European Community Trade Law (PART B)

PART B
“Commercial Policy has been identified by the European Court of Justice (ECJ) as one the spheres in which the Community’s competence is exclusive. The Opinion 1/75 in the Low Cost Standard case denied Member States the power to enter into international agreements or to legislate matters related to commercial policy, even if the Community has not yet acted.1 Article I-13 of the Constitutional Treaty seems to codify this case law by explicitly stating that Common Commercial Policy belongs to one of the Union’s exclusive competences.” (1) An exclusive competence is also defined by the Constitutional Treaty in Article I-12. Article I-12 instructs that if an area is so characterized, the Member States are able to legislate only if empowered by the Union or by implementation of Union acts. Although it appears as a mere summary of current state of affairs, the substantive scope of the empowerment may be easily changed by incorporating a new issue within the scope of the CCP, which means that this issue is automatically covered by the Union exclusively and Member States will no longer have the possibility to act on this matter. This part of the paper will deal with the delineation of the scope
of the Union’s commercial policy taking into account explicit changes in the wording of provisions, as compared to those present in the EC Treaty, and existing case law on the boundaries of this policy.
“The changes introduced by the Constitutional Treaty relate to both form and substance. Intellectual property and trade services were moved from a separate paragraph8 to the first paragraph of Article III-315 of the Constitutional Treaty, which is the equivalent of the EC Treaty Article 133. It should also be noted, that the Constitutional Treaty abolishes the possibility that the Council extend the external competence of the Union to non-commercial aspects of intellectual
property rights, which are currently contained in Article 133(7) EC Treaty. If the wording of paragraph 7 in Article 133 was indeed to allow the Community’s capacity with regard to changes of Treaty on Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, it could be argued that the abolition of this provision in the Constitutional Treaty could mean that the EU’s competence according to Article III-315 should never embrace those changes.”(5)
Currently, the Community’s competence to conclude agreements is to the greatest extent limited by Article 133(6), which states that an agreement may not be concluded if it includes provisions which would go beyond the Community’s internal powers; particularly by leading to harmonization of the laws or regulations of the members states in an area for which this Treaty rules out such harmonization. This is another safeguard against circumvention of provisions regulating or restricting harmonization of the laws of the Member States. “Article III- 315(6), which is the equivalent of Article 133(6) (of the EC Treaty) also limits the competences of the Union in external trade policy according to the internal distribution of powers between the Union and Member States. Consequently, the “new” Union would not have the exclusive competence to negotiate, conclude, or implement an international agreement covering aspects which the Union does not have the power to legislate internally.”(5)
Apart from invoking explicit limitations prescribed by the Treaties relating to harmonization of national legal systems of the Member States, attempts were made to narrow the scope of the CCP by including aspects of external trade policy within general foreign policy, which is still the second EU “intergovernmental” pillar. Thus, to the extent that the Member States continue to have powers in the area of Common Foreign and Security Policy (CFSP), the principle of exclusivity of the EC competence does not come into play.
The juxtaposition of commercial and foreign policy may be clearly seen when we consider that the preferred instruments of international relations, used in exercising political and economic pressure on countries and regimes, which can be decreed by the UN Security Council, are trade restrictions and embargoes. It is difficult to see them as non-trade measures, given their marked effects on trade, but there are doubts as to whether they should be really treated as such. If we regard trade restrictions used for political purposes as regular trade measures, the authority to adopt trade sanctions would then appear to come within the EC’s exclusive powers. Therefore, the Member States are likely to argue that what relates to foreign and security policy should be excluded from the scope of the CCP, and that national governments are still left with substantial freedom in adopting measures in that respect.
