14 September 2017

Differentiation or disintegration

"The right response to the new challenges and opportunities in the external area is not differentiation — whatever form it might take — but more united policies and actions. As for security and defence, the basic objective must be to establish progressively a “strategic autonomy” for Europe in the framework of the transatlantic alliance. The meaning of this autonomy needs further clarification and more precise definition with all the elements of policies, responsibilities and capabilities. The first very important step has now been made in the right direction."

 

Rethinking and Preserving the European Union


 

Renewal, reinvention, re-foundation, restart, reset, renovation: just a few words most frequently used for what the European integration process happens to be in urgent need of. Words multiply, meanings are hazy and convey multiple messages. It is not only the messages, but also the meanings of the words that represent a great diversity. However, in the middle of the semantic inflation some basic ideas or directions still appear to emerge, which might vaguely evoke the possibility of a limited area of consensus.

This is a welcome point of departure for a deep, thorough, open and genuine exchange of ideas that first clarifies the meanings of the propositions, identifies the main visions, aspirations and concepts, and then by adapting them to the political, economic, cultural and constitutional realities, makes an effort to establish some degree of common conceptional ground for the renewal we do not know yet what it precisely means.

Conceptual clarification is therefore a prerequisite for starting the exercise that will eventually lead to major and concrete political decisions possibly involving changes in the institutional and legal system as well. But the consideration of institutional consequences of political decisions must be present already in the conceptual debate together with all the constraints and limits of the concrete situation. Just to illustrate briefly this dilemma: does the word “reinvention” include the need for a fundamental treaty change? If it were so, we would probably have to abstain from using it, however nicely it sounds. In other words all concepts, ideas and propositions must pass the test of the real world’s concrete political and institutional conditions.

Among the large number of words and concepts with multiple meanings, differentiation is one that needs to be subject to clarification and possibly to some degree of consensus. Differentiation is, indeed, an established practice in the European construction. It has always been around — to various extents and in different forms — almost from the very beginning of the integration process. It was essentially considered to be a useful device stemming from economic and political realities, such as the differences between the conditions, interests, positions, ambitions and aspirations of member states. As a device or instrument, it has been used to resolve difficulties ensuing from the inherent diversity of the political entities — sovereign states — participating in an unprecedented historic process. This means, first and foremost, that it has never been and must never become a goal or constituting principle in itself. It has to remain an instrument tolerated and necessitated by concrete situations that need to be resolved in the interest of the furthering of the basic objectives and principles of the integration process. As a means, it should — preferably — be transitional, a “second best solution” for the tackling of dilemmas that cannot be solved otherwise, but can serve as a useful “stepping stone” to find permanent and generally accepted solutions.

While differentiation can be a useful device, it also carries very serious risks that could jeopardise the very objectives and principles it is supposed to promote. This is the reason why this instrument had to be resorted to with extreme caution; it always had to be carefully scrutinised both for the substance and the form, before one or the other technique was to be adopted. When it came to the various legal techniques of differentiation (special/transitional arrangements, opt-outs, enhanced cooperation, out-of-treaty legal instruments), it was therefore a generally recognised principle that preference was to be given to the technique which created the least possible divergence in the system and minimised the risk of fragmentation.

These were the reasons why differentiation always had to be interpreted in a restrictive manner, it was supposed to be limited in scope, in effect, preferably in length of time and in particular, in its overall impact upon the further construction. Certain core areas had to be politically as well as legally excluded from its application, such as policies of exclusive community/union competences (e.g. trade or competition), any acts or measures having an effect upon the functioning of the single market and, last but not least, anything that affects and possibly changes the institutional system. For all the above reasons the purpose of differentiation is to promote the inclusion and not the exclusion of member states based upon the basic principle of unity in diversity. This is what gives it a political legitimacy, but only within the framework and under the conditions established by the treaties.

If most of the above, fairly well-known elements of differentiation are subject to a more or less general agreement, why has it now become one of the most relevant, exciting and controversial issues pertaining precisely to the renewal, reinvention, etc. of the European integration? Why the meaning of the word, the interpretation of the political and legal concept — together with other words and concepts, like flexibility, subsidiarity, diversity or identity — has become decisive from the perspective of the ongoing and hopefully deepening strategic reflection about the “future of Europe”?

