Wednesday, June 15, 2005

Treaties, constitutions, referenda, rebates and CAP reform

The French and Dutch rejections of the constitutional treaty and the spat over the CAP and British rebate cannot be separated. Both are – at least in theory – to do with the future of the EU post-enlargement. Both should also, of course, have been dealt with over a year ago, before the expansion to 25 member states.

With last year’s enlargement, the hodge-podge of EU treaties needed to be redrawn and consolidated – hence the constitutional treaty. Treaty rethinks were never as immediately necessary as reform of the financial basis of the Union, but it did seem more likely to be the thing on which everyone could agree, and therefore form the basis of the more important financial rethinks. With the French and Dutch referendum results it turns out agreement even on the political basis of the EU wasn’t possible.

Still, the EU can soldier on under the existing arrangements without too much trouble. But without a serious rethink of the financial base of the Union, chaos and resentment were always likely – with the accession of a number of less well-off countries current CAP payment levels could simply never be maintained. This should have been the first thing to be tackled – not the redrafting of old treaties which, though flawed, still just about work.

The new member states should not fund Britain’s rebate; nor should they fund France’s CAP handouts. Times have changed significantly since both the rebate and the CAP were agreed, and the terms of both should be redrawn to take account of the new situation.

Without the rebate, Britain would end up contributing more than Germany. Considering the countries’ relative wealth, this would hardly be fair. But with the rebate, Britain’s net contributions (per capita) are a little under a third that of the Netherlands (47 to 121 euros per head). The UK also pays less net per capita than Sweden, Luxembourg and Belgium. You can understand why they might be a tad miffed. All these countries are – by GDI – less well off than Britain. Apply the same financing rules to the EU25, and the rebate becomes even less fair.

It isn’t just Britain, of course, France gets more CAP handouts than its fair share, so grievances are valid there too. But, and it’s important not to forget this amidst all the rhetoric, France is still a net contributor. More unfair still is the Irish situation, where Eire gets more EU handouts per capita than any other member state, despite now being one of the richest.

But as long as EU countries insist on retaining their vetoes, an agreement is likely to be impossible, as a redrawn, “fairer” financial structure would inevitably be to the benefit of the poorer members and the detriment of the wealthy likes of Britain and France. Without some of the wealthier countries like Britain and France being prepared to make even more of a financial sacrifice, as Germany has already done, it simply cannot work.

Yet whereas Britain’s rebate benefits primarily the British government, France’s CAP handouts go direct to the people and specifically the powerful farming lobby. As such, Chirac is in a far trickier position – any concessions on his part would directly affect the French voter.

Blair, however, can concede the rebate without too much of a financial impact on us voters – all he needs to do is avoid launching any more illegal wars and he'd save the money easily. Britain’s sacrifice could then act as concrete proof that the wealthier EU states can afford to live without the handouts by cutting a bit of budgetary flab at home.

The UK would then also no longer be seen as a selfish and reluctant member of the EU club. Instead France would find itself more resented and isolated as the country which not only was the first to reject the constitution, but also refused to make concessions for the good of the rest of the EU. Britain’s bargaining position, with a weakened France and as one of the principle financial contributors, would then be vastly improved, and the British “vision” for the EU, if such a thing exists, would be far easier to promote – especially as neither Chirac nor Schröder are likely to be around much longer, and relationships are already being built with their likely successors.

(Note - final two paragraphs slightly re-edited since first posted)

2 Comments:

Blogger Alex said...

On this occasion, the EU had a go at reversing the usual process - historically, the union starts with the economics, and then moves to the politics. This time we tried the politics first, and it didn't work very well.

6/16/2005 10:01:00 am  
Blogger Rousseau said...

Good points, but I don't think "good will" is enough of a reason for Britain to be able to get rid of the rebate, even if the political price is lower than for most.

It seems simply a negotiation for a reduced rebate seems the most rational solution, if anything was going to change.

But I must admit, I don't see why it would. Britian doesn't seem likely to get anything, financial economic or political, in return and Britain holds the decision in their hands there. And squishy-Christian Tony Blair, if he was going to throw the money away out of good will, would probably rather give the money saved to Africa than the second-world.

6/16/2005 04:21:00 pm  

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