Mixed competences and ‘second generation’ trade agreements: a consideration of EU disintegration

ABSTRACT

This paper considers recent developments in EU trade policy in the context of the theoretical framework of ‘disintegration’. The events surrounding the conclusion of the Comprehensive Economic and Trade Agreement (CETA) with Canada, as well as the CJEU’s opinion on the EU-Singapore free trade agreement, underscore the limits to centralized decision-making in trade policy for newer ‘second generation’ trade agreements. The argument is that recent political developments with EU trade agreements have complicated the possibility for further exclusive competence at the supranational level, and in doing so have indirectly illustrated some potential limits to further economic integration. This examination is helpful when considering if (or to what degree) the logic of European integration has been weakened in the aftermath of various crises, and whether the federal structure of EU governance is able to accommodate changes in the allocation of competences in trade policy.

KEYWORDS:

• External trade
• disintegration
• CETA
• Singapore
• competences

Introduction

The ability of the European Union (EU) to negotiate and implement international trade agreements as a single actor has been a prominent achievement of European market integration. Beginning with the European Economic Community (EEC) in 1957 with the formation of a customs union and the subsequent Common Commercial Policy, the pooling of sovereignty, with some qualifications, into the supranational level of external economic relations with third parties has long represented the potential ability of the EU to behave as a single cohesive actor on the world stage (EUR-Lex n.d.; Meunier and Nicolaïdis 2006; Woolcock 2010). However, two recent events concerning EU bilateral trade agreements offer impetus for the suggestion that trade deals are less likely to reflect areas of exclusive EU responsibility, and are likely to instead become more of a shared responsibility between the EU and member states in future endeavours. This paper examines these two events while employing the relatively newer framework of ‘disintegration’ in EU studies in order to consider the changing dynamics of supranational trade policy in the context of the potential political limits to further economic integration of the single market.

The first event is the reassignment of the Comprehensive Economic and Trade Agreement (CETA) with Canada to be concluded as a ‘mixed-member’ agreement (i.e. needing the approval of both the EU institutions and the national parliaments) rather than concluded through the supranational institutions alone. This change in trade agreement approval, which resulted from public and political protest following the results of the Brexit vote in summer 2016, resulted in a last-minute blockade by the Wallonian government in Belgium during October 2016 towards ratifying the agreement (Duina 2019; McGregor 2016; The Economist 2016a). The Wallonian parliament eventually gave its approval after achieving minor concessions, including requiring the Belgian federal government to request a preliminary opinion from the Court of Justice of the EU (CJEU) on the legality of CETA. Although the CETA has since come into provisional application, the incident demonstrates the complicated dynamics and potential for political brinksmanship with mixed-member authority in trade agreement, as well as provides an important precedent of regional protest and/or blockade for future trade endeavours.

The second event is the May 2017 CJEU opinion on the EU-Singapore trade deal. The Commission had submitted a request in 2015 to the CJEU to determine whether the EU has exclusive competence¹ to sign and conclude a ‘second-generation’ trade deal – meaning, a trade deal that goes beyond traditional trade in goods and removal of barriers to include non-tariff barriers to trade in the areas of services, intellectual property, investment, and sustainable development. The CJEU’s opinion stated the provisioned agreement with Singapore could only be concluded by both the EU and the Member States acting together because some of the provisions of the agreement fall within competences shared between the supranational and national levels; namely, the areas of non-direct foreign investment and the regime governing dispute settlement between investors and states (CJEU 2017).

The central research question here asks whether these two events taken together comprise any evidence of disintegration, or do they instead simply point to the usual dynamics of regional-centre machinations in a federal polity? The rationale for this questioning arises from the long-standing successful nature of the EU’s single external trade policy, which has long represented both an area of policy achievement as well as an essential feature of the EU single market (Cremona 2017; Meunier and Nicolaïdis 2000). In addition, there has been an upsurge of politicization of EU trade deals in recent years against the backdrop of social, political, and economic crises buffering the EU as a whole. The external trade activities of the EU, exemplified in no small part by the EU’s single customs union and single actor role within the World Trade Organization (WTO), had largely remained a technical affair, with muted domestic reactions and public acknowledgement of EU trade endeavours, up until the post-financial crisis era of the 2010s (De Bièvre 2018; Duina 2019). In this context, the events of CETA ratification and the CJEU opinion on trade competence offer significant instances of shifting dynamics within EU governance that may offer insight into the durability of EU trade policy specifically, as well as about the direction of economic integration within the EU more generally. Is it simply that the depth of these ‘second-generation’ agreements into economic areas such as investment and procurement necessitate the greater involvement of national and sub-national governments? Or is the shift to increased mixed competences a harbinger of more significant modifiers to the direction and strength of European integration? Using the policy area of trade as an important representation of the EU’s single market integration, this paper suggests that the combined events of CETA and the CJEU opinion on trade competences may contribute to a fundamental shift in the existing governance structure of the EU’s trade policy. Such a shift is noteworthy as it may portend a stress fracture in the larger construct of market integration.