The reason for this is complex and manifold. External and internál challenges all have brought about a fundamentally new situation, imposing unprecedented constraints upon the Union, and creating new risks as well as opportunities. Economic and geopolitical shifts, a more fragmented world order both in geopolitics and in international trade, devolution of power, re-emerging spheres of influences and the new antagonisms resulting therefrom, all in all a more dangerous global environment compounded by the vast and unprecedented challenge of migration makes it imperative for the Union to “reinvent” itself at least in the field of its external action. The basic question before the Union is how this “reinvention”, the qualitative strengthening of the external powers and capabilities can be carried out in various policy areas. All these constraints have now been reinforced by recent developments, new uncertainties regarding the unconditional nature of certain commitments in the framework of the Atlantic Alliance and the urgent need to speed up the development of a strategic autonomy of Europe. The various areas of the external action need different answers, but the need for a substantial reinforcement and the creation of the necessary instrument for that is of an absolute nature, equally applying to foreign policy, security and defence as well as to the common commercial policy, development cooperation and humanitarian aid.

There is, however, another need of absolute nature and that is the full respect for the treaties. Article 329 of the Treaty on Functioning of the European Union clearly lays down the limits of enhanced cooperation excluding from it the fields of exclusive competence and setting special conditions for enhanced cooperation in the area of the common foreign and security policy, such as consistency of the proposed enhanced cooperation with the CFSP, as well as with other Union policies (Art. 329(3) of TFEU). Although Article 329 only deals with enhanced cooperation, it must be clear that any more excessive technique of differentiation is a priori excluded in all these policy areas. Security and defence policy is a special area where the Treaty itself provides for special forms of differentiation in the sense that a group of member states execute certain tasks entrusted to them by the Council (Art. 42(5)) or establish permanent structured cooperation the condition and modalities of which are governed by the provisions of Article 46.

Despite the special treatment of the common security and defence policy it must be quite clear that the purpose of the special provisions contained in Articles 42(5) and 42(6) is not to create or increase differences, but quite to the contrary, to strengthen the external policies and operational capacities in this vital area by widening and diversifying the resources and forms of action that can be taken.

The right response to the new challenges and opportunities in the external area is not differentiation — whatever form it might take — but more united policies and actions. As for security and defence, the basic objective must be to establish progressively a “strategic autonomy” for Europe in the framework of the transatlantic alliance. The meaning of this autonomy needs further clarification and more precise definition with all the elements of policies, responsibilities and capabilities. The first very important step has now been made in the right direction. The European Commission’s Reflection Paper on the Future of European Defence is a good basis for further work; provided the ambitions do not stop with scenario a) or b), but unequivocally target scenario c): that is the Common Defence and Security option. If the member states of the European Union genuinely want to confront the new and rapidly changing threats coming from the outside world and realise that the “peace dividend” — while averting the risk of internal conflicts — does not protect them from external threats, it is indispensable to take much greater responsibility for their own security. Article 42 of the Treaty on European Union must be fully exploited and a common defence policy leading to a common defence with all the structures and capabilities must be established. At the same time, as it is underlined in the Reflection Paper, the “protection of Europe would become a mutually reinforcing responsibility of the EU and NATO”, and the cooperation between the EU and NATO should be raised to a qualitatively higher level.

It is not only in the field of security and defence where the growing external challenges and opportunities and the need to respond to them leads to the reinforcing of the political and legal instruments of the Union’s external action. The opinion 2/15 of the Court of Justice of the European Union has to be considered the most important milestone along the long road towards the extension of the area of the common commercial policy, hence the field of exclusive competence both by primary law, and by the ever broader interpretation of primary law by the case-law of the Court of Justice. The importance of this opinion is hard to be overestimated. From transport services to public procurement, from intellectual property rights to rules on competition, from sustainable development including environmental protection and social protection of workers to foreign direct investments, all these commitments contained in the free trade agreements with third countries fall within the field of common commercial policy that is in the exclusive competences of the Union. The Court found only two commitments that fall outside the exclusive competences and where the Union can only conclude an agreement together with the member states. One is the protection of non- direct foreign investments (including “portfolio” investments where the investor acquiring company securities has no influence over the management or control of the undertaking or real-estate investments) that are also covered by the envisaged agreement with Singapore, but are not foreign direct investments within the meaning of Article 207(1) of TFEU. The other is the regime for the settlement of investor-state disputes that — in the view of the Court — removes disputes from the jurisdiction of the courts of the member states without their consent, and therefore the approval of the relevant provision does not fall in the exclusive competence of the Union.

