Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 4 - Evidence
OTTAWA, Wednesday, June 5, 1996
The Standing Senate Committee on Foreign Affairs met this day at 3:15 p.m. to continue its study on the consequences of the economic integration of the European Union for the national governance of the member states, and on the consequences of the emergence of the European Union for economic, political, and defence relations between Canada and Europe.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, our witness this afternoon is Professor Dr. Panyatis Soldatos. He is the occupant of the Jean Monnet Chair at the University of Montreal. Dr. Soldatos comes with a distinguished academic background. He is twice a doctor of philosophy. He has been a visiting fellow at Harvard University. He has been a visiting professor at the Universities of Jean Moulin de Lyon, Paris, Versailles, McGill and Concordia.
Dr. Soldatos, please proceed with your opening remarks.
[Translation]
Mr. Panayatis Soldatos, Chaire Jean Monnet, University of Montreal: Mr. Chairman, I will be making a presentation within a context that is my own and that has its own limits. Being a legal scholar and political scientist, I won't be venturing into other fields in the presentation. During the question period, I will try to answer those questions that go beyond the framework of my presentation as best I can.
Thus, I am going ... my remarks will focus on the development of the political and institutional system of the European Union, a system which is currently being revised: an intergovernmental conference is taking place, a "constitutional" conference, the purpose of which is to amend the framework of this system in order to better prepare it for a large number of countries, 20, 25 or more, within 10 or 15 years.
It is therefore important to get the clearest possible idea of that framework because, with respect to policies for us in Canada, it is easier to create policies and to deal with a system whose nature we know well and whose essence or context we understand, the purpose being to deal with the European Union both bilaterally and trilaterally, when the United States is part of a trilateral dialogue, or even multilaterally when we have to deal with the Europeans in the context of international organizations or fora such as the World Trade Organization and so on. Lastly, it is important to be familiar with this system because it is very particular: it is difficult to get a clear idea of what it is, here and elsewhere, because there are no other systems of this kind in our political culture.
We have a system which both is intergovernmental, like an international organization, and also has a dose of federalism, hence the difficulty and the importance of examining it. There is another reason that leads me to focus on this system and that is the fact that, in Canada, for reasons relating to the difficulty of the system, but also to our own political controversies, the system of the European Union has been presented at times as a federal and at others as an intergovernmental system, depending on the political allegiance of the speaker. In Canadian and Québécois debates, this system has virtually been presented as a pot-luck affair. But it isn't a pot-luck affair; it is a system which, though special, has specific rules of operation. It can be understood objectively and it is important to examine it, particularly since that will enable us to see what this system is evolving or could evolve toward. Thus, rather than present this system and its workings in a technical manner, it is important to present it in accordance with its basic forms of logic.
What are these basic forms of logic on which the European Union's system, which in fact turns mainly on the European Communities, has been built and has evolved for more than 40 years: the common foreign and security policy and domestic and legal affairs are fields of pure intergovernmental cooperation where there is not much to say, except regarding their weakness in producing coherent and effective international and European policies?
These types of logic were in large part conceived by Jean Monnet, when he inspired the creation of the European Communities, and also facilitated and inspired by the circumstances of the time.
In this regard, I have identified seven basic types of logic around which this European system evolves, and sometimes does not evolve, and around which the debate turns today in Europe.
The first logic of this system is the logic of an elitist system. This is a system that was founded and that operates to a large degree apart from direct intervention by the public, by citizens. It is a system that was conceived among elites. The treaties that created the European Communities were never submitted to ratification by referendum. Furthermore, until the late 1970s, there was not even any directly elected European parliament. Representatives of the national parliaments sat in an assembly. Thus, it is a system that, in its creation and operation, is evolving without any direct impact by citizens. I would not only say without, but also sheltered from: it had to be protected. It wasn't inadvertently or in an anti-democratic spirit that the European Union, the European Community at the time, was created without direct elected representation, without ratification of the accords by referenda: there was a desire to prevent premature politicization of the system, which could force it to go out of control.
We in Canada are of course familiar with out-of-control agreements between political elites when plans are submitted for consultation in referenda. Provision was made at the time that, if political debate were instituted, they would never manage to create the European Communities because many political parties in various countries were hostile to the European Union, because Europe was emerging from a great war and it was not at all natural for the French and the Germans to hand their sovereignty over together to a common system, the European Communities.
For all these reasons, a system was created at the outset with a democratic deficit in order to prevent major political debate from derailing or causing a system that was young, that was special, that was new and that we did not know to go out of control. We had never known a system that was neither a state nor an international organization. If we opened this new, young, original and indeed fragile system to debate, we risked losing control.
This then is the first original feature: it is a elitist system. An elitist system and I am referring, among other things, to the technocratic elite in Brussels -- you have encountered it at the commission: the commissioners and their team of 14,000 or 15,000 officials. They were given a role as a driving force in this elitist logic. The technocratic elite had a role as a driving force. This role as a driving force was first of all a role of legislative initiative.