Work on European integration and disintegration dynamics offers a theoretical platform for exploring and explaining this shift. Instances of intergovernmental challenges to supranational governance – whether considered ‘spillback’, ‘differentiated integration’ (Rosamond 2016; Schimmelfennig, Leuffen, and Rittberger 2015), or the actual unravelling of previously delegated authority – are a helpful lens for elucidating recent tests of the long-standing success of EU external trade policy. In applying work on disintegration to the combined events of CETA and the CJEU opinion on trade competence, this assessment also explores the implications of ‘mixed-member’ trade agreements for supranational authority from both a theoretical and practical perspective. Theoretically, the requirement of national parliaments to approve trade deals alongside the supranational level offers additional fuel for thought in the context of discussions on neo-functionalist ‘spillover’, the possibility of ‘spill-back’, and the dynamics of the process of potential disintegration in the aftermath of the euro sovereign debt crises, migrant crisis, and Brexit. Practically, the precedents set with CETA and the CJEU opinion portend more complications in the EU’s behaviour in future trade negotiations in the form of less ambitious trade deals, fewer trade partners, or both. This paper aims to contribute to the ongoing discussion about the markers and processes of disintegration by highlighting the non-linear development of EU governance and by emphasizing the durability of the EU’s federal-style design in reaction to challenges.

The paper begins with a brief history of the EU’s external trade policy area to date, followed by an overview of the individual internal negotiation dynamics during the CETA and Singapore deals, relying on official public documents. It then provides a discussion of the theoretical framework of integration and disintegration and the relevance for trade policy and single market cohesion. Following is an analysis of the political machinations during the conclusion of each trade agreement through the perspective of recent scholarly work on theories of disintegration. The results of the analysis suggest that the shift to mixed-member trade agreements may indicate a resurgence of economic nationalism in tandem with the post-financial-crisis climate and other social and political nationalist movements, but that this shift does not provide unequivocal evidence of the unravelling of supranational authority. Trade policy is a ripe area for the application of European integration theories because of its early establishment within the customs union. The central contribution here is to use external trade as a policy area by which to flesh out the nuance of the overlap between frameworks of disintegration and federalism.

Background of EU trade policy

The evolution of EU trade policy demonstrates a clear forward momentum trajectory of integration from its inception up until the 2010s. Trade policy first began with the Common Commercial Policy (CCP) in the Treaty of Rome as a part of the new customs union among the then six original member states. The logic therein was straightforward – if goods were to be traded freely within the European Economic Community (EEC) there needed to be a corresponding need for common tariffs of goods arriving from outside the EEC – and proved to be self-replicating. Since the CCP, trade policy in the EC/ EU has continued to advance slowly in response to the development of the Single Market and other areas of EU competency, as well as in response to political dynamics from domestic groups and international market forces. Under the current design of the Lisbon Treaty, trade policy is now the exclusive power of the EU, as set out in Article 207 of the Treaty on the Functioning of the European Union (TFEU), meaning that individual member states are not able to independently legislate on trade matters and are not able to conduct individual international trade agreements (Woolcock 2010).

From the CCP onwards, the direction of integration in trade policy has remained relatively consistent. The EEC member states stopped coordinating their own external CCP action in 1970 and began using qualified majority voting (QMV) within the Council for some areas of trade. In 1978 the CJEU (then the European Court of Justice (ECJ)) extended the scope of the CCP to encompass a non-exhaustive list of potential trade items, so that the EC could consider trade negotiations as a whole rather than sector by sector (EUR-Lex n.d.). With the Maastricht treaty, trade policy became increasingly centralized; QMV was extended to nearly all parts of the CCP, the European Parliament (EP) gained a larger role in consultation on trade issues and in providing assent in some decisions, and the Commission gained a stronger role as a single representative for EU trade. These changes reflected the new EU Single Market, as well as a market-based shift of preferences toward export-oriented interests (Meunier and Nicolaïdis 2006; Young and Peterson 2013). The Lisbon Treaty, in consolidating the prior three-pillar system into the single legal personality, created the legal basis for the EU as a whole to adopt autonomous acts on trade for all areas covered by the commercial aspects of the Single Market – to include services, intellectual property, and foreign direct investment. Trade policy was now governed under the Ordinary Legislative Procedure (OLP), which meant the default procedures of QMV and the EP as a full co-legislator. Notably, the Lisbon Treaty allowed for exceptions for areas of trade considered to be culturally sensitive or within the provision of public welfare services such as health or education (European Commission 2009).