This argument was used by the German government in defending the legality under Community law of legislation, which applied to the control of export of socalled dual-use goods.14 The German legislation enabled the authorities to curtail contracts and activities in the sphere of foreign trade in order “to guarantee Germany’s security, prevent a disturbance of peaceful coexistence”, or “prevent the external relations of Germany from being seriously disrupted”. (3) In order to decide on the distribution of competences, as between the Community and the Member
States, to adopt such measures, the Court stated that the question was whether the common commercial policy solely concerned measures which pursued commercial objectives. However, the ECJ came to the conclusion that measures, whose effect was to prevent or restrict the export of certain products, could not be treated as falling outside the scope of the common commercial policy simply because they had foreign policy and security objectives15 on the grounds that Member States should not be able to restrict the scope of the CCP by freely deciding, in the light of its own foreign policy or security requirements, whether a measure was covered by conformed to EC legislation on export, which enables Member States to adopt restrictions on public security grounds. “In Centro-Com,16 the Court accepted that the Member States had indeed retained their competence in the field of foreign and security policy, but the powers retained by the Member States had to be exercised in a manner consistent with Community law. It was within the province of the Member States to adopt measures of foreign and security policy in the exercise of their national competence. Those measures nevertheless had to respect the provisions adopted by the Community in the field of the common commercial policy provided by the current Article 133, which may result from political measures adopted within the second pillar.” (4)
To addition, in the Energy Star Agreement case, 21 the Commission challenged the Council’s conclusion of the agreement on the basis of Article 175(1) (environmental protection), which is an area of EC shared competence, in conjunction with Article 300. The Commission was not interested in concluding a mixed agreement because it would still need to take into account the position of individual Member States and it argued that the agreement in question should have been concluded on the basis on Article 133 – exclusively by the Community. “The Court agreed with the position of the Commission. It is thus clear that the Commission, in order to be able to act independently from Member States, will argue the necessity, as the case-law shows with much support from the ECJ, of founding the negotiation and conclusion of agreements entirely on the basis of provisions relating to the CCP.” (8)
The external economic policy of the European Union traditionally includes the common commercial policy (CCP). Latterly it also includes a ‘new common commercial policy’ (new CCP) covering services and intellectual property.
The European Union is the world’s biggest trading bloc, accounting for more than a fifth of global imports and exports. It is the world’s leading exporter of goods and services and source of foreign direct investment, and the main export market for some 130 countries around the globe.
“There are four main categories of international or cross-border trade:
• Goods: This covers all types of physical goods, such as food, clothing, raw materials and machinery;
• Services: This covers things like tourism, banking and telecommunications;
• Intellectual property: This covers trade and investment in ideas and creativity (copyright, industrial design, artists’ rights, etc.), and
• Foreign Direct Investment (FDI): This is when a company from one country buys or establishes a company in another country. This is an alternative to trade and an important aspect of "globalization". The category does not include financial investments where the owner of the money has no direct influence on the running of the company.” (9)
Trade was one of the first areas in which EU countries agreed to pool their sovereignty, transferring to the European Commission the responsibility for handling trade matters, including negotiating international trade agreements on their behalf. This means that the EU’s 25 Member States negotiate as one, both with their trading partners and at the World Trade Organization, so maximising their influence on the international scene.
“EU trade policy is enshrined in Articles 131 and 133 of the EC Treaty, which set the objectives and modalities of the common commercial policy. These are to contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and the lowering of customs barriers.” (5)
The United Kingdom participates in the European single market and the EU’s external trade policy through the Community’s "Common Commercial Policy" (CCP).
“The CCP establishes uniform principles and gives the European Commission sole negotiating rights on trade policy for all 25 Member States. The Commission's responsibilities include negotiating on:
• a common external tariff and preferences;
• bilateral and regional tariff and trade agreements with third countries;
• uniformity in trade liberalisation measures, and
• instruments to protect trade such as anti-dumping measures and subsidies.” (3)
Officials representing their Member States on the EU Trade ("Article 133") Committee are accountable to their own ministers for their actions. The Council of Ministers decides on the mandates for negotiation and approves the result of the negotiation.