Unlike our systems where it is Parliament's role to introduce bills, to legislate, in the Community system, the commission has the monopoly on legislative proposals. Why? Because it was considered that a technocratic body removed from politics could synthesize all these national interests. Likewise, the final product, legislation in Europe, is produced today, with a few changes in Parliament, a Council of Ministers, as though the Canadian cabinet were legislating here. There was also a wish, with this democratic deficit obviously, to keep the legislation process isolated so that the commission, which proposes legislation and which is neutral, could first homogenize all national interests and then enable the ministers to conduct their negotiations, their bargaining, in isolation and to come up with a piece of Community legislation.
The second type of logic is the logic of proportionality. Mr. Bourassa often emphasized this aspect. Proportionality states that the institutions and their powers must be proportionate to the degree of economic integration.
The EC is not a free trade zone, nor is it a customs union. It is a common market, a single market with elements of economic and monetary union. Thus, this thorough integration must have proportionately strong institutions at its disposal, institutions that are strong in proportion to the degree of integration. One understands then why we have weak institutions under NAFTA: we have only a free trade zone.
Why strong institutions? First, for rapid decision-making. If we adopt a common agricultural policy, if we must negotiate under GATT and adopt a common trade policy, it must be done quickly. We cannot say to others, to the Americans or to the Japanese: we have a weak institutional system; we need a year or two to come to a common decision. Speed in these questions of economic integration calls for institutions that are capable of acting quickly. And what does acting quickly mean? That the institutions are strong, that they have decision-making powers within the EU; they legislate; they have legislative power and they reach decisions by majority vote rather than unanimously. This need for speed is a prerequisite, but there is also the need for cohesion. When you have 15 countries, as is the case today, you cannot make decisions in accordance with the lowest common denominator; hence the need for a system that is above the member countries, that is what we call supranational. This partly resembles federalism, with institutions that have received sovereign powers from the member states in order to legislate in their fields of jurisdiction and to do so in accordance with their own rules without everyone necessarily being in agreement. Today, with the majority rule, we see that major countries such as Germany and France can be relegated to the minority. That is why there are currently countries in the Intergovernmental Conference that want to review majority decision-making. Some are proposing not only a majority of countries, not only a majority of votes, but also a majority of populations. The reason is that the large countries realize that, with the new expanded Europe, they would be relegated to the minority to the benefit of the small countries.
Thus, there was a desire for autonomous and independent institutions to act quickly and coherently without taking into account the lowest common denominator of everyone around the table. This was the second type of logic, the logic of proportionality. It is the Single European Act. President Jacques Delors was able to sell this proportionality argument by saying: we must reinforce the institutions as we move toward the single market. In the Single European Act, we cannot refer only to the single market, opening borders for goods, services, capital and people; we must also speak of institutions. Thus, with the Single European Act, you have both the creation of a single market and a strengthening of institutions. In particular, the Parliament has received more legislative powers, the commission has received more executive powers and the field in which decisions are made by the majority has been broadened. There has been a desire to make the single market proportionate to the institutions or rather to make the institutions proportionate to the single markets. Thus, if economic integration is strengthened, institutional, decision-making and policy integration must be strengthened as well. This is the second principle: proportionality.
The third principle is that of monitored sovereignty. In the Community system, we have the principle of monitored sovereignty. That means that sovereign rights in agricultural policy and trade policy, fields where the Community has received sovereign powers, sovereign rights are transferred and exercised in a supervised manner. There is of course a body that oversees these transfers of sovereignty and that is the Council. This has been transferred to the common institutions: there is a Parliament, a commission which proposes legislation, but, ultimately, the body that essentially decides is the Council of Ministers: it oversees the exercise of common sovereignty; it oversees so that the states, the governments, are present at the table where legislative decisions are made. This is a transfer of sovereignty, but one that is overseen by the government representatives of the member states who essentially have legislative power. This is the third principle, the third type of logic.
The fourth type of logic is the creation of a system of mixed elites. The European Union is not only a system of technocratic elites. There are technocratic elites such as the commission and the Court of Justice, but, besides the technocratic elites, the political elites of the European Parliament and the Council have been brought together. Of the four important institutions in the system, you have two, the Court of Justice and the commission, that are technocratic and two, the European Parliament and the Council of Ministers, that are political. A system of mixed elites has thus been created by making them necessarily interdependent.
What does necessarily independent mean? It means that none of these elites can act alone in delivering the legislative goods. The commission proposes legislation and the Council can do nothing unless one of the commission's legislative proposals is put before it. Thus, it depends on the commission. Conversely, the ministers cannot amend the commission's proposals unless they do so unanimously. As I have already said, they may pass legislation by majority vote, but to change or amend a proposal, they must do so unanimously. This means that they are required to negotiate with the commission. There is a tandem effort. But the commission's proposal cannot be easily discarded because unanimity is hard to achieve. As Montesquieu said, "You must go in concert, you must go together". They are required to work in tandem in order to produce something. And it is moreover this second aspect which troubles a certain number of countries. In the British proposals made by the Minister of Foreign Affairs recently in March, it was announced that if the Council did not rule on the commission's proposals within a certain time, it was hoped that they would be abandoned and that the proposals would cease to exist. This is one way of circumventing the idea that the commission's proposals cannot be amended unless they are amended unanimously. Furthermore, as you know, without going into the details, the treaties provided that the Council may be charged with failing in its obligations if it does not rule.
