The Future of European Integration

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The Future of European Integration

• Richard E. Baldwin Professor of International
  Economics, Graduate Institute of International
  Studies, Geneva
• Bern 16 November 2005

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The Headlines

• French Dutch voted no this summer.
• EU leaders agreed to suspend the ratification
  process,
• deadline of November 2006 erased, so no deadline.

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Is the CT Dead?

• Case for defence (i.e. no its not dead)
• Danish said no to Maastricht Irish said no to
  Nice
• ERGO, EU leaders can fix this one too.

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Case for prosecution (i.e. its dead)

• French Dutch nos very different to Danish and
  Irish nos.
• 29 million French voters cast ballots with 15.5
  million saying no.
• Netherlands, the 61.5 no-vote meant 4.7 million
  Dutch rejected the Treaty.
• Irish no on the Nice Treaty
• Very low turnout (35) Only 529,4768 said no.
• No votes minus yes votes 76,017 votes.
• Identifiable swing voters were known
  Reassurances on neutrality.
• Danish no to Maastricht
• High turnout (83) Outcome VERY close, 50.7
  said no.
• No votes minus yes votes 46,269 votes.
• Again easily identifiable swing voters opt out
  of euro.

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Case for prosecution (i.e. its dead)

• 20 million Dutch and French voted no
• Healthy turnouts
• Very energetic campaigning for yes
• Causes of the no extremely diffuse
  ill-defined
• Seemed to be a general reaction rather than a
  specific objections.
• Not easy to identify swing voters who could be
  assuaged.
• Attempts to cajole voters could backfire.
• Current and likely future French governments will
  not want another fight with the voters.
• Wont risk adopting the Treaty despite the
  plebiscites.
• Trust me, its dead.

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How did we get here?

• Since 1994, Eastern enlargement of EU was
  inevitable so EU institutional reform required.
• Ten years of failed reform efforts.
• History of this critical to understanding whats
  next.

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Amsterdam Nice Failures

• 1996 IGC was supposed to reform EU institutions
  in preparation for Eastern enlargement.
• Amsterdam Treaty failed ? Amsterdam leftovers
• 1. Council voting (QMV), 2. Commission
  composition, 3.Extension of QMV to more areas.
• 2000 IGC was supposed to finish the leftovers.
• Nice Treaty failed ? Nice leftovers.
• Nice Treaty Council voting system will not work,
  Commission not settled, little extension of QMV.

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Nice leftovers

• Nice Treaty includes Declaration on the future
  of the Union. highlighted four themes
• defining a more precise division of powers
  between the EU and its members
• clarifying the status of the Charter of
  Fundamental Rights proclaimed in Nice
• making the Treaties easier to understand without
  changing their meaning
• defining the role of national parliaments in the
  European institutions.
• NB no mention of a Constitution.

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Laeken Declaration

• 1 yr after Nice, Declaration on the Future of
  the European Union. Laeken Declaration
• Established the Convention on Future of Europe
• 56 questions for the Convention grouped into the
  main themes of the Nice Declaration.
• Two crucial novelties.
• 1. Implicitly admits Nice Treaty failure.
• Reform the Nice reforms, even before they were
  tried.

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Laeken Declaration

• 2. The C-word appears for first time
• BUT, it did not instruct the Convention to write
  a constitution,
• includes a section entitled Towards a
  Constitution for European citizens.

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EU reform history

• Giscard dEstaing turned a vague mandate into a
  Constitutional Treaty.
• Wildly undemocratic procedure Consensus with
  Giscard as sole arbitrator.
• George Tsebelis (UCLA political scientist)
• Giscard expanded the authority of the
  Convention, and shaped the document that it
  produced. By eliminating votes, he enabled the
  presidium and the secretariat (which means
  himself) to summarize the debates. By stretching
  the concept of agenda in order to place issues in
  the debate, by using time limits in as a way of
  limiting possible opponents from making
  proposals, by selecting the staff members
  himself, and taking them away from every possible
  source of opposition he was able to shape the
  document in a very efficient way. This is one
  of the reasons that the process is encountering
  significant problems for ratification. (Tsebelis
  2005).

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Summary of CT

• Key point Legal logic implies no real
  constitution was possible.
• Maintain all at primary level.

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Summary of CT

• Euro-sceptics wanted to ensure European
  integration would not deepen without unanimous
  support.
• Federalist wanted to leave door open.
• RESULT Very awkward balance, but on the whole
  the CT at least keeps the door open to deeper
  integration.
• Passerelle flexibility clauses (Treaty revision
  without a new Treaty)
• Removal of the 3-pillar structure.
• Inclusion of the Social Charter in the
  Constitution Fundamental rights
• Name could be important to the Court in future.
• Pillar removal Fundamental rights thin edge
  of the social policy wedge.

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Summary of CT

• The articles in the Constitution fall into three
  groups
• i) Non-changes
• ii) Non-laws greater advisory role of national
  parliaments on subsidiarity, creation of the
  Council President and modifications of the
  rotating Presidency, creation of Mr Foreign
  Policy and reorganisation of EU foreign policy
  and the possibility of popular initiatives
• iii) Major legal changes
• the new voting rules,
• Commission size allocation
• the Charter of Fundamental Rights,
• removal of the pillar system
• New ways to modify the Treaty bypassing national
  ratification. (Passerelle clauses)

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Summary of CT

• Many changes possible without Treaty revision
• EU has long experience with this.
• Whats not possible
• Social Charter
• Removal of pillars
• Passerelle
• Voting
• Commission

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Key points

• 1. EU leaders never asked for a Constitution
• 2. The Council voting rules from Nice were so bad
  that EU leaders agreed to reform them even before
  they had been tried.
• Treaty of Nice voting rules are still in place
  (but they would have been in place until 2009 in
  any case).
• 3. Giscard created an extremely ad hoc coalition
  behind the CT.
• Hard to explain what it was about.
• Not easy to reassemble the coalition.
• CEECs were second class citizens at the
  Convention not involved in setting the Agenda
  (Laeken Decl.)

