Background Brief No 2 March 2010 Implications of the Lisbon Treaty on EU External Trade Policy Synopsis Contents This background paper examines the changes introduced by the Lisbon Treaty (which entered into force in December 2009) to the European Executive Summary 2 Union Common Commercial Policy (CCP) and the Background Brief likely implications for the EU’s trading partners. It Main provisions of Lisbon Treaty 5 begins with an overview of the major changes Changes in Common Commercial Policy 8 brought about by the Lisbon Treaty on the EU’s Increased role for European Parliament 9 external action and then elaborates more on the EU Trade Policy System of Competence 12 specific changes in the area of CCP. The paper Implications of changes in CCP for EU further puts forward some possible implications trading partners 13 that these changes may have for EU’s external trade relations with third countries. Author Ms Anne Pollet-Fort Associate Fellow, EU Centre Contributor Arturs Alksnis The EU Centre is a partnership of: Research Associate, EU Centre Editor Dr Yeo Lay Hwee Director, EU Centre in Singapore IMPLICATIONS OF THE LISBON TREATY ON THE EUROPEAN UNION EXTERNAL TRADE POLICY (COMMON COMMERCIAL POLICY) EXECUTIVE SUMMARY The Lisbon Treaty that was signed and ratified The EU trade policy has now to be seen as by all EU member states (MS) came into force an integral part of overall EU external on 1 December 2009. The Treaty is intended to action and its relations with third make the EU more efficient, more democratic countries internally and more coherent on the world stage. It introduces a number of changes to One of the main objectives of the Lisbon Treaty the institutional structure and functioning is to increase the coherence and the efficiency which would also have an impact on EU of the European Union’s external action. policies. The Lisbon Treaty brings the current external The EU now has a single legal personality, Community policies together in a more which enables the EU as a whole to negotiate comprehensive manner. All elements of the and sign in its name international treaties and EU’s external action - from the Common agreements. To enhance the visibility of the EU Foreign and Security Policy to trade policy for and streamline the external representation of example - are from now on submitted to the the EU, two new positions have been created: same principles and objectives. These include the Permanent President of the European inter alia human rights, good governance, Council and a High Representative for the environmental protection and sustainable Union’s Foreign and Security Affairs. Their development. work will be supported by a new agency, the European External Action Service. This implies that the EU in formulating its trade policy not only considers the economic Of particular relevance to the EU trading liberalization agenda, but has to take into partners such as Singapore are changes aimed account other objectives. The Treaty may at making the EU trade policy more therefore provide a basis for the use of comprehensive and more democratic. More conditionality in trade policy, and lead to the generally, the Lisbon Treaty also seeks to “politicization” of trade policy, something that achieve greater consistency between the may not be welcomed by EU’s trading partners. different elements of the EU’s external action. The Lisbon Treaty introduces three main How the current Trade Commissioner, Karel De changes to its external trade policy or what is Gucht interacts with Catherine Ashton, the usually Common Commercial Policy (CCP) in EU newly appointed High Representative of the terminology: Union for Foreign and Security Policy whose task is to ensure the consistency of the EU’s external action, could also be an issue of interest but may not necessarily have a huge impact on the overall conduct of trade relations with third countries. | Page 2 The European Parliament (EP) is given Some services and some trade related more powers in trade policy intellectual property rights fell under the European competence while some others fell To increase the democratic accountability of under the shared competences of the EU and the EU trade policy, the Lisbon Treaty gives the MS. Foreign Direct Investment was also an more power to the EP in scrutinizing trade area of mixed competence, giving the MS the policy. Before Lisbon, the EP only had a limited freedom therefore to negotiate its own role in the negotiations and conclusions of bilateral investment treaty (BITs) outside trade trade agreements and in the adoption of trade agreements. legislation. After Lisbon, the EU legislation for implementing trade policies will now be co- With the Lisbon Treaty, trade in goods and decided by the Council and the EP. services, commercial aspects of intellectual property and foreign direct