This tandem arrangement has now become a triangle because, as you know, since the Single European Act and particularly the Maastricht Treaty, the European Parliament has received joint decision-making power in a certain number of fields. Legislative fields are cited, section by section, and the treaties and require a joint decision with Parliament. Parliament must be in agreement with the Council. Here you have the commission which proposes legislation and Parliament and the Council which, in joint decision-making, decides. Thus you have a system of interdependent mixed elites, a triangular system in many cases. It is a system which is consistent with this type of logic, that it is possible to work with everyone, the political elites and technocratic elites in order to take into account the political sensibilities of the Council and of Parliament and, furthermore, is consistent with the quality of the decision, what is called the quality of the dossiers. On this last point, the commission has technocratic legitimacy: it prepares its dossiers, it consults the various states and it consults the various economic and social sectors. Thus it is able to produce draft legislation that reflects all aspects of the subject and all players, because leaving this task to the Council is somewhat like asking a federal-provincial conference to legislate. It is impossible. There were thus very good reasons for putting responsibility for legislation in the hands of technocrats.
The fifth principle is that of legal federalism. In legal terms, the European system of the European Community, not the common foreign and security policy, operates in accordance with a logic of legal federalism. In other words, the final product of legislation -- regulations, a decision, a directive -- has legal effects with which we are familiar in federal systems.
The first element of federalism implies that the regulations are directly applicable in each member country. The states have nothing to do to ratify them, incorporate them or transpose them. Just as an act is passed in Ottawa that applies to the entire federal jurisdiction, Community regulations passed in Brussels are directly similarly applicable. This is a principle of legal federalism, of the superimposition of Community rules. From the moment they are passed, they enter into the legal order of each of the 15 member countries.
The second element of legal federalism is that of the supremacy of Community law, of Community legislation, over national rights. This is a revolutionary idea. Regulations take precedence over all domestic legislation and domestic judges must give them precedence in cases of conflict.
In the Canadian debate, for example, in the case of an association of the Maastricht type, the Community statute will take precedence over the statute of the National Assembly in an area of the Community's jurisdiction.
The third principle of this type of federalism is that there is a Court of Justice, a supreme court -- we can call it that -- which has the privilege of interpreting community law. If a question of interpretation of Community law is raised in the highest court of any country -- a supreme court in France, England, Germany and so on -- that court is required to refer the case to the Court of Justice of the European Communities for interpretation. This is required by article 177. A trial court may do so, but the EEC is not required to make such reference. And it is the interpretation of the Court of Justice of the European Communities which has the authority of res judicata, which applies to the judge who requested it.
Federalism has other aspects, but these three are essential: direct applicability, supremacy of Community law and the privilege of the interpretation of Community law granted to the Court of Justice of the European Communities.
The sixth logic is the logic of indirect legitimacy. The European Union -- and the Community -- is not based on a logic of direct legitimacy such as we know in our political cultures, that is to say the logic of universal suffrage which permits a player to do things, to legislate, to decide. In the Community systems, as I have said, the commission proposes legislation, but has no direct mandate. It is not elected. It is the governments of the member states that, since Maastricht but not before it, have appointed it after it is approved by the European Parliament. Furthermore, the Council, which legislates, has not been elected as a legislative body of the European Union. It is the ministers, and they are of course legitimate because they have the approval of their national parliaments, but, with respect to the Community, they do not have a direct mandate from Europeans. The only body that has a direct mandate, and has had that mandate since 1979, is the European Parliament, which nevertheless has a limited range of legislative power.
The commission and the Council thus have indirect legitimacy. The commission's legitimacy stems from the fact that it is approved by the European Parliament and that it is appointed by the governments of the member states, which have their own legitimacy. Likewise, the Council has a secondary legitimacy. It is legitimized in each national parliament. The French or German minister sitting on the Council acts on that body on the basis of this indirect legitimacy. To go beyond this system of indirect legitimacy would be to create a federal system.
If the commission were to be given direct legitimacy, the result would be an American-style and thus a presidential administration. If the European legislature were to be given direct legitimacy, all legislative power would then have to be transferred to the European Parliament, which would thus make the system a federal one and make the Council a second chamber because the Council is the forerunner of a second chamber, an upper chamber, by virtue of the fact that it consists of representatives of the member states. For the moment, however, everything operates on the basis of indirect legitimacy, at the cost obviously of this democratic deficit and a communication deficit. People do not understand how ministers legislate in isolation, how a commission of technocrats proposes legislation. This is the cost that has been observed in Europe in referenda in France, Denmark and elsewhere.
It has clearly been said that the system has a deficit, but this was desired for the reasons I tried to explain at the outset. Democratic logic is indirect; it is not only indirect, it is more legal than political. In other words, there is a Court of Justice that can set aside legislation.
As for political legitimacy, it begins with the Maastricht Treaty, which makes provision for a European citizen. This European citizen has certain powers, but cannot vote except for the European Parliament or in local elections. An attempt has been made to introduce political legitimacy through this European citizenship, which moreover has caused great debate.