While the practical execution of competences within international trade dynamics is likely much more blurred than the tidiness of what legal definitions connote, the legal definitions themselves already provide qualifiers over which level of governance does what in trade negotiations. Article 3 of the TFEU defines exclusive competence as ‘areas in which the EU alone is able to legislate and adopt binding acts … EU countries are able to do so themselves only if empowered by the EU to implement these acts’, for the areas of customs union, competition rules for the functioning of the internal market, monetary policy for euro area countries, conservation of marine biological resources under the common fisheries policy, common commercial policy, and the ‘conclusion of international agreements under certain conditions’ (EUR-Lex 2016, italics mine). Article 4 of the TFEU defines shared competences as areas where both the EU and EU countries are able to legislate and adopt legally binding acts: ‘EU countries exercise their own competence where the EU does not exercise, or has decided not to exercise, its own competence’ (Ibid). Among many other areas, shared competence includes the internal (single) market. The language in Articles 3 and 4 illustrates not only how the competences are less strictly bordered than how they might initially sound, but also how external trade itself – predicated on allowing preferential access to the single market – comprises a great deal of nuance between all governing actors. For the purposes of this paper, there are three points to emphasize concerning the evolution of EU trade policy. First, as has been widely noted in scholarly literature, the stalling of the World Trade Organization’s (WTO) Doha Round left the EU to focus its international trade strategy on bilateral free trade agreements. Despite the EU’s strong advocation for multilateral trade rules and norms, informed to some degree by its own established success with internal market integration, the failure of the WTO negotiations meant that the EU’s linking of trade to growth in the Lisbon 2020 agenda needed different outlets than a multilateral regime (García 2013; Ladi and Tsarouhas 2017; Smith 2010). Since 2007, the EU has initiated bilateral agreements of various levels of depth and denomination (Association Agreements, Free-Trade Agreements, Partnership and Cooperation Agreements) with numerous countries in the Americas, Mediterranean, and Pacific (Bonciu and Moldoveanu 2014; European Commission 2018a). Second, while the institutional changes in the Treaty of Lisbon appear on the surface to be an extension of practices already established in earlier treaties (Woolcock 2010), the changes may have actually – with the benefit of hindsight, particularly when considering financial crisis – set the seeds of discord for decision-making on trade. The culmination of adjustments that came with the EU’s ability to conclude autonomous trade agreements, particularly with the inclusion of more areas of negotiation to do with non-tariff barriers and dispute mechanisms and other areas of likely contention, may have inadvertently streamlined the decision-making process at the supranational level at the expense of national interests. Third, the increasing input of the EP into trade agreements – due to the OLP and also to the creation of the International Trade Committee within the EP, to which the Commission must now report to regularly on trade negotiations – has helped invite closer representative (and thus partisan) scrutiny of the contents of trade agreements (Woolcock 2010). These three points taken together offer a perspective on EU trade policy as being an area that was simultaneously experiencing a spike in activity and a further centralizing of competences, all within the time-frame of financial crisis and resultant increased Euro-skepticism.

CETA

To date, CETA represents the largest free trade agreement in the wealthy industrialized world in terms of both market share and of provisions for non-trade barriers. To the latter point, CETA provides an excellent example of a ‘second-generation’ free trade agreement, which can be broadly defined as an agreement that may still attend to removing tariffs and quotas on goods but focuses more on removing and reducing barriers in areas that are either inherent in national regulations (licensing, intellectual property, anti-dumping measures, labour regulations, environmental protections) or are located in economic areas that had previously been off-limits to international competition (services, investment, public procurement) (Woolcock 2011). Early discussions between Canadian and EU officials led to a joint study of potential trade benefits between the two markets being published in 2008, and negotiations followed shortly thereafter (Global Affairs Canada 2018). Some issues of contention during negotiations included pharmaceutical patents, procurement, the liberalization of a few key areas of goods (dairy, beef, and automotive parts being the most visible in the press), and investment-state dispute mechanisms (D’Erman 2016). Negotiations concluded in 2014. Both parties signed the agreement on 30 October 2016; the EP approved the deal in February 2017, and substantial portions of the deal are provisionally in force since 21 September 2017 (Global Affairs Canada 2018). At the time of writing, 14 EU member states have provided national instruments of ratification on CETA, and Belgium has requested an opinion on the legality of the agreement from the CJEU (European Council 2019; Kingdom of Belgium 2017).

