Introduction: European Union and International Trade

7 Colum. J. Eur. L. 303 (2001)

William J. Davey. Edwin M. Adams Professor of Law, University of Illinois College of Law. Opinion 1/94 (World Trade Organization – WTO), 1994 E.C.R. 1-5267.

This Special Issue of the Columbia Journal of European Law on the European Union and International Trade is particularly timely. The field of international trade is one in which the European Union has an important position in the world. While there are, of course, other aspects of international relations in which the Union is active – the common foreign and security policy and development policy come quickly to mind, those fields are still dominated by the Member States acting individually (even if in a somewhat coordinated manner). In contrast, the Union is responsible for the common commercial policy and as such it is the key player on the world stage when European trade interests are in play. That is not to say that the Member States are uninvolved. Indeed, the Commission is required to consult them regularly, but it is the Commission that is the international negotiator. The five contributions to this Special Issue cover the field of important issues relating to the Union and international trade. For purposes of this introduction, I divide them into three categories, dealing with (i) the external relations power of the Community; (ii) key issues facing the Union’s attempt to launch a new round of trade negotiations; and (iii) matters related to EU-U.S. trade relations.

The primacy of the Commission as negotiator was undercut somewhat by the Court of Justice when it ruled in 1994 that certain aspects of matters dealt with by the World Trade Organization (WTO) – involving services trade and intellectual property – did not fall within the scope of the common commercial policy.’ In “The Unitary Character of the European Community’s External Trade Relations,” Rafael Leal-Arcas explores the history and the current problems arising from the division of power between the Commission and the Member States. As he explains, in a number of important situations, agreements deal with matters in respect of which both the Community and the Member States have competence. In these cases, the Court of Justice has stressed the duty of cooperation that exists between the Community and the Member States. He explores some of the problems that this raises in practice.

There are two aspects of the Union’s involvement in international trade matters that are particularly important at this moment. First, the Union is currently the principal proponent for a new broad-based round of international trade negotiations under the auspices of the WTO. Second, its trading relationship with the United States has undergone considerable stress as a result of a series of disputes, most of which have ended up before the WTO’s dispute settlement system.

The attempt by the Union (and others) to launch a new round of WTO trade negotiations at Seattle in 1999 was spectacularly unsuccessful and the accompanying street protests raised the question in the minds of some whether new negotiations to liberalize trade were appropriate at all. While the opposition to negotiations seemed to be inspired by myriad unconnected issues, certain themes were discernible. The principal questions seemed to be whether trade liberalization in itself was an appropriate goal or whether it should be accompanied by or subordinated to other concerns, such as those related to the environment, workings conditions, human rights and the right of communities to choose and apply their own policies and standards. The following three contributions to this Special Issue analyze aspects of these issues. In order for the Union’s new trade negotiation agenda to produce acceptable results, the negotiations will need to deal with issues like those raised in these articles.

First, Diego J. Liftin Nogueras and Luis M. Hinojosa Martinez address the trade human-rights connection in “Human Rights Conditionality in the External Trade of the European Union: Legal and Legitimacy Problems.” They explore the development of Community policy in this area, including the legal basis under which action can be taken. In exploring actual and potential Community activity, they draw a useful distinction between measures that promote human rights by rewarding countries that respect them (the positive conditionality of the Community’s generalized system of preferences scheme) and measures that withdraw benefits of one kind or another for failure to respect them (negative conditionality).

Second, concerning the rights of communities to choose and apply their own standards, Patrick Griffin examines the problems raised in the Union by enforcement of mutual recognition rules in “The Delaware Effect: Keeping the Tiger in its Cage – The European Experience of Mutual Recognition in Financial Services.” The mutual recognition principle has played an important role in the development of the Community’s single market, in particular through its application in the famous Cassis de Dyon decision of the Court of Justice in 1979. Yet as Griffin notes, there are legitimate concerns that such a principle may lead to a weakening of standards. He suggests that harmonization of essential requirements may still be necessary and even useful in obtaining the benefits of regulatory competition that mutual recognition may offer.

