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The European Union: Common Trade and Economic Policy

🔊 Listen to this Post Common and Economic Policy
The European Single Market is the single market of the European Union, which has officially existed under that name since 1 January 1993. Today, the European single market is the largest common market in the world. The four fundamental freedoms (free movement of goods, free movement of persons, freedom to provide services and free movement of capital and payments) form the basis of the internal market of the European Union. The creation of the European Single Market led to a new economic momentum in the EU in the 1990s, during a difficult global economic environment, as the Japanese bubble bursted, the stock market crash in the USA and the Eastern European countries, due to the collapse of the Eastern Bloc, in a deep recession. In order for the single market as well as the foreign trade to develop within a framework, the economic policy of the European Union is divided into a number of fields. The five main areas are the agricultural policy of the European Union, the European Economic and Social Committee, the European Union’s financial market policy, the European Union’s budgetary policy and the monetary policy of the European Union, which in turn can be subdivided into numerous other thematic complexes.

European Economic Governance
A European economic governance would make possible a joint fiscal and active stabilization policy in the EU as desired by some of the political spectrum but rejected by others. The EU itself can not levy taxes, and the European Union’s own resources managed by the European Commission are neither so large nor variable as to enable them to become active in economic policy. If an active economic policy is desired in principle or in specific situations, this is the respective issue of the individual Member States, which only co-ordinate themselves voluntarily. The same applies to wage policy, since wage regulations are mostly nationally limited. The conflict in the financial crises of 2007 onwards became all the more important when all the Member States prepared national economic stimulus packages, which were coordinated by the European Commission. Even if the direct discrimination of nationals of other Member States is not allowed within the framework of the European Single Market, these different economic approaches have led to imbalances between the individual EU Member States. In 2008, for example, the guarantee announced by Ireland for its national banks put pressure on the other Member States to follow similar means. Germany, on the other hand, was accused, particularly by the French side, of having increased its productivity and competitiveness more intensively than the rest of the EU countries for several years by means of moderate wage increases, thereby contributing to imbalances. During the Eurocrisis the demand for a European Economic Government increased, and the European Central Bank President, Jean-Claude Trichet, was in favour of this solution, too. Finally, the German government under Angela Merkel also agreed to establish a European Economic Government. However, this should be undertaken at the level of the whole EU, not just the euro area countries, and should be managed by the European Council, not by the European Commission, or by new institutions to be created. For economic policy decisions, this would require a consensus among all EU Member States. In order to facilitate coordination within the EU, there is also the proposal to unite various Euro-relevant offices in the form of a double hat, namely that of the European Commissioner for Economic and Monetary Affairs and the Euro, the President of the Economic and Financial Affairs Council and the President of the Eurogroup. This proposal was presented in a report by Pervenche Berès, Member of the European Parliament, and was approved by the European Parliament. Michel Barnier, the European Commissioner for Internal Market and Services, also proposed a similar proposal in a Humboldt speech on Europe in May 2011. He would, however, require a reform of the TFEU and thus the approval and ratification of all Member States.

Common Trade Policy
Common trade policy is a policy area that covers all the measures for the regulation and management of foreign trade with third countries. It is strictly differentiated from the European Single Market, which affects Member States ‘trade relations, but also from the Member States’ external trade policies, although their competences have been considerably curtailed by the Treaty on the Functioning of the European Union (TFEU). The common trade policy is part of the European Union’s external policy (“external action”). Close relations exist with the other areas of the Union’s external action, in particular the Common Foreign and Security Policy and Development Policy. A distinction must be drawn between pure trade agreements of so-called cooperation agreements. While the former are limited to agreeing on tariff rates, quantity quotas and other tariff and non-tariff trade restrictions and concessions, the cooperation agreements also cover some aspects of economic, transport, science or development policy cooperation. If this is the case, the European Union needs a separate legal basis for the conclusion of the Treaty outside Article 207 TFEU. In its AETR jurisprudence, the European Court of Justice has derived these from the existence of a corresponding competence in the European Union within the EU. Finally, a particularly strong reciprocal relationship produces association agreements under Article 217 TFEU. In addition to the bilateral agreement, there are also multilateral agreements, which include a larger number of actors, the best known of which is the WTO regulation. While some agreements are concluded exclusively by the European Union, the Member States themselves also act as contracting parties. This is the case, in particular, where the subject-matter of the Convention is wholly or partly subject to the competence of the Member States. The WTO agreements have also signed and ratified the Member States on account of their remaining trade-policy competences in the field of services and intellectual property. It is noteworthy that there are no comprehensive trade agreements with the main players in the global economy, namely the USA, the PRC, Japan and Australia. Specific particulars are regulated at best, while trade is to be measured solely by the WTO regulations. Since 2009, the EU has negotiated the Comprehensive Economic and Trade Agreement with Canada. The agreement was signed on 30 October 2016. It is also a test case for the Trans-Atlantic Free Trade Agreements (TTIP/TAFTA) negotiated since 2013.