The process of CETA’s approval since 2016 has been subject to political debate. Under Articles 3 and 216 of the Treaty on the Functioning of the European Union (TFEU, as the Treaty of Rome re-named in the Treaty of Lisbon), the EU has the authority to conclude international trade agreements if the texts meet the criteria of ‘exclusive competence’, in which case formal approval of the agreement circulates through the supranational institutions: after the Council gives final authorization, the EU Commissioner for Trade formally signs the agreement, and the EP then gives consent in a plenary session. However, if an agreement contains provisions that also fall under the responsibility of member states agreement it is ‘mixed’ between the levels, and all EU member states will also need to sign and ratify the agreement before the EP can give formal consent (EUR-Lex 2010). On 29 June 2016, Commission President Juncker stated that it was the Commission’s opinion that CETA could be approved as an ‘EU-only agreement’, implying that the content of CETA met the criteria of exclusive supranational competence (European Commission 2016). The backlash from some member state governments, trade unions and anti-trade activists across the EU received a great deal of press attention, with Juncker being characterized as trying to inappropriately ‘fast-track’ the CETA deal as an indirect political response to the Brexit referendum (EurActiv 2016; Guariscio and Blenkinsop 2016). As a result, on 6 July 2016, the Commission reversed its position and issued another press release with a statement from the EU Trade Commissioner:

Meanwhile, the open issue of competence for such trade agreements will be for the European Court of Justice to clarify, in the near future. From a strict legal standpoint, the Commission considers this agreement to fall under exclusive EU competence. However, the political situation in the Council is clear, and we understand the need for proposing it as a ‘mixed’ agreement, in order to allow for a speedy signature.²

Thus, it became necessary for CETA to proceed by ratification by all national parliaments within the EU, to include the regional national parliaments of some federal member states. This process opened up political space for local protests, the most visible being the Belgian region of Wallonia, which refused to give consent for the Belgian federal government to give approval of CETA in the Council. The Wallonian government argued that its agricultural sector would be overly exposed to competition from Canadian farmers, and that the proposed investor-state tribunals were incompatible with existing EU law. The EU offered the concession of allowing Belgium to request an opinion from the CJEU to determine the legality the investor-state dispute system, as well as a general promise that the Belgian government could assess the socio-economic and environmental impact of CETA before ratification; these concessions were enough for the Wallonian government to drop its objection in order for Belgium to give its approval in Council (The Guardian 2016). While CETA was then signed by the Commission and the Canadian government on 30 October 2016, the aftermath of the debate over competency and the actions of the Wallonian government have helped to raise the profile of anti-trade activists across the EU; at the same time, other national governments have also expressed concern over the investment-dispute mechanism as initially drafted in CETA (The Economist 2016b).

In April 2019, the CJEU provided the opinion that ‘an international agreement providing for the establishment of a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, including the Court of Justice, is not in principle incompatible with EU law’, provided that ‘the autonomy of the EU and its legal order is respected’ (Opinion 1/17 of the Court, 30 April 2019). While this development was in favour of the EU-level position that its negotiating mandate for CETA provided a sound precedent for future trade negotiations as well as reinforced the EU’s leadership role, the period of time elapsed between initial CETA approval in 2016 and the CJEU’s 2019 opinion saw increased activism and civil-society protest against CETA in particular and EU-level authority more generally (Financial Times 2019). The developments surrounding CETA ratification illustrate an increased awareness on the part of public observers on the nature and implications of EU versus national competences in the international trade arena.

Singapore

The EU stated its intention to pursue bilateral trade relationships with individual Association of Southeast Asian Nations (ASEAN) countries in 2009 and opened discussions with Singapore on a bilateral free-trade and investment treaty in 2010. Singapore is the EU’s largest commercial partner in ASEAN, and the agreement was expected to be the first with an ASEAN member. The negotiations on goods and services were completed in 2012 and both sides initialled the text of a free-trade agreement in 2013. Negotiations on investment protection concluded in 2014. While talks overall between the EU and Singapore went more quickly and with less controversy than those of CETA, the substance of the deal heralded one of the first ‘second-generation’ bilateral free-trade agreements (FTAs) for the EU. The ‘second-generation’ components contained provisions on intellectual property protection, investment, public procurement, competition and sustainable development. These provisions included: commitments on services and government procurement that comprised public utilities; an advanced regulatory framework for service sectors in telecommunications, courier and postal services, financial services, and international maritime transport; a high level of enforcement of intellectual property rights; and a regulatory framework for exporters with rules on enhanced transparency and competition, including the use of an arbitration panel or the intervention of a mediator for the efficient resolution of disputes (European Commission 2013). Accordingly, shortly after the EU and Singapore concluded talks on protection of investment in 2014, the Commission requested an opinion of the CJEU on the topic of competence to sign and ratify a trade agreement with Singapore (European Commission 2018b).

