World Trade Organisation, WTO
- World Trade Organization headquarters in Geneva (Photo: World Trade Organisation)
United Nations` specialised international organisation for trade.
The WTO, which replaced GATT, is tasked with organising world trade on free trade principles.
The EU is represented in WTO trade talks by the EU Commission. The member states are also represented in WTO but each member state is bound to support the common EU position in the areas where the EU has an exclusive competence as in most trade.
If a WTO agreement contains parts where the EU is not fully competent agreements can be co-signed by the member states. In 1994 the EU Court decided that the EU was not fully competent for all parts of intellectual property rights. Then, the member states had to co-sign the full agreement.
This difficulty was eliminated by the Nice Treaty. But the Nice treaty still raise difficulties for parts of trade in some sensitive services. The Lisbon Treaty will eliminate these remaining difficulties as the Nice Treaty eliminated the difficulties for intellectual property rights.
Most EU positions are adopted by qualified majority. The Treaty of Lisbon calls for the use of qualified majority voting in all international agreements where the internal decisions relating to them are agreed by a qualified majority.
This principle is not new. It was decided by the Court in the AETR verdict. But the principle may now be used in many more areas because the Lisbon Treaty widen the scope for EU regulation and introduce 49 new areas with qualified majority voting where the member states can no longer veto joint legislation.
The internal competences increase and these expansions are automatically followed by a parallel increase of the external competences of the new Union - if the Lisbon Treaty is ratified by all 27 member states.
The new derogations are very narrow for trade in health, education and services. The rule is qualified majority but then a member state can call for the use of a safety clause. It is not a general veto right. A member state can only call for unanimity if the international agreement "risk seriously disturbing the national organisation of such services".
The member state must be able to prove that before the Commission and the Council of Ministers.
The Lisbon Treaty offers the EU exclusive competence in all "common commercial policy" with the new Art. 3 TFEU. The common commercial policy is a wider concept than trade which have been developed into almost an exclusive EU competence.
The Lisbon Treaty also offers the EU legal personality with Art. 47 TEU allowing the EU to enter into all kind of international agreements where the EU decide internally. The agreements are entered into according to Art. 207, 212.3 and 218.8 TFEU.
There are no limits in Art. 216.1 TFEU defining the scope for international agreements entering into by the EU as long as the EU has the the internal competence.
The Lisbon Treaty also explicitly extend the scope for trade agreements to include direct foreign investments and trade with intellectual property, see Art. 206 and 207 TFEU.
It is difficult to find areas where the EU should not be able to enter into WTO agreements without decision by qualified majority or/and a requirement for co-signatures by the member states.
Trade in a very little part of transport services may still be an exemption where it is possible to require unanimity. But even this exemption can also be deleted by a unanimos decision among prime ministers using the new proposed method for simplified treaty amendment in Art. 48.6 TEU.
The Lisbon Treaty offers the European Parliament a greater say in trade agreements. The Parliament will have to vote for the most important agreements for them to enter into force. The Parliament must approve with absolute majority of members, which is 378 of 754 MEPs.
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Comments
In the Irish debate on the Lisbon Treaty the WTO was heavily debated. The first comment look more detailed at the articles for discussion. There is also a different comment by David O`Sullivan, former secretary general and now director general in the European Commission with responsability for trade.
World Trade Organisation (WTO) – Veto disappear
By Jens-Peter Bonde (MEP from 1979-2008)
Agreements in the World Trade Organisation are negotiated by the European
Commission under their own competences or after mandate from the Council of
Ministers. Under the existing Nice Treaty the EU competence to enter into
international agreements is parallel to the competence for internal
legislation.
When the EU has the right to decide laws for the EU countries they have an
automatic right to enter into international agreements as well. This principle
follow from several court cases. It is now extended with the Lisbon Treaty as a
general competence to enter into all kind of agreements with other states or
international organisations in areas where the EU decide internally.
The EU has gradually won most trade as an exclusive competence. Art. 3 TFEU
would establish the wider "common commercial competence" as an
exclusive EU competence.
