country has created an in/out referendum. That never ask people or Parliament about. We have being so, we have no precedent in relation to what I reached the point in the United Kingdom when understand to be Conservative Party policy. What is democratic consent has been greatly weakened for the your assessment of the influence that the United European Union. We have to recognise that, and deal Kingdom has now that the decision has been with it. We have to do that, whatever the announced? Will it serve to weaken British influence consequences. It is right to hold a referendum, but I in Brussels or will it serve to enhance it? don’t think in any case that it diminishes our influence Mr Hague: I want to make the case—I believe this in the EU or with the United States. Again, I have not to be true, looking at some of the comments around detected any sign of that in all the discussions I have Europe—that it can enhance our influence. It would had with the US Administration in recent days. be too early to dispassionately make a judgment about that. I argued a moment ago in terms of foreign affairs Q203 Sir Menzies Campbell: What work have you deliberations that it certainly does not reduce our done on the consequences of Britain coming out? influence. If you look at some of the comments from Mr Hague: That will be the debate of the referendum, around Europe, in Die Welt, for instance, on the day of subject to holding the referendum in 2017, or the Prime Minister’s speech, they were writing: “Our whenever it can be held. That will be what the debate Continent needs a rethink...In view of the excessive will be about. bureaucracy, unscrupulous debt-making, lack of transparency and democracy...What is needed today is Q204 Sir Menzies Campbell: a German-British axis.” The scope is there for Britain Surely some to lead with ideas. There are many such quotations. consideration has been given in the Foreign Office as I do not want to go through them all. We have the to what the consequences would be for Great Britain opportunity, which the Prime Minister is taking, to were there to be a vote in favour of coming out. lead and shape this debate. Mr Hague: The job of the Foreign Office is to work on those priorities I was talking about earlier: the Q200 Sir Menzies Campbell: But that is all about agreed programme of the Coalition Government. It is reform and about Britain remaining in. In these a full programme of work on Europe, as my comments, including the one from Angela Merkel that colleagues and officials will testify. Perhaps I should you referred to a moment or two ago, the assumption let them testify on some of these questions. was that Britain would stay in rather than walk out. Sir Menzies Campbell: I don’t think that any of us Mr Hague: What is also reflected in those comments doubt it. is that so many European leaders say that they want Mr Hague: It is very full, but that is their job. The Britain to stay in the European Union. judgment about the consequences of leaving the European Union is for political debate in the future at Q201 Sir Menzies Campbell: I do not think there is the time of our referendum. Of course, the Prime any doubt about that. Minister addressed this in part in his speech when he Mr Hague: It is very clear. It is always there. It is gave a brief analysis of the Norwegian relationship there in Chancellor Merkel’s remark—not only in her and the Swiss relationship with the European Union. public comments, but in her private comments. This is very much her position and passionate belief. We Q205 Sir Menzies Campbell: He dismissed them. do not sacrifice our influence by raising legitimate Mr Hague: He pointed out the disadvantages of those questions and by saying that the people of Britain will relationships. He made clear in his speech why he be allowed to decide. People then want to work with would like to be able to argue for Britain staying in us to make a success of the European Union and the European Union on the basis of a new settlement. Britain’s role within it. We should not be afraid of Of course, in all the references that he made to the that. single market and the advantages of being part of the single market, he is also pointing to the disadvantages Q202 Sir Menzies Campbell: There is universal of any separation from that. Such considerations run acceptance not just in Europe, but elsewhere; for through the Prime Minister’s speech, but an analysis example, President Obama. Joe Biden was making a of the merits of being in or out of the European Union speech at the weekend. It is perfectly clear that the on an improved basis is for the political debate, for United States sees its interest as best reflected by the political parties and for all concerned to present to Britain being within the European Union and the people in a referendum. exercising influence within the European Union. Is not the risk, if you pose an alternative, that the influence Q206 Sir Menzies Campbell: Not the responsibility we have both in Brussels and, indeed, in Washington of the present Government. will be diminished if people think there is a genuine Mr Hague: The present Government are proceeding prospect that we will come out? with the present Government’s policies. The Mr Hague: There are two parts in the answer to that commitment to a referendum is for a future question. First, for all the reasons I have set out, Government. leading the debate and advocating the necessary changes can enhance influence rather than reduce it. Q207 Sir Menzies Campbell: But that does not In any case, I do not think we can argue that allowing include any examination of the economic or political cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 43
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG consequences of an “out” answer in any future now, and how do you expect that development to referendum. affect the way you negotiate in Europe? Mr Hague: The very hard-working and dutiful Mr Hague: In a moment, I will ask Sir Jon to add to officials of the Government will analyse what we ask this, because he has so much daily experience of those them to analyse, but I very much ask them to continue negotiations, but there are several things to say before on this work of free trade set in the Multi-annual that. First, there is a vigorous debate within the Financial Framework, making Europe more eurozone about what these changes mean for the competitive. That’s their job. relationship of the eurozone countries to each other, before we even get to their relationship with those Q208 Sir Menzies Campbell: We are all in favour who are not in the eurozone. There are many different of that, but is the answer to my question, “Yes”? No views about that. Of course, the choices are for them such work considering the implications of Britain’s to make. In my view, there are painful choices to be withdrawal from the European Union is being carried made between democratic accountability and out at the moment. sovereignty in their own countries and being able to Mr Hague: We are not doing a preparatory exercise deal together with some of the challenges of the at this moment for withdrawing from the European eurozone. Only they can make those decisions. Union. The Government are engaged on a lot of That has not made them, in general, caucus on a wide things. The Conservative party is presenting its range of other issues in a way that changes their proposals for the next election. relationship on, say, foreign policy. Again, this is an Sir Menzies Campbell: Thank you. easier thing for me to refer to because this is the part of the European Council that I always attend—if Q209 Mr Ainsworth: So is it the job of the civil someone arrived to observe the meetings of the service to analyse what you want them to analyse, and Foreign Affairs Council without prior knowledge, it only what you want them to analyse, and you do not would not be possible to determine who was in the want our vetoing, preventing, or discouraging any eurozone and who was not, in terms of what our analysis of the consequences of our withdrawal from policies are on Syria, Iran, the Middle East peace the European Union? process or any other global issue. So it is primarily in the financial area that the Mr Hague: One thing to add on this question and Sir eurozone’s relationship with the rest of the European Ming’s questions—I should have mentioned this—is Union has changed to some extent and would change that we are also currently engaged in a huge analysis, most quickly. That is why we have particularly the balance of competences review, which is in the emphasised the negotiation of safeguards for the first of four semesters and is analysing in enormous single market in that area, such as the ones I detail the role and effect of EU competence across mentioned on the European Banking Authority. I think every area of our national life. That will come to a there is a statistic—officials may know the precise conclusion in 2014 and will help to inform the debate. percentage better than me—about the number of votes That is the right analysis to be conducting. in the European Council on which the UK has faced a eurozone bloc, but it is a figure below 20%, in the Q210 Mr Ainsworth: That is not the question that I order of 15%. Jon or Simon, do you want to add to or Sir Menzies Campbell were asking. Effectively, this? you are preventing, discouraging or refusing an Sir Jon Cunliffe: As the Foreign Secretary said, we analysis being done of the consequences of our can see the dimensions or axes on which the eurozone withdrawal. might integrate—fiscal, economic, financial and Mr Hague: It is open to anybody to conduct such perhaps political. But if you look at the outcome of analysis—a Committee, a think-tank— the European Councils, it is very uncertain how far and how fast they will go and in what order; there is Q211 Mr Ainsworth: But not the civil service. still a lot of agreement to be worked out between the Mr Hague: The job of the civil service is to work on euro countries themselves. It is not as if there is a joint the agreed priorities of the Government, and that is picture, plan or road map at the moment. Those details what they are doing. are being worked out, which is what makes the future so uncertain. Q212 Mr Ainsworth: Let’s talk about the eurozone. In most areas, the alliances that countries make across The inevitability of some of the measures that are different dossiers do not reflect the eurozone. Across going to be taken by the eurozone will lead to a the single market, some of the alliances can be very convergence of interests, and potentially to its strange, but in agriculture, fisheries, single market, members seeing themselves as a bloc. There will foreign policy and justice the alliances are very therefore be two different views on the most important different. They are very dossier-specific. But the aspects of the European Union. Those who are in the countries that normally group around what I call the eurozone will see the currency union as the most northern economic liberal alliance look to the UK, important thing, and the countries outside it as being Sweden, Denmark—all of them non-eurozone an unfortunate occurrence. Those who are outside it countries—to be part of those alliances when they will see the single market as the most important thing come to single-market issues such as trade. There is and the fact that some countries have chosen to go no evidence of caucusing around that. Indeed, from further as an addition. Are you beginning to see the the start of the euro, the evidence has been that those consequences of the development of the eurozone bloc countries very much want non-euro countries of cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Ev 44 Foreign Affairs Committee: Evidence
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG similar mind in the discussions, because it adds outside the eurozone—with Germany, the weight—particularly the UK, because we are a large Netherlands, Ireland, Austria, Sweden, Poland, and influential member state. Bulgaria, the Czech Republic—so, straddling the In specific areas, though—banking union is one—the eurozone. euro countries were coming together to create a new institution within the ECB to do something that was Q215 Mr Ainsworth: This double simple majority being done individually. Of course, there the issues of arrangement—do you think it will stand the test of block voting or caucusing arose by virtue of the nature time? You’ve just said that although it’s not clear and of the proposal, and that could happen again. there’s no agreement as to what the developments will However, generally speaking one is not seeing that at be within the eurozone, there are bound to be the moment. One has to wait to see how their developments that potentially provide a threat. If integration develops to know how much we will see eurozone members repeatedly want one thing and are it in future. then being prevented by the periphery—to use that term—from doing it, there’s going to be an enormous Q213 Mr Ainsworth: So the changes that the growing tension, isn’t there? Government are seeking are brought about not by the Mr Hague: There could be, yes, and it’s important to threat of the inevitable integration of the European recognise, as Sir Jon has just been underlining, the Union, but rather by the opportunity that that presents uncertainty about the future in this regard. That means to get what you wanted in terms of your vision in we have to build in as many safeguards as possible. any case. In addition to the voting system safeguard, we have Mr Hague: There is a threat. So far it has surfaced sought and secured other safeguards: for instance, the only in the way that we have described, but of course European Central Bank will be subject to an there could be much more far-reaching changes in the obligation to ensure that no action, proposal or policy eurozone, when they have resolved their own debates, that it pursues shall “directly or indirectly, that present, for instance, a greater threat of caucusing discriminate against any Member State…as a venue within the EU on a wider range of issues. for the provision of banking or financial services in Of course there is an opportunity, but there is also a any currency.” That is in article 1 of the ECB threat. The thing I want to emphasise is that the regulation. changes in the eurozone—the crisis in the eurozone— Could there be pressure to change some of these are only one of the reasons why we need the approach things in future? Yes. The voting arrangements, for that the Prime Minister has set out. In or out of the instance, are meant to be reviewed by the Commission eurozone, there is a fundamental issue of and the Council if there are four or fewer non- competitiveness, which means we really have to drive participating member states. Of course, their concern the single market and conclude more free trade is that once you go to a very small number and a agreements. simple majority is required of those who are outside, There is also the issue of democratic legitimacy and you have created a new veto for the United Kingdom. accountability, which means that we have to enhance Again, that means we may have to renew the debate the role of national Parliaments and make sure that at that time. But I think the arrangement we’ve arrived powers can go back to nation states. So the crisis in at so far is exactly what we want in these the eurozone is one of the factors driving the approach circumstances, and we have set, through this that the Prime Minister has set out, but only one of successful negotiation, a very good precedent for the them. future—that when the European Union has to make an arrangement dealing with the issues of the eurozone, it Q214 Mr Ainsworth: On the banking union set-up is right for it to include in its own institutional and the arrangement that you got this December, did arrangements the rights and interests of those not in you learn the lessons from the year before? You were the eurozone. That is a very important precedent. able to come back this time and say that we had something that potentially protects us, albeit that the Q216 Rory Stewart: Foreign Secretary, how many thing might change. Whereas the year before you of your ambassadors warned you that the European found yourself pretty isolated and exercised a veto, Union is unlikely to allow any significant concessions but nobody really knows what you vetoed. to the United Kingdom? Mr Hague: We know what we vetoed—the fiscal Mr Hague: I don’t think any individual ambassador compact treaty. But there is an important difference, would in any case be in a position to assess that. Our which was the lead-up to the proposals. These ambassadors are very good, I have to say, at working proposals were clearer for a longer time—what we on winning the kind of arrangement I have just been were dealing with in the proposed changes to the talking about and getting the concessions we need on European Banking Authority. one subject after another. It’s a very “can do” attitude The proposals that became a fiscal compact treaty and I admire them for it. On all the issues we’ve been were produced only in the hours before that particular debating, I cannot recall any occasion when they’ve European Council began in December 2011. Clearly, come back and said, “No, no—we just can’t do this it was easier in the circumstances in December 2012, at all.” on banking union, to form alliances and make the case for amendments to proposals that others were flagging Q217 Rory Stewart: Help me to understand the up well in advance. We certainly did make those hypothetical case. There is a possibility that the alliances, very effectively, with countries inside and European Union will be reluctant to return quite as cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 45
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG many powers to Britain as Britain wants. Some of my change has yet to begin. Secondly, red lines often constituents, for example, would like to be able to say, move, even though they are meant to be red, including “Okay, maybe we’re not going to get much back, but in European negotiations. As I pointed out earlier, can we at least have a position of, ‘This far and no there is a lot of support for the kind of rethinking and further. We’re going to draw a line in the sand’?” Is it new thinking that the Prime Minister is presenting to credible within the European Union to have that sort the European Union. I do not think that any country of position, or is it a dynamic thing with its own takes the position that they have such a red line that momentum that for ever integrates? Is Britain ever they want Britain to leave the European Union. able to halt it? Mr Hague: It is important for us to be able to halt Q220 Rory Stewart: One of the challenges seems to integration when we believe it is not in our political be around the whole idea of the single market. We talk or economic interests, or to be able to stand aside from about the single market and some people in Britain see it, because that’s what we’ve done in not joining the it as a WTO free trade area or think about it in terms eurozone, for instance. As regards treaty change, as of tariff barriers. Perhaps there are people in the we were discussing earlier, it is something to which French political establishment who see a single market the Act of 2011 now makes an enormous difference. in terms of harmonisation of currency and tax. What Such change, in so far as it transfers any additional do you mean when you talk about the single market? powers or competences, is subject to democratic Does it include the free movement of people or social controls through Parliament and a referendum. Of employment legislation? course, there are other ways in which the European Mr Hague: The provision of free movement is very Union’s institutions sometimes extend their powers important in the success of the European Union. It and reach, by changes in procedure and the judicial means free movement of capital and labour as well as creep that can come from the European Court of of goods and services. Justice. So it may well be that these are important The way I see it, there is much more to be done in things to address in making sure that Europe is several areas, particularly in services and the so-called flexible, competitive and has democratic digital single market. One of our main priorities in the accountability as part of that new settlement. But we coming years, agreed across the coalition—and, I are not at the stage of being able to go beyond the hope, agreed across the whole of British politics—is principles that the Prime Minister has set out. That is that we want more consistent implementation of the for a later stage. services directive and further liberalisation of services and trade across EU borders. We want the completion Q218 Rory Stewart: Just to push that a little more, of the single market for boosting cross-border e- would it be even hypothetically plausible for you to commerce and to make sure that EU rules do not limit issue instructions to officials essentially to stick their growth by placing unnecessary burdens on businesses. heels in the ground and say, “This far and no further. One of the things we have secured in recent We may not be able to get anything back, but we don’t negotiations is the exemption of very small businesses want to get any deeper into this thing”? Is that a from new regulations. remotely plausible view? Those are the sorts of priorities at the moment, so it Mr Hague: We do that in many ways. We are is not just about tariffs, but about making it easier to constantly, in posts around the world, never mind in do business in many different ways. the European Union, very much alert for competence creep, as it is called. The European Union is serious Q221 Rory Stewart: Just to pin you down on free about its treaties and so are we. The powers conferred movement of people and social employment on the European Union are set out in the treaties and legislation, do you see the single market as including do not go beyond the treaties. So we vigorously—and Romanians or Turks if they come to Britain? Do you generally successfully—contest efforts, for instance in think having uniform social employment legislation is multilateral organisations and sometimes by the important for the market to stop, for example, social European Commission, to take over any of the dumping? responsibilities of Member States. That is an example, Mr Hague: The free movement of workers is very but it is true of our policies as a whole. We always important, but of course in my view and that of our have regard in all negotiations to ensuring that there party, that does not require anything like the is no change of competence without a new treaty harmonisation or uniformity of social and discussion or without the approval of Parliament. employment laws that some people wish for, or indeed the uniformity that comes from some provisions, such Q219 Rory Stewart: To turn it around, as you think as the working time directive, being brought in by the about what a negotiation might look like, do you have back door. We do not believe that a single market any sense of what the real red lines of the other requires such things to be imposed in a uniform way. Member States might be? What would be the point at In my opinion, there are ways in which the EU has which a Member State might reasonably turn round gone too far. and say: “Forget it. We’d love to have Britain in the European Union, but that is too much. That is too Q222 Rory Stewart: What is the positive vision the far”? Government have for the European Union? We hear a Mr Hague: They vary enormously. That is what I lot of quite negative arguments, which seem to be would say. First of all, those red lines are not currently slightly pessimistic and to say that the problem with defined, because the whole process of further treaty leaving the European Union is that we are going to cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Ev 46 Foreign Affairs Committee: Evidence
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG end up poorer—our trade and our investment will be longer term. That is what has been described to us. affected. It is a bit as though we are somebody in a What are your comments on that? How would you bad marriage, who is not really in love but feels that refute that argument? if they left they might lose the house. Where is the Mr Hague: The argument begs many questions; that positive vision? Where is the real love for the project is the first thing to say. First of all, there is the that we are trying to express? assumption that those outside the eurozone will only Mr Hague: The positive vision is there in the Prime be very small in number. There are 10 of them at the Minister’s speech, and I warmly refer the Committee moment. Although there are not many countries that to my own speech of 23 October in Berlin. have the opt-out legally from the obligation to join the Chair: We were there at the time. eurozone, there are many others that are either not in Mr Hague: You were in Berlin, but I do not think any position to do so or not willing to in the near or you were in the actual premises where I delivered the foreseeable future. So I think the assumption that speech, and you might therefore still need to read it. those outside the eurozone are just reduced to a very It goes beyond free trade. The opportunity for small number may now be a rather out-of-date employment and prosperity that the single market assumption, proceeding along the tramlines of the brings is very important to us, but it is more than that. thinking of 10 years ago rather than now, in light of After all, we make an impact on world affairs when the financial and eurozone crises. we impose the same sanctions as each other on Iran, Secondly, as the world has changed over the last or in stopping purchases of Syrian crude oil, or in decade, the kind of arguments that the Prime Minister favouring a peace process in the Middle East. has been advancing—for Europe to take urgent action We can help countries across North Africa by having to be more competitive and flexible—are gaining a coherent policy together on how we are going to ground all the time. They have had a good reception work with them economically and politically. We can across many countries. make sure, as the Prime Minister referred to in his I entirely understand that the Committee will have speech, that we are nation states co-operating, heard many things in European capitals that say that supporting European values and European civilisation everything goes in one direction, and it is towards in the world. greater integration. But there are some very supportive So in our view, there is much more to it than a free comments, as the general secretary of the German trade area, but nevertheless it has to work in a way CSU said: “Whoever condemns wholesale Cameron’s that is consistent with the prosperity of the people of idea for a national referendum on Europe fans distrust those countries. It concerns their being able to keep towards Europe, as if Europe must hide away from up in the global economic race, with democratic people”. accountability and decisions being made at the right On the need for reform, the leader of the Dutch level. governing liberal party, VVD, said that Cameron had Those are all things we have to get right, despite all hit a nerve and named many things that the VVD is the many merits of nation states co-operating. The for: strengthening the single market, no ever closer Prime Minister set out that view of co-operating union and no super-state. “Great!” he said, and added nation states in that framework as an alternative to the that you can characterise Cameron’s speech as an ever closer union that has for so long been an article extended version of the Europe passage in the Dutch of faith in the European Union. I think that is the right coalition agreement. way to think about it. It does depend on which capitals, which people and Mr Baron: Foreign Secretary, just to put you gently which parties you speak to. Both those quotations are right, I was not advocating a referendum now. from governing parties inside eurozone countries. Mr Hague: I understand that very well. Mr Baron: Can I come back, Foreign Secretary? We Mr Baron: I was suggesting we move legislation have heard lots of quotes on both sides. forward to take it beyond the realm of party politics. Mr Hague: Of course. Mr Hague: Yes. Q224 Mr Baron: Can I just bring us back to the Q223 Mr Baron: I want to bring us back to the Government’s actual negotiating position? What business about the chances of the Prime Minister approaches are taken to forge alliances? We have not succeeding in—how can I put it—his struggle with the always been good as a country at doing that in the Gordian knot of federalism that exists. On our visits to past. Blame it on under-representation in the EU the European capitals, the direction of travel was all institutions or whatever, but we need to be better at it. one way. The solution to the crisis was more Europe, To offer a glimmer of optimism, you did see, with with closer economic and political integration. So we regards to the banking union at the end of last year, wish the Prime Minister well in his negotiations. our success there, which suggests that there may be We also met officials in Brussels who said that, more support there than we originally envisaged. Can whatever the short-term successes and whatever the you flesh that out a little bit? How are we going to go short-term political manoeuvres, in the longer term about constructing the alliances needed to achieve the there would be a eurozone core heading more towards goals that we want? fiscal union to make monetary union work and for Mr Hague: This is a very important point. We have political and economic integration. There would then intensified our efforts to build what really has to be be a very small outer core within the EU—in other a network of overlapping alliances. Of course, those words, us and perhaps one or two more in a very alliances are different on each subject. As Sir Jon has exclusive club, and that would not be feasible in the mentioned, you can think of a kind of northern, cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
Foreign Affairs Committee: Evidence Ev 47
6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG liberal—“liberal” in the economic sense—group of is to improve the relationship with the European nations, but even they will differ among themselves Union and be able to campaign in a referendum for on various questions. Britain to stay within it. Of course we will use our On the banking union, I listed earlier some of the judgment at the time. countries with whom we forged an alliance on the voting arrangements to conclude that negotiation Q227 Mr Baron: What happens if negotiations hit a successfully. The Committee can see that on the brick wall? multiannual financial framework negotiations in the Mr Hague: Well, then we will certainly have to use November Council, we worked closely with Germany, our judgment at the time. We can only state, as in so the Netherlands, Sweden and Denmark. many areas of policy, what our intended policy is. There are other issues, for instance pursuing Europe’s That is true for all political parties when setting out common foreign and security policy on things such as an approach to Government in the next Parliament. what is happening now in Mali, with the EU military training mission, where France is our closest partner—or we are their closest partner in what they Q228 Mr Baron: Finally, Foreign Secretary, in any are doing there. renegotiation of the UK’s position, will we be seeking We gave, I would say, over the last couple of years, certain safeguards involving movement of some single much increased attention to the smaller states of the market items from QMV to unanimous decision- EU, not only through the activities of our very good making? There is a general feeling that the single embassies, but through Ministers. The Minister for market, which was a laudable aim, has still not been Europe, David Lidington, is the first Europe Minister achieved in many areas, and that would help. ever to have been to all the states—to every capital in Mr Hague: Our main aim, as I was describing it in the European Union; in fact, he is now well on his relation to the digital market and the services way on a second lap. Nobody has done that before directive, is to deepen the single market and to drive since the European Union was enlarged. it further in many areas. In many areas, that would of We spend a great deal of time with the Foreign course conflict with going away from these particular Ministers of smaller European states when they come provisions from QMV to unanimity. I am not setting to the UK. We are very conscious of the need to build out now, as I said in an earlier answer, a detailed alliances on each subject, and we will be on the approach to negotiations. That can only come at a approach to future treaty negotiations. later stage, so I do not want to exclude anything at this stage. Q225 Mr Baron: The Prime Minister—rightly or wrongly, intentionally or not—has created the Q229 Sir John Stanley: Foreign Secretary, are you impression that at the end of the renegotiation, satisfied legally—I stress “legally”—that it is open to whatever that may involve, he will be, if he is Prime the British Government to go to our fellow EU Minister, supporting the “in” campaign. I put it to you, Member States and say that we want to carry out a Foreign Secretary, that we need greater clarity as to fundamental renegotiation of the terms of our where our red lines are as a Government. What would membership of the EU, our “new deal” with the EU turn the Prime Minister away from that position when as the Government term it, without first having given it came to renegotiation? Where is that red line with notice, under article 50 of the treaty, that we wish to regards to success or failure from the Government’s leave the EU? point of view? Mr Hague: Whatever we have to do legally, we will Mr Hague: It is too early to speak of red lines. We do. Clearly, most of the discussion we have been have launched a debate, a discussion, on the basis of having today is in the context of treaty change in the principles that the Prime Minister has set out. We different ways in the European Union. Some treaty are not at the stage of a detailed negotiation, which is changes are needed by other members of the European more the time for red lines. Union. We are not the only people looking for treaty change. Whatever we need to do legally in order to Q226 Mr Baron: We must have an idea of what we carry out the political programme that we have put want to renegotiate and what we want to claw back— forward for the Conservative Party or then to carry I hope that we have some idea. You would not go into forward any governmental responsibilities, we will do. a negotiation without an idea. Mr Hague: We are not, as of today, going into that negotiation. As of today, we are going into the Q230 Sir John Stanley: Foreign Secretary, I have multiannual financial framework negotiations. Of asked you about a key legal point. You have not been course, in social negotiations, we have our red lines. It able to answer that question precisely. I can quite is important to note, however, that in most successful understand that. Could we please have the answer to negotiations, such as the ones that I have been talking my question in writing subsequently? about, we do not publish our red lines. That does not Mr Hague: I am happy to elaborate in an answer in necessarily help bring about a successful negotiation. writing, but this is a question for the future. Giving I am not sure at what stage we will be able to answer any notice about anything does not arise at the that question in detail. The first part of your question moment, but we will implement any legal was about what would turn the Prime Minister away. responsibilities, of course, in order to carry out our We will all have to use our judgment at the time. We manifesto commitment if we are elected at the next have said—he has said and I have said—that our plan election. I am happy to elaborate on that. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG
Q231 Sir John Stanley: Thank you. I am asking you There are many things that have already happened. formally if you could give the answer to the We can look most usefully at recent examples, as we Committee as to whether, under the terms of the have done during this Committee session, such as existing treaty, if the UK wishes to carry out a negotiations on the banking union arrangements: those substantive negotiation of the terms of its treaty required unanimous agreement, but they have been membership it first has to give notice that it intends to successfully concluded to safeguard the interests of leave the EU under article 50. Thank you. the UK, in a totally new way that nobody would have Mr Hague: We will send you some formal advice. contemplated just a few years ago.
Q232 Sir John Stanley: Thank you. The second Q234 Chair: Foreign Secretary, you will be aware question I want to put to you is this. As you know, we that the Fresh Start group produced a manifesto for have travelled to most of the major capitals in Europe. change and set out what it called “a new vision for I would say that the broad view that we have had is the UK in Europe”. You wrote the foreword for it and that, happily as far as I am concerned, our fellow EU described it as a “well-researched and well-considered member states would like us to remain a member document full of powerful ideas for Britain’s future in state; but, I would say unanimously, it has been said Europe”. You then went on to say that “many of the to us that although they will try to be accommodating proposals are already Government policy, some could to a limited degree to the UK’s demands, there is well become future Government or Conservative absolutely no prospect of the UK being able to cherry- Party policy and some may require further thought” pick the acquis, to have the EU treaty à la carte.Do which phrase could be described as covering all the you agree that is the case? If so, why are the bases. Government holding out expectations that a Mr Hague: Correct. substantial renegotiation of the terms of our membership—having the EU à la carte—is a viable Q235 Chair: But on the last phrase—“some may policy option? require further thought”—could you give us a steer Mr Hague: On the à la carte question, the European towards a document you had in mind when you wrote Union is already a restaurant where people eat their that phrase? dishes in many different combinations, as we know, Mr Hague: The covering of all bases is so effective with some countries in the eurozone and some out, that it is also not specifically attached to any specific some in the Schengen arrangements and some out. We proposal. have the major advance recently of agreeing the patent Mike Gapes: Just as well. court, but that was by 25 countries not 27. The justice Mr Hague: Having just been accused of cherry- and home affairs arrangements apply in a different picking, I am not going to pick the individual ones. way to Denmark, Ireland and the UK. It is already Clearly there are suggestions in there about deepening quite a complex mixture. It depends how people and furthering the single market which are very much define à la carte, but clearly dishes are eaten in many in line with what I have just been describing of the different combinations, if we want to think of it as a thrust of Government policy, but there are others that menu. That is already the case. fall into more of the category that Mr Baron has been It is also the case that treaty changes have happened asking about—specific items that would need to be in recent years that were not contemplated only a few negotiated in the future in treaty changes, and those years ago. That is how rapidly the European scene is we have not yet committed ourselves to as a changing. Many of the factors that I was describing Government; they fall into the category of further earlier will only intensify the pressures on European thought or possibly future policy, but I do not want to competitiveness. Pressures will only intensify. On give you a checklist against each item in that very current trends the problem of democratic legitimacy good and thoughtful report. in the EU will only intensify over the coming years. Therefore I don’t think we should be held back from Q236 Chair: But you did write the foreword for it, putting the case for what is fundamentally and so I presume that you have had a good look at some essentially in the interests of this country and the of these. whole of the EU, just because some people, but not Mr Hague: I absolutely have had a good look, and everyone across the EU, say that they won’t those general categorisations are absolutely true. necessarily want to go along with it. Q237 Chair: So I can’t tempt you on the views of Q233 Sir John Stanley: Foreign Secretary, you the group on the common agricultural policy, for would agree that it is not going to come down to some example? or other. You will agree, surely, that the only way in Mr Hague: I am happy to give my views on the which the treaty changes that the Government want common agricultural policy, but I am really not going and most of us here would want to see carried out that to go through every proposal and say which of those would improve the relationship of the EU and the UK three categories it falls into. can only be achieved by the unanimous agreement of Chair: I wasn’t going to ask you to do that, I was just all EU member states. going to pick out one or two. Mr Hague: Treaty changes only come through unanimous agreement; that is right. There are, of Q238 Mr Baron: Foreign Secretary, you have course, treaty changes sought by other countries that correctly said that by planning to hold this require our participation in an unanimous agreement. referendum, you would be strengthening your cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG negotiating hand when it came to looking at powers Mr Hague: Again, what we have set out at the to repatriate. Would not the hand be strengthened even moment are principles. It is very much part of our more if the legislation for the referendum was brought argument that the European Union is changing in in to this Parliament? What is the downside of doing important ways, and indeed that the flexibility for that? If we are serious about renegotiating Britain’s some countries to participate in some arrangements position in the EU, we all know any Prime Minister while others do not participate in them is likely to get coming in would find it very difficult—not greater, and that is a positively desirable thing, on the impossible—to repeal a popular piece of legislation, whole. Given what would otherwise be the immense so why not bring that legislation into this Parliament? strains on the European Union of a one-size-fits-all I grant you that that is not in the coalition agreement, policy across the board, that is a desirable but then neither was same-sex marriage. development. Mr Hague: It is not in the coalition agreement, and The European Union will keep evolving. It should the coalition agreement does have a section dealing also be a European Union with many more members with Europe and our European policy. Of course, it is in future. We think it is vital to Europe’s future for different from any conscience or free vote issue in the countries of the western Balkans to be able to join that, of course, to pass it through the House of the EU, and we in this country are strong champions Commons—to pass it rather than just vote on it; for of Turkey joining the EU. I do not think that those the Government to put it forward and for it to be things change the EU’s fundamental nature, but they passed through Parliament—would require coalition will require its continuing reform. The European support. That part of the Prime Minister’s speech, the Union in 2025 may look very different in its structures commitment to a referendum, is a Conservative party of power and in its geographic expanse, and hopefully proposal not a coalition proposal. It is open to our it will look quite different in its ability to compete and colleagues in the coalition to favour the same policy its democratic accountability from how it does today. if they wish to, or to the Opposition to favour the same policy if they wish. I think the flaw as things Q242 Rory Stewart: Specifically on 2017, are you stand in the argument that Mr Baron puts is that there ruling out the possibility that you might, for example, is no majority committed to pass it through the present Britain as part of a single market tier with current Parliament. Norway and Switzerland? Is that completely ruled out? Q239 Mr Baron: I take your point about the Mr Hague: We have not ruled anything out. As I was coalition Liberal Democrats perhaps not supporting it, discussing with Sir Menzies, the Prime Minister’s but there are many on both sides of the House who speech set out the disadvantages of those things. There do support this, so the support may be there—the is no single market tier in existence. The arrangements numbers may be there to actually pass it. Now, if you that apply for Norway and Switzerland would have cannot put it through, then there is no downside in certain additional disadvantages in respect of the many respects, so I still have not heard a good reason United Kingdom. You were asking me earlier to set not to bring that legislation forward. out the other attributes of the European Union that we believe could be successful. They go beyond the Mr Hague: This is a political debate. I saw Mr Gapes single market. There isn’t a totally different structure shaking his head when Mr Baron was asserting that or a totally different basis to the European Union that it could be passed through Parliament, and that only we are setting out here; we are setting out principles illustrates the point. I cannot see that that majority of reform to the European Union that would allow exists at this moment. us to recommend to the British people that we stay within it. Q240 Rory Stewart: If I could first pick up on the idea of the new settlement that you might be offering Q243 Rory Stewart: Do you feel that you are raising to the British people. Is it always going to be a new the right expectations among British voters? How will settlement within the framework of the current you explain to British voters what they are likely to European Union, or is there a hypothetical possibility get out of this? Is there a danger that British voters that you would offer to the British people something are expecting that they are going to get back a huge slightly different from the current arrangements— amount more than we are ever plausibly going to be bringing in Norway and Turkey, or reconfigured in able to offer? How are you doing to deal with that? some way to take in a new US-EU free trade How are you going to discuss it so that we do not end agreement? up with a situation where when the referendum comes, Mr Hague: The conclusion of free trade agreements they think, “Gosh, is that all?” is something that we want the European Union to do Mr Hague: What they think at the time will be up to and for us to participate in. them, but I do not think we are raising the wrong expectations. We are setting out why Europe needs Q241 Rory Stewart: Sorry, I confused you. I meant reform and what principles that reform should be in the referendum in 2017—the thing that you offer based on. We are not able, nor would it be wise at this the people. Could it be something distinct from the moment, to set out a negotiating shopping list, so we current framework of the EU? Could it be some are not raising any expectation that anything that imaginative thing that brought in other players and could appear on that shopping list will be agreed or repositioned Britain in some sort of new relationship not agreed, at this moment. We are not at that stage; to the European Union? we are at the stage of launching the debate. I think cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:24] Job: 022929 Unit: PG04 Source: /MILES/PKU/INPUT/022929/022929_o004_th_ - Corrected TEMPLATE.xml
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6 February 2013 Rt Hon William Hague MP, Sir Jon Cunliffe CB and Simon Manley CMG people welcome that debate and they welcome, on the Chair: Of course not. whole, the knowledge that they will be able to cast a vote in the future. I do not think we have set any Q246 Mr Baron: If the EU did not exist would you unrealistic expectations going in what we have said create it? so far. Mr Hague: You can tell at this point, Mr Chairman, that we have had two hours of questions. I would not Q244 Rory Stewart: When you have got your new create it exactly as it is today. I would want it to look proposal together, what sort of evidence would you more like the answer I just gave to Mr Stewart in its use to determine in your own mind whether this is attributes, but I would not be opposed to the creation likely to win the support of the British voter? You of something that allowed European countries to work have worked out a deal and you have looked at it, and together in all the ways I have described they should before you present it to a referendum in 2017, what be able to work together. sort of evidence, what sort of criteria, would you address to work out whether it is the kind of thing that Q247 Chair: A couple of serious questions from me is likely to be acceptable? to close, Foreign Secretary. Do you see a role for Mr Hague: I think it will be whether we can say that national Parliaments in a restructured Europe? the European Union of the future will be more Mr Hague: Yes—a much stronger role. Obviously democratically accountable; that power will be able to parliamentary views on this are particularly relevant flow to nation states in some instances, not just and important. I think strengthening democratic towards the centre; that it is being operated fairly to accountability through national Parliaments is very all concerned, including those outside certain important. structures such as the eurozone; and that we have won the ability to do what we need to do to allow us to Q248 Chair: What have you got in mind? compete in the most intensively competitive global Mr Hague: This is for us all to develop but, for economic environment; and that there is the flexibility instance, we have the yellow card system, the orange for the EU to be able to evolve properly in the future. card system, and these are not much used in If we can say those things, then we will be in a good Parliaments around the EU. I think many Parliaments position with the British people and will have done a would welcome a strengthening of that system. It is great service to this country. important to look at ways in which national parliamentarians can be more readily involved in Q245 Mr Ainsworth: Let me take you back to just European affairs. As the European Parliament has after the Prime Minister’s speech, when he walked taken on more power, ironically, people around into Prime Minister’s Questions last Wednesday and Europe have felt more distant from European was cheered widely by his own side. I talked to one institutions. The prime focus of democratic or two Conservative Back Benchers just after that, and accountability remains the national Parliament—of the general view was summed up by one of them, who every country, actually, not just of the United said that you would now get a 10-point jump in the Kingdom—so we need to find a stronger role for opinion polls and the Labour Party would have to national parliamentarians in the affairs of the EU. change its position. None of those political Those are the directions that we should go in. considerations were in your mind, though, or in the Prime Minister’s mind when he made the speech; it Q249 Chair: If by 2015, no treaty negotiations have was just about protecting Britain’s interests in Europe. been initiated, would you initiate treaty negotiations Mr Hague: It is hard to have totally out of one’s mind after 2015 if you form the Government? the Labour Party changing its position as this happens Mr Hague: The Prime Minister said in his speech that on such a regular basis on this issue—that is a matter while there is a widespread expectation and advocacy for Mr Ainsworth and his colleagues rather than for of treaty change, if no other treaty change arose in me—but I believe very strongly that the policy we set the coming years, then we would embark on our own out, the changes we set out, are in the interests of the bilateral negotiation. EU and the United Kingdom. I am no great aficionado Chair: Thank you. That is very helpful indeed. Thank of opinion polls— you very much, Foreign Secretary, and thank you, Sir Mr Ainsworth: Did you get a 10-point jump? Jon, Mr Manley. We much appreciate you taking the Mr Hague: I couldn’t honestly tell you. These things time to come to see us. jump around all the time. These need not be the Mr Hague: Thank you. considerations of the Foreign Office, and I am sure would not be the considerations of the Committee in writing their report, Mr Chairman. cobber Pack: U PL: COE1 [SO] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Written evidence
Written evidence from Dr Jóhanna Jónsdóttir, Policy Officer, European Free Trade Association Secretariat Author Background I am currently a policy officer at the European Free Trade Association (EFTA) Secretariat in Brussels, which is responsible for the management of the European Economic Area (EEA) Agreement. In 2010 I was awarded a PhD in European Studies from the University of Cambridge. My dissertation focused on Iceland’s relations with the EU through the EEA Agreement. My PhD dissertation was awarded the Sir Walter Bagehot Prize by the Political Studies Association for best dissertation in the field of government and public administration. A revised and updated version of my dissertation is due to be published this year by Routledge.
Foreword I understand the Committee is starting from the assumption that the UK should and will remain a member of the EU. Nonetheless, as the Committee has expressed a particular interest in submissions from non-member states and in light of increasingly frequent suggestions that the UK should withdraw from the EU, I will reflect on the suitability of an EEA type solution for the UK. This is related mainly to the first two questions posed by the Committee: — To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? — Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? Please note that my submission does not in any way represent the official views of EFTA or its member states, but is based on my research and personal observations, which I hope may be of use to the Committee in its inquiry.
Summary of Key Points — The EEA Agreement allows Iceland, Liechtenstein and Norway to participate in the EU’s internal market while excluding potentially less attractive areas such as the common fisheries policy. — The EFTA states adopt all EU legislation in relevant areas without participating in the EU’s decision- making institutions. — Although the EEA contains various clauses to formally protect the EFTA states against loss of sovereignty, there are indications that it functions as a supranational agreement in practice. — It is unlikely that the UK would find the EEA model in its current form to be a suitable alternative to EU membership. — The EEA could perhaps provide some lessons for the potential development of a “multi-tier Europe”.
Introduction 1. The members of EFTA have a long history of EU rule adoption and close institutional contact with the EU. The current members of EFTA are Iceland, Liechtenstein, Norway and Switzerland. With the exception of Switzerland, the EFTA states are parties to the EEA Agreement and thus participants in the EU’s internal market. Indeed, it could be argued that the EEA Agreement entails a form of “quasi-membership” of the EU. Having been in force since 1994, the EEA Agreement has proved considerably more resilient than was expected at the time of its inception. Furthermore, it appears to have functioned relatively well over the years and in many respects it has benefited its signatory states. Although it is not without its challenges, it is an institutional framework which deserves attention, particularly in light of increasingly louder calls for a multi-tier Europe. 2. In recent years, proposals have been made to expand EEA membership, for example to Western European micro-states such as Andorra, San Marino and Monaco and Eastern giants like the Ukraine. In particular, following the UK’s decision in December 2011 to veto the new “fiscal compact” Treaty, suggestions have also been made as to whether the UK might better belong in the EFTA family rather than the EU. In order to evaluate the viability of this course of action, it is necessary to examine how the EEA Agreement works in practice, including its main challenges. In this submission I will explain the content and functioning of the EEA Agreement, before moving on to the recommendations section where I evaluate whether it potentially provides a realistic or suitable alternative to EU membership for the UK or whether it provides any lessons for the development of a multi-tier Europe. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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What is the EEA Agreement and how does it work?
3. The history of the EEA Agreement goes hand in hand with the EU’s plans to develop an internal market, which gained momentum in the 1980s. At the time, Western Europe was split into two blocks: the EEC and EFTA. The UK was the original driving force behind the establishment of EFTA as a non-supranational counterbalance to the European Economic Community (EEC), as it was called at the time. However, by the time the EEA was being negotiated, the UK had long since left EFTA for the EEC. Nonetheless, EFTA’s membership still included some of the Community’s most important trading partiers, ie Austria, Finland, Sweden, Switzerland, Iceland, Norway and Liechtenstein.1 The aim of the EEA was to allow them to participate in the internal market.
4. The EEA Agreement was signed in May 1992 and came into effect on 1 January 1994. However, Switzerland rejected membership of the EEA in a referendum on 6 December 1992. On the other hand, Austria, Finland and Sweden decided to join the EU, becoming full members in 1995, thereby leading to speculation that the EEA Agreement’s primary role would be to ease the EFTA states’ transition to EU membership. Currently, Iceland, Norway and Liechtenstein are thus the three remaining EFTA parties to the Agreement and there is potential for further dwindling on the EFTA side as Iceland has applied for EU membership.
5. In return for access to the internal market, the EEA Agreement requires a high degree of integration of EU acquis into the national legal systems of the participating states. The EFTA states must adopt nearly all provisions relevant to the free movement of goods, services, capital and persons. In addition, the Agreement provides for the adoption of EU legislation in a variety of horizontal areas such as labour law, consumer protection, environmental policy, statistics and company law. As the EU’s legal framework is in a state of continuous development, this includes not only legislation that was in place at the time the EEA Agreement came into effect but also all new legal acts that are passed in the relevant areas, which constitutes a large bulk of EU legislation. A number of substantial areas do fall outside the scope of the EEA Agreement (although the EFTA states participate to a certain extent in some of these policy areas through other agreements) including: (1) Common Agricultural and Fisheries Policies, (2) Economic and Monetary Union, (3) Customs Union, (4) Common Trade Policy, (5) Taxation, (6) Common Foreign and Security Policy and (7) Freedom, Security and Justice.
6. The exact proportion of the EU legal framework which is covered by the EEA Agreement is difficult to measure. In 2010, the Norwegian Government commissioned a comprehensive review of Norway’s agreements with the EU, the EEA Agreement being by far the most extensive. The results of this review, totalling 900 pages, were published in January 2012.2 The report estimates that through its agreements with the EU, Norway has incorporated approximately three-quarters of all EU legislative acts into Norwegian legislation. Iceland’s membership talks with the EU are also sometimes cited as an indicator of the scope of the EEA Agreement. The Commission stated that, prior to commencing negotiations, Iceland had already fully implemented 10 and partially implemented a further 11 chapters out of a total of 33 policy chapters through the EEA Agreement. Figures from the EFTA Secretariat show that at the end of 2010 approximately 8,300 legal acts had been incorporated into the EEA Agreement.
7. Despite the exclusion of certain fields, it is clear that the EEA Agreement is quite extensive. It has enabled Iceland, Norway and Liechtenstein to participate in the internal market while remaining outside of some potentially less attractive areas. However, there is a price to pay for “à la carte” relations with the EU, as the EEA Agreement grants the EFTA states very limited access to EU decision-making institutions, while requiring them to adopt all EU legislation in the relevant areas. The EEA Agreement does allow some access to the Commission’s expert groups and comitology committees (Articles 99 and 100 of the Agreement) but no formal access to either the Parliament or the Council. As the EFTA states adopt the majority of EU legislation, they have a clear incentive to make their voices heard and research suggests that they are increasingly making use of more informal lobbying tactics to do so. These may in some cases yield results, though this is difficult to measure. Nonetheless, the fact remains that the EFTA states do not have a seat at the table and their impact is undoubtedly limited. This inherent “democratic deficit” is indeed one of the main criticisms of the EEA.
8. Unlike the EU member states, the EFTA states have not formally ceded sovereignty to supranational institutions. In order to counter their lack of access to EU decision-making institutions, the EEA Agreement contains various clauses to formally protect them against loss of sovereignty. In the first place, EU acts do not automatically become part of the EFTA states’ legal orders. Rather, an agreement has to be reached between 1 Liechtenstein became a full member of EFTA in 1991 having previously been linked to EFTA through a special protocol. 2 See link to the English translation of the introductory chapter of the review: http://www.regjeringen.no/pages/36798821/PDFS/NOU201220120002000EN_PDFS.pdf cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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the European External Action Service and the EFTA states in the EEA Joint Committee3 as to their incorporation into the EEA Agreement. All decisions of the Joint Committee are taken by unanimity and, if approved, the acts are listed in the relevant Annexes to the EEA Agreement. 9. If the EFTA states find a piece of EEA relevant legislation unacceptable they have the right to refuse its incorporation into the Agreement. This was considered extremely important when the EEA Agreement was being negotiated. However, it could be argued that in practice it is a mere formality. In fact, it can be said that the EFTA states do not have any “real veto power” as they do not have the right to refuse without considerable consequences, ie the provisional suspension of the relevant part of the EEA Agreement according to Article 102 of the Agreement. As internal market issues are all interlinked, there is also fear that the entire EEA Agreement could be called into question if Article 102 were put into force. Therefore, due to their dependence on access to the internal market, this clause makes it difficult, if not impossible, for the EFTA states to say “no”. Perhaps not surprisingly, they have never yet refused the incorporation of an act into the EEA Agreement, although the Norwegian government has recently indicated that it intends to veto the incorporation of the third Postal Services Directive, which would mark a historic development in the EEA. 10. In some cases, the EFTA states have been able to negotiate certain exemptions or adaptations prior to incorporating acts into the EEA Agreement. However, they must be able to demonstrate the necessity of such adaptations for example because domestic conditions are entirely different from those in the EU member states. Granting exemptions or adaptations is at the discretion of the EU and they are generally not given because something is “inconvenient”. 11. Another feature of the EEA Agreement which is aimed at retaining the sovereignty of the EFTA states is that they have not formally transferred binding legislative powers to the EEA Joint Committee. In this way, although an act has been incorporated into the EEA Agreement, one or more EFTA state may have so-called constitutional requirements which means that their respective national parliaments must ratify the act before it can take effect. Thus, unlike in the EU, regulations are not directly applicable and directives do not have direct effect. However, the national parliaments of the EFTA states have never yet rejected an act which has been incorporated into the EEA Agreement. This is perhaps not surprising as refusing to transpose EEA relevant legislation at the national level would have the same effect as refusing to incorporate the act into the EEA Agreement, ie the suspension of the relevant part of the Agreement. 12. Once acts have entered into force in the EFTA states, they are not subject to monitoring and surveillance by EU institutions but have their own Surveillance Authority and Court which monitor compliance with EEA law. EFTA infringement procedures are fairly similar to the mechanisms for monitoring compliance in EU member states. The EFTA Court does not, however, have the same authority as the CJEU as it does not have the power to issue binding decisions, only recommendations and advisory opinions. This, coupled with the fact that the EFTA states monitor themselves, means that these mechanisms may appear rather weak at first glance. Nonetheless, research suggests that they function fairly well. This can partly be explained by the fact that having their own institutions increases the legitimacy of the EEA Agreement. Furthermore, each EFTA state is subject to control from its partners, not just its own officials. Finally, the EFTA bodies are in close contact with the EU throughout the monitoring process and so the EFTA states are aware of the potential danger in allowing the EU to perceive that the EEA Agreement is not functioning well. Therefore, in practice, the EFTA states appear to feel strong pressure to adapt to EU requirements. 13. If domestic opposition is very fervent significant delays may be experienced throughout the process of incorporating acts into the EEA Agreement and putting them into practice at the national level. Nonetheless, on the whole the EEA framework appears to be fairly conducive to domestic adaptation to EU requirements due in large part to the asymmetrical nature of the relationship between the EFTA states and the EU and their dependence on participation in the internal market. Taking into consideration lack of access to EU decision- making bodies, it could therefore perhaps be argued that in practice the EEA Agreement involves a greater loss of autonomy than EU membership and there are indications that the EEA Agreement functions as a supranational agreement in practice. 14. In this context it is important to note that the EFTA states have generally found participation in the EEA Agreement to be beneficial. In most cases, EU legislation corresponds relatively well with pre-existing domestic arrangements in the EFTA states and does not require much change to the national legal framework. State actors may also often feel that EU policy poses an effective solution to domestic needs and challenges. Therefore, the EFTA states willingly adopt the majority of the EU legislation which they are required to take on board through the EEA Agreement. Yet, as in all states adopting EU rules, situations do arise where EU requirements effectively clash with domestic policies or preferences. In these cases, the EFTA states have not had the opportunity to express themselves within EU decision-making institutions and they are not generally able to prevent their incorporation into the EEA Agreement or their implementation at national level. 15. Given that the EFTA states incorporate a large bulk of EU legislation into the Agreement without access to the EU’s decision-making institutions, they have been likened to colonies of the EU. This situation has also been described as a “fax democracy”, although perhaps a more apt description today would be an “email 3 The EEA Joint Committee provides the forum in which views are exchanged and decisions are taken to incorporate EU legislation into the EEA Agreement. The Joint Committee generally meets about eight times per year and is made up of ambassadors of the EEA EFTA states and representatives from the European External Action Service. Prior to the Lisbon Treaty, the Commission (DG RELEX) was the EFTA states’ counterpart in the Joint Committee. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 54 Foreign Affairs Committee: Evidence
democracy”. The democratic deficit has been a well-known aspect of the EEA Agreement from the start. It is the price which the EFTA states agreed to pay for enjoying many of the benefits of European integration without being full members of the club and without being bound to participate in some of the areas they considered less attractive. 16. In this context it should be noted that the EEA has been slowly extending into new areas. The EU’s methods of legislating have evolved over time with more comprehensive acts being adopted which can span over different policy areas. In many cases some elements of an act may be EEA relevant while others are not. As a result, the question of EEA relevance has become increasingly ambiguous. Cases where EEA relevance is controversial can potentially lead to an expansion of the scope of the EEA Agreement into new areas which were not foreseen when it first came into effect, at least when the EU attaches importance to their adoption by the EFTA states. Furthermore, the Parliament and the Council have gained more say in the EU legislative process over the past two decades at the expense of the Commission. Therefore, it could perhaps be argued that the democratic deficit in the EEA has been increasing over time.
Recommendations 17. Having considered the functioning of the EEA Agreement, a question arises as to whether it is, in fact, a viable long-term alternative to EU membership. To date, this has not been a model that has been replicated elsewhere; the closest exception might be Puerto Rico’s relations with the United States. As noted by the authors of the Norwegian review, the EEA Agreement has often been considered a second best solution both by those who favour EU membership and those who would prefer looser ties with the EU. By and large other states have not found this to be an attractive model and no other state has so far seriously made an effort to join EFTA and the EEA. Yet the possibility of developments in the membership of EFTA have often been suggested. 18. As a founding member of EFTA, the UK has been frequently named as an EU outsider. Indeed, as previously noted, the UK was instrumental in setting up EFTA as a counterbalance to the supranational EEC. Although the UK later decided that membership of the Economic Community better served its interests, it has never been a very enthusiastic member of the European project preferring to remain outside of areas of cooperation such as Schengen and the Eurozone. Indeed, some would argue that Euroscepticism and a general distrust of the EU are inherently British. 19. David Cameron’s veto of the EU fiscal treaty in December 2011 reopened the debate on the UK’s relationship with the EU, with a return to EFTA frequently being named as a potential alternative to EU membership. In the British media a number of reports suggested that the UK might have something to learn from Norway and Switzerland.4 One article argued that “switching from the costly and undemocratic European Union and joining the European Free Trade Association would bring many benefits and job creation is one of them”. Slightly ironically, the article further explained that such a move would mean regaining control over democratic law-making processes and being able to choose the best policies in a host of important areas.5 Another report stated that if Britain were to withdraw from the Union, but remain in the EEA “it would neither participate in the much maligned Common Agricultural Policy—nor the equally criticized Common Fisheries Policy. It would also fall outside of the common foreign and defense policies so detested by some Eurosceptics”.6 20. Many would, however, argue that a return to EFTA would not work for the UK. Not least because the EFTA states are bound by EU rules but lack access to its decision making processes. As noted in one article, in comparison to the EFTA states “semi-detached status for a larger and more assertive country might well be harder to achieve. And being in with the outs while trading freely in Europe comes at a price. It means paying to administer and police the single market while the in-crowd makes the important decisions about how it works. For a noisy nation accustomed to a place at the table and having its voice heard, that could feel like a very un-splendid isolation”.7 21. It is true that the EFTA states have so far been willing to pay the price of non-participation in EU decision-making institutions. However, this would arguably be a much larger price to pay for the UK, particularly due to its size and general international standing. If Iceland and Liechtenstein joined the EU they would be the smallest members of the Union in terms of population. Therefore, even if they did join the Union, they would not receive a large portion of the vote in the Council or a large number of seats in the Parliament. It is also likely that lack of resources would pose a problem for them in terms of active participation. Indeed, questions have even been raised as to whether membership of the EU is possible for a state as small as Liechtenstein. Norway is by far the largest of the EFTA states and therefore membership of the EU might make the biggest difference with respect to increasing influence within the institutions. However, although Norway is large in the EFTA context, it would still be a relatively small member state within a growing EU. 22. The UK on the other hand is one of the EU’s largest member states. It generally has the resources to participate actively in all policy areas and it is an important actor when it comes to coalition building and 4 For example http://www.economist.com/node/21541863 5 http://www.publicserviceeurope.com/article/1139/time-to-leave-the-eu-and-stop-exporting-british-jobs-abroad 6 http://www.publicserviceeurope.com/article/1090/what-exactly-would-the-uk-gain-from-leaving-the-eu 7 http://www.economist.com/node/21541863 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Qualified Majority Voting. Losing access to the decision-making institutions would therefore be a substantial blow. Furthermore, the incorporation of EU acquis into the EEA Agreement is an inherently asymmetrical process whereby the EFTA states adopt legislation which has been decided without their participation. In the view of the author, taking such a subordinate role would not sit well with the UK’s self image. True, the UK« s accession to EFTA would potentially make the relationship between the EU and EFTA pillars slightly less asymmetrical. Nonetheless, the EEA in its current form, is very much a one-way street whereby the EFTA states follow the EU’s lead. Therefore, a return to EFTA for the UK might not be such a plausible scenario. 23. Although the EEA Agreement in its current form is not a viable option for the UK, a future scenario of a two or multi-tier Europe in which structure, content and membership of the EEA was substantially revised could potentially be explored further. Forecasts predicting a widening gap between an outer core and an inner core within Europe abound. In his book, The Future of Europe: Towards a Two-Speed EU?, Jean-Claude Piris reaches the conclusion that the solution to the current economic and political climate is to permit “two-speed” development: allowing an inner core to move towards closer economic and political Union. Michael van Hulten, a former Dutch MEP, has detailed what a two-layer Europe might look like. “The outer layer would be an overarching, less intrusive and more inclusive framework for European cooperation: a European Area of Freedom, Security and Prosperity (EFSP). This would comprise all EU and EFTA member states, as well as all existing EU candidate countries including Turkey. It could be expanded eastward to all European countries, including Russia, if and when the Copenhagen accession criteria (or similar) were met”.8 24. Any such plans could potentially in some ways build on the experience of the EEA, albeit with substantial revisions. For example, changes in the EU’s policy making process and recent Treaty revisions should be taken into account. Furthermore, according to the EEA Agreement, Iceland, Norway and Liechtenstein are meant to harmonize their positions internally and then speak with one voice towards the EU. A greater number of diverse states would make this system of unanimity quite difficult and cumbersome. Changes might therefore imply a more supranational structure. However, in return, the members of the outer tier should be allowed further participation in decision-making processes. 25. The economic climate within the EU has perhaps served to decrease the attractiveness of EU membership. The future of the EEA is of course largely dependent on developments within the EU. Whether the EEA Agreement’s content, structure and membership are revised or whether it ceases to exist at all are questions which will only be answered in the fullness of time. In general, the EEA in its current form, probably does not provide a viable solution for countries such as the UK. However, this does not mean that the EEA can provide no lessons for the future of Europe. Rather, given that it has generally been found to function well, any deliberations on a multi-tier Europe should take the experience of the EEA into account. 25 April 2012
Written evidence from Mrs Anne Palmer, JP (retired) I do not belong to, and have never been in any Political Organisation or Political Party. My Faithful and True Allegiance is, as always, to the wearer of the British Crown. Responding to The Foreign Affairs Committee Inquiry into “The Future of the European Union: UK Government Policy”. 1. Question: To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU Policy and place in the Union? At first glance it looks as if we should and will stand by and watch while a continental system is built. A statement by the Eurogroup made 30 March 2012, states, “The stability and integrity of the Economic and Monetary Union have required swift and vigorous measures that had been implemented recently, together with further qualitative moves towards a genuine Fiscal Stability Union” etc. To me it is and should be a “wake-up call” for those that want to be further integrated into the European Union rather than be proud to be elected Politicians of what many believe is/was the best free Country and Nation in the World. 2. Noted that one Gentleman, Mr Ottaway was starting from the assumption that the UK should and will remain an EU Member. Should the EU progress towards the one State of European Union will that decision still stand? The people have recently watched this present Government divide the Nation and Country of England into nine EU Regions through the Localism Bill/Act which is shown quite clearly on the Council of Europe’s Website where “ticks” are recorded when action is taken. Is he and the Government concerned at the extra money for and extra layer of Governance this Country has never had before? These REGIONS with elected Mayors, full Cabinets and all the regalia that goes with them? Note also, “The Regional Dimension of Development and the UN System”. Is this also wanted? 3. Noted that Mr Hague made quite clear on 8 March 2012 that, the protocol was not agreed, and as a result the agreement among the 25 nations is not part of the Treaties of the European Union, and does not have the force of EU law and that we will have to continue to seek to protect the single market, financial services and our national interests in other ways in the absence of having secured a protocol to changes to the Treaties of the European Union. I would have thought even changing a Protocol to an already ratified Treaty requires a referendum in ALL EU Nation States. 8 http://www.spectator.co.uk/coffeehouse/7421503/what-kind-of-europe.thtml cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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4. However, on 31 May Ireland is to hold a referendum on the “Fiscal Compact” which is in fact the “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union” an extra Treaty on top of the Treaty of Lisbon, and whether it disturbs or intrudes on the previous Treaty remains to be seen for the original paragraphs relating to the Eurozone Members are in the body of the Lisbon Treaty.
5. I pray that the original intention to alter just the “Protocol” rather than alter the body of the Treaty, which I believe was/is required for such an important matter, was not the intention of being used to prevent or cheat the people of any country out-side the Euro-Zone.
6. “Should the UK Government support the incorporation of the “fiscal compact” into the EU Treaties?” Without doubt, if the alleged “Fiscal Compact” is included into the Treaty of Lisbon and therefore an alteration to the original Treaty of Lisbon, this Country should-without doubt, have the promised referendum. With a further additional Treaty, which may touch or intrude on the previous Treaty, I leave it to the experts.
7. I do have concerns regarding the recent extra funding to the IMF by the UK Government, which is not in the Euro-zone, yet this extra funding has knowingly been used to “help out” the Euro area through the IMF. This does raise concerns.
8. Further to Paragraph 2 re Mr Ottaway’s remarks regarding remaining in the European Union. That this Country will remain an EU Member. I have noted on more than one occasion that the EU wants to “use its ‘one voice’ in all matters and especially in the United Nation Security Council.” In the General Assembly 30 July at the 88th Meeting “General Assembly, in recorded vote, adopts resolution granting European Union, Right of Reply Ability to Present Oral Amendments”.
9. In fact I read Hungary’s representative, submitted the draft resolution on behalf of the European Union and reading a number of oral revisions, said it was the product of extensive consultations among a broad spectrum of Member Sates, held following the Assembly’s vote on 14 September 2010 to defer consideration of the original text outlining the bloc’s expanding rights”, Do you know what those expanding Rights were? Did the people of this Country know? Were they told? See here GA/10983.
10. UN General Assembly 3 May 2011. Mr Körösi (Hungary) “It is an honour for me to appear before the general Assembly, on behalf of the members of the European Union (EU), the draft resolution on the participation of the European Union in the work of the United Nations, contained in document A/65/L.64/Rev.1 I would like in particular to thank the High Representative of the European Union for Foreign Affairs and Security Policy for being here today at a moment of great significance for the European Union” etc.
11. What a great pity the people of this Country did not have the opportunity to celebrate this good news with them-FOR THE PEOPLE OF THIS COUNTRY WERE NOT TOLD. Will the EU soon have “one Voice” in the UNSC? Will this Country still need a British Government or a House of Commons or House of Lords, especially as the EU Regions have been set up here in the once United Kingdom of Great Britain and Northern Ireland at all, because no one will hear their voices, not even in the United Nation’s Security Council if the European Union are going to speak with their one VOICE in all matters and on our behalf.
12. Your questions, “The Future of the European Union: UK Government Policy”.
The future of the European Union as it is at the moment is rather doubtful. Whether we as a country could remain in the EU knowing without doubt that it is to become one European State/Country, not even as once thought a United States of Europe rather like the USA, which should, under the circumstances when recent Governments have let the people down, I would have thought should be decided by a Government of Great Britain that is faithful and true to their solemn Oaths of Allegiance to the British Crown, that the Oaths they make before they take their seats in that wonderful and once proud Houses of Parliament, would lift the people into perhaps bringing a little faith and hope of a Government they could be proud of once more. For the only way for this Country and nation to survive, is out of the European Union completely. We truly should never have joined. (See Hansard from the 1960s)
13. If that is rejected, the people of course should be given a referendum on an “in or out” of the European Union, and surely knowing exactly what the European Union is in reality to become, far better for our Government to tell the people exactly why they are proposing to allow such a referendum and for the people to make a decision. A federal European Union or a Sovereign United Kingdom of Great Britain and Northern Ireland once more? That way, a British Government may win back some credibility and respect which it lacks at present and a chance to really govern this Country according to its long Standing Common Law Constitution. Failing that, in all honesty, if the EU continues as is proposed and encouraged by British Governments to fill the role of a Single State of Europe, I have absolutely no idea what the ending will be, except that there will be in all probability a terrible and tragic ending for all, with no going back. 11 May 2012 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Written evidence from Dr Martyn Bond, Visiting Professor, Royal Holloway University of London
Please find below my evidence submitted to the Foreign Affairs Committee of the House of Commons concerning the future of the European Union.
The Argument of my Submission can be Summarised as Follows
The UK has lost its way in adapting to the challenges of globalisation. It is heading for an increasingly isolated position, out of sympathy with its regional partners in Europe. It needs to develop a leading role within its regional bloc, co-ordinating its priorities with other leading players there. UK foreign policy should prioritise the EU and project UK power increasingly through this regional organisation.
A Note on my Background
I am Visiting Professor of European Politics and Policy at Royal Holloway University of London, a Distinguished Visiting Fellow at the European Business School as well as a Senior Fellow of the Salzburg Global Seminar.
My main career was as a European civil servant, serving eight years from 1974 as press spokesman in Brussels for the Council of Ministers of the EU (then the EEC), a further seven years, first as a senior administrator during the negotiation of the fourth Lomé Convention with the countries of Africa, the Caribbean and the Pacific, and then with responsibility for relations between the Council and the European Parliament. From 1989 until 1999 I worked in London as Director of the UK Office of the European Parliament.
My initial professional training, however, was in the BBC, which I joined on my return from Hamburg in 1966, working there until 1970. I later took leave of absence from my civil service post in Brussels from 1981 to 1983 to work as BBC correspondent in Berlin, broadcasting in German and English about politics, economy and society in West Berlin and East Germany. In 2005 I was invited to become the London Press Correspondent for the Council of Europe, advising on media strategy and promoting the image of the Council in the UK.
I gained a BA in modern languages and literature from Cambridge, followed by further study at Hamburg and Sussex Universities (D.Phil 1971). Between 1970 and 1973 I was lecturer in West European Studies at the New University of Ulster. After retiring from the European civil service I was Director of the Federal Trust for Education and Research from 2000 to 2003, and from 2005 I have been Visiting Professor at Royal Holloway. In 2006 I was invited to become a patron of the University Association for Contemporary European Studies.
I have written and edited several books, including Eminent Europeans (Greycoat Press, 1996), The Treaty of Nice Explained (Federal Trust, 2001), Europe’s Wider Loyalties: Global Responsibilities for the New Europe (Kogan Page, 2002), The European Convention on Human Rights and the Council of Europe (Council of Europe, 2010), and The Council of Europe: structure, history and issues in European politics (Routledge, 2011). I also write for Public Service Europe (web only) and for Parliament Magazine, a Dods publication in Brussels, and I lecture on European issues both in the UK and abroad. I have contributed to numerous training courses for UK civil servants, in particular in the context of Dod’s programmes Westminster Explained and Brussels Explained.
The Future of the European Union: Implications for UK Government Policy
Global framework—Regional priority
1. The power of individual states such as the UK to shape an effective response to global shocks has considerably diminished over the past 50 years. Poor economic performance in relation to other European economies has increased the need for the UK in particular to work with other members of the EU in seeking common solutions for the region. The UK is not as impecunious as Greece, but it is also not as wealthy as Germany.
2. In addition to the shock of the current financial crisis, the member states of the EU now face cultural, social and economic adjustments to an exceptionally strong migratory influx as a result of globalisation. Doubtless other external shocks—possibly ecological or energy-related—will also soon call for a European response.
3. As Chou-en-Lai predicted long ago, at the global level the move to dialogue among several strong regional powers appears unstoppable. The EU represents one such power. The UK individually—despite retaining some elements of power acquired in earlier years (nuclear deterrent, Security Council seat, special relationship, Commonwealth)—does not. Sooner or later it will be the EU and not an individual nation which will answer Kissinger’s phone call and speak for Europe. The route to optimising the UK’s influence globally lies therefore in strengthening its position inside the EU. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Government influence or Party politics?
4. Many policy initiatives derive from party political discussions at European level. Across the continent, political forces are organised in three main groups, the European Peoples Party, the Socialists and Democrats, and the Alliance of Democrats and Liberals in Europe.
5. The absence of the Conservative Party from the EPP represents a serious weakness for the UK in its efforts to exert influence in the EU at a political level. Without a close alliance with the EPP, the Conservative element of the Coalition government is absent from the dominant circle of those deciding the direction of EU policies in most other states. This is a party political issue that is harming the national interest. It should be remedied as soon as possible.
6. The December fiasco last year was the most recent high-level example of the UK’s misjudgement of continental responses because of Conservative political isolation. Absent from the meeting of the EPP in Marseilles just before the Brussels Summit, the Conservative leadership was unable to grasp the importance of other states’ political capital invested in the Eurozone.