The last form of logic is the logic of the "spillover": from one level of economic integration, we slide toward another level of economic integration; from one level of economic integration, we could slide toward political integration. There is a "spillover" logic from the outset. When Jean Monnet proposed the European Communities, he knew that a federal system would not be accepted either by the states and their governments or by public opinion. He therefore proposed what some called federalism in disguise, starting with a common market, which leads to an economic and monetary union and to political unification.
First, he foresaw an economic "spillover": from a level of integration entailing a customs union and an as yet incomplete common market, there would be a move toward a single market, then toward an economic and monetary union. His first forecast of economic "spillover" was based on the socialization of the elites and the masses: ministers who have worked on a Council for many years know each other and are socialized in the European idea. Mrs. Thatcher, who did not greatly like Europe, played the game! She blocked its progress from time to time, but she signed the Single European Act, the act that created the single markets, with stronger institutions than previously. For the public, there was a utilitarian socialization. Jean Monnet's gamble was utilitarian first, then emotional afterward. A European state cannot be created; people are not immediately European. They do not have an identity, but they find this system, which provides them with material well-being, profitable. They will begin to like it and to want to live within it. Besides, we have difficulty moving toward a monetary union today because what is utilitarian is not clear to everyone. When they see 18 million unemployed workers, 11 percent on average, people say, "What purpose has Europe served?" And, lastly, there is the political. There was a hope that Europe would move from the economic to the political, but it is less clear that will happen. It is less clear that there will be an automatic shift from the economic to the political. It is difficult to achieve a supranational system in common foreign and security policy and domestic and legal affairs as in economic affairs. The second and third pillars of the European Union are still pillars of cooperation, not integration like the economic pillar. This shift from the economic to the political has not occurred and it is not certain that it will.
These are the seven basic types of logic of an evolving system which, again this year, is being disputed at the Intergovernmental Conference; some of these types of logic are indeed being disputed.
[English]
The Chairman: Thank you, Dr. Soldatos.
History tells us that the Canadian federation was very difficult to achieve. My own province, Nova Scotia, and my neighbouring province, New Brunswick, two of the Atlantic provinces, joined Confederation because of what was perceived as an immediate threat from the Fenian raiders. On the other hand, Prince Edward Island and Newfoundland, a bit farther away from New England, did not join because they did not feel so threatened. Then, as government became more complicated, the tensions within the union seemed to grow. We coped with them one way or another reasonably well, but we must remember that there we were dealing with fairly simple societies.
In Europe, on the other hand, we are not dealing with simple societies. We are dealing with well developed ethnic groups, national groups, and I can understand why they were prepared to accept this complicated new structure as long as there was a clear and present danger. However, that danger is no longer so clear, and it is not so present. I just wonder if the centripetal forces are adequate to produce a workable enlarged European union, particularly in those areas where attempts are being made to restrain government services in order to bring about monetary union.
What is your view as to the viability of the present union and of an enlarged union in the circumstances that you foresee?
[Translation]
Dr. Soldatos: Pressure for a more coherent Europe in international terms is there from the outside as a result of international competition with Japan and the United States and from the southern countries that are customers of Europe's economy.
There is an integration rationality there that dates from the time of Jean Monnet, even though there was no globalized economy at the time. There was the imperative of European reconstruction through the common market, whereas the economic and monetary union involves the European bloc's competitiveness with the rest of the world.
Now there remains the question of the shift to further economic and political integration. You have put your finger on the problem, Mr. Chairman. It is true that these old nations have moved toward economic integration for non-economic reasons because, at the end of the war, Europe found itself, for the first time in history, a hostile superpower and a completely different ideology that defended another economic and political system. It is said that Stalin was the architect of the common market together with Jean Monnet! It is true that economic needs were seen more objectively as a result of this threat, from an angle that was not at all that of the national interest.
The fact that this empire of the east no longer exists removes the external pressure. We know that the external factor was an integrating element in federations, including our own: direct or indirect external threats force cohesion on a regional player.
It is true that the absence of this political, military and ideological threat today removes an ingredient that could result in greater cohesion in the Intergovernmental Conference.
There has been a relaxing: if we're talking about Bosnia, people may think, wrongly, that they can live with the current situation. They would not be able to live with the same situation if the Soviet Union still existed. They would have acted otherwise if they had known that the Soviet Union was exploiting or receiving dividends from the conflict in the former Yugoslavia. The absence of political pressure has made people slow to realize the need for solidarity, even economic solidarity, even if, in my view, the economic danger in international competition today is much greater.
However the pressure will come from the monetary union. The greatest hope for Europe to further political and institutional integration within the next three or four years is monetary.
The Germans have clearly emphasized this "spillover" idea: if we create a monetary union, we will need an economic government, a certain fiscal harmonization, a fiscal pact, an economic pact and constant budgetary discipline. Will there be pressure for further economic integration? When we think of economic government, we see a certain degree of decision-making authority. If monetary union is realized, it will be the driving force toward political "spillover".
We must draw a distinction in another area, that of nationalism. This nationalism is currently an Eastern European phenomenon. Of course, there have been trends toward self-rule in Scotland, Spain and Belgium. This is not fragmentary nationalism. The Catalans, for example, believe it is to their benefit to be part of Europe and Spain at the same time. Spain is a good vehicle for Europe and Europe is a good vehicle for Spain. They are betting on a more decentralized framework that is both European and national. They are not seeking to fragment the national systems in western Europe. There are not really any major separatist movements.