The press release on the Commission’s request for a CJEU opinion quoted the then European Commission for Trade, Karel De Gucht, as stating:

I have been saying for months that we need to clarify the interpretation of the Lisbon Treaty as regards trade matters … The Court can solve ongoing difference of opinion between the Commission and the Council on the interpretation of the Lisbon Treaty, clarify which procedures to follow and increase EU predictability towards our trade partners. (European Commission 2014)

This statement highlights the ramifications of the Lisbon Treaty’s adjustments to trade policy; both the establishment of the EU as a single legal entity and the designation of trade policy falling under the OLP method of decision-making suggest that a more centralized style of decision-making ought to be the norm in external trade affairs, when in fact many of the newer areas of trade are still subject to complicated shared competences within the Single Market (Woolcock 2010). In 2017 the CJEU provided the legal opinion that

the free trade agreement with Singapore cannot, in its current form, be concluded by the EU alone, because some of the provisions envisaged fall within competences shared between the EU and the Member States. It follows that the free trade agreement with Singapore can, as it stands, be concluded only by the EU and the Member States acting together. (CJEU 2017)

More specifically, while the Court stated that the EU does indeed have exclusive competence in nearly all of the areas of trade content within the agreement (including, notably, procurement, transport services, direct foreign investments, and intellectual property rights) there are two particular areas of the agreement where the EU does not have exclusive competence – non-direct foreign investment and dispute settlements between investors and states.³

In order for the EU to have exclusive competence in the field of non-direct foreign investment, conclusion of the agreement would have to be capable of affecting EU acts or altering their scope. As that is not the case, the Court concludes that the EU does have exclusive competence. It has, on the other hand, a competence shared with the Member States. That conclusion also extends to the rules relating to exchange of information, and to the obligations governing notification, verification, cooperation, mediation, transparency and dispute settlement, as regards non-direct foreign investment. The regime governing dispute settlement between investors and States also falls within a competence shared between the EU and the Member States. Such a regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without the Member States’ consent. (CJEU 2017)

The CJEU opinion thus not only provided the legal perspective with which the EU could then proceed towards concluding the Singapore free trade agreement, but also delivered the EU with a significant precedent with which member states (to include their regions and constituents) could assert the limits to supranational authority over regulatory matters and the realm of deeper trade activities for the Single Market.

The above two cases illustrate how the encroachment of such ‘second-generation’ free-trade agreements into the areas of regulation, services, procurement, investment, and dispute settlement mechanisms brings with it two competing sets of principles surrounding the goal of EU external trade. The first set of principles is that the EU aims to employ bilateral trade agreements to complement its own growth and job strategy and to compensate for the decline of multilateral trade rules within the framework of the WTO (D’Erman 2018; Ladi and Tsarouhas 2017; Smith 2010), and in doing so, seeks to export a European model of market rules and sustainable growth. The second set of principles is that of subsidiarity and fiscal federalism, which assert that decisions ought to be taken at the national or regional level when there are different competing preferences (Bongardt and Torres 2017; Nicolaides and Hornik 2017); the national sensitivities inherent in some of the non-tariff areas of deeper FTAs would seem to speak directly to this. As Duina (2019) notes when assessing the case of food within both early TTIP negotiations and the CETA agreement, the assignment of norms and rules in areas such as the classification of genetically modified organisms (GMOs) engage with the values and identities of relevant civil society actors and consequently result in the politicization of overarching trade discussions. The ratification process of CETA in particular underscores a change in external trade dynamics for the Commission, as regulatory practices are increasingly becoming necessary to negotiate with civil society organizations and less the realm of purely technical norms (Hübner, Deman, and Balik 2017). The tension between these sets of principles with current and future EU free-trade agreements invites engagement with broader theoretical work on integration and disintegration.

Integration and disintegration in EU trade policy

The choice to focus on the forces behind disintegration as a theoretical framework is in part due to the difficulty that other major theoretical approaches to the EU have in explaining processes that indicate a reversal of, or reaction to, increasing integration (Jones 2018); an example here are the limitations that neo-functionalism has in accounting for ‘spillback’, as when a policy area that had earlier demonstrated the functional logic of spillover is later subject to developments that point to limiting earlier steps of integration (Lindberg and Scheingold 1970; Vilpišauskas 2013). The choice in employing the disintegration framework is also due to the added explanatory power that post-functionalist accounts of the EU have in operationalizing the interaction between economic interests and various kinds of identity politics (Hooghe and Marks 2009), or to the need for balance between centre formation and system building (Bartolini 2005). This interaction has become particularly salient in the aftermath of various crises – euro area debt crisis, Brexit, and the migration crisis being the most obvious here, all of which served as ‘shocks’ to the system of some kind – befalling the EU and its member states. The result of such a crisis atmosphere has been an overall weakening of the claim that European integration yields the economic prosperity needed to provide welfare-enhancing opportunities for all; the realm of EU trade policy, with its attendant emphasis on exports and investment, is arguably also subject to this same weakening process.