The entire new Union will become a so-called “legal personality". According to Art. 47 TEU the EU will have the competence to negotiate on behalf
of all member states. The principles and the procedures are laid down in the
Lisbon Treaty in Arts. 206-207, 212 and 218-219 TFEU.
Exclusive competence means that member states are only allowed to act if they
are specially permitted by the Union. They can do nothing on their own. The
competence for entering into commercial agreements with third countries or
international organisations will be fully lost by the Lisbon Treaty.
Under the Lisbon Treaty international trade agreements will normally be decided
in the EU by qualified majority in the Council of Ministers. But an overall
agreement may still contain single topics for which unanimity is required or
where the EU may have no formal competence for internal legislation.
In the latter case, the EU can then establish mixed agreements with the
additional signatures of each member state and/or it can add an extra legal
base, e.g. the flexibility clause of Art. 308 – Art. 352 TFEU in the Lisbon
Treaty – requiring unanimity. The full agreements are then formalised by
consensus in the Council.
This method has often been used in the past, also because the EU Court in a statement from
1994 did not give the EU a specific competence to enter into agreements on all
parts of intellectual property rights. This practise from the past is now used by
the Irish government to guarantee Irish farmers a veto on the agricultural
package in the ongoing Doha-round. This is for good and bad misleading.
The government's statement supported by a declaration from the European
Commissions` Dublin office is misleading for two different reasons.
Inclusion
of single topics requiring a unanimity decision in the EU for the next WTO
agreement does not mean that member states can veto the parts being dealt with
by qualified majority. Negotiations are prepared. The full internal legislation and the often parallel negotiating instructions for
agriculture to the Commission can be established by qualified majority in the
Council.
The Lisbon Treaty make majority voting the normal rule and also contains more specific amendments in order to avoid the
requirement of consensus and joint conclusions of mixed agreements with
national co-signatures.
Trade agreements on the commercial aspects of intellectual property rights is
not a shared EU/member state competence anymore. This change has
outlawed the previous court decision on WTO and opens for “exclusive” EU agreement
including intellectual property rights. This is called “TRIPS” in WTO language.
There is a requirement for unanimity when internal rules so require. But this
clause can not be used for other aspects or for parts where the internal
decisions in the EU can be dealt with by qualified majority. The derogations
for unanimity can also be deleted by unaninimity.
Under the Doha round the TRIPS part only include matters which are dealt
with by majority decisions in the EU. This is e.g. names for the origin of
products where the EU position is decided by qualified majority. From this part
of Doha there will come no veto to Ireland.
Then the Lisbon Treaty includes a safeguard clause for aspects of services. It
is possible to claim unanimity but only if a country can prove that the
national organisation of the service in health, culture or education risk
“seriously disturbing the national organisation” of that service.
“Seriously disturb” has to be accepted by the Commission or by a qualified
majority - or unanimity - in the Council. No part of the Doha round includes
such services which could seriously disturb the national organisation of the
services - in the eyes of the Commission or a qualified majority in the
Council.
The Commission has the monopoly of initiating this clause and will never allow
a member state to block a whole Doha agreement on that reason. Particularly not
if the real reason from the member state concerned is the agricultural part of
the deal.
The major elements of WTO agreements are based on Treaty Articles where
all internal rules are decided by qualified majority. Here there is no national
veto. Agriculture is the clear-cut example where no member state can activate a
veto, whether for internal rules or for international agreements in the WTO.
The foreseen changes in the Lisbon Treaty are designed to avoid the few
remaining unanimity problems of the past where one single point requiring unanimity
could mean that the whole package should be decided by unanimity. In EU chargon
it is called for the "pastis principle". One unanimity drop could
color the whole package.
Until 1984 it would have been possible to activate a veto according to the
so-called Luxembourg compromise. But this special type of veto has not been
used successfully since the adoption of the Single European Act in 1987. This
political veto was never a legal right. It will now be formally removed by the
Lisbon Treaty establishing completely new voting rules with.
The new rules can be upheld with the so-called new Ioannina compromise. Here a
blocking minority can upheld a decision for maybe three months. But no single
country can block the vote according to the voting rules for ever.