Finally, George York addresses one particular aspect of the trade and environment question in “Global Foods, Local Tastes and Biotechnology: The New Legal Architecture of International Agricultural Trade.” While disputes over how to regulate genetically modified organisms (GMOs) are an international problem, they have been a particular problem in EC-U.S. relations. York describes the different regulatory approaches of the EC and the U.S., which he characterizes as process versus product approaches, and then describes what has been done at the international level (focusing on the WTO and its agreement on sanitary and phytosanitary measures, but also commenting on the Cartegena Protocol on Biosafety). He concludes with a number of recommendations for the United States to help ensure that the benefits of biotechnology are not lost to society.

The second aspect of the Union’s involvement in international trade matters that is particularly important at this moment is its relationship with the United States. The EU-U.S. trading relationship is easily the most important in terms of any future trade negotiations. While the Union and the United States are not in a position to dictate the outcome of the negotiations to other trading nations in the WTO, they will play the predominant role in setting the topics for negotiation and their agreement will be necessary for any specific outcomes. Unfortunately, the trading relationship between formation of the WTO. The first two such disputes involved complaints by the United States and others against the EC in respect of its banana import regime and in respect of its ban on imports of beef from cattle treated with growth hormones. In each case, the EC was found not to have complied with its obligations under the WTO agreements at issue. Following the failure of the EC to bring the contested measures into conformity with its WTO obligations, the United States (and others) were authorized to take retaliatory action against the EC in 1999.

Since 1999, the EC has been the prevailing party in a number of cases it brought against the United States, including cases challenging U.S. countervailing duty and  safeguards actions and certain aspects of U.S. antidumping and copyright laws. Of particular importance has been a successful challenge by the EC to certain U.S. tax breaks afforded to so-called foreign sales corporations. The United States revised its law following the first adverse decision, but the revised law was found to be WTO-inconsistent at the first level of WTO dispute settlement in August 2001. Since this dispute appears to dwarf the others in terms of the amounts at stake, this is quite a touchy time for EU-U.S. trade relations. Hopefully, the pragmatic approach that led  to the settlement of the longstanding dispute over bananas will enable these two  trading partners to reach acceptable solutions in these various disputes and move forward on the trade front in a more harmonious manner.

This Special Issue has two contributions dealing with aspects of these EC-U.S. disputes. First, as described above, George York’s note examines some of the broader issues of biotechnology that were involved in the Hormones case. Second, Julia Kupfer considers “How the European Community’s Banana Regulation Brought Back Solange H: The German Constitutional Court’s Decision of June 7, 2000.” Kupfer’s note highlights one important aspect of the seemingly endless disputes deriving from the EC’s regulation of its banana market. Amazingly, the EC banana regime has led to important decisions at the WTO, EC and member state level. That the bananas trade is controversial in Europe is nothing new, of course. A special protocol on bananas had to be added to the 1957 Rome Treaty, and bananas were one of the last products to become part of the internal market. The way in which this was accomplished in 1993 was much disputed, both within and without the EC. On the international plane, the WTO dispute settlement system found the original 1993 regulation and the 1998 revision to violate various GATT and GATS provisions, which led to the retaliatory action mentioned above. Within the EC, important bananas-related cases have, inter alia, defined the position of GATT rules in the Union6 and the power of member states courts to grant interim relief in respect of EC legislation. Kupfer analyzes the important bananas related decision before the German Constitutional Court. The EC banana regime was especially unpopular in Germany and there was speculation that the German Constitutional Court might examine the regime for consistency with the German Basic Law and find it to be in violation. As explained by Kupfer, that did not happen and the resulting decision clarified the court’s Maastricht decision, indicating more clearly when the court might undertake such a review. As such, the decision marks an important stage in the occasionally rocky relationship between the Court of Justice and the Constitutional Court.

All in all, these five contributions to the Special Issue constitute a rich feast for those concerned with the European Union and international trade issues.