The eastern countries, on the other hand, are a special case. First, in the wake of many recent events, there are large national minorities in a certain number of countries raising problems within the delineation of existing borders. Second, these are nations which, having lived under Soviet domination, have development aspirations when they arrive on the international scene -- somewhat as in the decolonization of the third world -- and they want to take on the outward appearance of a nation. If we are in Bosnia, we want to have a Bosnian state. This is an eastern phenomenon which, in my view, if these countries are integrated into the European Union, will lose its strength, as we have seen in western Europe. The Slovaks and Czechs will realize that, by living in the European Union, they will have to combine their sovereignty in major economic fields and, later on, in domestic and legal affairs.
European integration today implies that the future is based on the existence or co-existence of a number of governing bodies: the World Trade Organization, European Union, the nation state, regions and cities.
If you consider, for example, the four regions that are the driving force of Europe, they have created a very extensive network consisting of the regions of Lombardy, Baden-Würtemberg, Catalonia and the Rhône-Alps, with which Ontario has been associated for a few years.
These are the economic locomotives which, in certain fields, include more than a few of the nations states of the European Union: regions such as Baden-Würtemberg, for example, have stronger economies than Greece and Portugal.
Ultimately, I believe that the east's integration into the European Union will soften these nationalist tendencies and lead to an integrational socialization of these countries and an acceptance of the combination of the number of societal frameworks such as the subnational, national, supranational or global frameworks. This is what we call subsidiarity. In the European Union Treaty, we have a subsidiarity article, 3(b), which affords each level of government the opportunity to do what it can do better. Subsidiarity has been a principle since Antiquity. We must get to the point where each level can act in accordance with efficiency criteria. I give you France as an example. Its education is national, but France has accepted the fact that there are education powers in the European Union, in occupational training, in diploma equivalencies, the creation of student mobility networks and so on and that there are educational roles to play at the regional level and in the Chambers of Commerce. In a state such as France where education is so centralized, we find subsidiarity. Some things are being done at the subnational level in France, others at the national level and others still at the European level. It is this combination of systems that is effective.
So, with regard to nationalism, I draw a distinction between Eastern and Western Europe. The eastern countries that enter the European Union will solve their nationalism problems: the single market and monetary union will make them view sovereignty in a more pragmatic way, from a twenty-first century rather than a nineteenth century perspective. For the moment, as they leave the soviet empire, they are seeking sovereignty where they lost it when they were absorbed by that system; they are recovering their sovereignty.
The Maastricht Treaty itself is the cause of various crises of confidence. The Maastricht Treaty criteria are criteria of discipline in the macroeconomic policies of the member states, criteria of reduction, in particular of inflation, of foreign-held debt and of budget deficits.
We in Canada are attempting the same macroeconomic things, the same disciplines, without the Maastricht Treaty. In the United States, they are following the same approach in ordering public finances. Why? We say that if there were no Maastricht Treaty in Europe, we would have to invent it because it creates a framework which, by its criteria, imposes more macroeconomic disciplines because there is ultimately a price, a compensation: a single currency.
Everyone understands this, even the British. In British economic and financial circles, there is no hostility toward monetary union. The same is not true in the British Parliament or among certain political elites.
The Maastricht Treaty is here responding to the pressures of economic globalization. Employment is generated through economic growth and competitiveness, depending on the health of public finances and the macroeconomic policies in control.
But there are demagogical phenomena in certain countries. We attack the bureaucrats in Brussels, knowing full well that it is the Council that decides and that the Maastricht Treaty was signed by the governments of the member states, not by the bureaucrats in Brussels. The political stratum legislates in Europe, except that public opinion is that the bureaucrats in Brussels are imposing criteria that lead to austerity and thus to unemployment.
Senator Bolduc: How do you see the scenario for the intergovernmental session that has begun and that will probably last 18 months. Because of the British elections, they are going to let that pass.
They're going to try to refashion the institutions somewhat in order to adapt them. What possible scenario for change do you see in the institutions we have spoken of?
Will the European Parliament try to reinforce it?
Will the bureaucrats in Brussels have to share their regulatory, legislative, policy or other initiatives either with the parliamentarians or through some other arrangement?
Will the European Council of Ministers remain what it is? What possible scenario for change do you see for the Senate? I raised the question when I was in Europe. As they understand it, there is no problem in a unitary system. When we decide no longer to live in a unitary system, for Canadians like us, that means we are in a federal system. I put the following question to Mr. Delors and to others: Are you verging on a federal system? He answered, "The federal system is still unthinkable."
I understood that their definition of federalism was something fairly centralized, something that would scare our English- speaking Canadians. That surprised me. He answered, "We aren't at that point, not at all; we are still far from that."
Even though not everyone will be part of the monetary union, there will be at least five or six countries in it in four or five years. That calls for political institutions that respond to that. Consequently, there is a federal system at the end of all this. How do you see that?
Dr. Soldatos: I'll begin with the second part of your question, that is regarding centralization. I will come back to the institutions, to the possible reform that we can expect this year rather than next year.