The Opinion in a strict procedural sense gives right to the Council as the agreement in the present form — because of these two commitments falling within the competence shared between the Union and its member states — cannot be concluded exclusively by the Union. In reality, the Opinion gives a fundamentally important push to the strengthening of the external action of the Union. The legal arguments of the Opinion in support of exclusive Union competence in various areas will be subject to ample scholarly discussions, and not without a reason. At the same time it is quite clear that the Opinion stepped in an economic and geopolitical situation where the instruments of external action need a substantive reinforcement within the framework of the treaties. This is exactly what now results from the Opinion of the Court. By intelligently adjusting the scope of the “new generation” free trade agreements to the conclusions of the Court on the borders of exclusive competence, the future agreements will not need to be ratified by 38 national and regional parliaments and the Union will re-become a powerful player (and negotiator) in the field of trade relations. This appropriately reflects the economic weight of the Union in the global order, reinforces the most effective and successful device of its external action and, last but not least, enables the Union to use and benefit from the opportunities offered by the recent developments in the field of the international trading system, notably the measures taken or likely to be taken by the new US administration. The new external economic and geopolitical opportunity is now coupled with a strong internal legal instrument and altogether this will significantly strengthen the Union’s external action.

Why the above is relevant for differentiation? For several reasons. The external constraints and opportunities foster stronger external actions, and a stronger external action supports a more cohesive, more united union. In the field of external policies — be it foreign policy, security or defence policy or common commercial policy — it is indispensable that the Union speaks with one voice in order to successfully enforce its interests and projects its economic and political power.

At the same time the treaties as well as the settled case-law of the Court ofJustice (Art. 3(2) of TFEU, Commission v. Council, 22/70 and a series of subsequent judgements and opinions) establish a clear link between internal and external competences to the effect that “when the European Union has thus exercised its internal competence, it must, in parallel, have exclusive external competence in order to prevent member states from entering into international commitments that could affect those common rules or alter their scope” (Opinion 2/15 para. 233). An excessive differentiation in internal competences would therefore have an impact upon external competences as well and would be susceptible of weakening the Union’s external action, hence its economic weight and political clout. Here is one important barrier to prevent overstretched differentiation whatever techniques are resorted to: it must not — directly or indirectly — adversely affect the Union’s external action.

The internal challenges to the European integration are manifold, overlapping and, in some respect, unprecedented. In which way, based upon what vision and principles, implementing what kind of institutional and legal techniques these challenges are approached and tackled by, will decide what is now called the “future of Europe”. In fact, most of these challenges are connected to the very nature of the integration process itself and lead back to a single fundamental cause. It is that the potentials of incremental, organic, “technocratic” or “functional” mode of integration have been exhausted and cannot be further relied upon. What used to be one of the reasons of the success of the integration has now turned into a major obstacle; indeed a serious threat to the continuation of the project. Progress through crisis, that is by reacting to and finding at least partial solution to the crisis is no longer possible. What is worse, is that the up till now fairly well functioning self- supporting dynamism risks turning into a self-dismantling dynamism, indeed a self- destructing negative spiral. The main reason for this threat is the emergence and deepening of the different types of divides within the integration structure and the intensifying centrifugal forces entailed precisely by these divisions. This is what gives now a special importance to the role, the objectives, the limits and the techniques of differentiation and this is why the scope and the way in which it is implemented will have a major impact upon the path to be followed. It can be a useful device, helping to keep everyone on board, facilitating progress in special situations bringing more flexibility in the system while fully respecting the existing institutional and legal framework. It can also be a toxic means of progressive dismantling of the existing structure, ultimately leading to a disintegration process. The stakes as well as the risks are, therefore, extremely high.

The divides referred to above are of different kinds, but are also interrelated. Geography is one factor (North—South, East—West), but it is also combined with criteria relating to the level of economic development, economic and fiscal policies. None of these geographic divisions are carved in stone or are of an absolute nature. Social and economic — including fiscal — policies change just like governments deciding about those policies. Differences between these policies of various groups of member states may be on the rise or on the wane depending upon the changing economic, social and political conditions.

It is important not to equate the geographic divisions with the various schemes of regional cooperation, such as the Benelux, the Nordic, the Baltics or the Visegrád 4, despite the fact that all these cooperations also have a geographic dimension. They essentially promote the interests of the group’s members in those areas where they have the same or similar interests based upon historical, geographic, economic, geopolitical or security related factors. Despite some suspicions raised notably regarding the Visegrád 4, all these regional cooperations should be considered as useful building blocks of the overall European project facilitating the working out of common positions of all member states. In any case, the principle of equal treatment should apply irrespective whether the cooperation is between big or smaller member states.