If a member state sought to misuse its right to block a full WTO agreement by
vetoing the full agreement because of elements which can be dealt with
internally by a qualified majority vote, the other member states can just
divide the agreement into two or more agreements where a qualified majority
would bind all member states to the deal in the areas where the internal rules
are decided by qualified majority.
For agriculture there is no veto at all – and even better or worse: The new
Lisbon system of voting may kill the existing culture of consensus in the
Council.
In the Nice Treaty there are still many areas requiring unanimity. Countries
are thereby depending on each other. If you bully me today, I will bully you
tomorrow. Since no one want to be bullied, the member states often reach
agreement by negotiating package deals which will have something for everyone.
The Lisbon Treaty will make the other member states independent of the Irish
voice in the EU in quite a new way. Ireland - and all other member states - will lose 68 areas for veto. Ireland will also lose the right to nominate Ireland’s permanent seat on the Commission by a
person of own choice. The Commission is the body which has the monopoly of
proposing negotiating mandates for the WTO.
Ireland will further erode the influence in the Council by reducing the Irish
share of the vote from 2% to 0.85 %. The Irish share in the blocking minority
will fall from 7.7 % today to 2.4 % after Lisbon. Germany’s voting share will
double because of its population size and the voting share of France, the UK
and Italy will increase by 50%.
Under Lisbon Germany, the UK and the other big member states will dominate
decision-making in the EU and also the international agreements that will be
made by the EU in the WTO.
The ongoing WTO negotiations are now being handled by the British Commissioner,
baroness Ashton who succeeded Peter Mandelson.
There may be a veto on WTO issues today. But surely not under the Lisbon
Treaty if you look carefully at the negotiating mandate from the Hong Kong
meeting. There, I have found not one single point requiring unanimity under
Lisbon. I am not an expert and may lack knowledge from the secret negotiations
and the secret negotiating mandates decided in the secret EU Council meetings.
But I have not been convinced by the comments from David O`Sullivan, Director
General for trade in the European Commission.
If there should be such points, the Irish government and the Commission should
prove it instead of just safeguarding something they cannot guarantee from the
articles everyone can read clearly in the Lisbon Treaty.
The Treaty is carefully drafted to avoid the unanimity requirements of the
past. And much better - or worse: In Art. 218.7 TFEU the Lisbon Treaty foresees
delegation of the competence to amend existing treaties to the non-elected
Commission where there will no longer be members appointed on their own from
the member states.
The possibility to delegate does also exist in the Nice Treaty but here there is still too many possibilities to request unanimity or joint co-signatures with all member states for the wole agreement.
The decision to delegate the amendment of a treaty to the Commission is
extended by the new design to avoid unanimity and any delegation can be decided
by qualified majority in the Council of Ministers - after proposal from the
Commission.
It would be easier for the Irish government to argue for this new Lisbon system to be much more efficient than the existing system where member states can still block for more free trade organised by WTO agreements.
For good and bad, there is no efficient veto right for Irish – or French or Danish - agriculture.
Other comments are welcome - send them to jp@bonde.dk
Still possible to veto for a single country
By David O'Sullivan, Director-General for Trade, European Commission
Dear Jens-Peter,
Thank you very much for kindly offering me the opportunity to reply to your posting. While I
disagree with the thrust of your argument, I appreciate your efforts to inform your readership about how the Lisbon Treaty would impact our conduct of multilateral trade negotiations.
In my view the Lisbon Treaty would not bring dramatic changes in the day-to-day handling of trade policy, as you imply in your posting. Many of the "new" arrangements you described
exist already under the current Treaty of Nice and have worked efficiently and to the
satisfaction of our Member States.
It is worth recalling, for example, that the EC's common commercial policy is already an
exclusive competence. The Lisbon Treaty simply confirms that. Even before the Nice Treaty,
Member States did not have the ability to negotiate trade agreements "on their own". This has ctually been the case since the inception of the common commercial policy in the late 1960s.
So your assertion that Member States will fully lose competences is somewhat misleading in
this sense.