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IMHO

• No way to renegotiate the CT.
• EU leaders will not allow another Giscard to
  control the agenda.
• Much wider differences among EU25 than EU15.

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What must be done?

• Voting rules still need to be fixed.
• Need big detour to explain why.

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Nice Treaty Voting Rules

• 3 main changes for Council of Ministers
• Maintained weighted voting in place since 1958
• Majority threshold raised
• Votes reweighted, favouring large members
• Added 2 new majority criteria
• Population (62) and members (50)
• These rules will not work.

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Efficiency

• A quantitative measure of decision-making
  efficiency, or ability to act
• Passage probability
• Look at all possible coalitions of yes no
  (134 million in EU27)
• Calculate the share of these that wins given
  specific rules and distribution of voting weights.

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Nice Voting Rules Wont Work
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Examples
EU27-population threshold
(millions of citizens)
Council-votes
threshold
Number-of-Members
threshold
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Political difficulties power measures

• Formal power measures
• Power probability of making or breaking a
  winning coalition

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Political difficulties Winners Losers
Poland Spain Italy France UK Germany
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Political difficulties Winners Losers
Germany
Poland Spain
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Whats next?

• Need to fix voting rules, so need a new Treaty.
• No new CT likely.
• Could do it in the Accession Treaties?
• Could be part of a Grand Bargain with new
  Member States.
• My guess
• Years of decision-making deadlock before voting
  reform.
• Most likely in context of the long-term budget
  talks in 2012.

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Provocative part of the talk

• New members competition for budget
• EU budget 80 on farms and poor regions
• New members have lots of farmers and poor regions
• 1/3 as rich as EU15 average
• 3 times more agrian
• Newcomers have much power in Council, What will
  they do with it?
• They will probably push for more SF and less CAP
  (at least in post 2013 budgets)

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Enlargement difficulties

• The 2004 enlargement creates huge problems since
  the club was designed for roughly similar
  members but now some are poor and agrian as
  Brazilians.
• The EU will straighten out these difficulties,
  but doing so will radically alter the EU.
• My conjectures

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Solutions

• More quick fix reforms?
• Radical re-think
• EU does 2 types of things
• Positive sum e.g. Integration, coordination
• All members can win
• Zero sum e.g. Budget
• One members gain is anothers loss.

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Concentrate on the positive

• Decision-making on positive sum issues is much
  easier
• Why not eliminate zero-sum decisions?

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My proposal

• Summary
• Nationalise Common Agricultural Policy (CAP)
• Turn Structural Spending into project funding
• Reduce EU budget by 50 to 80.

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Nationalise the CAP

• CAP spending not solidarity based
• 0.6 of EU citizens receive 40 of EU budget
• Rich, northern farmers get most of the money,
  e.g.
• Queen of England, etc. (UK, Belgium, Denmark)
• Could reduce CAP spending in France by 50
  without touching the receipts of 95 of the
  farmers.

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Nationalise the CAP

• Agriculture is not common
• Arctic tundra to Carnary Islands to Agean Sea
• Nations have right to transfer income among
  society groups.
• Why channel this through EU budget when this
  causes conflict?
• Switzerland and Norway provide HIGHER support to
  their farmers, without the CAP

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Nationalise the CAP

• De-link production and subsidies
• Apply appropriately modified Single Market rules.
• Let national preferences decide

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Structural spending

• Structural spending is not solidarity based
• Fish and fishing.
• What is the idea of structural spending?
• Charity? or Venture Capital?
• If Charity should be income tested
• If Venture Capital should have project evaluation

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Structural spending

• Charity is not the way forward
• too many poor entrants donor fatigue
• Project financing, World Bank-style
• Automatically limits spending
• 1 or 2 of GDP is typical
• Greatly reduces political conflict in EU
• Money more efficiency spent
• Bigger impact on real convergence

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My proposal

• Reduce EU budget by 50 to 80
• Reduce national contributions by same
• Nationalise CAP
• Structural Spending as Project Funding

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Further out on the limb

• EU institutions budget will be reformed to
  deal with new members (poor, agrian populous)
• Whatever these are, theyll make further
  enlargement easier.
• SO, the EU will continue to enlarge.
• Bulgaria, Romania, Croatia, Turkey, Serbia
• As it enlarges, enlargement will become easier.
• EU as the Single Market Clubs within the Club.

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And Switzerland?

• What does this all mean for CH?
• Difficulties making decisions
• ? Status quo bias
• Bilateral route will be hard to change, for
  better or for worse.
• But as EU enlarges, itll be harder for Swiss to
  bargain for special deals.
• Membership will be politically easier.
• EU membership Single Market and then a la carte
  (euro, common defense policy, Schengen, etc.)
• Sticky point remains supremacy of EU court on
  Single Market matters.

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End
Thank you for listening Many of my essays on
these topics on www.hei.unige.ch/baldwin/
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