Economic and Monetary Union of the European Union
The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states. Each stage of the EMU consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such, the third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to join the eurozone. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism (“ERM II”), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro. Nineteen EU member states, including most recently Lithuania, have entered the third stage and have adopted the euro as their currency. All new EU member states must commit to participate in the third stage in their treaties of accession. Only Denmark and the United Kingdom, whose EU membership predates the introduction of the euro, have legal opt outs from the EU Treaties granting them an exemption from this obligation. The remaining seven non-euro member states are obliged to enter the third stage once they comply with all convergence criteria. The debate on EMU was fully re-launched at the Hannover Summit in June 1988, when an ad hoc committee (Delors Committee) of the central bank governors of the twelve member states, chaired by the President of the European Commission, Jacques Delors, was asked to propose a new timetable with clear, practical and realistic steps for creating an economic and monetary union. This way of working was derived from the Spaak method. The Delors report of 1989 set out a plan to introduce the EMU in three stages and it included the creation of institutions like the European System of Central Banks (ESCB), which would become responsible for formulating and implementing monetary policy. Since membership of the eurozone establishes a single monetary policy for the respective states, they can no longer use an isolated monetary policy, e.g. to increase their competitiveness at the cost of other eurozone members by printing money and devalue, or to print money to finance excessive government deficits or pay interest on unsustainable high government debt levels. As a consequence, if member states do not manage their economy in a way that they can show a fiscal discipline (as they were obliged by the Maastricht treaty), they will sooner or later risk a sovereign debt crisis in their country without the possibility to print money as an easy way out. This is what happened to Greece, Ireland, Portugal, Cyprus, and Spain. Being of the opinion that the pure austerity course was not able to solve the Euro-crisis, French President François Hollande reopened the debate about a reform of the architecture of the Eurozone. The intensification of work on plans to complete the existing EMU in order to correct its economic errors and social upheavals soon introduced the keyword “genuine” EMU. At the beginning of 2012, a proposed correction of the defective Maastricht currency architecture comprising: introduction of a fiscal capacity of the EU, common debt management and a completely integrated banking union, appeared unlikely to happen at that time. Additionally, there were widespread fears that a process of strengthening the Union’s power to intervene in eurozone member states and to impose flexible labour markets and flexible wages, might constitute a serious threat to Social Europe. In December 2012, at the height of the European sovereign debt crisis, which revealed a number of weaknesses in the architecture of the EMU, a report entitled “Towards a genuine Economic and Monetary Union” was issued by the four presidents of the Council, European Commission, ECB and Eurogroup. The report outlined the following roadmap for implementing actions being required to ensure the stability and integrity of the EMU:

• Stage 1: Ensuring fiscal sustainability and breaking the costly link between banks and sovereigns (2012–13)
• Stage 2: Completing the integrated financial framework and promoting sound structural policies (2013–14)
• Stage 3: Improving the resilience of EMU through the creation of a shock-absorption function at the central level (2015 and later)

Agencies of the European Union
An agency of the European Union is a decentralised body of the European Union (EU), which is distinct from the institutions. Agencies are established to accomplish specific tasks. Each agency has its own legal personality. Some answer the need to develop scientific or technical know-how in certain fields, others bring together different interest groups to facilitate dialogue at European and international level. There are over 40 agencies, divided into 4 groups. Distinct from EU institutions, the agencies of the European Union were set up to accomplish very specific tasks such as promoting environmental protection, transport safety and multilingualism. They span Europe – Dublin to Stockholm, Warsaw to Lisbon – providing services, information and know-how to the general public. Most agencies were categorised under the three pillars of the European Union, but this structure was abolished with the entry into force of the Lisbon treaty. The European Space Agency has been proposed as a future agency of the EU.

European Social Fund
The European Social Fund (ESF) is the European Union’s main financial instrument for supporting employment in the member states of the European Union as well as promoting economic and social cohesion. ESF spending amounts to around 10% of the EU’s total budget. The ESF is one of the European Structural and Investment Funds (ESIF), which are dedicated to improving social cohesion and economic well-being across the regions of the Union. The funds are redistributive financial instruments that support cohesion within Europe by concentrating spending on the less-developed regions. The particular aim of ESF spending is to support the creation of more and better jobs in the EU, which it does by co-funding national, regional and local projects that improve the levels of employment, the quality of jobs, and the inclusiveness of the labour market in the Member States and their regions. The overarching strategy of the European Union is the Europe 2020 strategy, which aims to promote “smart, sustainable, inclusive growth” with greater coordination of national and European policies. In 2010 this succeeded the Lisbon Strategy which aimed to make Europe the most dynamic and competitive knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment, by 2010. The objectives of Europe 2020 shape the priorities of the ESF. In the light of the need to increase competitiveness and employment against a background of globalisation and ageing populations, the European Employment Strategy provides a coordinating framework for the Member States to agree common priorities and goals in the field of employment. These common priorities are then taken up in the Employment Guidelines and incorporated into the National Reform Programmes prepared by the individual Member States. ESF funding is deployed by the Member States in support of their National Reform Programmes as well as their National Strategic Reference Frameworks (NSRF) which establish a member state’s main priorities for spending the EU Structural Funds it receives. The European Social Agenda also plays a role in shaping the priorities of ESF spending. The Social Agenda seeks to update the European social model‘ by modernising labour markets and social protection systems so that workers and businesses can benefit from the opportunities created by international competition, technological advances and changing population patterns while protecting the most vulnerable in society. In addition, the concept of flexicurity contributes to current ESF initiatives. Flexicurity can be defined as a policy strategy to enhance the flexibility of labour markets, work organisations and labour relations, on the one hand, and employment security and income security on the other. The term flexicurity encompasses a new approach to employment involving ‘work for life’ rather than the ‘job for life’ model of the past. It encourages workers to take charge of their working lives through lifelong training, adapting to change and mobility. The ESF is managed through seven-year programming cycles. The ESF strategy and budget is negotiated between the EU Member States, the European Parliament and the EU Commission. The strategy defines the objectives of ESF funding, which it shares partly or wholly with other structural funding. For the current ESF funding cycle these objectives are:

• The regional competitiveness and employment objective: to reinforce regional competitiveness, employment and attractiveness for investment.
• The convergence objective: to stimulate growth and employment in the least-developed regions. This objective receives more than 80% of total ESF funding.

The strategy also lays down broad priority axes – the actions required to achieve the objectives and which are eligible for funding.

Directorate-General for International Cooperation and Development
Directorate General Development and Cooperation – EuropeAid was formed on 1 January 2011 following the merger of the EuropeAid Cooperation Office (AIDCO) with the Directorate General for Development and Relations with ACP States (DEV). AIDCO had been founded on 1 January 2001 with the mission of implementing the EU external aid programmes around the world. At that time, DG DEV and the Directorate General for External Relations (RELEX) were responsible for policy and programming. Following the creation of EuropeAid in 2011, Director-General Fokion Fotiadis was responsible for the overall realisation of the DG’s mission, which consists in the programming and implementation of the European Commission’s external aid instruments financed by the European Union budget and the European Development Funds. In November 2013, Fernando Frutuoso de Melo succeeded Fokion Fotiadis as Director-General of the Directorate General. EuropeAid focused on maximising the value and impact of aid funding by making sure support provided in a manner which complies with EU development objectives and the United Nations‘ Millennium Development Goals in a speedy and accountable fashion. Effective implementation and delivery of aid also helps the Commission and the EU as a whole to attain a higher profile on the world stage. The European Union is the world’s largest aid donor. DG Development and Cooperation – EuropeAid was reformed into current form on 1 January 2015. DG International Cooperation and Development formulates the European Union’s development policy abroad. Its mission is to help reduce and ultimately eradicate poverty in developing countries through the promotion of sustainable development, democracy, peace and security. It works on policy formulation at a global and sectoral level. The main intervention areas covered are: Trade and regional integration, Environment and the sustainable management of natural resources, Infrastructure, communications and transport, Water and energy, Rural development, Governance, democracy and human rights, Peace and security, Human development, Social cohesion and employment. EU development action is based on the European Consensus on Development, which was endorsed on 20 December 2005 by EU Member States, the Council, the European Parliament and the Commission. When implementing projects, it takes account of EU policy strategies and long-term programmes for the delivery of aid. It translates policies into practical actions and develops new ways of delivering aid, such as budget support and through sectoral approaches. It also issues guidelines and makes evaluations of aid implementation. In addition, it is responsible for the proper management of funds and must use clear and transparent tendering and contracting procedures. The programming cycle and responsibilities have evolved with the creation of the European External Action Service (EEAS). The EEAS has a key role in the programming of geographic instruments with EuropeAid and the EU Delegations. Directorate-General is responsible for all the steps of an aid delivery project: after identifying needs, it carries out feasibility studies and prepares all the necessary financial decisions and controls. It then moves on to drawing up the required tendering, monitoring and evaluation procedures. EuropeAid often publishes these evaluations in its website, aiming to improve management, in particular by taking into account the lessons of past public actions and to reinforce capacity to account for, and to ensure, better transparency. This institution is a decentralised organisation. Two out of three Commission staff members working on aid implementation are based in the field. That is why most of the preparatory and implementation work is done through the EU Delegations in the beneficiary countries. Directorate-General is made up of more than 43 units divided into nine directorates attached to the Director General. To ensure coherence, complementarity and coordination in implementing external assistance programmes worldwide, DG DEVCO works in close collaboration with its various partners. The overall aim is to make external aid more effective. Civil society, international organisations and governments of member states of the European Union are all important actors in this field. Directorate-General awards grants and contracts to implement projects or activities that relate to the European Union’s external aid programmes. To ensure that EuropeAid’s work to improve people’s lives is recognised, a set of visibility guidelines have been produced. These guidelines ensure that aid projects acknowledge the funding support they receive from Commission budgets. They also help to raise the general profile of the EU across the world.

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