I also disagree with your claim that the Lisbon Treaty would dilute powers for smaller
Member States and would upset the political balance at the Council of the European Union
(the EU institution that represents Member States' governments). In fact, the Lisbon Treaty is esigned to protect small Member States as much as big ones. This is the concept behind the ystem of double majority contained in the Treaty of Lisbon; it is also the principle behind the uarantees given to Ireland by the 2009 European Spring Council according to which the each member State will retain one Commissioner. And it is worth highlighting that the Treaty
would enhance the role of the European Parliament in trade policy, which would mean greater democratic accountability and scrutiny over any new multilateral trade deal under the World rade Organisation (WTO).
Before I address the nuts and bolts of decision-making in trade policy under the Lisbon
Treaty, let us not lose sight of the bigger picture: our common commercial policy has been at
the core of the European project over the past decades. It has helped us boost competitiveness n Europe by opening new markets for our goods, and by increasing our ability to source abroad. Over the past two decades, as the EU has enlarged, our internal trade has risen fivefold and our exports to third countries have increased by more than 350%. The EU now accounts for more than 30% of the world market for high-end quality products, as much as the US and Japan combined. This strong overall performance in world trade has been a key factor in our capability to maintain high levels of employment, wages and social protection in Europe to which we are attached. But that has not come at the expense of the poorest countries. Even when we strip out the rapid growth of emerging countries such as China, India and Brazil, EU imports from the least-developed countries are almost four times greater today than they were in 1988. And in times of economic crisis like today, trade policies that keep global markets open are a crucial part of the coordinated response towards economic recovery. The Lisbon Treaty seeks to build on these achievements to improve the value we offer Member States and to increase the democratic accountability of our work.
The main point of your argument is that the Lisbon Treaty, if implemented, would dilute
Member States’ decision-making powers in the area of international trade negotiations. Your
argument rests on the premise that if the major elements of an agreement under the WTO fall under provisions calling for qualified majority voting in the Council, say on agriculture, then Member States will adopt (or reject) the whole agreement on the basis of separate elements.
The reality is, in fact, quite the opposite. What counts is whether one single provision of the
agreement requires unanimity. If that is the case, the entire agreement must be concluded by a decision adopted unanimously (and so effectively Member States would retain a "veto" over final decisions).
Under the Lisbon Treaty international trade agreements that contain single topics for which
unanimity is required would need to be approved by unanimity. But it is worth recalling that
this situation is not new and this is already the case under the Nice Treaty. According to what scholars have described as "the pastis principle", one drop of unanimity or of mixed
competence triggers the requirement for unanimity for the approval of the entire agreement.
So, for example, the inclusion in the context of the Doha round of world trade talks of a single topic requiring a decision to be taken by unanimity or a single element making the agreement mixed means that the decision on concluding (or not) that agreement has to be taken by unanimity. This is indeed what happened for the WTO Agreement – the outcome of the previous Round of GATT negotiations and the instrument which created the WTO when it
was approved in 1994.. This has also what has happened for the trade agreements the EC has negotiated with the African, Caribbean and Pacific (ACP) States; – the Economic Partnership agreements (EPAs). These are examples showing that it is not possible to cut the agreement into different pieces, with different decision-making procedures applying to selected parts since the WTO Agreement and the EPAs contain provisions on tariffs on industrial goods which if adopted in isolation would have required only qualified majority voting. This explains also why there is one single authorisation to negotiate any agreement, and not a separate authorisation on agriculture, on trade in cars, on liberalisation of services in the banking sector, etc. This has been the case since the 1957 Rome Treaty. It will remain the same under the Lisbon treaty.
To sum up, it is not the "major elements" of an agreement that determine how the Council
decides to authorise its conclusion, but whether all the topics fall under provisions of qualified majority voting, or whether there is one or more issue that fall under unanimity or mixed competence. In that case, there is, indeed, an effective national veto.
Of course, you are right in suggesting that an agreement that would be purely agricultural and include nothing else would indeed be decided by qualified majority voting. But this has been the situation since the Rome Treaty and continues under Lisbon.
I would add that we already have qualified majority voting for many areas of trade policy
under the present Treaty, and Member States nevertheless operate very much on the basis of consensus. So I do not think it is correct that the culture of consensus in the Council will be displaced because of the extension of qualified majority voting to a number of new areas.