As for Visegrád 4, the argument is sometimes put forward that the only or at least the most important glue of this cooperation is a common stance on migration. A position that deviates from the mainstream and thereby obstructs the establishment, respectively the reinforcement of a common migration and refugee policy. While the reality is much more complex, it has to be clearly seen that to the extent migration has national security aspects “it remains the sole responsibility of each Member State” (Art. 4(2) of the Treaty on European Union). This also means that the creation of the conditions, capabilities and the disciplines on Union level can only be the common obligation of the Member States and unanimous decisions should be taken. Those aspects that fall outside of the scope of common security and defence and are not subject to other common policies, belong to the national competence of member states and consequently do not raise the need or possibility of the application of any differentiation technique. (Unless some member states decide to opt for an out- of-treaty solution: that is to make separate international treaties which would raise very serious legal and political issues.) Without going into the details of the subject, the conclusion can be drawn that the migration policy — to be distinguished from the treatment of refugees — is not an area where the techniques of differentiation may be relevant.

On top of the geographically identified divisions there is a more complex, more sensitive, at the same time largely simplified and exaggerated ideological divide within the Union. (And also within the Western World.) The dividing line itself is blurred, not easy to be traced, controversial and disputed. The trendiest line of separation — ardently put forward by both “sides” — is drawn between the isolationist, nativist, nationalist “populists” and the “politically correct” internationalist, globalist, progressive, elitist liberals. The problem with this artificial distinction is not only that it leads to mutual stigmatisations, insinuations, virtue-signalling and a battle of words, the meanings of which are themselves unclear, but it makes impossible to a significant number of people to choose between the two sides. Where should fit in or stand those, who believe in national and European collective identity rooted in historical and cultural legacy, respect traditional values and at the same time fervently support an open and free market economy, global competition, free, fair and rule-based multilateral trade?

Divides are real; no one can deny their existence. At the same time they are all vastly overblown and are perceived to be much deeper than they are in reality. Distorted perceptions naturally have their feedback on reality and result in the actual deepening of the rifts as well as in the rise of distrust between the various sides. Instead of exacerbating the differences and deepening the existing divides by excessive language and political rhetorics, efforts should be made to calm down and to find common grounds and solutions.

All the above developments make the concept of differentiation a centrepiece of the debates and also of political action. Old concepts and words return and compete in a growing confusion as the words themselves are hazy and carry different meanings. Two-speed, multi-speed, two-tier, multi-tier, variable geometry, concentric circles: all these words are frequently used in public discourse and become again the subject of political debate. Whatever are the words used and whatever meaning is attributed to them, differentiation need not and must not produce any of them.

Behind all these concepts, however, there is an increasing political ambition to react to the multiple divides and crises by introducing a qualitatively new level of differentiation, indeed, a new two-tier or several-tier Union and to make all the necessary institutional changes, including a substantial overhaul of the treaties. These ideas are not new, but they are now renewed and pushed forward with multiplied force. The history of these propositions goes back to several decades. The Kerneuropa proposal of Schauble—Lamers in 1994, Chirac’s idea of the “pioneer groups” in 2000, Fisher’s proposal to develop a “centre of gravity” in 2000, the Delors proposal of an “avant-garde” in 2001, all were rooted in the idea of returning to the “golden ages” of a small group of countries to reduce and, in particular, to fend off the prospective dilution of the integration project in the light of the upcoming and apparently inevitable Eastern enlargement. It would be interesting to analyse why all these proposals under different names, but going in the same direction ultimately failed to entail any significant political decisions and institutional changes.

By contrast, the Constitutional Treaty ended with a reasonable and well-balanced outcome which was essentially taken over by the Treaties of Lisbon. The first question is why all the radical proposals eventually failed, or at best were reduced to generally accepted devices of enhanced cooperation? The second question is why exactly two “avant-garde”, hard core, “Kerneuropa”, founding member states rejected by referendum the treaty aiming to establish a stable constitutional framework for the integration project? Whatever answers are given to these questions, the brief history of the Kerneuropa projects fortunately makes the success of the presently reinvigorating efforts more than doubtful.

One reason for this is that the divides are not only temporary, but are also manifold and of various nature. There is no single economic, political or geographic dividing line. Accordingly, existing differentiation schemes constitute different configurations that cannot be described as a single fixed-boundary division whatever word is now used to designate such structure.

The Eastern enlargement — the proper name of which is the reunification of Europe — no doubt, greatly contributed to the robust revival of the old dream of bringing back the good old times when we could sit around a much smaller table. Then came the sequence of multiple and overlapping crises with the well known economic and political consequences that had nothing to do with the “Eastern enlargement”.

Making the re-unification of Europe responsible for the crisis and the serious malaise resulting from it still became a widely accepted theory, in reality, a convenient excuse. While the mood has recently improved, the old-new panacea of establishing a hard core seems to have growing political support due to recent developments.

