State of the Union: The good deal by Charles Grant Published in the Wall Street Journal, 25 June 2007

The deal in Brussels on a new treaty this weekend is good news for those who hope the EU can become a more confident and effective contributor to global security. If German Chancellor Angela Merkel had failed to forge a consensus on this "reform treaty," the EU would have been stuck with acrimonious and introspective arguments over institutions for a prolonged period. Its leaders would have lacked the energy and time to tackle the many pressing external challenges - such as Russia, the wider European neighborhood, climate change and energy security - that the Union faces.

Ms. Merkel's success has reinforced her status as the pre-eminent European leader. But she needed the help of others to clinch the deal. President Nicolas Sarkozy of France erupted into his first EU summit with a burst of mercurial energy. Together with Britain's Tony Blair, he persuaded Polish Prime Minister Jaroslaw Kaczynski - sitting at the end of a telephone in Warsaw - to accept the new voting rules that everyone else wanted, in return for their implementation being postponed until 2014.

Mr. Sarkozy caused a stir by cutting the reference to "undistorted competition" from the list of the Union's objectives. Since the French had voted down the constitutional treaty two years ago in part because they thought it too "ultraliberal," he needed a symbolic change. The Commission's legal service says the deletion will not affect the way EU competition policy works. Many other references to undistorted competition remain in the treaty, while a new protocol reinforces the role of competition policy.

Although absent from the summit, Gordon Brown, who becomes British prime minister later this week, exerted a crucial and benign influence. He had to choose between pandering to Britain's euroskeptic press, which has urged him to oppose the new treaty, and backing a deal. He has decided to support the new treaty and will ratify it by parliamentary vote, not referendum. Since only the Irish (and possibly the Danes) will hold referendums, the new treaty is likely to take effect in 2009.

Its most significant innovations concern EU foreign policy, where the current institutions are dysfunctional. The rotating presidency shifts from one member state to another every six months, at the cost of continuity and credibility with rest of the world. And the diplomatic side of foreign policy, under the high representative (Javier Solana) in the Council of Ministers, has no link to the spending programs run by the commissioner for external relations (Benita Ferrero-Waldner). Mr.Solana and Ms. Ferrero-Waldner run two bureaucracies that work on the same problems but separately, with priorities that are seldom aligned. Too often they send mixed messages to the outside world.

Take the example of EU policy on China. The European Commission is negotiating a new trade agreement with China, which is supposed to open up hitherto protected Chinese markets. China will not sign such an agreement unless the EU lifts its arms embargo. Yet the EU officials who deal with the arms embargo, in the Council of Ministers, have no contact with those working on the trade agreement.

The new treaty will merge the Solana and Ferrero-Waldner jobs into one "high representative," who will take over from the rotating presidency as the chair of foreign ministers' meetings. He or she will also speak for the EU externally, instead of the current trio of the presidency's foreign minister, Mr. Solana and Ms. Ferrero-Waldner. A new "external action service," consisting of the relevant Council of Ministers and Commission departments, supplemented by national officials, will provide the high representative with advice, analysis and expertise.

None of this will bring about a revolution in EU foreign policy. The high representative will only be relevant if and when the governments unanimously agree on a common line for him or her to represent; every country retains its national veto. But when there is a common line - as there is today, for example, on the Balkans, Iran and much of Middle East policy - the EU should become more effective. Much will depend on the personal qualities of the high representative. Like the new EU "President" - who will chair summits, instead of the prime minister of the rotating presidency - the high representative will have no executive powers. The authority of both individuals will depend on their powers of persuasion and the force of their personalities.

Countries hoping to join the EU should be happy with the new deal on institutional reform. Without it, many member states would have simply blocked further enlargement, on the grounds that letting in more members would weaken already frail institutions. Now Turkey and the Western Balkans states can expect the accession process to keep moving. However, the process is bound to be bumpy, given the hostility of some member states to a wider Europe. New treaty language on the criteria that candidates must satisfy before joining the EU will not make a material difference.

Countries such as Belgium, Germany, Spain and Italy are bitterly disappointed that the reform treaty is so much less ambitious than the constitution agreed in 2004. But they may pause for thought before trying to push the Union toward yet another new treaty any time soon.
Ever since the Single European Act of 1986, the EU has engaged in an endless round of efforts to revise its founding treaties. And the wider the membership becomes, the smaller are the chances that every government will sign and then ratify a new treaty - which is the requirement for a treaty to take effect.

That is why the countries that want closer political union may in the future pursue that ambition in smaller groups, leaving behind troublesome partners like Britain and Poland. There is already "variable geometry": Some countries shun the euro or the Schengen area of passport-free travel. There could be more to come in areas such as the coordination of economic policy among euro members, police and judicial co-operation, or company taxation. In an EU of 27 countries - and perhaps a higher number one day - it is unrealistic to suppose that every member state will take part in every policy. The new treaty will give the EU more effective institutions, but they risk becoming very complex.

Mr. Grant is director of the Centre for European Reform in London.

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