The European system is not centralized. First, when we think of European institutions, we must realize that decisions in the Council essentially require a qualified majority, which is obtained among the representatives of the governments of the member states.
Senator Bolduc: For economic issues and political issues?
Dr. Soldatos: For economic issues. As for political issues, at the second or third level, the system is entirely decentralized, in the hands of the member states.
At the institutional level, having a Council that legislates does not mean a great deal of centralization. After all, there must essentially be a majority of governments in order to decide.
Even though this is not the unanimity rule, it is nevertheless a fairly extensive decentralization: each government is there to oversee it, what is called monitored sovereignty. Ultimately, the key figure will remain the intergovernmental parliament. The bureaucrats in Brussels cannot be blamed for centralization, since we know that the decision is ultimately made within the Council. This is highly decentralized because all the countries are involved.
Furthermore, in the European Union, powers are far less centralized than in a federal state. It essentially has virtually exclusive power in agriculture, trade policy and competition.
In the remaining areas, there are shared powers, which are now subject to the subsidiarity rule, that is to say that the Community cannot act first: it acts only second, after demonstrating that the member states were incapable of acting effectively. It must test the member states' inability, as a result of which there have been only a few legislative proposals in the past two years.
Senator Bolduc: If we applied it to the environment, for example?
Dr. Soldatos: There, too, the Community must demonstrate that an environmental issue cannot be more effectively settled at the national level. The test is reversed: it must start by seeking effectiveness at the national level, then move to the Community level, not the reverse. It must not prove the Community's ability, but rather the nations' inability.
There is thus no centralization here to the extent that the commission is increasingly timid: each time it proposes legislation, it must apply the subsidiarity test, which considerably reduces its output of legislative proposals because, when it goes to the Council, it is asked the following question: did you actually apply the test? And the test is redone in Council. Subsidiarity thus enormously decentralizes the exercise of powers.
Another aspect of decentralization is the budgetary aspect. Europe is often said to be federal, but the Union has a budget that represents approximately 2.4 percent of all national budgets taken together. This must be viewed in relation to its powers. We can have all the powers in the world without the means to exercise them.
If we had the same powers in Canada at the federal level, with a budget representing 2.4 percent of all provincial budgets, you wouldn't go far. This is the European Community's problem. The problem is not only to give it powers: it must also be given the means to act.
In addition, in the Union, roughly 50 percent goes to common agricultural policy alone. We are thus left with only 50 percent of that 2.4 percent of the national budgets.
Senator Bolduc: Let us come back now to the scenario. What do you see?
Dr. Soldatos: The scenarios for the institutions, for the commission, a problem that will be resolved, such as the idea of electing a president, of giving him the opportunity to select his Cabinet and of submitting it to Parliament so that the states have nothing to do with the appointment of commissioners, as though this were a Parliament that invested exclusively, that of the number of commissioners. As Émile Noël, the former Secretary General of the commission, said, if Europe expanded toward the eastern countries, under the current rules -- there would be two commissioners for the large countries and one for the small countries -- we would have about 36 commissioners. That is a lot. It is not a lot for a federal system. In Canada, we have cabinets with as many ministers. However, the difference here is that you would have 36 commissioners from 25 countries. That's not 36 ministers from the same country. You would have people of various national and political origins, a highly fragmented political spectrum with a very large number of nationalities represented.
How do go about reducing that number?
I believe that will be possible. This will be the only substantial change to the commission. We must manage to convince the large countries, the six large countries, Spain, France, Italy, Germany, United Kingdom and Poland, not to have two commissioners.
On the other hand, we will not be able to have commissioners by bloc. For example, the Benelux countries could have one commissioner.
The states want this since the commission has vast powers over legislation and competition. It is the body that tells the states that assistance is illegal in certain cases. It is the one that tells businesses wishing to merge that it is illegal, against the rules of competition. This is an enormous power. The states want to be involved in it. They will not abandon their seats on the commission.
We will therefore arrive at a smaller commission solely by convincing the large countries to have only one commissioner. Instead of 36 commissioners, we will have about 20. On the other hand, the suggestion that the commission's powers regarding competition should be withdrawn will not be followed.
The second change concerns the European Parliament. The number of parliamentarians will peak at about 700, which will result in under-representation if you have a Parliament for 450 million inhabitants who have only approximately 700 parliamentarians to represent them. Furthermore, there are currently more than 20 legislative procedures, three of which are important. There are cases in which Parliament gives its opinion; there are others where Parliament cooperates -- legislative cooperation -- there is only one suspensive veto; and there are others where it is a joint decision maker. It has an ultimate veto. We think the cases of legislative cooperation will be terminated, that is to say that there will be cases where it gives its opinion and cases where it is a joint decision maker; legislative cooperation will be absorbed by joint decision-making with an ultimate veto.
We are going to expand the cases of joint decision-making only indirectly by absorbing legislative cooperation. We will have two types of action by Parliament: purely consultative and joint decision-making, but without any new fields or new powers. There will be no increase in Parliament's powers, but the procedures will be simplified.
We will now talk about the Council, the third institution. With respect to the Council, the question of the vote will be brought. There are weighted votes so as to arrive at 87 votes. The qualified majority is 62. There is thus a weighting of votes.
