policy brief Why treaty change matters for business and for Britain By Hugo Brady and Charles Grant ★ The German presidency of the EU hopes that the Brussels summit on June 21st-22nd will approve its plans for a new treaty. This would amend the existing treaties and be much more modest in scope than the constitutional treaty defeated in the French and Dutch referendums in 2005. ★ The constitutional treaty would have changed little in the way the EU makes economic policy, and the new treaty, if approved, will change even less. It would probably improve the process of decision-making, but would not transfer substantive powers to the EU. ★ The arrival of 12 new members in the EU since 2004 has not stopped it taking decisions, for example on the single market. But EU institutions and procedures work poorly in two areas: foreign policy, and justice and home affairs. ★ Most EU governments believe that the EU’s ‘deepening’, the building of stronger institutions, and ‘widening’, the entry of new members, have to go together. This means that without a new treaty to prepare the EU institutions for a wider Europe, enlargement will stop. ★ With a new generation of reform-minded leaders in charge of France, Germany and the Commission, Britain has an opportunity to help lead the EU towards a more pragmatic, economically liberal future. But if Britain blocks an agreement on a new treaty, its voice in future negotiations – such as those on the budget and farm policy – will count for less. An EU riven by internal conflict would become more introspective and less able to forge coherent policies on climate change, Russia, the Middle East and much else. Businesses should feel broadly satisfied with the way the EU is developing. The Union’s enlargement has extended the single market to some 500 million people. The market is still deepening in areas such as energy, capital markets and postal services. The current German chancellor and the new French president have more sympathy for economic liberalism than their predecessors, while in the European Commission the key jobs – the president and the commissioners for the single market, competition and trade – are held by liberals. Before proposing new laws, the Commission now consults widely and carries out impact assessments. Under the so-called Hampton Court agenda – named after a meeting during the 2005 British presidency – the EU has tried to shift its focus towards issues that matter
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for the citizens of Europe, like climate change, energy security, and research and development. Yet the German presidency of the EU has put treaty change back on the agenda. The Brussels air is thick with talk of institutions, inter-governmental conferences, variable geometry and other such exceedingly dull concepts. To many observers, especially in Britain, the EU is once again shooting itself in the foot, preparing for another round of navel-gazing, when all around it the world is full of challenges and problems that need tackling. However, treaty change is not an unnecessary distraction. Businesses in general, and the British in particular, have a strong interest in Angela Merkel,
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