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The EU Constitutional
Meanwhile the rest of the world does not sleep. China has established itself as the 'workshop of the world', more British firms are looking to outsource to India in order to maintain competitiveness, and the US, for all its economic imbalances, continues to show the energy and dynamism to grow. We are living at a time when the "tectonic plates' of the global economy are shifting, with India and China re-establishing themselves as major economic players. It is increasingly clear that China's economic rise will be as significant as the arrival of the US on the global scene in the 19th century. Some may complain as jobs are 'exported' to these emerging colossi but, whether we complain or not, this seismic shift is occurring and we cannot ignore it.
But the EU, with its heavy regulations, increasingly fails to adapt to this new age. The European Social Market Model, with its high taxes and heavy regulation, is uncompetitive, old-fashioned and discredited. It may have had economic relevance in the second half of the 20th century, but it is irrelevant today. The implications for the EU are clear. Denis MacShane, Minister for Europe, helpfully informed Le Figaro Magazine last year: 'Today the European [EU 15] economy produces 20% less than the US economy... according to economists at the Foreign Office. By 2010 the European economy will produce 40% less than the US economy.' And the prestigious French think tank, Institut Français des Relations Internationales (IFRI) has concluded that, unless the EU changes its policies, it will totally fail to rival the US and will soon enter a downward spiral of relative economic decline. IFRI's report World Trade in the 21st century concluded that: 'The enlargement of the EU won't suffice to guarantee parity with the US. The EU will weigh less heavily on the process of globalisation and a slow but inexorable movement on to "history's exit ramp" is foreseeable.'
There is much loose talk about the EU's response to the economic challenges ahead. I have lost count of the number of times I have read that, reflecting enlargement or the decline in French influence or various Dutch 'deregulatory' initiatives, the EU is adopting more competitive policies and 'going Britain's way'. There is little hard evidence for this and a quick perusal of the Constitutional Treaty shows just how the EU remains wedded to its old ways. The Treaty contains not so much as a whiff of a change in direction. The Treaty is old-fashioned 'Social Market Modellism' writ large, combined with a dose of the trendy Environmentalism. Putting aside the enormous political significance of the Treaty, it is an appallingly complacent document, which comprehensively fails to address the EU's economic problems. It is another nail in the EU economy's coffin.
The Treaty explicitly enshrines the Social
Market Model. Article 1-3, 'The Union's objectives', states as its third
objective: 'The Union shall work for the sustainable development of Europe
based on balance of economic growth and price stability, a highly
competitive social market economy (sic), aiming at full employment and
social progress, and a high level of protection and improvement of the
quality of the environment.' The reference to 'the highly competitive'
nature of the social market economy is some bizarre 'Third Way' notion, EU-style.
It is meaningless, as there is no indication as to how such a blessed state
can be achieved. More concretely, the Charter of Fundamental Rights, of
afore-mentioned Beano-fame, will deliver the 'high level of protection'.
• Workers' right to information and
consultation within the undertaking.
We are not alone in our concerns about the
economic consequences of the Constitution, in general, and the Charter, in
particular. Georges de Menil (Professor of Economics, Ecole des Hautes
Etudes en Sciences Sociales) has written:
There are many other aspects of the Constitutional Treaty that have economic and business implications. There will, for example, be a new competence to promote and coordinate the economic and employment policies of the member states, whether in the euro or not. This is, potentially, of huge significance and would surely cover the overall level of taxation, interest rates and public expenditure, as well as pensions policy and employment policies. This competence could lead to some very damaging policies for the UK. The EU has an ageing and shrinking population, which has major implications for pensions. If economic coordination accelerates, these problems will increasingly be subject to common action, under the requirements of solidarity and burden-sharing in the Constitution. And this could lead to British taxpayers ultimately supporting pensioners in EU states that have worse demographics and higher unfunded pension liabilities than in the UK.
Other extensions to EU powers in the economic and business field include possible Qualified Majority Voting for company taxation specifically relating to tax fraud and tax evasion. (Though it should be noted that tax harmonisation through the ECJ route is probably more significant.) There is also a completely new energy competence, which is a so-called 'shared competence' between the EU and the member states. But it is a strange sort of sharing. Member states will only be able to legislate where the Union chooses not to. There were some people who originally welcomed the notion of a Constitution for the EU because it would 'clearly define the EU's powers'. Unfortunately, this Treaty does no such thing, as it has been deliberately engineered as an 'enabling' Constitution, which gives the EU the option of accruing further powers at the expense of member states. Therefore, the Constitutional Treaty does not set limits to Union power. And past history clearly shows that if the EU has powers it uses them.
I accept that this clause is only strictly binding if the Treaty had already been enforced, but its political significance should not be underestimated. It is a strong, powerful statement of political intent. It should not be ignored. It implies that, if there were 'refuseniks', there would be scope for negotiation for the Treaty to proceed for those (at least four-fifths) who wished to go ahead. At this point the UK should make it clear that it would be content for the majority to push ahead with political integration, indeed wishing them well, but negotiate a tough set of opt-outs from the Treaty and seek repatriation of powers. The UK should negotiate for a 'Common Market' type of EU membership, rejecting the political union as laid out in the Treaty.
The final option is that we say 'no' and the Constitution falls. This is a possibility (say 15%). At this point many options would open up, with the desire of a core 'pioneer group' wishing to push ahead with political integration as a strong contender. There would then have to be some very fundamental and positive negotiations with the 'non-pioneer group', including the UK, in order for the 'pioneer group' to go ahead. The UK would again have considerable negotiating leverage and, as above, should push for a Common Market style of membership.
It could well be that, with the accession of the ten new countries, the chances of a tight inner group (centring on the Franco-German relationship) and a looser outer circle (including many of the new EU countries) have increased. And there is another factor. The UK has never been a happy core member of the EU — much to the irritation of the core members. A 'no' vote with a tight inner circle and a looser outer circle (including the UK) could well be the most satisfactory outcome for all concerned.
Sometimes British commentators suggest that the EU should develop along very different lines from Continental-style political integration. They suggest that there should be a looser 'Anglo-Saxon-style EU of nation states'. And they suggest that this may be an option for the EU if the Constitutional Treaty falls. But the probability that the majority of EU member states (including the still very powerful Franco-German axis) would accept this option is negligible. It is, in other words, a complete non-starter.
Ruth Lea is Director of the Centre for