The new body of research on disintegration places equality of opportunity at the forefront of the integration process, defined as: ‘a framework that offers member states with different endowments a (relatively) equal voice in how decisions will be made … [and] the elimination of barriers or the promotion of common rules or norms’ (Jones 2018, 442). To the degree that equality of opportunity results in economic prosperity, the greater the possibility of states and other actors internalizing the norms of solidarity that accompany the integration framework. However, should opportunities become discriminatory, or should equal opportunity result in economic downtown and/or heightened economic disparities, the result becomes fragmentation of common rules and less commitment to the shared policy (Jones 2018; Zielonka 2014). This point is especially salient in the context of the euro area crisis and related sovereign debt crises, which dramatically flipped the promises of growth and prosperity inherent in the logic of the first 50 years of European economic integration over instead to a climate of austerity, increased inequality, and financial turbulence (Bach 2015). In addition, the effects of crisis management in this realm have inadvertently exacerbated inequalities throughout the euro area, which in turn have provoked social and political reactions among national political systems and public groups: ‘the paradoxical effects of European monetary integration have a reverse effect on the causes – the inequalities in productivity between countries – in such a way that their own internal dynamics reinforce themselves in a downward spiral’ (Bach 2015, 206).

Even in a hypothetical absence of crisis, disintegration is still a possibility when it presents itself as in the national or regional interest. Research on this point highlights the potential political limits of economic integration; when it is less the case that consensus has been difficult to reach, more the case that the economic integration of independent countries can only proceed into areas that touch on aspects of national sovereignty, or when an effective pan-European civil society opposition emerges to challenge the resilience of EU trade policy (De Bièvre 2018; Nicolaides and Hornik 2017). Examples here include sustainable development (Bongardt and Torres 2017) and public services (Hay 2007), both of which are areas that fall within the exclusive competency of EU trade but which necessarily engage with politically sensitive areas of environmental regulation, labour standards, and the public provision of goods. In this light, the economic integration of EU member states has a definitive end point, which manifests itself as the limits imposed from national and/or regional political principles.

A component of the logic of disintegration speaks indirectly to the conceptualization of the EU as a federation, with all the attendant tensions and dynamics between the centre and the sub-units. Whether or not reactions to, or resistance of, the integration process indicates actual fragmentation within the European community is a dilemma that is relevant to scholarship which considers the designation of the EU as a legitimate federation. In this context, the forces of disintegration can instead be understood as the familiar dynamics of tension between the centre and the peripheries in decision-making. To the extent that scholarly research accepts the federal qualities of the EU as a polity and assigns the EU the label of being a heavily decentralized federation, the tug-of-war of authority between member states and the EU institutions is comparable to the domestic political conflicts within other large, diverse federations.⁴ The comparative exercises with other decentralized federations offer more explanatory power for what could be considered processes of ‘spillback’, in that the focus narrows on the choices involved in problem solving of shared issues and allows for systems of governance that are inherently unstable as they attempt balance between the territoriality of sub-units and functionality of collective policies. A central example of work in this area is Jachtenfuchs and Kasack’s argument that sub-units cope with this dynamic by varying their position in two dimensions: exit, either by the extreme of secession (or threat of secession) or by derailing specific policies; or voice, by choosing to vary their level of influence on different collective decisions (2017, 598–599). To this end, disintegration is not the opposite of integration, but is rather a process that reflects the dynamism of the constituent parts of a whole (Rosamond 2016; Vollaard 2014), marked by a transfer of loyalties, an opening of alternative opportunities, or both.

The exercise of assessing whether the EU is actually vulnerable to the unravelling forces of disintegration, or is simply subject to the same stress fractures as other internally diverse polities, remains difficult to tease out in the abstract without the benefit of historical hindsight. More specifically, how can recent developments in EU external trade activity be used to attend to the discussion of disintegration? Is a shift from exclusive competence to mixed competence a harbinger of disintegrative processes, or are the recent developments concerning CETA and Singapore FTAs simply parallel responses that are more related changing global market realities than the political logic of European integration? The rationale of increasing economic prosperity via the mechanism of international trade is more fallible if social and economic inequalities have been exacerbated because of economic openness. Relevant here is work on the new transnational divide that has transformed the cleavage theory of party competition, where ‘transnational’ increasingly represents those who have benefitted from the lower costs of international economic exchange and cosmopolitan ideals in general, and those who do not benefit increasingly seek to defend economic nationalism against external actors (Hooghe and Marks 2018). As an understatement, international trade is hardly a top priority for those groups most negatively affected by financial crisis. Although most scholars agree that the EU is an example of a federal polity, it remains unusual in that its constituent parts are sovereign states in their own right, and so the option of exit remains – at least procedurally – a much more viable option than might be the case for a region within a federal country. The study of disintegration recognizes that the newer transnational cleavage within the EU context could become a growing centrifugal force, as members states may choose to try to solve their problems in a non-European framework.

