Can the EU still negotiate Free Trade Agreements on its own?

Tuesday 20 June 2017

According to a recent decision of the Court of Justice of the European Union, some matters related to trade need to be approved by Member States as well as the EU.


The Free Trade Agreement with Singapore[1] cannot, in its current form, be concluded by the EU alone. This was the conclusion of the Court of Justice of the European Union (ECJ) on the 16th of May 2017[2]. With that statement, the ECJ means that the provisions of the agreement relating to non-direct foreign investment and those relating to dispute settlement between investors and States do not fall within the exclusive competence of the EU, thus making the EU unable to conclude the deal on its own.


Although it was the Commission who brought the case in front of the ECJ on whether the EU had exclusive competence enabling it to sign and conclude the envisaged agreement by itself, the question was initially brought up by the Court’s Advocate-General, Eleanor Sharpston, who pointed out that some of the issues were a shared competence between the EU and the Member States[3]. However, the final decision does not concord with all the issues that were raised by Mrs. Sharpston. For instance, sustainable development and transport services remain an EU exclusive domain.


The EU and Singapore had launched one of the first ‘new generation’ bilateral FTAs on the 20th September 2013. This trade agreement contained, in addition to the classical provisions on the reduction of customs duties and of non-tariff barriers in the field of trade in goods and services, several provisions on other various matters related to trade such as intellectual property protection, investment, public procurement, competition and sustainable development.


This ruling also highlights the fact that most of the Agreement’s content is indeed of EU’s exclusive competence. This means that the future trade deals will not need national and regional ratification per se, as some might have feared after the difficulties encountered for the ratification of the CETA (Comprehensive Economic and Trade Agreement with Canada). Surely, the refusal of the Belgian region of Wallonia to ratify the CETA is still fresh in everyone’s mind[4]. The Commission’s power to conclude such deals is therefore reinforced for the matters that remain EU’s exclusive competence.


However, as a consequence of this decision, the Commission will have to decide whether or not it should split the agreement into two separate deals, one with all the aspects for which the EU has an exclusive competence, and another one with the issues of shared competence with the Member States. While, in the first case, it would indeed be much easier for the EU to conclude the deal – in case of exclusive competence, the Commission only needs the approval of both Council and Parliament –, the second deal would need to go through the lengthy process of ratification by all national and regional Parliaments. 


This Court’s decision, though not fundamentally jeopardising the EU trade policy, has to be considered in the light of other future or currently being negotiated agreements[5], as well of the imminent Brexit. Depending on the Commission’s next move, the future Brexit deal could have to follow the same pattern regarding the possibility of establishing two distinct deals for EU exclusive and shared competences. And as an EU-Japan Free Trade Agreement is being pushed forward to a swift conclusion, it seems that the Commission may think wiser to leave out some matters of shared competence[6].







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