Your posting also suggests that the EU under the Lisbon Treaty would have general
competence to enter into all kinds of agreements. This is overstated and inaccurate. In fact,
the EC does not currently have a general treaty-making power and this does not change under the Lisbon Treaty. So it is not correct to suggest that the Treaty gives the EU a "general competence" to enter into "all kind of agreements". For reference, Article 216 § 1 of the Lisbon Treaty provides in an exhaustive way the four situations in which the EU will be able to conclude international agreements.
Moreover you suggest that the Lisbon Treaty would lead to a loss of shared competences
between the EU and its Member States in areas such as trade agreements on commercial
aspects of intellectual property rights. But the Nice Treaty already placed agreements in this
field within the EU's trade competence (Article 133§5 ECT). This change took place before
the start of the current WTO Doha round of trade talks.
Having said this, it is true that the Lisbon Treaty would imply some modifications to the
decision-making in the Council. But it does not change the fundamental principle that one
single instance of mixed competence will require Member States to co-sign the mixed
agreement.
The safeguard clause referred to is one such new mechanism. It is intended to ensure recourse to unanimity, to the extent that a Member State can demonstrate that the agreement risks seriously disturbing the national organisation of social, education and health services”. With regard to two service areas, cultural and audiovisual services, the requirement for unanimity exists where the agreement risks prejudicing the Union's cultural or linguistic diversity. It is not, however, a matter of discretion for the Commission as to the appropriate legal basis for a decision to authorise the conclusion of an agreement, including the possible application of this safeguard clause. It is in fact the Council (i.e. the Member States) that decides how it takes the decision and under which voting rules, following the decision-making system laid down in the Treaty.
It should be added that the inclusion of transport services, which are not considered in the
Treaty as part of the common commercial policy, in comprehensive trade agreements may
well trigger unanimity. The WTO Ministerial Declaration from the Hong Kong Conference
refers to further negotiations in the field of services, and if the services negotiations cover
transport services, a final agreement including such commitments is likely to give rise to a
requirement of unanimity. In other words, even under Lisbon, there would be an effective
national veto on international trade agreements covering elements requiring unanimity voting in the Council
In that sense, the modification of decision-making procedures in the Council is not as
dramatic as you depict it.
But the Lisbon Treaty in my view would bring other more important changes that you do not
mention in your posting.
Above all, Lisbon would empower the European Parliament as a co-legislator with the
Council (the Member States).
This is a major change that improves the democratic legitimacy of the EU in a crucial policy
area. Currently trade is one of the few policy areas where the Parliament has no formal role:
the European Commission makes legislative proposals and the Council adopts them. While
the Commission makes great efforts to listen to the views of MEPs and to inform Parliament
of developments in ongoing negotiations, the Parliament is not even consulted, never mind
asked to give its assent, for the conclusion of standard trade agreements (e.g. on trade in steel products). It is only more comprehensive trade agreements, which for instance form part of association agreements, or which have comprehensive institutional structures, where the parliament's assent might be required.
Lisbon would change this and bring about a step-change in Parliament's legal role on trade.
First, Lisbon would give Parliament powers to adopt the legislation for implementing the
common commercial policy. Second, under Lisbon, Parliament would have to give its consent
(currently termed "assent") on all trade agreements before the Council can conclude them.
Third, Parliament would have to be regularly informed by the Commission on the progress of
negotiations in trade agreements.
The Lisbon Treaty would also, as you point out in your posting, merge two legal personalities into one. Readers will have noticed that the terms "EC" (i.e. the "European Communities") and "EU" (i.e. the "European Union"), have been both used in this posting. Both terms are used because, currently, both the EC and the EU have legal personality under the Nice Treaty.
But this is can be confusing. This innovation should simplify the nature of the Union for
European citizens.
On balance, the Lisbon Treaty would not only maintain the requirement for unanimity in
decisions on comprehensive trade agreements involving mixed competences, but would also
improve the democratic accountability of our work.
I see this as a very positive prospect.