A historical-institutionalist approach is relevant here for the identification and assessment of economic crisis as an important critical juncture whereby a reassessment of established trade competences becomes not only possible, but necessary in post-crisis political atmosphere (Pierson 1996). For a qualified federation that has relied on output rather than input legitimacy, the unfulfilled promises of integration create a distinct momentum towards disintegration that is arguably tangibly different than the legal push-pulls of federal states (Zielonka 2014). Put simply, a generalizable backlash against globalization is now directed at the European Union. Rosamond (2016) speaks to this notion with the discussion of Brexit as a part of considering disintegration as a process rather than as a tangible outcome; the weakening of the long-standing post-war democratic capitalist compact that gave rise to European integration is exemplified with the UK’s referendum to leave the EU, but is also visible in other realms of post-industrial (and post-financial crisis) transitions in the industrialized world. Disintegration, then, is not necessarily a process unique to European politics as it is a larger process that speaks to changing structural conditions in the form of growing inequality and the dealignment of partisan identities. Trade policies are thus subject to the same pressures of changing economic loyalties that are, as a result, swept up in critiques of supranational authority.

Mixed competences with CETA and Singapore FTAs

At a broad level, developments with both the CETA and Singapore FTAs at the concluding stage of negotiations are in line with the understanding that integrative and disintegrative forces can occur concomitantly (Lindberg 1971) – the EU can pursue new bilateral agreements around the world and simultaneously experience internal fissures over the promises made in such agreements. The complexity of second-generation trade agreements in the areas of investment, procurement, and dispute settlement systems offer evidence of the EU’s ability to secure its collective interests in deeper trade agreements with third parties, and at the same time, also offer evidence on challenges from its member states on the legality of such actions. EU trade policy offers a nuanced approach to engaging with theories of integration and disintegration precisely because some elements of newer free-trade agreements suggest limits to the extent to which the economies of independent countries can be integrated (Nicolaides and Hornik 2017).

If disintegration can be marked by the re-transferring of competences back to the national level from the EU level, then the CJEU opinion on the FTA with Singapore offers direct evidence of such a process, in stating that the EU does not have exclusive competence in concluding certain parts of the agreement (CJEU 2017). An obvious caveat here is that the Court’s opinion perhaps more accurately highlights the fact that such exclusive competence was never actually the case for certain issues; however, the need for this opinion, as reflected by the statements made by the EU Commissioner for Trade in 2014, suggests that perceptions of supranational autonomy are certainly at work. At the least, the Court’s opinion provides a critical instance of an objective legal opinion curtailing the authority of the Commission in conducting external trade negotiations, as per the legacy of the CCP. This corroborates work on measures of economic integration, which defines economic disintegration as ‘growing divergence of these economic indicators and the economic decoupling of the geographic entities’ (Eppler, Anders, and Tuntschew 2016, 13). If integration and disintegration can be measured with the same indicators going in different directions (Eppler, Anders, and Tuntschew 2016, 13), then it follows that disintegration necessitates more than just the absence of integration and requires the actual reversal of pooled sovereignty.

To that end, CETA developments in 2016 offer further evidence of such reversal. The decision to include national parliaments in the ratification process, rather than allow the EU institutions to have sole competency in giving final approval, has ushered in a wave of resistance to the deal that not only has the potential to affect CETA’s ultimate outcome but may very well also fundamentally restrict the ability of the Commission to negotiate future trade agreements. If the tool of ‘voice’ is a prominent means by which member states can cope with any one dilemma of territoriality, functionality and authority between themselves and the EU-level of governance (Jachtenfuchs and Kasack 2017), the use of voice can have prolonged intended and unintended consequences: ‘Instead, a “voice” spiral begins: a kind of institutional activism that becomes an end in itself, and in the end heightens barriers to action,’ (Bach 2015, 213). The response of various national governments towards the initial proposal to conclude CETA as exclusive competence, and ongoing debates over the compatibility of investor-state dispute tribunals with the EU’s legal order, offer empirical support to this notion. Yet, the tool of voice is critical to sustaining the entire European integration project. Central to the EU identity are the promises of peace and prosperity; if economic and trade agreements create mechanisms that are perceived as undermining one of those pillars – prosperity – then those same agreements risk undermining the foundation of the EU identity (Bongardt and Torres 2017). The threat of the Wallonian regional government to block the signing of CETA in October 2016 arguably illustrated the weakness of the EU as an external treaty-maker with regard to democratic representation and vertical political participation (Kleimann and Kübek 2018). At the same time, Young (2019) argues that the politicization of EU trade policy, particularly with the example of widespread popular opposition to the proposed Transatlantic Trade and Investment Partnership (TTIP) with the United States, was more likely due to temporary political circumstances and the balance of power with North American economies than it is a reflection of large-scale changes to the durability and cohesion of EU trade competency.