The EC Treaty establishes the overall objectives of its trade policy. Under Article 131 of the Treaty of Nice, the EC common policy aims to "contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and the lowering of customs barriers"; Article 133 sets out the scope, instruments and decision-making procedures. This objective underscores the general aims of the Treaty, i.e. "to promote, throughout the Community, a harmonious, balanced and sustainable development of economic activities, a high level of employment and social protection, equality between men and women, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States". (4)
More particularly, the EC's trade policy seeks to contribute to sustainable development by integrating more countries in world trade. It aims to promote European interests (in open markets and clear regulatory frameworks), and defend values on democracy, rule of law, environment, social rights, public services, cultural diversity, and food security. It seeks to open world markets through progressive abolition or lowering of obstacles to international trade. In addition, the policy is aimed at harnessing globalization by agreeing on a set of rules to regulate markets, and ensuring compatibility of trade opening with other societal values.
This will be achieved at the multilateral level in the framework of the WTO, through which the EC prioritizes the liberalization of its trade regime; through bilateral agreements, and specific trade policies with third countries and regional areas; and through unilateral measures in the interests of development or political stability in line with its political priorities.
“Through its Internal Market Strategy 2003-06, the EC seeks to improve the free movement of goods, services, capital, and labour within the Community, via a wide range of regulatory measures and actions.” (6) The regulatory measures cover: indirect taxation, mutual recognition, standardization, harmonization of national rules governing unfair commercial practices, air traffic control management, railways, procedures for the elimination of double taxation, public procurement, Community patent, enforcement of intellectual property rights, and corporate governance. In addition, the Commission seeks to ensure that these measures are transposed into national law on time and properly applied. “According to the Internal Market Scoreboard of 21 February 2006, on average, only 1.6% of directives for which the implementation deadline had passed had not been written into national law. This is close to the 1.5% interim target agreed by Heads of State. The EC also seeks to give businesses and citizens a quick and effective means of redress through the SOLVIT network.” (6)
In spite of its achievements, the internal market faces a number of challenges. In particular, it is not a reality in all areas: for example, markets are still fragmented in retail financial services, public procurement, transport, energy, and telecommunication. In addition, further action is necessary to enable small and medium-sized enterprises (SMEs) and consumers to trade or purchase across borders easily. Public consultations, aimed at stimulating a public debate on the future of internal market policy, ended on 15 June 2006. They resulted in an initial assessment of where the internal market stands and possible directions for future policy. The Union's influence on the international stage hinges on its ability to negotiate with its trade partners as a single entity.
Article 133 of the EC Treaty gives the European Commission this unique negotiating role in accordance with specific mandates given by the Council. In practice, ad hoc coordination procedures allow Member States to be involved in each phase of the Commission's negotiations.
“The scope of the common commercial policy, as defined by Article 133, has been interpreted very broadly by the Court of Justice. However, it does not cover international negotiations and agreements relating to services and intellectual property, two areas being discussed within the WTO. The Council can nevertheless extend the scope of Article 133 to include these areas by unanimous agreement following consultation of the European Parliament.” (9)
A new paragraph has been added to Article 133 (ex Article 113). It allows the Council, after consulting Parliament, to extend the scope of Article 133 to international negotiations and agreements on services and intellectual property rights where they are not already covered by common commercial policy.
The addition of this paragraph means that it will not be necessary to amend the Treaty (which would require an intergovernmental conference and ratification by all the Member States) if it is decided to extend the scope of the traditional trade negotiation procedure.
In concrete terms, a decision to extend the Community's powers in trade matters can now be taken by the members of the Council acting unanimously.

References:
1. http://europa.eu/scadplus/leg/en/lvb/a20000.htm#a20003
2. www.germanlawjournal.com/pdf/Vol06No11/
3. www.tdctrade.com/euguide/1-6.htm - 11k
4. http://ec.europa.eu/unitedkingdom/information/policy_briefs/bb40_en.htm
5. www.ciaonet.org/wps/erpa060/erpa060.pdf
6. http://www.hec.unil.ch/mbrulhar/papers/elagraa610.pdf
7. Free movement of goods in the European Community by Oliver, Sweet&Maxwell
8. Barriers to External and Internal Community Trade by Volker, Kluwer, 1993
9. The European Internal Market and International Trade: A Legal Analysis, Oxford, 1994
10. Foster N. (Ed) EC Legislation 2006-2007