I believe that this idea of having a double majority, that of weighted votes and that which is both what is done today and that of a majority of the populations to protect the large countries, will be accepted.
Another change will be in the Council's visibility. We started with sittings open to the public and to journalists, but this is ultimately being limited. The Council cannot operate like a Parliament because, if everything is public, there will no longer be any ability to negotiate. Paralysis will set in.
The Court of Justice issued decisions on this point a few months ago. The Council must now justify its refusal to communicate the Council's internal documents on debates, on voting. It will be led increasingly to open its records, not its sittings, but its records, that is to say to give the public more information with more visibility in order to reduce the communications deficit and this way of furthering Europeans' interests. There will be no changes to its powers. There will be no new powers regarding tourism, human rights and employment.
With respect to the Court of Justice, the English are the only ones who find that it is abnormal that the Court should rule in last resort with respect to a federal power, a highly federalist case law-- it has said things that are not even in the treaties, the supremacy of community law.
So we propose to be able to have an appeal system, without adding any further details. However, I do not believe that the current powers of the Court of Justice will be affected. I believe it will remain what it is.
Ultimately, then, these are relatively minor changes. You should expect very limited changes from this conference, which would be a success given our current circumstances, that is to say a difficult economic context, the absence of pressure from the east, as Senator Stewart said, the context of the United Kingdom which is heading into elections -- the British government is currently paralysed -- and the Franco-German context; the Franco-German axis is not operating well. Today, the French position, if we analyze it, is much closer to the British positions. Only the Germans are unable to push or have no interest in pushing too hard this time for a deepening. Thus, there will be another intergovernmental conference, which will probably be necessary, following monetary union.
If monetary union comes about, it will be the first "spillover" of the decade. To achieve monetary union, we need economic, fiscal and economic government discipline. The institutional system will have to be reviewed.
And as the broadening will not occur before 2005, the Community will have the time for another constitutional exercise.
It was an error to force the Community to have a conference required by law without regard to the situation: Italy has been without a government for a long time, the United Kingdom is paralysed, France has a new government party that is quite divided over certain European issues, Germany has a difficult budget situation and Europe is in a fairly extensive employment crisis. Let us say that it was inappropriate, but it was dangerous to cancel the conference and I believe that we will arrive at certain minor reforms.
Senator Bolduc: When you say that there are difficulties between France and Germany, I understood you meant that Germany had a more open trade policy, whereas France has a somewhat more protectionist trade policy. Is that what you mean?
Dr. Soldatos: That's not new. In France, as you say, ideas of free trade with Mexico, South Africa and Asia are not very popular. They said it was an impetuous, pointless and dangerous policy for the Community.
Furthermore, some in France -- and there are the statements of Mr. Séguin of the National Assembly -- currently find that the commissioners should be reduced to a more administrative role than to that of a real government, that the central bank should try to be a kind of syndicate of central banks. They do not like the idea of a German-style central bank. That being said, they're going to align themselves with the central bank plan; they are going to accept it. In institutional terms, however, they are not ready to make great concessions and they want the national Parliaments to play a role in the legislative process.
In addition, the French amended the Constitution during the last reform: now, each legislative proposal by the commission must be presented to the French Parliament for its opinion.
You will tell me that this requires only an opinion, but if you are a minister and are negotiating a piece of legislation in Brussels and your Parliament has taken a position opposing the bill politically, it won't be easy to vote for it.
So there is a French effort to renationalize the process by introducing the National Assembly's role into the community process and, in general, the role of the national parliaments. There is constant talk of the national parliaments' role in reducing the democratic deficit, rather than of the "federalization" of the European Parliament, in order to give it real power. That is where I see a great many differences with the Germans.
[English]
Senator Grafstein: I found the discussion by our witness very interesting and compelling. One of the major questions for the committee is: Where is the EU currently going?
When I was in Europe, and even more so after I listened to you, I thought we were having a 20th century debate about a 15th century question, when in Europe there were two schools: the school of Erasmus and the school of Luther, the particular school and the universal school. I think I have heard now from two and a half schools that I have heard, and I think you are in one of the schools -- and correct me if I am wrong.
Each school had the same objectives: economic progress, peace and stability. Those are shared goals, but everybody has a different analysis of how we achieve those goals.
School No. 1 contemplates widening and deepening the EU, Euro-discipline; making the economies in a macro-economic state more integrative; growing integration; growing federalism, dampening nationalism and, therefore, expanding progress and at the same time reducing instability. I think you are in School No. 1.
School No. 2 -- and I call this a half a school -- is the British Luddites school which says, "We do not want to have anything to do with this; we want to smash the EU; we would like to undermine it. We are happy being alone, we are happy having the various components in Europe in disarray." Britain has always been better in balances of power than in conglomerations of power; therefore, let us turn back the clock. Like the Luddites, let us smash the machines and put things back where they were. That is sort of the British school.
