October 26, 2016
We have been arguing for some time that the biggest single threat to western liberal democracy does not stem from Donald Trump or Marine Le Pen but from our own tendency to double down on the very measures that have given rise to a broad-based insurrection against the system. It is happening again in the Ceta debate.
One of the top German constitutional lawyers, Franz Mayer, who represents the German government in the Karlsruhe case against Ceta, has come up with a beguilingly simple way to circumvent the EU's Wallonia problem. He writes in Verfassungsblog that it would be no problem for this trade treaty to be signed by the EU, Canada, and 27 out of 28 member states. All you need to do is to cross out the words "Kingdom of Belgium" from the Treaty, he writes, and voilà: problem solved. We never cease to be amazed at what the world looks like from the eyes of a German constitutional lawyer. But if Wallonia continues to block this, we would be fairly certain that an increasingly desperate European Council would at the very least consider this option, if only to pressure the Wallonians into submission.
There is one issue on which we agree with Mayer - which is that one option is impossible - the one proposed yesterday by Guy Verhofstadt: turn the clock back and make Ceta an EU treaty only, thus bypassing the need for national ratification. The trouble is that Ceta goes well beyond the competences of the EU. The protests against Ceta have very little to do with trade, but are focused on the investor-state dispute settlement (ISDS) procedure, which essentially means that large multinational corporations can operate outside the national legal systems.
We noted a couple of German commentators following Mayer's argument about Ceta ratification without Belgium. The best-argued article is by Helene Brubowski in FAZ, who argues that the EU parts of the treaty - relating to trade - could apply to all, while the national parts would apply only in member states that signed the treaty. She writes this might be only proposed as a final desperate measure if Wallonia continues to block. But she acknowledges that there are big technical problems, and it would be a political provocation. In the long run, the only solution is for the EU to stick to EU-only business, and avoid mixed treaties.
In this context we noted a story from Australia according which the government there wants to press ahead with its FTA with the EU, but is now considering a narrower agreement to avoid the same problems.
We would assume that the ECJ would strike down any attempt to ratify a mixed treaty without the consent of all member states, because it would reduce the entire voting procedure to absurdity. If Mayer's solution were possible, than the EU and, say, Germany would be able to do a bilateral trade deal with a third country - a deal that would indirectly affect all the other countries since they are tied to Germany through a customs union and a single market. Did the EU not take the position post-Brexit that it was impossible for a member state to negotiate third-country trade deals while still a member?
On the political side, there were no developments yesterday. An intra-Belgian meeting between the regional and central governments took place, but reached no agreement. Paul Magnette, the prime minister of Wallonia, said he had been given three deadlines. If there is another one, he will stop talking.
In his latest FT column, Wolfgang Munchau points out that there are no good solutions to this dispute. He says it is now becoming increasingly evident that the EU requires a federal government not as a utopian future dream, but in order to do its basic business, such as running the eurozone or trade policy. He predicts that the EU will eventually take the path to further integration, but this will be preceded by a phase of disintegration, of which Brexit was only the first step.
Martin Wolf makes an important broader point. Protectionism may be popular, but "cannot solve the problems of distressed former and would-be workers". We are moving into a phase where global trade growth no longer exceeds global output growth, and one where the leadership on trade liberalisation will come from outside the US and Europe.
We also have stories on the Commission proposal to harmonise the corporate tax base; on how QE distorts the repo markets; on a difficult day for Tsipras; on the deteriorating financial situation of Greek pension funds; on Renzi's threat to veto the 2017 EU budget; on the politics of a hard Brexit, and on the astonishing fall of Hollande's approval rating to just 4%.