The twin events of the CJEU opinion on Singapore and the events surrounding the ratification process of CETA would seem to suggest that at the least an upset to the status quo of existing European trade strategy is at work. Disintegrative forces could arguably be identified in the process of change, but perhaps only if the context of the new legal necessity of national parliamentary ratification results in definitive backsliding of future EU trade policies. However, even if one accepts the theoretical and practical components of disintegration in these cases, do they matter? While the introduction of mixed competences in approving second-generation trade agreements may comprise a reversal of authority away from the EU-level, it does not necessarily weaken the governing framework of the EU as a whole. Returning to the framework of federalism, comparisons with other federations yield not dissimilar internal market dynamics; provincial participation in Canada’s international trade negotiations is rising to reflect newer and more sensitive issues, such as procurement, and is increasingly necessary to avoid last-minute obstacles (D’Erman 2018; Gauthier and Lapointe 2010). The comparison raises important considerations for more work on integration and disintegration. Therefore, in accepting the recent legal developments in trade agreement policy in the EU as small pieces of evidence of disintegration, an isolated area of policy-making can seem to indicate a harbinger of larger forces of fragmentation. But acknowledging the similar dynamic among Canadian provinces in international trade agreements illuminates the changing scope of international free trade agreements to encompass non-tariff barriers in more sensitive sectors, and thus situates the CJEU-Singapore and CETA events in a larger international (and comparable) context. Comparisons, however, invite the reminder that the EU’s particular federal agreement is more fragile and experimental than that of other major federal states, and thus the tools of voice and exit serve as stronger threats and leverage over the construction of community policy. In which case, the recent developments in EU external trade agreements would appear to indicate legitimate threats to the logic of integration.

Conclusion

The argument of this paper is that recent developments in the EU’s trade policy are useful for contributing to theoretical arguments of disintegration in European governance structures. The shift to mixed-member ratification in the CETA and Singapore trade deals for a portion of the issues contained within each agreement indicates that the content of second-generation trade deals, which increasingly focus on more sensitive areas of economic trade and less on conventional trade barriers, may be difficult to reconcile with centralized supranational decision-making. Although parallels between EU governance and that of federal nation-states might suggest that such debate over competences is simply a reflection of the dynamic functionality that continuously plays out between centre and regions in federal systems, the sui generis composition of the EU complicates this notion. For a supranational polity that leans heavily on output legitimacy to justify its existence (Zielonka 2014), the erosion of public confidence in the integration experiment in the aftermath of the financial crisis has increased the voice of national interests in EU trade policy. The qualifications and implications of this line of work point to future lines of research: if disintegration as a theoretical model is to be taken seriously, where do researchers distinguish between momentary tensions and longer-term divisions? What kinds of empirical evidence would best offer support or counter-evidence to disintegration? The cases of CETA and EU-Singapore trade agreement ratification in the least suggest increasingly complexity in the EU’s ability to conclude deeper free-trade agreements elsewhere, but also offer a snapshot of how the idea of disintegration overlaps with tensions inherent within a federal-like governance design.

Acknowledgements

The author would like to thank the helpful feedback and comments from the anonymous reviewers, as well as the guidance from the editors of this journal.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This research was supported in part through a postdoctoral position within a Social Sciences and Humanities Research Council of Canada (SSHRC) Insight Grant supervised by Dr. Amy Verdun (grant number 435-2015-0943).

Notes

1 ‘Competence’ in the EU legal context refers to the assignment of authority over specific domains of policy. The EU has only the competences conferred on it by the Treaties (principle of conferral). Competences are divided into three categories: exclusive competences (EU authority only); shared competences (authority is shared between EU and national levels, whereby the member states exercise their own competence when the EU-level has decided not to exercise authority); and supporting competences (the EU can only intervene to support, coordinate or complement the action of EU countries) (EUR-Lex 2016).

2 Cecilia Malmström as quoted in “European Commission proposes signature and conclusion of EU-Canada trade deal.” (6 July 2016). European Commission Press Release Database. Retrieved from: http://europa.eu/rapid/press-release_IP-16-2371_en.htm.

3 The distinction between foreign direct investment and non-direct foreign investment is that the former involves establishing a direct business interest in a foreign country, such as buying or establishing a manufacturing business, while the latter (referred to in Eurostat as ‘foreign portfolio investment’) refers to investing in financial assets such as stocks or bonds in a foreign country (Eurostat, “Foreign Direct Investments”, http://ec.europa.eu/eurostat/web/structural-business-statistics/global-value-chains/fdi [last accessed on 4 May 2018]).

4 As a great deal of work exists on this subject, only a handful of chief examples are provided here: Burgess’ (2000) work on federalism and the European idea; Keleman on comparative federalism; Tarlton (1965) on asymmetrical federalism; Schimmelfennig, Leuffen, and Rittberger (2015) on differentiated federalism; Eppler (2016) on dynamic theories of federalism; and Verdun (2015) on scholarship on federalism and the EU.