investment will Furthermore, the Commission has to report now all fall under the exclusive competence of regularly to the Special Committee of the EP on the European Union. Member states (MS) will the progress of trade negotiations, and more no longer be able to conclude its own bilateral importantly, the EP must now give consent investment treaties (BIT) unless they are before a trade agreement can be adopted. This empowered by the EU to do so. This also raises means that the opinion of the EP becomes concern as to what would happen to existing essential and this even before the initiation of BITs that MS concluded with its third countries. any future trade negotiations if one wants to The Treaty notes that MS will be obliged to avoid the risk of having the entirety of the adapt their BITs to EU law. How this would be agreement blocked by the EP. However, it is done is however not clearly spelt out, and in important to point out that the Lisbon Treaty the short term a “grandfathering solution” is does not grant the EP powers to authorize the likely to be adopted. This means that an EU to engage in trade negotiations. This power exemption might be granted allowing the still belongs exclusively to the Council. existing BITs to be kept in place until the adoption of EU investment agreements. The enhanced role of the EP will also increase the possibility of having non-economic All these changes to bring trade in goods and objectives such as human rights and social services and FDI under the exclusive standards issues being included in future trade competence of the EU are expected to agreements. The increased role given to the EP contribute to a streamlining of the trade policy. in the EU trade policy may therefore contribute The need for further mixed agreements will to increased politicization of future trade reduce significantly. Future trade agreements negotiations leading to uncertainties and concluded by the EU are likely to be possible delays in getting a trade agreement comprehensive economic agreements covering through. all aspects of trade and investments. The system of allocation of competences in the area of EU trade policy is clarified Conclusion Before the Lisbon Treaty, the allocation of The extent of the impact of reforms introduced competences between the European by the Lisbon Treaty on the EU’s external trade Community and the Member States (MS) was relations is still not entirely clear as the Treaty complex and difficult to comprehend. Trade in just came into force in December 2009. What is goods was an exclusive European competence. important to note is that the EU’s trading | Page 3 partners will have to look more broadly to the the EU on trade issues. It is no longer enough EU’s trade policy as an integral part of its just to lobby the key players in the Commission overall external action globally. This may mean and the Council. The key players in the that non-trade policy issues may gain traction International Trade Committee of the EP, and and impact specific trade agenda and the political leanings and mood of the EP will negotiations. Secondly, the EU’s trading have an impact on the negotiations and partners will have to watch more closely the conclusions of any trade agreement. European Parliament (EP) when dealing with | Page 4 IMPLICATIONS OF THE LISBON TREATY FOR THE EUROPEAN UNION EXTERNAL TRADE POLICY (COMMON COMMERCIAL POLICY) Written by Anne Pollet-Fort, Associate Fellow, EU Centre (with inputs from Arturs Alksnis, Research Associate, EU Centre) Edited by Yeo Lay Hwee, Director, EU Centre in Singapore Introduction in to focus on the three key changes in the EU’s Common Commercial Policy that might have On 1 December 2009, the Treaty of Lisbon implications for EU relations with its trading entered into force. This Treaty actually refers partners. to the Treaty amending the Treaty of the European Union (1992, commonly referred to Main Provisions of the Lisbon Treaty in as the Maastricht Treaty) and the Treaty the area of EU’s External Action establishing the European Community (1957, commonly referred to as Treaty of Rome). The The Lisbon Treaty groups together the multiple latter is renamed the Treaty of the Functioning aspects of the EU’s foreign policy and external of the European Union (TFEU). relations under the new heading of “Union’s External Action”. External Action includes the The aims of the Lisbon Treaty is to make the policy areas covered by Title V of the Treaty of European Union (EU) more efficient, more the European Union (TEU), and Part V of the democratic internally and more coherent on Treaty of the Functioning of the European the world stage. It introduces a number of Union (TFEU), namely Common Foreign and changes to modernize EU institutions and Security Policy, Common Commercial Policy, optimize working methods in the EU.