7. Ideological assumptions increasingly shape member states’ political positions at continental level. They influence the European argument well before the Commission puts practical proposals on the table for formal discussion in Brussels. For the UK, the underlying issue is as much a matter of political contacts and ideological affinities as of institutional structures.
8. In this analysis, the fiasco of last December was not a watershed, but one of a series of accidents as these broad political affinities surface from time and time. Until the Conservative Party changes its continental political alignment, the UK under its present leadership will be isolated again and again. In the 2014 European Parliament elections, for instance, the main political groups are all likely to nominate their candidates for the post of President of the Commission well in advance. Conservative absence from the EPP will again isolate the UK Prime Minister when the European Council is subsequently called on to endorse the next President of the Commission.
9. The grand narrative of European unification has little attraction in the UK at the popular level. However, it clearly still has—as it has had since 1945—considerable strength among European political elites. The assumption of “strength through unity” drives the policy choices of major political parties across the continent. If the alternative is impotent isolation, it also makes more and more sense for the UK.
Maximising UK influence inside the EU
10. It is only within a grand strategy of close co-operation with other like-minded political forces in the EU that the UK government—whichever Party is in power—will achieve its specific foreign policy goals: security of supply for food and raw materials, open markets in third countries, and respect for our values in regard to democracy, human rights and the rule of law. All these objectives are shared with other members of the EU. Only by playing an engaged and proactive role in advancing further integration within the EU will the UK have a powerful voice in deciding how these objectives are to be secured at a global level.
11. Successful opposition to manifestly unfair proposals or specifically detrimental policies at EU level increasingly requires enough allies to form a blocking minority, and preferably a positive majority to press for improvements. This is not achieved from a position of isolation, opposed to the main thrust of integration. Opposition by the UK can be productive—as witness stalling proposals for a financial transaction tax and advancing reforms in agriculture and fisheries—but it is considerably more successful when exercised from within the tent.
12. The UK government should move from a default position of opposition in principle to further European integration to a position that allows it to respond positively to new proposals. The UK administration is still respected for the clarity and consistency of the positions it takes in Council, and a shift of stance in no way detracts from its right to raise objections and call for amendments to proposals as discussions proceed. But to gain a more sympathetic hearing, the UK government needs to signal that Brussels is appreciated more as the solution and criticised less as the problem.
13. In particular the UK government needs to show that it wants to stay as closely associated as possible to initiatives undertaken by groups of other states under “enhanced cooperation”. The UK should avoid formalising divisions within the EU, maintaining above all the option to join such initiatives later. It should maintain this option for itself and argue for it as a principle for other states.
14. With specific regard to the “fiscal compact”, the UK should rapidly seek allies within the Eurozone prepared to argue its case to keep open the option for the UK a) not to be excluded from the decision-making fora set up for Eurozone countries, and b) to be able to opt in without onerous conditions if it later decides to. Hence the fiscal compact treaty should be agreed—like other EU treaties—by all member states. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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15. Exclusion from the treaty would cause political, moral and economic damage to the UK. It stands to lose its traditional status as a leading member state of the EU if it is forced to position itself outside the mainstream of European integration. This is reflected in exclusion from political decision-making (the top table argument), the absence of British officials in important posts (the engine room reality), and reduced formal and informal influence in Brussels (the everyday experience). The UK stands to lose morally if it is not present alongside its traditional allies in debate, notably states of Scandinavia and central and eastern Europe. In economic terms it stands to lose by being absent from decisions that directly affect the UK’s trading interests, notably regarding currency issues and matters relating to the Single Market.
Re-positioning among larger and smaller allies
16. As the EU develops further it will need more than just Franco-German leadership, and the UK should have enough awareness of its own interests to seek a role alongside them in deciding the future of Europe. France and Germany need the UK as a balancing partner in their bi-lateral relationship, if this traditional core of the peace settlement in Western Europe is to develop into a regional force in the world.
17. The reformed voting arrangements of the Lisbon Treaty give the larger states a greater say in the development of EU legislation and policy. The UK should therefore prioritise its efforts, identifying and developing common interests in particular with the big players. The UK’s main allies in the EU should be those countries which have the capacity—material and moral—to lead it.
18. At the same time, the UK should not neglect its relations with smaller states in the EU. Many of these— Scandinavia, Ireland, Portugal, Benelux, Malta, Cyprus and the Baltic States—have traditionally had close relations with the UK. As it has done in the past, the UK needs to maintain good relations with the medium and small member states, building up clusters of friends, but in doing so it should not lose sight of the need to identify common interests with the larger leading countries.
Wider responsibilities and the longer view
19. As the UK is increasingly linked with its European neighbours—tourism and residence abroad, trade and aid, finance, military alliance and foreign policy co-ordination, higher education, intermarriage, historical experience and cultural roots—it should strive to maximise its interests in playing a leading role in the new structures of Europe. That cannot be done effectively from the sidelines.
20. The UK government should take measures to stop the drift towards isolation from the continent which has recently marked the country’s relations with the EU. A role for the UK comparable to Norway without its oil or Switzerland without its reserves is profoundly unattractive. If the country were reduced to this, the UK would be dominated by an integrated power on the continent and relegated to a subordinate role in both regional and global affairs—an outcome which would realise the worst fears of British foreign policy.
21. As an alternative, the UK should develop its own vision of an EU under conditions acceptable both to this country and to our European allies. It should position itself in the mainstream of economic and political integration, from which position it would be better able to steer it in the direction and at the speed which optimises British interests.
22. Division among EU states plays into the hands of other powers which are not slow to take advantage of it. Examples include Russia on energy supply, the US on air transport, China on a range of trade issues, and many multinationals (backed by their governments) on conditions for FDI. Temporary advantages won by the UK in competition with other EU states are more than balanced out by benefits won by other members and lost to the UK. Overcoming this zero sum game would benefit all and permit the development of a more coherent foreign policy as a regional bloc.
23. That geopolitical option will involve a considerable revision of recent UK foreign policy aims and means, which have assumed that the UK will continue as a priority to relate bilaterally to the rest of the world. The future will require a perspective looking from London through Brussels out to the wider world. The world by 2020 will be looking first towards the EU and only secondarily towards the individual member states.
24. A view of the UK independent of this perspective is doomed to increasing irrelevance. If the UK does not want to be marginalised in international affairs by positioning itself outside any regional power bloc, it must quickly concert its efforts with other European states to optimise its interests both within and through the EU. 15 May 2012 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Written evidence from Sir Colin Budd KCMG Summary — The December European Council not necessarily a watershed for UK/Europe, but an important wake up call. — For the UK voluntarily to accept demotion from the top European tier would be a huge strategic error. On the contrary, we should wherever possible ensure that we are part of its leadership. — To maximize our leverage in EU policy making, the whole of UK plc must apply itself to that task, with energy, imagination and unceasing effort. — If we fail to wake up, we will increasingly find that we are living in Britzerland. — We can and should do better.
Introduction The writer was a member of HM Diplomatic Service from 1967Ð2005, serving in Warsaw, The Hague, Bonn and Brussels. He was Assistant Private Secretary to Geoffrey Howe, then Foreign and Commonwealth Secretary, from 1984Ð87; Chef de Cabinet to Leon Brittan, then Vice President of the European Commission, from 1993Ð95; Director General for Europe in the Foreign and Commonwealth Office from 1997Ð2001; and Ambassador to the Netherlands from 2001Ð05.
Background 1. Sir Percy Cradock, who from 1983Ð90 was Margaret Thatcher’s foreign policy adviser, once observed that the story of British European policy since 1945 had to an alarming extent been one of “mistaken assessments and missed opportunities, a depressing chronicle of delayed awakening to reality, of belated arrival in institutions fashioned by others, of repinings, second and third thoughts, divided counsels and qualified enthusiasms, and a general confusion of policy designed to achieve maximum pain and minimum influence”. 2. To ask about the impact of the December 2011 European Council on the UK’s policy towards and place in the European Union (EU) is to beg the question: what should that policy and place ideally be? If as a nation we want to avoid simply continuing the lamentable story so pithily summed up by Cradock, we need to think clearly about this. 3. The policy of the present UK government, as laid down in the Coalition Agreement, is that this country should play a leading role in the EU—in order (inter alia) to ensure that “all the nations of Europe are equipped to face the challenges of the 21st century”. 4. What that, quite rightly, implies is that European countries can meet those challenges more effectively if they stand together than they could on their own. But there is more to the story than that. 5. The underlying logic of EU membership for the UK, for those who support it, has always in essence rested on two perceptions: (i) the assumption that UK interests are best served by our being inside the EU; and (ii) the view that we are best placed to protect and promote those interests the more influence we can bring to bear on the directions in which the EU is heading. 6. Why is EU membership to our advantage? Partly for economic, and partly for wider reasons. 7. The economic case in favour is very well trodden ground. It rests on full access to the Single Market, with its many implications for profitability and employment; on the magnetism of the EU for foreign direct investment; and on the huge clout the EU has in world trade talks. The UK badly needs Europe to be economically strong, open to free trade, and prosperous. The best way to maximize the chances of that is for the UK to be influential inside the EU. 8. There are also numerous wider benefits—including the ability to travel, live and work anywhere in the EU, the scope the EU affords for action to improve the environment, and the forum it provides for more effective cooperation over crime and justice matters. 9. Above all, there is the wider strategic imperative: the whole question of how in the 21st century to maximize the UK’s global influence and authority, in a world in which so many of the key problems cross national borders. As a member state in the EU the UK exercises far greater influence internationally than it could on its own. The more we fall out of the key EU decision-making circle, the more that will undermine our political relationship with the United States and reduce our influence in many international fora. 10. If we want to maximize our prosperity, trade and employment rate, if we want our own continent and the world to be safer and greener, if we want to be as influential as possible in world affairs, there is simply no option but for the UK to be an active and leading member of the EU. 11. It follows that unless there is a compelling case, given the national interest, for standing aside from any particular policy proposal, we should in all circumstances aim to exert as much influence as possible on the decision-making process inside the EU. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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12. It was with that analysis in mind that the outcome of the December 2011 European Council left many UK observers with a considerable unease. Far from strengthening the UK’s position in Europe, there is accumulating evidence that this has reduced our capacity to influence future EU legislation in the areas it covered—which by common consent are of very great importance for this country. Though there is much left to play for, there must be a strong probability that by the time future policy proposals in the areas in question come to ECOFIN, where the UK will still be present, the outcome of ECOFIN discussion will in effect have been predetermined—by decisions in the prior caucusing of the member states committed to the fiscal compact. 13. The key dilemma for the UK, when it comes to questions of EU institutional architecture, is that the more we choose to stand aside from the evolving process, the more it will tend to evolve in directions and ways which do not suit our interests, while continuing to impact very directly on those interests. Eurosceptics may want us to roam the globe, untethered by Europe. But whatever their dreams, we will still be 22 miles from the European mainland, and profoundly affected by the way the EU is organized.
Response to the FAC’s Questions 14. The FAC asks what institutional architecture the UK should seek for the EU, and whether the UK should embrace the idea of an EU made up of two or more tiers. That directly raises the question of what on any such analysis would be the right tier for the UK to be in. The answer plainly depends on how far we want in future to be counted among the leaders of Europe, rather than the followers. 15. Germany and France will continue to lead, and will tend always to look to each other first—bound as they are by the 1963 Elysée Treaty to arrive, “on all important policy questions, insofar as possible, at a similar position”. Along with the leaders of the key EU institutions, they will tend to dominate any European top tier, however much they may disagree on many of the substantive issues. 16. If the UK wishes to maximize its influence in Europe, it has much scope for exercising as much influence as and sometimes more than Germany and France. So long as we remain in the top tier, then in the future as in the past, when either Germany or France disagree with the other, they will often seek support from the UK, thus giving us real scope for influencing the outcome in question. In addition to which, if we cultivate as we should our natural allies on each issue among the other member states, we can in any case often build up a strong bargaining position. But to the extent that we fall, voluntarily or otherwise, outside the top European tier in any given field, there will be an inevitable reduction in UK leverage and influence, often to our disadvantage. 17. We need in this connection to beware of the incremental effect of the widespread and increasing assumption in the rest of the EU that the UK perspective, when it comes to considering the future of Europe, is of less and less importance. 18. The potential danger to which the UK needs to be alert, in assessing the impact of the new “fiscal compact” treaty, is that in other areas too the notion will take hold that in the construction of the key deal the UK does not have to be involved from the start, but can instead be presented later—as now happens routinely to Switzerland—with a series of faits accomplis. Our rights under the Treaty, where unanimity is required, of course still provide us with real protection, but there is nonetheless a clear and significant difference between being one of the prime movers in the power dynamics of the EU, from the beginning of any discussion, and simply being presented with an already constructed package, which by that stage has become much more difficult to amend. 19. There is little solace to be had, even when we are right, from any situation in which we end up, as most recently in the context of the EU’s implementation of the Basel III rules on banking regulation, isolated 26Ð1. If we find ourselves in that position, the strong likelihood is that we have in one way or another misplayed our hand—especially if it is clear that a number of the 26 in fact share our analysis. 20. Thus at the time of last December’s European Council, it was plain that a number of other member states had real sympathy for aspects of our position—but we tabled our proposals and started to look for allies so late in the day that it proved impossible to build the alliance in our favour which would have greatly strengthened our position. The way the UK played its hand, in response to all attempts to agree the fiscal compact unanimously, and within the existing treaties, was in some respects understandable but on any analysis weakened our overall position in the European Union. The outcome of the December European Council, it is increasingly clear, in the eyes of many observers in the rest of Europe as well as in the UK strengthened the perception of a binary division between the UK and the rest, and opened up speculation about the more formal establishment of an explicitly two tier system. 21. It would certainly be better if the fiscal compact could still be incorporated in the treaties—provided the UK position were adequately safeguarded—because the UK would then be able, in an area of such cardinal importance for its interests, to play a full role in all relevant EU discussion. As far as possible, all future framework policy statements should be agreed by all 27 member states. 22. There will always be instances in which the strength of the UK interest in a particular policy line is such that we may prefer isolation to dilution of our own proposals—but there is a strong case for reducing their number to the absolute minimum, to avoid as far as possible our being forced de facto to live with policy outcomes affecting our interests which have been shaped and decided by others. How can we best seek to achieve that? cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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23. To keep the UK in the forefront of European decision-making will require, in addition to the necessary political commitment, first class planning and a clear and sustained determination to use to the full the networking and other assets we have. What are those assets? 24. We start with the benefit of the growing strength in Europe of the English language. It would be bizarre indeed to accept demotion from the top European tier just when our language is increasingly the lingua franca of our continent. 25. We have, and need to use to the full: — bilateral links to the 26 other member states of the EU, which need to be nurtured constantly by all Ministers with EU-relevant business; — and a policy coordination system the envy of our European partners (Jacques Delors, when President of the European Commission, went on record as saying he considered the UK’s system to be the best in the EU). If used sufficiently far in advance, that system will tend to maximize our chances of securing, in any given case, at least a significant proportion of our objectives. If we continually reinvest in keeping it well oiled, and in first class working order— which requires (i) optimal coordination between the Cabinet Office, FCO and UKREP Brussels; (ii) effective EU coordination sections in other Whitehall Departments, and (iii) full involvement and use of our Embassies in other EU member states. 26. We also have, but have so far only fitfully chosen to play, a potentially significant role in the developing European polity which is, like it or not, part of the way today’s European policy-making game is played. 27. Both Government Departments in London and our political parties need to understand the significance of the evolving pattern of party politics on a European scale. Important in part, clearly, because of the European Parliament’s position in the EU, but also because of the prior caucusing of the party leaders before many European Council meetings which has now become a routine part of political life in the EU. 28. Our Government Departments need to make a much greater effort to engage with the MEPs, from all countries, who are active in their policy areas. All our political parties need in the national interest to ensure that they are playing an active role in intra-European dialogue, and in particular that their weight is felt in intra-party debate at the European level in the run up to key meetings of the European Council. In this respect, for instance, the Conservative Party’s decision to leave the European People’s Party has in effect meant that in recent meetings of the EPP leaders from the EU member states—such as that at Marseilles just before last December’s European Council—the UK voice has gone unheard, sometimes at tactically very important moments. 29. Another weakness in our position is the alarming decline in recent years in the number of UK nationals securing posts in the EU institutions: in the most recent EU-wide competition, fewer than 3% of the successful candidates were from the UK (which has some 12% of the EU’s population). This needs urgent attention, otherwise 15Ð30 years from now it will come to haunt us. In the real world, all EU member states rely significantly on the nationals they have in the EU institutions as part of their collective networking strength, and it makes no sense for the UK not to push hard to ensure that the playing field is made level. There is a strong case, which the FAC may wish to consider, for a substantial remedial package—including more training, especially in foreign languages, and agreement across Whitehall that the UK needs to send to Brussels some of its best and brightest civil servants. 30. One obvious test case in the offing for the UK’s ability to remain constructively engaged in the EU inner core discussions is the subject of growth, and the issue of a potential growth compact to match the fiscal compact. Here the UK will plainly want an outcome to EU debate which takes the fullest possible account of the UK interest. Equally obviously, some other participants in the discussion may tend to emphasise questions on which they are not at one with HMG—but there will certainly be some member states in broad agreement with the UK. The question of growth and how best to stimulate it should very clearly not be left solely to the euro area. It is much to be welcomed that the UK has been to the fore in the so-called “Like-Minded” group of member states, which since well before the French Presidential election has been stressing the strength of the case for action to help boost economic growth in the EU. 31. Another test case will be the forthcoming discussion of the EU budget. There we can either establish a purely defensive position, and just sit tight, determined to be inflexible, leaving the shape of the final package to be created by others—or apply ourselves proactively, while still of course pulling no punches about the importance of the UK interest, to the task of working hard at the core of the EU’s debate on the subject, using all the arguments we can, to help forge an outcome which can be seen as acceptable to all.
Conclusions 32. Last December’s European Council does risk becoming a watershed for the UK’s place in the EU, but that is by no means inevitable. 33. To conclude that the UK should now favour a much looser arrangement for the future institutional architecture of the EU, whereby we would take up a position somewhere outside a new core Europe, would be a fundamental misreading of the UK national interest. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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34. Certainly the UK must continue to fight its corner in relation to the fiscal compact, but our strategic approach should continue to be to do all we can to shape the evolution of future European policy. 35. In pursuing that strategy we need always to remember that in the modern European Union outcomes are increasingly shaped and predetermined away from the formal negotiating table. The race tends to go to the proactive, well organized alliance-builders, who maintain effective networks and plan their approach to each issue well in advance. Last minute initiatives of the kind the UK tried immediately before last December’s European Council are unlikely to prosper. The UK has in ample measure the skills needed to build effective alliances in Europe, but we need to ensure that we both maintain them and use them, early enough in the game to have a chance of achieving our objectives. 16 May 2012
Written evidence from Jean-Claude Piris, former Legal Counsel, European Council and EU Council, and Director General, EU Council Legal Service (1988–2010) Summary — The implementation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (“Fiscal Compact”) which was signed on 2 March 2012 by 25 Member States of the European Union (EU) will not, in itself, go against the UK’s interests. — The conclusion of other intergovernmental agreements or arrangements of a similar kind, binding EU Member States other than the UK, and in particular the members of the eurozone, are not to be excluded in the future. — If this were going to happen, the UK’s policy should be to obtain legal guarantees for the protection of its rights and interests. — An intergovernmental agreement or arrangement might be signed, in the period to come, by the members of the eurozone, given the need to increase the convergence of their budgetary and economic policies in order to solve durably the current financial and economic crisis. — Solving this crisis and relaunching economic growth in Europe is a priority aim and an essential interest not only for the eurozone but also for the UK. — It is argued that, if the way of a further integration was chosen by the eurozone to attain this aim, the UK would have no interest, and in any case would have no legal or political means, in trying to oppose or delay this evolution. The UK’s aims could be that the provisions of any new intergovernmental arrangement should be fully compatible with the EU Treaties and guarantee openness and transparency. It should as well confirm the legal obligation of the Contracting Parties, under the judicial control of the EU Court of Justice, to comply with the letter and spirit of the EU Treaties, including the rules on the internal market.
Brief Answers to the Specific Questions of the Committee on the “Fiscal Compact” (1) The December 2011 European Council and its outcome, including the signature on 2 March 2012 of the Fiscal Compact by 25 EU countries, are a logical consequence both: — of the need felt by the eurozone members to go forward in the integration of their policies in order to try and solve the current crisis, and — of the policy decided by the UK’s Government and Parliament, in particular by the 19 July 2011 EU Act.9 (2) One cannot expect the other EU Member States to remain inactive, if and when they think that they have important interests at stake, in cases when the UK exercises its right of veto within the framework of the EU. (3) If such a case happens, it is argued that the UK’s policy should aim at ensuring that any action by the eurozone members shall respect their legal obligations under the EU Treaties. If this condition were fully respected, in letter and in spirit, the place of the UK in the EU and the possibility for the British Government to defend its rights and interests could be safeguarded. (4) The Fiscal Compact will not be legally part of the EU’s acquis. Its entry into force will not have any impact on the EU budget, on enlargement, or on the Common Foreign and Security Policy. (5) The rights and interests of the UK might be easier to defend through an incorporation of the Fiscal compact in the EU Treaties. It appears that the Contracting Parties to the Fiscal Compact would not have any obligation or interest to make concessions as a price to pay to the UK for that incorporation. However, the UK could ask that some rules should be formally confirmed (this would in any case follow from the incorporation 9 See the Written Evidence that I submitted on the EU Bill to the House of Commons (European Scrutiny Committee) on 24 November 2010: “...this might lead to the UK to be sidelined on certain issues. This is because it could trigger a tendency among other Member States to circumvent this situation, either by engaging in enhanced cooperation among themselves without the participation of the UK, or by concluding intergovernmental agreements outside the framework of the EU”. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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in the Treaties), such as the possibility to go to Court in case the UK’s interests would be put in jeopardy by any decision taken by the Contracting Parties to the Fiscal Compact.
On the Possible Future Evolution of the EU and on the Policy of the UK (6) To solve durably the crisis of the eurozone, its members will probably have to increase the convergence of their budgetary and economic policies. (7) Most economists argue that it will not be possible to exit the financial (now also economic) crisis without increasing significantly the convergence of the budgetary and economic policies of the members of the eurozone. This has also been acknowledged by British political authorities. (8) This is now becoming more pressing. The high rate of interest which some of the eurozone countries have to pay to borrow money in the markets makes it difficult to encourage investment. Given the present state of affairs, trying to re-launch their economic growth could trigger a further increase in their interest rate. At the same time, it is becoming unsustainable to continue on the road of more austerity. This increases desperation on the part of their population suffering unemployment and fall in revenues and translates into a heavy price to be paid to populist political parties. (9) To be able to use adequate instruments to re-launch economic growth, a protection from possible reactions of the financial markets would be needed. The opportunity to earn money by speculating against individual members of the eurozone should disappear. To reach this aim, the eurozone should move closer to becoming a full economic and monetary union, as this is the only realistic way for the markets to be convinced. (10) This would demand visible and credible—albeit politically hugely difficult—actions, committing the governments, parliaments and populations of the eurozone countries. This evolution might be accelerated by the current situation in Greece. (11) It is obvious that this would raise huge political problems in the countries concerned, and that it is by no means certain to happen. Would taking such a road be sustainable politically, especially when coupled with budgetary austerity and slow or negative economic growth during a few years? This is a big question mark. However, the economic and political risks of an explosion of the crisis are such that one can bet that the road towards more share of powers within the eurozone has a reasonable chance to be accepted. (12) Making the eurozone a full economic and monetary union would involve accepting a substantial sharing of powers. (13) In such a hypothesis, the members of the eurozone would accept not to be the only masters of their budgetary and economic policies. (14) In legal terms, this would translate into a legally binding convergence, ie to go much further than the language used in 2 March 2012 “Fiscal Compact”, where the Contracting Parties “undertake to work jointly towards...”, “stand ready to make active use, whenever appropriate and necessary...” and “ensure that all major economic policy reforms that they plan to undertake will be discussed ex-ante and, where appropriate, coordinated among themselves...”. (15) The members of the eurozone would be linked together by a joint responsibility and solidarity. (16) According to the author of this Evidence, “joint responsibility” would mean that each country involved should not finally adopt its national budget before having obtained a green light from “the centre”. The choice not to respect a red light would entail the exclusion of financial help from Eurozone Funds. Economic policies might be subject to a convergence mechanism, which would be tighter in cases where a country is receiving financial help. A Eurozone Debt Agency could be created, as well as a Eurozone Banking Supervision Authority, going in the direction of a kind of Banking Union. This might also be accompanied by a minimal harmonisation of national laws concerning taxation (eg a common basis for the assessment of corporate taxes, to be followed eventually by minimal harmonisation) and social policy (such as linking the age and conditions of retirement to current demographic trends, establishing a common minimum guaranteed salary, taking measures to liberalise the labour market and to encourage labour mobility). It is also recalled that Article 138 TFEU might be used to ensure unified representation of the members of the eurozone in the Bretton Woods institutions in Washington, both the International Monetary Fund and the World Bank. These policies and actions would not be detrimental to the rights and interests of the UK or of the other EU States not having the euro as their currency. (17) If such a framework were to be adopted, the other side of the coin, ie “joint solidarity”, might trigger a joint answer to a move from the financial markets directed against an individual country in the eurozone. (18) Such an evolution would take the form of an intergovernmental treaty or arrangement to be concluded by the eurozone countries. (19) A revision of the EU Treaties is politically excluded, especially due to the opposition of the UK and of other EU Member States. The only way forward for the eurozone members would therefore be to negotiate an intergovernmental agreement or arrangement among them. Taking into account its content, the conclusion of a cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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legally binding instrument might involve a referendum, and possibly a change of Constitution, for some countries. (20) It is argued that the UK would not be able, and in any case would have no interest, in trying to oppose such an “Intergovernmental Arrangement” among the countries of the eurozone. However, the UK could and should obviously demand that this arrangement be compatible with the EU Treaties. (21) Besides, the members of the eurozone might, for reasons of coherence and also of political visibility, decide that the Additional Treaty could have other ambitions than in EMU matters stricto sensu, for example: — in the policy of immigration, as linked to the labour market; — in giving new political rights to the citizens of the countries involved, after a few years of residence; — in encouraging swift progress in judicial cooperation in civil matters, especially the law of contracts and family law with cross-borders implications, in order to try and make life easier for families of different nationalities; and — in armament industry cooperation, aiming at a common public procurement; moreover, as regards defense policy, it is not excluded that some of the Contracting Parties consider that the time has come for the implementation among them of the “Permanent Structured Cooperation” foreseen in the Lisbon Treaty. If these last issues were to be considered as raising a difficulty for the UK, the British Government might think about launching other ideas in that domain, if that would better suit the UK’s interests. This might be welcome by the other EU States, as it is difficult to conceive a group of European countries going ahead on defence matters without the active participation of the UK. (22) One of the issues concerning the UK would be to know if a new intergovernmental arrangement would entail a new institutional framework, distinct from the EU’s institutions. (23) It would be in the interest of all to avoid the establishment of new organs, in order not to make the picture of Europe more complex than it is already today. (24) In principle, this should not be problematic for some institutions: the EU Court of Justice, the Court of Auditors and the European Central Bank could work, in their present composition and without any change to their status, in the implementation of an “Intergovernmental Arrangement”, subject to the acquiescence of all EU Member States. One could hardly see what would be the interest of the UK in opposing this. Actually, British nationals are members of all these institutions. It would look better for the UK (and the other EU Member States non members of the eurozone) to accept that these institutions work for the eurozone as well as for the EU, rather than pushing the Contracting Parties to create new organs, which would appear to be legally feasible, even if politically unadvisable. (25) As for the European Council and the Council, the current situation would not be changed. Meetings of the 17 are already taking place back-to-back with them, both at the level of Heads of State or Government and at the level of ministers responsible for economic and financial affairs. (26) The issue of the possible role to be conferred on both the European Parliament and the Commission would be more difficult. (27) It is quite obvious that, given its content, the implementation of an Additional Treaty would make it an absolute requirement to have strong, effective and legitimate democratic control. For legal reasons (text of the EU Treaties), it would look a priori impossible to use only the MEPs from the eurozone countries.10 For political reasons, it would be difficult to use the entire European Parliament which, moreover, would not bring sufficient political legitimacy, especially in these matters, which are in the remit of National Parliaments, which have the power to decide on taxes. It would also be difficult to ask the National Parliaments of the States concerned to accept an important transfer of their powers in such essential domains, without giving them any say when corresponding decisions will be made at the European level. The logical solution would therefore be to establish a Delegation composed of Representatives of the National Parliaments concerned and to confer upon it a real power of co-decision and control. (28) As to the Commission, it would be difficult to imagine the EU Commission, composed of one member for each of the 27 (soon to be 28) EU Member States, taking (at least theoretically) all its decisions by a simple majority, being in charge of monitoring and imposing its decisions in essential matters to a group of them. However, it would be even more difficult to envisage the creation of a new organ with a whole range of similar functions, as well as with the necessary human resources which that would require. A solution might be found through the establishment of a small political organ, exercising limited tasks by itself, and out-sourcing their preparation, as well as other tasks, to other bodies, including to the EU Commission, if this was accepted by all EU Member States. 10 This might be seen as going against the letter and the spirit of the provisions of the EU Treaties on the European Parliament. Article 10(2) of the Treaty on European Union provides that “citizens are directly represented at Union level in the European Parliament”. The mandate of MEPs is a European and not a national one. Actually, there are numerous acts voted in the EP that do not apply to all 27 EU Member States, for example legal acts concerning fisheries, mountain areas, or specific kinds of industry. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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(29) This would look easier if the EU Commission were re-organised, in order to be more efficient, assertive and independent, both from the Member States and from the European Parliament, in particular at a time when more powers are conferred upon it for the governance of the euro. The UK might be interested in such a way out, especially if it helps re-organising the EU Commission, which has been regrettably weakened over the last two decades or so. (30) The imperative for the UK would be to request and obtain respect and protection of its rights and interests. (31) The UK will certainly demand that the eurozone should not establish itself as the first class of a permanent two-class or two-tier EU. Any action of what should remain a temporary group should be excluded in areas pertaining to the exclusive competence of the EU, including the areas of shared competence where the EU has already exercised its competences. The group should be forbidden to deal with issues directly linked, inter alia, to the internal market, external trade or foreign policy. (32) It should respect the normal functioning of the EU and of its institutions. Priority should always be given to proposals of the Commission to act or to legislate in the framework of the EU. The cohesion of the EU should be preserved, both in the internal market and in foreign policy. (33) An Intergovernmental Arrangement, legally binding or not, should always remain open to accession for the other EU Member States, and foresee means to help those of “the others” willing and able to join. Actually, “the others” include States whose stated policy is to have the euro as their currency as soon as possible. Once these States will have ratified the “Fiscal Compact” and confirmed their policy, they might be offered an “active observer status” in the organs of the eurozone group. (34) As for the others, including the UK, they should insist that their concerns be taken into account and allayed. Provisions ensuring the legal protection of their rights and interests should be included in any new Intergovernmental Agreement. Firstly, openness and transparency should be ensured. Secondly, legal rules, whose respect should be under the judicial control of the Court of Justice of the EU, should guarantee the group’s strict compliance with the letter and spirit of the EU Treaties, in particular of the rules on the internal market. (35) Solving the current crisis of the eurozone would obviously be good for all EU Members, including the UK. It would be in the interest of the UK that the members of the eurozone organise themselves in order to solve durably the crisis, on the condition that the rights and interests of the UK be strictly and legally protected. 15 May 2012
Written evidence from Sir Michael Franklin KCB, CMG Deputy Director General, European Commission, 1973–77; Head of the European Secretariat, Cabinet Office, 1977–81; subsequently Permanent Secretary, Board of Trade and Ministry of Agriculture, Fisheries and Food
Summary — The December 2011 European Council did not disrupt business and was not a watershed. — The EU can accommodate different national needs without the dangers of a “two-tier” Europe. — Political changes in France and elsewhere open a new debate on how to restore growth in Europe; the UK must play a full part. — n other important areas of EU activity, the UK has an important contribution to make. — HMG should see its role in the EU in constructive not defensive terms, and present it in this way to Parliament and the British public. 1. The December 2011 European Council was not, and should not be seen as a watershed. Whatever the arguments for and against the position taken by HMG at the meeting, its effect was not to block progress. With characteristic ingenuity, the EU institutions found a way of dealing with the UK’s unwillingness to sign up to the draft fiscal declaration. It is encouraging that, since the meeting, HMG has shown every sign of wishing to proceed with “business as usual”. The eurozone crisis is too serious to worry too much about legal niceties. 2. Over the years, the EU has shown itself adept at accommodating different requirements of the member states. It abounds in derogations, opt-outs, partial membership, special treatment and other departures from a monolithic structure. I see no need and many dangers in trying to formalise this practice into some kind of two-tier EU. 3. It is now clear, notably with the arrival of a new French President, that a new debate on how to deal with the economic crisis is beginning. It may not reopen the Fiscal Treaty as such but it will certainly lead to a vigorous challenge to its adequacy as a means of solving the many problems of recession, unemployment and banking failures. In one form or another, there will be more emphasis on parallel policies to stimulate growth. This will be an EU-wide debate and it is therefore important that the UK should play its full part in it. It could also provide a convenient opportunity for the Fiscal Treaty to be incorporated into the EU Treaties. Since its cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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contents accord so closely with current UK policy, there seems no reason why HMG should not give its consent, perhaps as part of a package of measures acceptable to the UK resulting from the current debate. 4. I note with satisfaction that the Committee’s enquiry is “starting from the assumption that the UK should and will remain an EU Member”. This must surely be right. But at present the UK is not getting full value from its membership. The Committee could play a very valuable role in asking, more generally than the particular questions on which the Committee has sought evidence, how the UK Government should play its role as an EU member. All too often in the past, under governments of different persuasions, the UK has put itself on the defensive in Europe. Hence it is often seen by others as a reluctant member, not willing to engage constructively and all too often seeking special treatment for the UK. 5. When we were fighting for a fair UK budgetary contribution such an attitude was inevitable and the legacy is still with us. But that touches only one aspect of EU policy. There are others where the UK can and should have a positive contribution. That has always been true of trade policy where the generally liberal trade policies have owed much to British influence. Even in agriculture, the CAP, albeit still absorbing too large a share of the budget, has changed significantly for the better in ways much closer to UK thinking. In those areas where the EU has still not achieved a single market, there is much for the UK to play for. 6. The EU’s Common Foreign and Security Policy is a hugely important and growing part of the EU’s activities. Here, surely, with its basis in co-operation rather than majority voting, is a place where the UK by virtue of its history and diplomatic skills can and should play a leading role. 7. If, in these and other areas, the UK Government can be seen actively to serve British and European interests well, it would offer public opinion good news to counterbalance the negative and often misleading accounts currently offered by the media. Its actions and decisions need to be explained to Parliament and to the British public not in confrontational terms but as being the result of honest negotiation and in terms which show where the outcome has been beneficial for Britain and of the EU as a whole. As I wrote in 1990,11 “by all means let Britain act in the future more as though what is good for Britain is good for the Community, but we need also to believe that what is good for the Community may be good for Britain”. 18 May 2012
Written evidence from The Church of England, The Archbishops’ Council Summary of Main Points — The Church of England is a Church established by law in the UK but it is also by virtue of its history a European Church. It recognizes that to have any influence in Brussels it needs to work in partnership with others. To this end it has invested time, energy and resources in building appropriate bilateral and multilateral relations with key strategic partners across Europe. — At the December 2011 European Council, the United Kingdom found itself not only without allies, but without credibility as a negotiating partner as it opposed measures which were intended to achieve broad policy goals which are fully in line with UK national interest. This exposed the domestic constraints on the British government and left its partners with the impression that it was an unreliable partner. An opportunity to show solidarity with partners was missed. The UK must work to rebuild trust with its EU partners. — Successive British governments have failed to articulate a policy towards the United Kingdom’s closest partners that sustains public opinion while enabling it to take a constructive line across the board. Unless future governments develop more constructive and positive conceptions of and commitments to the EU and are able to sell them to an increasingly skeptical domestic audience then Britain could find itself slowly drifting towards the exit. Rather than looking to formalize a two-tier structure the Government should use existing Treaty provisions on enhanced cooperation to press for a more flexible multi-speed Europe with variable membership across different policy spheres. — By agreeing a legally binding intergovernmental agreement outside the scope of the EU Treaties, signatories to the fiscal compact have marginalised the EU institutions and in so doing weakened their ability to defend the single market. These new arrangements could also have significant implications for the EU’s common judicial space and common foreign and security policy. There is a very real worry therefore that the fiscal compact while saving the Euro might over time contribute to the EU’s demise. — It is in the fundamental interests of the UK that the problems of the Eurozone are resolved and it is in the UK’s interests that this fiscal compact is folded back into existing EU Treaties as soon as possible. Those wishing to press ahead with a stability union should be able to do so using existing Treaty provisions that allow for enhanced cooperation. The development of a two-tier or even a multi-speed Europe is not without its risks but it is preferable that such a development builds on existing Treaties rather than departing from them. 11 “Britain’s Future in Europe”. Michael Franklin with Marc Wilke, Chatham House Papers, RIIA, 1990 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Introduction About the Mission and Public Affairs Council 1. The Mission and Public Affairs Council is the body responsible for overseeing research and comment on social and political issues on behalf of the Church. The Council comprises a representative group of bishops, clergy and lay people with interest and expertise in the relevant areas, and reports to the General Synod through the Archbishops’ Council.
A European Church 2. The Church of England, established by law in England, is a European Church active in all the member states of the European Union. It counts among its members nationals of all the member states and many others. 3. The Church of England maintains very close links with the Anglican churches of the rest of the United Kingdom, Ireland, Spain and Portugal. It works in partnership with the Old Catholic churches in Netherlands, Germany, Austria and Switzerland, the Lutheran churches of Iceland, Norway, Denmark, Sweden, Finland, Estonia and Lithuania. Special agreements also exist with the Evangelical Church in Germany and the Roman Catholic Church in France. It maintains 25 companion links with churches in Europe and is active in the Conference of European Churches. 4. It is from this broad base that the Church of England engages with the European Union. The Archbishop of Canterbury has a permanent representative to the EU institutions in Brussels and members of its Europe Bishop’s Panel are frequent visitors to Brussels and Strasbourg. 5. The Church of England’s policy on Europe has been framed by a succession of papers which have been endorsed by the General Synod, its representative assembly. The Church of England engages with the European Union to ensure a values based approach to Europe’s development. It does so in order to build a humane, socially conscious and sustainable Europe at peace with itself and its neighbours.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 6. The 2011 December European Council was less a watershed in Britain’s relationship with the EU as it was the natural and inevitable consequence of decisions taken by successive British governments over the last two decades. 7. The decision not to join the Euro until the economic conditions are right, and only then if approved by referenda, has meant that Britain has always been detached from conversations regarding the governance of the Eurozone. One of the stated reasons why past governments have opposed membership of the Eurozone is that along with monetary union must come closer fiscal integration. There is therefore a “remorseless logic” of closer integration in-built into the Euro project that Britain has rightly or wrongly decided to exclude itself from. 8. Moving beyond Eurozone specifics, the 2011 European Union Act acts as an emergency brake on Britain’s relationship with the EU by requiring any proposed EU Treaty or Treaty change to be subject to a referendum. As a number of Lords Spiritual pointed out at the Second Reading, the Bill ties the government’s hands in future Treaty negotiations by delegating authority to the people acting through a referendum. The relatively negative state of public opinion towards the EU (in 2011 opinion polls indicated for the first time a majority in favour of leaving the EU) opens up the prospect of referendum defeat for any future government. 9. The December 2011 European Council showed, however, that the 2011 European Union Act does not serve as an emergency brake on the integrationist tendencies of others. That other countries, even non-Eurozone states, are now willing to openly press ahead without Britain, even if that means working outside the formal structures of the EU, is symptomatic of Britain’s waning influence in Europe and its declining ability to cultivate allies in Europe.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 10. Institutional architecture and membership should be the servants of the issues and priorities that can be anticipated, not goals in themselves. Economic austerity and its consequences are likely to dominate policy, not just in the United Kingdom, but across Europe, well beyond 2020. In these circumstances it will be more than ever necessary for government policy to project hope and to demonstrate solidarity, not just domestically, but with our partners. 11. Against this uncertain background future British governments need to develop constructive and positive conceptions and commitments to the EU, sell these ideas to an increasingly sceptical domestic audience, and find friends in Europe. Unless it does so the UK could find itself slowly drifting towards the exit. That would be a travesty given the positive contribution that Britain has made to the EU since it joined in 1973. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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12. Any notion that the UK could somehow turn to “like-minded” member states to define an alternative to a core of more “integrationist” member states was shown by events in December to be unrealistic. The problem of the December European Council was not that of two camps, but of a single camp with one major player outside it, despite its vital interest being at stake. 13. The events of December have shown that, despite differences of approach between member states, almost all wish to travel together based on a recognition of continuing shared interests and a desire for solidarity in the face of the most significant policy challenge for the EU since its inception. A two-tier Europe is simply not on the agenda. We suspect Europe’s future will be more messy and complex with Europe developing a multi-speed approach with variable membership across more closely coordinated policy spheres. 14. Existing European Treaties provide for enhanced cooperation between member states. Britain should look to use this Treaty provision to develop permanent areas of structured cooperation with like-minded member states on issues of strategic concern across the other two pillars of the EU. An obvious area which would benefit from enhanced cooperation is the field of defence and security and it is an area where Britain can play a leadership role. Such an approach might ensure that Britain is seen as a full and committed EU member, even if it absents itself from the Eurozone and its governance structures. 15. Under this arrangement member states are likely to find themselves operating in different contexts with a different mix of partners and travelling at differing speeds rather than travelling together in convoy at the speed of the slowest. The Europe of tomorrow might therefore more closely mirror the Europe de Parties envisaged by Charles de Gaulle than the supranationalism pursued by Jean Monnet. 16. We anticipate that the break with the one-speed model to a multi-speed Europe, could help unpack some of the obstacles that currently impede the future enlargement of the European Union. Enlargement has run into the ground within the current EU. But a messier and more variable multi-speed Europe might prove a vehicle through which to integrate Turkey, Ukraine and others. 17. We accept that there are as yet un-assessed risks with this model of European cooperation. Is enhanced cooperation fragmentation by any other name? Will an a-la-carte approach to Europe generate a strong-enough sense of common purpose for Europe to survive? At what point in the process does Europe’s policy making become incoherent and ineffective? How might the move to various sub-groups possibly with their own institutions and procedures impact on the EU’s institutions and other policy areas? Will smaller member states feel marginalised such that the trust that binds all member states together is eroded? 18. Whatever the answer to these questions, ideas regarding the future of Europe must seek to close the gap between Europe and its citizens. Popular disenchantment with the EU, might be most marked in the UK, but the EU’s crisis of legitimacy is a Europe-wide rather than a uniquely UK problem. As suggested by the Lord Bishop of Guildford in the House of Lords debate on the EU on 16 February 2012, Europe needs a revival of the vision of Europe which fired the EU’s founders and which is deeply rooted in Europe’s many cultures and, now, its many communities of faith. 19. From a UK perspective the Government needs to move beyond the defensive measures provided by the 2011 European Union Act to articulate new channels by which voters can be engaged in the political choices facing the EU. These measures need to be complemented with steps to tackle at both a national and European level some of the issues that fuel populist debates about Europe, some of which are based on miscommunication.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy? 20. As the Lord Bishop of Guildford made clear in the EU debate of 16 February it is to be welcomed that Britain has taken a more pragmatic line when it comes to the use of EU institutions in the workings of the fiscal compact. 21. We remain concerned, however, that the fiscal compact weakens these institutions and makes it harder for them to perform their role of defending the single market and ensuring that all member states are treated fairly. At the very least these institutions will have to try and reconcile two sets of rules and procedures which can only absorb time and resources so making it harder for them to protect and extend the single market. We suspect that over time the relationship between the EU institutions and the fiscal compact will be determined by the European Court of Justice. 22. It was possible that over time the “Euro core” even without the complication of the fiscal compact would increasingly speak with one voice within the EU as well as outside it. The fiscal compact threatens to accelerate this process. Although history suggests that countries tend not to act as a cohesive caucus there is clearly a risk of signatories to the fiscal compact agreeing a single position and only then negotiating with others. It is important that assurances are in place beyond those set out in the fiscal compact that key policy areas such as the single market, common trade policy and the common budget will be negotiated at the level of all 27 member states rather than being decided by a subset of the EU. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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23. Externally, there is a danger that these new arrangements will impair the EU’s ability to present a coherent and unified position to others and in international forums with the result that the benefits of a common foreign and security policy remain unrealized. The EU has built a reputation for being fiercely committed to a global order based on strong, multilateral rules and institutions. It supports free trade, the United Nations and global solutions to challenges such as climate change, economic marginalization, poverty and organized crime. 24. As suggested by the Lord Bishop of Exeter in a supplementary question in the House of Lords on 8 December 2011 the EU’s international reputation has already been dented by its handling of the Eurozone crisis, but its soft power could be further eroded if others find the way it organises itself less attractive. We suspect it will be hard for the EU to meet future challenges if an important geopolitical country such as Britain is excluded from its core. 25. We note here the ongoing discussions between France, Germany and Italy as to the possibility of unilaterally establishing their own joint representation at the IMF which might in time provide a core multi- country seat around which all euro area members might be included. We worry that in seeking a solution to the Euro crisis member states might have weakened Europe’s ability to play a role in a world which is seeing a significant transition of power from West to East. That is not only regrettable but shortsighted.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so? 26. The EU and the Eurozone had various options available to them to resolve the institutional crisis that lies behind the euro crisis. They could have continued with the policy of incremental shifts without treaty change, changed the European treaties to create a stability union or broken free from existing treaties and signed a legally binding agreement amongst themselves. 27. None of these options provide(d) a cast iron solution to the problems affecting the Eurozone, but we consider the third option the most risky and least attractive. It potentially threatens the future of the EU itself by creating over time a tightly integrated core that undermines the single market and prevents Europe from exercising its collective power on the world stage. 28. It is in Britain’s interests that this fiscal compact and/or its provisions are folded back into existing EU Treaties as soon as possible. Those wishing to press ahead with a stability union should be allowed to do so using existing Treaty provisions that allow for enhanced cooperation. The development of a two-speed or even a multi-speed Europe is not without its risks, but it is preferable that such a development builds upon the existing Treaties rather than departing from them. 29. In terms of safeguards, the Government should press for a deepening of the single market in order to strengthen the ties that bind all member states together regardless of which lane they are in. This step might be productively linked to pressing for enhanced cooperation in other areas where Britain has a competitive advantage and strategic interest such as foreign and defence policy. 30. Taken together these measures might go some way to dispelling the impression given in December 2011 that Britain was being awkward for the sake of it. We recognise that this strategy is unlikely to find immediate favour with a euro-sceptic electorate, but over time it might help to refute the assertion that the EU works against British interests. 21 May 2012
Written evidence from Professor Clive H. Church, Dr Paolo Dardanelli and Sean Mueller, Centre for Swiss Politics, University of Kent THE “SWISS MODEL” OF RELATIONS WITH THE EU AND ITS RELEVANCE FOR THE UK Executive Summary 1. The idea that it would be advantageous for the UK to adopt the “Swiss model” of relations with the EU instead of membership is neither new nor politically neutral. 2. The suggestion is based on a poor understanding of the features of such a “model” and of the conditions within which it operates. 3. Actual Swiss relations with the EU have disadvantages as well as advantages. 4. A careful examination of the Swiss experience suggests that the Swiss “model” is inferior to the status quo of UK-EU relations. 5. The UK should try to preserve a unified institutional structure for the EU in the face of pressures for a formalised two-tier architecture.
Submitters Clive H. Church is Emeritus Professor of European Studies, Paolo Dardanelli Lecturer in European and Comparative Politics, and Sean Mueller a doctoral researcher in Comparative Politics, all at the University of cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Kent’s Centre for Swiss Politics. Prof. Church has been working on Switzerland since the 1970s and published three books, notably the edited volume Switzerland and the European Union (Routledge 2007). Dr Dardanelli is the author of a series of articles and book chapters on Swiss politics while Mr Mueller, a Swiss national, is completing a PhD on inter-governmental relations in Switzerland.
1. Purpose It is sometimes claimed that Switzerland’s relations with the EU might provide a better model for the UK than membership. The claim is generally based on a limited understanding of the Switzerland-EU “model” and especially of the conditions within which it operates. The purpose of the present evidence is to outline key features of Switzerland’s actual relations with the EU and explore the extent to which these could profitably be adopted by the UK.
I. Swiss Relations with the EU 2. The Idea of a Swiss “model” Those who suggest the UK adopts the “Swiss model” proceed from admiration for Switzerland’s economic and political performance. However, the reasons for this are rarely spelled out. They have to be teased out of a series of broad statements about free trade and bilateral cooperation. Critics of UK membership tend to believe the main pillars of the Swiss model to be a popular refusal to join the EU; government intransigence towards “Brussels”; one-to-one free trade deals with the EU; co-operation in other areas of use to Switzerland; a separate currency; a limited/part time parliament; and referenda. However, whether all this amounts to a “model”, either in the sense of a single, deliberate Swiss creation or a template accepted by all those who urge the UK to follow the Swiss example, is far from certain.
3. Background Membership of any supranational organisation was long considered incompatible with the country’s traditional policy of neutrality. Switzerland did not get involved in the early phases of European integration and stayed outside both the European Coal and Steel Community and the European Economic Community. It joined, however, the European Free Trade Association (EFTA) in 1960 and the Council of Europe in 1963 as these organisations were by then perceived not to encroach on neutrality and sovereignty. In 1972, along with the other EFTA states, it signed a treaty with the EU on free trade of manufactured goods.
4. EEA negotiations and EU application The emergence after 1989 of a narrower conception of neutrality, and the changing international context led Switzerland to take part in the negotiations to create the European Economic Area (EEA) and to apply for EU membership in May 1992. Ratification of the EEA treaty, however, narrowly failed in a referendum in December 1992. The campaign exposed deep divisions within Swiss society and led to a record high turnout. Subsequent events have confirmed the caution of the Swiss electorate about further integration, although pragmatism has often won out over Europhobia.
5. The bilateral approach After the EEA vote, the country embarked on a bilateral approach, aiming to sign separate treaties covering a range of policy areas so as to fill the gaps left by being outside the EEA. The first main package of bilateral treaties proved difficult to negotiate and only came into effect, after endorsement in a referendum, in 2002. It contained seven separate agreements on free movement of persons; technical barriers to trade; public procurements; agriculture; research; and overland transport. A second package was signed in October 2004. Its nine separate agreements entered into force at different times, according to different ratification requirements: processed agricultural goods, pensions, and taxation of savings (all three in force since 2005); environment and media/film industry (both 2006; renewed film agreement signed in 2007 and in force since 2010); statistics (2007); Schengen/Dublin (2008; airports 2009); education (2010), and fight against fraud (not yet ratified by all EU states; applied by Switzerland since 2009 with those that have). In these areas, EU law directly applies to Switzerland. At least 120 other technical agreements are also in place, some dating back to the post war years. Switzerland also contributes financially to EU cohesion and research policies.
6. Informal Integration The EU’s impact on Switzerland goes beyond the effect of formal treaties. In order to make its economy as EU-compatible as possible, the country has adopted a policy of “voluntary adaptation” whereby Swiss law is aligned with the EU’s acquis communautaire. A prominent example is the incorporation of the Cassis de Dijon principle into domestic law in 2010. Recent research shows that around 55% of the laws passed by the Swiss parliament concern transposition of international, including EU, law. The bilateral treaties and the country’s voluntary adaptation have led to Switzerland being much more deeply integrated with the EU than suggested by its formal status as a non-member. Indeed, in certain respects such integration is deeper than that of EU members such as the UK, as the case of Schengen shows. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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7. Advantages 7.1 The resulting relationship clearly has many attractions for Switzerland. If initially it was a fallback option in the face of a lack of popular support for membership, it has come to be seen by both the elite and the electorate as the best way of managing the country’s relations with the EU. 7.2 The bilateral way essentially enables Switzerland to benefit from access to the single market while retaining a degree of political autonomy in other spheres. Compared to EU membership, such autonomy is particularly significant in monetary, fiscal, trade, and agricultural policy. It also exempts the country from making a contribution to the EU budget commensurate with the size of its economy. 7.3 Symbolically, the bilateral way preserves the formal trappings of state sovereignty and allows the unencumbered exercise of direct democracy. The bilateral way has so far served the country rather well. After a difficult period in the early 1990s, the economy has been highly successful over the last 15 years. At least some of this success can plausibly be attributed to its pragmatic partial integration with the EU.
8. Disadvantages 8.1 The most fundamental disadvantage is that Switzerland finds itself directly or indirectly compelled to adopt much of EU law without having any say in the process of making such law. The EU has made it clear that access to decision-making can only come with membership, so this is unlikely to change. The paradox is thus that an arrangement meant to protect Switzerland’s autonomy is actually eroding it. Indeed, some say Switzerland is a vassal or satellite of the EU. 8.2 The legal framework of the bilateral approach is cumbersome, fragmented and static. The linked nature of most of the treaties makes individual agreements potentially hostage to others. This complicates their adaptation to the evolving acquis communautaire. A subsequent negative vote in a referendum might endanger the whole initial package. Moreover, while the Swiss government has contemplated negotiating a third set of treaties, the EU has made it plain that it believes the bilateral road has come to an end and that in the future the relationship would have to be based on quasi-automatic acceptance of EU law. The government has aired proposals on the basis of which Switzerland would “provisionally” adopt the evolving acquis under the supervision of a Swiss monitoring agency and subject to direct democracy challenges. But the EU has already signalled its opposition to such an arrangement. 8.3 Some of the advantages also have a negative side to them. Freedom of movement has led to a substantial influx of labour and exacerbated tensions around the high percentage of non-nationals in the country (22%). In April 2012, the Swiss government decided to cap immigration from the post-2004 EU states under a safeguard provision, attracting vocal EU criticism. The rapid appreciation of the Swiss franc in the context of the Eurozone crisis has also created problems. The Swiss National Bank tried to cap the currency’s rise by committing itself to maintaining a lower bound of Sfr 1.20 to the euro, a stance now being tested by the markets.
9. Conclusions 9.1 The Swiss “model” of relations with the EU is one of considerable integration without membership. It would be erroneous to interpret it as “market access without the burden of regulation” as the impact of EU law on Switzerland is very extensive. Equally, the idealized view of an intransigent and wholly aloof stance is not borne out in practice. Moreover, while bilateralism has served the country well so far, there are serious doubts as to whether it can continue to do so. Switzerland thus finds itself in an impasse, with the bilateral room for manoeuvre increasingly narrow, on the one hand, and severe domestic obstacles in the way of a more comprehensive agreement—or membership—on the other. 9.2 Switzerland has not ruled out membership altogether. Although joining is no longer active government policy, the application submitted in 1992 has not been formally withdrawn despite much pressure for this. A fundamental obstacle is presented by negative public opinion and high constitutional hurdles. Under the country’s federal system, membership would have to be approved in a referendum by a double majority of citizens and cantons. As some of the latter are very small and strongly anti-EU, observers estimate that close to a 60% popular majority would be needed to clear the cantonal majority requirement. The present state of public opinion is very far from that: only around 20% favour EU entry, although attempts to insert a 10-year moratorium on entry into the Constitution have recently failed. 9.3 Switzerland thus faces a fundamental trade-off, pitting the autonomy derived in some areas from staying outside the EU against the costs of not having access to EU decision-making. The viability of the bilateral model rests on the former being greater than the latter. While this might have been true in the past, as the country’s de facto integration continues—hence its autonomy shrinks—there are increasing concerns that costs might soon outweigh benefits.
II. The Model’s Relevance for the UK 10. Origins of the idea The idea that the UK should adopt the Swiss model of relations with the EU is neither new nor politically neutral. It has its roots in calls for the UK to rejoin EFTA and was advocated in the late 1980s by the Bruges cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Group. More recently, it has been advanced by Daniel Hannan MEP, Sir Rocco Forte and others. Thus David Campbell Bannerman MEP told the EP that the UK should replace membership by “a free trade agreement, an arrangement very successfully adopted by Switzerland, saving it CHF 3.4 billion”. In other words, the idea has come mainly from critics of the EU. Some have also called for the adoption of features of the Swiss system in the UK, notably direct democracy and decentralisation.
11. Applicability to the UK However, the model has significant limitations even for Switzerland. Any discussion over its applicability to the UK must also take into account the major differences between the two countries. While some of them would work in favour of the UK, others would make the model even less attractive for the country than it is for Switzerland.
12. Levels of interdependence A first important aspect is the different level of interdependence with the EU. Because of its size, economic structure, and geographical location, the UK is less dependent on (the rest of) the EU than Switzerland is—the EU buys 60% of Swiss exports. A hypothetical UK-EU bilateral relationship would thus be less asymmetrical than the Switzerland-EU relationship at present. This could mean that the UK would find itself in a stronger bargaining position vis-à-vis the EU and be better able to secure advantageous terms.
13. “Withdrawal” versus “rapprochement” A fundamental difference, however, is that Switzerland has come to the present model through progressive rapprochement to the EU. The UK would have to adopt it after having left the EU. The two dynamics are obviously very different and might produce different attitudes on the part of the EU. While the EU has been more accommodating in its approach to Switzerland than might have been expected, this is now changing, and could rub off on attitudes to the UK after renegotiation or withdrawal.
14. No such thing as “free trade without regulation” As outlined, the Swiss model is essentially one of considerable integration without membership, not of rejection of integration. Crucially, it includes acceptance of EU economic regulation without a say in shaping such regulation. If support for the Swiss model in the UK is motivated by a desire to escape EU regulation, then the former certainly is not the way to pursue that objective. If the UK left the EU, it could only retain access to the single market by also accepting regulation, and would have no influence over the making of such rules—or certainly less than at present.
15. Savings versus influence trade-off The UK already enjoys a tailor-made, semi-detached form of EU membership—which leaves it outside two of the key areas of integration, monetary union and Schengen, but with the option of joining them any time— while Switzerland has joined Schengen. Hence, the Swiss situation’s chief attraction for the UK essentially rests on the savings the country would make if it did not have to pay member-level contributions to the EU budget. While such savings would be substantial, they should be set against the loss of influence the UK would suffer from withdrawing from the EU. In broad, as opposed to narrow accounting, terms, the costs of the latter would almost certainly be greater than the benefits of the former.
16. The impact of possible EU restructuring It is possible that the EU will restructure in the direction of a two-tier, core and periphery, architecture as a response to the Eurozone crisis. If so, the key question for the UK would be what level of access to institutions and decision-making the “outer” members would have. Should restructuring go as far as effectively marginalising the non-core countries, membership of such “periphery” would come to resemble membership of the EEA. This would raise questions in the UK as to whether the terms of the trade-off outlined above would still be in the country’s interests. In such a scenario, the Swiss model might become more attractive for the UK. It would be premature, though, to assume a restructuring along these lines. While the “remorseless logic” of integration, as the Chancellor put it, is certainly at play in the Eurozone, there are powerful obstacles in the way of fundamentally changing EU membership into separate “classes”.
17. Conclusions Many of the advocates of the Swiss model in the UK have an imperfect understanding of the features of actual Swiss practice and the challenges it is currently facing. In particular, they fail to appreciate that the model does not deliver free trade without regulation and that it carries high costs in terms of influence. The “selective” form of membership the UK currently enjoys appears clearly superior to the Swiss model, even from a narrow cost-benefit analysis, let alone from wider considerations such as the UK’s place in the world etc. Unless the “constitutional” architecture of the EU changes dramatically in the wake of the Eurozone crisis, this situation is unlikely to change for the foreseeable future. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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III. Recommendations to the Committee
18. Swiss model unsuited to the UK
Our central recommendation is that the Committee should consider the Swiss “model” of bilateral treaties as unsuited to the UK. It would be an inferior form of pursuing the country’s interests in its relations with the rest of Europe compared to the status quo, because it would mean giving up political leverage over fundamental EU decisions.
19. December 2011 European Council and the “fiscal compact”
We would not over-emphasise the significance of the December 2011 European Council. While the “fiscal compact” is important, it has not so far greatly impinged on thinking about the Swiss “model” or on actual Swiss relations with the EU. The latter continue to focus on banking secrecy, tax policy and the question of finding a mutually acceptable form of institutional and policy cooperation. However, in line with much Swiss opinion which sees the history and structure of Swiss nation building as something which the Union should adopt, one think tank has seen it as another potential case where the EU might use Switzerland as a model. This points to the fact that the fiscal compact, assuming it comes into effect in its present form, and especially if it is incorporated into the treaty base, could well introduce a new element of EU-directed control of national economic and financial policies.
20. UK Position on a “two-tier” EU
The UK is already in a de facto special form of membership but has full access to the institutions and formal decision-making. A more formalised division into two tiers that would limit institutional access and influence on decision-making would be unlikely to be in the country’s interests. The UK should thus try to retain a unified institutional structure for the EU. 21 May 2012
Written evidence from Civitatis International
About Civitatis International
Civitatis International is an independent and supranational think-tank on global governance. Civitatis International is composed of a global network of leading international relations professors and practitioners around the world who research according to the editorial mandate of Civitatis International: Constructive solutions to the common global challenges and crucial issues facing mankind’s civilization now and in the future.
Civitatis International works with stakeholders around the world as a supranational research institute independent of any state interest so as to effectively analyse and propose solutions to the interlinked global challenges. Civitatis International publishes its high-level research on global issues to former and serving heads of state and government and global stakeholders.
Policy Seminar: The Future of Europe
Civitatis International convened a policy seminar on “The Future of Europe: Towards the European Dream?” at the Office of the European Parliament in London on 19 April 2012.
Sir Peter Marshall KCMG CVO, Former Deputy Secretary General of the Commonwealth and distinguished British diplomat, chaired the seminar. The discussants included: Mr Edward Mortimer CMG, Former Chief Programme Officer of the Salzburg Global Seminar and former speechwriter to UN Secretary General Kofi Annan; Mr Daniel Ottolenghi, Head of the London Office of the European Investment Bank; Mr Maurice Fraser, Senior Fellow in European Politics at the European Institute, London School of Economics and Associate Fellow at Chatham House and Professor Christopher Coker, Lecturer in International Relations at the London School of Economics and former member of the Council of the Royal United Services Institute.
Taking part in the Civitatis International policy seminar were: Ambassadors to the Court of St James’s; First Political Officers and Embassy representatives from key nations; former British Ambassadors and diplomats; representatives from the United Kingdom Foreign and Commonwealth Office; Former Members of the British Parliament; the Atlantic Council and CEOs of City of London companies. Also in attendance were selected young leaders from the British political parties and London’s leading universities.
The basis of the seminar was to explore the greater vision for the future of the EU in a broader context and not necessarily for the specific interests of each member state. Therefore our recommendations to the UK Foreign Affairs Committee drawn below are specifically to questions 1 and 2 as submission of evidence. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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The below submission of evidence does not necessarily represent the views of the seminar’s participants.
Summary to Recommendations
Some of the solutions derived from the seminar included: Retelling the European story in a way that engages and makes sense to all Europeans; emphasizing not what divides us but focusing on what brings us together as Europeans; reaffirming the values on which Europe was built and not allowing politicians to override those values; building a new European economic growth based on an increased European competitiveness in the global market; accepting the new realities of the changing world order towards a more communitarian world and that the European cosmopolitan model may not become universal.
1. Observations and Factual Information Derived from the Civitatis Seminar
1.1 The current pockets of optimism for Europe appear to be, on the surface, more economic, as opposed to political, and in terms of any separation between the two, a “two-tier” Europe appears to exist. However this is not just simply political versus economic, since there are aspects of economic union which are very important to countries such as Britain, the single market particularly, and equally there are aspects of the political which not all Eurozone members are willing to fully sign up for. “Variable Geometry” or “Multi-speed” Europe is the best description of Europe’s current state. Phrases like “two-tier” imply some sort of automatic division. The situation is infinitely complicated and unless there is full political union it is bound to exist. Sovereign states will always want to do different things. How far will it be possible to organise some sort of fiscal union without it drawing in its train everything else? The language of “two-tiers” is unhelpful. There must be more flexibility than terms of “two-tiers” or “two-speed”, and so “Variable Geometry” is a better phrase for the UK government to use.
1.2 It is imperative that Europe overcomes the Eurozone crisis, because apart from the economic damage, it decreases talk of integration and increases the language of break-up; of the Eurozone or perhaps even of the European Union. Average unemployment in Europe was at 10.9% in March 2012, according to the Financial Times, and there are nine countries in the European Union with double-digit unemployment rates. In creditor countries there is growing appeal of Eurosceptic populist parties. In debtor countries austerity is perceived as imposed by Brussels or hostile Northern European countries, and Europe-wide there is anti-EU sentiment feeding on the impact of recession. The UK government should look into alternatives to austerity.
1.3 To see growth which might facilitate its aims Europe must achieve an increase in competitiveness. This will require both in-depth structural reforms at the national level and gains in competitiveness that can be achieved by European action, through completing the single market in areas so far untouched, such as many service sectors, and potentially developing common infrastructure in transport and energy. Some countries, such as Germany, have already progressed greatly, but many others still have much to do to improve competitiveness. Here too, there is evidence, including that of Germany, suggesting it will take a long time. Mario Monti, the Italian Prime Minister, has even said that Italy will need eight years of structural reforms. Improving competitiveness will mean reform of labour markets, of pension and welfare systems, investments in physical infrastructure, education, Research & Development, and at the European level, completing the single market. There will be powerful resistance to reform from those who benefit from the existing system. Current opposition in Greece, or Italy, to structural reforms is because they touch the interests of people who are benefiting from the existing system.
1.4 While Europe needs to increase competitiveness, it does not have a problem of a finance gap in aggregate. Looking at the EU-27 as a whole, the European Union’s balance of payments is essentially in equilibrium. The problem of gaps in foreign finance for Europe as a whole would arise if Europe had a balance of payments deficit, and in order to finance that deficit it would need recourse to finance from countries such as China, Japan, and Brazil. Europe, as a whole, also does not have a balance of payments deficit. However there are surplus countries and deficit countries, so the problem is of a flow of funds within Europe. There is a reluctance already within Europe by European investors to invest in countries which currently do not appear to have favourable prospects. Why would Japanese investors, for example, want to invest in projects in countries where there is little confidence of a sufficient return? This reinforces the argument for improving competitiveness in Europe. The moment competitiveness begins to increase private capital will start flowing again. A reform that improves the productivity of a rail transport system, for example, would very much interest private investors globally.
1.5 It may be time to start thinking of a wider Europe, and a looser confederation of countries, perhaps in stark contrast to any protectionist measures, including countries like Turkey. This does not exclude the European project or the European Union continuing to go on its way as a free-market, but it does rule out the idea of a political state in the near term, because a political state would exclude those other European countries that have to be part of the European project. Indeed through a broader lens the EU should welcome the fast growth of new emerging powers as they could power a major engine of growth for Europe through trade, and therefore there needs to be an increasingly open trading system both within the EU and with the rest of the world. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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1.6 The emerging economic powers must be factored into European decision-making. Many non-Western people see the European Project as a form of regulatory imperialism, translating Europe’s minimal political power into maximal political power by changing the rules of the game. There are also an increasing number of non-Western social advocacy groups and NGOs that do not share the liberal agenda of the 75,000 NGOs Europe is familiar with, in areas such as social planning. Much of the world does not share Europe’s vision. For example in Africa the Cotonou agreement has existed since 2008, a tripartite dialogue between the European Union, China and Africa around terms of trade. Europe has tried to use this to influence China away from corrupting local officials or using bribery, and to adhere to International Labour Organization standards regarding labour practices. However those in Africa share the Chinese view not the European view. So perhaps there is a failure by the European Union, despite its commitment in its first security paper of 2003, to underwrite soft power with a military dimension which Solana said was essential for civilian power to mean anything in a 21st Century world. 1.7 There is an emerging common European voice on the world level. It is a voice based on European values that speaks on global issues: on climate change, on human rights, on democracy, on the breakdown of non- proliferation, and on the activities of transnational companies around the world. In terms of trade and climate change, it is evident that there is such a thing as collective preferences based on a particular culture and originating in a particular set of values. If Europe intends to be serious about multilateralism then it is going to have to develop a new emboldened type of multilateralism and back up its values with a credible peacemaking capability.
