Why the constitutional treaty is better than Nice for business

Date: 16/09/04

WHEN America's founding fathers were dabbling in constitution writing they didn't pay much attention to making the US the most dynamic knowledge-based economy by 1800.

No matter. The rest, as they say, is history.

So should we worry that the EU's unratified constitutional treaty pays little attention to the needs of business? "Yes" and "No" is the verdict from the industry lobby.

Jérôme Chauvin, a constitution-watcher at European employers' federation UNICE says that bosses were downhearted about the lack of substance to back up the business-friendly rhetoric in the introductory part of the constitution - which refers to the need for competitiveness alongside other laudable goals such as full employment and sustainable development.

"We were a bit disappointed. If you go to Part III on the actual policies it only mentions social, environmental and consumers' requirements that are to be taken into account in the definition and application of policy. That is a bit odd."

Nevertheless, if you scratch beneath the political surface there are plenty of issues touching directly or otherwise on the business of wealth creation.

Social affairs and the incorporation of the European Charter on Fundamental Rights are where much of the excitement lies. And they will have a serious impact on business.

The charter caused a stir in Britain. Eurosceptics feared that Margaret Thatcher's reforms restricting strike action - such as the right for workers to picket factories of other firms - might be unpicked and that the Union's flag-bearer for liberal labour markets would be forced to fall into line.

UK premier Tony Blair has promised that would never happen, because the EU does not actually have the power to legislate on sensitive issues such as industrial action.

Nevertheless, Jaymeen Patel, constitution expert at the Confederation of British Industry (CBI), admits that UK firms are still "not 100%" sure about the idea of the charter. "The assurances we got," he adds, "are not fully reassuring."

The charter could nevertheless help improve the rights of businesses, as well as workers, when they become involved in legal action.

Jane Golding, a Brussels-based partner with law firm Crosby Renouf, said: "Fundamental rights such as the right to a fair trial are now expressly set out in one place together and would be interpreted taking into account European Court of Human Rights case law.

"This could provide enhanced arguments for litigants in a range of cases - for example competition cases," added Golding, who chairs a special sub-committee on the constitution set up by the UK's Law Society's EU committee.

These would come on top of extra rights in other parts of the constitution for individuals and firms to complain directly to the European Court of Justice about "regulatory acts of direct concern".

UNICE's Chauvin says the group is pleased with the way article 1-48 of the constitution enshrines the role of the "social partners" - employers and unions - in developing future EU social policy. Nothing much changes from the old EU Treaty. But keeping the social dialogue in place is "key", says Chauvin. "We now have a recognition that social partners is a tool for social policy," he adds.

It's not just the traditional Eurosceptics which are concerned about social policy.

French former prime minister Laurent Fabius has announced that social issues should lie at the heart of the referendum campaign.

It is too late to change the draft, which he said is "insufficient" in many respects.

But before saying "Yes" to the constitution, Fabius wants other guarantees and action showing that the new Commission led by José Manuel Barroso and the EU as a whole takes jobs, social issues and, crucially, public services of general interest, seriously.

For example, he wants a specific directive on the statute books protecting public services as a matter of absolute priority.

Contradicting Fabius' warning, other critics say the constitution could actually undermine deregulation in energy, transport and postal markets.

Koen Coppenholle, chair of the institutional affairs committee of AmchamEU, a group which represents US firms, said the text on services of general interest - Article 3(6) - is one of the few blots on the constitutional treaty.

"Overall we were pretty satisfied," said the GE executive.

"But on services of general interest the text of the constitution is weaker than the existing treaty. Now they [member states] have more leeway to derogate from the competition rules. These are issues that we are concerned about."

Elsewhere in the constitution, businesses are pleased with the general extension of qualified majority voting (QMV) in the Council of Ministers - although the happiness is tempered by frustrations.

Some groups wanted trade policy - such as positions of the EU in world trade talks - to be settled on a QMV basis - complete with a new voting system taking more account of the relative size and importance of respective member states in the expanded 25-state Union.

But the final deal carves out services and commercial aspects of intellectual property and foreign direct investment.

Chauvin says keeping "islands of unanimity" will inevitably slow down trade negotiations, making them far more complex. Other groups, including the CBI, were concerned that QMV for foreign investment would, in practice, have meant that sovereign states would have lost their veto in certain elements of taxation policy.

Taxation policy, per se, remains a matter for unanimity in the Council of Ministers - though interesting possibilities exist. So-called passerelle (bridge) clauses allow governments to decide to drop unanimity and plump for QMV in any policy area.

The catch is that they need to agree unanimously to do that and just one national parliament can block the exercise, which essentially short-circuits the need for a treaty change.

More realistically - at least on tax - splinter groups of member states - such as France, Germany and their allies - will be freer to press ahead more quickly on a QMV basis, freed from the shackles of unanimity.

So-called enhanced cooperation is seen by some as bad because it allows a two-speed Europe to develop rather than a unified, albeit slower, one. But moving ahead together - following decisions made in distant meeting rooms in Brussels - is not what the EU is meant to be about.

Subsidiarity, a concept under which decisions should be made at the most appropriate level, be it regional, national or European, is also taken into account. National parliaments will have more say in the early stages of the legislative process. The European Commission will also be forced to take into account the regional and local impacts of new laws.

There is a genuine risk that voters - such as the eastern Europeans, who are building reputations as Eurosceptics - will turn their backs on the constitution.

If they do - and the constitution is condemned to sit forever in the EU's dusty archives - will it matter?

The UK's CBI, for one, hasn't even decided whether or not it would be sorry. Others (see article Page 24) will be decidedly happy if the constitution comes to nought.

However, UNICE's Chauvin says it will matter enormously - and not because of the relatively scant industry-related content, but because rejecting the constitution would also mean saddling the EU with the unwieldy voting system inherited from the acrimonious Nice summit four years ago. That, he warns, would make it well-nigh impossible to pass sensible laws in many areas, especially with 25 member states instead of 15.

"If the constitution is not ratified, we have a big, big problem. After enlargement, if we don't progress on the constitution we will be completely blocked by the decision-taking framework. The EU would be paralysed," he says. Nice?

Had George Washington and Co failed to win approval for their magnum opus, at least Congress wouldn't have been stuck with Nice…