Then, there is an alternate vision, which I call the second school, not a half school, and the vision says this: To accomplish those same goals, we have to take a look at the practical realities of what is happening by widening and deepening. As we widen and deepen in Europe, we find that the differences and the difficulties are intensifying; that the government machinery is becoming more complex; that the whole system is slowing down because the bigger and the wider the governance, the slower the decision-making; that differences are now emerging between France and Germany who are key to the European Union; that Euro-discipline is too difficult, too fast, and causes too much instability; and, finally, just to make the school correctly argued, all of a sudden, when a country decides to go off course as Britain with respect to the mad dog, it can then put sand in the machinery and clog or almost stop the machinery.
If that analysis is correct, there is a wider vision, and the wider vision is what has been called the Atlantic Union, where you step back from this federal integration and move back to a larger vision which is an Atlantic economic union between Canada, U.S. and Europe -- move back and move forward.
What weight do you give to the last school? We have not heard much from that last school, but I think it is growing because of the difficulties I have mentioned with the first two schools I described.
[Translation]
Dr. Soldatos: I'm going to draw a parallel. It has often been said that Quebec does not need Canada; it need only take one step back toward NAFTA, then toward globalization and the rest of the world.
This is somewhat how I have interpreted this idea that some people have about Europe: now there is an Atlantic Community; there is the agreement, the transatlantic action plan with the United States; there will be that with Canada, and there will be liberalization in some areas, and the WTO will also do its job. So Europe should perhaps take one step back and contemplate the broader picture.
The problem with this school is that, while admitting that economics is essential today, it finds that the states should do less, but it does not say that the states must do better. They say, "The less state, the better."
And yet no one has told the United States that the state has no role to play. It has essential macroeconomic roles and, if there were no state, who would play this macroeconomic role?
In the European Union, there isn't only free movement; there must be macroeconomic cohesion, and who will decide? If there are 25 of them and they meet without there being any preliminary institutional deepening, would they leave the discussion table with a common budget policy, more homogeneous fiscal policies and more homogeneous trade policies? It is not clear that they would.
So the first element, the future macroeconomic role of a modern Europe, of a modern society -- let's not call it a state -- requires cohesive decision-making.
The second element is the social role. There are vast regional and social disparities in Europe. If it was the Europe of six, I would have said that this is the macroeconomic element, but when you have eastern countries joining, there must be a regional agricultural policy.
Likewise, if you take countries such as Portugal or Greece, who is going to think for these countries and bring them up to speed? It will be said that structural funds are necessary, but what is necessary are decisions and money. So we must strengthen the Community's ability to decide, to provide a remedy for regional disparities. As in Canada, there are regions which, if left alone, will be unable to get by. Political action is required through decisions and economic action through budgets.
Europe cannot undertake any dialogue or Euro-Atlantic or global integration venture without managing its economic and social heterogeneity in a Europe of 25, which will be even greater with the new, politically and economically fragile democracies of Central and Eastern Europe.
The third question is the question of the democratic deficit. The more Europe progresses toward economic integration, the more people are refusing to recognize its legitimate power to decide. Ultimately, Europe is condemned to become a federal entity; otherwise it will be anti-democratic because it has opted for a single market without any direct legitimacy. It could have remained at the free-trade level, but it opted for a single market; it wants to opt for an economic and monetary union.
It cannot be considered that all these macroeconomic activities are being carried on away out of all political view, without any direct mandate. For reasons of democracy, modern and advanced economic integration requires a deepening of the political system.
One element, and this is a trivial yet essential argument, may be seen by considering Europe's competitors. I cannot understand an economic Europe next to Japan and the United States, an economic, political and military power. One cannot understand this asymmetry in a globalized economy, as a result of which Europe will not succeed in its technological, environmental and macroeconomic policies if it sets out as a group of 25 countries to reflect on what fiscal policy, what monetary policy and what environmental policy it will put forward with respect to the United States and Japan.
At the same time, as you said, it must settle its internal European problems and its Atlantic component must conduct a dialogue with us, with the United States and the WTO. How will it be able to generate such an ability for dialogue through a soft, fragile and fluid collection of 25 countries? It will not be able to manage all that.
In my view, the first school of the development of a European federalism is the only one possible. But it will be fairly slow. I believe that if we want to avoid desintegration in the broad sense of the term, we must adopt this school. That is why Europe à la carte is not possible, but a variable-speed Europe is necessary and desirable. In other words, the speeds will be different, but the ultimate objective will remain the same. That is the difference between a variable-speed Europe and Europe à la carte. Under an à la carte arrangement, you indefinitely take what suits you. In a variable-speed Europe, you temporarily go at your own speed, while waiting to be able to go faster. Those who can must go at different speeds from those who cannot, but everyone must want to because those who do not want to and those who do cannot work together.
[English]
The Chairman: We have appreciated the opportunity to hear your analysis, Dr. Soldatos, and we thank you for your frank and candid answers to our questions. The more we analyze the relationship between Canada and the European Union the more intriguing and the more intricate it becomes. I predict that the committee will want to return to this subject again.
[Translation]
Dr. Soldatos: Thank you very much for this wonderful opportunity to be able to speak with you and to tell you that, once your report is published, the chaire Jean Monnet would like to be able to disseminate it through a strategic meeting, a roundtable or an activity that would make it possible to publicize the results of your efforts and your many meetings here and abroad concerning this issue.
We are therefore asking in turn for your report once it is ready.
[English]
The Chairman: Thank you.
The committee adjourned.