2. Civitatis International Recommendations from the Seminar 2.1 Europe must increase its competitiveness. This is imperative if Europe seeks to see growth and is the strongest plan to bring Europe out of the Eurozone crisis. This will allow the flow of private capital to recommence within Europe, both internally and through external investment. 2.2 The European story must be retold in a way that engages and makes sense to all Europeans. The threat of far-right and -left parties in Europe is very real and many people feel disassociated with the European Project. It is important to connect with those living in Europe to make them feel like Europeans and become engaged with the European story. 2.3 Europe should adopt an increased liberal attitude, rejecting insular protectionist measures. The future of Europe is not as predictable as it once was and as it is rewritten, Europe must ensure that this is not at the cost of the project. Europe needs to start rethinking what it should be ultimately by emphasizing not what divides but what unites us. 2.4 Europe should consider a common military policy. Although it looks unlikely at present, if the EU is going to punch at least not under its weight in the future, there will need to be some form of common military and foreign policy with teeth. This could take the form of an integrated EU Army, Navy, and Air Force. Furthermore, Europe should create its own European Security Council, composed solely of EU member states, enabling Europe to speak and act with one voice on security issues. 2.5 There is a need for a real European identity. Having created Europe there is now a need to create Europeans. It may be time to start thinking of a looser confederation of countries as the way forward for Europe and through this establish what a European identity actually means. This is also true for ideas of the West, which must reconsider its own common values and integration, and seek a new model which facilitates these. 2.6 The EU needs one voice on the global stage, and to enable this each EU country should be represented by one voice on the boards of global economic institutions such as the IMF and World Bank. A debate should begin on the merits of a directly elected, through universal suffrage, executive President of the European Union. 2.7 The EU should welcome the growth of the new emerging powers, as they could prove an engine for growth within the EU through trade. To enable this Europe must promote an increasingly open trading system between itself and the rest of the world. 2.8 Erecting protectionist barriers, both within Europe and at its borders, would be a grave mistake as it would deprive Europe of at least half its potential for growth and job creation. Seeking compromise solutions would do a great deal to avoid the break-up of the EU, and encourage further integration, as many past crises have done. 2.9 Europe must achieve gains in competitiveness by completing the single market in areas so far untouched such as many service sectors and developing common infrastructure in areas such as transport and energy. Europe must also recognise and invest sufficiently into key areas where opportunities for future growth lie, such as Research and Development. 2.10 The UK should seek to emulate states such as Denmark, Sweden and Germany in building models of affordable welfare states within stabilised economies. These countries show this existence is not beyond the capabilities of European states such as the UK and on a wider scale suggest that competitiveness can be restored without eliminating the social protection to which Europe has become accustomed. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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2.11 If European heads of government do not pull themselves together in matters of solidarity with Greece, consolidating the common European values of human rights, social justice and delivering real democracy, they risk the break up of the EU and the values that it and the broader West stand for. To consolidate the peace of Europe, heads of government must build a common defence and energy security framework for the E-27 and accession states or the European Dream of a cosmopolitan legal and rights based world order risks being eclipsed by one of “Hybrid free-market communism”. The United Kingdom, more so than others, has a key interest in and therefore responsibility to secure the peace, values and prosperity of the European Union. The British Government, MPs and MEPs should be mindful of this in their statements which are noted as representing our resolve on the world stage. 22 May 2012
Written evidence from Graham Avery CMG 1. This submission addresses the following questions posed by the Committee: — To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? — Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 2. In summary, I argue that: (a) The UK’s “veto” at the European Council, as seen by its partners, illustrated significant aspects of Britain’s relationship with the EU. (b) The EU already has the characteristics of a multi-tier system; the UK will face grave risks if it remains in the outer circle. (c) The UK has a strong interest in participating in the main political and economic decisions of the EU, including the shaping of its foreign policy. 3. I am a Senior Member of St. Antony’s College, Oxford, Senior Adviser at the European Policy Centre, Brussels, and Honorary Director-General of the European Commission. My evidence is based on personal experience of 40 years as a senior adviser and administrator in Whitehall and Brussels (see biographical note at end).
Implications of the December 2011 European Council 4. The British “veto” at the summit was not, according to commentators, the result of strategic planning on the part of the UK, but a response to the unexpected failure of negotiations in which the UK requested guarantees for Britain’s financial sector in return for ratifying amendments to the Treaty. According to sources in diplomatic circles and the EU institutions in Brussels, this incident illustrated a number of aspects of Britain’s relationship with the EU: (a) The partners were unwilling to compensate the UK for ratifying a deal that imposed no new obligations on it. As one diplomat remarked “we would have liked you to join with us in changing the Treaty, but we didn’t see why we should pay you for it”. (b) Although the UK’s position was presented as a “veto”, it did not stop 25 other partners from continuing with the process of ratifying the changes in another way. As another diplomat remarked “we prefer you to join with us in doing things together, but you are not going to stop us from doing things without you if we think it’s necessary”. 5. These remarks were made—more in sorrow than in anger—by persons friendly to the UK. Others are more critical of British attitudes, for example “you continually preach at us, saying that the success of the euro is a priority, but you show little solidarity; as a result, Britain loses influence and credibility”. Others have remarked that the preparation of the December summit on the UK side was below the professional standards expected of British negotiators. 6. The events of December may not represent a watershed in the UK’s relationship with the EU, but they did demonstrate that when Britain stands outside important EU policies, it has little leverage with its partners.
Multi-tier Membership of the EU 7. The EU already has the characteristics of a multi-tier system: 22 of its 27 member states are in the Schengen zone, and 17 are in the euro-zone. This has not had much impact so far on the EU’s institutions, which still operate mainly in a unitary fashion, but the increasing importance of decisions concerning the euro- zone is beginning to create problems and tensions that will be aggravated by the recent compact involving 25 member states. 8. The EU’s enlargement from 15 to 27 did not result, as some predicted, in more “variable geometry”. Although the 12 new members could not join Schengen or the euro on their entry to the EU, they have cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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progressively qualified for membership of the “inner circles” and continue to do so. The UK thus finds itself in a diminishing minority in the “outer circle”. 9. The Coalition’s Programme for Government stated “We will ensure that the British Government is a positive participant in the European Union, playing a strong and positive role with our partners”. This declaration sits uncomfortably with the actual situation in which the UK is a commentator, rather than an actor, in current decisions on the euro-zone. 10. Britain’s EU policy encourages by default the development of a multi-tier system in which the UK remains in the outer circle. The members of the inner circles will continue to develop common actions and common policies, and take decisions without other members having a vote or being at the table. Whatever assurances may be given, they will naturally tend to ignore the interests of the outer circle. 11. If you are not at the table, your point of view is not likely to be taken into account. Decisions taken without you may not go in the direction that you prefer, and may go in directions that are against your interests. A non-British commentator has expressed it brutally in the following way: “if you are not at the table, you will be on the menu”. 12. As a matter of national interest, the UK needs to be involved in all the important political and economic decisions concerning Europe. This is a question of realism. If the development of common policies is left to Germany, France, Italy and others, this may lead to serious economic and political problems for us. The EU poses difficulties and problems for the UK (and for other members) but it remains the most effective system that has been devised of organising Europe in political and economic terms. It is an illusion to think that, if Britain pulls back, the EU will disintegrate, or limit itself to a common market. Without an effective British presence in the balance of power—in the inner circle—the EU may move in directions that are not in our interest. 13. Two practical conclusions: (a) The British government should be more proactive in the development of European policies in areas where we have a decisive contribution to make and much to gain; this is especially true of foreign policy, a field in which the UK has the experience and resources to shape policy in ways that correspond to British interests. (b) When the sovereign debt crisis is resolved, and the euro-zone is stable, a future British government needs to address the question of joining the euro. In the long term we cannot evade this question if we are to play a decisive role in Europe.
Britain’s Role in the Development of EU Foreign Policy 14. The most important feature of the Lisbon Treaty was the creation of new structures for foreign policy— the EU’s High Representative and the European External Action Service. This reform, which brings together the economic and political instruments of foreign policy, offers the possibility for the EU and its member states to act more effectively to deal with regional and global problems. 15. There are few areas of foreign policy where the UK can be more successful acting on its own than acting together with its European partners. In Beijing, Delhi and Moscow the Europeans exert more influence jointly than individually. As for Washington, an American diplomat with experience in London and Brussels recently told me “in the State Department we naturally want to cooperate with the Europeans acting together; when they act separately—and particularly without the UK—it’s less useful for us”. 16. Although the European External Action Service—the EU’s embryonic diplomatic service—has had a difficult birth, it offers a chance to project the interests and values of the EU’s member states in a more efficient and cost-effective way. In this, British ideas and British personnel can have a decisive influence. If it’s true that the common agricultural policy was fashioned by France, and corresponded largely to France’s interests, then surely the future common foreign policy should be shaped by Britain.
Biographical Note Graham Avery is Senior Member of St. Antony’s College, Oxford University, Senior Adviser at the European Policy Centre, Brussels, and Honorary Director-General of the European Commission. He has given evidence on a number of occasions to Committees of the House of Commons and the House of Lords. In the Ministry of Agriculture, Fisheries and Food in London (1965Ð72) he headed the unit responsible for negotiations for accession to the EC, and later (1976) served as Private Secretary to two Ministers. In the European Commission in Brussels (1973Ð2006) he worked in agricultural policy, foreign affairs, enlargement policy, and the cabinets of the President and other Commissioners. His last post was as Director for Strategy, Coordination and Analysis in the Directorate General for External Relations. He has been Fellow at the Center for International Affairs, Harvard University; Fellow at the Robert Schuman Centre for Advanced Studies of the European University Institute, Florence. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Visiting Professor at the College of Europe, and Secretary General of the Trans European Policy Studies Association. In the Queen’s New Year Honours 2012 he was appointed Companion of the Order of St. Michael and St. George (CMG) for services to European affairs. 21 May 2012
Written evidence from the Foreign and Commonwealth Office Letter from Rt Hon David Lidington MP, Minister for Europe I welcome your Committee’s decision to hold an inquiry on the Future of the European Union: UK Government policy. In providing written evidence I have focused exclusively on addressing the questions posed by the Committee rather than commenting on wider Eurozone issues. However, I appreciate that these issues and broader questions about the Future of the European Union are also of considerable interest to the Committee, and I am willing to discuss these with the Committee at a later stage.
Memorandum To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 1. The December 2011 European Council and its outcome need to be set in context. First, they must be seen in the context of the original decision to set up a single currency within the European Union, which led to the creation of the Eurozone. Greater fiscal cooperation within the Eurozone is a logical consequence of that decision and the December European Council is one moment in this process. As the Chancellor has said, Eurozone states need to accept the remorseless logic of monetary union that leads from a single currency towards greater fiscal integration.12 However, the UK has been clear that as a Member State not committed to joining the euro, it will not be part of this integration. Second, if integration in the Eurozone deepens, the interests of the UK and other non-Eurozone Member States must be protected. Third, since December, we have continued to engage actively in EU negotiations to shape the debate on a variety of EU issues and promote our national interests.
The logic of greater fiscal cooperation in the Eurozone 2. On the first point, in 1992, the UK Government negotiated the right to remain outside the euro area, even when all convergence criteria are met, and therefore the UK is under no obligation to take part in the euro in the future. The UK’s decision to remain outside the euro area has been proved correct. This Government has also enacted legislation (the European Union Act 2011) to ensure that approval in a national referendum would be required by law before the UK could join the euro. 3. Stability and growth in the Eurozone, to which 40% of our exports are sold, matter to our own economic recovery. We have been and will remain a supportive and constructive partner. We have been concerned for some time that certain aspects of the Eurozone arrangements were unbalanced. 4. As the Foreign Secretary outlined in his letter of 15 February 2012 to the Committee,13 as the Eurozone crisis grew more acute through 2011, it became increasingly clear to us that for the euro to survive, the Eurozone required greater fiscal and economic coordination as well as the implementation of the October 2011 Agreement: a larger firewall, the recapitalisation of the most vulnerable Eurozone banks and a sustainable solution to Greece’s debt crisis. Thus this Government has welcomed the greater fiscal and economic co- ordination in the Eurozone required to resolve the crisis, while maintaining the position that it should take place in a way that does not spill over into areas that are properly for the EU at 27, such as the Single Market. We also note that this greater co-ordination does pose questions for Eurozone countries on how it should relate to national democracy and accountability. 5. There is a material difference in terms of the value of and rationale for integration between those Member States in the Eurozone and those outside it. Given the UK’s role outside the euro and having not committed to join the euro, it is right and logical that we have said we will not be part of that closer fiscal integration. It is good that we have our own economic policy, our own interest rates and the ability to deal as we deem fit with the problems that face our economy.
Protecting the interests of non-Eurozone Member States 6. The UK considers that under the EU Treaties there is a proper role for the EU Institutions in supporting the Eurozone and strengthening its internal governance, in the way that the European Commission already 12 Hansard: 6 September 2011, Column 156 (http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110906/debtext/110906Ð0001.htm) 13 http://www.parliament.uk/documents/commons-committees/foreign-affairs/120215-SoS-on-December-European-Council.pdf cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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suggests measures Member States, including Eurozone Member States, should take to correct an excessive deficit. But the interests of non-Eurozone Member States must also be protected and the EU Institutions must not be used in a way that undermines the integrity of the Single Market. 7. We want to ensure that the EU Institutions continue to operate fairly for all Member States and safeguard the Single Market. This is as important for those current and future members of the EU, for whom it will be many years before they join the euro, as it is for those members who have no current intention of joining. In preventing a proposal to amend the EU Treaties that did not include proper safeguards, the Prime Minister demonstrated how strongly we will defend the Single Market.
UK influence in Europe 8. On the third point, this Coalition Government is committed to playing a leading role in the EU, whilst advancing the UK’s national interests and protecting its sovereignty. Over the past two years, Britain has pursued an active and activist policy in Europe, through both the EU itself and through deeper bilateral relationships with European partners. As has long been British policy, this Government has strongly supported the deepening of the Single Market. It has built a coalition of Member States pushing for reform of the EU to deliver economic growth. It has been at the forefront of ensuring that the EU leads on the international stage, delivering a new climate change treaty in Durban and providing support for new democratic regimes in the Arab world. 9. Our approach has not changed since December and we continue to play a full, committed and influential role in the EU. For example, we worked closely with the European Parliament, other Member States and the Danish Presidency to reach agreement earlier this year on the European Markets Infrastructure Regulation (EMIR), which regulates post-trading of derivatives and the operation and governance of Central Counterparties and Trade Repositories. We welcome EMIR as an important element in delivering on our international commitment to reduce systemic risk in derivatives markets, and in negotiations we ensured that the final regulation upheld single market principles. 10. We are also leading a like-minded group on growth which spans both euro-ins and euro-outs. Together we are working to push the Commission to implement various reforms to help stimulate economic growth in the EU. 11. Furthermore, ahead of the March 2012 European Council, the Prime Minister and 11 other EU leaders set out an action plan for jobs and growth in a letter to Mr. Barroso and Mr. van Rompuy. This letter effectively became the agenda for the European Council and our proposals on free trade, deregulation and completion of the Single Market were included in the final communiqué from the summit, agreed by all 27 Member States. 12. In foreign policy, the UK has worked tirelessly to build a solid and coherent EU policy towards Burma and EU sanctions were part of the mix of international pressure which led to the Burmese Government’s decision to begin reforms. This is EU external action at its most effective—complementing and supplementing, not replacing, the foreign policies of individual EU Member States. We have also led the way on EU policy towards Syria. Working closely with our European partners, we have agreed 14 rounds of sanctions on Syria which seek to undermine the Syrian regime and deny it access to significant sources of revenue to fund its killing machine. On Iran, we have spearheaded the debate within the EU on the “twin-track” approach— pressure and engagement. This is now accepted by all EU partners. We have also worked intensively with Baroness Ashton’s team to build up the “engagement” track, for example through E3+3 meetings with Iran; and have worked extensively with EU partners to build up the “pressure” track, for example through oil- and other sanctions. 13. We will continue to work alongside our EU partners to tackle climate change building upon December’s successful negotiations in Durban, for which Europe has been widely credited. The UK was active in driving high EU ambition during those negotiations and this clearly demonstrated how we can work through the EU to achieve our international objectives as well as the value of a co-ordinated EU approach to climate diplomacy. By settling on a legally binding approach, Durban removed the biggest roadblock to reaching agreement on the measures that will be necessary to tackle the problem. 14. The UK champions the EU’s further enlargement, including to the Western Balkans, Iceland and Turkey, based on all countries’ continued progress towards meeting the necessary conditions for membership. Croatia’s Accession Treaty was signed in December 2011 and it is expected to become a full EU member in July 2013; a Bill to seek Parliamentary approval to enable us to ratify that Treaty was announced in the Queen’s Speech on 9 May 2012. Serbia received EU candidate status in March 2012 after progress in meeting conditions related to Kosovo. 15. EU enlargement is a vital strategic goal for all of the countries of the Western Balkans: it creates stability, security and prosperity across Europe on a firm foundation of democracy, freedom, and the rule of law. Through tough accession negotiations designed to ensure that candidate countries fully meet the EU’s standards before they join, EU enlargement offers an unparalleled opportunity for these countries to move on from the conflicts of the past. 16. It follows that the Government does not believe that the December 2011 European Council represents a watershed in the UK’s EU policy and place in the European Union. The UK was prepared to support EU cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Treaty change with all 27 Member States in return for safeguards to protect the integrity of the single market. However, without those protections, what was on offer was not in the UK’s interests. Therefore the December European Council demonstrated how strongly we are prepared to defend our national interests.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 17. We support a multi-faceted EU where Member States with a range of different interests and needs can work together in informal groupings, such as the like-minded groups, or in more formal groups, for example the Schengen countries. Multiple forms of EU membership already exist and it is in both the EU and UK interest that the EU has the flexibility of a network and not the rigidity of a bloc. The EU is not and should not become a matter of everything or nothing. 18. This Government’s priority is the delivery of outcomes which are good for Britain and good for the EU. Instead of speculating in this evidence on possible structures, therefore, we will show how we aim to deliver the FCO’s agenda of security and prosperity through the EU and our membership of it as we approach 2020, touching on some key principles which govern our approach to the EU reform agenda, such as accountability and subsidiarity. But of all the institutional issues which others are discussing in more detail, there is one which we think is worth raising here, as it is pertinent on the state of democracy in the EU—the role of national parliaments. In all European countries national parliaments embody national democracy. No other institution matches their legitimacy or their closeness to electorates. They play too small a role in the EU. Part of the answer to the EU’s democratic deficit must lie in their playing a larger role. 19. What do we want from the EU and how will we work with the EU to ensure we achieve it? First, we want an outward-looking EU that is more dynamic and competitive on the global stage. The speed and scale at which globalisation is shifting the balance of wealth and political power towards emerging economies poses a challenge to the position of the EU in the world order. This shift reinforces the urgent need for EU countries to reform to stay competitive, generate growth and maintain employment and standards of living. This crisis in the Eurozone has shown the absolute need to ensure that the foundations of Europe’s economies are strong. 20. The UK has led the EU debate on reforming the EU economy to deliver growth but we will go further over the remainder of this parliament by looking to keep the immediate need for structural reform at the heart of the debate on growth. We will push for an ambitious programme of deepening the Single Market and reducing the burden of EU legislation. We will also continue to contribute to the EU’s prosperity, for example through the City of London, one of the most significant global financial centres. It is in and through the City that many French pensions are managed, German manufacturing companies buy financial services, many energy risks throughout Europe are hedged, and provisions of capital for European infrastructure projects flow. 21. Second, we want an EU that is able to use its collective weight for our common interests, such as trade and security. The UK’s ability to influence events abroad is greatly enhanced by our place within the EU. Together we hold more sway than apart and we are stronger in assuring our security when the 27 EU Member States agree. So on issues where there is a common European interest, when the national interests of the 27 EU Member States converge, it makes sense for the EU Members to act together, pool our influence and speak with a united voice. 22. On trade, one voice representing half a billion consumers is heard more loudly in Beijing, Delhi and Moscow, than 27 separate ones. With UK support, the EU has already completed a Free Trade Agreement with Korea worth £500 million to UK exporters. But our ambition does not stop here. We also aim to conclude trade agreements with Canada, India, Singapore and Mercosur, as well as launch a comprehensive package of negotiations with the US, which would tackle the remaining barriers to almost half the world’s trade flow. 23. In security and defence policy, as in many other EU policies, there is a need for variable geometry. In Afghanistan, representations from certain Member States are involved in EU military and civilian missions supporting NATO in building stability and security, with a specific focus on police training. In the Balkans, others are working in EULEX as it seeks to bring justice and stability to Kosovo; and off the Horn of Africa, the EU mission, ATALANTA, is tackling international piracy. 24. The Government will work to make sure that the European External Action Service (EAS) acts to boost UK prosperity and security by complementing and supplementing—not replacing—the work of the FCO. The Lisbon Treaty makes clear that the EAS “shall work in cooperation with the diplomatic services of the Member States”. The EAS brings together existing EU external action mechanisms and experts from the Commission and Council. 25. While I did not personally support the EAS’s creation, now it is established I believe that our goal should be to ensure that it usefully complements and supplements our national foreign policy but does not in any way replace it. Therefore we believe the EAS can have the most effective impact on UK security and prosperity by focussing on: stability in Europe’s neighbourhood—South, East and the Western Balkans; relations with emerging and major powers such as the US and BRIC countries; conflict prevention, development and peace building—especially in Africa; and some key foreign policy challenges such as Iran and the MEPP. We are working at home to promote the EAS as a stepping stone in the career of talented UK officials, so we can cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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ensure that the UK participates fully both in Brussels and in the work of delegations abroad. We remain very clear that the division of competences must be respected, in line with the Treaties; and any changes in representation must be agreed by Member States by consensus. The EAS will only represent the UK where we or the Treaties mandate them to do so—for example, on agreed positions in the CFSP.
26. Third, we want an enlarged EU that helps spread freedom, democracy and the rule of law more effectively in its neighbourhood. Despite the EU’s current economic troubles, the extension of European democracy is a success few dared to hope for 30 years ago. Then as now, the prospect of membership of the EU to countries such as Turkey—a key emerging economy—and those of the Western Balkans is providing the incentives to encourage and embed the necessary reforms to enable both the EU and the aspirant countries to benefit from the expansion of stability, security and prosperity across Europe. This is a key part of our vision for the EU.
27. Fourth, we want an EU which faces the challenge of legitimacy. Those within the EU saying that they had a positive image of the EU dropped from 52% in autumn 2007 to 31% in autumn 2011.14 This is not an isolated trend. The appeal of mainstream politics has weakened in most western democracies in the last thirty years. However, without the roots that sustain national democracies, it is particularly important that the EU addresses demand for greater accountability, transparency, efficiency and probity.
28. This issue of accountability is something we have also sought to address at home. We recognise that many people in Britain feel disconnected from how the EU has developed and the decisions that have been taken in their name on EU matters. To counter this, the Government is committed to ensuring that there is no further transfer of competence or power from the UK to the EU over the course of this Parliament.
29. To help rebuild trust and reconnect people to EU decisions, the European Union Act 2011 has established a referendum lock over any future proposals to transfer further competence or power to the EU, to which only the British people hold the key. It also gives the UK Parliament more control over key EU constitutional decisions taken by the Government.
30. Looking ahead, we will continue to make the case for a Europe which respects and builds on national identities. We will work to improve consultation of national parliaments, advancing transparency, accountability and control over EU spending, and to better assess the regulatory impact of EU legislative proposals before they are voted on. We will look to ensure that principles of localism and subsidiarity are more deeply embedded into EU decision making in line with the approach to decentralisation and flexibility we are seeking to achieve in the UK.
31. In many cases we can in fact achieve “better Europe” by reducing administrative and regulatory burdens at EU level—the UK was instrumental in securing commitments by EU Heads of State and Government (eg at the March European Council) to do just that. The Government is also committed, under the Coalition agreement, to examining the balance of competences between Britain and the EU, on which we will have more to say in due course.
32. In conclusion, under this government, Britain is developing its global role. In 2020 we will be a nation with closer ties to the emerging economies of the world than today. We will have more British companies with a foothold overseas, and exports, manufacturing and investment will make a bigger contribution to our economic growth. This reinvigorated and expanded approach will be built on our strong alliances in the EU and with the United States, building new networks without sacrificing the old. But a strong economy is the bedrock of international influence and the EU’s ability to contribute to a secure, peaceful and prosperous world ultimately rests on its economic strength.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy?
33. The Fiscal Compact is not part of the EU Treaties. It is a self-standing international agreement between the signatory States. It is outside the EU Treaties and therefore does not form part of the EU acquis.
34. The Fiscal Compact does not have the force of EU law, for the UK, the EU or for the signatory States. The principle of the primacy of EU law is not affected by the Fiscal Compact, in fact it is the express intention of the parties to the Treaty that insofar as there may be any conflict or overlap between the Fiscal Compact and the EU Treaties, the EU Treaties shall prevail. Indeed, any other arrangement would be contrary to EU law.
35. The Fiscal Compact deals primarily and in some detail with fiscal discipline for the Eurozone States, and also touches on growth where its provisions are much less specific. The Fiscal Compact does not touch on the EU budget, enlargement, or the Common Foreign and Security Policy. These and all other EU policies will continue to be negotiated under the terms of the EU Treaties. 14 Standard Eurobarometer 76 (http://ec.europa.eu/public_opinion/archives/eb/eb76/eb76_first_en.pdf) cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so?
36. Any decision to incorporate the substance of the Fiscal Compact into the framework of the EU Treaties would require the consent of all 27 Member States of the EU. In any negotiation on Treaty change, we would protect and advance our own national interest.
37. The Prime Minister demonstrated this in agreeing to a change to Article 136 of the Treaty on the Functioning of the European Union (TFEU), which recognises that Eurozone Member States can establish a permanent stability mechanism—the European Stability Mechanism (ESM)—to safeguard the financial stability of the eurozone. By agreeing to the Article 136 Treaty change, the Prime Minister secured agreement in both the Council Conclusions and the European Council Decision that the ESM will replace both the euro area-only European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM), for which the UK holds a contingent liability, and that Article 122(2), the basis on which the EFSM was created, will no longer be needed for the purpose of safeguarding the financial stability of the euro area as a whole, and should not be used for those purposes. Consequently, the UK will not be exposed to any future programmes of financial assistance for the eurozone through the EU Budget, specifically the EFSM.
38. In his letter to the Treasury Select Committee on 27 February 2012 the Chancellor outlined the substance of the safeguards proposed at the December 2011 European Council when changes to the EU Treaties were discussed.15 These safeguards were not UK opt-outs, exemptions or any other kind of special treatment for the UK. What we proposed were safeguards for the whole EU that would have supported open competition for financial services companies across the Single Market, and upheld the existing commitment to ensure the ability of all Member States to supervise their domestic financial sectors, which is particularly important given the scale of the fiscal risks involved.
39. In the context of a more integrated euro area, it will be very important to ensure that EU rules respect the Single Market and vital national interests of all Member States whether they happen to be part of the euro area or not. Although it would be premature to outline now what safeguards the UK would propose if there were proposals to amend the EU Treaties in future, we remain concerned to maintain the integrity of the Single Market and vital national interests of all EU Member States. 22 May 2012
Supplementary written evidence from the Foreign and Commonwealth Office
Letter from Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs
Thank you for your letter of 14 February. You asked five questions about the evidence I gave to your Committee’s inquiry The future of the EU: UK Government Policy. The answers to your questions are below.
1. Would any future Government seeking to renegotiate the terms of their membership of the EU need to give notice to the European Council under Article 50 of the Treaty on European Union?
The Conservative Party starts from the premise that we will negotiate changes to reform the European Union and then seek the consent of the British people on that new settlement. As the Prime Minister said in his speech, “I want the European Union to be a success. And I want a relationship between Britain and the EU that keeps us in it.”
Article 50 of the Treaty on European Union provides a mechanism for states to withdraw from the EU. It is not intended to provide a mechanism for Member States to force a renegotiation of the terms of their existing membership of the EU whilst remaining within the EU. The withdrawal process that Article 50 sets out does include a period of negotiation. However, Article 50(2) makes clear that this negotiation follows a decision by a Member States to leave and states that the purpose of this negotiation is to set out the arrangements for a Member State’s withdrawal, taking account of the framework for its future relationship with the European Union. In addition, Article 50(4) deprives the withdrawing State not only of a vote on the terms of the withdrawal agreement but also of the right to take part in discussions about that agreement in either the European Council or the Council. The Prime Minister, by contrast, envisages a British Government playing an active and positive role in securing reforms of the EU as a whole, including through changes to the Treaties.
Amendments to the Treaties may be adopted in accordance with either the ordinary or simplified revision procedure both of which are provided for under Article 48 TEU. Article 48(2) sets out that proposals can “serve either to increase or to reduce the competences conferred on the Union in the Treaties”. Therefore, I do not consider that any future Government seeking to renegotiate the terms of their existing membership of the EU would need to give notice under Article 50. 15 http://www.parliament.uk/documents/commons-committees/treasury/120228%20-%20LetterfromChxtoChair.pdf cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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2. Is it the Prime Minister’s policy to negotiate what would be the terms of the UK’s trade with the EU as a non-Member State before any in/out referendum takes place? No. As the Prime Minister said in his speech, “Britain’s national interest is best served in a flexible, adaptable and open European Union and [the] European Union is best with Britain in it”. Achieving such a settlement in the European Union is the goal of his policy and negotiations to that end. In the event of the majority of British voters deciding that the United Kingdom should leave the EU in a referendum the terms of the UK’s trade with the EU would be resolved under the process set out in Article 50 of the Treaty of the European Union.
3. The number of votes in the Council of Ministers on which the UK has faced a Eurozone bloc In the period 2009Ð12, the Council of Ministers (in all its configurations) voted 373 times. The number of times each Member State’s vote matched that of the UK is shown in the Annex and ranged from 317 to 335 occasions, with little difference between the record of ins and outs. We do not have data that shows on how many occasions the Eurozone as a whole lined up against the UK. But our concern remains for the future when a greater degree of political and economic integration in the Eurozone could lead them to vote more often as a block.
4. Safeguards requested at the December 2011 European Council: (a) Identify the Treaty or other legislative provisions that these proposals sought to amend or—otherwise, and where relevant—specify by what legal instrument the Prime Minister sought to realise these proposals At the December 2011 European Council we sought agreement to the principle that safeguards were needed to protect the single market as greater integration took place. We were as flexible as possible in our approach and we did not specify the precise amendments for achieving the protections that we sought. There are a number of ways these could have been incorporated into the existing Union framework, such as a protocol to the Treaty. Establishing the precise method for doing this would have been subject to negotiations that would have taken place if this principle had been accepted.
(b) Tell the Committee whether any of these proposals have by now been realised, for example through the agreement on the European Banking Authority reached at the end of 2012 The need for protections to maintain the unity and integrity of the single market was subsequently accepted at the June 2012 European Council. It remains important that any proposals for further integration are fully compatible with the single market, and we sought protections on this basis. For example, it was agreed that the Commission would bring forward proposals to transfer prudential supervision of credit institutions in the euro area (along with non euro area members that chose to participate) to a new Single Supervisory Mechanism led by the European Central Bank. These proposals were brought forward under Article 127(6) of the Treaty on the Functioning of the European Union, which requires unanimity. As part of the Council’s approach to the Commission proposals, we agreed an explicit duty for the ECB to have regard to the unity and integrity of the internal market in performing its supervisory tasks. Furthermore, none of its actions, proposals or policies should directly or indirectly discriminate against any Member States or group of Member States as a venue for the provision of banking or financial services in any currency. The Council’s agreement on the European Banking Authority in December 2012 secured additional protections to balance the influence of those in banking union and those remaining outside. EBA powers and decisions will apply equally to the ECB and other supervisors, and voting on key issues will be on the basis of a “double majority” of participating and non-participating Member States.
(c) Tell the Committee if the Government is still pursuing, or would pursue, these proposals, and if so under what circumstances Our overall objective in negotiations on financial services legislation is to preserve and strengthen a competitive and open single market. We will continue to strive for targeted protections based on the specific proposals that are under negotiation. For example, as part of agreeing a Council approach on banking union, we sought and obtained protections that addressed in the EBA the changing nature of the ECB and how it would interact with other EU institutions and agencies.
5. Does the Government consider there are some elements of the TSCG that could be incorporated into the legal framework of the EU only through treaty change? The Contracting parties to the TSCG have made clear it is their intention to incorporate the Treaty into the legal framework of the EU within five years of it entering into force. Some aspects of the TSCG have already been proposed in Secondary Legislation under the EU Treaties, namely the “two pack” of economic governance proposals that apply only to the euro area. The Government believes that if other elements were to be incorporated in the Treaties, they would need to be brought in through EU Treaty change. Specifically: Article 3, including measures constituting the Fiscal Compact; Article 7, which amounts to an agreement of the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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participating Member States to accept Commission proposals for decisions under the excessive deficit procedure unless there is a QMV majority against the proposal (so-called “reverse QMV”); and Article 8, which confers jurisdiction on the ECJ on compliance with Article 3 (2). 24 February 2013
Annex ABCDEF UK matching with: Total votes Matching votes % Non matching % Austria 373 319 86 54 14 Belgium 373 335 90 38 10 Bulgaria 373 328 88 45 12 Cyprus 373 335 90 38 10 Czech Republic 373 331 89 42 11 Denmark 362 320 88 42 12 Estonia 373 329 88 44 12 Finland 373 331 89 42 11 France 373 335 90 38 10 Germany 373 317 85 56 15 Greece 373 335 90 38 10 Hungary 373 335 90 38 10 Ireland 370 327 88 43 12 Italy 373 327 88 46 12 Latvia 373 333 89 40 11 Lithuania 373 335 90 38 10 Luxembourg 373 330 88 43 12 Malta 373 335 90 38 10 Netherlands 373 332 89 41 11 Poland 373 325 87 48 13 Portugal 373 327 88 46 12 Romania 373 329 88 44 12 Slovakia 373 332 89 41 11 Slovenia 373 335 90 38 10 Spain 373 330 88 43 12 Sweden 373 335 90 38 10
Column B shows the total number of times the Council voted from 2009 to December 2012. The figures in columns C & D show the number of times the UK cast a vote in Council that matched with each of the countries listed in column A. The figures shown in columnsE&Fshow the number of times the UK cast a vote in Council that did not match with each of the countries listed in column A. Source: VoteWatch Europe: www.votewatch.eu
Further supplementary written evidence from the Foreign and Commonwealth Office Letter from Tim Hemmings, Head, Future of Europe Department, Europe Directorate Thank you for letter with some additional questions following the Foreign Secretary’s oral evidence to the Committee’s future of Europe inquiry. Please find enclosed our responses to those questions. If there is anything further we can help with, please do get in touch.
UK Derogations and Opt-outs 1. For the sake of completeness, it would be helpful if you could a) supply a list of opt-outs, derogations, etc that the UK enjoys under the EU Treaties, indicating the relevant Treaty provisions; and b) indicate the cases where these affect UK participation in EU decision-making, and how The UK’s derogations are principally in the areas of Justice and Home Affairs (JHA) and in Monetary Union policy. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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CURRENT OPT-OUTS/INS Treaty Reference Nature of derogation, Opt-out or Opt-in Protocol 15. on certain provisions Single currency opt-out: recognises that the UK is under no EC Treaty relating to the United Kingdom of obligation to adopt the single currency and that a separate decision to do Great Britain and Northern so would be required by the UK government and parliament. Establishes Ireland[1] procedures to enable the UK to opt-in to the single currency—it is for the UK government alone to initiate procedure for moving to 3rd stage of EMU Protocol 19. on the Schengen Art 2 provides for UK (and Irish) opt-out of Schengen acquis integrated into the Arts 4&5 provide for UK (and Irish) opt-in to some or all of the existing framework of the European Schengen acquis (by unanimity) or to measures building on it on a case Union[2] by case basis Protocol 20. On the application of Art. 1: authorises the UK to maintain border controls on persons seeking certain aspects of Article 26 of the to enter the UK from other Member States (thus opting-out of Treaty on the Functioning of the prohibition of internal border controls) European Union to the United Art. 2: provides for UK and Ireland to maintain their Common Travel Kingdom and to Ireland[3] Area Art.3: provides for other MS to exercise equivalent controls on persons entering their territories from the UK and Ireland Protocol 21. On the position of Referred to as the UK’s JHA Opt-In Protocol. the United Kingdom and Ireland Arts 1&2: provide for the non-application to the UK (and Ireland ) of in respect of the Area of Freedom, measures concerning border controls, visas, asylum and temporary Security and Justice.[4] protection, immigration policy, judicial co-operation in civil matters and family law having cross-border implications based on Title V of the TFEU Arts 3&4: provide for UK (and Irish) opt-in to any of the above measures at the stage of negotiation or after adoption Amendment to Protocol 21[5] Amends Amsterdam Protocol on the Position of the UK and Ireland (the UK Opt-In) to extend its scope of application to all JHA measures in the field of freedom, security and justice, including police and criminal judicial co-operation. A new Article 4a in the Protocol makes explicit that the Opt-In applies to amending measures. Amends Amsterdam Protocol Integrating the Schengen Acquis into the Framework of the EU to make clear that the UK is not bound to take part in any measures building on parts of the Schengen acquis in which the UK already participates. The effect is to ensure that the UK’s JHA Opt-In applies to all Schengen-building measures. Protocol 36, Article 10[6] The Protocol provides that, 5 years after the Lisbon Treaty enters into force, any remaining Third Pillar police and criminal judicial co- operation measures that have not been repealed, replaced or amended will be subject to ECJ jurisdiction and Commission powers of infraction. A special provision enables the UK to notify the Council that it does not accept ECJ jurisdiction and Commission powers of infraction in respect of such measures. In the event of such notification, the remaining Third Pillar measures will cease to apply to the UK. The UK may subsequently apply to opt back in on a case-by-case basis.
Table Notes: Adopted in the Maastricht Treaty as Protocol 11 annexed to the EC Treaty Adopted in the Amsterdam Treaty as Protocol Integrating the Schengen Acquis into the Framework of the EU, annexed to the EC Treaty and TEU Adopted in the Amsterdam Treaty as Protocol on the Application of Certain Aspects of Article 7a TEC to the UK and Ireland (the “Borders Protocol”), annexed to the EC Treaty and TEU. Adopted in the Amsterdam Treaty as the Protocol on the Position of the UK and Ireland, annexed to the EC Treaty and TEU (the “Title IV opt-in”). Adopted in the Lisbon Treaty as Protocol No 1 amending the Protocols annexed to the TEU and TEC. Adopted in the Lisbon Treaty as part of the Protocol on Transitional Provisions.
Derogations in Relation to JHA Protocol 19 integrates the Schengen acquis into the EU framework. The UK is not bound by measures that are a part of, or build on, this acquis, unless the UK requests to take part in a measure and the Council agrees this unanimously or the measure builds on a section of the acquis which the UK has already opted into (Council cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Decision 2000/365/EC). Although the UK is permitted to opt out of these “deemed opt-ins”, it has never done so. The UK is present at and able to contribute to discussion of Schengen measures. It is not able to vote on measures in which it is not participating. However, it retains an active interest in Schengen measures, and UK contributions are welcomed by other Member States. A good example can be found in the negotiations on the Schengen Information System II. Initially, the legal base meant that the measure did not apply to the UK, and therefore the UK would have been unable to vote on its adoption. However, the UK was able to take part in the meetings and push for a change of legal base, which was achieved. Protocol 20 entitles the UK (and Ireland) to continue to operate border controls, notwithstanding the provisions of the treaty prohibiting barriers to free movement of persons. The protocol also allows the UK and Ireland to maintain the Common Travel Area. It does not limit the UK’s participation in EU decision-making. Protocol 21 establishes the UK’s position in relation to the Area of Freedom Security and Justice. The Protocol provides that Title V TFEU, and no measure adopted pursuant to it, applies to the UK unless the UK decides to opt-in within three months of its presentation. When the UK has exercised the opt-in in relation to a draft Title V measure, it plays a full part in Council decision-making in the normal way. The opt-in does not determine the UK’s voting position—we retain the freedom to vote against the adoption of a measure that we have already opted in to. However, if after a “reasonable period of time” the measure cannot be adopted with the UK taking part, the Council may proceed to adopt the measure without the UK’s participation. In these circumstances, the measure would not apply to the UK as if it had not opted-in. There is nothing in Protocol 21 which prevents the UK from attending and speaking in negotiations on a proposal that the UK has not opted in to. Indeed, the UK contributes to negotiations on measures that it does not wish to opt in to, and is thus able to influence decision-making. Even where it has not opted-in, the UK also remains entitled to challenge the legality of the adoption of a measure in the Court of Justice of the European Union if it considers there are grounds to do so. Protocol 36 contains various transitional provisions relating to entry into force of the Lisbon Treaty and Title VII of this Protocol (articles 9 and 10) contain transitional provisions relating to JHA measures adopted on the basis of the Treaty on European Union prior to the entry into force of Lisbon. Article 10(4) entitles the UK to notify the Council at least six months before the expiry of the transitional period (1 December 2014) that it wishes to opt-out of police and criminal judicial cooperation measures adopted prior to the entry into force of Lisbon. The decision on whether or not to opt out of these measures is known as the “2014 Decision”. If such an opt-out is made, those measures will cease to apply to the UK from the expiry of the transitional period, although the UK has a right to notify, pursuant to the procedures in Protocols 19 or 21 as applicable, its wish to participate again in those measures. Should the UK exercise the opt-out, Article 10(5) calls on the Union institutions and the UK to seek to re-establish the widest possible measure of participation in the acquis of the Union in JHA, without impairing the operability and coherence of the acquis. This Protocol has no impact on the UK’s participation in decision making around current measures.
Derogations in Relation to EMU Protocol 15 expressly recognises the UK’s opt-out from the Euro and lays down detailed provisions for the application of Treaty provisions on economic and monetary policy to the UK. These include in certain cases, the suspension of the UK’s voting rights in relation to Council decisions adopted under the treaty articles specified in the Protocol. The effect of not being a member of the Euro on decision making in the EU is that the UK does not sit in the Eurogroup (or its preparatory bodies), the Governing Council of the ECB and the Board of the ESM. Experience shows we can be outside the Euro and still be influential in making financial and economic decisions within the EU that are good for the UK. In the last two years, for example we have ended Britain’s obligation to bail-out Eurozone members and secured specific protections on Banking Union that the UK and other non-Eurogroup members needed. Proposed legislation for a single supervisory mechanism and reforms to the European Banking Authority included fair and legal protection for the non-euro States because of arguments made by the UK. The legislation established a new system of double majority voting to ensure that those outside the Eurozone cannot be outvoted by those inside.
Bilateral Relations 2. At Q 224 in his evidence session on 6 February, Mr Hague said that Mr Lidington was the first Europe Minister to have visited all the EU Member States. He also said that no Europe Minister had done this since the EU was enlarged (my emphasis). I would be grateful if you could confirm that Mr Lidington is the first Europe Minister since the EU’s major enlargement of 2004 to have visited all the EU Member States Mr Lidington is the first Europe Minister to have visited all EU Member States since the 2004 enlargement. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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3. When the Committee visited Berlin in October 2012, it heard that the UK and Germany had established a joint bilateral EU Affairs Sub-Committee. The Committee head that the Sub-Committee had met twice and was due to meet again in early 2013. I would be grateful if you could confirm that this third meeting took place; when the fourth meeting is expected (assuming it is); and whether the UK has similar arrangements with any other EU Member State(s) The UK’s EU Affairs sub-committee has established a regular pattern of meetings with German State Secretaries. The EASC visited Berlin on 14 January for the third meeting in that series. Seven British Ministers led by David Lidington took part in the 14 January meeting, which was judged a great success by both sides. The next meeting is due in the summer. But Ministers on both sides have concluded that a meeting at their level will be impracticable just before the German federal elections in September. EU Directors will therefore meet, probably in June, to maintain the dialogue in the expectation of a further Ministerial meeting around the turn of the year. The UK has no arrangement for joint EASC meetings with any other EU Member State.
UK Embassies 4. When he gave evidence on 24 January to the House of Lords EU Committee, Sub-Committee C, for its inquiry into the European External Action Service (EEAS), at Q 274 David Lidington said that the “number of staff at pretty much every embassy in Europe [has been] reduced over the last few years”. What has been the reduction in headcount for policy staff in UK Embassies in EU Member States since 2007 and 2010? We cannot provide an exact figure for changes in headcount for policy staff in UK Embassies in EU Member States. Policy staff can be UK based or locally engaged; while data on UK based staff numbers is held centrally, data for locally engaged staff is managed by individual missions and can change from year to year as local circumstances dictate, eg posts might reinforce their political teams by recruiting a locally engaged policy officer to support an EU Presidency for a specific period of time. Over the period of Spending Review 20010, overall headcount within Europe Directorate (including posts in non-EU member states) fell by 76. The vast majority of this was the result of reductions in corporate services or consular teams as posts adopted more efficient working practices, including some consolidation and regionalisation of work. During this period a number of UK based policy positions were also localised and may subsequently have been rationalised as Posts developed more innovative and collaborative ways of delivering policy work. To date under Spending Review 2010Ð14, we have seen some reorganisation of policy slots in posts in EU Member States. While the overall headcount in posts in EU member states continues to fall, this again is predominantly staff in corporate functions. We have to date protected policy positions, including retaining or localising rather than eliminating “Band B” (also known as “Executive Officer”) policy positions within the Europe network. We have also used the FCO reprioritisation exercise to create small scale but additional regional economic and policy capacity within some European posts until the end of 2015. Our headcount for policy work has remained consistent over this period.
UK Nationals on the Staff of the EU Institutions Undergraduate survey 5. In 2010, the FCO commissioned a survey among UK undergraduates about their awareness of EU careers (“Students unaware of EU career opportunities”, FCO press release, 21 January 2011). Has this been published, or, if not, might the Committee see it (in confidence if necessary)? We have attached the report, for the Committee’s attention. There is nothing explicitly sensitive about the survey results (which are anonymous) and we therefore do not judge is necessary for it to be shared in confidence.16
“Concours” 6. At Q 181 in the evidence session on 6 February, Sir Jon Cunliffe said that the numbers of UK nationals applying for EU careers had been rising. In answer to a PQ on 8 January 2013, Baroness Warsi said that there had been a “30% increase in British applicants to the main EU graduate recruitment”. I understand (from the FCO’s written briefing for the Committee’s 2012 visit to Brussels) that Baroness Warsi’s 30% figure is for an increase between 2010 and 2012. It would be helpful if you could supply the number of UK nationals who a) entered and b) were successful in the EU concours for generalist administrators, and the total numbers of a) entrants and b) successful entrants, for 2008, 2009, 2010, 2011 and 2012. (I am defining being successful as making it onto the reserve list.) There were no general concours in 2008 and 2009. We can, however, provide figures for 2010, 2011, and 2012. These figures illustrate the success to date in increasing the number of British people applying for EU jobs, but work remains to be done to help translate this into more successful candidates. Whilst there is no general concours in 2013, we are contacting those British applicants retaking the 2010 concours17 and 16 See Ev 94 17 Retakes were permitted because of a technical fault with the exams in 2010. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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providing training to help those candidates succeed. All British laureates in 2012 received training from UK Rep.
GENERAL CONCOURS Year 2008 2009 2010 2011 2012 Total entered N/A N/A 747 996 1,066 Total successful N/A N/A 7 7 6
7. I understand that the FCO recently funded a secondee into EPSO. I would be grateful if you could confirm the dates of the secondment, and whether there are any plans to repeat the exercise
The dates of the EPSO secondment were October 2009 to February 2012. The exercise was a success, and we have recently placed another UK secondee in EPSO, co-funded by FCO and BIS. Since returning to London, the EPSO secondee now works in the Foreign and Commonwealth Office managing the team which deals with EU Staffing.
Fast Stream
8. How many entrants were there to the Civil Service European Fast Stream in 2011 and 2012? (I have a figure of 21 for 2010, from a PQ to Francis Maude answered on 15 June 2010, col 416). Since it is a two- year programme, and I understand that there is no generalist administrator concours in 2013, I assume that only those who entered the European Fast Stream in 2010 have so far entered the concours. How many of the 2010 intake of 21 have a) entered and b) passed the concours so far, and how many have secured jobs in the EU institutions?
14 graduates joined the European Fast Stream programme in 2011 and 15 in 2012. 15 of the 2010 intake took the AD5 concours computer-based tests in 2011, with three achieving the pass mark and proceeding to the Assessment Centre. Of these three, one passed the Assessment Centre and secured a place on the EU “reserve” list, but did not take up a place in the EU institutions. Additionally, one European Fast Streamer reached the required standard in a specialist AD5 Communications concours but failed on a technicality. 25 European Fast Streamers took the computer-based tests in the 2012 concours but none achieved the pass mark. Recognising that it is the computer-based tests which cause most difficulty, Civil Service Resourcing, which has overall responsibility for the European Fast Stream, is putting in place a more rigorous and targeted programme of training and preparation for this element of the assessment process.
9. Is the European Fast Stream only for entrants to the Civil Service, as opposed to the Diplomatic Service/ FCO? If so, does the FCO offer any support for junior members of its staff who wish to sit the concours and make a career as a permanent EU official?
The majority of European Fast Streamers enter the Home Civil Service but the FCO have specific Diplomatic Service European Fast Stream posts set aside which form part of the European Fast Stream intake. The FCO will also provide support for members of staff not on the European Fast Steam, should they wish to apply for the concours.
10. I understand that BIS has provided bursaries for UK Fast Stream Civil Servants to undertake postgraduate study at the College of Europe. Is this scheme still functioning? If so, I would be grateful if you could clarify if it is for European Fast Streamers or “ordinary” Fast Streamers? If the scheme is no longer functioning, does the Government now provide any funding for UK nationals to study at the College of Europe? How many students, if any, were funded by the UK Government in the 2009–10, 2010–11, 2011–12 and 2012–13 academic years?
The BIS College of Europe scheme is still in operation. BIS retains a budget to fund postgraduate study at the College of Europe, managed on behalf of Whitehall. The scheme is open to all Fast Streamers, whether generalist or on the EFS programme.
In academic year 2011Ð12 BIS funded four scholarships to the College for established Fast Stream civil servants with the intension of pursuing a career with the European Institutions. BIS is also funding four students in 2012Ð13 and intend to fund a further four 2013Ð14 subject to successful applicants being chosen through the College’s own admission process.
In addition, the FCO is planning to fund one member of staff per year at the College of Europe. This is new funding, and there is not currently a member of staff on secondment. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Job entrants
11. At Q 181 in the evidence session on 6 February 2013, Mr Hague said that there was an increase in the number of UK nationals joining the EU institutions, including at junior levels. It would be helpful to have any figures that are available to support this claim, including any information on UK nationals joining mid- career, as well as those joining at junior grades. In each year since 2008, how many UK nationals have joined the European Commission as permanent career staff at administrator entry grades?
As Sir Jon Cunliffe said in the evidence session, following the Foreign Secretary’s comments, the number of UK nationals applying for posts in the EU Institutions has been increasing. We do not have figures for the total number of UK nationals joining the EU Institutions that include those joining outside of the concours recruitment process.
However, whilst the number of successful applicants is broadly stable, more UK nationals are retiring than are arriving, resulting in a fall in the overall number of UK nationals in the Institutions. We continue to work to address this shortfall, and will be building on existing programmes which have proved so successful in increasing the number of Brits applying for EU jobs.
12. In the written briefing that it provided to the Committee for its visit to Brussels in 2012, the FCO said that there was a 100% success rate in 2011 as regards UK nationals who passed the concours then securing an EU job. If possible, it would be helpful to have this success rate “on the record” for 2011 and other recent years
Of the 2011 laureates, four have secured jobs. The remaining three, two are in the process of securing a post and one has decided to pursue an alternative career path. UK laureates are usually among the first to secure posts once on the reserve list, which illustrates the value placed on UK civil servants in Brussels. Under the new recruitment system, the issues experienced in the past, where many laureates were left on the reserve list, is now much less common.
For 2010, all of the seven UK laureates have secured positions within the EU Institutions. It is too early to comment on the six laureates from 2012, but early indications suggest that the appetite for UK laureates remains healthy.
Commission staff
13. The Committee would like to see some data over time for the numbers of UK nationals on the staff of the Commission, so that it can see how matters are developing
The total number of UK nationals working in the European Commission has been declining steadily as more British officials are retiring than are being recruited. The figures for total numbers of UK nationals in the European Commission can fluctuate within a one year period. 2005 2006 2007 2008 2009 2010 2011 2012 Total number of UK 1,449 1,452 1,417 1,362 1,340 1,296 1,175 1,094 nationals in the European Commission
14. In his speech “British foreign policy in a networked world” on 1 July 2010, Mr Hague said that the number of UK officials at Director level in the European Commission had fallen by a third since 2007. I would be grateful if you could confirm which grades Mr Hague’s statement applied to, and supply any data you have on the numbers of UK Commission officials at these grades since 2010
The Foreign Secretary said that “since 2007, the number of British officials at Director level in the European Commission has fallen by a third and we have 205 fewer British officials in the Commission overall”. The UK is better represented at higher grades than at lower grades, but as staff who joined the European Commission after accession in the 1970s start to retire, our numbers will continue to decline.
Director level positions within the EU Institutions, as defined by the Staff Regulations, are staff holding positions at AD14 to AD16. The UK currently holds 56 of these 698 posts, or 8% of the total staff at those grades. In 2011, the UK held 63 of these posts; in 2010, the UK held 76; in 2009 the UK held 71; in 2008 the UK held 85; and in 2007, the UK held 94. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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External Action Service (EEAS) 15. I understand from evidence provided by the EEAS to the House of Lords Committee in December that there are 20 UK diplomats or civil servants on the staff of the EEAS (seconded national diplomats employed as temporary agents). I would be grateful if you could provide the breakdown of these officials by UK department. Does the December 2012 figure of 20 include the two EU Special Representatives who are UK nationals (Gary Quince, African Union, and Rosalind Marsden, Sudan)? As of April 2013, there are 22 UK diplomats or civil servants working as Temporary Agents in the EEAS. These include 18 staff from the Foreign and Commonwealth Office, one from the Department for International Development, one from the Ministry of Defence, one from the Department for Transport and one from the Police Service of Northern Ireland. This figure does not include the two British EU Special Representatives who are UK nationals.
16. In a parliamentary answer on 16 July 2012, col. 564, Mr Lidington said that, in addition to UK diplomats and civil servants employed by the EEAS as temporary agents, the UK had 17 seconded national experts (SNEs) in the EEAS—two from the FCO, 11 from the MOD and four from DFID. I would be grateful if you could update these figures for UK SNEs in the EEAS As of 1 January 2013, the UK has 24 seconded national experts (SNEs) in the EEAS: seven from the Foreign and Commonwealth Office, three from the Department for International Development, and fourteen from the Ministry of Defence.
17. In a parliamentary answer on 16 July 2012, col. 562–4, Mr Lidington provided figures on the numbers of UK civil servants seconded to EU institutions and agencies in recent years, including from the FCO. I would be grateful if you could confirm that these figures did not include either the 17 UK SNEs in the EEAS or seconded UK diplomats or civil servants employed as temporary agents by the EEAS The figures provided to the House of Commons on 16 July 2012 by Mr Lidington did not include any of the SNEs or Temporary Agents currently working in the EEAS.
18. I understand from the EEAS evidence to the Lords Committee that, of EEAS Heads of Delegation, 11 are UK nationals. It would be very helpful if you could supply a list of them, and indicate the breakdown among them between seconded national diplomats and permanent EU officials. Does the figure of 11 include Mr Quince, who I understand is double-hatted as EUSR and Head of Delegation to the AU? There are currently 11 Heads of Delegation with British nationality. Three are seconded to the EEAS from the Foreign and Commonwealth Office as Heads of Delegation to Switzerland, Morocco and Bolivia. Eight are permanent EU officials, who are Heads of Delegation to Egypt, Fiji, Indonesia, Israel, Nigeria, Sri Lanka and Thailand. This latter figure also includes Gary Quince, who is double-hatted as EUSR to the Africa Union and Head of Delegation. This does not include current outstanding applications for Heads of Delegation, where we hope to gain further positions.
19. In what percentage of cases has a UK diplomat or civil servant who has applied for an EEAS job (as a seconded national diplomat to be employed as a temporary agent) been successful? In the 2012 EEAS main jobs Rotation (the latest for which full statistics are available) the UK put forward 83 applications and secured six jobs, giving an overall success rate of 7%. In addition, the UK also put forward in 2012 42 applications for 34 EEAS jobs which were advertised on an ad hoc basis outside the main Rotation. We have secured three of these so far, which again represents a success rate of 7%, but hope to gain further positions as the recruitment process is completed.
20. When the previous FAC considered the EEAS in the last Parliament, as the Service was still being established, it was told by then-PUS Sir Peter Rickets that the FCO might second around 25 officials into the Service. Does the FCO expect the current figure of 20 UK seconded national diplomats to rise further? As of April 2013, there are 22 UK diplomats or civil servants working as Temporary Agents in the EEAS. We continue to field UK candidates for EEAS jobs, and to promote them in the FCO and Whitehall departments as a good career option for talented staff. We anticipate that this figure will therefore continue to rise.
21. I understand that national diplomats seconded into the EEAS are employed as temporary agents on EU terms and conditions. In the FCO’s experience so far, how do these terms and conditions compare to those which apply within the FCO to the FCO officials applying for EEAS positions? Does the FCO guarantee to its officials that, after a secondment to the EEAS, they can return to the FCO on terms and conditions at least as good as those applying to them beforehand? Staff joining the EEAS and taking up EU terms and conditions have found that they compare favourably to those of the FCO. The EEAS requires EU Member State governments to guarantee that they will take back Temporary Agents at the end of their secondment. Candidates return to their home department after the secondment ends on the home department’s terms and conditions. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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22. How would the FCO expect a successful secondment into the EEAS by one of its officials to be reflected, after his/her return to the FCO, in his/her performance against the FCO’s core competencies? For what kinds of senior FCO positions would the FCO see an applicant’s prior successful secondment to the EEAS as desirable or necessary?
Secondments to the EEAS provide staff from the FCO and other Whitehall departments with an excellent opportunity for individual career development, as well as the chance to build and deepen EU expertise. In general, roles in EU delegations will provide a similar range of opportunities to develop core competences, core diplomatic skills, and country-specific or regional expertise as in equivalent FCO posts. In addition, some roles in EU delegations may provide opportunities for FCO staff to manage significantly larger budgets (for instance on development programming) than they would in a UK mission, to manage larger and more diverse teams of staff, or to use a wider range of language skills.
The EEAS is still a new organisation, but we expect it to continue to bed in and establish itself in the future. Successful EEAS secondments are likely to be an asset to applicants for FCO roles on the EU. Given that the EEAS has a large number of Delegations (though not as extensive as the FCO network), the experience of a successful secondment could be useful and relevant experience for staff working in very many areas of the FCO in future.
23. In the EU’s Delegations in third countries, how many UK nationals participated in the Junior Experts in Delegation (JED) scheme in each of the last five years? What have the UK participants in the scheme gone on to do? How many UK participants are being deployed to EU Delegations from March 2013 in the new High Level Traineeship Programme? What is the FCO doing, if anything, to encourage the participation of UK nationals in the programme; and how much funding for participation by UK nationals is the Government providing, if any, through a voluntary Member State sponsorship agreement? I understand that two EU- funded places are available for UK participants
Following the creation of the EEAS, the Junior Experts in Delegation scheme has been renamed the Junior Professionals in EU Delegations scheme (JPD). Like the JED, the JPD offers the chance for EU nationals to apply for a short-term traineeship once every two years. DFID is the lead UK department on this scheme. They received 80 applications to the JED scheme in 2008 for postings in 2009Ð10, and 100 applications in 2010 for postings in 2011Ð12.
The JPD was launched in 2012 for candidates to take up traineeships in EU Delegations from March-October 2013. DFID received about 80 applications for the 2012 JPD scheme. Two candidates successfully secured EU-funded places: one is now in the EU Delegation to Peru under the EEAS JPD, and the other is in the EU Delegation to Algeria under the European Commission JPD. The FCO is not funding any additional candidates but helps publicise the scheme and works alongside DFID to sift applications.
UK Civil Service
24. Answering a PQ on 16 September 2010, col. 1185, Mr Lidington said that “work [was] underway to develop a more strategic approach to the use of secondments of UK civil servants to [...] the EU institutions”. What progress has been made on this issue? How, if at all, are secondments to the EU institutions to be encouraged and recognised under the Civil Service Reform Plan and the forthcoming Civil Service Capabilities Plan?
Seconded National Experts (SNEs) are a key means of ensuring UK representation at the EU Institutions. SNEs are currently funded from departmental budgets. The UK currently places 60 fewer SNEs than either France or Germany. To redress this imbalance, a new “EU Staffing Unit” has been created in the Foreign & Commonwealth Office. The remit of this new Unit, which will commence work in May 2013, is to place 20 additional SNEs in EU Institutions each year for the next three years, with a specific focus on strategic posts within the Institutions. The Unit is funded from cross-Whitehall contributions, and will also act as a cross Whitehall focal point to develop best practice for SNEs.
25. What coverage is given to EU business in the new Civil Service Learning core curriculum? Are EU matters covered in any of the training that is compulsory for UK civil servants?
Civil Service Learning’s curriculum for Policy Professionals includes a 1.5 day course entitled “EU Training”. This course is aimed at policy advisers whose role is focused on, or includes elements of, work with EU. The course combines face-to-face workshops with workplace learning and is designed to explain how the EU works and how EU policies might be influenced. Policy curriculum courses are not mandatory. In addition, some Government departments provide specific and tailored training on the EU. For example, the FCO offers a one week course entitled “Understanding, working with and influencing the EU”. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Cabinet Office 26. I understand that Angus Lapsley has been seconded from the FCO to the Cabinet Office to work on the Balance of Competences Review. He is routinely described in public as Director of the European and Global Issues Secretariat, but I can find no public announcement of any change in the position of Ivan Rogers, who I understood held that position. For the record, I would be grateful if you could confirm Mr Rogers’ and Mr Lapsley’s current positions and when they took effect Ivan Rogers is the Prime Minister’s Advisor on European and Global Issues and Head of the European and Global Issues Secretariat. He took over this position on 12 December 2011. Angus Lapsley has been a Director in the Europe and Global Issues Secretariat since April 2012. 11 April 2013 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Working for the European Civil Service
1. Have you heard of the EU Recruitment competition or assessment process?
Response Response
Percent Count
No 81.0% 1,787
Yes 19.0% 420
answered question 2,207
skipped question 0
2. If No, have you ever considered working for the European Union?
Response Response
Percent Count
Yes 56.2% 994
No 43.8% 776
answered question 1,770
skipped question 437
3. If Yes, have you applied for, or considered taking part in the EU Competition or assessment process?
Response Response
Percent Count
Yes 24.8% 350
No 75.2% 1,059
answered question 1,409
skipped question 798
4. If you have heard of the EU Recruitment competition or assessment process, where did you hear about it?
Response Response
Percent Count
EU website (EUROPA) 37.4% 114
UKREP website 2.3% 7
Career adviser 29.2% 89
Newspaper 7.9% 24
Friend 24.9% 76
Can't remember 14.1% 43
Other 14.1% 43
Other (please specify) 51
answered question 305
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5. If you have not applied, or considered working for, the EU please tick up to three reasons why not.
Response Response
Percent Count
Never heard of it 38.0% 681
Don't know about the recruitment process and what's 74.2% 1,329 required
Can't find any information about it 18.2% 326
I'm not interested in what the EU 6.8% 121 does
It's too boring 3.4% 60
The application is too time 5.1% 91 consuming
Its too competitive 13.9% 248
My language skills are not good 35.4% 634 enough
I don't want to work abroad 9.3% 167
I don't believe in the EU 4.9% 87
Other (please specify) 157
answered question 1,790
skipped question 417
6. What are your career ambitions when you leave university? Please tick your top two choices
Response Response
Percent Count
Work in the public sector / civil 42.2% 859 service
Work for an international 51.2% 1,042 organisation
Work in the City or finance 15.1% 308
Further study 31.1% 633
Graduate training scheme 19.4% 396
Don't know 13.0% 265
Other (please specify) 165
answered question 2,037
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7. What do you look for in a career? Please tick your top two choices.
Response Response
Percent Count
Good salary 49.4% 1,006
An interesting/challenging job 80.4% 1,637
Travel 28.6% 583
Promotion opportunities 19.3% 393
Job security 18.3% 373
Working in a multicultural 15.6% 318 organisation
Flexibility/work-life balance 32.8% 668
Other 1.4% 28
Other (please specify) 38
answered question 2,037
skipped question 170
8. Where do you get your information? Please tick your top two favourite newspapers.
Response Response
Percent Count
The Daily Telegraph 16.8% 340
The Guardian 46.9% 946
The Times 43.8% 883
The Daily Mail 10.5% 211
The Mirror 2.9% 58
The Sun 5.5% 110
The Financial Times 7.8% 157
You don't read any newspapers 21.6% 435
Other (please specify) 360
answered question 2,018
skipped question 189
9. Do you listen to the radio? (if so please tick up to 2 favorites.)
Response Response
Percent Count
Radio 1 42.5% 858
Radio 2 12.1% 245
Radio 3 2.3% 47
Radio 4 21.6% 435
Another radio station 37.5% 756
You don't listen to the radio 26.2% 528
answered question 2,018
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10. Please tick the social network membership site you most use.
Response Response
Percent Count
Facebook 96.4% 1,945
MySpace 1.9% 39
Bebo 0.6% 13
Twitter 7.3% 148
Other site (please specify) 68
answered question 2,018
skipped question 189
11. Do you regularly read specialist or consumer magazines such as the Economist, Wired, Vogue, Vanity Fair, OK or other? If so please state which ones below.
Response
Count
1,158
answered question 1,158
skipped question 1,049
12. Do you regularly read or view the website or newspaper of any foreign media (ie Le Monde, Die Zeit etc)? If so, please state which ones below.
Response
Count
1,047
answered question 1,047
skipped question 1,160
13. Where would you look online for jobs or careers information? Please tell us which two sites you are most familiar with - or of any others you use.
Response Response
Percent Count
Monster 24.2% 481
Prospects 21.1% 419
Totaljobs 13.2% 262
Jobsite 18.4% 365
Reed 10.7% 212
GRB (Graduate Recruitment 11.7% 233 Bureau)
Gradjobs 13.3% 265
MilkroundGraduate-jobs 24.8% 492
Don't know of any 28.4% 564
Other (please specify) 221
answered question 1,986
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14. Have you ever approached your careers office about information on working for the EU?
Response Response
Percent Count
No 92.2% 1,813
Yes 7.8% 154
answered question 1,967
skipped question 240
15. Please tick the EU related websites below that you have visited most regularly.
Response Response
Percent Count
Europa 14.5% 287
EU Careers 8.2% 162
EPSO 2.5% 50
European Fast Stream 5.5% 108
FCO 8.8% 175
UK Representation to the UK 3.6% 72
None of the above 69.8% 1,380
answered question 1,978
skipped question 229
16. Please tell us the name of your course and university
Response Response
Percent Count
At what university are you studying? 99.9% 1,946
What subject are you studying? 99.7% 1,941
answered question 1,947
skipped question 260
17. Gender
Response Response
Percent Count
Male 41.3% 805
Female 58.7% 1,142
answered question 1,947
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18. What year of study are you in?
Response Response
Percent Count
Year 1 35.0% 682
Year 2 26.7% 520
Year 3 19.4% 378
Year 4 14.1% 275
Year 5 4.7% 92
answered question 1,947
skipped question 260
19. Please provide us with your email address if you would like to be entered for the draw to win £50 of Amazon Vouchers.
Response
Count
1,898
answered question 1,898
skipped question 309
20. Will you be interested in receiving further information about EU careers via this email address?
Response Response
Percent Count
Yes 61.7% 1,193
No 38.4% 742
Other (please specify) 21
answered question 1,932
skipped question 275
Written evidence from Nigel Farage MEP on behalf of the UK Independence Party (UKIP) Summary What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? The Fiscal Union Treaty stands outside the Treaties and in the absence of agreement by the UK cannot form part of the acquis or permit use of EU institutions under it.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? No, because the means by which this is to be done sets a dangerous precedent inconsistent with future UK interests.
If it should, what demands and safeguards, if any, should it make its condition for doing so? We doubt that any safeguards and conditions would be honoured, given our prior experience of such.
Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? No. We believe that this would still involve an unacceptable loss of sovereignty and would be far too complex to establish and administer.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? If the UK remains a member, then the relationship should be confined to trade and access to the single market with a concomitant architecture. UKIP’s policy is clear, however: only withdrawal is the means of securing the exclusive national interests of the UK. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy? We believe that this will be a signal for the EU to increase its budget, raise more of its own resources and to enforce harmonised tax rates across the Union. Enlargement is on hold. The clamour for an EU foreign policy and defence force will grow.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? With the deft sidestep by the Commission of the “veto”, this was no watershed. In the first instance we feel that a more helpful order for the questions posed in the Committee’s rubric is to follow the order we have used below.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? As a matter of international law, the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union (“The Fiscal Union Treaty” or “FUT”) is a Treaty within the meaning of the Vienna Convention on the Law of Treaties and therefore has all the attributes of a Treaty in international law. It is signed by 25 sovereign nations who are, coincidentally, also members of the European Union. It is not, however, a European Union Treaty. The Treaties—now consolidated as The Treaty on European Union (TEU) and The Treaty on the Functioning of the European Union (TFEU)—are those to which 27 sovereign nations have acceded. Two sovereign nations which are EU members, The UK and the Czech Republic, having declined to sign this Treaty, the Fiscal Union Treaty has no legal nexus to TEU/TFEU. Since the EU is not a signatory to the FUT and two of its members have not assented to be bound by it, the EU is not itself bound by the FUT. Nor does the Fiscal Union Treaty have any lawful impact on any Treaty or other agreement which is itself linked to TEU/TFEU. One should be mindful of Article 5 TEU by which “the limits of Union competences are governed by the principle of conferral”. The full 27 member states have not granted to the EU any of the competences which are set out in the FUT. This has significant consequences. For example, Article 818 of the FUT makes provision for use of the ECJ in certain circumstances. Given that the FUT Group legally lies wholly outwith the structures of the EU, it is difficult to see how Article 8 might legally be deployed, given the jurisdiction of the ECJ as set out in Article 19 TEU. The jurisdiction of the ECJ is the “interpretation and application of the Treaties” [ie TEU and TFEU] and, “in accordance with The Treaties”, ruling on actions brought by “a member State” or “an institution” (ie an institution of the EU as defined by the Treaties) or a natural or legal person; giving preliminary rulings on the interpretation of Union law; ruling on other cases provided for “in the treaties”. The FUT falls outside that jurisdiction. We submit that neither the FUT, nor any organization set up thereunder and nor any contracting party has any locus standi to bring actions before the ECJ. The contracting parties may say whatever they wish in their own Treaty: the Treaties make it clear that the jurisdiction of the ECJ is limited. Article 8.3 of the FUT pretends to the notion that referring matters to the ECJ under the FUT is a “special agreement” for the purposes of Article 273 TFEU. Yet Article 273 only grants jurisdiction to the ECJ in any dispute between Member States which relates to the subject matter of the Treaties. The FUT is not part of the subject matter of the Treaties. Nor can this be claimed as an act of enhanced co-operation under Article 20 TEU (which applies to non- exclusive competences) since the subject matter is the Euro, an exclusive competence of the EU. Notably, The United Kingdom has in no way consented whatsoever to any institution—such as the European Court of Justice (ECJ)—or mechanism of the EU being used by the FUT group or UK Taxpayer’s money being thus deployed. UKIP MEP Stuart Agnew, substitute member on the European Parliament’s Constitutional Affairs Committee, has repeatedly asked what the legal basis for any such use might be: no satisfactory and compelling answer has been proffered. Her Majesty’s Government has itself no power to permit use of the ECJ by outside organisations or otherwise acquiesce in such use. No such power was granted by The European Communities Act 1972 nor any subsequent Act which makes such permission or acquiescence lawful under UK law. We therefore contend that any expenditure of British Taxpayer’s money on such use of the ECJ would quite simply be illegal. 18 Given the need for brevity we have not set out in extenso the text of individual articles on the assumption that this Honourable Committee is fully conversant with them. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Whilst the 25 may have agreed that as far as this arrangement is concerned, “this Treaty shall be applied and interpreted by the Contracting Parties in conformity with the Treaties on which the European Union is founded”, that is entirely a matter for them. Such does not bind the UK.19 We also feel it imperative that this Committee considers in this regard two other matters: — The intimate relationship between the FUT and the Treaty Establishing the European Stability Mechanism (ESM). Implicitly, at the very least, each of the treaties is intimately linked the one with the other. There is an on-going case before the Irish Courts initiated by Independent MEP Thomas Pringle which has this relationship at its heart, challenging the lawfulness under EU law of the ESM and calling for a Referendum on the ESM. — Continuing developments in Europe. We respectfully suggest that the Committee cannot properly come to any settled conclusion until the issue of further amendments to the FUT is resolved. France’s new President Hollande has called for major changes. Greece faces an uncertain future which may have major implications for the FUT. The Netherlands soon has a general election which may produce a call for yet further amendments or even a refusal to ratify. Six months from now the architecture of the EU may look very different.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? For the reasons set out here, we believe that to do so would be wrong and would set a potentially very damaging precedent. It will be recalled that very soon after the Prime Minister had indicated Her Majesty’s Government’s unwillingness to sign this Treaty, the Deputy Prime Minister (DPM) spoke, on 9 January 2012, of the FUT being “folded into” the existing Treaties: U.K. Deputy Prime Minister Nick Clegg called for changes to the way euro-area countries monitor each other’s spending to be “folded into” existing treaties to prevent multiple rulebooks governing members of the 27-nation European Union. “We believe that it should, over time, be folded into existing treaties so that you don’t get permanent two parallel treaties working separately from each other,” Clegg told reporters in London today following talks with leaders from European liberal parties, which included EU Economic and Monetary Affairs Commission Olli Rehn and Dutch Prime Minister Mark Rutte. “We all see this as a temporary arrangement.”20 As an aside, one is bound to wonder who the DPM meant by “we” here. It is a matter of note that the DPM was speaking of the FUT being “folded into” existing Treaties. One wonders if he had been talking to his erstwhile colleagues at The Commission and had been privately alerted as to how the Commission saw the FUT becoming EU law. We would point to the observations of a Mr. Romero, a legal expert from the Commission, who spoke to a joint meeting of the Constitutional Affairs Committee and Economic Affairs Committee of the European Parliament on 12 January 2012 at Strasbourg. A video of his contribution can be found here: http://youtu.be/WfSvvgCmvbo. In summary, Mr. Romero was making it plain that making the FUT part of EU Law did not, as far as they were concerned, require a Treaty change of any kind. It would all be done by means of what Mr. Romero calls “secondary legislation” which we take to mean by way of the whole gamut of Directives, Regulations, Delegated acts and implementing acts. Within about a month of the Prime Minister claiming having to have vetoed the FUT, the Commission had found a way round that little local difficulty and thus rendered the so-called veto nugatory. One might properly infer that The DPM knew all of this when he spoke. For whom, then, was he speaking? Her Majesty’s Government or the Commission? We strongly submit that this means of eliding external agreements into EU should be fiercely resisted by HMG and that there should be no question of the UK supporting the stealthy insertion of such via the back passage of directives, regulations and the like. Once this exercise has been done once, it will be repeated. British MEPs might in such instances vote against it but the UK stands to be over-ruled at every turn. What is proposed thus represents a serious threat to the UK’s interests and must be resisted, involving as it does a considerable further loss of sovereignty, power and influence within the EU. That is quite apart from our grave concerns that this particular enterprise is both the template for and harbinger of a further strong drive towards Federalism. It contains within it a powerful impulsion towards overall control by the EU of harmonising a wide range of taxes and control over national budgets into which we fear the United Kingdom will be sucked. The degree to which the power of Sovereign States to draw up 19 FUT Article 2.1 20 Eg Bloomberg online: http://tinyurl.com/bmofpcp cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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budgets and set their own tax rates independently is gravely threatened by this Treaty and Her Majesty’s Government should have nothing to do with such an anti-democratic step. This is a major step towards “ever closer union”. Whilst the UK remains outside much of this closer integration—for the moment—the United Kingdom remains bound to EU Treaties which call for an ever-closer union whose currency is the Euro. The grave danger is that we shall be pulled headlong into such union by the maelstrom of the collapse of the Euro and its consequences. We believe that the People of the United Kingdom desire—and demand—that we travel in an entirely opposite direction. In addition the emergence of a nascent proto-government for the Eurozone is bad for the members of the Eurozone in terms of democracy. This Treaty is profoundly undemocratic, placing as it does so large a degree of control over national budgets in the hands of the EU. Given the ineptitude displayed during the Euro crisis by its leaders at all levels, it is not unreasonable to be pessimistic about Europe’s prospects for growth and competitiveness. That would be deeply damaging to the UK’s interests. Having as a major trading partner a sclerotic group of countries becoming ever less competitive by the day—thus inhibiting growth—is hardly likely to enhance the UK’s trade. With so many of our eggs in this basket, that can only be against our vital interest.
If it should, what demands and safeguards, if any, should it make its condition for doing so? We have set out above our view that it should not be supported under any circumstances. If that means we become fully-declared opponents of the great European Project, so be it. We doubt that any safeguards and conditions would be honoured, given our prior experience of such.
Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? The problem we foresee with the suggestion of a two- or multi-tier EU is that it will inevitably involve concession of an unacceptable degree of Sovereignty. More than that it is very difficult to see how such a complex arrangement could be made to work. We now have 40 years’ experience of how a single-tier EU is administered and its anti-democratic tendencies, of which the overthrowing of the results of National Referendums and the insertion of EU-approved Technocrats as national leaders are but part. We have also had ample evidence of the poor performance of the unelected and unaccountable officials of the EU who are immune to the norms of democratic life.
Why should a two- or multi-tier EU be any different? We consider that the notion of a two—speed or multi-speed EU is simply a non-starter. The notion of any significant powers being repatriated—after the EU has spent 55 years in the careful and assiduous accretion thereof—is risible. A genuine two-tier relationship is very unlikely to be on offer on any terms that are actually advantageous. The attitude of the new French President to the UK ought to make that abundantly plain.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Whilst the UK remains part of the EU, it should seek the loosest possible architecture for the EU and to be bound by the least political commitments possible. We should take this opportunity to disengage ourselves, above all, from all the non-trading elements (especially the political ones) of the EU and look to concentrate only on our access as a trading nation to the Single Market and our trading relationship with Europe which, we say, is all the People of the UK have ever assented to by way of the 1975 Referendum.
What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy (CFSP)? As far as enlargement is concerned, we believe that this process will be placed in abeyance for the time being. A new entrant is required to adopt the Euro. The next countries in line, in no particular order, are the likes of Serbia, Albania, Macedonia, Bosnia-Herzegovina and Montenegro. It will be some time before we can assess the impact of Croatia’s accession. Given the state of the economies of the prospects, further enlargement is unthinkable for the time being. Greece may yet leave or be ejected from the EU. We could not, with the problems that now face us, contemplate trying to digest Turkey or any of the Balkan states. Enlargement is at best on hold. The new agreement is highly unlikely, we believe, to promote growth and prosperity for its members. What it will do is provide the impetus to the EU to introduce new ways of raising EU taxes (“own resources”) and harmonising tax rates across the EU. The EU’s appetite for spending other people’s money will never diminish but will continue to rise. We already know how many of the EU states greatly resent Ireland’s low corporation taxes. France calls stridently for a Financial Transaction Tax. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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As far as the CFSP is concerned, the diminishing ability of member states to afford proper defence spending will lead to greater efforts to impose the creation of a European defence force, thus further diminishing the UK’s independence and ability to protect its own interests. We believe that this agreement will be a disaster for UK vital interests.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? It is not the case that the supposed “veto” of the Prime Minister represents a watershed. As we have seen above, the EU plans to sidestep it almost without moving a muscle and the use of secondary legislation to “fold” the FUT into EU law will happen, in a stark demonstration of the impotence and marginality of the UK’s MEPs. In reality it was not a veto at all but simply a spur to the EU to find a way of thwarting UK policy and getting on with the business of integration as fast as possible. Having thus revealed the utter contempt of our so-called partners for the UK’s position and interests, it may be thought a watershed in that the UK must now admit to and contemplate the fact of our impotence and lack of influence at the heart of Europe. Those who would claim otherwise must stand adjudged of mere hollow bluster. If we have no influence, then what is the point of our membership?21 22 May 2012
Written evidence from the Scotch Whisky Association (SWA) The Scotch Whisky Association (SWA) is the trade organisation whose main aim is to promote and protect the interests of the Scotch Whisky industry. A key element within that broad remit is to try to ensure that the trade regimes in which our members operate are non-discriminatory and permit fair competition. The EU is the industry’s single largest export market and is therefore of vital importance to our sector. Our member companies, which range from small and medium-sized enterprises to multi-national companies, sold over 500 million bottles of Scotch Whisky in the EU in 2011: over 40% of all Scotch Whisky sales take place in the 27 Member States. Much of this success has been built on the harmonised trade rules in the internal market and the EU’s regular phases of enlargement. We frequently campaign to ensure the internal market’s rules are appropriate to our sector and we greatly appreciate the dialogue with, and the support we receive from, UK officials. The EU legislation of greatest interest to our sector often bears the hallmark of UK participation. We only are able to secure rules meeting the needs of our sector through the UK’s EU membership and full involvement in its decision making processes. The SWA therefore welcomes the Foreign Affairs Committee inquiry into the future of the European Union and UK Government policy. The attached submission seeks to highlight the benefits the UK’s EU membership has brought our sector within and beyond the EU’s borders. We have provided information regarding the internal market, EU enlargement and international trade relations. As a trade association, however, the Committee’s questions in relation to eg the “fiscal compact” lie outwith our remit. Naturally we would be ready to provide further written information if that would be helpful.
1. Executive Summary 1.1 The Scotch Whisky Association welcomes the Foreign Affairs Committee’s inquiry into the future of the European Union and UK Government policy. Our sector liaises regularly with UK government departments and greatly appreciates their guidance and support in the effort to improve trading conditions for Scotch Whisky in the EU and in third countries. 1.2 The EU is the industry’s single largest export market and is vital to the Scotch Whisky industry. Global exports in 2011 were worth £4.23 billion, of which sales to the 26 other EU Member States accounted for £1.45 billion. Total sales within the EU, ie including the UK, amounted to over half a billion bottles, or 42% of the industry’s total volumes. 1.3 Scotch Whisky is sold in every EU Member State; our sector benefits greatly from harmonised trading rules in the single market, ie as opposed to the 27 sets of national rules that would otherwise apply. These advantages have been extended by EU enlargement. Although the internal market provides a (relatively) barrier- free trading environment, more is required for it to reach its full potential. 1.4 The UK plays a key role in the EU’s decision-making processes through the European Council and European Parliament. The Association is extremely grateful for the readiness of UK officials, MPs, MSPs, MEPs and Ministers to raise our sector’s concerns and pursue our interests in all relevant fora. 21 UKIP does not, of course, thereby concede that if we had influence membership has a point. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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1.5 The UK’s EU membership has delivered benefits to Scotch Whisky which would not otherwise have been possible. We very much hope that, whatever decisions are taken regarding the EU’s future institutional architecture, and the UK’s role therein, these will not jeopardise the benefits of the internal market and the UK’s ability to influence and shape EU policies.
2. Introduction 2.1 Scotch Whisky is the world’s foremost internationally traded spirit drink. The Scotch Whisky Association (SWA) is the trade organisation which represents the interests of the Scotch Whisky industry. Its main objective is to protect and promote Scotch Whisky at home and in its overseas markets. More than 90% of sales take place outside the UK. 2.2 Despite the current economic difficulties, rising demand in both emerging and mature markets has resulted in export values increasing by an average of 10% a year over the last five years. The government regularly exhorts business to find new opportunities overseas. The Scotch Whisky industry provides an excellent example of the benefits of such trade. Much of the export success could not have been achieved without the UK’s EU membership. 2.3 Exports of Scotch Whisky to over 200 countries in 2011 were worth £4.23 billion. This equated to nearly 1.2 billion bottles; or 3.2 million bottles every day. Scotch Whisky alone represents 80% of Scotland’s food and drink exports, 23% of the UK’s and 7% of the EU’s (2010 data, as 2011 figures are not yet available for the whole EU). Scotch Whisky contributes £134 per second to the UK balance of trade. 2.4 The industry employs over 10,000 directly and a further 35,000 jobs across the UK are supported by the industry. Our sector spends £1 billion each year with UK suppliers of goods and services. Prospects for further export-led growth have resulted in the industry investing £1 billion in additional distillation, maturation and bottling capacity over the last five years. 2.5 The ability to export is vital to the health of the industry. Our members have been exporting for over a hundred years and are fully familiar with intra-EU and international trade and a wide variety of national trading environments, not all of which are benign. The SWA is an active campaigner against trade barriers and seeks to ensure fair and non-discriminatory trading conditions in all markets. 2.6 Our submission includes an overview of Scotch Whisky in the EU, and highlights some of the benefits it has brought as well as the work that remains to be done. It also looks at international trade aspects, and explains why the UK’s EU membership brings benefits within and beyond the EU’s borders. We have not sought to address questions in relation to, eg the “fiscal compact” since these lie beyond the Association’s remit.
3. Scotch Whisky in the European Union 3.1 Exports to the 26 other Member States were worth £1.45 billion in 2011. Total sales within the EU, ie also including the UK, amounted to over half a billion bottles. Scotch Whisky is sold in every Member State and our sector enjoys the advantages of the EU’s harmonised trading rules, ie as opposed to 27 sets of national rules. Our success in the EU is in large part a consequence of the internal market’s (relatively) barrier-free trade environment. 3.2 Our sector has long been involved with UK/EU officials and MEPs to try to ensure that EU legislative proposals are appropriate for our sector and enhance trade rules in the internal market. Our involvement is both direct and through our membership of the European Spirits Organisation—CEPS, which represents spirits producers at EU level. In the same way as CEPS relies on its members to determine the best policies for the industry, so too do the EU decision making processes rely on the active engagement of national governments and MEPs to pursue the interests of their constituents. 3.3 Thanks to the readiness of EU and UK officials to engage with our sector, much useful legislation for the Scotch Whisky industry has been passed. Policy areas where the Association has been actively involved at every stage include VAT and excise taxation, bottle sizes, spirit definitions, holding and movement of excisable products, strip stamps, environment, food labelling and protection schemes for geographical indications. 3.4 The policy work in which SWA and CEPS are engaged requires a constant dialogue with UK and EU officials in national capitals and Brussels, and with MEPs once those dossiers come before the European Parliament. The breadth of issues, and the level of engagement needed, are such that we could not secure trading conditions appropriate to the sector without UK support. Some of the dossiers on which we are engaged affect Scotch Whisky far more than any other spirit drink and the UK’s voice is critical in ensuring the enacted measures meet industry needs. 3.5 Among the advantages brought to our sector from the UK’s EU membership since 1973 are the following: — removal of excise tax and VAT discrimination against Scotch Whisky in France, Greece, Italy and Denmark; — adoption of EU rules to define and protect whisky, and to provide specific protection for geographical indications, such as Scotch Whisky; cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— introduction of common rules on labelling requirements and the bottle sizes in which spirits must be sold; and — removal of tariffs, quotas, tax discrimination, national labelling requirements and many other trade barriers in EU accession countries.
4. Single Market—Work Still in Progress 4.1 While we strongly support the principles of the Single Market, as is regularly observed it is far from complete. In our sector difficulties persist, notably on tax issues and inappropriate national rules which prevent free movement or protect domestic interests. Resolving such concerns does not happen overnight; the UK’s voice is needed over the long term to try to improve the operation of the single market. 4.2 A key area of concern is the EU’s excise tax directives which require Member States to apply minimum rates of tax according to category of alcoholic beverage. On spirits the minimum rate is €1,000 per hectolitre of pure alcohol (hlpa); for beer, it is €127 per hlpa; and on wine, the minimum rate is zero, a level applied by 16 Member States. All alcoholic beverages compete with one another and we believe the tax structure should reflect this situation. Instead the current crisis is being used by some countries to further widen discrimination against spirits; in many cases Scotch Whisky is the main imported spirit. 4.3 In addition, EU structures permit some national derogations from the broad principle that, within each category of alcoholic beverage, everything should be taxed in an identical manner. Thus, for example, there are lower rates of tax in France on rum from its overseas departments and on ouzo in Greece. There are other examples, too numerous to mention, of particular categories of spirit receiving preferential tax treatment sanctioned by the EU. 4.4 These have created the conditions in which some Member States, unilaterally and illegally, have introduced protection for domestic products: Hungary and Romania are the current worst offenders but Greece too has illegally extended its derogation for ouzo to include other local spirits. While there are means of redress in place, infractions proceedings, designed to enforce compliance with the acquis, are often slow and can take over four years before being resolved. In the meantime the discrimination continues. 4.5 Although it is usually the Commission that leads in removing such barriers, the UK’s involvement, at EU level, and bilaterally with the offending Member State, are extremely helpful in trying to resolve such concerns. We are constantly grateful for the UK’s support in this respect.
5. EU Enlargement 5.1 The internal market’s benefits have regularly been extended by EU enlargement. In acceding countries this has brought, among other things, the removal of many trade barriers including high tariffs, quotas, preferential tax rates, import permits, inappropriate laws defining whisky and national labelling rules. 5.2 The SWA has been closely involved in each phase of enlargement. Our main aim has been to ensure the EU acquis is implemented and enforced in the new Member States at the earliest opportunity, and that any derogations and/or transition periods in our sector are kept to a minimum. We have been helped greatly by the UK administration in this process. Through, eg the Enlargement Working Group, and bilaterally with the accession country, the UK has been extremely effective and persuasive in ensuring new EU members accede under the right conditions. Among other things, the UK was influential in securing: — the introduction of two benchmarks in Turkey’s accession negotiations which were instrumental in resolving two major trade barriers for the Scotch Whisky sector; — the agreement by Romania that, in advance of its EU accession, the tariff preferences it had negotiated for US whisky should also be extended to EU whiskies; — the introduction of a review period for certain tax derogations granted to some of the 2004 intake of accession countries; and — the refusal to permit any continuation of the preferential treatment (via excise tax and/or tariffs) of local vodka after Poland joined the EU. 5.3 More recently, we very much appreciate that the UK and others did not accept Croatia’s request for a seven year transition period to allow the sale of inappropriately labelled national spirits (“domaci rum” and “domaci brandy”), against which Scotch Whisky competes. Croatia’s accession in 2013 will therefore provide far greater potential for improving Scotch Whisky exports than if the current protection had been maintained. 5.4 EU enlargement has, over the long term, proved to be of massive importance to Scotch Whisky exporters. Some countries that have joined the EU over the last 25 years have been among the industry’s most important export destinations: — Before its 1986 accession, exports to Spain were typically £20Ð30 million a year. 10 years later they averaged over £200 million; between 2003 and 2010 they exceeded £300 million on four occasions. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— Exports to Greece were worth £10Ð15 million a year between 1980 and 1985. When barriers were removed upon its 1986 accession, exports rose to £71 million after five years. They exceeded £100 million four times between 2003 and 2010. Prior to the recent economic difficulties, Greece was often cited as the country with the highest per capita consumption of Scotch Whisky in the world. 5.5 Among more recent accession countries, exports to Poland have increased from £5 million in 2003 to over £42 million in 2011.
6. EU and International Trade 6.1 Europe is the world’s largest trading bloc, accounting for one fifth of global trade. EU trade policy promotes the principles of free and fair trade around the world. While the Commission negotiates on behalf of the EU, the active involvement of Member States is critical in ensuring vital national interests are pursued in the negotiations. For example Free Trade Agreements (FTA) between the EU and third countries remove market access barriers, including excessive tariffs, and are an important tool in helping exporters gain better access to markets. In an export dominated industry such as Scotch Whisky, we are very grateful to UK officials and Ministers who regularly seek to ensure our interests are pursued in FTA negotiations. 6.2 The highest priority market for the Scotch Whisky industry is India. There is significant demand for Scotch Whisky in the market, but also major barriers, the most important of which is the excessive 150% tariff; effectively this prices our products out of the range of most consumers. The negotiations on the proposed EU- India FTA offer the only realistic chance of significantly reducing this tariff in the medium to long term. The Association is very grateful to UK officials in Delhi, Brussels and London who put in a considerable amount of time and effort to ensure the interests of the Scotch Whisky sector are taken into account during these complicated negotiations. 6.3 In the case of South Korea, where Scotch Whisky is both the UK’s largest export to the country and by far the biggest imported spirit, the entry into force of last year’s FTA provided substantial benefits. Not only will the 20% import tariff on spirits be eliminated, but the Agreement provides a mechanism to introduce legal protection for Scotch Whisky as a Geographical Indication. As in India, UK officials in London, Seoul and Brussels played a major part in delivering the successful outcome. 6.4 WTO trade rules have also been very useful in improving trading conditions for Scotch Whisky. For acceding countries, we have been helped enormously by the UK and EU’s readiness to ensure, in some cases, that longstanding barriers are resolved as a condition of accession. Elsewhere, WTO rules provide a mechanism for the EU, pressed by the UK, to take action against illegal protectionism in world markets. Our sector has been successful in removing tax discrimination in Japan, Chile, Korea and the Philippines. 6.5 More generally, the EU’s trade dialogue with third countries also helps it to promote and “export” the application of EU rules as best practice, and thereby shape trading conditions around the world. As mentioned earlier, the UK is active in seeking to ensure EU rules are appropriate for the Scotch Whisky sector; such rules can have a positive impact well beyond the EU’s borders.
7. Conclusions 7.1 The SWA firmly believes the UK’s membership of the European Union has provided significant benefits in improving trading conditions for Scotch Whisky in Europe and beyond. We could not have secured these advantages from outside the EU. And there remains much to be done, in particular to ensure that the proposed FTA with India delivers the tariff reductions that would help unlock this potentially huge export market. 7.2 The UK government has a vital role to play in promoting a level playing field for business in the EU. The EU Single Market and free movement of goods has already delivered huge benefits to Scotch Whisky producers. However, improving the Single Market and removing the remaining barriers to trade should remain a priority UK objective. 7.3 It is therefore critical that the British voice is, and continues to be, heard in Brussels and is successful in shaping EU policies. The UK would lose its current influence if, like EEA members Iceland or Norway, it was not part of the EU decision making process. Moreover, the UK would still be required to implement EU legislation which it had not helped shape. 7.4 We hope any decision regarding the institutional architecture and the UK’s EU membership will not jeopardise the advantages membership has brought, or weaken the influence and impact membership brings in the decision-making processes. We hope the above comments will be helpful. If any further written information or clarification on any aspect would be useful, please do not hesitate to get in touch. 22 May 2012 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Written evidence from the Liberal Democrat European Parliamentary Party Summary Unless structural problems are tackled, the long-term future of the EU is at risk. UK European policy lacks strategic clarity on this and other matters. Economic recovery is not possible without a stronger Union, where fiscal solidarity supplements fiscal discipline. The fiscal compact treaty is a necessary expedient. Its incorporation in the EU framework will trigger a full-scale revision of the Treaty of Lisbon. The UK will have to decide whether to support further integration of the EU—and, if so, whether to participate. A British referendum on the EU is likely to be necessary. 1. We welcome your important enquiry, and hope it can produce some clear-sighted commentary on and options for the guidance of the United Kingdom’s future relationship with the European Union. 2. As Liberal Democrat Members of the European Parliament we are committed to making a success of British membership of the EU and, in particular, to advancing the role, efficiency and legitimacy of the European Parliament in the governance of the Union and in British politics. We sit within the group of the Alliance of Liberals and Democrats for Europe (ALDE). 3. To set a context for our responses to your particular questions, we have some general points to make. First, we firmly believe that Britain’s membership of the European Union has been of substantial benefit to the UK and remains fundamentally in the national interest. The UK is clearly more prosperous, more secure and more powerful as a result of being a member of the European Union. 4. Second, no group has produced even a remotely compelling or attractive alternative to full EU membership. The obvious alternative available to the UK is to move to a Norwegian model as a member of the European Economic Area (EEA). But as the recent and thorough report from the Norwegian EEA Review Committee shows,22 there are serious negative consequences from such a model, not least to national sovereignty since Norway is obliged to implement the vast majority of EU rules without having any voting powers over what those rules actually are. We find this “fax democracy” option deeply inappropriate for the UK. 5. Third, the protracted liquidity and sovereign debt crises have made the EU more not less necessary. Economic recovery is not possible without deeper European integration, and the Europe 2020 programme sets the appropriate agenda. Recognising the need for a return to fiscal discipline at the national level, it is the obvious role of the EU to provide the platform and instruments for a revival of investment in sustainable growth. Appropriate action at the EU level, both directly through programmes financed by the EU budget, and via the EIB and through the launching of new project bonds, can produce massive cost efficiencies and economies of scale, not least by cutting wasteful duplication and adding value in science and technology (including defence capabilities), as well as by modernising Europe’s infrastructure. The transfer of some significant items of public expenditure from national budgets to the EU budget, re-shaped to be more flexible and drive competitiveness, makes every sense. New streams of genuinely autonomous EU revenue will reduce the burden on national treasuries. We broadly support the Commission’s range of proposals on reform of the own resources system. 6. Fourth, we believe that European integration has come almost as far as it can under present constitutional conditions; and that while, after the Treaty of Lisbon, the EU lacks little in terms of statutory authority it is deficient in terms of capacity of government and resources. Unless these structural problems are tackled urgently, the legitimacy and durability of the Union will be at risk. 7. And fifth, we are gravely concerned about the state of British European policy which we find too often to be driven by short-termism and partisan and populist pressures, managed by a declining diplomatic force, and guided by no sense of strategic direction. This may in part be the consequence of having a coalition government composed of contradictory pro-European and eurosceptic tendencies. Yet previous Labour and Conservative governments also signally failed to deepen Britain’s engagement with the EU or to enlighten British public opinion about the true nature of the country’s deep interdependence with its EU partners and the scale and scope of integration.
The December European Council 8. So, to turn to your questions, we believe that the crisis at the December European Council marks a radical shift both in the UK’s policy towards the EU and, more importantly, in its partners’ attitude towards the UK. No other prime minister since Anthony Eden has turned his—or her—back on the Brussels negotiating table. We find Mr Cameron’s demands of his colleagues in the European Council to be matters of secondary not primary law, largely misguided in content and intemperate in tone. The evidence is that the coalition partnership did not work that day. 9. It is impossible, however, to be surprised by what happened. The European Union Act of July 2011 installed UK referendums on all future important constitutional change in the EU. Although denied by ministers at the time, this unilateral British constitutional innovation was not received elsewhere with equanimity: the EU Act is seen to have side-lined the Westminster parliament, weakened British political parties, and given the 22 http://www.europautredningen.no/english/ cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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populist press a nationalist field day. The result is that the hapless British people have an entrenched veto against the constitutional evolution of the European Union. 10. Treaty change is a normal if complex phenomenon because the European Union is founded on a system of common law. Regular treaty amendment is needed to codify settled jurisprudence of the Court of Justice, to adapt to enlargement, or to adjust the Union’s competences and the powers of its institutions to deal with new challenges. Remove the possibility of treaty change, and the Union is paralysed. The fact is that the EU is once again facing a further round of substantial reform with, one way or another, major political consequences for the UK. Therefore the government cannot indefinitely resist a European referendum in Britain. 11. The December European Council was well aware of the threat of a looming British referendum. The main story of that meeting was not so much the attempt by a British prime minister to stymie the efforts to salvage the euro but, rather, the willingness of the other heads of government, under the leadership of President Van Rompuy, to call his bluff. Subsequent events confirm that the rejection of the British was not just a one night stand. There is no attempt made either to reverse the split or even disguise it. Indeed, we detect a palpable sense of relief in some quarters in the EU institutions that the perennially neuralgic British problem might be about to go away. While the Coalition Government has shown engagement and indeed leadership in some areas—for example by former DECC Secretary of State Chris Huhne on moving to an immediate EU 30% reduction in GHG emissions and at the UNFCCC COP in Durban—the more common perception has unfortunately been that the UK remains uncooperative, notwithstanding the Coalition Agreement commitment to being a positive partner in Europe. The UK maintains a negative attitude across a number of areas of EU policy—including the EU’s accession to the ECHR, the negotiation of opt-outs in the field of justice and home affairs, the first shots fired in the battles over the budget rebate and the reform of the own resources system, the continuing debate over the regulation of the financial markets, and a general British refusal to back the development of common foreign, security and defence policies. Good and energetic initiatives from the UK side need to utilise the usual European channels to reach their full potential. For example, the Like Minded Growth Group has successfully brought together 16 member states to focus on deepening the single market, smarter regulation and growth generation, but so far only in a parallel process not cross-referenced to the details of initiatives already underway at a European level. 12. It is extremely difficult to identify any benefit to the UK from the outcome of the December European Council, a view echoed in private by many in the British financial services industry which the Prime Minister’s actions were apparently seeking to protect. Meanwhile the costs to British reputation and relationships have been significant, with potential knock-on consequences for our negotiating clout, including, ironically, on financial services dossiers. Moreover, the potential for caucusing among Eurozone or Eurozone Plus countries on EU matters, including the single market, is now more real than before December. 13. We note with deep regret the tendency in London to proceed to debate EU affairs as if “Europe” were a far off country of which nothing much needs to be known. The narrow nationalistic tone of the domestic debate does great harm to the image of the UK in the rest of Europe. The argument over the future of Britain’s treaty commitment to the ECHR and the Charter of Fundamental Rights is being closely scrutinised, as will be any official discussion of “repatriation” of EU competences. The behaviour of British right-wing MEPs who work merely to undermine the institution to which they are elected to serve is universally ridiculed, but the relative influence of all British MEPs is affected adversely by the belligerence of the few. In short, we deplore the fact that conclusions are now being drawn in Brussels, across Europe and in the wider world about Britain’s fitness and trustworthiness as an EU partner.
The Fiscal Compact Treaty 14. The new treaty is unprecedented.23 It works by explicit analogy with the EU treaties, respects the competences conferred under the EU treaties, seeks to deploy the institutions which are empowered by the EU treaties, commits to its own eventual incorporation within the EU treaties, but is not itself of them. It is an archetypal confederal treaty, committing the governments of signatory states to a course of action which if in the event they choose not to pursue there is no enforceable legal sanction against them. The European Commission may help to implement the fiscal compact treaty, but it is unable to use the fullness of its powers vested under the EU treaties to do so. The European Court of Justice is enjoined to act at the behest of one member state against another according to Article 273 of the Treaty on the Functioning of the EU in a dispute “which relates to the subject matter of the [EU] Treaties”. Here the vessel of the fiscal compact sails into uncharted seas: Article 273 has never been used in litigation, not least because of what its use would imply for the elevation of the ECJ into a federal supreme court. At the very least, as the UK government has already made clear, the EU institutions will only be able to act in the context of the fiscal compact treaty under the threat of court action from another EU institution or a member state if a provision of the EU treaties is breached or the integrity of EU law abused.24 The principle of sincere cooperation among member states and between the institutions is here a very relevant and important general principle of EU law.25 It is difficult not to conclude that the relationship between the fiscal compact treaty and the formal EU treaties is highly ambiguous. 23 The Schengen Agreement, by contrast, concerned an area of policy (passport controls) which the EU itself had not at that stage (1985) embraced and was crafted with the consent of all EU member states even though only some were to be bound by it. 24 See the letter from the UK Permanent Representative to the Secretary-General of the Council, 22 February 2012. 25 Article 4(3) Treaty on European Union. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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15. Despite its portentous title, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union does not go all the way to remedy the flawed structure of EMU as handed down by the Treaty of Maastricht. Nor does it comprise more than one element in establishing the reign of austerity: indeed, most of its provisions are already enshrined (with the full support of the ALDE Group in the European Parliament) in the “Six Pack” of EU laws which re-tightened the nuts and bolts of the Stability and Growth Pact and has made it more difficult for states, even large ones, to evade their mutualised responsibilities to observe fiscal rectitude. 16. An important innovation of the fiscal compact treaty is that the signatory states commit to passing cardinal laws at home in order to install a debt brake on national budgets where structural deficits rise above 0.5% of GDP. The confederal nature of the treaty means, of course, that there is no mechanism for enforcing the implementation of such rules. The contracting parties also agree to use reverse qualified majority in the Council of Ministers when it acts in the excessive deficit procedure—a principled code of conduct whose practical operation will be under close observation. The effect of the corrective provisions of the new treaty will only be felt in a number of years once the outcome of the present austerity regime is known. The immediate impact of the treaty falls on those eurozone states which will be unable to access bail-out funding from the European Stability Mechanism unless and until they agree to ratify both the fiscal compact and ESM treaties. For that reason alone, the substantive importance of the fiscal compact should not be underestimated. Its symbolic importance lies in its exclusion of the British. 17. Two other features are notable. First, the treaty commits its signatories to using the enhanced cooperation provisions of the Treaty of Lisbon to go further and faster in matters of social and economic integration. And, second, like all good confederal pacts, the treaty will come into force before all signatory states have completed their ratification process—indeed, when only 12 of the 17 eurozone states have done so. One would hope that such flexibility will influence the debate which the Union is bound to have at its next Convention on how to modify the entry into force provisions of its own treaties. 18. In any case, the fiscal compact treaty, if not an entirely good thing, is a necessary expedient, and adds to the pressure of market discipline and continual peer assessment to which all member states are now subjected to a greater or lesser extent. What is needed now, however, is faster economic growth to make palatable to a sceptical democracy the inevitably painful process of structural reform.
Incorporation of the Fiscal Compact Treaty 19. Article 16 of the new treaty foresees its substantive incorporation within the EU legal framework “within five years at most” following entry into force. It also predicates a situation five years hence in which the United Kingdom (and the Czech Republic) have changed their mind about the business and are prepared to concede what in 2012 they blocked. We support such incorporation. The UK’s interests are not served well in the current set up. We must ensure that a rigid two-tier Europe, with the UK as a second rank junior partner, does not develop. 20. We would draw the Committee’s attention to the likely significance of the institutional innovation of twice yearly summit meetings of the eurozone. Under Article 12(3) of the fiscal compact treaty these summits will discuss Europe’s competitiveness, the modification of the global architecture of the euro and its fundamental rules—that is, the convergence criteria and the Stability and Growth Pact. Unless and until the UK agrees to the incorporation of the substance of the fiscal compact treaty into the EU framework its prime minister will be excluded from such important negotiations. British self-exclusion from such a forum would not serve the national interest.
Fiscal Union and Beyond 21. The integration of the fiscal compact treaty into the EU framework will not be the only item of constitutional business which the Union will need to address over the next few years. For a start, in addition to the new treaty, the rigid fiscal discipline enshrined in the current austerity programmes, the stronger regulatory framework for the financial sector, the creation of the EFSF and ESM and the revision of Article 136 TFEU, the Euro Plus Pact proposals on the supply side, the Six Pack (and other) EU legislation—all need now to be followed through by a decisive move towards fiscal solidarity. The debate about stability eurobonds takes the Union in that direction, as does the election of President Hollande in France. We believe that it is in everybody’s interests that the euro is consolidated through the building of a fiscal union in which joint and several liability for sovereign debt is admitted. Such a fiscal union will need effective economic governance to make common economic policy.26 The shape and size of this government have yet to be determined, but its powers and instruments are becoming increasingly well defined—including, for example, the creation of a proper treasury facility at the EU level. We have discussed above the need for a rebalanced EU budget with its own sources of revenue. 22. The creation of a fiscal union requires a radical overhaul of the Economic and Monetary Union chapters of Maastricht, including the granting of new powers to the Commission and Court, adjustment to the statute 26 We note that Mr Cameron appears to agree with this. He told the Daily Mail on 8 May 2012: “We think that single currencies really require single governments if they are going to work properly”. Mr Osborne speaks of the “remorseless logic” of fiscal union. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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of the European Central Bank, changes to the decision-making procedures in the Council of Ministers, and modification of the “no bail out” rules. Moreover, in addition to fiscal union, the next opportunity to revise the EU treaties will surely be minded to rectify some of the less good features of the Lisbon treaty. There will also be moves to reform the electoral procedure of the European Parliament and, possibly, to address the issue of its seat. In any case, it is already some ten years after the start of the last constitutional Convention whose work culminated in the Treaty of Lisbon: another general revision of the treaties cannot reasonably be long avoided—with its inevitable climax in a British referendum. 23. For the United Kingdom, therefore, and for other member states frustrated by the British problem, there will be one unavoidable topic at the next Convention. This is nothing less than the continuing status of the UK as a member state. Will the UK wish to stay a member of a more federal union or not? If not, will the UK have either the moral authority or the political will to block its partners from proceeding where they deem it necessary and desirable to go? Alternatives to EU membership should be properly assessed. Would a form of associate membership be more convenient for the UK? If so, what shape could that association take? Would other countries, either currently full member states of the Union or actual or probable candidate states, prefer to be more or less closely associated with the federal core but not to be a full part of it? These questions will be divisive. Their answers will be complex. Any outcome of a re-ordering of membership of the European Union will be controversial both for those who stay and for those who go. But the future of Europe will not be secure unless the European Union reaches a higher stage of integration than it has at present or one it can hope to reach under the treaties currently in force. 22 May 2012
Written evidence from Professor Michael Dougan, Chair in European Law, and Dr Michael Gordon, Lecturer in Public Law, Liverpool Law School, University of Liverpool 1. The main points substantiated in this evidence may be summarised as follows: — The December European Council veto will only be treated as a watershed if the UK opts to view it as such. — The TSCG27 is separate from and subordinate to the EU Treaties. One should be wary of dressing political reservations about the TSCG in the language of illegality. — There are several different scenarios in which UK policy towards the TSCG will be conditioned by the legal and political environment created by the European Union Act 2011 (EUA). — Flexible membership of the EU already exists. The benefits of further reform must be balanced against the corresponding costs of greater flexibility.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 2. There is no necessary reason that the “veto” exercised by the Prime Minister at the December 2011 Brussels summit should be treated as a watershed moment in UK Government policy towards the EU. The exercise and consequences of the veto were significant, yet we believe its implications can be construed in two ways. We suggest that the veto will only be treated as a watershed if the UK opts to view it as such. 3. First, the 2011 veto could be understood “narrowly”, as an exercise in the protection of specific UK national interests which has had a minimal impact on its broader position in the EU. Indeed, this would seem to reflect the view of the Prime Minister, who in a statement to the House of Commons on 12 December 2011 maintained that the veto was necessary in the absence of “relatively modest” safeguards “on the single market and on financial services”. Disagreement about the fiscal compact might thus be seen as effectively severable from other EU policy issues, and not necessarily inhibiting constructive engagement by the UK with fellow Member States. 4. Further, the UK, as a non-Contracting Party to the TSCG, actually remains in substantially the same position with respect to the provisions of the fiscal compact as non-eurozone Contracting Parties. The new obligations set out in the fiscal compact, and in particular the balanced budget rule, will only be applicable to such non-eurozone Contracting Parties if they declare an intention to be bound by these provisions. Further, the UK may decide at any point to accede to the TSCG, thereby placing itself in an identical position to any other non-eurozone Contracting Party. The UK may not then in practice be isolated on the margins of the EU simply because it has declined to participate in a compact designed principally to regulate fiscal policy among Euro-members. 5. Secondly, however, the Brussels veto might in contrast be viewed more “broadly”, as expressive of a more fundamental shift in UK Government policy towards the EU. The UK Government’s attempts to obtain concessions in exchange for consenting to an amendment of the existing EU Treaties demonstrates a lack of solidarity with fellow Member States during the ongoing financial crisis, especially since the most controversial provisions contained in the fiscal compact would not have been automatically applicable to the UK. Nor was the Prime Minister’s veto necessary to avoid a national referendum in accordance with the EUA, because the 27 TSCG—The Treaty on Stability, Coordination and Governance cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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“referendum locks” contained in that Act would not have been triggered by the provisions of the fiscal compact. Indeed, it is difficult to see the Brussels veto as necessary or effective in any real sense, given the Prime Minister’s negotiating strategy failed to secure any of the safeguards sought, while the provisions of the fiscal compact objected to by the UK Government were still enacted by alternative means. 6. Perhaps the UK veto might then be emblematic of a shift in Government policy towards the EU, rather than a statement of dissatisfaction with the notion and/or terms of the fiscal compact itself. If this is the case, the 2011 veto may ultimately come to be seen as a watershed moment: the diplomatic manifestation of the UK’s retrenchment from Europe. Yet the fact that such an understanding of the veto may be adopted does not mean that it ought to be adopted. Whether viewed narrowly or broadly, the Brussels veto will have implications for the UK’s future within the EU. The two contrasting understandings discerned here will, however, afford different priority to the questions raised in this inquiry. If the impact of the veto is to be understood narrowly, attention should be directed to the Committee’s questions concerning the relationship between the fiscal compact and the existing EU architecture. If the impact of the veto is to be understood broadly, then one should concentrate rather upon the Committee’s questions concerning the UK’s vision for future EU membership.
Narrow Focus What is the relationship between the TSCG and the EU acquis? 7. The formal relationship between the TSCG and the EU Treaties is very straightforward. The TSCG is an international agreement entirely separate from and constituting no part of the EU legal order. Moreover, the TSCG must be interpreted and applied in conformity with EU law, the latter taking precedence in the event of any conflict between the two regimes. 8. Despite that formal separation, there is a significant overlap between the subject matter of the TSCG and EU law. The TSCG contains certain obligations for Contracting Parties which go beyond those already laid down under EU law: eg the “balanced budget” rule in Arts.3 and 4 TSCG commits the Contracting Parties to a higher standard of fiscal discipline than that imposed under existing EU law (while Art.8 establishes a specific enforcement mechanism in respect of limited aspects of that commitment); the “reversed qualified majority voting” rule in Art.7 TSCG commits the Contracting Parties to a particular course of conduct within the Council (though there is no effective way to enforce that commitment, should a Member State behave otherwise in accordance with EU law). 9. Otherwise, however, the TSCG does little which can be considered genuinely novel. Various provisions merely anticipate obligations which are possible and indeed imminent under the EU Treaties, eg Art.5 budgetary and economic partnership programmes; Art.6 public debt issuance plans; Art.11 major economic policy reform plans. Similarly, several provisions do no more than express aspirations about the future use of powers/procedures already provided for under the EU Treaties, eg Art.10 enhanced cooperation; Art.13 parliamentary cooperation. Meanwhile, other provisions refer to informal programmes/activities already established before the TSCG, eg Art.9 enhanced convergence and competitiveness; Art.12 Eurosummit meetings. 10. We do not share the analysis expressed by certain commentators, and partially endorsed by the recent report of the European Scrutiny Committee, concerning three important issues of compatibility between the TSCG and EU law. 11. First, there is the idea that recourse to an international treaty is somehow improper, as a matter of principle, whenever a Member State(s) tries and fails to persuade its partners to amend the EU Treaties themselves. That is quite a remarkable proposition—amounting to a virtual denial of state sovereignty. It cannot be seriously argued that the failed or indeed hypothetical possibility for the EU to have assumed responsibility over a given matter thereby precludes the Member States from pursuing the same or similar objectives under ordinary international law. 12. Secondly, there is the argument that Art.273 TFEU28 is an improper legal basis for the jurisdiction conferred upon the ECJ pursuant to Art.8 TSCG. There is little direct judicial authority exploring the detailed conditions governing resort to Art.273 TFEU, though there is much historical precedent to support the view that the Member States enjoy a wide margin of appreciation when it comes to voluntarily submitting disputes to the ECJ. To reject the lawfulness of Art.8 TSCG implies adopting a systematically restrictive interpretation of Art.273 TFEU without any real legal authority and despite the evidence of past practice. 13. Thirdly, there is the argument that it is impermissible for Member States to entrust limited tasks to the Union institutions outside the framework of the EU Treaties. There is direct authority from the ECJ to support the lawfulness of such delegated functions as a matter of constitutional principle. However, the conditions governing such delegated functions in practice remain unclear—especially whether delegation requires the express consent of all Member States. There are solid legal arguments on both sides of that debate—which should caution against adopting a strong critical stance based on the alleged unlawfulness of the TSCG, as opposed to holding an opinion about its political desirability. 28 TFEU—The Treaty on the Functioning of the European Union cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Should the UK Government support the incorporation of the TSCG into the EU Treaties? 14. Adopting a narrow understanding of the implications of the UK veto, and accepting that the TSCG contains little which can be considered genuinely novel, the possibility of the fiscal compact’s future incorporation into the existing EU Treaties will need to be considered. We focus here on the legal issues arising in relation to the UK Government supporting incorporation of the fiscal compact into EU law, as envisaged by Art.16 TSCG. 15. There is no compelling political reason that the Government should not support incorporation, especially since the provisions of the fiscal compact do not bind the UK. There is also no domestic legal impediment to the Government supporting incorporation, for, as noted above, the referendum locks contained in the EUA would not be triggered by such a development. Although an amendment of the existing EU Treaties to include the balanced budget rule set out in Art.3 TSCG would appear to be caught by s.4(1)(f)(i) EUA, which provides that an extension of EU competence in relation to economic policy will attract a referendum, the exemption in s.4(4)(b) would serve to obviate this requirement. By this exemption, while the provisions of the fiscal compact remain inapplicable to the UK, it would not be necessary for a national referendum to be held before an amending Treaty could be lawfully ratified by the Government. 16. This basic position should be qualified by noting three potential legal problems in relation to future incorporation attempts. First, if an amending Treaty went beyond the simple incorporation of the fiscal compact provisions into EU law, and purported to make other changes which extended the competence of the EU in any of the ways specified in s.4 EUA, unless those changes were exempt under s.4(4), a referendum would be necessary. If the UK were to make its acceptance of an amendment of the existing EU Treaties conditional upon certain demands being satisfied, and other Member States were to counter with competing demands, it is conceivable that the exercise could expand beyond the mere incorporation of the fiscal compact into EU law, with the consequence that a broader amending Treaty might engage the EUA’s referendum locks. 17. The remaining problems expose inconsistencies in the EUA itself. The second problem is a gap in the scheme of referendum locks. If the UK were to support the incorporation of the fiscal compact into EU law, and subsequently opted to be bound by these provisions, the competence of the EU with respect to UK economic policy would have been extended, and yet a referendum would not have been required lawfully to ratify this extension of competence. A referendum lock would only be engaged if the rules contained in the fiscal compact were to be applicable to the UK from the time of their incorporation. Otherwise, a national referendum could be readily avoided, and while this may appear politically convenient, given the controversial content of the fiscal compact, it might also be difficult to justify. 18. The third problem is, in contrast, one of overprovision. If the UK were to accede to the TSCG in accordance with Art.15, and declare an intention to be bound by the fiscal compact prior to supporting its incorporation into EU law, a referendum would be required at the moment of incorporation notwithstanding the fact that the UK would already have put in place a domestic mechanism to implement the balanced budget rule. In such circumstances, the formal extension of EU competence would trigger a referendum essentially to approve what had already been done, with the corollary that a failure to obtain the requisite popular approval would produce significant legal and political uncertainty. 19. In essence, the EUA adds a further layer of legal and political complexity to any UK Government decision to support the incorporation of the fiscal compact into the existing EU Treaties. In so far as it has transformed the domestic procedure for approving an amendment of the EU Treaties, and dramatically reconfigured prior assumptions about the role played by national referendums in this process, we contend that, if a watershed moment in UK Government policy towards the EU is sought, it should be found not in the Brussels veto, but in the enactment of the European Union Act 2011.
Broader Focus Between now and 2020, what institutional architecture and membership should the UK seek for the EU? 20. It is worth recalling that, despite its controversial evolution, the final Lisbon Treaty was widely seen across Europe as a triumph for the UK’s vision of European integration. Lisbon clearly affirms that the EU is merely the creation of its Member States, the latter remaining sovereign states under international law, and that the EU lacks any claim to statehood of its own. Lisbon reinforces fundamental characteristics such as the principle of attributed EU powers and a system of differentiated EU competences. It redraws the EU’s institutional balance by strengthening the influence of national governments. It also includes specific provisions for the UK, such as extending the opt-out across all of justice and home affairs. Against that background, we should ask: if the British vision for Europe triumphed at Lisbon, what is it that remains “wrong” with the UK- EU relationship? 21. For some, the problem is a relatively narrow one: it relates to the fact that one government objects to being bound by particular EU reforms or policies (in fields such as employment rights) that were agreed to by or under a previous administration. If that diagnosis is correct, there seems little that can be done to remedy it: there is no unilateral capacity to undo EU treaty reforms; the right to repudiate existing EU secondary obligations is very rare. Perhaps the major political parties need to reconcile themselves to a system in which cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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certain policy choices are indeed a collective responsibility of the Member States and as such difficult to reverse unilaterally even after a change of domestic government. 22. For others, however, the real difficulties are significantly more far-reaching. Perhaps the British vision for Europe has changed since Lisbon, even among those actors who are not opposed as such to UK membership: there is certainly a strong political constituency which argues that the extent of our participation in European integration now needs positively to be rolled back. Or perhaps the fallout from the ongoing Eurozone crisis will see other Member States pushing for a renegotiation of the Lisbon settlement, so as to strengthen considerably the foundations of European economic and political integration—a project in which the present or a future Government decides the UK should not fully participate. In either case, the FAC’s terms of enquiry suggest that one potential solution lies in developing multiple forms of EU membership. 23. In that regard, it is worth recalling that “flexible integration” already exists under the current Treaties. The range of policy opt-outs provided for directly under the Treaties themselves, together with the system for engaging in enhanced cooperation within the EU framework, mean that there are myriad constellations of (actual and potential) national participation in various fields of EU activity. Moreover, such flexibility already carries clear institutional (as well as substantive) consequences, eg as when the Council acts in restricted formations, taking into account only the votes of participating Member States. 24. Against that background, one should ask: how much further might the UK want such flexibility to go? Eg would it be sufficient to encourage more frequent/extensive resort to enhanced cooperation within the framework of the existing Treaties? If so, that would permit the UK to opt into or stay outside given EU measures or policy sectors as the national interest required—but would require building consensus within the EU that enhanced cooperation should be exploited to its full potential (and possibly also a Treaty amendment to remove the requirement that enhanced cooperation may only be used as a “last resort”). Or would the UK wish to negotiate amendments to the Treaties themselves, extending its existing opt-out rights beyond the single currency or justice and home affairs, to cover additional policy fields? If so, that would require the UK to persuade its European partners of the need for potentially far-reaching revisions to its EU membership, potentially including making the difficult case for special treatment within the single market, or a second-rate status for UK workers/consumers. 25. In any event, it is worth recalling that flexibility has costs as well as benefits. Flexibility can involve a tangible loss of policy leadership and influence—especially if it involves institutional arrangements which exclude a Member State even from being present around the negotiating table. Depending on the relative sizes of the core/periphery, and the importance of the subject matter, flexibility might risk non-participating states being de facto obliged to follow, or work around, the policy agenda agreed by others. Flexibility can also exacerbate concerns about the complexity, transparency and legitimacy of EU decision-making—though such concerns pale when compared to the limitations of more traditional intergovernmental bargaining conducted outside the EU framework. Seeking to negotiate “country specific” Treaty amendments obviously still requires unanimity among the Member States, and opens the door for other countries to bring their own demands to the table, some of which may not serve the UK national interest. 22 May 2012
Supplementary written evidence from Professor Michael Dougan and Dr Michael Gordon, Liverpool Law School, University of Liverpool 1. All of the most important issues we identified in our original submission remain essentially the same today; indeed, we suspect that the terms of debate will come into greater focus only in the light of the Prime Minister’s forthcoming speech on EU-UK relations. In particular, while we make no attempt to prejudge the substance of the Prime Minister’s imminent intervention into the debate, if a referendum to obtain fresh consent for a renegotiated relationship between the UK and EU were to be proposed, it would seem necessary to reassess existing assumptions as to the use of national referendums in the UK for the purpose of validating EU reform. Such work would, however, need to be undertaken once the detail of the Prime Minister’s position has been disclosed to be most meaningful. 2. However, we wondered whether the Committee has already taken into account the implications of the European Court of Justice’s recent ruling in the Pringle dispute (Case C-370/12, Judgment of 27 November 2012)? Although this case concerned the compatibility of the European Stability Mechanism Treaty with EU law, the ruling addresses several important points of broader constitutional principle, which seem equally relevant for the UK’s approach towards the controversial Treaty on Stability, Coordination and Governance— including various issues which concerned the Government after the European Council meeting in December 2011, as well as being dealt with in detail by the European Scrutiny Committee in its 2012 enquiry and report into the new Treaty. 3. In particular, when it comes to certain Member States requesting an EU institution (such as the Commission) to exercise various non-EU functions on their behalf, the Pringle ruling offers a clear affirmation of that possibility under EU law. According to the Court, “the Member States are entitled, in areas which do not fall under the exclusive competence of the Union, to entrust tasks to the institutions, outside the framework of the Union... provided that those tasks do not alter the essential character of the powers conferred on those cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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institutions by the EU and FEU Treaties”. In addition, when it comes to certain Member States conferring jurisdiction upon the European Court of Justice over disputes arising under an international agreement to which those Member States are party, the Court in Pringle adopted a broad interpretation of its own special jurisdiction under Article 273 TFEU, eg as regards the possibility of consenting to ECJ jurisdiction over a pre-defined category of potential future disputes; eg as regards how one should understand the concept of international agreements “related to” the subject matter of the EU Treaties themselves. 4. Altogether, the Pringle ruling thus suggests that many of the legal objections originally raised against the Treaty on Stability, Coordination and Governance were not well-founded. 11 January 2013
Written evidence from Open Europe Open Europe is an independent think tank, with offices in London and Brussels, set up to contribute positive new thinking to the debate about the future direction of the European Union and Britain’s role within it.
THE UK MUST REVISE ITS EU MEMBERSHIP TO SAVE IT Summary — The institutional and political status quo in Europe is not an option for the UK. The UK public and political class are growing more sceptical of the European Union at exactly the same point as the Eurozone is set for more integration: the final destination points for the UK and the Eurozone are inevitably different. — Without a revision of the UK’s EU membership terms and if the EU is left to become simply an extension of the euro, Britain may be forced to leave altogether. — Based on these changed circumstances, the UK should set out a new, firm and positive vision for its place in the EU, based on the following principles: — Powers can flow back from the EU—it should not be a one-way street; — Countries must be free to integrate with each other to different degrees; — No EU interference in areas that can be better—or equally well—handled locally or nationally; — A far greater role for national parliaments. — This agenda should be pursued with a concerted and thought-through drive by the UK government aimed at: — Formalising an EU structure based on different—but equally legitimate—circles of membership; — Seeking safeguards to counterbalance the risk that a more tightly knit Eurozone could dictate terms to non-euro members; — Starting a process of devolving powers back from the EU when the political and economic circumstances present themselves.
1. To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 1.1 The December veto was a reflection of the multi-tier Europe inherent in the creation of the euro, not the cause of it. It was a watershed moment in as much as it could signal the start of a new political settlement in Europe in the wake of the Eurozone crisis, a process which could last for a number of years—perhaps more than a decade. Furthermore, no matter what we think of the diplomatic efforts and the preparatory work that preceded the veto,29 so far there is no evidence that the UK has lost influence in Europe as a result of it—as some warned, in very stark language, following the December Council.30 On the crucial Capital Requirements Directive, for example, the UK managed to largely achieve its objectives, despite being in a minority position at the outset. 1.2 What is clear is that the status quo is not an option. The euro crisis will inevitably force EU member states to develop a more variable approach to European cooperation. Though not of the UK’s making, the rules of EU cooperation are changing—Britain’s role in Europe must change with it. This presents opportunities as well as challenges.
Challenges 1.3 If the EU becomes a political extension of the Eurozone, then the UK may well be forced to leave the EU: The December veto did remind us that the end points for the Eurozone and the UK are now, inevitably, 29 For a broader discussion, see Open Europe, “Cameron’s EU veto: Ten lessons that need to be learnt”, December 2011, http://www.openeurope.org.uk/Content/Documents/PDFs/10lessons.pdf 30 See, for instance, Charles Grant, “Britain on the edge of Europe”, 9 December 2011, http://www.opendemocracy.net/ourkingdom/charles-grant/britain-on-edge-of-europe; Charles Grant is Director of the Centre for European Reform (CER) cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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different if the UK remains outside the euro. The British public and political class is becoming increasingly sceptical of the EU at exactly the same point that the Eurozone is set for further integration. Therefore, if the Eurozone continues to insist on more political integration, including those EU member states that are not euro members—such as was the case with the fiscal treaty—then the UK will become increasingly uncomfortable within the EU and could well slowly move towards the exit. The question is whether this is what the UK and the rest of the EU really wants and if it is inevitable (see “Opportunities” below)? 1.4 Eurozone caucusing: A well-documented risk is that Eurozone states start to act and vote as a “caucus”— not only in areas of direct concern to the running of the Eurozone but also, for example, in single market legislation, social policy or financial services regulation.31 It is hard to envision how “Eurobonds” or other forms of shared eurozone government borrowing could work without some sort of banking resolution fund at the eurozone level to underpin the financial system or potentially even a shared finance minister, as proposed by former ECB President Jean-Claude Trichet.32 This would clearly have major implications for the UK’s financial services industry. 1.5 So far, there has been limited evidence that Eurozone caucusing is taking place, but it remains a clear risk—this is particularly true if the EU grows more protectionist in services (including financial), on which the UK is heavily dependent.33 1.6 Future changes to qualified majority voting weight in the Council of Ministers (under the Lisbon Treaty) could potentially exacerbate this risk. In 2014 or 2017 (if a country requests it), Eurozone countries, if they vote as a bloc, will for the first time have a qualified majority in the Council of Ministers, meaning that they can outvote non-euro members on issues decided by QMV.
31 We discussed the issue thoroughly in Open Europe, “Continental shift: Safeguarding the UK’s financial trade in a changing Europe”, December 2011, http://www.openeurope.org.uk/Content/Documents/PDFs/continentalshift.pdf 32 See the FT, “Trichet seeks single EU finance ministry”, 2 June 2011, http://www.ft.com/cms/s/0/e0bd4e7a-8d15Ð11e0Ð815d-00144feab49a.html#axzz1vUPlj1IT 33 An early example of the potential for eurozone dominance was the decision leading to the creation of the EU’s European Financial Stabilisation Mechanism (EFSM) bailout fund, used to aid Ireland and Portugal. Unlike the European Financial Stability Facility, which is guaranteed solely by eurozone states (EFSF), the EFSM is jointly guaranteed by all 27 EU member states via the EU budget. The decision, in May 2010, to create this fund was hugely controversial because it used Article 122 of the EU Treaties, previously reserved for providing financial assistance only in times of natural disaster, to overrule the Treaties’ “no bailout clause”. Although the decision was formally approved under QMV at a meeting of the EU-27 finance ministers on 9 May 2010, eurozone leaders had already outlined the creation of the EFSM at their own meeting two days earlier. The statement of the heads of state or Government of the euro area (from 7 May 2010) is available here, http://in.mobile.reuters.com/article/businessNews/idINIndia-48328620100507 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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CHANGES TO QUALIFIED MAJORITY VOTING UNDER THE LISBON TREATY Under the crrent pre-Lisbon After 2014/17 system (number of votes) (% of EU population)
345 100 United Kingdom (29) United Kingdom (29) Denmark (7) 90 Latvia (2) 300 Denmark (7) Sweden (10) Latvia (2) Sweden (10) Poland (27) 80 Poland (27) Czech Republic (12) Czech Republic (12) Lithuania (7) Lithuania (7) 250 Hungary (12) Hungary (12) 70 Bulgaria (10) Romania (14) Bulgaria (10) Romania (14) 60 200
50
150 40 Eurozone (213) Eurozone (213) 100 30
20 50 10
0 0 Current rules: The New rules: The Eurozone needs Eurozone will need 255 out of 345 EU to get 65% of the Council votes vote - it has 66%
1.7 The colonisation of the EU institutions: Linked to the above is the risk of the European institutions being used to pursue policies that are designed for the specific needs and concerns of the Eurozone as opposed to the EU as a whole. There is some, albeit limited, evidence that the EU institutions are already starting to act as facilitator of a Eurozone agenda. As has been widely noted, without the specific approval of the UK, and despite it not being incorporated in the EU treaties, the fiscal treaty makes some use of the EU institutions to enforce Eurozone budget rules (the ECJ is meant to police whether the new rule on “balanced budgets” is implemented into national law, but cannot impose penalties if a signatory country breaks the rule).34 Likewise, the European Commission has tabled a proposal for a financial transaction tax, following pressure from within the Eurozone (the proposal is protected by a veto so will not be adopted at the EU-level as long as the UK objects).35
1.8 These risks are linked to the possible “fragmentation” of the single market, ie the single market gets divided between those inside the euro and those outside, which would represent a step backwards for intra-EU trade. However, the UK could have allies in seeking to prevent this. The European Commission and smaller member states want to avoid it, as it would tip the balance of power further towards the Franco-German axis.
Opportunities
1.9 A new vision and model for European integration: The Eurozone crisis marks a clear setback to the original founding principle of “ever closer union”. First, the principle has led directly to financial and political turmoil; Greece should clearly not have joined the euro, but there was so much political momentum for closer union that it signed up, which is now threatening to cause major political and economic fallout in Europe.
1.10 Second, as noted, it cannot accommodate for the different end points for the UK and euro countries. It follows that the UK now has a unique opportunity to take the initiative, stating clearly and firmly an alternative 34 See Open Europe’s blog, “Fifth time lucky?”, 30 January 2012, http://openeuropeblog.blogspot.co.uk/2012/01/fifth-time-lucky.html 35 See Open Europe’s blog, “Taxing unicorns”, 23 March 2012, http://www.openeuropeblog.blogspot.co.uk/2012/03/ftt-rears-its-ugly-head-once-again.html cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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principle of European cooperation, which allows for different circles of membership of the EU, and which would be based on the following principles: — Powers can flow back from the EU—it should not be a one-way street; — Countries must be free to integrate with each other to different degrees; — No EU interference in areas better—or equally well—handled locally or nationally (the current concept of “subsidiarity” is so vague that it can mean anything, elsewhere we have instead proposed a “European localism” agenda, ie taking the principle of localism endorsed at the national level and applying it to the European level);36 — A far greater role for national parliaments. 1.11 The UK government has consistently suffered from a poverty of vision for its role in Europe, which has left it without an overall strategy.37 The euro crisis, and its potential aftermath, means this must change. The alternative vision it now has the opportunity to set out needs to be positive, stressing a new, economically flexible model, growth opportunities across the globe and the need to reconcile EU membership with national democracy. David Cameron came close to spelling out such a vision last year when he said that the EU should take on “the flexibility of a network, not the rigidity of a bloc—whose institutions help by connecting and strengthening its members to thrive in a vibrant world, rather than holding them back.”38 Having a clear vision of where the UK should be in Europe—and setting out an alternative vision for European cooperation—will also help to focus diplomatic efforts and make it easier for EU partners to know what, exactly, the UK wants to achieve (and therefore easier for them to lend support or at least reach a position of compromise based on mutual interests). 1.12 Pushing for redistribution of powers: As the Eurozone will continue to need the UK’s approval to pursue further integration via the EU institutions, and as Germany and other member states have a strong incentive to keep the UK inside the EU, the UK should accompany its drive for an alternative model for European integration which includes bringing specific powers back to the UK (see below). 1.13 Reorientation of the UK economy away from the eurozone: The EU will remain an important destination for UK trade but the short and long-term economic challenges Europe faces warrant a rethinking of the UK’s economic interests. Currently, only 1.4% of UK exports go to India forecasted to grow on average by 8.1% a year up to 2050 and only 2.35% to China forecast to grow at 5.9%.39 Although trade negotiation remains an exclusive EU competence, the UK retains the power to promote UK business and exports to non-EU countries, something which the current Government has correctly made a priority. This is an important exercise for two reasons. Firstly, boosting UK trade with emerging and fast-growing economies is clearly beneficial in its own right but, secondly, the less the UK depends on the EU/eurozone for trade, the stronger Britain’s negotiating position when it comes to arguing for reform.
2. Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 2.1 Talk of a “multi-speed Europe”—implying that all EU member states are religiously heading in the same direction—must stop. Instead, the UK should fully embrace a formalised EU structure based on different modes of membership, based on the principles set out above and the understanding that Britain will not join the euro. 2.2 The notion that such a multi-facetted EU structure would leave the UK on the side-lines is misplaced: the UK is one of EU’s “big three” economies; it is a large export market; remains a genuine global player; a big net contributor to the EU budget; is home to Europe’s financial centre and a nuclear power. The rest of the EU will listen to the UK if it comes up with a constructive agenda. In the EU debate, “influence” is a term too often used—particularly by those who favour the status quo—in a rather lazy and undefined way. Those who worry about loss of influence must give concrete examples of where this is happening and, crucially, what the UK should be influencing. 2.3 In terms of an EU institutional framework, the UK has three basic options: — Status quo; — Changing the institutional framework from within, ie seeking new membership terms; — Seeking a new institutional arrangement with Europe altogether, which most likely would involve withdrawal. 36 See Open Europe, “The case for European localism”, September 2011, http://www.openeurope.org.uk/Content/Documents/PDFs/EUlocalism.pdf 37 See, for instance, Open Europe Senior Analyst Christopher Howarth’s article on Conservative Home, “If he wants Britain to have a vision for Europe, David Cameron should appoint a European Secretary”, 17 April 2012, http://conservativehome.blogs.com/platform/2012/04/christopher-howarth-if-he-wants-britain-to-have-a-vision-for-europe-david- cameron-should-appoint-a-e.html 38 From David Cameron’s speech at the Lord Mayor’s Banquet, 14 November 2011, http://www.number10.gov.uk/news/lord-mayors-banquet/ 39 ONS, “Pink Book” and Open Europe, “Continental shift: Safeguarding the UK’s financial trade in a changing Europe”, p25 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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2.4 We believe the status quo is not an option, while withdrawing from the EU altogether would raise more questions than it would answer (the alternative trading arrangements with Europe, ie the European Economic Area or a free trade agreement, would also require the “approval” of EU partners and therefore raise many of the same issues as renegotiation from within). Therefore, creating a new institutional arrangement from within is the UK’s best option. Concretely, the new institutional architecture that the UK should push for could include: 2.5 The devolution of powers from EU—at least for the UK: David Cameron has labelled the current crisis “An opportunity, in Britain’s case, for powers to ebb back instead of flow away and for the European Union to focus on what really matters.”40 This is the right thinking. Substantially reforming the institutional division of labour between the UK and the EU may be necessary to reconcile public opinion to EU membership. The pursuit of returning powers to the UK and further Eurozone integration is not mutually exclusive—on the contrary. 2.6 The priorities should be areas that have an everyday impact, for example: — Devolving EU regional spending to richer member states, including the UK, which would save Britain billions and allow it to run a far more effective regional policy (no treaty change);41 — The UK should exercise its “block opt-out” from around 130 EU laws in justice and home affairs, which it could do unilaterally under the Lisbon Treaty (by 2014—no treaty change);42 — As noted below, there needs to be a better balance between European market access and control over vital national economic interests, for example via a veto over disproportionate financial services law (treaty change);43 — At least part of the CAP should be re-nationalised (no treaty change);44 — A UK long-term objective should be to devolve social and employment law (treaty change). A short-term, intermediate objective should be to minimise the impact of the working time directive (no treaty change);45 — EU environmental legislation should be far less prescriptive. A compromise may involve overall targets set at the EU-level but member states free to meet them in whatever way they deem the most cost-effective (no treaty change). 2.7 Far stronger roles for national parliaments: This should include far greater scrutiny powers for MPs (for example a mandate-based system based around the Danish model, which could be achieved unilaterally) and pushing for parliaments to be given a “red card” option which would enable them to veto Commission legislation if there was a significant majority opposed (requiring Treaty change).46 2.8 European cooperation must be a two-way street: As noted above, it simply has to be possible under the Treaties for powers to flow back to member states. There are a number of ways in which this could be formalised. For example, the Lisbon Treaty already allows for so-called “enhanced cooperation”, whereby a group of member states are free to pursue a policy separately if not all 27 are able to agree. This has already happened in areas such as family law and an EU patent. However, there is no reason why this cannot also work in reverse, with a group of countries deciding to repatriate powers or EU laws, even though it may not be politically possible for all 27 countries to do so.
3 Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so? 3.1 Yes, subject to safeguards or powers back. These safeguards need to be better thought-through, prepared and communicated than the UK’s demands ahead of the December summit. The safeguards could include: (1) Formal safeguards for the non-euro group. For example, “double QMV” to give the non-euro group a veto or a non-euro red card allowing non-euro members to block a Eurozone “caucus” in the Council. (2) A new “single market protocol”, which could commit the EU to a pro-growth, outward looking and proportionate regulatory regime while safeguarding the UK from decisions taken solely by the eurozone for all 27 member states.47 (3) UK-specific, legally watertight safeguards that will ensure that the UK is not overruled on a vital financial measure and cement London’s ability to do business and compete in global markets. Though it will be resisted by EU partners, this could include a “double lock”, 40 From David Cameron’s speech at the Lord Mayor’s Banquet, 14 November 2011 41 See Open Europe, “Off target: The case for bringing regional policy back home”, January 2012, http://www.openeurope.org.uk/ Content/Documents/PDFs/2012EUstructuralfunds.pdf 42 See Open Europe, “An unavoidable choice: More or less EU control over UK policing and crime law”, January 2012, http://www.openeurope.org.uk/Content/Documents/PDFs/JHA2014choice.pdf 43 See Open Europe, “Continental shift: Safeguarding the UK’s financial trade in a changing Europe”. 44 See Open Europe, “More for less: Making the EU’s farm policy work for growth and the environment”, February 2012, http://www.openeurope.org.uk/Content/Documents/Pdfs/CAP_2012.pdf 45 See Open Europe, “Repatriating EU social policy: The best choice for jobs and growth?“, November 2011, http://www.openeurope.org.uk/Content/Documents/PDFs/2011EUsocialpolicy.pdf 46 Open Europe, “The case for European localism”. 47 For a broader discussion, see Open Europe, “Continental shift: Safeguarding the UK’s financial trade in a changing Europe”. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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acknowledging the UK’s prominence in this sector and giving the Government the right to refer any disproportionate or discriminatory laws to the European Council, where it has an effective veto over regulatory proposals.48 3.2 We have recommended that the UK focus first and foremost on financial services as it is a policy area where we can already see the potential friction that can occur between Eurozone integration and UK interests (as a fiscal union could well spill over to financial supervision and regulation)—therefore options two and/or three are our preferred ones. 22 May 2012
Annex POTENTIAL WORDING OF THE PROTOCOLS WORDING OF A POTENTIAL SINGLE MARKET PROTOCOL PROTOCOL ON THE SINGLE MARKET THE HIGH CONTRACTING PARTIES, RECOGNISING the importance of maintaining the single market for the prosperity of the Union; DESIRING to reduce barriers to trade in areas such as the digital economy, services, telecoms and energy by 20XX; DESIRING to allow for a competitive flexible and responsive labour market; HAVE AGREED upon the following provision, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:
Article 1 So as to ensure that competition in the internal market is not distorted, all decisions relating to the internal market are to be decided by the Council of Ministers by the ordinary legislative procedure and that all decisions relating to the operation of the euro-area are compatible with the internal market of all member states.
Article 2 No provision will be introduced unless it has been subject to a rigorous impact assessment, is matched by the cancellation of a current measure, is proportional, consistent with the principle of subsidiarity and is demonstrably related to a known risk.
Article 3 No provision relating financial services will be introduced unless it is proportional, related to and seeks to remedy a known and demonstrated risk, and does not impose maximum standards on the sector, if a member state demonstrates the need to safeguard its own industry.
Article 4 That a Code on Better Regulation will be considered before any proposal is brought forward and an assessment made as to whether measures will improve growth and competitiveness of the Union economy.
WORDING OF A POTENTIAL UK PROTOCOL PROTOCOL ON THE FINANCIAL SERVICES INDUSTRY IN THE UNITED KINGDOM THE HIGH CONTRACTING PARTIES, RECOGNISING the importance of the financial services industry to the United Kingdom; DESIRING to allow the United Kingdom to maintain control over the regulation of its financial services industry; WHILST wishing to allow the United Kingdom to retain the ability to participate in regulations and measures; ACKNOWLEDGING the United Kingdom’s responsibility to act responsibly and preserve the Single Market; HAVE AGREED upon the following provision, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union: 48 Ibid. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Article 1
Notwithstanding the provisions of the Treaties, where the United Kingdom indicates to the Council that it believes that a proposed regulation or directive or an amendment to an existing regulation or directive is or would in its judgement adversely and disproportionately affect its financial services industry it may request that the proposal is referred back to the European Commission, that additional assessments are made of the proposal and that suggested amendments are considered.
Article 2
Notwithstanding the provisions of the Treaties, where the United Kingdom indicates to the Council that it believes that an existing directive or regulation, a proposed regulation or directive or an amendment to an existing regulation or directive is or would in its judgement adversely affect its financial services industry it may request that the proposal is suspended and referred back to the Council. In that case, the ordinary legislative procedure shall be suspended and the validity of such a request shall not be called into question whether by the ECJ or in any other way.
Written evidence from Ruth Lea, Economic Adviser, Arbuthnot Banking Group
Summary — The December 2011 European Council and the subsequent signing of the “Fiscal Compact Treaty” by 25 EU Member States (excluding the UK and the Czech Republic) would at face value seem to have little impact on the UK’s EU policy and place in the Union. After all the British Government remains firmly committed to EU membership, which is not, in my judgement, in the country’s best interests. — But perhaps the December Summit will be seen by future historians of the EU as a watershed event for the UK and the EU, when the UK’s isolation was obvious, at last, for all to see. Moreover, despite the PM’s veto, the European Council has simply pushed ahead with the Treaty, which will probably be incorporated into the EU Treaties sooner rather than later. One can only conclude that Britain’s influence on EU events, as crisis engulfs the Eurozone, is minimal. — Given the lack of UK influence in the EU, we are in the weakest possible position to drive forward institutional or policy developments in the EU. Whilst we remain a member, the best we can do is respond to decisions made by the Franco-German axis and EU institutions and attempt to obtain the best deal for us. This may seem like a counsel of despair, but it is a realistic one. — In any case, any major near-term to medium-term developments in the EU will almost certainly concern the Eurozone as EU institutions and the EU17 Member States struggle with the existential threat to the currency. Britain, thankfully outside the euro, is inevitably at the periphery of events, a bystander. — Moreover, any notion that the British Government could use the Eurozone crisis to negotiate any repatriation of powers, and develop a different form of membership, is a chimera. There is absolutely no evidence that our EU partners would accept such a move. — It is not clear that the Treaty will have any direct impact on other aspects of the EU and its policies. But the indirect impacts of its implementation must not be underestimated. The Treaty is part of the on-going centralisation of EU policy-making. Under these circumstances, I would expect the EU’s institutions to push ahead with the further centralisation of policy-making, some of which is intended, at least putatively, to “save the euro”. — Having vetoed the incorporation of the Fiscal Compact Treaty into the EU Treaties in December 2011, the UK Government should continue to reject any such move for the sake of consistency, at the very least. If the Government is prepared to agree to the incorporation they should at the least get guarantees that the EU-wide Financial Transactions Tax will remain subject to veto in order to support the City. They can, after all, do little to protect the City from the flood of EU Single Market financial regulations which are subject to QMV.
Submitter of Evidence
Ruth Lea has worked in the Civil Service (the Treasury, the Civil Service College, the CSO and DTI (1970Ð88), with a short break lecturing in economics); the City (Mitsubishi Bank (1988Ð93), Lehman Brothers (1993Ð94), Arbuthnot Banking Group (since 2007); ITN (1994Ð95) and the Institute of Directors (1995Ð2003). She was Director of the Centre for Policy Studies (2003Ð07) and Director of Global Vision (2007Ð10).
I would be happy to give oral evidence to the Committee. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Submission To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 1. A brief analysis of the background to the “Treaty on Stability, Coordination and Governance of the Economic and Monetary Union”, otherwise known as the “Fiscal Compact Treaty”,49 is required in order to assess the significance of the December 2011 European Council meeting for Britain. 2. The Treaty is intended to strengthen the Eurozone’s Stability and Growth Pact (SGP), whereby general government deficits should not exceed 3% of GDP and general government debt should not exceed (or is “sufficiently declining towards”) 60% of GDP, by introducing a new range of medium-term objectives, including a “balanced budget rule” and an automatic mechanism to take corrective action. The former states that budgets must be balanced, with “a lower limit of a structural deficit of 0.5% of GDP”, or in surplus. Concerning the corrective action, if the European Court of Justice judges that a member has failed to comply with the “balanced budget rule”, it can impose a fine, a sum “that shall not exceed 0.1% of GDP”. It should be noted that there is some flexibility in the “balanced budget rule” in that “exceptional circumstances” are allowed for. In addition, the target is expressed in terms of the “structural” (ie the cyclically-adjusted) balance, not the actual recorded balance, which can allow for large deficits if the economy in question is performing well below potential. Note also that, because the Treaty is exclusively about the Eurozone, it does not directly affect the UK. 3. Putting aside the feebleness of the SGP to impose fiscal discipline on the Eurozone’s members in the first decade of the euro’s existence, there are significant doubts about the Treaty’s potential success, given the horrendous and deep-seated structural problems faced by the Eurozone in its current dysfunctional configuration. The Treaty is, significantly, only concerned with fiscal discipline in the Eurozone and should be seen in the general context of the EU’s endeavours to tighten economic governance procedures.50 It is not, as sometimes reported, concerned with the development of an EU fiscal union, broadly defined as comprising a common Ministry of Finance, common sovereign debt (the mutualisation of debt) and substantial financial transfers from the rich, highly competitive northern economies (principally Germany) to the less competitive peripheral economies. Such a fiscal union is arguably necessary to save the currency area in its current configuration. There are moreover few signs that the Eurozone is moving towards such a union. It should also be noted that the Treaty does nothing to address the fundamental structural fissure at the heart of the Eurozone crisis, namely the competiveness mismatch between the northern and the peripheral economies, which is tearing the currency union apart. It can be argued that the Treaty, by focussing on fiscal discipline, has simply side- stepped or chosen to ignore the causes of crisis engulfing the euro. 4. Twenty-five out of the 27 Member States signed the Treaty in March 2012, with the UK and the Czech Republic the only two dissenting members. The Czech Republic may yet sign, leaving the UK completely isolated. December’s Summit was, of course, noted for the British Prime Minister’s veto of the EU’s plans to incorporate the proposed Fiscal Compact Treaty into the current EU Treaties when his stipulations for relatively modest safeguards for the City of London were refused. His veto forced the separate Treaty but the EU clearly intends to push ahead and incorporate the Treaty into the EU Treaties “as soon as possible”.51 The likelihood is that this will happen sooner rather than later. 5. So to what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union, given this background? The short answer appears to be “very little” at face value. After all the UK’s EU policy remains committed to membership of the EU, which is not, in my judgement, in the country’s best interests.52 6. But developments since the PM’s veto have merely served to underline our lack of influence in EU affairs, implying our place in the Union is firmly at the periphery. The Fiscal Compact Treaty has gone ahead essentially as planned by the European Council, even if it remains outside the main EU Treaties. Because the UK is (rightly) outside the Eurozone, which is understandably focussing on trying to hold the currency union together, the UK is inevitably increasingly peripheral. Our influence diminishes as crisis engulfs the Continent, even though the future of the Eurozone has major implications for the country. If the Eurozone pushes ahead towards full fiscal union the UK’s influence in EU affairs will diminish even further. Perhaps the December Summit will be seen by future historians of the EU as a watershed event—an event when the UK’s isolation was obvious, at last, for all to see. 49 European Council, “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”, signed on 2 March 2012. Subject to ratification by at least 12 Eurozone members, the Treaty enters into force on 1 January 2013. Available on www.european-council.europa.eu. 50 Council of the European Union, “Council confirms agreement on economic governance”, press release, 4 October 2011. This press release for example outlines the “Six Pack”, the six legislative proposals on economic governance in the EU (though more specifically in the EU17), agreed by the Council of the European Union (the Council) in October 2011. The proposals related to a reformed SGP, reducing macro-economic imbalances and promoting competition. The press release is available on www.consilium.europa.eu. 51 The precise words in the Treaty are “…bearing in mind that the objective of the Heads of State and Government of the euro area Member States and of the other Member States of the European Union is to incorporate the provisions of this Treaty as soon as possible into the Treaties on which the European Union is founded.” 52 See Ruth Lea and Brian Binley MP, Britain and the EU: a new relationship, Global Vision, May 2012, for wide-ranging discussion of the options open to the UK. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 7. Given my earlier comments on the lack of UK influence in the EU, I believe we are in the weakest possible position to drive forward developments in the EU. Whilst we remain a member, the best we can do is respond to decisions made by the Franco-German axis and the institutions of the EU and attempt to obtain the best deal for us. This may seem like a counsel of despair, but it is a realistic one. 8. More specifically, any debate on the future of the EU and its institutional architecture is inevitably dominated by the possible resolution of the existential Eurozone crisis. It is worth speculating as to how the UK should respond, given possible Eurozone resolution scenarios. Very broadly three such scenarios can be identified. The first scenario is that the EU17 members push ahead with full fiscal union and the Eurozone bloc survives broadly as currently configured. The EU is already a two-tier organisation comprising the EU17 (and arguably the pre-in aspirants) and the “outs” the UK, Denmark and possibly Sweden.53 With fiscal union, or political union, a two-tier structure would be formalised and the UK’s peripheral position would be reinforced. The second scenario is a possible major reconfiguration of the currency union with either the weaker countries returning to their own currencies or, more fundamentally, a split into a northern Eurozone and a southern Eurozone to reflect the competitiveness gap between these two blocs. The power would indubitably be with the northern Eurozone bloc. Britain should, of course, stay clear of both blocs, but with the Eurozone split Britain would look less isolated from mainstream affairs than with full fiscal union. The third scenario is a complete collapse of the bloc which would shake the EU to its very foundations and could possibly present the UK with an opportunity to remodel, or reform, the EU as a looser trading relationship. But I regard this scenario as highly unlikely with the chances that the UK could drive forward a major reform of the EU as vanishingly small. There is simply no stomach for such a “reformed” EU in the other EU Member States. 9. There are, of course, non-currency “multi-tier” aspects to the EU already (Schengen springs to mind) but these are of minor significance compared with the currency and will almost certainly remain so. On a slightly related issue, there is much speculation that the UK Government could negotiate the repatriation of certain powers thus creating a different class, or form, of EU membership. But there is absolutely no evidence that our EU partners would accept such a move and plenty of evidence to show they would block it totally. For example, German Minister of Finance Wolfgang Schäuble said last October that Britain should forget any attempts to use the Eurozone crisis to repatriate EU social and employment laws.54 The repatriation of powers is a chimera.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy? 10. I assume for all practical purposes that the Treaty is already part of the acquis and if/when it becomes part of the EU Treaties then it will formally become part of the acquis. 11. It is not clear that the Treaty will have any direct impact on other aspects of the EU and its policies. But the indirect impacts of its implementation must not be underestimated. The Treaty is part of the on-going centralisation of EU policy-making. The history of the EU tells us that its proponents only have forward gears and the EU’s institutions cumulatively accrue competencies and influence. They do not divest power. Under these circumstances, I would expect the institutions to push ahead with further control over policies, possibly including budgetary issues or matters relating to the CFSP. Where there is a possible link between an EU policy (say budgetary control or promoting an EU-wide Financial Transactions Tax) and “saving the euro”, I would expect “saving the euro” to be invoked frequently in support of increased EU activism. Concerning the implications for enlargement, I would speculate that successful countries on the EU’s periphery, Turkey springs to mind, would have even less interest in joining the EU if it means an EU-grip on its economic policies.
Should the UK Government support the incorporation of the ‘fiscal compact’ Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so? 12. Having vetoed the incorporation of the Fiscal Compact Treaty into the EU Treaties in December 2011, the UK Government should reject any such move for the sake of consistency, if nothing else. But, as already commented, the Treaty states clearly that the European Council wishes to proceed with its incorporation “as soon as possible” and I expect the UK Government to agree to this. 13. The Government should revisit the Prime Minister’s demands for some relatively modest safeguards for the City of London and insist they are enshrined in the Treaty. Specifically, any proposals for an EU-wide Financial Transactions Tax should strictly remain subject to veto. But there is little that the UK can do about the EU’s heavy programme of financial regulations because they are part of the Single Market and subject to QMV where we have just 8.5% of the vote in the Council of the European Union. As such the UK has little influence over the legislation relating to one of its major businesses, arguably one of its most successful 53 Only Britain and Denmark have formal opt-outs whilst Sweden has decided to stay out of the euro for the time being. The other seven, however, are legally bound to join and wish to do so except, perhaps, the Czech Republic. 54 “David Cameron told by Berlin: drop demands for repatriation of powers”, Guardian, 19 October. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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businesses, some of which has been described as “harmful”.55 Membership of the Single Market is increasingly disadvantageous for this country. But this is a different issue. 22 May 2012
Written evidence from TheCityUK 1. Preliminary 1.1 This Note sets out views on behalf of TheCityUK in response to the Select Committee’s Inquiry into the future of the European Union and UK government policy. TheCityUK is a membership body representing UK- based financial and related professional services businesses competing in global markets, both developed and emerging. It coordinates its work through its Advisory Council, its Board, and various Groups and Committees on which its member-businesses are represented. 1.2 In this evidence, TheCityUK will take all four principal Inquiry Questions together, and seek to give a combined response. Given TheCityUK’s remit, the evidence will focus on financial and related professional services and will be cross-sectoral in its approach.
2. Short Summary of Main Points of Submission 2.1 Service businesses including financial and related professional services play a key role in the UK economy, the UK’s international competitive advantage and in meeting the saving, protection and investment needs of its citizens. Financial services account for 8.9% of UK GDP—higher than all other major economies including the US (8.4%), Japan (5.8%), Germany (5.3%) and France (5.1%). A significant portion of this is made up from the contribution of financial services exports (2.9%). To safeguard this key economic interest, the UK must be fully engaged in EU financial services policymaking. 2.2 UK businesses and non-UK firms established in the UK rely on the Single Market. They take its “four freedoms” (free movement of goods, persons, services and capital) as the basis for conducting business in Europe. UK exports of financial services to the EU totalled £17.8 billion in 2010, 80% up on the £9.8 billion in 2005, although down from a peak of £21.8 billion in 2008. Main destination centres in the EU for UK exports of financial services in 2010 were the Netherlands £3.4 billion, Germany £3.4 billion, France £2.9 billion, Ireland £1.7 billion, Luxembourg £1.2 billion and Spain £829 million. The existence of the Single Market also partly explains the UK’s success in attracting foreign firms. A total of 1,442 financial companies were authorised by the FSA as foreign owned at end-2011 including 634 US companies and 78 Swiss companies. 2.3 The new UK regulatory authorities succeeding the FSA will need to remain engaged with the EU Institutions and European Supervisory Authorities (ESAs). Indeed we would argue that even greater focus and resources are needed today than before. First, UK participation in the staff of the EU Institutions and ESAs needs to be enhanced. Rulemaking powers will reside with the EU authorities. The new UK regulatory bodies will have a secondary supervision and enforcement role. This change in the balance of decision-making necessitates the establishment of a UK secondment/placement scheme for filling senior roles. Senior vacancies in EU Institutions and ESAs need to be mapped out, followed by an identification of suitable candidates whose candidacy can then be promoted. TheCityUK is keen to support this effort. Secondly, the UK authorities will need to co-ordinate their activities to ensure that UK interests continue to be seamlessly promoted in discussions with the EU Institutions and ESAs. 2.4 Financial services regulation and trade liberalisation both have key implications for EU economic growth. An over-emphasis on regulation is likely to act as a brake on jobs and growth-oriented policies. Regulatory policy should prize stability but not at the expense of economic growth, while trade policy should be a spur to business expansion and lasting job creation.
3. Breadth of TheCityUK’s Interest in EU Issues 3.1 TheCityUK’s member-businesses exist to service their customers’ needs in the UK and globally; and TheCityUK has an interest in those EU policies that impact on their ability to do so. The areas of EU policymaking with which TheCityUK is particularly concerned include EU regulation of financial services and related professional services, EU proposals for taxing financial services, the EU’s strategy for regulatory convergence with other global markets, and the EU’s trade and investment policy for market opening; as well as an interest in such other areas of EU policy as encouraging Small and Medium Enterprises (SMEs); finance for business including promoting alternative sources of finance; trade finance; corporate governance, competitiveness and innovation. 3.2 Services including financial and related professional services are integral to the UK economy. UK private- sector businesses in the services sector contribute around 60% of UK GDP and employment. The UK is the largest exporter and importer of services in the EU, with a third of total EU trade in services. More than 60% of all outward foreign direct investment (FDI) by UK business and around 70% of FDI coming into the UK is 55 The Economist, “Save the City”, 7 January 2012. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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invested into the service sectors. Financial services account for 8.9% of UK GDP higher than all other major economies including the US (8.4%), Japan (5.8%), Germany (5.3%) and France (5.1%). A significant portion of this is made up from the contribution of financial services exports (2.9%). Consequently, UK engagement in EU policymaking lies at the heart of safeguarding these UK interests.
4. Promoting an Active EU Engagement Strategy 4.1 The UK benefits from being within the EU Single Market in goods (the stock-in-trade of many of TheCityUK’s members’ clients) and services (the business of TheCityUK’s members); UK businesses and non- UK firms established in the UK rely on the UK presence within the Single Market and the “four freedoms” inherent in the Single Market (free movement of goods, persons, services and capital) as the basis for conducting business in Europe. The UK also derives benefit from participating in the formulation of such EU policies as the Common Commercial Policy—the basis for the EU’s trade relations with third countries. UK exports of financial services to the EU totalled £17.8 billion in 2010, 80% up on £9.8 billion in 2005, although down from a peak of £21.8 billion in 2008. Main destination centres in the EU for UK exports of financial services in 2010 were the Netherlands £3.4 billion, Germany £3.4 billion, France £2.9 billion, Ireland £1.7 billion, Luxembourg £1.2 billion and Spain £829 million. The existence of the Single Market also underlies the UK’s success in attracting foreign firms. A total of 1,442 financial companies were authorised by the FSA as foreign owned at end-2011 including 634 US companies and 78 Swiss companies. 4.2 The UK seeks to shape EU policies in line with the principles of open and competitive markets. For financial and related professional services, this needs to be backed by a reinforced system of financial regulation which promotes financial stability and high levels of consumer protection and unlocks capital which is vital to economic growth. 4.3 It is also clear that many other EU Member States wish to work alongside the UK for policies that will promote the EU’s growth and global competitiveness. UK policymakers should use the UK’s resources across government, regulatory bodies and in financial and professional services firms themselves to champion the UK’s interests with other Member States.
5. Enhancing UK Engagement on EU Financial Regulation and EU Trade Policy 5.1 This part of TheCityUK’s response will not attempt a comprehensive itemisation of the details of every policy area in which the UK has an interest in full participation in EU policymaking. Instead two policy areas are highlighted as examples, namely financial regulation and trade policy.
Financial regulation 5.2 Changes to financial regulation are clearly required to address failures highlighted by the financial crisis. Protecting consumers, businesses and taxpayers from the costs of failures in financial firms is rightly the priority. A significant programme of change is already underway including via the Financial Services Bill, and TheCityUK’s members are willing partners to complete this programme of reform. 5.3 In EU terminology, financial regulation is not an EU “common policy” established under the Treaties (ie it differs from the EU’s Common Commercial Policy, Common Agricultural Policy or Competition Policy). It comprises a developing body of legislation and institutions. These have evolved to a point where the EU’s common legal framework for much of financial services is now a “given” in the international business of the UK as a global financial centre: indeed the provision of financial services in the UK by non-UK firms has become to a large degree dependent on the maintenance of that common EU legal framework and the UK’s part in devising it and operating within it. The evolutionary character of this common legal framework means that the UK must be engaged at all levels of policy development. 5.4 Nor is the process of widening and deepening EU engagement only a matter for Government. Financial institutions also have a role to play. TheCityUK and its membership in conjunction with the City of London Corporation have decided to promote a dialogue with other Member States. It is envisaged that this dialogue will encompass policymakers and regulatory authorities as well as business and trade associations, think-tanks and civil society. We believe this effort can complement UK diplomatic engagement with other Member States. 5.5 Nonetheless the main burden of maintaining constructive engagement with the European Institutions and international bodies will inevitably fall on the FSA and its successor bodies and other UK regulatory authorities. Further, we would argue that greater resources and attention are now required given the changing political and regulatory environment. The developing role of the ESAs mean that greater focus is required from the UK. This was highlighted by FSA CEO Hector Sants in February 2012 when he said “it needs to be recognised that currently in respect of prudential regulation, and increasingly in the future in respect of conduct, the rules will be made by the European Supervisory Authorities and the role of PRA and FCA will primarily be one of supervision and enforcement.” The example of the European Securities and Markets Authority (ESMA) emphasises the scale of the challenge for UK representation. The UK market accounts for between 60 to 80% of all EU securities trading, yet the UK has only 8% of the vote. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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5.6 TheCityUK welcomes the Government’s commitment to establish an international co-ordination committee for the Treasury, the Bank of England, the FCA and the PRA (“the UK authorities”): its mandate should be to lead and co-ordinate UK engagement on European financial services policy issues and to: — establish clear ownership and responsibility for each European policy dossier: overlap or worse “underlap” is undesirable in the UK’s international representation; — enable strategic objectives and the full extent of “the UK position” to be agreed in advance of EU negotiations and during their progress; — harness the expertise and contacts of UK Government officials in Member States so that engagement on European dossiers is not seen through a narrow Brussels prism but takes into account the realities that views promoted in Brussels are determined in Member State capitals; the efforts of FCO officials in Member States to complement Brussels engagement are to be welcomed; and — harness the views, knowledge and skills of financial industry practitioners in the UK. 5.7 Two specific issues should be highlighted. Firstly, UK staffing of European Institutions, European Supervisory Authorities (ESAs) and international authorities: the UK needs to play a full role in the governance of the ESAs and other bodies, whose importance is forecast to grow. There is high level UK staff participation in ESMA, EIOPA56 and ESRB.57 Whilst these developments are helpful, greater depth of resource is needed. This necessitates the putting in place of a dedicated UK secondment/placement scheme for filling senior roles both in the European Institutions and the ESAs. TheCityUK is willing to support HMG in the establishment and promotion of this scheme. 5.8 Secondly, interaction of the new UK regulatory regime with EU Institutions and European Supervisory Authorities: the transition to a new UK financial regulatory regime will change responsibilities for representing the UK in European and international bodies. It is already clear that there will not be a perfect match between the responsibilities of the new UK bodies and those of the European Supervisory Authorities (ESMA, EIOPA and the EBA58 which are set up along sectoral lines). The Financial Services Bill should therefore make full provision for coordination between different UK bodies to ensure that the UK’s interests continue to be seamlessly represented. The Bill requires the preparation of a Memorandum of Understanding between the Treasury, the Bank of England, the FCA and the PRA (“the UK authorities”) and the establishment of a committee for the purposes of co-ordination. The Government should make it clear that the UK authorities have an equal voice and parity of status in agreeing the UK position. The Financial Services Bill, as currently drafted, lacks any requirement for UK financial regulators to have regard to the impact of their actions in an international context: TheCityUK considers that this requirement (which previously existed) should be reinstated. 5.9 TheCityUK believes that taking a holistic approach to engagement with the EU agencies and with other Member States should yield dividends over the medium term making it more likely that the UK achieves understanding and support for its views and positions when policy issues reach Heads of State and Government in bodies such as the European Council. We commend the work of UK Ministers in seeking to explain and develop support for the UK’s positions in the Council.
Trade regulation 5.10 Trade policy is different in character from EU financial regulation. It is a “common policy” whose ambit is set under the Treaties. The demands placed upon trade policy are now changing. Until recently, the policy focused on long-term, multilateral trade liberalisation. This has now changed. First, under the Lisbon Treaty, the EU trade policy now includes investment and investment protection (previously the province of Member States). Secondly, the focus is now on shorter-term bilateral approaches, reflecting both the global trend towards preferential trade and investment agreements between a limited number of parties and the EU’s own policy enshrined in the Commission’s “Global Europe” initiative (2006). This provides opportunities for the EU to engage with emerging economies. 5.11 This change in policy has had several important effects. First, EU trade policy, by focusing more bilaterally, involves prioritisation of markets to a greater extent than before. Secondly, the types of trade agreement being entered into (bilateral Free Trade Agreements (FTAs) for instance), are narrower and deeper agreements than before, embracing such matters as regulation and consultation mechanisms for resolving regulatory conflicts. Third, there are more linkages between trade policy and regulatory policy. Fourth, the importance of the EU’s trade policy for services in general, and highly regulated services in particular, is heightened as services liberalisation requires regulatory barriers to be tackled. 5.12 For all these reasons, the interplay of different Member States’ choices and priorities in policy-formation is even more marked than before. The UK has a well-respected position in the EU Trade Policy Committee, supported by the government’s wider commercial diplomacy initiative (which TheCityUK welcomes). It will be important for the UK to continue to have an influential voice. Trade policy is changing its nature, and the 56 EIOPA—European Insurance and Occupational Pensions Authority. 57 ESRB—European Systemic Risk Board. 58 EBA—European Banking Authority. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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UK will need to see that its interests continue to be recognised and that the EU retains an outward-looking perspective drawing in emerging economies.
6. Financial Regulation, Trade Policy, and Growth 6.1 In developing its views on both regulation and trade policy, a particular feature of TheCityUK’s approach has been to emphasise the potential implications of both for EU economic growth. In the case of EU financial regulation, TheCityUK has consistently stressed that regulatory reform cannot be viewed in isolation from wider economic policies. True, sound regulation of financial services is important in itself. But financial services facilitate the functioning of the economy as a whole by channelling savings towards productive investments. 6.2 An over-emphasis on regulation is likely to act as a brake on growth-orientated policies. The EU’s current Proposals on CRD59 IV and Solvency II need to be carefully calibrated to ensure that they do not restrict lending to the real economy and investment in corporate bonds and infrastructure. Other Proposals such as MiFID60 II need to ensure the EU remains open to business with third countries. TheCityUK welcomes the Government’s efforts to reorient EU policy towards growth, modernisation and competitiveness exemplified in the Prime Minister’s recent letter (with eleven other EU Prime Ministers) to President Barroso calling for fresh initiatives in the interests of trade and growth.
7. The EU’s Institutional Architecture 7.1 Even a cursory review of some of the EU’s economic, commercial and regulatory policies suggests that the UK ought to be wary of any new institutional architecture in which the UK’s influence is reduced, whether this be through new formal or informal structures. Fiscal integration within the Eurozone is likely to lead to further changes in architecture and an EU policymaker presumption that the needs of the Eurozone and of the Single Market are the same. UK policy will need to be alive to these trends and assumptions, working with the grain of other Member States’ perceptions while countering or rebutting them as necessary. To be effective, UK policy will need to operate within an institutional framework that accords the UK a full voice in representing UK, and full equality of treatment in securing them.
8. Conclusion 8.1 TheCityUK’s evidence does not seek to cover the entire policy field. However, by taking two key policy areas bearing on its members’ business, and by bringing out how both relate to growth, TheCityUK seeks to illustrate two essential points: first, that the EU policies in question are themselves evolving and, secondly, that the UK needs to be a continuing force in contributing to their evolution in ways consistent with UK interests. The European Union has reached a sudden and unanticipated phase in its development. These changes are taking place against a global backdrop of great changes in traditional patterns of economic comparative and competitive advantage between trading blocs. For TheCityUK and its members it is vital that the UK retains and enhances its influence over the development of EU policy and practice at a moment of change. 22 May 2012
Written evidence from Professor Richard G. Whitman, University of Kent and Associate Fellow, Chatham House, and Thomas Raines, Chatham House The submitters of evidence are the authors of a recent Chatham House report evaluating the performance of EU foreign policy and the EU European External Action Service. Thomas Raines is Programme Coordinator for Europe and North America at Chatham House. Professor Whitman is an academic and commentator working on the EU’s foreign, security and defence policy and has previously presented written and oral evidence to the Foreign Affairs Committee on EU matters.
Summary of Evidence The evidence submission argues that Stability and Governance Treaty (SCG) sets a precedent that could be exported to other EU policy domains. This is illustrated by reference to the EU’s foreign, security and defence policies. The evidence outlines areas where an approach drawing on the SCG might be devised by other EU member states may be seeking to develop policy beyond consensus at 27 and to the detriment of the UK.
Evidence 1. The Stability Coordination and Governance Treaty (SCG) raises important questions about the UK’s future place in the EU. This is primarily because the Treaty represents an approach towards setting near-term objectives for the European Union without any formal UK participation. 2. A key concern for the UK must be the precedent that it sets as an arrangement for future collaboration and agenda setting between Member States based on an agreement to which the United Kingdom is not a party. 59 CRD—Capital Requirements Directive. 60 MiFID—Markets in Financial Instruments Directive cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Of crucial significance for the UK is the principle that is established to use the EU institutions outside of the provisions of the EU Treaties. These policies could be styled “sub-EU 27” policies as they do not contain the participation of all the member states but will carry the imprimatur of the EU. 3. The UK’s future European policy could be affected by the precedent that has been set to operate on this basis. Consequently a broader discussion of the possible implications of the SCG for other policy areas is important. This submission will deal principally with the potential knock-on effects of the SCG on the EU’s foreign relations and the UK’s capacity to play a lead role in collective European foreign and defence policy. 4. The Foreign Secretary (in his letter to the Committee of February 2012 final paragraph) was sanguine about the implications of the SCG for other policy domains and specifically referred to the leading role that the UK continues to play in foreign, security and defence policy. However, foreign, security and defence policies are areas in which the SCG model [of cooperation] might well be replicated. 5. A sub-27 member state arrangement already operates in the area of EU defence policy with the government of Denmark not participating. The remaining 26 member states fully utilise the EU foreign, security and defence policy institutions for defence matters. 6. In addition, the innovations introduced by the Lisbon Treaty can be viewed as facilitating an approach similar to the SCG. The Lisbon Treaty represented a departure from the EU’s previous foreign and security policy arrangements, with the intention to bring greater coherence and impact to the EU’s international relations. Implicit in the design of foreign, security and defence policy post-Lisbon is an innate capacity for the creation of “sub-27 EU” policies. 7. The Lisbon Treaty has diminished the international profile of the EU’s 27 member states in its elimination of the rotating six-monthly Presidency of the Foreign Affairs Council (formerly the General Affairs and External Relations Council). This was intended to ensure a greater degree of continuity in EU policy-making and in the representation of EU foreign policy to third countries. However, the opprobrium attached to Baroness Ashton from some member states for her reluctance to proactively lead a more ambitious European foreign policy (rather than just be a servant of the EU’s Foreign Ministers) may encourage her successor to seek a more independent line on foreign policy issues. Such an approach to the role of High Representative might encourage a “sub-27-EU” tendency within the foreign policy domain amongst member states that are receptive to a more developed approach [supported by the majority] which overrides the objections of some member states. Some member states may even wish to collectively grant the High Representative representation for their national foreign policy to third parties and in international fora. 8. In establishing the European External Action Service (EEAS) as an institution separate from the main institutions of the EU there has already been institutional innovation in the foreign and security policy domain. As we have noted in a recent report written for Chatham House (Chatham House, 2012) the EEAS will need to establish a reputation for independent action if it is to carve out a distinctive role for itself. In order to make the most of its role and its capabilities, the EEAS needs to cultivate the virtues of entrepreneurship: seeking to be ahead of the market by emphasizing intellectual leadership and innovative policy development; utilizing resources most effectively through a clear strategy; seeking new opportunities to advance the EU’s common agenda and be prepared to take calculated risks for that purpose; and building the confidence of its “shareholders”—the EU’s 27 member governments and the EU institutions—through creative diplomacy that takes advantage of the leverage that comes with the EU’s unity while exploring the opportunities that lie in its diversity. 9. If considered as “shareholders” in the EEAS it is possible to envisage a majority group of member states seeking to steer the service in directions that may not represent the unanimous view of all 27. Further, the EEAS is already actively operating on a foreign policy issue (Kosovo) where there are cleavages between the 27 on the issue of recognition and so is pursuing a policy which, in effect, represents a “sub-27 EU” position. It is difficult to envisage how the UK might resist moves to further task the High Representative and the EEAS with a collective policy agreed by a “sub-27 EU” group of states if this was presented as offering a boost for EU foreign policy. 10. Another area in which “sub-27 EU” practices can be considered is a decision by a group of member states to “sub-contract” their consular work or political representation in third countries to Union delegations. Under such an arrangement the member state(s) concerned would sign an agreement that allows for their consular activities or diplomatic representation to be conducted on their behalf by the Union delegation. This arrangement is likely to appeal to states that face resource constraints in running an extensive embassy network in third countries and/or take the view that they do not have foreign policy interests that extend beyond those already pursued collectively through Union foreign policy and which may be more effectively conveyed through collective negotiation. Agreement by a “sub-27 EU” group of countries to sub-contract representation may be difficult to resist in principle by other EU member states if it is presented as a more efficient use of national foreign policy budgets. 11. The Common Security and Defence Policy (CSDP) is an area in which “sub-27 EU” policies could be contemplated. This is also an area in which the UK currently finds itself in opposition to majority member state support for increasing the European Defence Agency (EDA) budget and setting up an EU operational cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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headquarters. An SCG-type arrangement in defence may become an attractive option to other member states if the UK is considered to be the primary obstacle to greater EU defence integration. 12. The Lisbon Treaty created the Permanent Structured Cooperation arrangements of the CSDP that allow for “cooperation between member states whose military capabilities fulfil higher criteria and which have made more binding commitments to one another in this area”. The participating member states are expected to “bring their defence apparatus into line with each other as far as possible, particularly by harmonising the identification of their military needs, by pooling and, where appropriate, specialising their defence means and capabilities, and by encouraging cooperation in the fields of training and logistics” (Art. 2(b), Protocol 10). Although it is not envisaged as a procedure for the deployment of EU missions, this mechanism should facilitate capability development and the pooling of assets, in turn increasing CSDP operational capabilities. The Treaty defines membership as voluntary: there is no obligation for the member states to join a Permanent Structured Cooperation. Further, the decision for the establishment of a Permanent Structured Cooperation is to be adopted by the Council on the basis of qualified majority voting. The existing un-utilised voting provisions of the CFSP suggest that recourse to voting in the face of member states opposing a policy innovation in this area in unlikely and the SCG provides an alternative model to provide for such an arrangement. 13. The Treaty also foresees the possibility of entrusting CSDP operations to a group of member states “which are willing and have the necessary capability for such a task”. The procedure to establish a “coalition of the willing and able” is much less convoluted than in the case of Permanent Structured Cooperation. The Council authorizes the decision and, thus, the mission is launched in the name of the EU, but run by the “coalition of the willing”. The coalition will agree on the details of the implementation of the task, in association with the High Representative. The rest of the member states have the right to be kept regularly informed of its progress. Again the SCG-type agreement provides an alternative governing arrangement for such an undertaking. 14. The precedent setting consequences of the Intergovernmental Treaty on Stability Coordination and Governance in the Economic and Monetary Union should be considered. A broader discussion of the possible implications of the SCG for other policy areas is important. As indicated, EU foreign, security and defence policies are policy domains which could see the evolution of comparative arrangements of collective action by smaller constellations of states within the 27. This could place the UK in a position of future disadvantage, reducing UK leadership in these fields and limiting HMG’s influence and capacity to set the EU’s agenda. 22 May 2012
References Staffan Hamra, Thomas Raines & Richard G Whitman “A Diplomatic Entrepreneur: Making the most of the European External Action Service”, Chatham House, (January 2012). (http://www.chathamhouse.org/sites/ default/files/public/Research/Europe/r1211_eeas.pdf)
Written evidence from Professor René Schwok and Cenni Najy, University of Geneva UK RETURNING TO EFTA: DIVORCE AT 40 AND GOING BACK TO MOM AND DAD? Summary Our objective is to assess the proposal that the United Kingdom (UK) leave the European Union and return to the European Free Trade Association (EFTA) in order to get deals such as the European Economic Area (EEA) or even simple bilateral agreements such as Switzerland enjoys for a couple of years. In the first part, we analyse the relationship between EFTA states and the EU through the EEA. This mechanism is based on a certain number of complex features that offer a high level of integration to three EFTA countries. Second, we address the Swiss case, an active member in EFTA, who maintains close relations with the EU despite its rejection of EEA membership. Prima facie, the example of Switzerland supports many British eurosceptics because it provides an example of flexible arrangement. Third, we assess the likelihood of the UK joining either the EEA/EFTA or instead adopting the EFTA/ Switzerland approach as a sustainable and realistic choice.
Biography René Schwok is professor of political science at the University of Geneva, specializing in European integration. He is the holder of the Jean Monnet Chair, and Director of the Master programme in international and European security studies. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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He has published 20 books and authored many journal articles and book chapters. They are available at http://unige.academia.edu/RenéSCHWOK/ René Schwok was born in Geneva and is Swiss. He has been a consultant for various Swiss and European agencies and governments, comments frequently on European issues for the media and speaks regularly at conferences. Cenni Najy is a Master student at College of Bruges and holder of a Master from the European Institute of the University of Geneva.
Introduction 1. There has been increased domestic pressure demanding that the United Kingdom (UK) leave the European Union. 2. Some of them also propose to return to the European Free Trade Association (EFTA) and to get a “more advantageous integration” through deals such as the European Economic Area (EEA) or even simple bilateral agreements such as Switzerland enjoys for a couple of years.61 3. Advocates of this EFTA option expect major positive effects following a UK withdrawal from the EU. 4. Economically, they foresee greater prosperity and growth due to the removal of the British contribution to the EU budget, the phasing out of the common agricultural and fishery policy, a lowering of VAT, a reduction of European workers from Eastern Europe, a decrease of bureaucratic norms that constitute barriers to trade and the possibility of concluding independently free trade agreements with other countries in the rest of the world. 5. They also argue that EFTA states (especially Norway and Switzerland which are the two biggest members) are more prospering economically than the EU countries and, consequently, that their levels of unemployment and debts are much lower.62 Note also that the combined GDP of Norway and Switzerland is nearly half of the UK!63 6. They also anticipate political benefits including greater independence and increased democracy. In addition, it is argued that by abandoning the EU’s foreign, security and defence policy, the UK will benefit from a rapprochement to United States’ external policies. 7. On the other hand, advocates of maintaining UK membership to the EU do not take into serious consideration the EFTA option, which they consider as a regressive proposal, comparing this to divorcing at 40 and “going back to mom and dad”. 8. Overall, the objective of this paper is to consider the essence of EFTA and to try to analyse it as objectively as possible. 9. In the first part, we analyse the relation between EFTA states and the EU through the EEA. This mechanism is based on a certain number of complex features that offer a high level of integration to three EFTA countries. 10. Second, we address the Swiss case, an active member in EFTA, who maintains close relations with the EU despite its rejection of EEA membership. Prima facie, the example of Switzerland supports many British eurosceptics because it provides us with an example of flexible arrangement. 11. Third, we will assess the likelihood of the UK of joining either the EEA/EFTA or instead adopting the EFTA/Switzerland approach as a sustainable and realistic choice.
AÐThe EFTA/EEA Model 12. The European Economic Area was established on 1 January 1994 following an agreement between the European Union and the member States of the European Free Trade Association. 13. By July 2013, its total membership could reach 31 states included in two pillars: the 28 EU member states (including Croatia) as well as three EFTA countries (Norway, Iceland, Liechtenstein).
61 Van Randwyck, H (2011). “EFTA or The EU?”, The Bruges Group, 21 March. Available at:
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14. Materially, the EEA is an association based on primary EU law and treaties, in addition to secondary law such as regulations and directives commonly referred to as the acquis communautaire. It mainly contains the so-called EU “four freedoms”: free-circulation of persons, goods, services and capital. 15. The EEA agreement also include issues pertaining to several horizontal provisions relevant to the four freedoms, such as competition law (ie the abuse of dominant position, cartels, merger control, state aid and state monopolies), minimum social standards as well as consumer and environmental protection. 16. The EEA does not eliminate however border controls for rules of origins and indirect taxation. Indeed, the free movement of goods is only established in respect of products originating from the contracting parties. Otherwise put, this agreement does not establish a customs union as it is the case in the EU. 17. Consequently, EEA/EFTA countries retain their full sovereignty over their trade policies in addition to the capacity of establishing their own different level of value added tax (VAT). 18. Similarly, the EEA is not related to the Economic and Monetary Union (EMU), the Common Agriculture Policy (CAP), the Common Foreign and Security Policy (CFSP) as well as the Justice and Home Affairs policies. 19. Finally, the EEA agreement provides a cooperation framework between EU and EEA/EFTA states in matters concerning research, development, tourism and civil protection.
EEA institutions 20. In exchange for internal market access, the European Commission imposed from the beginning a rigid institutional arrangement with the concept of the European Economic Area based on two pillars: EC and EFTA. 21. As a result, the Oporto agreement established four different institutions: the EEA Council, the EEA Joint Committee, the EFTA surveillance authority and the EFTA court. Let us briefly introduce them hereafter. 22. The EEA Council is composed of members of the Council of the EU, members of the EU Commission and of one of the government members of the participating EFTA states. According to Article 89 of the treaty, it “is responsible for giving the political impetus in the implementation” of the agreement. Furthermore, it may decide to amend the agreement. 23. Daily tasks are left over to the EEA Joint Committee. This body ensures that, “the implementation and operation” of the agreement is carried out on a monthly basis. In practice, it is responsible for adopting the decisions extending the evolution of the acquis to the EEA/EFTA members. 24. Taking a step back the Committee’s composition and functioning appear to be quite interesting as well. Since the EU is represented by the Commission and faces EEA/EFTA states representatives, it can be argued that this committee is an interesting example of both a supranational/intergovernmental mixed institution. 25. The EFTA surveillance authority, which is a technical and supranational institution by nature, ensures that the EEA/EFTA member states respect their legal obligations. Hence, as the EU Commission, it may initiate proceedings against one of these states (for instance in case of development of unlawful burdens on commercial activity). cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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26. Parliamentary cooperation is also provided through the EEA Joint Parliamentary Committee. Interestingly enough, this institution has a special composition, as it includes members of the EU Parliament and of the EFTA states. However, it does not carry out important political tasks. 27. Finally, a Court of Justice, also referred to as the “EFTA Court”, has been created in order to ensure a single interpretation of the treaty. Generally, this Court aims at ensuring a strict homogeneity of interpretation with the Court of Justice of the EU (CJEU). That being said, it has no legal monopoly as rulings of the CJEU falling within the EEA scope are also bound to produce effects for EEA/EFTA participants.
The EEA as an asymmetric market-association 28. Despite this seemingly balanced institutional architecture, the EEA agreement prevents significant political participation of EEA/EFTA member states in the EU decision-making process. 29. As we have seen, these States must comply with the obligations imposed by most of the acquis, in addition to the adoption of Community law and the interpretations made by the ECJ existing prior to their EEA accession. 30. Although, they have been granted a right of consultation and association during the early stage of the legislative procedure, the so-called “decision shaping”, no possibilities of participation to the voting procedure in the EU Council or the European Parliament are provided. 31. Admittedly, an opting-out instrument exists but it is politically unusable and has never been used until now. Like in the case of the decision shaping clause, this opt-out instrument has to be agreed upon by the entirety of the EEA/EFTA pillar members. 32. In principle, any of these three countries may refuse to take on new EU legislation. However, this would drag into the same opt-out position the other EEA/EFTA countries, regardless of their particular position on the matter. Indeed, the EEA agreement clearly stipulates that EFTA participants are not entitled to take the decision to adopt EU legislation on an individual basis (see art. 93). 33. An additional deterrent is also the understanding that failure to adopt an act after the end of the time- limit, may lead to the partial or even total suspension of the EEA agreement (see art. 102). Consequently, these conditions make any rejection less likely to occur.
BÐThe EFTA/Switzerland’s Model 34. Following the rejection of the EEA agreement in a popular referendum on 6 December 1992, the Swiss Federal Council engaged in long negotiations which led to the conclusion of a first package of bilateral agreements, hereafter “Bilateral Agreements I”. Signed on 21 June 1999 in Luxembourg, these agreements were adopted by the Swiss electorate on 21 May 2000 and entered into force on 1 June 2002.64 35. Five of the agreements posed no difficulty and concerned relatively secondary matters. The most important two—free movement of persons and overland transport—on the contrary, were the object of intense debate. 36. The EU and Switzerland also signed a second series of Bilateral Agreements (BA II) on 26 October 2004. These agreements cover nine dossiers each of which took effect on different dates. The most important concern the participation of Switzerland into the Schengen area and a withholding tax on taxation of savings in place of the lifting of bank secrecy originally demanded by the European Union. 37. From a legal perspective, these agreements are not interlinked, unlike the Bilateral Agreements I, and thus do not include a “guillotine clause”. Switzerland could have rejected any one of them without the others being called into question. 38. Seven of these agreements posed no problems and concerned secondary issues. Once again, the two most important ones, Schengen/Dublin and the taxation of savings, were the subject of a heated internal debate. As a result, the Agreement on Schengen/Dublin was subject to a referendum in June 2005 but was accepted by about 54.5%.
64 More details on the Bilateral Agreement I and II in Schwok, R (2009). Switzerland-European Union. An Impossible Membership?, Brussels, PIE Peter Lang, pp. 37Ð78. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Figure 2: The Swiss-EU Bilateral Agreements or a time-consuming process
Bilateral Schengen/ Taxation of Electricity Agreements 1 dublin savings (B.A.II) (B.A. III?) (whole package) 2013 2012 Implementation 2011 2010 Probing Phase 2009 2008 Signing 2007 2006 Pre-negotiations 2005 /Negotiations 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
Differences between the Bilateral Agreements and the EEA 39. In comparison with the EEA, the Bilateral Agreements enable a third-party country (in this case Switzerland) to negotiate on an individual basis. 40. This freedom of action is in part limited by the multilateral structure of the EEA, which obliges EFTA countries to speak with a single voice. Here, Switzerland has never been obliged to harmonise its position with its EFTA partners before or during its dealings with the European Union.
Differences in terms of structures 41. The structure of the Bilateral Agreements I and II is light and does not create any new institutions. This distinguishes it from the EEA which was more unwieldy and based on a two-pillar system relying on a galaxy of institutions. 42. In principle, the Bilateral Agreements I and II do not function through a literal and all-inclusive application of Community law as is the case in the EEA: they are not governed by a Community or para- Community justice mechanism akin to the European Communities Court of Justice or the EEA/EFTA Court, but rather by a political mechanism (the Joint Committees). 43. The Bilateral Agreements I and II, therefore, radically differ from the EEA agreement, under which the EFTA-pillar states were obliged to adopt the relevant Community law together with its interpretations by the European Communities’ Court of Justice pre-existent to the date of the signature of the agreement.
No automatic acceptance of new relevant Community legislations 44. The Bilateral Agreements I and II do not include an automatic adoption of new relevant Community legislations but instead, allow for the renegotiation on a case-by-case basis. There are, however, exceptions concerning Schengen legislation and air transport competition. 45. Thus, these Bilateral Agreements I and II differ from the EEA, where the EEA/EFTA countries are almost obliged to integrate developments of the relevant acquis. 46. Nonetheless, the Bilateral Agreements should not be over idealized. Switzerland is not immune to outside developments and the processes of “EU-isation”. Since 1988, with every new federal legislation considered, it is mandatory for the Swiss parliament to include a paragraph summarising the EU position on the relevant matter. As a result, this has led to indirect adaptation in that Switzerland adopts numerous legislation of the European Union without conducting formal agreements.
Differences in terms of content 47. The EEA includes important sectors not covered by the Bilateral Agreements I and II, mainly concerning the free movement of services (ie financial, telecommunications and postal services), the free movement of capital, company law and intellectual property. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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48. Additionally, the EU rules of competition for the four types of free movement were transposed into the EEA treaty. Regarding the monitoring of competition rule compliance is carried out, on the one hand, by the European Commission and, on the other hand, by the EFTA Surveillance Authority. 49. Conversely, the Bilateral Agreements I and II do not make provision for rules of competition. The only exception is in the domain of air transport where the European Commission and the European Community Court of Justice obtained exclusive jurisdiction over compliance with competition rules provided for in the agreement.
Differences in terms of horizontal and flanking policies 50. In comparison with the bilateral path, the EEA also added horizontal and flanking policies. This included concepts such as equal treatment between men and women, labour rights, participation in enterprises, consumer or environmental protection, and some social policy, education and youth, tourism, civil protection together with European economic and social cohesion. 51. The financial solidarity towards less affluent countries and regions of the EU that would have been asked from Switzerland as a member of the EEA would be greater than that required under the Bilateral Agreements I and II. Figure 3: Overview of the scope and depth of the EAA/EFTA and Swiss options
See Schwok, R (2009) and Lavenex, S (2011).
The bilateral approach is largely deadlocked since 2007 52. Since 2007, no more significant agreements were signed. This can be attributed to the EU dissatisfaction regarding the continuous Swiss’ strategy aiming at concluding rigid “tailor-made agreements”. 53. Recently, the European Union demanded that Switzerland adopt the evolution of the relevant EU acquis and called for a uniform interpretation in its application. 54. For its part, the Swiss Confederation does not want to lose its autonomy of decision and to accept the rulings of foreign judges. In fact, Bern would prefer as a model for future agreements the 2009 Switzerland- EU bilateral agreement on “the simplification of inspections and formalities in respect of the carriage of goods and on customs security measures” (also known as the “24 hours” agreement). 55. This technical agreement offers interesting institutional components. 56. First, it provides a participation in the early stage of the legislative process. 57. Second, Switzerland does not adopt automatically the evolution of the relevant EU acquis. Although it declares itself in principle ready to adopt the new EU legislation, the internal approval processes are respected. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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58. Third, if Switzerland were not able to adapt to the evolution of the relevant EU acquis, the whole agreement would not become automatically terminated (there could be however proportionate “rebalancing measures” decided by the EU). 59. Fourth, the settlement of dispute about the interpretation or application of the agreement is also very creative because it is not let to the EU Court of Justice but to the Joint Committee or to an ad hoc arbitration. 60. This contrasts sharply with the EEA agreement since there are no such possibilities of independent arbitration on the proportionality of the EU rebalancing measures. 61. That being said, the European Union has constantly repeated that the 24 hours agreement will not serve as a framework model for the future of the Swiss-EU relations.
CÐAdvantages and Disadvantages of the Two Options 62. Within the following analysis, our goal is not to argue for or against the UK leaving the EU. This is a political decision to be taken by the British themselves. 63. Besides, we are also aware that the circumstances of a return of the UK into EFTA are not comparable to the situation of EEA/EFTA countries as well as Switzerland. 64. Finally, although not addressed within this text, we acknowledge that a withdrawal of the UK from the EU itself would likely result in an avalanche of consequences that are difficult to assess.
Advantages of joining EFTA 65. First, EFTA membership would imply a far lower British financial contribution. Costly EU policies are not included, especially the ones related to the onerous CAP. 66. Nevertheless, one should also keep in mind that EEA/EFTA membership is not free of costs. These three countries have to pay for policies in which they are included. Their most important financial contribution is related to their participation in EU structural funds (1.8 billion Euros allocated to 13 EU member states for the 2009Ð13 period). Similarly, Switzerland, which is not even part of the EEA, had to disburse significant amounts to secure its relationship with the EU. Indeed, through its bilateral agreements, Bern is also obliged to contribute, though far less than EEA/EFTA states, to the “reduction of socio-economic disparities” in the Union. 67. Thus, it is plausible that a country with a larger GDP such as the UK would have to disburse much more than the above-mentioned amount if it was to join the EEA/EFTA pillar or even to adopt a Swiss approach through the use of bilateral relations. 68. In terms of the total financial cost, it is possible, by extrapolation, to provide the following figures for both potential EEA/EFTA pillar membership and the Swiss-type bilateral approach (all-included): EUR 2.54 billions and EUR 1.62 billions per annum, respectively. However, it is also important to note that the UK would have to negotiate the exact amount of its contribution in both cases. Hence, these figures are only intended to be indicative as they assume that the UK would get the same treatment as EEA/EFTA states or Switzerland. 69. In addition to the above mentioned elements, the UK government would also be free to set its VAT level. That being said current British VAT level is 20% for most of their products, which is much higher than the 15% required by EU legislation. Therefore, it is unlikely that a withdrawal from the EU would change immediately anything in this regard. 70. Another advantage of EFTA membership is that States within this organisation have demonstrated their capacity to ratify free-trade agreements faster and with more partners than the EU.65 As of 2012, EFTA member states have implemented 24 free trade agreements (covering as much as 33 countries). 71. It should be noted that the EFTA countries negotiated agreements with all States, which have concluded a Free Trade Agreement with the EU. 72. Additionally, it is interesting to observe that the EFTA States preceded the EU in their free-trade agreements with Canada, Columbia, the Gulf Cooperation Council, Ukraine and South Korea. Moreover, they are also well advanced in their negotiations with India, Indonesia, Thailand, Russia, Belarus and Kazakhstan. 73. It can be argued that Switzerland and Norway have been more efficient in terms of developing their free trade network than the EU. Indeed, the Union is often mired with internal disagreements as well as its institutional constraints in matters of trade policies (mainly related to the existence of divergent interests and views regarding agriculture and conditionality). 74. Finally, it is also important to underline that EFTA member states are free to enter into trade agreements independently. Thus, if the UK would join the EFTA, it would certainly benefit from a greater freedom of manoeuvre to sign free trade agreements with other countries in the world. 65 Schwok, R (2010). “Specificities of Switzerland's Relations with EFTA”, in Bryn, K & Einarsson G. (eds.). EFTA 1960–2010, Elements of 50 Years of European History, Reykjavik, University of Iceland Press, pp. 117. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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75. Concerning dimensions of foreign policy, security and defence, bilateral agreements between the UK and the EU, based on the Norwegian model, would undeniably better protect British sovereignty. It would come however at the expense of a loss of influence, particularly on CSDP. This would also mean that it would be more difficult for the UK to control or even to slow down the development of a more integrated EU defence “from the inside”. 76. While it can be argued that a withdrawal from the EU would imply a decrease of adaptation to new norms the Norwegian and even the Swiss cases show that these two “outsider” countries have still adopted directly or indirectly a certain number of EU laws.
Challenges of EFTA and EEA membership 77. In order to accede to EFTA or to the EEA/EFTA pillar, the UK would have to follow a potentially difficult path. 78. First, the UK would have to submit an application to EFTA. Unlike the EU, this organization does not pursue an active enlargement policy and, according to a well-informed source: “Feasibility and desirability of a possible EFTA enlargement would have to be assessed on a case-by-case basis for each possible applicant”. 79. As a matter of fact, there is no guarantee that EFTA States would welcome any new member or simply not veto its application (as the EFTA convention specifies that unanimity is needed in case of enlargement). Indeed, this organization represents a quite homogenous bloc in terms of countries’ size, economic development and trade preferences. Hence, the accession of big countries such as the UK would certainly shake the established bases of the whole organization. Besides, it is also questionable if the British would accept to deal on a one to one basis with small countries such as Liechtenstein. 80. Furthermore, even if London secured an EFTA membership, it is not guaranteed that the three EEA/ EFTA States would welcome the UK in “their” pillar. As we have seen, these countries would have to adopt a common position during the joint decision making procedure. While this has not proven to be a problem until now, it could very well change with the arrival of a new member. These three countries would be laying at the mercy of any kind of British opt-out, leading potentially to a partial or even the total suspension of the EEA agreement.
Swiss or EEA option? 81. Arguably, the Swiss option can be seen as relatively favourable when compared to the EEA option as a way to formally maintain its sovereignty. That being said, the EU is clearly against the perpetuation of this sui generis bilateral relation mechanism, which is a case resulting from the several economic and political particularities of Switzerland. 82. In contrast, the EEA option could result in the support of the European Commission and of its member States. There is also the advantage of providing full access to the EU internal market. Given EEA’s evolutionary nature, this allows for easy and rapid adaptation to the developments of EU legislation, while also offering strong legal certainty, and therefore predictability. 83. The main challenge of the EEA option is related to the undermining of UK sovereignty. If the UK withdraws from the EU, it may very well end up becoming a sort of “satellite” of the European Union if it joins the EEA/EFTA pillar. Indeed, its government would be obliged to automatically adopt certain legislation within important policy areas, while being unable to take part in the making of decisions. 84. In 2012, Norwegian experts mandated by the government went as far as relating these sovereignty problems to a more general question of democratic deficit. In their view, the Norwegian government cannot be held accountable for most of its European policy.66 Thus, one has to seriously question the argument that the EEA would be a better deal for the UK because it would restore important parts of the British national sovereignty. 6 June 2012
Written evidence from the Liberal Democrat Parliamentary Party Committee on International Affairs Executive Summary — British membership of a European Union of peaceful, free democracies has brought us a huge range of benefits including jobs and prosperity both through free access to the EU’s internal market and through the EU’s collective weight in international trade negotiations. It has brought robust consumer rights and protections, justice and home affairs measures which help our police and security services to keep British people safer and more secure and greater environmental protection and it has generally magnified UK influence in the world. But EU institutions are not perfect and should be subjected to challenge and review. 66 EEA Review Committee (2012). “Outside and Inside: Norway’s Agreement With The European Union”, Official Norwegian Reports (NOU 2012:2), Oslo, 17 January, pp. 7. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— The obsessive focus by some on the worst aspects of the EU gives the British public a grotesquely distorted view of Europe. But British parliamentary scrutiny of EU affairs is itself inadequate and needs to be mainstreamed across departmental select committees. Ministers need to be questioned ahead of sectoral council meetings. More also needs to be done to increase British representation within the commission and across the EU institutions. — No compelling case has been made for any alternative to full EU membership. Norway and Switzerland, by their own admission, have to comply with EU rules but are unable to shape those rules. This would be a bizarre way to try to defend British sovereignty. — Rather than the exercise of a British veto, the December council was a decision by the rest of the EU to walk away from the UK and carry on with their negotiation in a different room. The key danger now is that the questionmark over Britain’s future place in Europe becomes a self-fulfilling prophecy as other member states start to overlook UK interests. But the government has rightly worked hard to rebuild key relationships and this must continue. — A formalised two-tier model could relegate the UK to permanent second class citizen status in the EU with all the consequences this implies for British influence over the shape and fortunes of our continent and the seriousness with which we would be taken as a global player. We should retain top table status within the EU. — The fiscal compact treaty should be incorporated eventually into the EU treaties along with safeguards and access guarantees for non-Eurozone countries like the UK but without those countries having to sign up to any aspect of the treaty itself.
Introduction 1. The Liberal Democrat parliamentary party committee on international affairs is a sub-committee of the Liberal Democrat parliamentary party. The committee is chaired by Martin Horwood MP with co-chairs Baroness Kishwer Falkner, Lord David Chidgey and Lord John Lee. 2. The Liberal Democrats believe that the UK belongs firmly at the heart of Europe. This political stance is built on our long tradition of internationalism and our clear belief that UK membership of a European Union of peaceful, free democracies is in the British national interest. Our membership of the EU has brought huge benefits in terms of jobs and prosperity through free access to the EU’s internal market and a uniform regulatory environment for EU-wide business, and through the EU’s collective weight in international trade negotiations, whether via the WTO or EU free trade agreement negotiations. 3. Membership of the European Union allows us extraordinary freedom to live, work, study and retire anywhere in the Union. It makes life cheaper and easier by, for example, driving down flight costs through competition, cutting phone and data charges, providing free access to EU-wide health insurance and putting in place robust consumer rights and protections. EU justice and home affairs instruments and minimum standards help our police and security services to keep British people safer and more secure from security threats and serious organised criminal gangs operating across borders, whilst also raising the standards of justice, and the protection of civil liberties and rights for our citizens wherever they are across the Union. 4. Collective European action enables the UK to pursue credible policies on cross-border matters of vital importance, whether it is energy security, combating climate change, boosting environmental protection or developing joined-up infrastructure networks. Collective EU action in foreign, development and defence matters can be an extraordinary magnifier of British influence in the world. We have included in the Annex to our submission a range of facts, figures and examples to illustrate some of these points. 5. The UK has driven forward an open, outward looking and liberalising agenda to improve the Union and increase the benefits it delivers for the British people and all Europeans. In an increasingly interconnected global economic and political system with shifting patterns of power and influence, EU membership has helped successive British governments to shape our own future direction and fortunes by actively helping to shape the future direction and fortunes of the continent of which we are a major part. In the process, the UK has been able to retain global player status, taken seriously in Washington, Beijing, Moscow, Delhi and Brasilia, in large part because we hold influence in Brussels, Paris and Berlin, the world’s largest single market and biggest trading bloc. 6. The EU is not perfect. Liberal Democrats believe as passionately in reform of the European Union as we do in reform of the UK’s political system. We want the EU to work and to work better. And as with any set of political institutions, the EU structures, systems and processes are in need of constant attention, regular challenge and review. We are convinced that there is considerable scope for cutting waste, achieving greater cost efficiencies and refocusing EU level spending on areas where it will add greater value to spending at a national level.