Instead of the variety of words used for the idea of (re)establishing Kerneuropa a single expression should be used. It is the fragmentation, the progressive self- generating dismantling and eventually the disintegration of the whole project.

The focus point of the “new generation” hard core theory and the political action based upon it is, of course, the Eurozone. The idea of the deepening and completing of the Economic and Monetary Union is an objective shared by all, including the non-euro countries. The question is whether this objective can be achieved within the framework of the treaties or the proposed institutional changes would need the amendment of them. How the economic, political and legal consequences of these developments will be tackled will have a decisive impact upon the future of the European integration.

The strengthening of the euro, the completing of the EMU is a common interest of all — 27 — member states. If, however, some basic conditions were not respected, the operation would not lead to the targeted objective; quite to the contrary, it would cause the weakening and the dismantling of the whole structure. The conditions that are well known have been amply referred to and reconfirmed not only by member states with derogation, but also by important documents, like the Commission’s Reflection Paper on the Deepening of the Economic and Monetary Union. The EMU and its completion must remain open to all EU member states. The integrity of the sing le market must be preserved.

A further condition should be that the measures to be taken to complete the EMU do not create permanent institutional structures separated by the institutional system of the EU as a whole. Doubling the system by creating parallel permanent institutions would go against the first condition (openness of the EMU), increase the much and rightly criticised complexity and aggravate the lack of transparency and accountability. All the steps towards completing the EMU — whether in the first or in the second phase envisaged in the Commission’s Reflection Paper — should be carried out within the existing treaty framework. But this is not the primary issue. Much more important is the imperative not to cut the overall structure in half, not to dismantle the unity of the system and ultimately not to disrupt the functioning of the single market and thereby go against also the second basic condition as set in the Commission’s Paper.

At the same time the temporary and moving nature of the divides ultimately also applies to the Eurozone non-Eurozone division. The relationship between the Eurozone and the rest is continuously changing both in numbers and in economic weight. With Brexit, 85% of the overall GDP of the Union will be produced by the Eurozone, and only one of the member states will have a permanent opt-out. All the others are legally obliged to join, an obligation that is for all of them — except for one (Sweden) — has been reconfirmed by their accession treaties. The further shift strengthening the Eurozone will likely raise the question of the democratic legitimacy of the zone and all the institutional and legal issues regarding the relationship between the Eurozone and the EU. Whatever the final outcome of this process will be, the Eurozone cannot be considered as a kind of hard core. Quite to the contrary, the Eurozone will have to be identified more and more with the Union as such and the necessary legal conclusions will have to be drawn. This is, however, not the story of tomorrow. At present the main task and responsibility is to preserve the unity of the Union, including that of the single market and of the institutional system.


 

CONCLUSIONS


 

1) The concept of differentiation can only be analysed in the general context of the integration project. The renewal and strengthening of the project needs a long term vision based on a thorough and in-depth reflection in the light of the external and internal challenges and opportunities that not only make this reflection indispensable, but also create favourable conditions for it.

External threats and constraints as well as the “Brexit glue” increase the internal cohesion of the 27 despite all the divides of various natures. This creates a better mood and improves the chances of finding a basic consensus on the long term vision.

2) The vision on the future Union based on universal values, but insisting upon the European cultural heritage and identity, will have to be the fundament of a permanent constitutional framework finalising as much as possible an institutional structure and respecting the competence of the political units of the integration, i.e. the member states, as well as the principle of subsidiarity.

3) A stable constitutional framework cannot dispense with a reasonable degree of flexibility. This is bound to involve, again, some form of differentiation among the member states, the techniques of which must be selected, scrutinised and shaped with utmost care and caution, given the high stakes and risks of the operation.

4) Out of the existing techniques of differentiation preference must be given to those that involve the lowest risk of becoming sources of fragmentation of the structure with special regard to the hazards of developing a European Union of two or multiple tiers with a lasting fragmented structure.

5) It is the legal device of enhanced cooperation that raises the lowest risk, as it does not create across the board divides between different groups of member states participating in various enhanced cooperation schemes. Any other technique of differentiation would likely raise more general and persisting barriers between member states. In any case the most undesirable form of differentiation would be the “out-of-treaty” instrument resorted to by a group of member states.

6) Limits to and conditions of enhanced cooperation must be strictly interpreted, in particular the full respect for the unity of the single market. The risk of triggering a self-dismantling dynamism should be averted.

7) Differentiation does not and should not have anything to do with the existing or future regional cooperation schemes like the Benelux, Baltic, Nordic or Visegrád 4 cooperation. These schemes have the function of promoting and facilitating the coordination among member states and do not provide criteria for any kind or form of differentiation.






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