Treaty reformers target services veto

Date: 23/11/00

By Peter Chapman

THE European Commission says trade in services worth trillions of euro a year is the key to the future of the world economy.

But with so much at stake, the institution is demanding radical reform of the way trade deals in the services sector - including investment and intellectual property rules - are thrashed out.

Since day one, the EU's founding Treaty of Rome has given the European Commission the right to go to international trade conferences and negotiate deals to reduce tariffs or trade barriers on goods on behalf of all the Union's members.

Both the Commission's negotiating mandate and the subsequent deals are rubber-stamped by the Council of Ministers, provided a qualified majority of member states are willing to sign up to them.

But for the intangible 'services' sector, which is far more subject to the vagaries of national culture and custom, the picture is very different - with unanimity required in the Council.

Does it still make sense, asks the Commission, to tie the EU's hands in international negotiations by relying on a 43-year-old system to govern the crucial services sector? Trade chief Pascal Lamy and his aides think not.

In a recent speech, Lamy's top official Peter Carl said it was "unthinkable that decisions in the Community interest can be taken by a procedure that was agreed in 1958". He added: "We need a substantial improvement in the procedure used to take decisions in the Council."

In a bid to tackle this problem, his boss is trying to persuade member states to agree on a new system at next month's treaty reform summit in Nice which would allow deals on services, like those covering goods, to be approved by qualified majority vote (QMV).

Under the plan, individual member states would only be able to veto negotiations in areas which would have a profound impact on vital national interests.

Likely candidates for an opt-out would be the culture and audiovisual industry - a sector considered by France as crucial to its national identity, and shipping services - a Danish and Greek priority.

But if the Commission's proposals were approved, it would still have a far freer hand to negotiate reform of international treaties, such as an update of the World Trade 'General Agreement on Trade in Services' without having to pander to each member state's special interests.

To complete the reforms, the Commission wants to make trade negotiations in all sectors the exclusive responsibility of the European Community, rather than the European Community and member states.

This seemingly arcane difference would mean that member states would no longer be able to negotiate bilateral deals such as 'open skies' aviation agreements.

Crucially, it would also mean that every national parliament would no longer have to ratify each and every EU-level agreement individually before it can become legally binding.

It remains doubtful that Union leaders will sign up to all or even some of these changes in Nice. Member states, understandably, fear the Commission would try to sign agreements with third countries which would be unpalatable at home. "What they want to avoid is a situation where the Commission can, for example say 'the US wants us to harmonise our taxes at x per cent, therefore we propose by QMV this should happen'," explained one diplomat.

But if reform is not forthcoming, warns Peter Carl, the EU will find itself in a terrible mess in trade negotiations once it expands to take in up to a dozen new members. Achieving unanimity among 25-plus member states would be a nightmare, let alone waiting for their parliaments to sign off a deal.

Worse still, the Union will not be able to punch its real weight in a new general round of tariff-cutting talks under the auspices of the World Trade Organisation. "The Community will be weakened on the international stage," he said, adding that there would be "no chance of getting a credible agreement" in the next round.

Article forms part of a survey on trade.