Public Perception and Scrutiny of European Affairs 7. We want a more efficient, effective, transparent and accountable European Union helping to deliver a prosperous, progressive, liberal and outward looking Europe. But there is a tendency, sometimes an obsession, in many parts of British political and public life to focus on the worst of the EU. Too often, a picture is painted cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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that is grotesquely distorted, riddled with myths and peppered with untruths. If our picture of British public life was equally distorted—if all the British public knew about the UK government, parliament and British politics was MPs’ expenses, party funding scandals, media scandals, and failed big budget projects—it would hardly be surprising if people questioned the value and purpose of the whole British political system. 8. We do want to see a more responsive, transparent and accountable Union, and we believe that some of the reforms necessary to achieve this need to occur at home. For instance, it is painfully clear to us that the Commons European scrutiny system needs urgent reform. In a post-Lisbon world, it is simply unacceptable for the Commons to rely on a single Scrutiny Committee and a system of ad hoc Standing Committees to scrutinise EU affairs. Such a setup is symptomatic of the widely held and misplaced view that Europe is a niche foreign policy issue and only of general interest when framed in terms of in/out or the future of UK-EU relations. While we welcome the Foreign Affairs Committee’s inquiry, it is in danger of falling into this trap as well, unless it is accompanied by a mainstreaming of EU foreign policy matters within the work of the committee. 9. The vast majority of MPs have little or no engagement with substantive EU matters at all. The level of understanding of how the EU operates and Britain’s role within it is staggeringly low and the awareness of EU policy developments practically non-existent. The European Commission’s 2011 Work Programme—the European equivalent of the Queen’s Speech—was given less than an hour’s debating time in an ad hoc standing committee some six months after it was published and when the bulk of the planned measures had already been introduced. If MPs handled the Queen’s Speech in this way, there would be outrage. EU matters need to be mainstreamed across the departmental select committees so that they can consider them early enough to influence government and commission thinking, question ministers representing Britain’s interests ahead of sectoral councils and focus on policy direction and how it relates to domestic policy and British interests, not just constitutional questions. 10. Equally, we are extremely concerned at the UK civil service’s capacity on EU matters and the long-term decline of British personnel in the EU institutions and the numbers successfully passing through the Commission concours. We understand that EU units across Departments have been among the first to see cut- backs, that the UK has never before been so under-represented amongst commission personnel and that only eight British nationals successfully passed through the concours in 2011. The lack of focus on this crucial area by successive governments needs to be urgently addressed. The British civil service and UK representation (UKRep) have some incredibly good people working on EU matters, and many talented British nationals work in the EU institutions. But we need to drastically increase Whitehall capacity and British representation across the EU institutions.
There is no Realistic Alternative 11. In the absence of any clear and compelling alternative vision to Britain’s full membership of the European Union, the only option for Britain is to remain at the heart of the European Union. Within the EU, we will retain the economic benefits, individual freedoms and advantages for British citizens, the enhanced ability to manage major cross-border issues and the geo-strategic advantages of increased global influence in an increasingly interconnected and competitive world. 12. There is no compelling case for an alternative relationship between the UK and the EU. The only realistic alternative to full EU membership is membership of the European Economic Area (EEA) along the lines of Norway or Switzerland. But this would clearly be detrimental to UK national interests. 13. In order to gain access to the single market as a member of the EEA, the Norwegian government has to implement the vast majority of the EU’s rules but has no say in deciding those rules. This “fax democracy” represents a huge democratic deficit for the people of Norway. As a Norwegian Committee set up to consider the impact of EEA membership recently reported,67 Norway is as “Europeanised” as the UK despite not being a member of the EU yet there is an enormous democratic cost to not having votes in the Council, MEPs in the European Parliament or a commissioner in the commission as the UK and all other member states do. 14. In our view, this would not enhance British sovereignty. It would leave the UK sitting on the sidelines as others went ahead and shaped the future of the continent without us. Without a British voice pushing for open markets, green governance and an outward-facing Europe, the EU could turn in ways that would damage all our collective interests. As the Prime Minister put it: “Leaving the EU is not in our national interest. Outside, we would end up like Norway, subject to every rule for the single market made in Brussels but unable to shape those rules. And believe me: if we weren’t in there helping write the rules they would be written without us—the biggest supporter of open markets and free trade—and we wouldn’t like the outcome.”68 15. The case of Switzerland is very similar. Though the Swiss have tried to resist the rigid application of EU rules under the EEA and other agreements with the Union, the trend is very clear as the country has increasingly accepted that it is in its interests to apply EU rules given the importance of the Union for its own trade. Bern, by its own admission, has increasingly deferred to Brussels in the key areas of banking and trade. New hedge fund rules proposed in Switzerland are explicitly based on EU rules with additional Swiss rules— 67 http://www.europautredningen.no/english/ 68 PM’s Lord Mayor’s Banquet Speech, 2011 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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a Swiss form of gold-plating. And negotiations between the Swiss and the EU aimed at encouraging the Swiss to conform to “all the criteria” of the EU Code for Business Taxation are due to start imminently.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU Policy and place in the Union?
16. Prior to the December European Council, the major concern in Britain was that a caucus of Eurozone countries might stray into EU-27 matters, most importantly over the single market. This is a legitimate concern. But the outcome of the December council increased the risk of such caucusing rather than reduced it. 17. The UK was not asked to pool any additional sovereignty or power within the EU architecture. What we were being asked was to allow the Eurozone countries to enhance the debt rules that apply to them by amending the EU Treaties accordingly. Worryingly, and for the first time in our membership of the Union, all the other member states decided that they could not work with the UK in this regard. They had to find an alternative arrangement outside the EU Treaties and without the UK. Rather than being a British veto, this was a decision by the rest of the EU to walk away from the UK and carry on with their negotiation in a different room. 18. This broke the number one rule that has guided British policy on Europe for decades: that we should always seek to exert maximum British influence on decision-making inside the Union. And, far from protecting the City of London, it actually put the City’s interests, and broader British interests, more at risk not less. The outcome of the Council was a plan for a Fiscal Compact signed by 25 out of 27 member states (and we expect the Czech Republic to sign before long). Provisions for discussions and initiatives among the signatories are dangerously close to single market matters under Title IV of the Treaty and regular meetings among Eurozone and Eurozone Plus members will take place around European Council meetings. Unless the Treaty is embedded into the institutional architecture of the EU, the UK cannot fully rely on the protections and rights afforded to member states under the Treaties. The potential for caucusing among Eurozone or Eurozone Plus countries, and without the UK, on single market matters, especially financial services, remains clearer than ever with vehicles and legal scope for this to occur.
19. This risk is reinforced by the political impact of the December council, with British relations with our partners strained at a time of extreme anxiety for the Eurozone and broader EU. The UK’s reputation as a fully committed, reliable and trustworthy member of the EU has been questioned. It is far from rare to hear people openly speculate about Britain’s future in the EU, or about whether EEA membership may be a better model for us. The key danger in the short/medium-term is that the questionmark over Britain’s future place in Europe becomes a self-fulfilling prophecy as other member states start to overlook UK arguments and interests (regardless of their merits), and make other alliances over matters of core interest to the UK. The recent negotiations over the CRDIV Directive, a piece of legislation of crucial importance to us, saw the UK dangerously close to a position of one against 26, despite the merits of our argument. A by-product, perhaps, of the December council. And there are plenty more difficult negotiations to come.
20. All is not lost—far from it. The use of our observer status in the negotiations following the December council was wise, as was our decision to allow the use of the EU institutions which themselves are bound to protect the EU Treaties in full and thereby British rights and responsibilities. The UK is a highly valued member of the Union in many ways, not least for our free trade and liberalising instincts which chime with many other member states and the natural disposition of the European Commission. But also for our leadership in foreign and security policy matters, our excellent reputation on police and judicial co-operation, our strong climate change credentials and our rigorous scrutiny of EU proposals at a technical level to ensure they are workable.
21. The UK has rightly fought hard to rebuild key relationships and alliances on matters such as the European growth agenda, climate change and EU foreign policy matters. We need to redouble our efforts, maintain a flexible approach, generate new initiatives and ideas, deepen existing alliances and build new ones—especially with Euro “ins”—and maximise our influence while taking opportunities for good deals and trade-offs for the UK.
Between now and 2020, what institutional architecture should the UK seek for the EU? Should the UK embrace a formalised two (or more)—tier EU and start to develop ideas for multiple forms of EU membership?
22. A multi-speed Europe already exists. The UK is not a member of the Euro or of Schengen (though we participate in police and judicial cooperation aspects in the latter) and we have an opt-in on all justice and home affairs matters. The treaties also offer considerable safeguards for the UK and other member states on sensitive matters such as the emergency brake clauses, safeguards on the single market and new powers for national parliaments over subsidiarity matters. This flexibility has worked well for Britain and many other countries within the overall framework of the EU, while they retain the option of altering these arrangements according to their own interests. Denmark, for example, is considering moving from an opt-out on JHA matters towards a UK opt-in model, and many non-Eurozone states are committed to joining the Euro in the future. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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23. The treaties’ enhanced co-operation mechanisms (the first use of which the UK pushed for in relation to the EU patent and patent court) was one amongst other innovations in the treaties. These offer a vehicle to preserve the rights and responsibilities of non-participants in specific areas of deepened integration. 24. However, a formalised two-tier model is not in the British national interest. It could relegate the UK to permanent second class citizen status in the EU with all the consequences this implies for British influence over the shape and fortunes of our continent and ability to project power and influence internationally. The non-Euro block is likely to decline in size so the idea of forming a non-Euro group to balance a Euro-grouping is fanciful. If the UK wishes to maximise its influence in the EU and retain global player status in world affairs, it is fundamentally in the national interest to ensure we retain top table status within the EU. We see grave risks of the “self-fulfilling prophecy” if the UK openly starts to explore different forms of membership with the EU. The reality is that, in such circumstances, others might take that decision for us.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the Fiscal Compact Treaty have on other aspects of the EU and its policies such as the budget, enlargement, or CFSP? 25. The fiscal compact Treaty lies outside of the EU treaties, but is linked via the EU institutions and sets out political commitments among the signatories over the use of EU Treaty tools, such as enhanced co- operation, and positions such as on the enforcement of the new “six pack” rules. Our primary concern over this structure is the potential for caucusing over EU-27 matters, most notably on the single market. Within the Fiscal Compact Treaty, this could occur through actions taken under Title IV of the Treaty. More broadly, the new opportunities for Eurozone and Eurozone Plus groupings of member states to meet to discuss matters under the Fiscal Compact Treaty could directly or indirectly impact the interests of the EU-27 or the single market. The prospect of this materialising depends to a large extent on the 27’s ability to find solutions to problems with the EU’s main architecture, and thereby on the attitude and approach of the UK and other member states.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so? 26. The “fiscal compact” Treaty envisages its own incorporation into the main EU Treaties within five years. This would be far more satisfactory than the current situation and clearly in line with British national interests. It would not mean that the UK itself would need to sign up to the debt rules included in the Treaty or to any other aspects of the Treaty itself. Rather it would, as was the original intention, enable Eurozone countries to tighten and apply greater discipline to their own debt rules by amending them within the EU Treaties. The UK and other non-Eurozone countries would be well within their rights to ask for a generic safeguard on single market matters (that is that they remain the exclusive preserve of the EU-27 and that the Compact will honour and not undermine existing single market rules), as well as access to future Eurozone and/or Eurozone Plus meetings. 22 May 2012
Annex 1. Creating British Jobs and Prosperity through the Single Market — The UK economy benefits from the single market alone (not including EU external free trade deals) to the tune of up to £90 billion annually, or £3,300 per household every year (27 million households in UK).69 — The EU’s single market gives British companies free trade access to the world’s biggest single market worth nearly £12 trillion in GDP and over 500 million consumers.70 — 3.5 million British jobs are reliant on the EU’s single market. That’s one in every 10 British jobs.71 — 50% of British trade, worth £450 billion a year, is with other EU member states.72 — Over 100,000 British firms export to other EU countries, 94,000 of which are SMEs. 80% of all UK businesses think the Single Market delivers concrete benefits to them.73 Over 200,000 UK companies trade with the EU every year.74 — The growth in free trade within the EU has generated up to £3,300 in extra income per British household per year over the last 30 years.75 69 http://www.theyworkforyou.com/wrans/?id=2011Ð09Ð06c.67079.h&s=section%3Awrans+speaker%3A11494#g67079.q0 70 http://www.bis.gov.uk/policies/europe/eu-single-market-introduction 71 http://www.theyworkforyou.com/wrans/?id=2011Ð09Ð06c.66959.h&s=section%3Awrans+speaker%3A11494#g66959.q0 72 http://www.bis.gov.uk/policies/europe/eu-single-market-introduction and http://www.theyworkforyou.com/wrans/?id= 2012Ð03Ð27a.101662.h&s=section%3Awrans+speaker%3A11823#g101662.q0 73 2006 MORI Poll 74 http://www.theyworkforyou.com/wrans/?id=2012Ð03Ð27a.101662.h&s=section%3Awrans+speaker%3A11823#g101662.q0 75 http://www.theyworkforyou.com/wrans/?id=2011Ð09Ð06c.67079.h&s=section%3Awrans+speaker%3A11494#g67079.q0 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— Over 50% of foreign direct investment to the UK comes from other EU member states, and is worth £351 billion a year.76 — Over 50% of companies investing in the UK cite the UK’s membership of the Single Market as a core reason for investing in the UK.77 — Full access to the EU’s single market makes the UK a magnet for foreign companies locating in the UK: Between 1998 and 2011, 603 major foreign companies chose to locate their European Headquarters in the UK.78 — An OECD and Bank of England study suggest that UK withdrawal from the EU would cut FDI into the UK by over a third and damage household incomes.79 — The UK is pushing to liberalise trade within the EU in new growth areas such as energy, digital, services and green tech. sectors. This could add over £650 billion to the EU economy, making the average UK household almost £3,500 better off each year.80 — EU enlargement is hugely economically beneficial for the UK by expanding the EU’s single market. The enlargement of 10 central and eastern European countries has seen UK exports to those countries treble over the last ten years to almost £12 billion. — The City of London and Edinburgh are the leading financial centres in Europe. Ensuring the UK retains its influence over financial services regulation is vital. — The level of trade liberalisation in the EU is unparalleled anywhere in the world.
2. New Opportunities, Making Life Cheaper and Easier for British Citizens — Our membership provides UK nationals freedom of movement across the entire EU. — Today, around 2.2 million British nationals are living in another EU member state—either working, studying, or in retirement. Around 50% live in Spain.81 — EU free movement rules allow British families to travel freely on holiday throughout the EU at any time in the year—some 25 million Brits go on holiday to other EU countries every year.82 — EU rules allow for Brits to live and work anywhere else in the EU too. Some 260,000 Brits work in another EU country, an increase of more than 40,000 since 2005.83 — Under current and emerging EU rules, British nationals will be guaranteed to have their rights and protections respected in all other EU member states. — Eg the European Protection Order will ensure that British victims of violence who have a UK protection order will receive the same protections anywhere in the EU. — Eg the EU is in the process of passing a package of measures that will ensure that any British citizen arrested on the continent will have their basic rights guaranteed including the right to be fully informed at all stages of the process, access to a lawyer and translation rights. — The European Health Insurance Card (EHIC) enables UK travellers to receive free or reduced cost healthcare when on a temporary visit to another member state. There are around 30.5 million UK- issued EHICs in circulation. — EU competition and consumer rights laws have driven down prices, opened up markets for smaller businesses and boosted consumer protections. — The average British UK consumer saves around £480 per person per year as a result of EU single market competition driving down price of goods and services.84 For example, British families and businesses now enjoy vastly reduced mobile phone roaming charges, cheaper flights and proper compensation when flights are delayed or cancelled.
3. Opening up Markets for British Businesses Around the World — The EU is vital to opening up new trading opportunities for the UK around the world. — By negotiating as part of the world’s biggest single market bloc, the UK is able to get much better terms and access than it would if it were negotiating by itself. 76 http://www.theyworkforyou.com/wrans/?id=2011Ð09Ð05a.66958.h&s=section%3Awrans+speaker%3A11494#g66958.q0 77 UKTI, OMB Research, (2010) UKTI Performance and Impact Monitoring Survey (PIMS) Inward Investment. 78 Calculated taking 2010Ð11 figure from: http://www.theyworkforyou.com/wrans/?id=2012Ð03Ð27a.101660.h&s= section%3Awrans+speaker%3A11823#g101660.q0 and 1998Ð2009 figure from http://www.ukti.gov.uk/uktihome/item/ 113922.html 79 Pain and Young, (2004) Macroeconomic Impact of the UK Withdrawal from the EU. 80 http://www.bis.gov.uk/news/topstories/2011/Mar/eugrowth 81 http://www.theyworkforyou.com/wrans/?id=2011Ð09Ð06c.68474.h&s=section%3Awrans+speaker%3A24928#g68474.q0 82 http://www.theyworkforyou.com/wrans/?id=2011Ð11Ð24b.82499.h&s=section%3Awrans+speaker%3A11494#g82499.q0 83 http://www.theyworkforyou.com/wrans/?id=2011Ð11Ð24b.82500.h&s=section%3Awrans+speaker%3A11494#g82500.q0 84 http://www.theyworkforyou.com/wrans/?id=2012Ð04Ð16b.102035.h&s=section%3Awrans+speaker%3A11823#g102035.q0 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— For example, a recently signed EU Free Trade Agreement (FTA) with South Korea (a bigger market than Turkey or Indonesia) has virtually eradicated all tariffs barriers for EU exporters. It will bring £500 million a year of benefits to British businesses.85 — The EU is in the process of negotiating a series of new FTAs including with India, Canada, Ukraine and South America which will deliver enormous economic benefits to British households and businesses. Completing all ongoing EU FTA negotiations would generate over £50 billion for the economy.86 There are many others in the pipeline, including with Japan and the US which could bring enormous economic benefits to the UK and broader European economy. — Below is a snapshot of some of the benefits from some of individual FTAs under negotiation:87 — EU-Canada: The benefits of this agreement to the UK could be approximately £423 million per annum in the short term; — EU-India FTA: This agreement could produce benefits to the UK of approximately £2 billion over ten years; — EU-Mercosur FTA: The Commission has conducted some research but there is not yet a published SIA; — The EU-Malaysia FTA and EU-Singapore FTA are important building blocks towards an EU- ASEAN FTA, which could bring benefits of up to £3 billion per annum to the UK in the long term.
4. Helping the UK Combat Climate Change, Deliver Energy Security and Generate a Low Carbon Economy — The EU is vital to delivering British objectives on climate change, energy security and generating a low carbon economy. — The EU is a world leader in combating climate change. Collective EU action was crucial for establishing the Kyoto protocol. Strong leadership by the UK and the European Commission helped to keep a strong and united “Team EU” position at the UNFCCC CoP in Durban in 2011 and secured a remarkable global commitment including all major emitters. — The EU’s collective position to deliver a 20% reduction in emissions by 2020 is essential for securing a global deal on climate change. The UK is pushing for a 30% EU climate change target. — The EU’s Emissions Trading Scheme is the biggest of its kind in the world and vital for combating climate change and generating low carbon growth. — The EU’s new Energy Strategy is essential in delivering UK energy security by diversifying energy generation and supplies, driving through reductions in consumption, creating a fully functioning internal energy market and investing in an efficient European Supergrid. — EU targets and actions stimulate investment in UK renewables and low carbon technologies, and generate British low carbon export markets across the EU. — For example, a European Supergrid could generate tens of thousands of new British jobs in the offshore renewable industry, turn the UK into a net exporter of energy again and reduce the costs of investing in new offshore wind and marine energy by 25%.88
5. Helping to Combat Criminal and Security Threats Facing the UK and Protecting Rights EU-wide action is essential to tackle cross-border security threats to Britain like terrorism, human trafficking, drug smuggling, illegal immigration and money laundering. Some examples: — A three-year Europol investigation, Operation Rescue, broke the world’s largest online child pornography network making 184 arrests (121 in Britain) and rescuing 230 children (60 in the UK) 2011.89 — Operation Golf, a joint operation between Europol, the Met and Romanian Police, broke up an organised criminal operating a child trafficking network in the UK and across the EU. In 2010, this saw seven individuals arrested in the UK and the release of 28 children. In total, some 121 individuals were arrested under the Operation.90 — Through the European Arrest Warrant (EAW), in 2010 the UK extradited over 145 individuals from other EU member states to the UK to face criminal prosecutions for crimes they had committed here.91 85 http://www.bis.gov.uk/news/topstories/2010/Oct/davey-free-trade-agreement 86 http://www.number10.gov.uk/wp-content/uploads/EU_growth.pdf 87 http://www.theyworkforyou.com/wrans/?id=2012Ð04Ð16b.102034.h&s=section%3Awrans+speaker%3A11823#g102034.q0 88 http://www.parliament.uk/business/committees/committees-a-z/commons-select/energy-and-climate-change-committee/news/ esg-publication/ 89 http://www.guardian.co.uk/society/2011/mar/16/global-paedophile-ring-smashed and http://www.build.co.uk/national_ news.asp?newsid=124346 90 https://www.europol.europa.eu/content/page/operational-successes-127 91 SOCA Annual Report 2010Ð11 page 93 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— Over the last two years, the UK has used the EAW to extradite at least 71 non-UK nationals suspected of committing serious crimes in the UK. This includes four thefts, four robberies, five murders, five rapes, six child sexual offences, nine cases of GBH and 14 cases of fraud.92 — This, of course, excludes British national extradited back to the UK for crimes committed in the UK. We note, for example, the extraordinary success of the Crimestoppers’ Operation Captura which has successfully seen the arrest and return under the EAW of 49 out 65 most wanted British nationals on the run in Spain.93 — Through EU action to enable transfers of data on convictions, the UK is now aware (previously unaware) of 276 British nationals who have committed offences against children across the EU. — The Eurodac System helps the UK cross reference thousands of asylum claims in the UK with those in other member states.94 Since 2003, the EU’s “Dublin System” has enabled the UK to remove over 12,000 asylum applicants to member states that are responsible for deciding their claims.95 — EU action via “Frontex” at Europe’s external borders helps to combat illegal migrant flows into the Union, many of whom intend to travel to the UK. — The EU’s Joint Investigation Team (JIT) has become a key vehicle for the British Police to operate smoothly with other national forces in pursuing lengthy and complex cross-border investigations. Since 2009, British Police have been involved in at least 15 JITs.96 — The recently operational EU Council Framework Decision 2005/214/JHA should enable the UK to ensure that hundreds of thousands of pounds worth of financial penalties issued for offences committed in the UK can be claimed back from individuals in other EU member states.97 — The EU’s Prisoner Transfer Framework decision, which recently came into force, should allow the UK to both improve rehabilitation outcomes and reduce the size of the British prison population by returning foreign national prisoners to the home EU member state. The transfer of the first batch of prisoners is currently in the pipeline.98 — The ongoing package of legislation to put in place minimum standards for victims rights, heavily inspired by UK best practice, will help to ensure that British victims of crime in other member states have their rights properly protected. The parallel package on procedural rights in criminal justice, also heavily inspired by UK best practice, are crucial for ensuring that the more than 3,000 British nationals arrested and tried in other member states every year are subject to high standards of criminal justice.99
6. Helping Deliver British Foreign Policy: Global Security, Stability and Combating Poverty Acting as part of a 27 nation bloc, representing the largest single market in the world, is a huge magnifier of Britain’s voice and influence in the world. Some examples: — The EU’s biggest foreign policy success is spreading European values, peace, security and prosperity across the continent, most recently through enlargement in 2005 to include 10 new EU member states. The UK remains a leading proponent of further enlargement to the Western Balkans, Iceland and Turkey. — The EU’s Neighbourhood Policy is essential to delivering UK objectives of stability and prosperity to countries on the Eastern-edge of the EU, and in supporting the transitions underway across much of North Africa and the Middle East. — EU sanctions have a much greater impact than UK-only sanctions. The EU, urged on by the UK and others, recently agreed sanctions on all oil exports from Syria to help put pressure on the regime there. Syrian oil exports to the EU are 95% of their total oil exports and reports suggest that the impact of the sanctions is already being felt by the regime and the ruling elite.100 The EU has also enacted a robust sanctions package on Iran and Zimbabwe. — Equally, removing EU sanctions, opening up normal diplomatic channels and relaunching aid flows are a huge incentive to positive reforms. Indeed, we saw this and the benefits it brings to UK influence overseas very neatly in Burma with the PM’s initiative to urge the suspension of sanction on Burma, this position being approved by EU Foreign Ministers, the EAS opening up a new office in Burma and the reopening of EU aid flows to the country. 92 http://www.theyworkforyou.com/wrans/?id=2011Ð11Ð28c.81230.h&s=section%3Awrans+speaker%3A11494#g81230.q0 93 http://www.crimestoppers-uk.org/most-wanted/catching-criminals-in-spain/arrests-to-date-operation-captura 94 http://www.theyworkforyou.com/wrans/?id=2011Ð11Ð15c.81155.h&s=section%3Awrans+speaker%3A11494#g81155.q0 95 Ibid 96 http://www.theyworkforyou.com/wrans/?id=2012Ð04Ð16b.103060.h&s=section%3Awrans+speaker%3A11494#g103060.q0 97 http://www.theyworkforyou.com/wrans/?id=2012Ð05Ð01b.106071.h&s=section%3Awrans+speaker%3A11494#g106071.q0 98 http://www.theyworkforyou.com/wrans/?id=2012Ð03Ð07a.98443.h&s=section%3Awrans+speaker%3A11494#g98443.q0 99 http://www.theyworkforyou.com/wrans/?id=2011Ð11Ð15c.81154.h&s=section%3Awrans+speaker%3A11494#g81154.q0 100 http://www.bbc.co.uk/news/world-middle-east-14759416 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— The EU remains the world’s biggest aid donor and will be crucial for delivering on the UK’s objectives of combating global poverty.101 — The EU’s trading power is vital for supporting poorer countries growth and stability. The EU, under a UK initiative, agreed an ambitious emergency trade relief package for Pakistan in the wake of the devastating floods in the country last year. — The EU’s Common Security and Defence Policy (CSDP) is delivering in a variety of important areas to the UK and broader EU such as: — The large-scale rule of law mission in Kosovo to combat organised crime, corruption and deliver stability in the country;102 — Operation ATALANTA, a UK-led (commanded from Northwood) EU naval mission to counter-piracy off the coast of Somalia which has reduced the number of successful pirate attacks and protected over 500,000 tonnes of food aid.103
Written evidence from Professor Richard Rose, FBA, University of Strathclyde and European University Institute DISTINCTIVE UK PRIORITIES FOR THE EU’S FUTURE 1.1 The December 2011 European Council is a challenge, not a watershed, because it is unclear how eurozone members of the EU will react to future events. The German Chancellor is calling for changes in EU rules that could trigger a British referendum under terms of the 2011 European Union Act. To avoid misunderstandings and possible isolation, HMG should start preparing for such developments. 1.2 The European Union notionally endorses diversity as well as Union, but the predominant position favours all member states advancing in unison toward an ever closer union. Thus, the UK’s repeated challenges to further European integration are widely perceived as negative. This submission recommends that, consistent with HMG’s distinctive position, it should promote institutional diversity as a positive means of managing differences within an EU that has 27 or more member states. — 1.2a Pragmatic experimentation. EU procedures for enhanced cooperation enable willing countries to adopt policies and countries with doubts to observe the experiment before deciding whether to join in. This has been Britain’s stance on the euro and the Stability Treaty can go into effect after ratification by 12 countries. — 1.2b Give European citizens a say on major increases in EU powers. HMG should promote its 2011 EU Referendum Act as a positive step to address the EU’s democratic deficit by testing the commitment of Europe’s citizens to further expansions of the EU’s powers. — 1.2c Link enhanced cooperation and referendum endorsement. A coalition of the willing implies that the unwilling should satisfy themselves by opting out. Therefore, future agreements on the expansion of EU powers should have complementary and contingent provisions for enhanced cooperation by countries that favour further integration and opt out clauses for countries that may not do so, eg Britain after a national referendum. 1.3 The above recommendations are based on an ESRC-funded study to be published by Oxford U. Press next spring, Representing Europeans: a Pragmatic Approach, and related publications. Both projects reflect my long-term interest in how growing cross-national interdependence can be managed by governments accountable to a national parliament and electorate. See for example, The Prime Minister in a Shrinking World and The Post-Modern Presidency. 2.1 Experimenting through enhanced cooperation occurs when some EU member states adopt a policy and others do not. This has been happening for decades in different policy sectors and institutional forms. For example, the Schengen agreement promoting easy movement across national boundaries started in 1985 and Britain and Ireland continue to opt out. Pragmatic experimentation enables governments that consider a policy in their national interest to cooperate with other member states and promptly learn how it works. Simultaneously, it allows governments that think a measure not in their interest to avoid being forced to join and, even worse, being forced to pay the costs of doing so if the experiment is unsuccessful. 2.2 Title IV of the Treaty on European Union and the Treaty on the Future of the European Union Article VI. Title III contain detailed rules for the use of enhanced co-operation to maintain momentum toward an ever closer Union when unanimity is lacking about what the EU should do. Hence, the practice is sometimes described by the term “differentiated integration”. The eurozone crisis pushes EU countries into uncharted waters. In conditions of high uncertainty, trial-and-error policies are being adopted in an experimental search for measures that will work. Since eurozone countries fall into three different groups—members; non-members with a commitment to join at some unspecified future date; and countries not expected to join—it is possible that different policies may be suited to each group. By allowing for differentiation, enhanced cooperation increases the number of countries satisfied with their EU obligations. 101 http://development.donoratlas.eu/home.html 102 http://www.eulex-kosovo.eu/en/front/ 103 http://www.eunavfor.eu/ and http://www.publications.parliament.uk/pa/ld200910/ldselect/ldeucom/103/10302.htm cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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2.3 Enhanced cooperation can avoid the extremes of Britain vetoing an EU measure favoured by a substantial majority or Britain being compelled to adopt a policy unacceptable to the UK Parliament and citizens. In a 27- country European Union it is unlikely that Britain would be alone in hesitating about being in the vanguard of moves toward closer integration. However, in the absence of leadership from a major country, small states lack the political will and clout to secure major changes in what a predominant majority agrees. 2.4 The convention of the acquis communautaire prevents “retro-fitting” enhanced co-operation to established measures. Hence, it is rhetorical overkill to suggest that it would cause the EU to disintegrate. Where uniformity is required, for example, the admission of new member states or basic principles of the single Europe market, enhanced cooperation is not feasible. However, existing EU policies show that the case for uniformity tends to be exaggerated. Key measures affecting the three pillars of the EU are not uniformly applicable across EU member states, eg, border controls (Schengen); monetary policy (the euro); and defence (NAT0). 2.5 HMG should promote enhanced cooperation as desirable in principle and invoke it when issues emerge where there are pressures to act but no agreement about what is to be done. Ideally, these issues would include policies where Britain can lead in cooperation, as it did in air support for Libya, as well as those where its distinctive priorities recommend opting out. 2.6 Pragmatic experimentation through enhanced cooperation is not a commitment to a two-speed Europe. The dynamic consequence depends on its success. If an initiative is successful, laggards (that is, those who do not initially join) can catch up with leaders subsequently. This is the process by which the UK entered the European Union two decades after refusing to be a founder member. It also provides a firm institutional foundation for flexible integration, in which the member states that join together can differ from one policy to another. This is the basis on which Britain participates in the chief institution for European defence, NATO, while remaining outside the chief institution for European monetary policy, the ECB. 3.1 Giving European citizens a say through referendums. While the European Parliament has gained in powers vis a vis other EU institutions, its claim to represent EU citizens has fallen as turnout has settled below half the electorate. Moreover, key decisions in the EP are made by multi-national party groups, which research shows are much more in favour of an ever closer Union than are Europe’s citizens. Moreover, irreversible decisions on treaties expanding the EU’s powers can be agreed in the European Council by national governments representing less than half their country’s voters and binding future national governments. This is less than the super-majority normally required to endorse changes in national constitutions; ten member states require referendums on major changes in their national constitution. 3.2 Consistent with the EU principle of subsidiarity, it is open to the government of any EU country to call a referendum on an EU issue. At different times over the years 22 countries have called a national referendum on an EU issue on grounds of political principle, political prudence or for domestic political reasons. The conduct of a referendum campaign focuses attention on whether citizens want to be committed to further integration. Turnout at EU referendums is normally significantly higher than national participation in a European Parliament election. In three-quarters of the cases, the result of a referendum is popular endorsement of an EU measure. Public opinion in every EU member state favours a referendum vote on any new EU treaty (Annex 1). 3.3 The current practice of referendums on expanding EU powers has major flaws. National referendums have excluded between 72 and 99 percent of EU citizens from voting (Annex 2) and a single EU country can veto the adoption of an important measure supported by a preponderant majority of countries. Because a free and fair referendum vote risks the rejection of an EU agreement, current EU policy is to expand its powers by adopting “treaty-like” agreements through novel procedures. The new Treaty on Stability, Coordination and Governance in the Economic and Monetary Union is a prime example. It confers new powers on the European Commission and European Court of Justice and national governments are expected to get their parliaments to adopt fiscal measures prescribed therein without further reference to their national electorate. 3.4 The UK is now one of three member states with a legal requirement to hold a national referendum on treaties transferring powers to the EU. The Irish court has ruled that the Stability agreement is a Treaty subject to a national ballot. Danish lawyers have been able to finesse referendum requirements. National elections in member states, occurring at the rate of seven a year, present further challenges, as Greece most vividly demonstrates. In addition, the German Federal Court is now prepared to examine cases challenging whether EU measures are consistent with the democratic principles of the German Constitution. 3.5 HMG should call for European citizens to be given a bigger voice on major EU decisions through simultaneously held national referendums. This is a practical means of reducing the EU’s democratic deficit and increasing popular commitment to EU measures that national majorities endorse. Moreover, it does not require a new Treaty to be enacted. National governments that decide to hold a referendum need only co- ordinate the date and wording of a ballot. National governments hesitant about doing so would be under pressure to follow where others lead. 3.6 The prospect of a referendum on the transfer of powers to the EU should have a significant influence on discussions in Brussels about whether and how integration should be increased. It should encourage the pro- integration majorities in the Commission and Parliament to pay more attention to securing the commitment of cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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their citizens. It would also remind national governments meeting in the European Council that British concerns with ambitious transfers of power are not a peculiarly insular fixation but one that a significant number of their own citizens may share. 4.1 Linking enhanced cooperation with popular support through referendums. Any treaty approved by all national governments in the European Council is likely to be endorsed by a majority of national referendums. But since all referendums raise the possibility of defeat, a treaty proposal should include clauses for opting out by countries rejecting a treaty and also clauses allowing countries to join subsequently if a new policy is successful. 4.2 HMG should have a two-pronged strategy for proposals to expand EU powers. It can seek support to modify proposals to make them acceptable in Britain. If this is not practical, it should emphasis including enhanced cooperation clauses that allow member states to co-operate and allow Britain to opt out. Such a strategy can be justified as consistent with the EU principle of diversity, authorized by the Treaty on European Union. It will also avoid conflict between the UK’s 2011 EU Act and commitments that majorities endorse. 22 May 2012 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Annex 1 NATIONAL DEMAND FOR REFERENDUMS ON EU TREATIES Q. Do you agree or disagree that EU treaty changes should be decided by refendum? Ireland 88% Greece 82% UK 81% Cyprus 79% Bulgaria 74% Spain 71% Malta 66% Poland 65% Denmark 65% Portugal 65% France 64% All EU 63% Hungary 62% Czech Republic 62% Latvia 62% Lithuania 62% Germlany 60% Estonia 59% Finland 59% Romania 59% Italy 58% Austria 58% Slovakia 55% Luxembourg 55% Netherlands 52% Belgium 51% Sweden 45% Slovenia 41%
0% 50% 100% Pro-referendum
Source: European Election Study, 2009. A survey of 27,069 respondents across all EU Member States. For details see www.piredeu.eu cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Annex 2 EXCLUSION OF EUROPE’S CITIZENS BY NATIONAL REFERENDUMS (Percent of citizens in Member States not holding referendum) % excluded from voting
Stabilty Treaty 99%
Lisbon 99%
European Constitution 73%
Amsterdam 97%
Nice 99%
Maastricht 80%
Single European Act 97%
0% 50% 100%
Notes: Stability Treaty and Lisbon: Ireland voted; 26 countries did not. European Constitution: France, Spain, Luxembourg and Netherlands voted, 21 countries did not. Amsterdam: Ireland and Denmark voted, 13 countries did not. Nice: Ireland voted, 14 countries did not. Maastricht: France, Ireland and Denmark voted, 9 countries did not. Single European Act: Denmark and Ireland voted, 10 countries did not.
Written evidence from Professor David Phinnemore, Queen’s University Belfast THE FUTURE OF THE EUROPEAN UNION: FORMS OF MEMBERSHIP Executive Summary — A UK referendum on the EU is now highly likely and will, irrespective of the wording, most likely be treated as a vote on whether to stay in the EU or not. — Any renegotiation of the terms of UK membership will need to address the individual and collective interests and preferences of all member states and not just those of the United Kingdom. — Any renegotiation could result in a demand from “full” members that the United Kingdom’s institutional representation and role in decision-making be reduced. — Any renegotiation would set precedents for and challenge the EU’s approach to enlargement. — The United Kingdom already benefits from a specially tailored form of membership that other member states may be willing to see refined in the context of a further round of wider treaty reform but this refinement may not be sufficient to meet popular and political demands for a renegotiation. — For a range of reasons relating primarily to maintaining the existing balance of rights and obligations of member states and to enlargement the EU is unlikely to agree formalized tiers of membership. Prof. Phinnemore is an expert on the politics of the European Union and specifically its treaties and enlargement. He is Visiting Professor at the College of Europe where he teaches on EU enlargement. He has published widely on successive rounds of EU treaty reform as well as on enlargement and forms of association with the EU. During 2010–11 he was seconded as a Senior Research Analyst to the Foreign and Commonwealth Office during the passage through parliament of the EU Act 2011. He is currently completing a book on the negotiation of the Treaty of Lisbon. 1. Whether or not the December 2011 European Council and its outcome can or should be seen as a watershed in the United Kingdom’s EU policy and place in the Union is open to question. Current debates on how the United Kingdom should respond to calls for further integration, particularly within the Eurozone, on whether the UK government should seek to alter the terms of its membership, and on whether there should be a referendum on remaining in the EU all predate the eurozone crisis. Rather they are the symptoms of the United Kingdom’s uneasy and unenthusiastic participation in a process of European integration which is poorly cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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understood and which successive governments and oppostions have shown a tendency to portray as alien and threatening.
Towards a Renegotiation of the United Kingdom’s EU Membership 2. Although support for the United Kingdom’s continued membership is regularly re-affirmed by governments and most political parties, there can be no question that the current inquiry is taking place at a point when the desirability of this membership is being most openly and forcefully questioned among voters, campaigners and politicians. The political saliency of the issue has not been so great since the early 1980s. With public opinion remaining for the most part unenthusiastic about European integration—whether the status quo or further integration—and increasingly inclined to express a view on the United Kingdom’s position within the EU, debate on alternatives appears set to remain a feature of UK politics until such time as a referendum is held and its outcome addressed. 3. The likelihood of a referendum is high and not simply because of the political saliency of the continued membership issues. The EU Act (2011), irrespective of whether it requires or not a referendum for a treaty change, has heightened expectations of a referendum being held. In the current political climate, it is extremely difficult to envisage a future government being able to resist popular and parliamentary calls for a referendum even if it can provide a completely water-tight legal case for ratification of a treaty change being exempted from referendum requirement under the EU Act (2011). Irrespective of the formal focus of the referendum, the vote would be treated by many campaigners and voters as a question of whether the United Kingdom should remain in or alter its relationship with the EU. 4. Many opponents of the United Kingdom’s continued membership of the EU advocate withdrawal and the establishment of an alternative relationship, often along the lines of the European Economic Area or the complex, multi-agreement bilateral relationship that Switzerland has with the EU. These are dynamic forms of relations in which the non-member state takes on a substantial proportion of the obligations of EU membership without a formal role in their adoption, an important point often overlooked by supporters of such relations for the United Kingdom. 5. A key feature of the emerging debate is, however, the preference to consider “renegotiation of membership” as some form of middle way between the status quo and withdrawal. 6. Assuming such a focus is maintained, it raises the question of what alternative forms of EU membership are possible and which would suit UK interests best. However, and importantly, consideration of options cannot be undertaken simply from a UK perspective of what would be desirable. EU membership, it cannot be forgotten, is regulated by unanimous agreement among the member states as contracting parties to the EU’s constitutive treaties—the Treaty on European Union and the Treaty on the Functioning of the European Union—and so renegotiation would have to take place with their active consent and potentially be ratified by them. 7. It is not the case that the United Kingdom could dictate the terms of any renegotiated form of membership. The interests of the other member states both individually and collectively would have to be addressed. It is to be expected that the EU’s institutions will also seek to influence the substance of any renegotiations with the European Parliament likely to demand a role in the formal approval of any change. As regards the collective interest, any renegotiated form of membership would set precedents for other actual and would-be members as well as the terms of accession governing enlargement. Renegotiation would have implications well beyond the narrow terms of the UK’s continued membership.
One Membership, but Degrees of Membership 8. Formally, there is only one form of EU membership: membership. Other forms of membership have been proposed (eg affiliate membership) but no treaty provision has ever been drafted to enable them. If a state wishes to become a member of the EU, it has one option: membership. Established practice is that it assumes all existing treaties as well as all other primary and secondary legislation—the acquis. Opt-outs are exceedingly rare and highly specific. Moreover, acceding states are obliged to subscribe to the acquis politique of the EU, ie its often loosely worded political ambitions, including “ever closer Union”.104 9. In practice, certain forms of contractual relationships have been presented as a form of (eg “associate”) membership. Legally speaking, however, these are not a form of membership of the EU, but a form of relationship with the EU. This is irrespective of the fact that the intensity of the contractual commitments in some relationships is so great (eg the European Economic Area) that the non-member state assumes many of the obligations and receives many of the benefits of membership and in some cases, notably where Schengen participation is concerned, is actually more of a member than certain member states (eg the United Kingdom). However, one important and highly sought benefit of membership that has never been granted to a non-member state has been representation in the EU’s institutions and therefore participation in EU decision-making. 104 It can and should be expected therefore that states acceding to the EU in the future will be expected to commit in principle at least to acceding to the extra-EU Fiscal Compact Treaty even if becoming a signatory is not a pre-requisite for membership. In any case, with the “six-pack” legislation on economic governance part of the acquis, acceding states would be committed to most of the requirements of Fiscal Compact Treaty albeit with the obvious exception of the debt brake. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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10. Although legally there is only one form of EU membership, in practice various degrees of membership exist. On the one hand, not all member states are members of the eurozone. Member states can be divided into three categories: eurozone members—“ins”; member states that have not yet met the criteria to become part of the eurozone—“pre-ins”; member states—“outs”—that have either previously signed up to economic and monetary union and subsequently decided not to join the eurozone (Sweden, Denmark) or have always had an opt out (United Kingdom). On the other hand, not all member states participate fully in Schengen activities or the area of freedom, security and justice: the United Kingdom, Ireland and Denmark have a partial membership of these areas due to various opt-out/opt-in arrangements. Furthermore, the United Kingdom and Poland have a special status vis-à-vis the Charter of Fundamental Rights,105 and Denmark has a politial opt-out from defence cooperation. And then we have the recently established forms of enhanced cooperation (ie on cross-border divorce, an EU patent).
Formalizing Tiers of Membership 11. Each of these arrangements alters the degree of a state’s membership and has been developed following negotiation between the member states. Each—with the exception of the eurozone opt-outs—also remains rather fuzzy, the boundaries shifting as the relevant acquis evolves and opt-ins are exercised. None has been formalized through the creation of a particular form of named membership that is made available—explicitly or implicitly—to others, whether current or would-be members. Only at the time that the relevant treaty change was agreed (eg Maastricht, Amsterdam, and Lisbon) was the variable degree of membership established. 12. The unscripted emergence of the variable degrees of membership and the fact that they have remained ad hoc arrangements reflects a widespread reluctance to formalize tiers of membership. At least five reasons can be advanced: — securing agreement on what constitutes a second or third etc. tier of membership would be exceptionally difficult given the integrated nature of the acquis and the fact that unanimous agreement among the member states would be required; — member states have studiously avoided any situation where they might be classified as a second- class member as with all certainty would be the case if tiers of membership were established; — formalizing tiers of membership would necessitate a debate on the balance of rights and obligations associated with each tier leading potentially to differentiated levels of institutional representation and decision-making involvement; — the existence of formalized tiers of membership could, and potentially would, necessitate a fundamental re-working of how the EU enlarges (eg regarding which tier should be the basis for negotiation) and oblige the EU to admit applicant states to some form of membership earlier than would normally be the case; and — if certain rights of membership (eg relating to institutional representation or decision-making) were clearly associated with only specific obligations being undertaken, a non-member state meeting such obligations under a contractual arrangement with the EU could legitimately claim such rights. 13. While the possibility of EU member states formalizing tiers of membership—whether via political agreement or formal treaty change—cannot be ruled out, precedent suggests there would be little appetite to do so. The default option of the EU and its member states has always been for any deviations from “full” membership to be negotiated on an ad hoc basis and only when absolutely necessary to secure agreement on a wider set of treaty reforms. The preference for flexibility is also reflected in the decision not to specify the minimum content of any agreement governing relations with a member state that decides to leave the EU through the withdrawal clause in Article 50 TEU introduced by the Treaty of Lisbon. 14. Moreover, the question should be asked as to whether other member states actually support the idea of formalized tiers of membership. Past proposals for differentiated forms of integration and of establishing an “avant garde” of member states have generally attracted little support beyond the most integrationist member states. Most member states have feared relegation to a second or potentially lower tier. Among those member states has been the United Kingdom. There is currently little, if any evidence, to suggest that member states would be receptive to any formalization of tiers. Reaching unanimous agreement among the current 27 member states would be a major challenge.
Obstacles to Renegotiation 15. The history of the European integration has been long been characterised by flexibility with ad hoc solutions often being generated to address the particular concerns of individual member states. This helps explain the unique nature of the United Kingdom’s formal participation as a member in the EU. Whether there is scope to secure a renogotiation or further refinement of that relationship is unclear. Precedent would suggest that the latter—refinement—may be possible, although media and academic accounts of successive rounds of treaty reforms reveal a persistent frustration with UK demands for exceptions, exemptions and other special treatment. It may be that the United Kingdom has at last exhausted the patience of other member states. 105 This is due to be extended to the Czech Republic. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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16. If a further refinement of the United Kingdom’s EU membership were possible, the question still remains whether the result would satisfy domestic demand for a more substantial renegotiation such that a UK government could win a referendum which in all likelihood would be perceived by many as a vote on whether the United Kingdom should remain in the EU or not. 17. How member states would respond to a UK demand for a more substantial renegotiation is unclear. It is likely that they would baulk at the prospect, not least because membership has always been—at least for member states—a carefully negotiated balance between rights and obligations in which all member states have had to compromise. If renegotiation were possible, it can be expected that it would only be possible in the context of a wider, possibly major, treaty reform process, during which the United Kingdom would be expected to make concessions to the other member states allowing them to pursue further integration. If so, the United Kingdom’s renegotiated—and reduced—form of membership would be accompanied by further integration among the remaining member states thus increasing the gap between “UK” and “full” membership. 18. As the gap—which already exists—widens, attention will undoubtedly shift to whether with reduced commitments and obligations the United Kingdom should retain the same level of membership benefits, notably regarding institutional representation and decision-making. The EU would be faced with its own West Lothian question, most obviously within the Council and European Parliament, but also potentially within other institutions (eg the Court of Justice) and the EU’s advisory bodies, the Economic and Social Committee and the Committee of the Regions. Existing practice means that MEPs are not excluded from debates and decisions relating to areas of EU activity from which the United Kingdom has opted out. In the Council, however, the United Kingdom does not have a vote in such situations. 19. A consideration that will undoubtedly influence the willingness of the other member states to consider a renegotiation is the fact that the result would further expose the inconsistency between the requirement the EU makes of acceding states to accept as a prerequisite of membership the acquis in full and the fact that a member state can negotiate down various, possible many of its, obligations while retaining the benefits of membership. The EU will undoubtedly want to avoid accusations of double-standards; it will also want to maintain at least a semblance of consistency in its approach to enlargement and the terms of accession. A UK government will also presumably wish to avoid accusations of double-standards. Could though a UK government, with its strong advocacy of Turkish membership, insist that Turkey only be admitted if it meets the criteria for membership in full when the United Kingdom is seeking to reduce its commitments and exempt itself from elements of the acquis which it finds incovenient and undesirable? 22 May 2012
Written evidence from Dr Robin Niblett, Director, Chatham House Dr Robin Niblett is Director of Chatham House. He also contributes to the institute’s work on Europe and UK foreign policy. His recent publications include The Chatham House-YouGov Survey 2011: British Attitudes Towards the UK’s International Priorities (Chatham House, 2011) and Playing to its Strengths: Rethinking the UK’s Role in a Changing World (Chatham House, 2010).
Summary of Evidence The December 2011 European Council meeting was a watershed for the UK’s relationship with the European Union (EU). It exposed the growing divergence between the UK’s approach to its membership of the EU and that of the overwhelming majority of other member states. Britain’s position outside the eurozone means that it will have minimal influence over near-term changes to the EU’s institutional architecture, which are being organised around the need to stabilise the monetary union and may include building a fiscal union. The risk has grown, therefore, that the UK will be pushed to the margins of European integration and that this will undercut its influence and interests within the EU overall. The UK has three options. It can take the radical step of withdrawing from full EU membership. It can sit on the sidelines of the EU while other member states focus their energies on saving the single currency. Or it can make the most of its EU membership. Either of the first two options would demonstrate a serious misreading of the UK’s national interests at the start of the 21st century. These interests are best served through active UK participation in the EU. Stepping back or sitting aside from the EU would also reveal a misreading of the process of European integration. Even a fiscally united eurozone will be divided between the more and less competitive, between those who favour a more federal or a more intergovernmental Europe, and between the smaller and the bigger states. Britain will continue to be an important player in this multi-tiered Europe. Rather than holding the EU at arm’s length at this critical juncture, the government should be more proactive than it has been in its approach towards the large realm of EU policy outside European Monetary Union (EMU). For example, it should lay the groundwork for a deepening of the Single Market in the services sector, drive the agenda on collective approaches to energy, trade and climate change, and build more coordinated European foreign policies towards the Middle East and the Asia-Pacific region. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Evidence The logic of EMU 1. The December 2011 European Council was a watershed for the UK’s relationship with the EU. It exposed the growing divergence between the UK’s approach to its membership of the EU and that of the overwhelming majority of other EU member states. Since December, the divergence has widened rather than narrowed. Eurozone members and those EU member states that hope to join the single currency area (and even countries such as Sweden and Denmark which currently do not) are working together to create new structures of financial and political integration that they hope will put the euro on a more stable footing for the future. 2. There are some in the UK and beyond who expect the current crisis to be the beginning of the end of the single currency. Others expect it to retreat into a core group of North European countries clustered around (and sharing some of the same competitive advantages as) Germany. These expectations ignore the political thinking on continental Europe that launched the euro and the economic drivers that created a large rather than “core” eurozone in the first place. 3. The decision in 1992 to create the euro was not driven by economic logic. Principally it reflected the determination of the French government of President François Mitterrand to contain the economic power of a unified Germany. The creation of the euro also reflected Chancellor Kohl’s desire to bind a unified Germany irreversibly into an integrated Europe with France and Germany at its core. This fundamental Franco-German political pact at the heart of the eurozone remains intact. 4. With France and Germany locked into a single currency, there was economic logic (as well as political pressure) to launch the euro with a larger rather than smaller number of members. If Italy had remained outside the euro, German companies would have faced stiff competition in their domestic market and internationally from companies based in Italy’s dynamic north pricing their goods in cheap lira. If Spain had remained outside the euro, German companies would have been tempted to shift more of their production to its relatively cheaper labour market. In either case, prospects for German domestic growth and job creation would have been affected. This economic dynamic remains in place today; as such, Germany and other northern states have a powerful economic incentive to keep the eurozone together. 5. Most eurozone members also see membership of the single currency as part of their defence against the growing might of China and other emerging economies, as well as a counterbalance to the economic power of the United States. Despite the current turmoil, being inside the euro offers EU members greater long-term stability in terms of interest rates, inflation and exchanges and some prospects for solidarity (in terms of the role of the European Central Bank and other mechanisms of intra-eurozone financial support). Carrying out painful structural reforms to their welfare systems is likely to be easier inside the eurozone than if each country had to manage its own currency. This is a principal reason why other EU members are still queuing to join the euro. 6. Certainly, there is a growing risk that Greece will leave the euro. The contagion effects of such an event could force out vulnerable countries such as Portugal or even Spain. But the pressures and incentives to avoid this outcome are enormous. Even if it happens, the impetus to sustain the euro in some form, covering as many EU members as possible, would be powerful. If it did have to be re-fashioned, it would likely be with the political dimensions of a fiscal union debated and approved from the outset.
The UK and the single currency—divided we stand 7. Given its geography and its history, the UK has never shared the same political commitment to European integration as other European countries. This means that not only the British public, but also the two major political parties have viewed the single currency with considerable scepticism. No UK government, either at the time of its launch or since, has been a strong and consistent advocate of membership, doubting the economic benefits and fearing the domestic political consequences. 8. The divide between British and continental European perspectives concerning the relative merits and risks of joining the single currency has not abated. Today, with the euro crisis in full flow and with British public opinion as eurosceptic as ever, there are no prospects of the UK joining the euro at any point in the near- to medium-term (indeed, remaining outside the eurozone is even written into the “Coalition Agreement”). There is also little prospect that the UK will join the fiscal compact any time soon, as other non-euro and “pre-in” governments have chosen to do. 9. For their part, eurozone members have drawn the opposite lesson from the crisis. They now recognise the insufficiency of the political mechanisms in place to manage the single currency during periods of stress. They have committed, therefore, to deepen their fiscal coordination and have embedded national commitments to fiscal discipline in a treaty that requires a dilution of legislative sovereignty and a commensurate increase in the power of EU institutions. 10. The UK must recognize that, absent a sudden implosion of the entire single currency, building this fiscal union and resolving the euro crisis in a sustainable manner will be the overriding objective of most EU member states for the next few years. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 152 Foreign Affairs Committee: Evidence
11. The UK will be on the margins of this process, and its absence could affect its political relations with other EU member states. The attitudes of the Netherlands and of Poland are a case in point. Both countries have traditionally been close bilateral allies of the UK within the EU: the former as one of the main advocates of an open EU Single Market, like the UK; and the latter as a sovereignty-minded late-comer to EU integration with strong Atlanticist instincts, also like the UK. Today, however, the governments of both countries have thrown in their hand with the logic of deeper European integration. And their officials are deprecating in private about the UK’s stance. 12. It is true that deeper political integration within the eurozone should not imply material changes to the overall EU acquis, whether in the management of the Single Market or negotiation of the budget, nor in more intergovernmental areas such as EU enlargement or foreign policy. And, while the UK may end up as the only EU member state outside the fiscal compact (or one of a very few), it has been in this sort of position before (as the only EU member state not to adopt the “Social Chapter” initially) while remaining a full participant in other areas of EU competence. 13. On the other hand, close and regular cooperation between EU members on an issue as fundamental as fiscal policy will change the dynamics of EU integration and the UK’s place in Europe in ways that are hard to predict. There is a risk that “package deals” of demands and concessions among euro members over issues that begin in the fiscal realm will then spread into other aspects of EU policy-making. This was partly the concern of the UK government in the lead-up to the December 2011 summit; the fear was that new regulations governing EU financial services—a Single Market issue in which the UK has a full vote—might be driven by concerns over the stability of the euro rather than by the need to sustain market openness and stability.
Options for the UK
14. Faced with a structural transformation of the EU in which it does not want to share, the UK has three options. It can take the radical step of withdrawing from full membership of what looks likely to be an even closer Union. It can sit on the sidelines while other EU member states focus their energies on saving the single currency. Or it can make the most of its EU membership. I argue in this evidence for the third option. 15. The first option, reconsidering full EU membership, presupposes that UK leverage within the EU will inevitably decline as the euro crisis deepens. By this logic, the UK might as well get out before it is pushed into a second tier of membership from which it is increasingly difficult to shape an EU that best fits UK interests. Is this likely to be the case? 16. On the contrary, there is every possibility that an integrating eurozone will contain the same tensions and inconsistencies that the EU as a whole has carried since its inception: between big and small states; between those that favour a more federal future and those that want to preserve as much national sovereignty as possible; between those that are already competitive and those that are struggling to become so; and between those who foresee the eurozone becoming a genuine transfer union and those, such as Germany, which currently remain committed more to the principle of “collective responsibility rather than solidarity”.106 17. These cleavages within the eurozone mean that the UK will continue to find receptive partners to promote a range of its EU priorities, whether in the Single Market, on the budget, on energy policy, or on priorities for EU foreign and security policy. In contrast, stepping out of the EU but remaining inside the European Economic Area would turn the UK into a consumer rather than a co-designer of the Single Market and into an observer rather than a leader of its more intergovernmental policies.
18. The second option, sitting on the side lines, fails to recognise the enormous value that the UK gains from its membership of the EU and the importance of the UK’s voice in shaping the future evolution of the Union in ways that reflect the best of British ideas as well as national interests. 19. The UK’s membership of the EU already gives it (almost) barrier-free access to a single market of 500 million of the world’s wealthiest consumers; estimates suggest that trade between EU countries is twice as high as it would be without the Single Market. It is a key reason that the UK continues to attract some of the largest inflows of foreign direct investment (FDI) and sends the lion’s share of its own FDI into the EU. Government estimates suggest that 3.5 million jobs in the UK are linked to exports to the EU, and the income gains for UK households from the Single Market are in the region of £1,100У3,300 per year.107 20. Even if the UK adjusts its patterns of trade to take better advantage of emerging markets, Europe is likely to remain by far its dominant market. At the end of 2011, eight of the UK’s top ten trading partners 106 Philip Whyte, “Governance reforms have left the euro's flawed structure intact”, Centre for European Reform, 18 April 2012, http://centreforeuropeanreform.blogspot.co.uk/2012/04/governance-reforms-have-left-euros.html. 107 These figures are taken from the Department for Business, Innovation and Skills. For more information, see Department for Business, Innovation and Skills, The UK and the Single Market, 2011, http://www.bis.gov.uk/assets/biscore/international-trade- investment-and-development/docs/u/11Ð719-uk-and-single-market, p. 3. According to BIS, in 2008, 49% of total inward FDI originated from EU member states. 108 Office for National Statistics, “Trade in goods—one month geographical analysis”, 9 February 2012, http://www.ons.gov.uk/ons/ rel/uktrade/uk-trade/december-2011/stb-uk-trade-december-2011.html#tab-Trade-in-goods—one-month-geographical-analysis— seasonally-adjusted-. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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were in the European Economic Area.109 And, if the UK were to double its exports to China, these would still only match the volume the UK currently exports to the Republic of Ireland.110
21. In addition, at a broader political and geopolitical level, the UK’s attachment to Europe is likely to increase rather than decline in the coming years. As a medium-sized power in a world of increasingly large players, and at a time when the United States is spending more of its time and energy in Asia, being part of a unified European market and of a coordinated diplomatic entity enhances rather than diminishes UK international influence. This applies as much to negotiations with third parties over UK trade interests, energy security and climate policy as it does over preventing nuclear proliferation or the spread of instability in the Middle East.
22. The third option, making the most of its EU membership, represents the best choice for the UK, in light of both the compelling economic case and the strategic realities inside and outside the EU.
23. Moreover, as a major player in a multi-tiered Europe, the UK government has every opportunity to build alliances with other EU members and within EU institutions on EU policies that do not form part of eurozone competence, but that continue to be of direct interest to the UK. These include: — Liberalising further the Single Market by opening up the EU market in services, a key element of a European “growth strategy” that is supported both by northern EU governments such as the Netherlands and Denmark and southern governments in Italy, Spain and Portugal. A 2005 study examining the economic gains for the EU of integrating services into the Single Market, undertaken by the Dutch Planning Bureau, suggested this could yield growth benefits of 0.6Ð1.5% of GDP;111 — Energy policy, where the European Commission’s emphasis on building a more inter-connected and open energy market plays directly to UK strategic and economic interests; — Re-designing the EU budget, where Germany shares many of the UK’s interests in re-balancing funds towards new drivers of economic growth; — International climate negotiations, where UK and EU leadership and leverage were instrumental in the breakthroughs made at the Durban summit in November 2011; — Trade policy, where the UK, EU Commission and a number of member states see the completion of new free trade agreements or economic partnership agreements as critical to the much-needed European growth strategy; — Designing and conducting more coherent EU foreign and security policies in targeted areas where the common interests of all EU member states are clear, such as the sanctions regimes against Damascus and Tehran or joint operations to combat piracy off the Horn of Africa.
Conclusion
24. The UK’s national interests are best served by active participation in the European Union. But, given eurozone members’ rush to build a fiscal union, the government will need to be more proactive than it has been in the past in its approach towards EU policy. It cannot afford to hold the EU at arm’s length.
25. In order to overcome the growing suspicions of their EU counterparts about UK objectives and motivations, the Prime Minister and his senior ministers will also need to engage consistently, not spasmodically, in EU policy debates.
26. And they will need to work as collaboratively as possible with EU institutions such as the European Commission, the increasingly powerful European Parliament and the European External Action Service, rather than treating them instinctively as obstacles to progress or threats to national sovereignty.
27. The euro crisis will change the EU. The UK’s psychological detachment from the process of deepening European integration will be more apparent than before. But the contributions that it can offer and the benefits that it can obtain from active EU membership will continue to make the EU one of the cornerstones of Britain’s place in the world. 24 May 2012
109 Office for National Statistics, “Trade in goods—one month geographical analysis”, 9 February 2012, http://www.ons.gov.uk/ons/ rel/uktrade/uk-trade/december-2011/stb-uk-trade-december-2011.html#tab-Trade-in-goods—one-month-geographical-analysis— seasonally-adjusted-. 110 The Guardian, “UK export and import in 2011: top products and trading partners”, 10 January 2012, http://www.guardian.co.uk/ news/datablog/2010/feb/24/uk-trade-exports-imports#. 111 See European Commission, “Economic Benefits of the Services Directive”, 20 May 2009, http://ec.europa.eu/internal_market/ services/docs/services-dir/explanatory/economic_benefits_en.pdf. The case for expanding the Single Market was made by Prime Minister David Cameron and other EU leaders in two letters to Herman Van Rompuy and José Manuel Barroso in February and March 2012, http://www.number10.gov.uk/news/joint-letter-to-president-van-rompuy-and-president-barroso/; http://www.number10.gov.uk/news/letter-to-european-council-on-european-growth/. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 154 Foreign Affairs Committee: Evidence
Written evidence from Brendan Donnelly, Director, Federal Trust 1. This submission addresses all the four questions posed by the Committee in its call for evidence. In summary, I argue that as a result of decisions by successive British governments the United Kingdom is likely to be for the foreseeable future a spectator rather than a shaper of the most important developments in the European Union. The events of the European Council in December 2011 were in my view a clear illustration of this reality. 2. I am the Director of the Federal Trust, a research institute concerned with subnational and supranational political structures. From 1994 to 1999 I was a Conservative Member of the European Parliament. My submission is offered in a personal capacity.
To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? 1. At one level, the European Council of December 2011 can be regarded as a simple failure of British negotiating tactics. The British position was not that of refusing to join the proposed Fiscal Compact act as a matter of principle, but rather of being willing to do so if certain changes were made in the Union’s decision- making procedures in order to “renationalize” the regulation of financial services. The European Council’s consideration of this proposal had not been well prepared, nor was it well conducted during the meeting of the Council by the British side. With better preparation and presentation, it might have been possible to secure a more sympathetic consideration or at least a less brusque rejection of this British proposal. 2. Beyond the immediate issue of questionable negotiating tactics, however, the events of December 2011 mark the unsurprising culmination of a series of events and decisions by successive British governments which have weakened British influence and standing within the European Union. The continuing refusal to join the euro; the continuing refusal to participate in passport-free travel in the Schengen area; the passage of the EU Bill in 2011; the commitment of the Coalition government to stand aside from any further European sovereignty-pooling over the five years of its existence; and finally the perceived attempt of Prime Minister David Cameron to unpick in December 2011 central elements of the European single market—all these steps have cumulatively led Britain’s partners in the European Union to the conclusion that the political trajectory of the United Kingdom within the European Union is likely over the coming years to be at best one of semi- detachment and at worst eventual total withdrawal. This has fundamentally changed the political “terms of trade” between the United Kingdom and the rest of the Union. Britain’s partners in the Union emphatically do not think today that the British government believes “we are all in this together.” 3. It would have been surprising indeed if this growing perception on the part of Britain’s partners had not led eventually to a diminution of British negotiating capacity within the Union. The enormous fund of good will towards the United Kingdom from its European partners and clever diplomacy by British officials and ministers have to some extent postponed this day of reckoning. But the increasing centrality of the Eurozone and its structures to the future evolution of the European Union has inevitably hastened the process of British marginalization. The Coalition agreement stipulates that during its five years of office the United Kingdom will not join or make any preparations to join the euro. The larger party of government has as its established policy not to join the euro in any circumstances. Against this background, the British government cannot reasonably expect to play any significant role in the European Union’s current defining debates, those about the future of the Eurozone and about the implications of that future for the wider structures of the Union. There will no doubt continue to be some areas of the European Union’s activities where the United Kingdom will be able to make a constructive contribution. But the crucial question of the euro is not one of them. That fact has the profoundest consequences for Britain’s position within the European Union.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? 4. Over recent months, the British government has found itself in the unexpected position of urging upon its partners in the Eurozone a quicker and deeper process of integration than some of them might wish. Britain’s position outside the Eurozone deprives these calls of political authority or significance. The fact that they are being made highlights however the uncomfortable alternatives with which a United Kingdom semi-detached from the European Union finds itself confronted. The success or failure of the Eurozone is a matter of central economic importance to the United Kingdom, not least in view of the British economy’s current fragility. There is a more than plausible case to be made for arguing that the success of the Eurozone can only be achieved by greater political and economic integration among its members. Yet when the current British government calls upon its neighbours to pursue more vigorously such integration, it is spectacularly reversing centuries of British foreign and European policy, central to which was the avoidance of united European structures potentially hostile to the United Kingdom. While a more deeply integrated Eurozone will no doubt be a more positive factor for the British economy than one which has disintegrated, its successful integration may well pose in the medium term a new set of political and economic problems for the United Kingdom. There could be no guarantee, or even likelihood that the approach of this integrated Eurozone to such questions as macro- economic policy, financial regulation, trade and competition would always be congenial to the United Kingdom. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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5. Ironically, its very semi-detachment within the European Union dispenses the present British government from needing to form any very precise view of the appropriate future structures for the Eurozone and of the European Union in general. Unless the single European currency ceases to exist, or its membership is radically reduced, decisions on these matters will overwhelmingly be taken by others, and it will be up to Britain to make what it sees as being the best of the situation with which it is confronted. In the chaos that would follow the collapse of the single currency, Britain’s voice might (but not necessarily) be a determining one in the reconstruction of European co-operative and integrative structures. Otherwise, its role will predominantly be that of a spectator. Even on the question of how many other countries from within the Union will wish to share Britain’s role as spectator, and to what extent, the British capacity to shape events should not be over-estimated. Before the European Council of last December, there were well-publicized calls in this country for the United Kingdom to play a role of leadership for the member states of the Union not in the Eurozone. The outcome of the European Council clearly suggests that these calls are unrealistic.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy? 6. The “Fiscal Compact” is unlikely of itself to compromise the present acquis of the European Union. On the other hand, the Compact is unlikely to be the final building-block of the greater economic, fiscal and political integration emerging from the present difficulties of the Eurozone. If this integration continues on its present path, the current acquis of the Union will inevitably come to form an ever smaller proportion of the Union’s legal instruments and structures. The members of the integrated Eurozone will be well placed to shape the new elements of the acquis and in some instances to revise the existing acquis, according to the Union’s established decision-making procedures. Fear of this latter prospect may well have weighed with Mr Cameron in his abortive attempt to change some of the Union’s decision-making procedures at the European Council last December. 7. The Fiscal Compact is equally unlikely to affect directly the three mentioned policy areas of the European budget, enlargement and the Common Foreign and Security Policy. The Eurozone countries are clearly unwilling to use the European budget as a major instrument of macro-economic or fiscal adjustment; if they had wished to do so, that would inevitably have created controversy with member states outside the Eurozone. The terms of the debate surrounding the continuation of the British rebate/abatement in the next Financial Perspective for the European budget are long familiar to all involved. The Fiscal Compact will neither exacerbate nor mitigate this probable confrontation. The debate about the further enlargement of the Union in general and specific candidate countries in particular is already a complex one, and the Fiscal Compact will not simplify it. The Common Foreign and Security Policy is a predominantly intergovernmental arrangement with its own specific decision-making procedures, in which Britain plays and is likely to continue to play a significant role. If the countries of the Eurozone were willing to adopt between themselves decision-making procedures for their contribution to the Common Foreign and Security Policy more akin to those of the Union’s other policy areas, then that would of itself be a radical innovation. No such change however seems in immediate prospect.
Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so? 8. Paragraph 6 above sketched out the possible implications of the increasing integration of the Eurozone for the evolution of the Union’s acquis. These implications are not greatly affected by whether the Fiscal Compact is incorporated into the EU Treaties or not. If a future British government were able to secure some “renationalization” of decision-making in return for accepting the Compact’s incorporation into the Treaties, then it might regard itself as having achieved some desirable measure of “protection” against future developments of the acquis driven primarily by the member states of the Eurozone. To judge from the events of December 2012, it seems unlikely that any such quid pro quo would be on offer. It would of course be open to a future British government to acquiesce in incorporation of the Pact into the European Treaties as a simple gesture of goodwill to its partners, which will avoid legal complications for them and make no objective difference to the United Kingdom. Whether it will wish or be politically able to make this gesture cannot be predicted today.
Final Comment 9. The Committee’s Chairman, Mr Ottaway, remarked in connection with the proposed report that he was “starting from the assumption that the UK should and will remain an EU Member.” A recurrent theme of this submission is that Britain’s present capacity to influence the Union’s decision-making is small and likely to become smaller. When Britain joined the European Community in 1973, a central reason why it did so was in order to influence European decisions that, for better or worse, would crucially affect British interests. Policies pursued by successive British governments which put that influence at risk cannot but undermine the political rationale for British membership of the European Union. 28 May 2012 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 156 Foreign Affairs Committee: Evidence
Written evidence from the European Movement Summary 1. This submission argues that the European Union represents the best way for European countries to cooperate on matters of mutual interest whilst respecting the political rights of their citizens. The increasing trend towards opt-outs and integration at different levels is a reflection of the different state of public opinion in different parts of Europe, but nevertheless there are some core principles which must be observed by all EU member states. The several opt-outs that apply to the UK will not necessarily deprive it of influence in Europe’s future direction, as long as the government acts positively towards the rest of the EU. This is not obviously the position of the government at present.
About the European Movement 2. The European Movement is a independent, not-for-profit and all party organisation that calls for closer integration at the EU level, with more powers for the democratically elected institutions of the EU and more popular involvement in its intergovernmental decision-making structures. It was founded in 1948 by Sir Winston Churchill, and its president is Rt Hon Charles Kennedy MP.
Introduction 3. The case for the European Union is made stronger by the recent developments in the eurozone and around the world. That individual countries are no longer able to safeguard their own interests acting independently becomes clearer and clearer every day. To enable European countries to take care of their own interests and those of their citizens is the purpose of the European Union. This is true when considering the current economic crisis, the developing social and environmental challenges, or the growing change in the global balance of power. 4. We recognise that, for the time being, public opinion in some countries means that not every country can take part in every aspect of European integration. We regret the fact that public opinion feels this way, but the fact that the EU is a union of consent means that this must be respected. 5. It is therefore necessary to design the future European Union taking into account these variations in public opinion in different member states. This is a process that started in fact in the Maastricht Treaty with the opt- outs for the UK and Denmark from the euro, and has acquired many new dimensions since then. The notion of a finalité politique that was perhaps in the minds of some of the founders of the EU has been replaced by a more varied picture. Public opinion can change, meaning that the opt-outs that were once necessary might someday be relinquished, so the picture we paint here is not necessarily permanent. However, it may be said to be more than strictly temporary.
Core Principles of the European Union 6. The design of the European Union under this approach, recognising opt-outs, must also specify those aspects of EU membership from which no opt-out may be permitted in order to ensure that the EU is not hollowed out into nothingness. There are some core principles to which all EU members must subscribe, and we list them here: 6.1 The rule of law—decisions taken through the European institutions must have the force of law, which citizens can see enforced through the courts, and not be merely political declarations to be made or dropped for political convenience. Both market credibility and public trust must be earned and cannot simply be taken for granted. 6.2 The supremacy of EU law over national law in those areas specified in the treaties—this is a long-standing principle of the EU that ensures that its decisions have meaning and that the member states can rely on each other to keep to the commitments they have made. 6.3 The role of the European Parliament and the Council of Ministers as the two chambers of the legislature—the directly elected European Parliament performs a vital role in representing the interests of the citizens in the European decision-making process, and the Council represents the interests of the member states. Both are important; neither should have supremacy over the other. 6.4 The role of the European Commission as the executive of the EU—there must be a part of the institutional system that represents the common European interest rather than the interests of any particular member state. Among other things, this is a protection for those member states not participating in any particular European initiative. 6.5 Transparency—the EU institutions may have been created as a diplomatic initiative but are now better understood as an expression of democracy. The standards of openness and transparency observed by the institutions should reflect their democratic role rather than their origins in diplomacy and international relations. 6.6 Minimal use of the veto power—it is for the time being unrealistic to propose that the veto power should be relinquished by the member states altogether, but its use should be absolutely cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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a last resort. The threat of the veto creates uncertainty and discontinuity in policy—one country’s “red line” is another country’s “unreasonable veto”—which qualified majority voting does not. The academic literature shows that QMV encourages member states to join successful coalitions rather than to hold out in lonely opposition. 6.7 Subsidiarity—the idea that there should be no more centralisation than necessary and as much decentralisation as possible is another foundation of the European idea. Changes in technology and markets will lead to a reassessment from time to time of what is the appropriate level for each policy, or for different aspects of the implementation of each policy. Debate between the member states and the European institutions over the appropriate level is an expression of the success of this policy and not its failure. 6.8 Contributions to the EU budget—to be able to act effectively, the EU needs reliable and sufficient financial resources. The original vision that the EU should be financed wholly from own resources has been lost in a complex web of political compromises between the member states, made up of rebates, exceptions and correction mechanisms. It is imperative we replace this opaque system with something that resembles what the treaty originally intended, to function in a more transparent, simpler and above all fairer way. A more direct form of EU funding would signal an end to the clientelistic relationship between the union and its member states and at the same time strengthen the direct connection with citizens, by making clearer how much the EU costs and how it is being paid for.
Core Powers of the European Union 7. Those principles of decision-making must apply to a minimum core set of powers, including: 7.1 The single market, with its implications for issues such as environment, social policy and international trade. 7.2 The fight against international terrorism and cross-border crime. 7.3 Human rights. 7.4 Foreign policy, to the extent that EU member states have foreign policy interests in common. 8. Opt-outs currently exist inter alia from the euro (the UK, Denmark and Sweden), defence cooperation (Denmark), Schengen (the UK and Ireland), the European patent (Italy and Spain), the euro-plus pact (Hungary, Czech Republic, Sweden and the UK). These and future opt-outs have to be reconciled with the organising principles of the EU (paragraph 6) and the essential powers of the EU (paragraph 7).
Britain and the EU 9. Britain belongs in the European Union. The principles outlined in paragraph 6 above are entirely consistent with the view of EU and of democratic politics as understood in Britain over many years. They imply that the EU is effective in the policy areas granted to it by the treaties but not beyond those areas. They grant citizens legal rights within the political process, in a way that no other international organisation can do.
10. That Britain is currently not a member of the euro nor of the Schengen area is a matter of regret. Nor was the UK an active participant in drafting the fiscal compact treaty. However, these exclusions do not have to imply a termination of British participation in the European Union.
11. There is still plenty of opportunity for a positive attitude on the part of the British government to exert a positive influence on the European Union, even given the exclusions mentioned above. However, that influence has got to be earned and cannot simply be assumed. The European Movement remains concerned that the current government is not doing nearly enough to earn that influence in the EU, a trend which if taken to its logical conclusion would render redundant the speculation by this and other parliamentary committees about the future of the European Union. It is necessary to act before it is too late. 28 May 2012
Written evidence from Maurice Fraser, Senior Fellow in European Politics, London School of Economics and Political Science (LSE) and Associate Fellow (Europe), Chatham House
Biographical Note Maurice Fraser was Special Adviser to three UK Foreign Secretaries, 1989Ð95: Sir Geoffrey Howe, John Major and Douglas Hurd. He is Director of the LSE-Sciences Po European Double Master’s Degree programme and Director of the LSE European Public Lectures Series. He is a trustee and council member of several European think tanks and policy networks and is a regular commentator on European affairs in the international news media. He has recently conducted master classes on French politics for Whitehall departments and the BBC. He was made Chevalier de la Legion d’ honneur in 2008. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 158 Foreign Affairs Committee: Evidence
Key Propositions
1. The EU needs an institutional framework which enables it to improve the quality of its outputs and genuinely to add value.
2. The UK’s national interest remains in the promotion of a unitary model of European integration, with a complementary rather than an alternative role for “variable geometry”.
3. The UK has an interest in a strong European Commission that upholds the interests of the Union as a whole.
4. Whilst the assumption continues to take hold that monetary union requires fiscal union if it is to be sustainable, the appetite for far-reaching economic union in the eurozone is at present limited. The UK’s role should be to inject clarity and realism into such a discussion, in the interests of the EU as a whole.
5. Those who argue for political union to underpin economic union have yet to demonstrate how their proposed solutions would command legitimacy.
6. Institutional reform and public consent need to be pursued in tandem and not left entirely to post facto legitimation in the form of parliamentary ratification or a referendum.
7. The momentum behind EU enlargement has faltered, potentially irreversibly. Real effort will be needed just to keep the option on the table.
Argument
1. The EU needs an institutional framework which enables it to improve the quality of its outputs and genuinely to add value
This should be obvious but urgently needs restating. For all the soaring rhetoric of European construction, the fact is that the founding rationale of the EEC/EU was a practical and unsentimental one: it was to be an instrument for addressing collective action problems in those areas where solutions were beyond the reach of nation states acting on their own—principally cross-border issues such as the movement of people, goods, services and capital, but also those areas where collective action can yield significant economies of scale. On the whole there were few arguments about such public goods: the customs union, the common commercial policy, the competition policy and, later, the single market were win-win projects. To be sure, they produced negative externalities which required regulation. But the only losers were inefficient producers who had grown used to national protection.
This mission for the European Union is one which successive UK governments have sought to promote, with the accent on “outputs” and “deliverables”—the goods which make a real difference to the lives of Europe’s citizens. Far from being a minimalist “anglo-saxon” idea of Europe (mistakenly characterised as a glorified free trade area by some of Europe’s political and intellectual elites), this instrumental conception of the EU generates a rather long list of strategies requiring close cooperation, some best pursued intergovernmentally, others lending themselves to the Community Method. The list includes not only the dismantling of trade barriers but concerted action for dealing with cross-border crime, terrorism, migration flows, energy security, pollution and climate change.
This mission for the EU finds its legitimacy in the effectiveness of its outputs. But there are other lenses through which we look at the EU, and some of these are more problematic. One such lens is that of values, because the EU is a community not only of law but of values such as freedom (in the form of civil liberties) and democracy, originally enshrined not in the EEC/EU but in the Council of Europe—specifically in the European Convention on European Rights, though such rights now form part of the acquis communautaire. As with the original economic goods, these too were not zero-sum games: everybody could enjoy them. They are at the heart of Europe’s identity and are a key element of its attractiveness to others—its “soft power”. But, as a rationale for the EU’s institutional architecture, the “values vision” is deeply problematic, because, in its relentless attempts to lever up standards to a level which (to the minds of some at least) adequately expresses what it means to be a European, it falls foul of the decentralising principle of subsidiarity.
This has been most apparent under the heading of “Social Europe” and the recent concept of socio-economic rights. The UK’s objection to the Working Hours Directive is an example, as are some recent controversial rulings of the European Court of Human Rights. At best the “values” rationale of the EU is a distraction (no EU member state sends its young boys up chimneys); at worst, it takes the EU into unnecessarily contentious territory, alienating public opinion in some member states.
This is why the UK should press the case for an institutional architecture for the EU which enables it to realise its instrumental mission, concentrating on those (mostly cross-border) challenges of the 21st century which are evidently beyond the reach of nation states acting alone. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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2. The UK’s national interest remains in the promotion of a unitary model of European integration, with a complementary rather than an alternative role for “variable geometry” Successive British arguments have put the case for both unitary and flexible models simultaneously (and somewhat uneasily). While the flexible, decentralised and non-coercive character of variable geometry most closely reflects traditional UK concerns about sovereignty, concerns about marginalisation, loss of influence or potential vulnerability to caucusing by other member states has often impelled British governments to caution against fragmentation and the idea of a “hard core” Europe. From a UK perspective, the most prudent course is to insist on the integrity of the acquis and the primacy of EU obligations over other political or legal instruments amongst Europeans, on the basis that the liberal economic character of the acquis, and the level playing-field it provides, serves the UK’s interests well. The demonstrable utility and moral capital which the EU has built over more than half a century should help ensure that Britain will find many allies for this argument. What is more, the unitary model has proven its ability to accommodate multiple forms of integration (Schengen, EMU, CFSP, aspects of JHA) outside its “core” competences and indeed has formalised arrangements for pioneer groups through the “enhanced cooperation” provisions of the Treaties. The UK needs to take care, however, to give convincing reasons when it calls for the exclusion of new areas of integration (such as those defined in the Fiscal Compact) from the EU treaties, and to learn better how to use the communautaire language of solidarity in the service of its national interests.
3. The UK has an interest in a strong European Commission that upholds the interests of the Union as a whole Even before the economic crisis, it had become apparent that the power and influence of the European Commission had been waning. From a UK perspective as well as a European one, this is regrettable. First, the Commission has responsibility for ensuring that the writ of EU law runs through the EU. (It was precisely to bolster the rule of law that the UK successfully proposed at Maastricht the power for the ECJ to impose fines.) Second, the Commission has responsibility for safeguarding the interests of all the EU27. In any new institutional architecture for the EU, it will continue to perform this role, thereby helping to ensure that the UK’s keen interest in, for example, the single market and an effective competition policy, are safeguarded. Third, the Commission has been a powerful force and ally for economic liberalism, structural reform and free trade. This is not widely understood by the British public; in the printed media at least, memories of the Delors Commission’s activist approach to social legislation die hard. But that chapter is closed and is likely to remain so, barring a seismic shift to the left in the Commission’s complexion over the next few years, which is improbable. After a short-lived and unhappy flirtation in the early 2000s with a UK-France-Germany directoire—no longer an option in an EU of 27—the UK is now in a better position to understand, following its self-exclusion from the Fiscal Compact and the fears about marginalisation which this has raised, the need for allies in upholding the interests of the 27 and the integrity of an acquis which is broadly liberal in complexion.
4. Whilst the assumption continues to take hold that monetary union requires fiscal union if it is to be sustainable, the appetite for far-reaching economic union in the eurozone is at present limited. The UK’s role should be to inject clarity and realism into such a discussion, in the interests of the EU as a whole Among many supporters of the “European project”, and indeed numerous “neutral” commentators, it has become a commonplace that, beyond the present eurozone crisis, a new system of economic governance going beyond the Fiscal Compact requirement of balanced national budgets, tight surveillance and automatic sanctions for excessive deficits, will be required. At present, however, against the background of painful fiscal retrenchment across the EU member states, there is little support for more ambitious ideas such as fiscal federalism in the form of a new dedicated budget for economic transfers, or for the mutualisation of existing debt in the form of Eurobonds (though the limited use of such bonds for new debt may yet prove acceptable to Germany). We are still in an EU of nation states and, for as long as this remains the case, it would seem unlikely that the member states would fail to draw from the eurozone crisis the obvious conclusion that countries should in future avoid moral hazard and take full responsibility for their own economic management. As for the more radical ideas for European economic governance intermittently advanced by France (such as harmonisation of company taxes or of labour market regulations), these have attracted little support across eurozone members, given their potential to undermine the comparative advantage of many member states. Nor, crucially, are such ideas likely to be acceptable to Germany. The UK’s role—from its position as a non-member of the eurozone but a significant economic and financial actor—should not only be to urge clarity in the Europe-wide debate about further economic integration but also to caution against a rush to political union which is not, of itself, required by the degree of economic integration which seems likely, in light of the limited provisions of the Fiscal Compact. (The legitimacy of such a political union is discussed at paragraph 5, below.) cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 160 Foreign Affairs Committee: Evidence
It would not be in the UK’s interest to absent itself from such a debate, given its degree of economic interdependence with its eurozone and fiscal compact partners. But, to be effective, the UK’s contribution to the debate (however intergovernmentalist or “eurosceptic”) should be presented in a way which does not call into question its bona fides or its commitment to secure and build on the demonstrable achievements of the EU to date.
5. Those who argue for political union to underpin economic union have yet to demonstrate how their proposed solutions would command legitimacy After decades of a progressive pooling of sovereignty through the extension of community competences, of the co-decision procedure for EU legislation, and of qualified majority voting (QMV)—developments which were widely taken as presaging a fuller “political union”—it now seems clear that policy integration in the EU has reached a plateau. Key areas of policymaking, such as health, education, welfare, pensions, law and order and defence, along with most areas of taxation, will remain matters of national competence, and there is no serious suggestion, even from federalists, that these should be revisited. (N.B. Whilst the communitisation in recent years of much EU activity under the heading of Justice and Home Affairs would appear to contradict the “plateau” theory, in fact this is one of the areas where the particular logic of collective action applies, consistent with the founding rationale of the EEC/EU—see paragraph 1, above.) The absence from the European public space of most of the “high-salience” policy areas which touch directly on the lives of the citizen, with all the opportunities for political contestation and mobilisation which these present, is of major significance: it constitutes a potentially insurmountable obstacle to the ambition of building a legitimate political union on the foundations of a European “demos”. And it is by no means clear that proud and ancient nation states (with the possible exception of Germany) are yet ready to endorse the establishment of potentially competitive institutions with an equal claim to democratic legitimacy. There are further reasons why a top-down or mechanistic pursuit of a European demos is likely to remain counter-productive. Ideas such as the direct election of the president of the European Commission by European voters, or even of the president of the European Council, run straight into a number of difficulties. First, their adoption would require treaty change—a fraught and uncertain process, as European leaders have learned to their cost on many occasions over the last 20 years. Second, the assumption that a democratically elected Commission or Council president would command functional (as opposed to titular) legitimacy rests on the heroic assumption that levels of allegiance and consent are unaffected by the geographical remoteness or cultural “otherness” of those who wield authority, even where democratically endorsed. It is asking a lot of people’s sense of European identity to suppose that a left-wing voter at one end of the European continent would comfortably accept decisions taken by a right-wing leader from the other end of the continent, and vice versa. There is a real risk here of jeopardising the cornerstone principle of democracy, namely, the willingness of a minority to be bound by the decisions of the majority. Third, the well-documented and much-analysed decline in voter turnout at European Parliament elections reminds us of the inherent difficulty in building the legitimacy and credibility of a majoritarian institution which handles predominantly low-salience issues (even when its powers have steadily increased under successive treaties). It also illustrates the difficulties already experienced by the main actors and channels of contestation in any putative European demos: the pan-European party groups. Whilst the European People’s Party, the Party of European Socialists and the Alliance of Liberals and Democrats for Europe are able to agree broad statements of principles and values, they find it much harder to achieve internal consensus around concrete policies from which European voters can be invited to make a clear and decisive choice. Furthermore, party labels can be misleading: it could be more logical for a supporter of free trade to vote for a Scandinavian social democratic MP than for a French centre-right MEP. So it is by no means clear that European political parties are yet in a position to upload to the European level their national function of articulating clear policy options and aggregating voters’ choices. This is to say nothing of the lack of interest in politics shown by most citizens, most of the time, in well-ordered polities— let alone in European Parliament elections. And even if the political parties were more effective actors on the European stage, we are drawn inexorably to the conclusion that whilst the continuation, de minimis, of the present “passive consensus” within a full-fledged economic union looks very precarious, most of the innovations now being canvassed for addressing the even larger democratic deficit which would be opened up by full economic union risk disappointing expectations and alienating public opinion—thereby encouraging the centrifugal forces which such innovations were designed to reverse.
6. Institutional reform and public consent need to be pursued in tandem and not left entirely to post facto legitimation in the form of parliamentary ratification or a referendum It is unrealistic and ultimately futile to posit any set of institutional arrangements as being appropriate for the UK independently of the likelihood of these securing public endorsement. For any new set of EU institutional arrangements to command public consent across the European Union and, more particularly, in the UK, with its particular concerns about sovereignty, the rationale of institutional reforms needs to be explained and set out in advance of the “end game” of treaty negotiations in an Inter-Governmental Conference (IGC). In the UK, this will require a degree of public information which successive governments have shirked, on the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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grounds that such activity could be seen as “propaganda”. This has led to the curious and regrettable situation in which one of the two central planks of UK foreign policy—membership of the EU (alongside membership of NATO)—has never been properly explained to British citizens—and this in spite of the fact that EU membership not only provides benefits for UK consumers but also creates rights for UK citizens. To succeed in its objective, any public information campaign about the EU should explain the centrality of institutions and law in the European project, given the need to lock in the commitments of the member states and to prevent free-riding and cheating. Such an explanation should be intelligible and persuasive for British public opinion. Until now, however, the impression has been given that the customs union and single market provided by the EU can be guaranteed through self-policing. This is evidentially not the case—as the regular use of infringement procedures by the EU Commission and ECJ testifies. It needs to be explained.
7. The momentum behind EU enlargement has faltered, potentially irreversibly. Real effort will be needed just to keep the option on the table A combination of enlargement fatigue, the distractions of the eurozone, concerns about uncontrolled migration and the social integration of minorities, and more general fears about the sustainability of the whole European project has chipped away at the EU’s most compelling narrative since the Single Market programme and risks undermining its international profile as an effective normative power. This presents a real obstacle to continued enlargement beyond Croatia and, possibly, Iceland. For the Western Balkans, the accession process will be kept alive procedurally by the European Commission, which remains a committed but increasingly low-profile supporter of enlargement. If substantive progress is to be made, there is no substitute for high-level support from the member states and the public articulation of the case for a widening, outward-looking and inclusive EU, consistent with the principles of openness which historically have underpinned its success. But the reality is that none of the EU’s leaders now see any benefit in such an investment of political capital; indeed, it is striking how even the most enthusiastic supporters of EU enlargement, notably the UK, have largely dropped EU widening from their public discourse. In order merely to retain a realistic medium-to-long term prospect of membership for aspirant countries, the UK government needs to explain why EU enlargement is a win-win scenario, not a zero-sum game; how the EU has built its success on an open and outward-looking mindset; how transitional arrangements can be put in place to ease problems of absorption and adaptation (as in Germany and Austria after 2004); and how stability and prosperity in the western Balkans, on the EU’s doorstep, is of vital interest to the EU’s existing members. The case of Turkey, historically part of Europe’s “Other”, was more problematic even before EU accession negotiations stalled over Cyprus, European concerns about civil liberties and the treatment of journalists in Turkey intensified, and Turkey’s commitment to a western orientation began to look equivocal. The question of Turkey’s ultimate geopolitical choice (western, middle eastern, or eurasian/pan-turkic) is unlikely to be resolved definitively and is in any case simplistic: there is no reason why Turkey should not pursue several strategic vocations, whilst privileging its western one. But if Turkey’s EU accession is not to wither on the vine, the present stand-off will need to be overcome before its exclusion from the EU becomes a self- fulfilling prophecy. The case for Turkey’s EU membership remains compelling: it is in the EU’s interest that as important an economic player and commercial partner should join the EU (for the same reason it joined the customs union in 1995); that as influential and increasingly important a geopolitical player should join the EU (for the same reason it joined NATO in 1952); and that the EU should succeed in its mission of extending its norms and values beyond its present territorial confines. 29 May 2012
Written evidence from Nucleus Summary of Submission — The events of the December 2011 European Council meeting were not so much a “watershed” as a missed opportunity, emblematic of the long-term approach of the UK to EU-level policy. — Whilst the UK has increasingly isolated itself from key EU decisions, there are plenty of reasons to be optimistic that the UK can still play a vital, and leading role in shaping the outcome of the eurozone crisis. — The UK’s current approach to EU-level policy-making has negative consequences for both the UK and the EU itself. — It is the approach, not the policy detail, of the UK Government, that has done most to isolate it from its European allies. — An informal two-tier EU already exists. This flexibility is part of its strength. — A formalised two-tier EU—with the eurozone 17 at the heart of decision making, with the 10 euro “outs” excluded—would dramatically alter the focus of the EU, and have disastrous consequences for the UK. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— The euro is a key priority of the EU, and it is extremely unlikely that it would be allowed to fail. — Before the sovereign debt crisis in Greece and the burst of asset bubbles in Ireland and Spain the euro had reportedly become the most widely held currency and the de facto second reserve currency. — The US and China have continually shown their support for the euro, both verbally and practically. — The UK Government’s outright rejection of the fiscal compact was unwise, given its effect on those outside the common currency as well as within. — The uncertainty over ratification of the fiscal compact by its signatories may present an opportunity for the UK to re-involve itself in negotiations.
About the Submitter Nucleus is a euro-realist campaign organisation that seeks to promote a positive and pragmatic approach by the UK towards membership of the EU, other European institutions and diplomatic relations with key member states. Nucleus brings together various euro-realist voices, and provides a platform for figures from business, media, academia and politics. Nucleus is an independent, private not-for-profit organisation. We are not affiliated with, nor do we receive any funding from, any Government, political party, or European institution. Our activities are funded entirely by donations from the private sector. Our team includes senior figures from Westminster, think-tanks, media, and business. Recommendations for action by the Government or others which the submitter would like the Committee to consider for inclusion in its report to the House: The Eurozone crisis has brought fresh focus on the entire EU project and reopened questions about the role of national parliaments—indeed, the role of citizens—in European policy-making. These questions are, naturally, most urgent for countries like Italy and Greece. For Britain, however, the situation provides an opportunity to promote a new understanding of what the EU does, how Parliament can influence it and how Britain can enhance her role in the process. The Conservative Party’s position is clear: we seek a changed relationship with a reformed EU, but at present we have an important and influential role inside the Union and wish to remain full-fledged members. However, such is the mistrust of “Brussels” and everything to do with the EU today, that there is little appetite amongst Tory MPs to fully understand how the EU actually works—and how to use parliamentary power to change it. Indeed few MPs seem even to be aware of the power Parliament now yields, following enactment of the Lisbon Treaty, in influencing or even blocking EU legislation particularly if it joins forces with just nine other EU countries. If we are honest, UK MPs are generally not interested in EU details. Few visit Brussels, few speak European languages well and few bother to exploit networking opportunities in other capital cities with like- minded politicians. Consequently we do our citizens a disservice by providing inadequate oversight and influence over what the EU does. Consequently the party is not as good at changing EU policy upstream as it should be, but excels at complaining about the same policy when it becomes law. Such a “complain-but-don’t-change” policy is clearly not in Britain’s interests considering that around 10% of all UK law determined along with 50% of all business legislation is decided in Brussels. A new approach is now needed. If we are to fully master all the EU mechanisms at our disposal then a clear strategy must be given, which allows Government Ministers, the civil service and Parliament to contribute towards shaping, tempering or indeed rejecting proposed EU legislation emanating from Brussels. This means, firstly, improving the current (underpowered) system of EU scrutiny; and, secondly, a cultural shift towards engagement, which will assist in projecting Britain’s national interests in EU decision-making and encouraging other member states to support us in the process. Essentially we must understand the (EU) beast in order to better tame it and improve its “democratic deficit”. MPs must be encouraged and rewarded for developing a specialism and building influence in European capitals. We must get away from reducing every debate on EU legislation to the broken record of quibbling about our fundamental relationship with the EU. This rhetoric undermines progress made by the Conservative-led government in enhancing our influence in Brussels through UKREP, the influence of British EU officials and ad hoc alliance building with other member states. It also overshadows the critical role we play as one of the three big players in the EU. Germany and France need us. In a whole variety of areas from security to climate change we are the “lead” nation. The Lisbon Treaty also fully recognizes the case for so called “European Localism”112 the antidote to centralization. But to date there has been no voice providing a constructive plan to maximize British interests and influence with the Europe we have today, not the Europe some might want to have in the future. If we are in it—then we must be committed to deliver on our priorities and aims. If we are committed we can lead. If we lead we project influence. This paper considers how that enhanced commitment might start. 112 Open Europe: The Case for European Localism: Anthony Brown and Mats Persson cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Questions To what extent should the December 2011 European Council and its outcome be seen as a watershed in the UK’s EU policy and place in the Union? The “veto” of December last year, ought not to be considered a “watershed”, as the outcome of the European Council was emblematic of the UK’s approach to European-level politics under this Government. Rather, this should be seen as a missed opportunity for the UK to exert its influence in any meaningful sense, and a dangerous step towards self-propelled isolation on the sidelines. Prime Minister David Cameron issued a rallying cry for a “time for boldness”,113 then meekly retreated. Despite what the UK media overwhelmingly presented, the UK Government was not alone in its reservations; but what is striking is that when it could have indeed spoken for a large number of fellow member states, and provided leadership in an obvious vacuum, the government failed to rise to the occasion. It was this approach, especially the failure to seek out and win allies in advance and during the negotiations and the last-minute nature of the UK’s demands, rather than the substance of the UK views, which cast Britain into self-imposed exile from the negotiating table. However, whilst the UK has increasingly isolated itself from key EU decisions, there are plenty of reasons to be optimistic that the UK can still play a vital, and leading role in shaping the outcome of the eurozone crisis. There has been (often justified) criticism among its partners that the UK government is carping and lecturing from the sidelines but these partners remain anxious for Britain to offer its wisdom and expertise— in financial services above all—in a co-operative spirit. This was true, particularly of Berlin and other capitals, in the run-up to and even during the December 2011 “summit”. Since then too, there was the single market letter, signed by David Cameron and eleven fellow European Prime Ministers. However, so far, the UK’s approach to EU-level policy-making has had and continues to have negative consequences for both the UK and the EU itself. “Annoyance” has become the oft-repeated way to describe the feelings of our EU partners towards the UK.
Between now and 2020, what institutional architecture and membership should the UK seek for the EU? Should the UK embrace a formalised two (or more)-tier EU and start to develop ideas for multiple forms of EU membership? The FAC is correct to use the term “formalised”, as a two-tier—also referred to as a multi-speed—EU already exists in many senses. The most obvious example of this is the division between the 17 members of the eurozone and the 10 non-members or “outs.” But there are others such as membership of NATO or the Schengen “passport-free” area. Bence Nemeth, of the Defence Planning Department of the Hungarian Ministry of Defence, has argued that the Anglo-French military co-operation treaty has created a “two-tier Europe” insofar as foreign and security policy is concerned.114 Tracing the development of a two-tier structure back further, Dr Michael J Geary, (lecturer in history of European integration at Maastricht University), and Kevin A Lees, (Associate, Latham and Watkins LLP in Washington, D.C), have written: By the 1990s, a two-tier EU was already emerging, which became an enshrined reality by the early 2000s when it became clear that Britain had not only firmly opted out of not just the single currency, but also rejected the Schengen Agreement on the removal of border controls within the EU and had scoffed at a Europe-wide foreign policy.115 This might also be applied to other countries such as Denmark, Sweden in the case of the euro—or Ireland regarding NATO. It is our opinion, however, that a two-speed EU, based around those embracing closer fiscal union, and those who do not, would formalise a two-tier structure. This would undoubtedly have strongly negative consequences for the UK—we would likely see the 17 eurozone countries driving decision-making, while the 10 euro “outs”, of which we are one, are not even in the room, let alone at the table. This is already happening to a large extent—much to the consternation of “outs” such as Poland, which are bound to join the EZ sooner or later. The centre of gravity of the EU has—since the onset of the eurozone crisis—moved away from the leaders of the 27 member states in the European Council towards what are now known as the EZ-17. The agreement amongst those eurozone states over ten steps to formalise how the EZ should be run, and a decision that EZ summits will take place at least twice a year separately and not necessarily concurrently with European Council meetings, based on agendas encompassing key economic and financial policies, including on growth and competitiveness, has dramatically shifted the centre of power within the EU to an organ in which the UK has no place and no voice. For an image of what this would be like, we need only look to history, and the founding of the European Free Trade Area (EFTA) as an alternative to membership of the then EEC. The UK quickly realised that 113 http://www.nucleus.uk.net/home/item/a-time-for-boldness 114 http://www.nucleus.uk.net/diary/ideas-on-europe/item/pesco-and-british-french-military-co-operation 115 http://www.nucleus.uk.net/diary/item/britain-and-the-european-union-continuity-or-rupture cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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influence and opportunity for growth were limited by being outside the core EU decision-making process, and began to pursue membership. Britain would be in danger of becoming “Greater Switzerland”: bound by the rules of the EU and, indeed, the EZ but having no influence over the latter and, increasingly, over even those of the former.
What is the relationship between the new “fiscal compact” Treaty and the EU’s acquis? What impact might the conclusion of the “fiscal compact” Treaty have on other aspects of the EU and its policies, such as the EU budget, enlargement, or the Common Foreign and Security Policy? The “fiscal compact’s” effect is to politicise the single market. Clearly, the fiscal compact draws upon and enhances previous EU policies and treaty provisions such as the Maastricht criteria, the Stability & Growth Pact and the recently adopted “Six Pack” (already in the process of being amplified). The “European Semester” hands extensive powers to Brussels to oversee and influence the budget process in member states. These powers are even more extensive in the case of Greece and other Member States subject to the “bailout/rescue” programmes, including those of the EFSF and soon-to-be ESM. Arguably, they prefigure a fully-fledged EU federal state. The EU—including many of the current “outs”, future members and actual or potential applicants who are all treaty-bound to join—is engaged in a process of monetary integration which might soon be coupled with fiscal and political union. No matter what the immediate and short term problems of the eurozone (and its institutional architecture) are, the EZ and its single currency are so systemically important for the EU (and global) economy that it is a matter of when rather than whether the zone will sort itself out and continue its path towards becoming a global reserve currency. (More than a quarter of reserves are already in euro-denominated assets.) Before the sovereign debt crisis in Greece and the burst of asset bubbles in Ireland and Spain the euro had reportedly become the most widely held currency and the de facto second reserve currency. It has maintained that status throughout the financial and debt crisis of 2008 and 2010 and it has also kept its value, while global powers like the US and China have verbally and practically shown their confidence in the euro. As a result we will soon find ourselves in a world where the global economy will be dominated by two, maybe three, currencies: the US dollar, the euro and the Chinese renminbi/yuan. This would be a situation that could contribute to the re-balancing of the global economy, away from the current uni-polar and destabilising system towards a more sustainable multi-polar system. The question is what happens to relatively declining economies like Britain’s, with a freely floating currency, when they get caught up in the headwinds of those three global reserve currencies and the enormous economies that underpin them.116 Lord Hannay of Chiswick has written: The global financial and economic crisis which engulfed the world in 2008 would have tested the European Union severely whether or not the single currency had by that time been established. So it makes no sense to blame the euro for everything that has happened. Nor can any of the European Union’s 27 governments afford to neglect that it is in our collective interest that the Eurozone should survive and prosper and avoid a chaotic collapse which would damage all of us. The hard fact nevertheless remains that, for the foreseeable future, the European Union is going to consist of member states within the Eurozone and member states outside it; and, since it is unlikely that the errors of premature admission to the Eurozone will be repeated, that foreseeable future could be a long time indeed, so we had better get used to that and learn to live with it to our mutual benefit, minimising the differences between the two groups. In that context the British coalition government’s decision to reject the fiscal union treaty was unwise, given that the different obligations on the two groups are clearly spelled out in it. And we do all share the view that fiscal austerity, which is proving every bit as painful in this country as elsewhere in Europe, must not be regarded as an end in itself but rather as part of a concerted growth strategy.117 There remains some uncertainty over the fiscal compact. Germany has sought a delay on a vote, and cannot now say when it will ratify—possibly in June, maybe July. The new French President has clearly signalled his intention to amend or, at least, amplify the treaty; the ratification process is incomplete. A compact will be agreed though, whether in its current form or otherwise. Any delay presents an opportunity for the UK to return to the negotiating table and, this time, help shape the outcome in a more constructive manner. However, it is also clear that the closer union of those signed up to the fiscal compact will have a growing influence on the future direction of the EU’s organs and policy-making. The budget will largely be decided within its framework, future enlargement will require new member states to meet stricter financial criteria from the very beginning, even long before entry, and, by its very nature, this “inner club” will begin to dominate all areas of EU policy and decision-making. The question then arises whether the UK should actively support and participate in this integration process or, as in the last 40 years, with exceptions such as the Single European Act, continue to “sit it out”. 116 http://www.nucleus.uk.net/diary/item/the-european-view 117 http://www.nucleus.uk.net/diary/item/britain-in-europe-a-tragedy-in-the-making-or-just-another-episode-in-a-long-running-soap- opera cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Should the UK Government support the incorporation of the “fiscal compact” Treaty into the EU Treaties? If it should, what demands and safeguards, if any, should it make its condition for doing so?
Nucleus firmly believes that the UK should play a positive but not uncritical role within the current—and future—EU. This requires a substantial shift from the position adopted at 8Ð9 December 2011 “summit”: Britain should now support the inclusion of the compact within the existing treaty framework. The compact’s provisions will provide greater stability to the EZ and that, as the Prime Minister and Chancellor constantly remind us, is in the UK’s vital interests. However, certain safeguards—notably over parliamentary control over the budget process—must be retained. In the absence of a full fiscal and indeed political union the old adage of no taxation without representation applies to no small degree. We do not share the view that—in a multipolar, highly complex globalised world— national sovereignty is an absolute. But the British legislature and executive must retain control over the national budgetary process and influence monetary policy while we remain outside the EZ/euro. There can be no question of the European Commission holding a veto on that process. The same holds true, obviously, for the decision to go to war or engage in peace-keeping operations with partners. 29 May 2012
Written evidence from Sir Peter Marshall KCMG, CVO
I hope you will permit me, as someone who has followed with great enthusiasm the work of the Committee, to express to you my delight at your decision to launch this inquiry into The future of the European Union: UK Government policy.
First, its timing: “by conducting an inquiry at this stage, we hope to contribute to public debate by airing some of the options that might be available to UK policy-makers”. That is of particular relevance in the light of the inquiry into the Lisbon Treaty undertaken by the previous Committee, and of their clear dissatisfaction at the lateness of the stage at which they were able to express an opinion. Anyone familiar with the work of the Select Committees readily understands their key importance, not only in the service which they render directly to the House of Commons, but also more widely in enlightening and shaping public opinion in matters of great weight and complexity. Timing is of the essence.
Secondly, the background. You call attention to “a widespread sense that the Eurozone crisis and the December 2011 European Council have raised fundamental questions about the future of the EU and the UK’s place in it”. The causes of the disquiet now so generally felt are manifold. They also go back a long way: 2013 will mark the 40th anniversary of UK accession to the EEC, an appropriate juncture at which to make a general assessment. More fundamentally, 2014 will be the poignant centenary of the outbreak of the Great War, with all its disastrous consequences. It cannot fail to sharpen memories of the upheavals and the suffering endured by the peoples of Europe during so much of the twentieth century, and cast fresh inquiring light on the relevance to our own day of the pressures which ensued for European integration. It is a sombre thought that disaffection in a minor part of the Austro-Hungarian Empire led to much of Europe going up in flames. It is a no less sombre thought that Greece, a mere 2% of the Eurozone GDP, has the G8 by the ears.
Thirdly, while attention to the historical perspective does not reduce their urgency, it would nonetheless suggest that the four questions on which in particular, the Announcement notes, evidence would be welcome represent in a very real sense the tip of the iceberg. That helps to explain the extraordinary way in which the Eurozone crisis has developed, or has been allowed to develop. Such have been the scale and rapidity of the crisis, any answer to the four questions must inevitably involve a measure of second-guessing of governments or even of electorates. Fourthly, you speak, Mr Chairman, for the vast majority of our compatriots in stating that you were starting from the assumption that the UK should and will remain an EU Member. That is a broad judgement, not a narrow one. To approach the question of member ship of the EU as if it was only a matter of whether we should, or should not, be part of the Brussels institutions, or of whether we should, or should not, acquiesce in any particular amendment of them, is to adopt an essentially two-dimensional approach to a three-dimensional problem. There is more to our stake in Europe than the EU. There is likewise far more to the EU than l’acquis communautaire.
Fifthly, by virtue of their mandate, and of the skilled and imaginative way in which they are discharging it, the Committee under your leadership have acquired a unique understanding of the interplay between ends, ways and means in British diplomacy, and of the broad political and social context, both national and international, which modern world wide interdependence demands of the conduct of foreign policy. These are factors which have in the past too often been ignored or underestimated in the conduct of our European policy.
These considerations prompt the submission to you of two lines of thought. First, while concentration on the policy options that might be available to UK policy-makers has great practical value, are the Committee not ideally placed at the same time to contribute to public debate on the wider issues involved in the future of the EU and Britain’s place in it? cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Secondly, could that contribution with advantage extend not only to the substance of our relations with our European partners, but also to the management of them? It is clear that the over-polarised and divisive debate on the issues which has largely prevailed in this country has weakened the influence which we can exert in Europe. Why is it, we should ask ourselves, that we have so far failed to achieve in our dealings with our European partners the same type of broad ad hoc, ex post/ex ante, de facto/de jure consensus which we have managed in virtually every other major aspect of our international involvement? These lines of thought in their turn point to a yet more basic consideration. We may have reached a stage in the debate on our European involvement at which it is appropriate to seek the expert impartial assessment and advice which only an authoritative high level body set up exclusively for that purpose, and with adequate resources and time at its disposal, is in a position to furnish? A study of the appointment over the years of Royal Commissions in the UK and elsewhere in the Commonwealth suggests that the criteria for the utilisation of this eminent vehicle are less than clear cut. The principal factor seems to be the perception that a particular situation requires the response that only a body of the consequence of a Royal Commission can provide, or help to provide. The present state of our relations with our European Partners can be a case in point. The publication of the findings of a Royal Commission during the lifetime of this Parliament would be an enormous help in the next general election. I am acutely aware that, for all the effort to make it both brief and self-contained, a submission of this kind to the Committee cannot but rest on a wide and detailed analysis of the relevant factors, which of necessity would be of a length putting it beyond the normal compass. I have therefore offered to the most admirable staff of the Committee a memorandum, prepared in the first instance for my fellow members of the FCO Association, that is to say, the Diplomatic Service alumni, addressing the issues in greater detail. A copy of this memorandum is enclosed with this letter. 21 May 2012
Annex Memorandum for the FCO Association on the inquiry launched by the House of Commons Foreign Affairs Committee into the future of the European Union: UK Government policy As our Chairman noted in his report to the AGM, the House of Commons Foreign Affairs Committee have launched an inquiry into the future of the European Union and UK government policy. The brief text of the Select Committee Announcement, dated 28 March 2012, repays close attention. The timing is significant. The Committee’s hope is that by conducting an inquiry at this stage they may be able “to contribute to public debate by airing some of the options that might be available to UK policy-makers”. The Committee have invited the submission of written evidence by 22 May. Although time is limited, the case is a strong one for responses where possible from members of the Association. But that of course is by no means the end of the matter. The subject as a whole is on-going. It is as massive as it is complex. Boredom will not be a problem in the foreseeable future. We are under the ancient Chinese curse “may you live in interesting times”. The background, as it would seem to affect the membership of the Association in particular, is explored in this memorandum under three headings: Opportunity; Context; and the Image of the Diplomatic Service and its Alumni.
I. Opportunity (a) One of the many respects in which we are fortunate indeed to have William Hague as Foreign Secretary is that he is the first holder of that office to make a strong positive point about the value of the alumni. The strong historical sense which pervades his speeches is not only greatly reassuring in itself, but also gives added weight to the practical steps, in pursuit of clearly articulated objectives and priorities, which he outlines in them. He and his Ministerial colleagues are a team for which anyone who values the work of the Diplomatic Service should be profoundly grateful. Never before has a chairman of the House of Commons Foreign Affairs Committee subsequently become an FCO Minister, as is the case with David Howell. (b) The present Foreign Affairs Committee is likewise unprecedented in its expert, detailed and supportive scrutiny of the work of the Diplomatic Service in the pursuit of UK international priorities, which are advisedly extensive, despite the financial exigencies which are likely to beset us for years to come. The Committee’s work testifies to a precious ability to look simultaneously at the ends, ways and means of diplomacy in the broad political and social context, both national and international, which world interdependence demands. We should be much encouraged that the Committee set store by the experience and the opinions of the alumni, and have promised to let the Association know about future inquiries. (c) Past experience of discussion of the UK role in the EU suggest that it can easily generate more heat than light. However after years of polarisation and a dialogue virtually of the deaf, there is a great deal of constructive thinking and discussion. I make no apology for referring in particular to the recent seminar at Europe House, organised by Civitatis International, on the theme “The Future of Europe: towards the European Dream?”, which I had the honour of chairing. The contributions of the four main speakers—Edward Mortimer, cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Daniel Ottolenghi, Maurice Fraser and Christopher Coker—taken individually and collectively, were outstanding. Still less do I apologise for drawing attention to the “Eurogazing” missives circulated to members of the Wyndham Place Charlemagne Trust by its indefatigable Secretary, Win Burton. All in all, one is conscious of a hint of consensus in the air. It should be inhaled deeply.
II. Context: (i) Political and Diplomatic
(a) In the announcement of the inquiry, the Chairman of the Foreign Affairs Committee, Richard Ottaway, observed that “there is a widespread sense that the Eurozone crisis and the December 2011 European Council have raised fundamental questions about the EU and the UK’s place in it”. That observation becomes more pertinent day by day.
(b) Next year we shall mark the fortieth anniversary of UK accession to the EEC. The anniversary will stimulate much further analysis. 2014 will be the centenary of the outbreak of the Great War, which will prompt even more profound questions about our European involvement. Have Sir Edward Grey’s lamps, which went out all over Europe in 1914, been lit again? What would Eyre Crowe have to say now for our guidance? It is a sobering thought that disaffection in a minor part of the Austro-Hungarian Empire led to much of Europe going up in flames. Today Greece, which accounts for some 2% of Eurozone GDP, has the G8 by the ears. There must be better ways of running the railroad.
(c) In the meantime let us go back 50 years. On 5 December 1962, in a speech at West Point, Dean Acheson waspishly remarked that “Britain had lost an Empire and not yet found a role”. His comment was ill-received in this country at the time, not least because it was uncomfortably near the truth. There seemed to be no let- up in our post-war adversities. The Plowden Committee to examine our future overseas representation had just been appointed. Our standing aside from the EEC and the creation of EFTA meant that Europe could be said literally to be at Sixes and Sevens. De Gaulle’s veto of our first application to join the EEC was only a month away.
(d) Matters are somewhat better now. We have a perception, both realistic and responsible, of the scale and nature of our international involvement in a world of growing interdependence, or, to put it more picturesquely, in the Global Village. Our perception of course has its continuities with the past. But it is in the main very different from our prevailing notions of a century ago.
(e) The best measure in the twenty-first century of this transformation is to be found in the ground-breaking White Paper on UK international priorities published by Jack Straw, one of our patrons, during his Foreign Secretaryship, in December 2003 (in which our present Permanent Under-Secretary had a noteworthy part) and its sequel in March 2006. Detailed study of both these wide-ranging texts continues to be rewarding. The policy of the Coalition, comprehensively outlined in 2010, has a good deal in common with them. The same overall approach is convincingly endorsed in the lecture delivered at Ditchley last year by Sir John Major, another of our patrons. In all these documents our relations with our European partners are seen as integral to our international involvement as a whole, and not as some external, unwelcome, yet overriding, priority.
(f) The FAC Chairman speaks for the overwhelming majority of our compatriots in stating that he was “starting from the assumption that the UK should and will remain an EU member”. Exactly what this implies must be approached from a number of different standpoints. It certainly does not suggest that there can or should be a single view on the major issues of the day The Committee’s announcement lists at the outset four burning questions on which in particular evidence would be welcome. The rapidity and invasiveness of developments even since 28 March are such that any reply to these questions could not but be highly speculative, and require a measure of second-guessing of governments, or even of electorates. No two members of our association would be likely to come up with exactly the same answers. The idea of a collective Association view is fanciful.
(g) We need surely to give more attention to the shortcomings of discussion in this country of European issues. Historians surveying our record on the fortieth anniversary of our accession to the EEC are unlikely to shower us with compliments on our handling of business. They would be bound to draw attention instead to the divisiveness, the sterility even, of much of the debate, when the commonality of interest is so great and so promising. Sir Edward Heath said at the outset that he would not wish to take Britain into the EEC without the “full-hearted consent of the British parliament and people”. He soon changed his tune, averring that a single vote was enough.
(h) The requirement has in reality always been to nurture an approach to the EU embodying the same ad hoc, de facto/de jure, ex post/ex ante broad consensus we have achieved in almost every other major aspect of our international involvement. Within such a compass, there will inevitably be considerable differences of analysis and a plethora of prescriptions. Once again, the idea of a single view on such a massive array of interrelated topics is fanciful. It is however the overall consensus which is crucial. Without it, our impact on European counsels is much more limited. With it, we can be more confident that what we have to say will receive greater attention. Failure so far to achieve such a consensus has cost us dear. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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III. Context: (ii) Public and Social (a) Reaching a consensus on how best to involve ourselves in the EU is not the elitist preserve of policy- makers. Public opinion and the public mood are becoming an increasingly important factor in virtually every aspect of foreign policy-making. Yet failure to carry people with you, and indeed the deliberate riding roughshod over the views of voters and what are firmly seen as their democratic rights, have in recent years been the besetting sins of the EU. (b) In the 21st century we are hearing more than ever before about national solidarity, the maintenance of which is indispensable for security as well as prosperity. There is increased willingness to examine our EU policy, not only in the context of Britain’s international involvement generally, but also in the light of the necessity of fostering national values and the social cohesion essential to the discharge of our international responsibilities. It is a far cry from classical diplomacy. (c) In EU terminology this is a matter of l’esprit communautaire in dialogue with l’ acquis communautaire. We have heard little or nothing in recent years about the former: the latter, principally in the shape of a raft of treaties and their ensuing regulatory moves—the Single European Act, followed by the Treaties of Maastricht, of Amsterdam, of Nice, of Lisbon and the current fiscal compact—has squeezed it out. That is the antithesis of the creation step-by-step of a de facto solidarity envisaged by Schuman in the 1950 Declaration. (d) EU Heads of Government fully recognised the importance of securing public support or acquiescence for this fuite en avant, inspired and engineered by Jacques Delors in his long tenure of the office of President of the European Commission. (e) The European Council Declarations of Nice (December 2000) and Laeken (January 2002), on the eve of major enlargement to the East, followed up by the Declaration of Berlin on the occasion of the 50 anniversary of the signature of the Treaty of Rome (March 2007), dwelt on the twin necessities of fulfilling our international responsibilities abroad and of bringing the EU institutions nearer the people at home. The outcome is distressingly different. Inward-looking institution-mongering, eventually enshrined in the Lisbon treaty, itself stubbornly adhering to the precepts of the Constitutional Treaty spectacularly rejected by the voters of France and the Netherlands, has absorbed an inordinate amount of time and attention. The Eurozone is now, and is likely for some time to come to remain, the major headache of the international financial and business community. The EU institutions, very largely by their own fault, have never been further than they now are from the public in the member countries. (f) Developing within the UK a broad ad hoc, de facto/de jure, ex post/ex ante national consensus on EU matters will be a mighty multi-faceted task. But we have a no less mighty weapon available to help meet it in the shape of the richness of our heritage, of our creativity, of our adaptability and of our diversity. We are a happy breed. In recent years we have had limited success in expressing that noble truth in our European involvement. (g) Co-operation among the major faiths has an important part to play in this quest, especially as regards the role of Christianity, and historically, of Christendom. On 18 February the Archbishop of Canterbury brought together at Lambeth Palace representatives of the nine major faiths on the occasion of a visit by The Queen and the Duke of Edinburgh as part of the Diamond Jubilee celebrations. As Dr Rowan Williams observed, it was an unprecedented gathering here within these walls, but it was one which certainly revealed the degree to which our society has changed quite radically in terms of its religious composition, just within the last 60 years. It was an event which highlighted both the religious diversity of our society and the willingness to integrate, represented by the elements within that diversity. The text of The Queen’s short address to the gathering is highly satisfying food for thought. (h) In November, 2009, Notre Europe, a think-tank of which Jacques Delors is the Founding President, issued a Declaration which can be regarded as an authoritative orthodox formulation of the post-Lisbon mission of the EU in the 21st century. It asserts that “the condition for success is to rediscover … the Community method, a virtuous and dynamic counterpoint between the three institutions responsible for the well-being of the Union and its people”, a triangle formed by the Council, the Parliament and the Commission, each body “newly strengthened … and led by men and women freshly summoned for the task”. (j) Matters have not worked out that way. The thesis itself is seriously flawed in at least two respects. First, the Declaration makes no mention of the European Court of Justice. The Court’s powers, enhanced by the wide extra discretion conferred on it in the Treaty of Lisbon, constitute probably the greatest stumbling block to the willing public acceptance of the Union’s institutions as a whole. (k) Second, there is no hint of a popular dimension to the problem. We are concerned not with a virtuous and dynamic triangle, but with an irregular quadrilateral, the fourth side being composed of the people of the Union in numerous configurations, Europe-wide, national, regional and local, and with interests and preoccupations far removed from institutional fine-tuning in Brussels. (l) In our own country the establishment of the Supreme Court in the old Middlesex Guildhall offers us a lively example of the quadrilateral in what can be called the Allegory of Parliament Square. To the East is the Legislature; to the North, the Executive; to the West, the Judiciary; and to the South, Westminster Abbey. It cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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comprises, in what many people think of as the Parish Church of the Nation, a Royal Peculiar, the Seat of Monarchy, the chief National Shrine, homage to excellence and sacrifice, and a beacon in modern society.
(m) In her message on Accession Day, The Queen expressed the hope that “this Jubilee year will be a time to give thanks for the great advances that have been made since 1952 and to look forward to the future with clear head and warm heart as we join together in our celebrations”. That surely applies as much to our involvement in the EU as to any other aspect of our national life.
IV. The Image of the Diplomatic Service and its Alumni: Three FAC Inquiries
Thirdly, a word about our own concerns as a Diplomatic Service. The Foreign Affairs Committee has, within a relatively short span, launched three related inquiries into policy matters which, though by no means the sole concern to the FCO/Diplomatic Service, are very much in our bailiwick: the first was concerned with the role of the FCO in UK government; the second is considering the role and future of the Commonwealth; the third is the present EU inquiry. They need of course to be looked at synoptically.
(a) Until recently the FCO was not so much getting a bad press on account of its shortcomings as being the subject of concern on account of the difficulties created for it by No 10 and the Treasury. In evidence submitted to the Committee, I listed three in particular of what I described as the “present discontents”: sofa diplomacy in No 10, managerialism and what Douglas Hurd, yet another patron, called “the hollowing out of the FCO”. One of the last recommendations made by the FAC in the previous Parliament was that the new government should “carry out a comprehensive foreign policy-led review of the structures, functions and priorities of the FCO, MOD and DFID”.
(b) I am not aware that the new government responded directly to this recommendation. But William Hague and his ministerial colleagues at once grasped all the main nettles. The discontents were rapidly remedied. A new atmosphere prevailed.
(c) The new Foreign Affairs Committee, for their part, sprang early into action. They immediately launched an inquiry into the Role of the FCO in UK Government. The Committee’s report was published a year ago, actually on the day of our last AGM. The directness of the report is refreshing. Its main conclusions were that there was indeed a significant role for the FCO/Diplomatic Service and that we were significantly underfunded for its adequate fulfilment.
(d) The moment however was hardly propitious for demanding an immediate large increase in the FCO budget. But the question remained whether the FCO/Diplomatic Service had been sufficiently robust in recent years in defending our legitimate interests, or sufficiently comprehensive in the discharge of our responsibilities.
(e) In this context it is relevant to recall the point noted by the previous Foreign Affairs Committee that “among the 30 Member States of the OECD only one other—Germany—has a fully-fledged ministry of international development, with all the others maintaining agencies or departments that in one way or another fall under the authority of the foreign ministry”.
(f) The reasons for this state of affairs may be numerous. But chief among them is undoubtedly the failure of the FCO adequately to understand either the emergence of what was aptly termed “the third world coalition”—the collective actions and the pressures of the countries newly acquiring their independence and eager to join others, similarly desirous of expressing their sovereignty and of securing a “level playing field” internationally—or the ever-widening concept of “development”. The chief consequence in practical terms of this failure is the grotesque discrepancy between the expanded funding lavished on the DFID on the one hand, and the penury visited on the Diplomatic Service on the other.
(g) The second of the three inquiries directly affecting us was launched by the FAC on 8 December. It addresses the role and future of the Commonwealth, and was prompted by what was widely thought of as the disappointing outcome of the biennial Commonwealth Heads of Government Meeting in Perth (Western Australia) last October. The Committee will take its time about reporting, not least because of what may emerge in this Diamond Jubilee Year.
(h) Although they will deservedly commend Ministers for their stance on the Commonwealth putting the “C” back into the FCO, the Committee are likely to be unenthusiastic about the performance as a whole of the FCO over the years. The Commonwealth has been seriously neglected. In one halcyon year—I name no names, nor date no dates—the word “Commonwealth” did not appear in the Annual Departmental Report except in the term “Foreign and Commonwealth Office”.
(j) The third is the EU inquiry, launched on 28 March. The particular context is the outcome of the December EU Council meeting and the consequences of the British “veto”. It must be said that the Committee can hardly ignore the general public perception in this country of the FCO as having been unduly influenced by, and ready to endorse, the actions and ambitions of Brussels. Former members of the Diplomatic Service, especially those who have served in UKREP, have been vociferous in their collective advocacy in particular of the euro and the Lisbon Treaty. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Envoi This brief survey of the issues involved in the Foreign Affairs Committee EU inquiry suggests a number of areas in which we as alumni are well placed to make a contribution, individually if not collectively, to the on- going debate. And let us not feel inhibited about discussing these matters among ourselves. How about, for example, a laid-back exchange of views on some low-key question such as “will future historians cast Jacques Delors in the role of Pied Piper of Brussels?”. Finally, what of the Diplomatic Service itself? Perhaps Hollywood mogul Sam Goldwyn sums up our position: “the last thing I think about is money—pause—before I fall asleep”.
Further written evidence from Sir Peter Marshall KCMG, CVO Three recent developments have, in combination, gone far to transform both the perception in this country of the UK role in the EU, and, not less important, the perception of our EU partners of that perception. The situation, if imaginatively handled, could be one of abundant promise for the United Kingdom, and for the EU as whole. These developments are: (1) The Prime Minister’s speech on January 23 While reaction to the Prime Minister’s speech understandably concentrated at the outset on the referendum undertaking, and the risks that may attach to it, there has been a growing understanding of the validity for the EU as a whole of the analysis it contains of the Union’s current woes. There has been neither any effective challenge to the analysis, nor any significant alternative to it. Overall, reaction on the Continent has seemed almost more favourable than in this country. (2) The Multiannual Financial Framework, 2014–20 The adoption by the European Council, at their meeting on 7/8 February, of the next Multiannual Financial Framework covering the years 2014Ð20, represents a turning point in the Union’s financial—and, indeed, general—history. Hitherto there had been a general acceptance of a virtually automatic increase in the resources vouchsafed to the Union’s institutions by member governments, irrespective of the pressures on their expenditure in other respects. Mr Cameron found allies in his insistence that this could not be the case when austerity and cutbacks were so prominent and painful a feature of life in the member countries. (3) Review of the Balance of the Competences between the United Kingdom and the European Union The interdepartmental examination of the Balance of Competences announced in the White Paper presented to Parliament by the Foreign Secretary in July, 2012 (Cm 8415) has so far attracted little attention. It was regarded in some quarters as a tool in the repatriation of powers implicit in the “negotiation”, or “renegotiation”, of the UK’s terms of membership of the EU. In reality, it has fundamental and far-reaching implications for the EU as a whole. One of the extraordinary lacunae in the management by the EU of its affairs is that, although the conferral of competences on the Unions institution is proclaimed to be the essence, and the justification, of its activities, no collective assessment of them has ever been collectively undertaken. Nor it appears, has the need to conduct such an assessment,, still less the obligation to do so, even been perceived. In the interests both of the efficient functioning of the Union, and of engaging the full support of the governments and peoples of the member countries in the enterprise, however, a thorough- going audit is long overdue. The UK Review, as outlined with outstanding clarity and methodology in the White Paper, even as a prospect, let alone when completed, will have a salutary effect on the Union’s institutions.
Ends, Means and Ways These three developments, surveying ends, means and ways respectively, afford, when taken together, a comprehensive insight into the lines on which the Union should evolve in the twenty-first century. This insight is a distinctive contribution from the UK to the mighty task we face together in the EU. It is a tailor-made response to the recognition in the closing paragraph of the Declaration of Berlin, issued in 2007 on the occasion of the 50th anniversary of the Treaty of Rome, that “we must always renew the political shape of Europe in keeping with the times”. Six years is a long time in EU politics.
The Paradox of Our Partners’ Perception of what the UK can Contribute I have long been struck by the paradox in our partners’ perceptions of us. On the one hand we are told repeatedly told that we probably have the greatest contribution of any member country to make to its future health and prosperity. On the other they insist that this has to take the form of falling in with the views of the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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majority. It is pointed out to us, for good measure, that we are at the bottom of the league of member countries as regards the level of public support for the EU. The possibility that there might be some connection between the two phenomena has not so far been the common coin of discussion.
The Contrast with the Situation in December 2011
The full significance of the situation can be grasped more easily by comparing what we see today with the panic-stricken reaction to the Prime Minster’s “veto” of the fiscal compact at the December 2011, meeting of the European Council. Hands then were freely wrung, and denunciations were plentiful of our self-inflicted “isolation” and “marginalisation” The panic died down in the months that followed. There was a very different son de cloche by the time the Prime Minister reported to the House on the December, 2012, meeting. It was a harbinger of a more balanced appreciation of our EU involvement.
The Decisiveness and the Incisiveness of the Changes
The decisiveness, and the incisiveness, of these favourable developments in our position in the EU prompt the question how it was that we laboured long under a dreary, defeatist Anglo-Brussels Orthodoxy ,asitmay be called, of going along in general with the Union flow, however belatedly or reluctantly. It was an orthodoxy which went so much against the national grain on the one hand, and which was so essentially anti-democratic, and so inadequate analytically, on the other. There is less purpose, however, in pursuing the question on its own account than as a means of highlighting the opportunities which now are opening before us.
The Role of the Foreign Affairs Committee
I hope I do not lay myself open to the charge of sycophancy if I add to the three developments to which I have referred a fourth development-in-the-making: namely the Report which you, Mr Chairman, and your colleagues will shortly be publishing on the inquiry which you launched in March, 2012, into The Future of the European Union: UK Government Policy. The immediate reason for offering this comment is the Committee’s day-to-day and practical concern, and indeed familiarity, with every major aspect of the United Kingdom’s international involvement. It gives the Committee an unrivalled standpoint from which to appraise the position. One of the great difficulties in the past in the management of our relations with our EU partners was that it was regarded as basically a self-contained affair, either enjoying the right of eminent domain over other aspects of our international involvement, or somehow escaping the laws of political and administrative gravity. Thanks in large measure to the work of the Committee, that phase is now over.
I would add two further general considerations. First, it is now beyond doubt that the parliamentary element in the Union’s arrangements is unsatisfactory. Fairly or unfairly, the European Parliament has come to be widely regarded as part of the problem rather than part of the solution. There is well-justified pressure for greater involvement of national parliaments. The Foreign Affairs Committee, or its equivalent country by country, cannot but be a significant part of this.
Secondly, some adjustment in the balance between parliamentary democracy on the one hand, and direct democracy on the other, has been made possible, and perhaps inevitable, by the worldwide impact of the information technology revolution. Delicate as this development is in national societies, it is even more delicate in complex international entities such as the European Union.
Even so, the requirement identified by the Schuman Declaration of 1950 is the same: namely, the maintenance of an ad hoc solidarity as the essential companion of the step-by-step building of Europe: in EU terminology, that means the maintenance of l’esprit communautaire, in parallel with l’acquis communautaire. This essential linkage was broken by single-minded pursuit first of a Constitution, and then, after the failure of the latter, of a para-Constitution, in the form of the Lisbon Treaty. Once again, the Select Committee system is undoubtedly a key factor in any adjustment of the balance.
It is not altogether fanciful to suggest that the situation has something of the exponential about it. The whole is not the sum of its constituent parts, important as each of them is. It is their product. One does not add them together; one multiplies them one by another. The prospects are as exciting as they are unlimited. We might even repeat to ourselves, if not to others, and without prejudice to the outcome of the forthcoming Scottish referendum, the observation of William Pitt the Younger in the wake of the Battle of Trafalgar: “England has saved herself by her exertions, and, as I trust, will save Europe by her example”. If that seems over-ambitious, would we be justified in echoing the words of Winston Churchill after the Battle of El Alamein: “this is not the end. It is not even the beginning of the end. But it is perhaps the end of the beginning”. 26 February 2013 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Written evidence from Professor Pauline Schnapper, Sorbonne Nouvelle University, Paris Pauline SCHNAPPER, Professor of British Studies at the Sorbonne Nouvelle University, Paris. I have been doing research on the UK and the EU since I completed a PhD in International Relations at the Institut d’Etudes Politiques (Sciences Po Paris) in 1997, having spent two years at St Antony’s College, Oxford. I published among other books and articles: La Grande-Bretagne et l’Europe: le grand malentendu (Paris, Presses de Sciences Po, 2000) and British Political Parties and National Identity: A Changing Discourse (Newcastle: Cambridge Scholars, 2011).
