Wednesday, August 31, 2016

The E.U.’s Federal System: Thwarting a Trade Deal with Canada

Dwarfed by the arduous trade negotiations between the E.U. and U.S., the E.U. and Canada actually completed negotiations on a free-trade deal in February, 2016. Ratification had to be pushed back from the fall. The drag from the “deep suspicion over the benefits of unrestricted trade” that was increasing globally was ostensibly the reason.[1] I contend that the true obstacle was the amount of sovereignty that the E.U. states still retained in the Union. Americans can think back to the Articles of Confederation as having the same major drawback. In the E.U.’s case, however, the Union had evolved past being a confederation, given the governmental sovereignty already at the federal level. The veto-power of a state government was thus out of place, and thus an obstacle for the E.U. even in fulfilling its existing responsibilities at the federal level.
Brussels had sought to “fast-track” the treaty’s ratification so the document would be ready in time for October’s E.U. meetings with Canada; however, E.U. Trade Commissioner Cecilia Malmström pushed back the signing in July. She cited the “political situation” inside the E.U. amid growing anti-globalization sentiment and criticism of Brussels itself within the E.U.[2] In other words, she thought rising populist sentiment globally would slow down the ratification process, even though “both sides are developed economies that see relatively eye-to-eye on thorny trade issues like labor markets and environmental issues.”[3] This likeness did not exist between the E.U. and U.S., hence the difficult negotiations.
I contend, however, that the cumbersome ratification process on the E.U. side was the real culprit jeopardizing the closing of the deal. Malmström announced that she would submit the deal for approval to more than 30 state and regional legislatures. Assuming that any one of them could veto the treaty, the odds against ratification stem from the unanimous requirement. Even without each state having to approve the treaty, merely submitting it to 30 legislatures would at the very least slow down the process, and could invite proposed amendments that would force renegotiations.
The state governments are represented in the European Council so a qualified-majority rather than unanimous vote there would, as an alternative, both give the states a voice and streamline rather than elongate the ratification process. The treaty also had to pass the E.U. Parliament, which represents E.U. citizens, so approval from both chambers would mean that representatives both of the States and the people will have had a role in the process. This means that either the States or the People could have rejected the deal, yet without the cumbersome process of turning the treaty over to the States and even some of their regions and without a State being able to hold up or defeat the ratification.
I submit, moreover, that the E.U. had already grown too big—too many states—for individual state governments (and in some cases their regional governments too) to have so much control over federal treaties (as well as federal legislation and regulations). At the time, given the E.U.’s existing governmental sovereignty—its competencies—the Union could have used more federal power freed up from the dominance of state governments. That is, just to fulfill its existing competencies, which included the making of treaties, an additional transfer of governmental sovereignty was needed. As Malmström pointed out, criticism of Brussels itself within the E.U. was in the air. It would be unfortunate (and ironic) if the role of the state governments on federal treaties, legislation, and regulations were a factor in the anti-federalist sentiment then on the rise in Europe.

[1] Paul Vieira, “Antitrade Sentiment Thwarts Talks,” The Wall Street Journal, August 30, 2016.
[2] Ibid.
[3] Ibid.