Summary — The decision of the present government to reject the fiscal stability pact signed by the other 26 EU members in December 2011 was unprecedented. — It has led to Britain being isolated in the EU, which cannot be in its long-term interest. — The EU has actually evolved in a “British” direction in the last 15 years, a fact often overlooked in the public debate. — The UK government should not let itself be drawn, for party political reasons, into an even more remote corner but play a full part in EU developments which are clearly in the national interest, such as CFSP, the single market, the future EU budget, etc. 1. The refusal of the coalition government to sign the fiscal stability pact agreed by the other 26 European Union member-states in the midst of a major economic crisis during the December 2011 European Council marks a turning point in the British engagement in Europe, with potentially long-lasting consequences. The obvious risk is that Britain will find itself isolated and incapable of exercising influence in an organisation which weighs heavily on its economy and provides it with an opportunity to increase its clout on the world scene. 2. It was the first time that a British government chose not to opt out from some aspects of a treaty but completely withdraw from a negotiation since it joined the EC in 1973. Neither Margaret Thatcher nor John Major had in effect adopted such an empty chair policy in spite of their reservations, to say the least, towards plans for further integration in the 1980s and early 1990s. They always chose, whatever the rhetoric, to try to influence negotiations from the inside, hoping thus to advance what were defined as British interests—the single market, deregulation, reform of the CAP, etc. 3. Arguably, David Cameron was in a different situation last December since the UK is not part of the eurozone and therefore not as directly affected by measures destined to help resolve the crisis as eurozone members. In theory it also pursues an independent monetary and budgetary policy, with no obligation to follow rules that apply to others. The well-known truth is, as acknowledged by David Cameron and William Hague themselves, that the British economy is totally interdependent with that of the eurozone countries and that it is definitely not in the British interest to see the eurozone collapse—whatever the gleeful predictions of some eurosceptics. It could therefore have been argued that the national interest made it imperative to sign the treaty. The other argument used, that the treaty failed to protect the interests of the City of London, “threatened” by new regulations, was also debatable. On the one hand it is not obvious that the interests of the City totally overlap with the interests of the British economy as a whole, as underlined at the time by some British business worried about British isolation in Europe. Secondly, it is not certain either that EU plans for financial regulation are contrary to British consumers’ interests. There should at least have been a debate on whether obsession with the protection of interests of the City can become counter-productive. 4. It is clear therefore that the decision to stay out of the treaty was taken not so much for economic reasons as for party political ones, which raises once again the issue of British euroscepticism, in its different guises, and the constraints it imposes on governments. There is still a widely shared perception in the UK that membership of the EU is a pragmatic adaptation to international economic pressures but that it fundamentally undermines the sovereignty of Westminster and the identity of Britain. In this view membership offers some advantages, such as access to a wide and expanding market conducive to growth, but the scope of the EU, or at least of Britain’s involvement to it, should be curtailed. The EU is seen as an obstacle to the UK’s full enjoyment of the benefits of globalisation and open markets. The Conservative party has entrenched this “soft” euroscepticism in its DNA since the late 1990s, while some in the party as well as its direct competitor in the electoral field, UKIP, campaign for a complete withdrawal from the EU. I do not believe that it is a reasonable reflection of the situation Britain finds itself in as a member of the EU. 5. The reality of the EU is much more complex than this vision suggests. Eurosceptics ignore the fact that the EU has actually become much closer to the model that they favour than it was 20 years ago and that the federal dream is to a large extent dead. The European Union is now much more intergovernmental, in spite of or thanks to enlargement, than federalists hoped for. In institutional terms, this evolution can be traced back to the Nice treaty (2000), when big EU countries, including Britain, secured a majority of votes in the European Council, thus preventing a coalition of small countries from potentially outvoting them in the future. Voters throughout Europe have become much more wary of European integration, for both good and bad reasons, as illustrated in opinion polls, European Parliament elections and referendum results, which imposes heavy constraints on what all governments are ready to accept in the EU. Britain is not alone in resisting moves towards more integration—France under Presidents Chirac and especially Sarkozy has reasserted the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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importance of intergovernmentalism in the EU, contributing to a weakening of the Commission. Britain is therefore less “different” than its politicians think from a new mainstream Europe. 6. In the midst of the sovereign debt crisis, it is difficult to assess the future for Britain in the EU. Provided the whole euro project does not collapse, more budgetary and tax integration is likely in the eurozone. This deepening of integration among some member states should not push Britain even further to the margins than it already dangerously is. In a European Union which would become de facto multi-tier, Britain should remain a central player in all the other crucial sectors dealt with at the EU level. This includes the Common Foreign and Security Policy, where the UK is a crucial player and has a vital interest in improving the efficiency of the current system, if only for economic reasons. Bilateral cooperation with France, however positive, will not be enough to reduce costs and improve European defence within NATO. The CFSP offers an opportunity to encourage other EU members, notably Germany, to improve burden-sharing. It also includes cooperation in the former “third pillar”, home and justice affairs, where Britain has enjoyed the “best of both worlds” (to use Andrew Geddes’ phrase) in being able to opt in or out of EU directives. British input into the EU will also be necessary in decision-making about the budget and single market issues in general if the government is to push the EU towards Britain-friendly policies. 7. The long-term economic and political interests of Britain and Europe in general require continued engagement in the EU, not the dogmatic opposition to anything European, based on an outdated vision of an illusionary “superstate”, which is too often heard in the British media and on some Parliamentary benches. The British government should acknowledge how much the EU has changed since the 1990s and the extent to which the debate about sovereignty is out of step with a globalised world in which individual European nations are not major players. The debate about organising a referendum on whether to stay in the EU is equally surreal—leaving aside the debate about the merits of referenda in general in solving complex issues—when considered within the global environment. This is marked by the relative decline of “the West”, the rise of emerging countries and an economic crisis unprecedented since the 1930s. In this context Britain’s active participation in the EU is more necessary than ever. 30 May 2012
Written evidence from Business for New Europe (BNE) Business for New Europe (BNE) welcomes the opportunity to make a submission as part of the consideration by the Foreign Affairs Select Committee for their Inquiry into “The Future of the EU: UK Government Policy”. This evidence outlines what BNE views as the key priorities.
1. Executive Summary The UK government should seek the following goals for the UK’s relationship with the European Union: — Seek to retain the UK’s seat at the EU table and have a voice in all negotiations. — Boost jobs and strengthen growth by pushing for reform at the EU-level. — Recognise and advocate the benefits of UK’s full access to the single market more clearly. — Push for greater liberalisation and completion of the single market. — Prioritise digital and energy markets in the pursuit of a more liberal European market. — Foster and encourage EU external trade policy. — Push for Common Agricultural Policy reform. — Support measures to solve eurozone crisis and protect the UK’s financial services sector. — Continue to fight against a rise in the EU budget for 2014Ð20. — Proactively address the diminishing UK numbers in the EU institutions at both UK and EU levels.
2. Introductory Comments 2.1 BNE is an independent coalition of business leaders advocating a positive case for reform in Europe. We are an independent not-for-profit organisation funded by donations from the private sector with offices in London and Brussels. 2.2 Our Advisory Council consists of Chairmen and CEOs of FTSE 100 companies and our Executive consists of experts in foreign and economic policy. 2.3 We are involved in a wide range of advocacy activities to provide a platform for debate on European issues to business leaders and policy makers. We publish research, hold seminars and conferences, and contribute in the media. We seek to ensure that a reasoned, pro-European voice is heard in the UK. 2.4 The author of this evidence, Ariane Poulain, Head of Research at BNE, specialises in quantitative and qualitative analysis, EU and UK affairs, immigration, international development and economics. The editor of this evidence, Phillip Souta, Director of BNE, is an expert on the eurozone, international trade, Britain’s cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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relationship with the EU, European foreign affairs and comments on these issues regularly in the media. Phillip Souta would be happy to appear before the Select Committee and provide oral evidence on this submission. 2.5 BNE appreciates the opportunity to put forward evidence and will focus on advocating: (a) positive and engaged approach to the UK government’s relationship with the EU; (b) specific policy areas that the UK government should prioritise as critical to the future of the EU: the Single Market, EU external trade policy, reform of the Common Agricultural Policy, the Multiannual Financial Framework 2014Ð20 and financial services; and (c) British representation in the EU institutions.
3. Recommendations 3.1 The UK should pursue a realistic, pragmatic and positive approach to the EU. We advocate that the UK government’s approach to its future relationship with the EU should be characterised, overall, by the following two prerogatives 3.1.1 The importance of the UK having a seat at the negotiating table must not be underestimated. — Britain must remain engaged across all relevant policy areas. The view that the UK would be in a better position if it left the EU and instead took part in an EEA-style agreement, similar to that of Norway, is not in the UK’s best interests. — A January 2012 report commissioned by the Norwegian government118 highlighted major drawbacks of their agreement with the EU stemming from not having a seat at the table during negotiations. Norway is “bound to adopt EU policies and rules on a broad range of issues without being a member and without voting rights” and as a result, for example, has actually implemented more EU regulations than the UK. — Norway’s “association without membership” relationship with the EU provides access to the single market but at the cost of contributing to the EU budget and not having a voice at the negotiating table. An EEA-style arrangement, if it were even available to Britain on equivalent terms to Norway, would in practice do little to enhance British sovereignty, and would mean that the UK would be obliged to implement EU legislation without having any say in its formation. 3.1.2 The pursuit of opt outs is a red herring and the UK government must shift the current debate towards a more constructive agenda, primarily focused on achieving better growth. — According to the Office for National Statistics, the UK’s real GDP has stagnated for nearly two years and is currently in a “double dip” recession with a second successive quarter of economic contraction—real GDP declined by 0.3% in Q1 2012. — At present, the EU has not implemented the necessary reforms sufficient to boost jobs and growth—this is damaging the EU and in the process, the UK. — Thus, the UK’s future relationship with the EU must be based upon pushing for reform that is in the UK’s interests. With this in mind, the future of UK government policy on our membership of the EU should not be about renegotiation, it should be about reform. — As 3.2 notes in greater detail, the EU is the UK’s largest trading partner and the single market adds over €600 billion to the UK economy annually. It is in the UK’s best interests that the EU overcomes the crisis and regains competitiveness in the global economy.
3.2 The European single market is vital to the UK economy and plays a major role in the importance of the UK’s relationship with the EU. We advocate that the UK government should build a stronger agenda on the following 3.2.1 Seek to more clearly recognize and build upon the key benefits of the European single market. The following identifies why—despite the current financial crisis—the UK’s full access to the EU single market remains highly attractive and lucrative in the global political economy. 3.2.1.1 The single market is the world’s largest trading area with almost 500 million consumers and worth €12.6 trillion, compared to €12 trillion and €3.5 trillion in the US and Japan respectively. 3.2.1.2 Over 50% of foreign direct investment to the UK comes from EU member states; the UK attracts global FDI primarily because of its full access to the EU single market. An example of this is the recent decision by the leading Japanese pharmaceuticals giant, Shionogi, which is currently rolling out a five-year global expansion plan. In July 2012, Shionogi announced that they would set up their European headquarters in London because of London’s strong infrastructure, outstanding talent and “easy access to the rest of Europe”; this creates 50 new jobs and Shionogi are now also considering moving part of their manufacturing operations to the UK. 3.2.1.3 The single market adds €600 billion a year to the UK economy, accounts for over 50% of all UK trade in goods and services, and three million jobs are directly or indirectly linked to it. 118 “Outside and Inside: Norway’s agreements with the European Union”, Report by the EEA Review Committee submitted to the Ministry of Foreign Affairs on 17 January 2012, Official Norwegian Reports NOU 2012: 2, Chapter 1 [in English], at http://www.europautredningen.no/wp-content/uploads/2011/12/NOU201220120002000EN_PDFS.pdf cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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3.2.2 Full completion would add a further €200 billion to the EU’s GDP. We advocate that the UK government prioritise the following two policy areas in the push for greater liberalisation and completion of the European single market: the digital single market and the energy market. 3.2.2.1 The Digital Single Market — The failure to complete a digital single market in the EU has the potential—under cautious assumptions—to cost Europe at least 4.1% of GDP by 2020 due to the lack of coherence and fragmentation across EU member states which present significant barriers to growth in a swiftly growing market. — In the UK alone, it is estimated that the digital market will grow by 10% in 2012 and by the end of 2015, the Minister for Media, Culture and Communication, Ed Vaizey, predicts that it will represent 20% of the UK’s total GDP. — We strongly encourage the UK government to fully support the goals of the “Digital Agenda for Europe”,119 from improving cross-border online transactions to the implementation of pan-European licensing for online content such as music, photography and film. 3.2.2.2 The Energy Market — Like the digital market, the EU’s member states are operating in a highly fragmented European energy market and at present, EU 2020 targets in the area of energy will not be achieved. For example, in energy efficiency alone, the EU is forecasted to improve its energy efficiency by 9% which is less than half of the EU 2020 target. — In May 2012, European Commission president, Jose Manuel Barroso, stated that the EU energy market was worth €620 billion in itself.120 This clearly underlines the importance of the Commission’s communication “Energy 2020: A Strategy for Competitive, Sustainable and Secure Energy” goals which comprehensively set out the requirements for a stronger and more productive EU energy market, such as energy efficiency and infrastructure. — We strongly encourage the UK government to actively support and push forward the EU 2020 goals in energy for the benefit of the wider EU economy as well as domestically. Furthermore, the UK does not have the capacity to independently meet national energy demands and is currently falling behind other EU countries in its ability to maintain important environmental priorities such as reducing greenhouse gas emissions and increasing the amount of energy produced from renewables.
3.3 As a member of the EU, the UK trade sector is in a much stronger position and it is in the UK’s best interest to foster and encourage the EU’s external trade policy 3.3.1 The EU is a significant force multiplier for UK trade. There are three main reasons for this: 3.3.1.1 The UK trade sector has the support of the EU if external trade partners contravene WTO rules. 3.3.1.2 As part of the EU27, the UK is in a more influential and attractive position to secure Free Trade Agreements (FTAs). The following examples demonstrate a benefit already achieved and the potential for future UK opportunities in EU external trade policy: 3.3.1.2.1 In July 2011, an FTA between the EU and South Korea came into force. The deal is estimated to eliminate over 99% of duties on EU goods and in the UK specifically, the Department for Business, Innovation and Skills estimates that the deal will bring £500 million of annual benefits to the UK and create an additional £2 billion in export opportunities for UK business. 3.3.1.2.2 We advocate that the UK should continue to encourage the EU’s external trade policy because of the vast potential opportunities for the UK trade sector. According to the European Commission’s comprehensive sustainability impact assessments for FTAs, the following benefits to the UK of completed EU FTAs would be, for example: — EU/Canada: Around £423 million per annum in the short term. — EU/ASEAN: Up to £3 billion per annum in the long term. — EU/India: Approximately £2 billion over 10 years. 3.3.1.3 The UK’s EU membership places the UK in the strongest position to push for a more liberal trade agenda at the global level. This influence is two-fold. Firstly, the UK has a significant role to play in shaping the EU trade policy agenda which—considering that the EU is the world’s largest trading area—allows the UK to push forward its open market philosophy and encourage greater liberalisation in the single market. Secondly, as an individual voice on the 119 See http://ec.europa.eu/information_society/newsroom/cf/pillar.cfm?pillar_id=43&pillar=Digital%20Single%20Market 120 “Deepening EU China co-operation on energy: Working together to meet global challenges”, speech by European Commission President Barroso, EU-China High Level Meeting on Energy, Brussels, 3 May 2012, press release available via http://europa.eu/ rapid cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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global level the UK is more powerful as part of the EU27; if the UK was outside of the EU, for example, it would have little ability to influence and shape the WTO agenda.
3.4 The UK government should call for reform of the Common Agricultural Policy (CAP) to ensure CAP spending is conducive to long-term growth and better aligned with the UK’s best interests alongside providing more effective support to the EU’s agricultural sectors
3.4.1 The main issues surrounding negative CAP spending are: 3.4.1.1 The allocation of direct payments are highly unequal: (a) over 50% of CAP goes to the top 16% of farmers; (b) direct payments per hectare vary significantly across EU member states, from €462 to €190; this primarily disadvantages the Central and East European (CEE) member states and the CEEs are most in need of support to strengthen their agricultural sectors. 3.4.1.2 Subsidising the EU agricultural sector goes against the values of the single market: it is (a) highly protectionist, and (b) distorts regional and global markets. 3.4.1.3 CAP is currently allocated over 40% of total MFF spending and of this amount, only 25% goes towards rural development. Rural development spending is more sustainable and effective than direct payments in the long-term.
3.4.2 We consider that the above issues should be addressed in the next MFF and as a result, an 8% reduction would be made to overall CAP spending but alongside efficiency gains and an increase in positive spending. We advocate that the UK government should consider the following reforms to CAP: 3.4.2.1 Introduction of means testing for individual beneficiaries of CAP. 3.4.2.2 A 50% reduction in direct payments to the top 11 EU member states with a GDP above the EU average, with the aim to phase out post-2020. 3.4.2.3 Increase direct payments by 26% to the four EU member states with the lowest GDP below the EU average. 3.4.2.4 An increase in rural development spending by over €4 billion.
3.5 The euro area summit conclusions dated 29 June 2012 provide for the creation of a “single supervisory mechanism” by the end of 2012. This mechanism will be vested in the European Central Bank (ECB) and once established will allow for the European Stability Mechanism (ESM) to recapitalise banks directly. It is in the UK’s interests that the eurozone crisis be resolved. It is reasonable to talk about common resolution, depositor protection at a eurozone or EU level. We submit that the UK government should strongly support the creation of such a “European Banking Union,” whilst bearing in mind the following
3.5.1 Financial services are of considerable importance to the UK economy, accounting for 9% of UK GDP, and £63 billion in UK tax revenues in 2010Ð11 accounting for 12% of total UK tax receipts. Financial services employ two million people in the UK—7% of UK employment.
3.5.2 The UK accounts for 36% of the EU’s wholesale finance industry and 75% of European financial transactions take place in London.
3.5.3 The European Council conclusions dated 29 July 2012 state that proposals to be prepared on a European Banking Union, “will include concrete proposals on preserving the unity and integrity of the Single Market in financial services and which will take account of the Euro Area statement and, inter alia, of the intention of the Commission to bring forward proposals […]”.
3.5.4 It should be remembered that the proposals referred to in 3.5.3, above, will not change fundamental treaty freedoms. At this stage, it is also impossible to give a detailed analysis as there is no detail on the proposals.
3.5.5 In order for the Single Market in financial services to be properly maintained and protected, the government should maintain that: — Regulation of eurozone banks should remain fully within the scope of the EU’s existing EU treaty structure, where both the European Commission and the European Court of Justice are bound to maintain a level playing field. — The UK should remain fully engaged in the operation of the European Banking Authority, which works with the national regulators of all the EU’s 27 member states to prevent regulatory arbitrage and help maintain a level playing field. — The UK should seek to establish whether there is any risk of a European Banking Union creating barriers to eurozone banks which currently have operations in the UK. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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3.6 Negotiations on the next long-term EU budget “The Multiannual Financial Framework 2014–2020 (MFF)” are ongoing. We encourage the UK government to push for the EU to avoid raising the size of the MFF to reflect the impact of the current fiscal pressures on member states — This submission recognizes that areas such as energy, the digital agenda, innovation and research play a significant role in the success of productivity, growth and unemployment levels in the EU and individual member states alike. — However, future EU spending must offset the current times of austerity and policies, such as CAP, that are not conducive to long-term prosperity should be reduced.
3.7 In order to pursue this realistic, pragmatic and positive approach to the UK’s membership in the EU, British influence towards and within the EU institutions is paramount. We strongly encourage the Government to proactively push for greater UK representation at the EU level alongside building a better platform to encourage the importance of this domestically 3.7.1 Whilst a European Commission official is of course required to act on behalf of the interest of the EU as a whole, rather than that of his/her member state, the official naturally reflects his/her national perspective and culture in his/her daily interactions. Without national perspectives represented in each institution, the institution would not act on behalf of the Union as a whole. Regrettably, the number of British officials within the institutions, namely the European Commission, is dwindling at an astonishing pace. — The UK represents 12% of the population of the EU but holds only 5% of posts within the institutions. — These figures are only deteriorating and UK representation in new EU institutions, namely the European Financial Supervisory Authorities, is also a worry to the British business community. 3.7.2 The main issues behind this lack of overall representation include the following and all of these reasons fall on a background of an overall national negative perception of the EU: 3.7.2.1 The 1972 intake of British citizens is close to retirement. 3.7.2.2 The Concours examination must be taken in French or German. 3.7.2.3 The awareness of career opportunities at universities is poor and secondments within the Civil Service to Brussels are not encouraged. 3.7.3 BNE has worked with the UK Government, both in London and Brussels, on this issue for the past two years. We will continue to push this agenda and encourage continued government support. — We applaud the Foreign and Commonwealth Office and the UK Permanent Representation to the EU in placing such a priority and resources to achieving the objective of greater UK representation in the EU. — Following representations made by our members, we welcome the introduction of mandatory foreign language learning in the English Baccalaureate and we support the government’s drive to work with universities, including the College of Europe, to create awareness of the many EU career possibilities open to UK graduates. — We also welcome the support given in the establishment of the British Brussels Network. This network seeks to provide a platform for debate on EU issues from a British perspective in Brussels and has been successful in doing so over the past year. 3.7.4 Whilst the Foreign and Commonwealth Office has made noticeable progress in highlighting the need to address this subject, BNE seeks to ensure that this priority is heard across Government. We strongly recommend that further action be taken as follows: 3.7.4.1 The Civil Service should explore the possibility of requiring civil servants to work on EU issues at some point during his/her career development, whether it is through secondment or training. 3.7.4.2 The Government must seek to ensure that the new financial supervisory authorities are staffed appropriately. This is of upmost importance because without the continuation and strengthening of this drive, British influence within Europe is bound to diminish. 10 July 2012
Written evidence from Lord Howell of Guildford THE EU AND UK STRATEGY This paper argues that rather than becoming bogged down in sterile, polarising and ultimately divisive arguments about renegotiating Britain’s relations and powers vis-a-vis the rest of the EU (a situation towards which we are currently fast slipping), the moment has come for the UK to take the initiative for once in reforming (ie changing the direction of) the EU as a whole -and doing so in a thoroughly pro-European and Coalition-friendly way. We have, in short, to mount and win the argument for a better sort of Europe—and do so in a manner which wins over, rather than antagonises, allies throughout the EU and the best and brightest cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Europhiles in all parties here at home. We have to show that the integrationist doctrine has reached its limits (as everyone privately acknowledges) and that a better model, in tune with our times, is available. There are always voices ready to assert—from both Eurosceptical and Europhile wings—that this is “not on” and that the rest of the EU “will never have it”. But these views are becoming rapidly out of date. Big forces are building up not only at national and political level throughout Europe, but also at the levels of intellectual argument and theory, which invalidate the old integrationist case and put in reach the alternative, but still highly pro-European, model of flexibility, diversity and decentralisation of powers. The time is fast becoming ripe for Britain to lead in this new direction, not only in the interests of the EU itself, but also to head off major and imminent problems here at home. As an undeniable old-timer, I suspect that I have been tangling with these matters longer than most in Parliament, or indeed in Government (since 1962 when I wrote the D.Tel guide to the Common Market, after interviewing Monnet!). I don’t know whether that qualifies or disqualifies me from opining, but I do know that the need now is for a European policy—repeat, a European policy—not a policy for Britain in Europe but a strategic framework for the reform of the structure of the whole EU enterprise, in line with commonsense and completely up-to date needs and principles. We are constantly told by advisers that this is “Not on”, that “no-one in Brussels will listen” etc. This is no longer so. Lots of quality support for a radical overhaul of the EU—its powers and institutions—exists in France and Germany, the Netherlands, in Central Europe (where they long for a British lead) and even in Club Med. countries. There is also the view that no initiatives of this kind would be appropriate until the present Eurozone problems are resolved. But that could take ten years. Neither we nor the rest of the EU can afford to, or need to, wait that long. Anyway, the intellectual conversion required takes time (just as it took time to convert the world to privatisation and market economics thirty years ago). Ideas on a reform programme for the EU emanating from the UK must be strongly pro-European, pro- France, pro-Germany and pro-the smaller member states. We will get nowhere at all by sounding anti-European or withdrawalist (or anti-French or anti-German). The question is not about us v. the EU, it is about what kind of EU we want to see develop and how we intend to use our full weight and intellectual capacities to promote it. The watchwords must be decentralisation and flexibility. The balance of competences study is an excellent start—but only a start—from which to build this approach. At all costs this exercise must not be allowed to degenerate into an argy-bargy about Britain in Europe, and about which powers we can take back or “repatriate” unilaterally. That way lies certain polarisation into a sterile argument about withdrawal, inner or outer cores and so on. We have been round this course before and it always ends in stalemate, bad feeling and political divisiveness. It would also suck us into an in/out referendum which is not what most people want. Instead, the emphasis should be on the contribution British thinking can make to overall EU reform as it effects all member states (in different ways). The phrases in statements on the balance of competences exercise about contributing to the modernisation of Europe as a whole are therefore the key ones. We come to the substance. What does reform really entail and how does it interrelate with the on-going Euro crisis and its resolution? There is first a profound intellectual conundrum—or indeed series of conundrums—to be resolved—which have been debated over many years in endless EC/EU conferences and informal circles. What does integration in Europe really mean. Does it mean conformity or diversity? To get on the right track we first need to demonstrate that our EU vision is superior, in European terms, to the outdated integrationist one. This approach has never been seriously attempted. Most of the campaigns for change on the EU front— including the current backbench Fresh Start one—begin from the narrower and shallower assumption that integration will prevail for the “core” majority of member states, that it will work and that this therefore forces us in Britain to review our relationship with Brussels. A much better starting point is that integrationism is not the best thing for modern Europe, that it probably won’t work, that we have a better model and that our ideas can do more for the EU and its future health and interface with the rest of the world, than the prevailing “more Europe” orthodoxy can ever deliver. How do we do that? We have to open a new front of proposals and initiatives on EU reform. Of course this does not resolve, or even engage immediately with, current headaches such as the upcoming Budget issue, fiscal union and any consequential Treaty changes, FTT or other challenges. But the gap to be filled here is one of vision, strategy and direction—without which every second order issue becomes another damaging and defensive struggle. The central intellectual contention, which we need to build on, and which to the world outside politics is becoming a self-evident feature of the way society now works, is that networks triumph over hierarchies. Hierarchies produce pyramid thinking, constant centralisation, laager mentalities and inclinations to wall- building and protectionist measures. The old EU is shot through with these tendencies. The current signs of growing support for climate protectionism are an excellent example of this. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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So our policy has to demonstrate (repeatedly) that decentralisation, diversity and flexibility (the “refashioning of the EU” the PM calls for), offer a superior model to political integration, more in line with 21st-century practices and technological possibilities and bringing Europe closer to the people, in line with the (largely forgotten) principles of Laaken. More specifically it is an approach which insists on real subsidiarity, not just tokenism. It demands the transfer of a range of competences back to national and local level—e.g making social legislation more intimately tailored to local needs and circumstances and bringing employment and health legislation closer to the shop floor. We have to be able to argue convincingly that our model—involving a more variable and less standardised approach to European co-operation—is a better dedication to the integrity of the single market than the current Euro-orthodoxies. We have to establish that the mindsets of those who still hanker after tax harmonisation, fiscal union, FTT and other centralising trends lie outside the Treaties and outside the interests of the Union in modern conditions. This applies to the whole Eurozone itself, for which we should now seek legal separation from the evolving Union. Whether pure political integration is the answer to the Eurozone’s future—and whether it is actually practicable if attempted, however logical—is for others to try out and establish. Britain’s message should ride above that. The force, in the end, is with decentralisation, variety and member states acting democratically— rather than with central power attempting to rule Europe. The essence of Europe is diversity, and always has been. The web age of information and interactivity makes it ever more of a necessity. To make all this more than a set of mere assertions (or dismissed as another perfidious British try-on) we have to go still deeper into the analysis and show that modern economic thinking is swinging to our side. We have to call in aid the fact that revised economic theory and example are recasting economic activity as a process and increasingly rejecting conventional macro-economics as system-shaped and mechanical—leading, as it invariably does, to the apparent need for more and more central control, bloc planning and regulation. For Europe, we have to demonstrate and establish propositionally this does not and will not work. Beyond economists’ arguments one can also summon in aid many other professions and disciplines. The spearhead principles of today in science, biology, engineering all point towards self-assembly, self-regulation and against central compression. Difficult stuff but reflected in EU localism. From these new perspectives and insights flow the practical arguments for unravelling the existing accumulated acquis, for more competition and bringing social and economic policy much nearer the shop floor and the local office. A further “pro-European authentication” of this new direction can be secured by tying it up with the widely accepted principle of subsidiarity. Even the Lisbon Treaty, despite its heavy integrationist bias, accepted subsidiarity as a founding principle of the Union. On this growing consilience of modern theory and practice, together with the new social and technological imperatives of the information and cyber ages, and together with the new economics, we can and should build our case for a different Europe. The delivery politics of this new approach are challenging, but a good deal more promising (and enjoyable) than the prospect of constant defensiveness in face of new Continental initiatives and Treaty change proposals, and constant domestic pressures for EU withdrawal where our defences fail (as they inevitably do in places). The first step towards getting on the front foot is to advance the arguments, with the real profundity and intellectual backing which is there to be mobilised from the sources enumerated above. The best brains in all parties have to be won over to the anti-integrationist case. The second step is to join up in harness with the other EU member states, and the growing opinion blocs within them, who take the same view—pro-European and also pro-reform. The conventional integrationists and federalists have long been better organised than their critics. They have to be assured about new ways of proceeding as their old ones fail, not just confronted. There has to be mutual give and take. The third step is to promote and apply, with the support of organised allies, principles of decentralisation, local intimacy as against remote bureaucracy, and flexibility at all levels of decision-making within the Union. Specific focuses and strategies are required to beam in on all the official power centres and institutions of the EU, as well as the unofficial ones. The four official centres of directional drive are the Council, the Court of Justice, the Commission and the Parliament. The key lessons of lifelong experience and studies of Union (and before that Community) progress are that decisions and trends are hatched in think-tanks and at informal gatherings, with which alliances of opinion must be sought and to which unrelenting intellectual pressure must also be applied. Further reinforcement for this whole new approach comes from events and developments outside the Union. The EU is now dealing with, and competing in, markets that are no longer just developing but are in some areas fully matured and pulling ahead of the West in sophistication and general standards. Established Asian dynamism and market opportunities are now being reinforced rapidly by rising African and Latin American prosperity. For the EU to survive in these new conditions demands an agility, flexibility and openness which the conventional integrationist approach cannot deliver. Behind these remarkable shifts in the global economic pattern lie, amongst other things, big developments in energy prospects, revolutionised by enhanced discovery and recovery technologies. Led by shale gas and cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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shale oil prospects (already realised in the USA) the African states, both East and West coast, are emerging as major world energy suppliers, while across the southern Atlantic the same pattern, as predicted by geologists, is emerging, with Brazil now taking its place as the sixth-largest energy- producing power in the world.
Alongside these resource developments, and in part because of them, the emerging powers are becoming the world’s chief sources of wealth and investment capital. The flow of capital has been reversed. The EU, in making itself an attractive destination for funds, has no alternative but to become less of a standardised and regulated bloc, and more of a region of varied opportunities.
In Sum: In the PM’s words “the EU is an organization in peril”. Another attempt at unilateral British recapture of EU competences is a dead end. It will strengthen the withdrawalists, antagonise our European friends and allies, divide our parties and undermine the Coalition. Instead the argument has to be won, as it now can be, against the traditional EU integrationist model and in favour not just of variable geometry but of a more decentralised, modernised EU structure. This reform strategy has to be built up and promoted (with allies) in a PRO-European manner, as an attractive model for all those who genuinely want to see the EU survive and prosper in the transformed global landscape 29 September 2012
Written evidence from Frank Vibert, Senior Visiting Fellow, Department of Government, London School of Economics (LSE)
DIFFERENTIATION IN THE EU
Summary and Conclusions
In the context of the EU, “differentiation” refers in a broad sense to the possibilities open to member states to pursue public policies along their own track in a particular policy field where the EU is active.
Differentiation, in one form or another, has long been possible within the EU and is now of critical importance. At one end of the spectrum, members of the Eurozone need to share powers in new areas such as fiscal policy and banking union. At the other end, the UK would like to repatriate certain powers. Potentially, an increase in differentiation offers a way to accommodate both ends of the spectrum.
Differentiation should not be seen simply, or even mainly, as a response to British “exceptionalism”. It provides a way for all member states to connect more closely with their own electorates and to help redress the “democratic deficit” in the EU. Greater differentiation will consolidate the direction of institutional change in the EU in favour of a more coherent involvement of national parliaments and constitutional courts. In addition, rather than a “turning inwards” it also provides a way for member states to recognize the importance of international rule making in forums that extend beyond the regional grouping offered by the EU.
This paper maps the scope for further policy differentiation and identifies the institutional implications of this more open architecture.
1.Background
Membership in the EU means that countries agree to share powers in order to pursue common policy objectives or to “pool sovereignty”. The preferred norm is that the EU becomes the focus for policy-making across the main fields of public policy making and that member states share their powers and give up the right of independent action in them.
The current scope for differentiation
In practice there are many exceptions, some of long standing and some recent, to the preferred norm of fully shared powers. These exceptions define the scope for differentiation as currently recognized in the EU’s treaty base. The main varieties are as follows: — First, there is differentiation that allows for different approaches to compliance with EU directives. (TFEU Art. 288) Differentiation in this case is about using different means to achieve the same effect. — Secondly, there is differentiation that allows for derogations that permit different time paths to implement common policies. For example in the case of enlargement both new and existing members have been provided with grace periods to allow time for policies to adapt. This form of differentiation assumes that grace periods will lapse and that policies will converge thereafter. — Thirdly, there is differentiation in the form of limited exemptions to harmonisation measures in the Internal Market. These are subject to a “Union control procedure” (TFEU Art.114 (4,5& 10)). cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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— Fourthly, there is differentiation in the form of general exemptions or derogations that allows member states to carry out their own polices in certain areas of shared competence, for example in the case of development cooperation (TFEU Title1 art.4 (3&4)) and in relation to the admission of third country nationals under the area of Freedom Security and Justice (Art. 79(5)). There are other derogations that permit members to enact higher standards than the EU agreed level in certain areas of the treaty such as in heath and the environment (for example TFEU Art.193). — Fifthly, there is differentiation that allows some member states to move ahead of others into new areas of common policies (areas of enhanced cooperation) while outsiders wait and see what the outcomes are, or wait to qualify as members of the in-group. (TEU Title IV Art. 20). This form of differentiation assumes a goal of eventual convergence and opt ins over the long run around the new areas of shared policy. — Sixthly, there is differentiation that allows for member states to stay outside an area of power sharing with no assumption that convergence will necessarily take place over time. This form of differentiation is built around “opt out” provisions in the Treaty base. A leading example is in the Protocol on the UK in relation to the Euro. “Unless the UK notifies the Council that it intends to adopt the euro, it is under no obligation to do so” (Protocol para1). As a variant, opt outs can also be framed in ways that allow for future opt ins to selected items or initiatives under a common policy. The leading example is in the Protocol on the UK & Ireland in relation to the Area of Freedom, Security and Justice (Protocol Art3). — Finally there is differentiation in the form of “structured cooperation” applying in the field of security and defence. This recognizes differentiation in two ways. First, it acknowledges the importance of wider international groupings and obligations—specifically NATO. (TEU Art. 42 (1) & (6) and Protocol). Secondly, it recognizes the importance of coalitions of the willing and able when it comes to implementation. While differentiation in this wide variety of forms has been permitted under EU treaties it has also been regarded as a largely undesirable exception to the preferred norm of a uniform approach to power sharing around common policy objectives and the uniform application of the treaties. For example the use of the provisions for enhanced cooperation is referred to as a “last resort” (TEU Title IV Art.20(2)). Most of the opt outs are exercised by just four of the member states (UK, Ireland, Sweden and Denmark). The aspiration remains, even in cases where differentiation takes place, that convergence around common policies for all members should still be the ultimate goal. Further differentiation challenges this treatment of differentiation as the exception. It would mean that differentiation would become part of the normal workings of the EU.
2. Mapping the Scope for Differentiation Discussion of differentiation is best organized around the concept of policy “clusters”. “Clusters” are a familiar concept in spatial geography (for example the tendency of financial service providers to cluster around a dominant centre such as London or New York). They are also a relevant concept in policy terms. They measure how far policies are related or connected to each other. Those that are necessarily or very closely connected can be viewed as a “cluster”. The second element in differentiation allows for variations in the degree to which members wish to associate themselves with particular clusters. The scope for differentiation can be mapped by bringing together these two dimensions.
Degrees of Linkage between policy clusters In this paper the mapping of policy clusters distinguishes between four categories of linkage: — The first is where there is a necessary connection between policies. For example it is accepted that monetary union must necessarily be accompanied by fiscal policy discipline for those that are members of the currency union. They are part of the same cluster. — The second is where there is a close connection. For example, policies that concern critical infrastructure in energy, water, telecommunications and transportation systems share a common concern about consumer satisfaction, the security of supply, the resilience of basic services as well as about interconnection policies and are therefore clustered together. — The third is where the connection is contingent. For example, the Common Agricultural Policy has a contingent connection with the Single Market in goods because income support provided to those in rural areas might distort the supply and pricing of agricultural goods. However it has a closer ideological connection with other policies related to achieving social cohesion and is therefore included with a cluster of other policies designed to increase social cohesion. — The final distinction is where connections are remote. For example, a common policy providing for the right of abode in member states has only a distant connection to the Common Fisheries Policy. They can be treated therefore as belonging to different policy clusters. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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The clusters are illustrated in Annex 1. They are not exhaustive of the current range of polices pursued in the EU but are intended to be illustrative of the principle of clustering.
Degrees of association with policy clusters In the same way that areas of public policy can be mapped by degrees of connectedness so too can different degrees of desired policy association be mapped for member states. — First, powers can be pooled in order to achieve a common objective in ways that mean that the member state concerned gives up the possibility of taking independent action in the same area. — Secondly, member states may wish to acknowledge that policies in a particular area are of common concern, and of concern to themselves, while retaining discretion as to whether and when exactly they want to pool powers. For example environmental policies can be seen as of common concern to all members because pollutants cross borders. Nevertheless some member states may still wish to conserve considerable policy discretion in their own hands (for example in determining the energy mix or in deciding which greenhouse gases to target). Areas of common concern lend themselves to an “opt in” approach. — Thirdly, there are some areas of policy that member states may wish to pursue in a wider international setting rather than in a regional (EU) one. As policy making becomes more global the issue extends well beyond the recognition of the importance for some countries of membership in NATO. For example, in the area of financial services the UK might wish to frame its policies in the context of international bodies such as IASB, FSB & IOSCO rather than in the context of a regional grouping such as the EU. In such areas both “opt outs” and “opt ins” have a role in structuring cooperation. — Finally, there are some areas of policy that member states may wish to keep as areas for their own independent domestic policy action—for example in respect of criminal justice, asylum policy or family law. Here, opt outs are also the relevant instrument.
3. The Map The different degree to which policies are connected in different clusters and the different degree of closeness with which member states might wish to associate with the different policy clusters can be put together as a theoretical map that reflects the two sets of considerations. Annex 2 shows a theoretical mapping. It charts four cases. They are summarized in the table below.
Table A MAP OF DIFFERENTIATION Degrees of association Policy clusters Pooled common concern wider domestic Case a 13 0 0 1 Case b 9311 Case c 5522 Case d 2435
The mapping exercise reflected in the table above is a purely theoretical one. It is not intended to correspond to the actual preferences of any identifiable member state. The point is simply that, in theory, a much greater degree of policy differentiation in the EU is possible.
4. The Institutional Implications The theory of “functionalism” that is often used to track or to “explain” the development of the EU as a political union asserts that if the EU performs an increasing number of functional tasks successfully then democratic forms of government at the EU level can be constructed following in their wake. The assumption is that policy making at the EU level brings democracy at the EU level following in sequence. What this means is that any concerns about the alleged “democratic deficit” in the EU should be put on hold. If more policies are pooled successfully in more areas then democracy will follow. Differentiation is an obstacle to this sequencing and from this perspective an obstacle to the development of EU level democracy. The experience of the recent past runs counter to this logic. As EU policies reach more deeply into matters traditionally regarded as falling within the policy discretion of individual member states the democratic voice is increasingly being expressed at the national level. It is not simply a matter that demonstrators choose to express their opposition to policies set at the EU level in front of their own parliaments. Nor is it simply that new parties are emerging at the national level because traditional parties no longer seem to aggregate opinion about EU policies effectively among their own supporters. It is also shown in the way that the head of the ECB finds it necessary to explain ECB policies to the German Parliament and it is the German constitutional court and Parliament that sets limits on the bail out of Greece. cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Greater differentiation has institutional implications that go with the grain of reattaching democratic sentiment about EU policy making to national democratic institutions, both for member states that want to pool more powers and for member states that want to pool less. One key issue is how to articulate the role of national parliaments.
Joining up national parliaments—the “subject to approval” test One of the most powerful reasons for developing the EP as the focal centre for representative democracy in the EU is that it is difficult to see in practical terms how the voice of 27 or more national parliaments could be expressed in any collective form. Despite all its limitations as the voice of the people the EP seems to be the only available platform for representation. The simplest way in which the national parliaments can be brought into play as the voice of democracy on EU measures is through a new legislative procedure that stipulates that any agreement reached in the Council of Ministers is subject to the approval of their parliaments under an agreed timetable for approval. The procedure offers three main advantages: — First, it makes decisions of governments in the Council more transparent in front of national electorates. — Secondly, it recognizes that, for a variety of reasons, what is termed “executive dominance” over national parliaments is much weaker than in the past in a number of member states and that this new reality needs to be respected. — Thirdly, the reassignment of legislative responsibilities provides a way of exploiting the value of the EP as a platform for integrationist views (that cut across and often over-ride party distinctions in the EP) while acknowledging the strengths of national parliaments in “socialising differences” on a conventional left/right continuum. This ability of national parliaments to “socialise differences” needs to be harnessed in respect of the approval of European measures.
7. Conclusions Greater differentiation represents a different model of how the EU might develop. It goes with the grain of recent developments in the EU where some member states want to pool more powers and others less. It also goes with the grain of the reassertion of democratic opinion through national institutions. It provides the means to hold together in one union a greater diversity of expression. 14 January 2013
Annex 1 POLICY CLUSTERS. ILLUSTRATIVE GROUPINGS IMG (Internal market—goods) prohibition on tariffs & quantitative restrictions on goods originating in member states (TFEU Arts. 28 & 34). Prohibition on tax discrimination (arts 110Ð112). IM NFS (Internal market non financial services) Prohibition on restrictions to provide non financial services within EU. (TFEU Art 53). Including professions (Art. 57). Right of establishment (Art. 49). IM FiS (Internal Market—financial services). Prohibition on right to provide financial services in EU (TFEU Art.53). Prohibition on restrictions of movement of capital (Art.63). Measures versus terrorism funding (Art. 75) Measures versus money laundering (Art. 83). IM INFRA (Internal Market Critical Infrastructure). Transportation (TFEU Arts 90Ð100) TransEuropean Networks (Arts 170Ð172) Energy (art 194) Telecommunications & postal services. Rules on competition and against market abuse (COMP) (TFEU Arts 101Ð103). Rules on state aids (Arts 107Ð108) Consumer Protection (art. 169). Economic, Monetary & Fiscal Union (EMF) economic policy a matter of common concern (TFEU Art 121) exchange rate policy of common interest (Art.142) Excessive deficit procedure (art.126). monetary policy (Arts 127Ð128) provisions specific to Eurozone(136Ð138). Environment (ENV) (TFEU Arts 191Ð193) Fisheries (TFEU Arts 38Ð44). Taxation policies (TAX) Re harmonization of indirect taxes (TFEU Art.113) Own resources policy (Art. 311). Research & development (R&D) (TFEU Arts 179Ð190). Freedom, Justice & Home Affairs (FJHA) Freedom of movement of workers (TFEU Art.45) measures in field of social security (Art.48) Absence of internal border controls (Art.77) Common policy on immigration& external border control & asylum (Art.67 & 78) Measures to promote police & judicial cooperation & approximation of criminal laws (Art.67) Judicial cooperation on criminal & civil matters (Arts 81 & 82) Measures in field of crime prevention & police cooperation (Arts 84Ð88). cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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Social & Cohesion policy (SOCCOH) CAP (TFEU Art 39) Employment (Arts 145Ð150) Social policy (151Ð160) Education, public health, territorial cohesion, (Arts 165, 167, 168, 174Ð178). Budget (Arts 313Ð319). Foreign policy (EX FOR) (TEU chap.2. Sect. 1 Arts 23Ð41) inc development cooperation (TFEU Arts 208Ð211), cooperation with third countries (Arts 212Ð214) International agreements (Arts 216Ð219) relations with international organisations (Art. 220). Security & Defence (DEF) (TEU chap.2. sect.2 Arts 42Ð46) Trade policy (TRADE) Tariff policy towards third countries (TFEU Arts 28 & 31). Common commercial policy (TFEU Arts 206Ð207).
Annex 2 HYPOTHETICAL CHOICES BEHIND THE MAPPING OF DIFFERENTIATION This annex illustrates some hypothetical choices of how far different member states might wish to associate themselves with different areas of EU policies. Case a case b case c case d. IMGPPPP IM NFS D P P D IMFiSPPPW IM INFRA. P P CC CC COMP P CC P P EMFPCCCCD ENV P CC W CC TAX P D CC D R&D P P CC CC FJHA P P D D SOCCOH P P D D EX FOR P P CC CC DEF P W W W TRADE PPPW Key: P member state agrees to pool powers CC member state treats cluster as of common concern W member chooses wider grouping for policy making D member retains domestic policy making prerogatives
Written evidence from Dr Simon Usherwood, Senior Lecturer, School of Politics, University of Surrey 1. In 1997Ð9, I took the general concours for both the European Commission and the European Parliament. At the time, I was working at the College of Europe in Bruges as a Teaching Assistant, having done my Masters there in 1996Ð7. In both cases, I was successful in passing stages up to and including final interviews, but not by enough to make the final lists. 2. My decision to apply was a result of being at Bruges, where many students go on to work in Brussels, and a lack of certainty of my own career path. Certainly, I considered that a permanent position as a fonctionnaire would have many attractions (interesting work and colleagues, high level of job security, personal interest in the EU), but it was never my sole objective, especially as I got to know Brussels better and could see that such a position would be relatively rigid, as compared to work with private bodies or think-tanks. 3. The Commission concours in particular suffered a number of major delays which did little to enthuse me to the organisation. The level of effort that many people seemed to put into preparation for the first round (which was highly selective) was substantial and anyone considering applying would need to be aware of the difficulty of passing that first threshold. I was fortunate that my Masters study (and subsequent work) was highly relevant, so both I and many others from the College were able to progress. This included several UK citizens on the European Fast Stream programme. 4. The length of the concours process was a major factor in my final career choices. By the time I had got to the end, I was actively considering academic options (I ultimately returned to the UK for my PhD) and more time spent in Brussels (as a city) had not really made me feel it was a place I wanted to spend more time in. Thus my failure to make the lists was a disappointment, but one which allowed me to move on. 5. My impression—both from my own cohort and from many others that I know of—has been that the College remains a very valuable means of securing employment in Brussels, both within the Institutions and more generally. The cutting of funding for scholars in recent years therefore strikes me as completely counter- productive to securing positions for UK nationals. The level of engagement that the College has had with the cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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EU was, and remains, invaluable in this regard: several of the people running the concours that I encountered were anciens of the College and it was a door-opener (this is equally true with other organisations too). 8 January 2013
Written evidence from Erna Hjaltested, Senior Legal Officer, EEA Co-ordination Division, EFTA 1. You are indeed correct that the EEA Agreement only provides for two ways for a state to be a contracting party to the EEA Agreement, either by being a Member State of the EU or a member of EFTA. As the Agreement stands today, it is therefore not possible to become a party to the EEA Agreement without being a member of either EU or EFTA. 2. With regard to possible amendments of the EEA Agreement, Article 98 of the EEA Agreement states which parts of the EEA Agreement can be amended by a decision of the EEA Joint Committee. Article 102 EEA then lays down the procedure and the general principles for incorporation of new EU legislation. For other amendments, the Agreement does not contain any specific provisions as you rightly state. Hence, any other amendments, such as an amendment of the main agreement, is subject to new negotiations between the Contracting Parties. 14 January 2013
Written evidence from Dr Richard Corbett,121 Member of the Cabinet of Herman Van Rompuy, President of the European Council 1. On Competences The European Union is the framework that we and our neighbouring countries have built up, over a period of decades, not just to help secure peace, but to manage our interdependence. Cautiously, we and the other Member States have gradually enlarged the fields in which we work together at European level. It is worth remembering that EU competences concern subjects on which member states have by common agreement— duly ratified by each and every one of them—decided that it is in our collective best interests to work together, because of our interdependence or because of economies of scale or because of the leverage that it brings at world level. And when something is within the field of competence of the EU, the exercise of that competence normally requires the agreement of the Council—that is of national ministers, members of national governments, accountable to national parliaments. These are not people who by definition want to limit their national margin of manoeuvre unless there is a good case for doing so. That case must convince a qualified majority of them (currently over 70% of the votes), and on many issues, where unanimity is required, all of them. For good measure, the approval of legislation by the directly elected European Parliament is also required, and most national parliaments are now taking advantage of the eight-week period, given to them for prior scrutiny before Council deliberates, to shape the position to be taken by their minister in the Council. So, the idea that “Brussels” arrogates to itself powers and competences against the will of Member States must be taken with a pinch of salt. On the contrary, the EU only deals with subjects that all Member States agreed it should, and even then can only act when an overwhelming majority want it to. In these circumstances, any discussion on devolving powers back to Member States is about reversing a very large onus. It can be done, but requires a big shift in opinion to secure either a qualified majority (and usually support of the EP) to repeal or modify legislation, or else unanimity (and national parliamentary ratification) to amend the treaties. This is true both for a general devolution of powers, or for unilateral opt- outs or derogations. It has been done in the past, to a degree. Competition decisions below a certain threshold were devolved back to Member States’ competition authorities to deal with. Fishing policy reforms currently underway go in the same direction. The EU budget has fallen as a proportion of EU GDP (even ahead of the February 2013 agreement to reduce it in absolute terms) and now represents just 1% of GDP. There are other examples. But they are all collective devolutions, not specific to one country. From time to time, Member States have embarked on new areas of cooperation in which not all wish to participate, most recently the common European Patent. But we have never seen a country retreat unilaterally from existing areas of cooperation. After all, they were all voluntarily embarked upon for good reason, and working together across different fields inevitably involves give and take, the sum of which is positive. It is therefore understandable that there is reticence to the idea of countries leaving existing fields of cooperation. There is a genuine concern that, if every Member State were able to cherry pick those parts of 121 Dr Richard Corbett is an advisor to the President of the European Council, Herman Van Rompuy. This submission is made in a strictly personal capacity. Dr. Corbett has written widely on European matters, including “The European Union: how does it work?” (OUP 2012) and “The European Parliament” (JHP, 8th ed 2011). He was an MEP from 1996 to 2009 and was the Parliament’s co-rapporteur on the Lisbon Treaty. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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existing policies that they most like, and opt-out of those that they least like, the Union in general, and the single market in particular, would soon unravel. Indeed, such concerns explain what is widely perceived to have been the dynamic in December 2011, when the UK’s refusal to allow an amendment to the treaties for matters affecting the eurozone (and not affecting the UK) unless another change were agreed reintroducing unanimity for certain decisions in the financial sector, led to the eurozone countries signing a separate treaty among themselves (joined, in the end, by all others bar the UK and Czech Republic). The perception that the UK wanted to retreat from the principle that single market rules (other than tax) are decided by QMV—the norm since the Single European Act signed by Mrs Thatcher—was quite a surprise to other Member States. Until then, the UK had rarely been out-voted on any important financial sector legislation. Reintroducing unanimity would give Britain a veto it rarely needs, but would give everyone else a veto too, which could be used to block things the UK wants. And if the UK successfully reintroduced unanimity for the financial sector, would others (perhaps more protectionist minded than Britain) not seek to do likewise in fields sensitive for them? There is similar perplexity about the various suggestions currently being floated for UK opt-outs or “repatriations” of power. Why, it is asked, would the UK want to cease cooperation with its neighbours on police & justice matters (given the growing threat of international crime and cross-border evasion)? on fishing (given the unfortunate habit of fish to swim from one country’s waters to another, making the management of stocks impossible to do alone)? on the environment (where common norms are both more effective and also simpler for industry than 27 divergent national norms)? or on the social chapter (regarded by most— notwithstanding a willingness to re-examine individual pieces of legislation—to be part and parcel of the common rules for the common market)? By contrast, on Britain’s pleas for reducing the regulatory burden, there is much sympathy in many other EU countries, and even in the European Commission. There is a focus on this that wasn’t there before. Importantly, it is a common interest, not a unilateral one. And the debate is tempered elsewhere by the appreciation that common rules for the common market, when we get it right, can be an exercise in simplification, cutting red tape. For businesses, replacing 27 sets of disparate and often conflicting national regulations with one common European-wide approach has usually been a huge exercise in cutting costs. Of course, the EU, like any political system and every level of government, has its faults and makes mistakes. There are policies and legislation that need correcting, updating or adjustment. It is a common challenge to correct any mistakes, and ensure that they do not happen again in the future. But simple unilateral opt-outs (or requests to reinstate unanimity where qualified majority voting currently applies) will certainly be resisted. All Member States can, and do, have particular requests and needs that are taken into consideration, provided that the interests of all are not unduly damaged. And every member country brings its own unique contribution to our Union of diversity. Britain’s contribution is greater than it sometimes seems to realise itself. It has been crucial in building the EU’s centrepiece, the single European market, now the largest market in the world, and the common rules for the common market that are necessary for it to function. British expertise in the fields of foreign policy, finance, and trade shape the EU’s policies in these fields. It has led the way on climate change and development aid. It has offered the English language, now in practice the lingua franca of Europe. And Britain, as a trading nation, has a particular interest in the success of this enterprise. Britain is unique—but so is each and every one of the Member States. None has come into the Union in order to lose their character or their identity. The European Union is there to enable us to work together whilst preserving identities—hence the motto “Unity with Diversity”.
2. On a two (or more) Tier Europe Of course, Britain remains outside the euro, and does not therefore participate in the increasingly close cooperation among those who need to jointly manage their common currency. That cooperation may be taken further (see below), but will probably not involve as much integration (beyond what has been agreed already) as some hope and others fear. As President Van Rompuy pointed out last month in London, it is far from certain that it will require further treaty change. But, in any case, the bulk of EU decision-taking is still at the level of all 27 Member States. That will not change. Fields such as the single market, foreign policy, police & justice, development aid, research, the environment, student exchanges, transport links and others are for the whole EU. Yes, there are some other exceptions. Denmark does not participate in defence cooperation; Ireland and the UK are not in all aspects of Schengen; Denmark, Ireland, and the UK have rights to opt-in, or not, to measures in the field of security and justice; the UK and Poland have a protocol with restrictive interpretation of how aspects of the Charter of Rights interacts with their domestic law; Denmark has an exemption from the single market regarding the acquisition of secondary residences on its territory; Sweden does not participate on cross border divorce procedures; Italy and Spain are not joining in on European patents; the UK and the Czech Republic did not sign the Stability Treaty (“Fiscal Compact”). cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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This list covers relatively few fields, and what is also striking is that, in each case, the number of non- participating States is small (and has a different configuration). Thus, every policy area involves the overwhelming majority of Member States. The general unity of the Union remains the rule, non-participation the exception. The reason goes back to what was said in the very first paragraph of this submission: EU competences concern subjects on which member states decided that it is in their collective best interests to work together, because of interdependence or because of economies of scale or because of the leverage that it brings at world level. Such an assessment generally applies to all, not just some, Member States. And when countries have chosen not to participate, it was from the outset of cooperation in the field in question, not opting-out of an already existing policy. Some have expressed a fear that the eurozone will be a “vanguard” for further integration or a cohesive block within the EU in other fields. This is not plausible. On most subjects, the range of views and interests among the 17 are as wide as among the 27: just think of foreign policy, the environment, or police & justice matters. In the one area where such a fear seemed plausible, namely banking regulation, a double majority (of ins and outs) arrangement was found to reassure the outs. Any further eurozone integration will therefore be only about euro-related matters, not a vanguard for a deeper integration in other policy fields. But what is potentially dangerous, is the emergence of new procedures and bodies without every Member State (and not the UK) in the room. Up until recently, a situation of not all Member States participating in a policy field did not entail any division in the institutional structures. For example, UK and Irish ministers sit in the Council and take part in discussions on Schengen related matters, and on the Justice & Home affairs issues they have opted out of, even if they don’t have a vote. In the Parliament, their MEPs do have a vote, and in the Commission too, there is no distinction made by nationality, nor in the Court. The only exception was the “Eurogroup” of finance ministers, but even then, the treaty described this body as “informal”, unable to enact decisions alone. That is now beginning to change. As mentioned above, the British government’s refusal in December 2011 to allow an amendment to the treaties for matters affecting the eurozone (and not affecting the UK) led to the eurozone countries signing a separate treaty among themselves (joined, in the end, by all others bar the UK and Czech Republic). This Stability Treaty creates a partly separate structure, including formal “Eurozone Summits” at the level of Heads of State or government, without the UK in the room.122 It has also triggered discussion about whether non-euro MEPs should vote in the EP on euro related matters, or even whether a separate parliamentary body should be established. It may have made it less likely that a Brit will be chosen as President of the European Council or of the Commission. This situation is, of course, entirely of the volition of the UK government. It need not have happened, and could be rectified if and when the Stability Treaty is integrated into the EU treaties, as intended by the signatories.
3. On Accountability of the Institutions and the Decision-taking System Another important part of the discussion about the future of the EU relates to its democratic accountability— whatever its field of competence. Of course, EU institutions will always be more distant from people than are national or local institutions. That is a good reason not to do things at European level unless there is a good reason to do so. But to the extent that we do—and we do—it must be done in as accountable as democratic way. EU laws are not “diktats from Brussels”. The European Commission in Brussels only has the right to put forward proposals (and to implement what has been agreed). The actual adoption of legislation is done by the elected governments of European countries through their ministers meeting in the EU Council of Ministers. The Ministers are scrutinised by their national parliament. In addition, EU laws also require the approval of the directly elected MEPs in the European Parliament. But does this double check—of needing both a qualified majority (or more) of national ministers in the Council and a majority of MEPs in the Parliament—have its weak links? Are national ministers genuinely accountable for their actions in Brussels to their national parliament? Are MEPs sufficiently representative? On the first question, there is certainly a trend to strengthen ministerial accountability. The requirement for an eight week period to allow national scrutiny to take place before Council deliberates on EU legislation gives national parliaments more time. Some have organised to take advantage of this and genuinely shape the position to be taken by their minister before he or she goes to a Council meeting, rather than just hear about it afterwards. Several national parliaments have revised their procedures on this. There is no doubt scope for further improvement, but this is a matter for each national parliament. They do now compare notes, and many find that the parliaments of the Nordic countries are an example to be followed, with ministers appearing before the appropriate committee before they leave to Council meetings. Whether others should follow is a domestic decision—the EU cannot tell national parliaments how to organise themselves. 122 It was not intended as such. One description (by Luuk van Middelaar) describes the Stability Treaty as a buttress, strengthening the Union from the outside. cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
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One aspect of this prior scrutiny by national parliaments is, however, a European matter: the “yellow card” and “orange card” procedures whereby a national parliament can object that a Commission proposal violates the principle of subsidiarity. Given that the first time that even a “yellow card” was shown (by over a third of national chambers), the Commission withdrew the proposal in question (even though it disagreed that the objections were genuinely about subsidiarity), it can be argued that the yellow card (and certainly an orange card, where over half object) is de facto a “red card”. All the more so, as a proposal is very unlikely to receive the support of a qualified majority in the Council if there are so many national parliaments opposed to it. So why not recognise this? It would not require treaty change: if the Commission were to make a solemn declaration that it would, as a matter of course, withdraw any proposal that had triggered an “orange card”, and normally do so in response to a yellow card, then there would be a more visible and (for national parliaments) reassuring guarantee.
The second question, about the effectiveness of the European Parliament, is also frequently raised. But the existence of a body of full time elected representatives, coming not only from governing parties (as in the Council) but also from opposition parties in each Member State, able to query, question and confirm or reject, is surely a guarantee of pluralism and additional scrutiny of everything the EU does.
The fact that it is elected on a lower turnout than we are used to in national elections does not detract from that, any more than does the similar turnout for US Congressional elections (or the even lower turnout in local elections) render those institutions invalid. Its turnout is lower than national elections because less is at stake than in them. And most national parliamentary elections in Europe also have a visible impact on the choice of the government or head of government, whether it is closely linked as in the UK or only generally, as in Belgium or the Netherlands. It will be interesting to see if this begins to change with the treaty provision that the EP will henceforth “elect” the President of the Commission, and the stated intention of the main European political parties to have candidates for this post as part of their election campaigns. In any case, this is more realistic and more appropriate than ideas to have a direct presidential election on the American model.
The strengthening of both parliamentary dimensions (national and European), which has been the trend for over twenty years, means that we now have an EU that is subject to more checks and balances, and far more parliamentary scrutiny, than ever before and more than in any other international structure. It needs to be highlighted, not denigrated.
To sum up:
— The fields of EU competence are ones where Member States have, for good reasons, all chosen to act jointly at European level. When they then do so, specific actions have to be agreed by an overwhelming majority of national governments.
— In a few cases, cooperation has been established in certain fields without one or more Member States, who chose at the outset not to join in. However, none have unilaterally retreated from areas which they have chosen to join. Attempts to do so are unlikely to be treated sympathetically, especially if they involve the common rules for the common market—the bulk of what the EU does. They would need genuinely good reasons, which are hard to discern.
— Multilateral devolution of competences (or loosening of existing requirements) is possible, and has been done—though it requires winning an argument reversing the burden of proof from the original decision to act jointly at European level.
— On the other hand, reform and updating of existing EU legislation, for instance to lessen the regulatory burden, is perfectly possible and is on-going.
— Further pooling of competences in the eurozone (which in any case may not be as far reaching as some think) does not detract from the fact that the bulk of EU competences and decision- taking will remain at the level of the whole EU. The UK should not encourage any duplicate institutional structure. Its policy should be to be in the room and in the discussions.
— Democratic accountability in the EU has been improved in recent years, by strengthening both the European and national parliaments. Further progress can be made on enhancing national parliamentary scrutiny over the minister representing them in the Council and on recognising that “orange cards” and perhaps “yellow cards” are in practice a “red card”. It remains to be seen how the election of the Commission President by the EP will work in practice, with the stated intention of the main European political parties to propose candidates ahead of the EP elections. 19 March 2013 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Foreign Affairs Committee: Evidence Ev 189
Written evidence from HE Laetitia van den Assum, Ambassador of the Kingdom of the Netherlands 1. With reference to your letter of 31 January 2013 regarding your inquiry into The future of the EU: UK Government policy, I would like to inform you of the following. 2. In the Netherlands, like in other EU Member States, the exercise of competences at the EU level vis- à -vis other levels of government has increasingly gained attention. It is against this background that earlier this year, following up on a commitment laid down in the coalition agreement, the Dutch Government launched a cross-ministerial process to look into the issues of subsidiarity and proportionality. Participating ministries are expected to make an internal assessment, as well as to consult with stakeholders, to identify aspects of EU policy that could possibly be addressed more effectively on the national or local level. We will not subject all European legislation to a subsidiarity and proportionality test again. Together with experts and stakeholders our ministries will be able to take stock of sufficient examples of regulations, directives and decisions that cannot stand the test of subsidiarity and/or proportionality based on experiences, practical bottlenecks, or changed circumstances since adoption. No other Member States or the EU institutions will be asked to contribute to this exercise. 3. On the basis of the results of this stocktaking exercise we will prepare a report with recommendations, which we aim to conclude by late September 2013. Shortly after that we intend to submit the results to the European Commission, in line with the mechanisms of the Smart Regulation Programme and the Better Regulation Action Plan. 4. The process is being coordinated by a task force set up within the Ministry of Foreign Affairs, which will also formulate the recommendations. 5. At this stage in the process, the Government has not yet identified any policies or areas that cannot stand the test of subsidiarity or proportionality (excluding draft EU legislation that is currently negotiated). 12 April 2013
Written evidence submitted by VoteWatch Europe [Note: at the Committee’s request, VoteWatch Europe supplied the data below for July 2009-March 2013 to update the data presented in Figures 6, 7 and 8 of its report Agreeing to Disagree: The Voting Records of EU Member States in the Council since 2009, published in July 2012 and available at: www.votewatch.eu/blog/ wp-content/uploads/2012/07/votewatch-annual-report-july-2012-final-7-july.pdf]
VOTING TRENDS IN THE COUNCIL OF THE EU 1. Overall Statistics, all Votes in Council, July 2009Ð22 March 2013 Total votes cast in % in non- No. of % in minority in Total votes unanimous statements minority disputed % with Member State cast situations drafted overall votes statements United 391 117 30 10.49 35.04 7.67 Kingdom Austria 406 125 23 5.91 19.20 5.67 Germany 406 125 29 5.42 17.60 7.14 Netherlands 405 125 25 4.69 15.20 6.17 Denmark 379 113 16 4.22 14.16 4.22 Portugal 406 125 22 3.45 11.20 5.42 Sweden 405 125 25 3.21 10.40 6.17 Poland 405 125 21 2.96 9.60 5.19 Ireland 390 116 21 2.56 8.62 5.38 Italy 404 125 25 2.48 8.00 6.19 Spain 404 125 20 2.23 7.20 4.95 Czech 405 125 15 2.22 7.20 3.70 Republic Bulgaria 406 125 16 1.97 6.40 3.94 Slovenia 406 125 13 1.72 5.60 3.20 Slovakia 405 125 8 1.48 4.80 1.98 Finland 405 125 18 1.48 4.80 4.44 Estonia 405 125 10 1.48 4.80 2.47 Romania 406 125 10 1.48 4.80 2.46 Belgium 406 125 11 1.48 4.80 2.71 Hungary 406 125 9 1.23 4.00 2.22 Malta 406 125 19 1.23 4.00 4.68 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 190 Foreign Affairs Committee: Evidence
Total votes cast in % in non- No. of % in minority in Total votes unanimous statements minority disputed % with Member State cast situations drafted overall votes statements Luxembourg 406 125 9 1.23 4.00 2.22 Latvia 406 125 14 0.99 3.20 3.45 Greece 405 125 14 0.49 1.60 3.46 France 406 125 19 0.00 0.00 4.68 Cyprus 405 125 8 0.00 0.00 1.98 Lithuania 405 125 9 0.00 0.00 2.22
2. Percentage of Votes in which Member States were in a Minority, all Votes in Council, July 2009Ð22 March 2013 Member State % in minority overall United Kingdom 10.49 Austria 5.91 Germany 5.42 Netherlands 4.69 Denmark 4.22 Portugal 3.45 Sweden 3.21 Poland 2.96 Ireland 2.56 Italy 2.48 Spain 2.23 Czech Republic 2.22 Bulgaria 1.97 Slovenia 1.72 Slovakia 1.48 Finland 1.48 Estonia 1.48 Romania 1.48 Belgium 1.48 Hungary 1.23 Malta 1.23 Luxembourg 1.23 Latvia 0.99 Greece 0.49 France 0.00 Cyprus 0.00 Lithuania 0.00 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Foreign Affairs Committee: Evidence Ev 191
3. Percentage of Votes in which Member States were in a Minority, Non-Unanimous Votes in Council only, July 2009Ð22 March 2013 % in minority in Member State disputed votes United Kingdom 35.04 Austria 19.20 Germany 17.60 Netherlands 15.20 Denmark 14.16 Portugal 11.20 Sweden 10.40 Poland 9.60 Ireland 8.62 Italy 8.00 Spain 7.20 Czech Republic 7.20 Bulgaria 6.40 Slovenia 5.60 Slovakia 4.80 Finland 4.80 Estonia 4.80 Romania 4.80 Belgium 4.80 Hungary 4.00 Malta 4.00 Luxembourg 4.00 Latvia 3.20 Greece 1.60 France 0.00 Cyprus 0.00 Lithuania 0.00
4. Percentage of Votes Accompanied by Statements out of Total Votes Cast in Council, July 2009Ð22 March 2013 Member State % with statements United Kingdom 7.67 Austria 7.14 Germany 6.19 Netherlands 6.17 Denmark 6.17 Portugal 5.67 Sweden 5.42 Poland 5.38 Ireland 5.19 Italy 4.95 Spain 4.68 cobber Pack: U PL: COE1 [E] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Ev 192 Foreign Affairs Committee: Evidence
Member State % with statements Czech Republic 4.68 Bulgaria 4.44 Slovenia 4.22 Slovakia 3.94 Finland 3.70 Estonia 3.46 Romania 3.45 Belgium 3.20 Hungary 2.71 Malta 2.47 Luxembourg 2.46 Latvia 2.22 Greece 2.22 France 2.22 Cyprus 1.98 Lithuania 1.98
5. Combined Presentation In minority in Member State In minority overall disputed votes % with statements United Kingdom 10.49 35.04 7.67 Austria 5.91 19.20 5.67 Germany 5.42 17.60 7.14 Netherlands 4.69 15.20 6.17 Denmark 4.22 14.16 4.22 Portugal 3.45 11.20 5.42 Sweden 3.21 10.40 6.17 Poland 2.96 9.60 5.19 Ireland 2.56 8.62 5.38 Italy 2.48 8.00 6.19 Spain 2.23 7.20 4.95 Czech Republic 2.22 7.20 3.70 Bulgaria 1.97 6.40 3.94 Slovenia 1.72 5.60 3.20 Slovakia 1.48 4.80 1.98 Finland 1.48 4.80 4.44 Estonia 1.48 4.80 2.47 Romania 1.48 4.80 2.46 Belgium 1.48 4.80 2.71 Hungary 1.23 4.00 2.22 Malta 1.23 4.00 4.68 Luxembourg 1.23 4.00 2.22 Latvia 0.99 3.20 3.45 cobber Pack: U PL: COE1 [O] Processed: [06-06-2013 12:39] Job: 022929 Unit: PG05 Source: /MILES/PKU/INPUT/022929/022929_w042_michelle_FEU 39 VoteWatch Europe FOR PUBLICATION.xml
Foreign Affairs Committee: Evidence Ev 193
In minority in Member State In minority overall disputed votes % with statements Greece 0.49 1.60 3.46 France 0.00 0.00 4.68 Cyprus 0.00 0.00 1.98 Lithuania 0.00 0.00 2.22
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