June/July 2002 - CER BULLETIN, ISSUE 24

A 'COMPETENCE CATALOGUE' IS CODE FOR PROTECTIONISM
By Ulrike Guérot

The European Convention is now in full swing, working on reform options to ensure the EU works better after enlargement. Among the many issues the Convention intends to explore is the question of how better to define the division of 'competences' the right to exercise power between the various levels of government across the EU.

The loudest calls for a catalogue of competences come from Germany's powerful regional governments the Länder who insisted this issue should figure on the Convention's agenda. In the run-up to the Laeken summit in December 2001, regional leaders demanded a document that would clarify which political decisions should be reserved for which tier of government.

There are two strands in this debate. Leaders of the largest Länder such as North-Rhine Westphalia and Bavaria point out that their regions are larger in terms of population and economy than EU member-states like Luxembourg or Denmark. But regions are not directly represented in the EU's decision-making institutions, because the system is based largely on representation by national governments. The large regions claim that the interests of their populations are not adequately taken into account in EU decision-making. Within the German federal system, the regions are directly represented through the upper chamber of the parliament the Bundesrat. In the Council of the EU, by contrast, only the national governments are represented. The Länder are particularly concerned about the growth of EU co-operation in justice and home affairs, because the police and justice system is organised regionally within Germany.

However, the regional governments' loss of powers is not a European problem to which a catalogue of competences would provide a solution. Rather, it is a domestic problem that should be resolved by improving the co-ordination of European policy-making within Germany. The federal government should consider introducing an EU co-ordination unit like the French government's Secrétariat Général du Comité Interministériel, which is attached to the prime minister's office. Germany should have such a unit attached to the chancellery, and the regions should send representatives to it to ensure that policy on Europe reflects their concerns. Another idea is to create a Europe ministry with a co-ordinating role.

The EU has many good reasons for clarifying which powers are exercised on which level. It would make for greater transparency, because a clear denomination of what should be done by the Union, and what by the member-states, would help the public to know who had responsibility for which decisions. It would also reduce the tendency of some EU institutions to grab more power for themselves. However, many competences are shared between the EU's institutions and the member-states, making a clear division impossible. Whatever the merits of an EU catalogue of competences, it would fail to redress the grievances of the Länder about their input into European policy-making.

The German Länder have another motivation in calling for a catalogue of competences one that is protectionist and dangerous for the Union. Their politicians are dressing up the economic concerns of the richest regions as an issue of constitutional principle for the whole Union. Länder leaders complain that the EU is steadily eroding their powers, especially in economic policy, and that a catalogue of competences should limit the control of state-aids by the European Commission and the European Court of Justice. The richer Länder would like to carry on granting regional aid to enterprises, but the Commission opposes their subsidies on the grounds that they distort competition in the single market.

Some regional politicians are using the debate about institutional reform to try to remove certain sectors from the scope of the Commission's exclusive competence in competition policy. In the name of providing 'public goods' such as basic services, the Länder are trying to maintain subsidies for state-run enterprises that protect them from competition. Many regional politicians argued that the small regional savings banks (the Sparkassen) should be allowed to extend government-backed credits to small and medium-sized enterprises when commercial banks refuse to offer them. They claim that local transport services and regional industries should get exemptions from EU competition law and benefit from regional industrial policy measures. Lower Saxony, for instance, has subsidised jobs at Volkswagen, while Baden-Württemberg has paid subsidies to BMW. The German Länder led the opposition to the EU's Takeover Directive last year because they feared it would diminish their ability to shield local businesses from acquisitive rivals.

German rhetoric on economic policy has long been fairly liberal, particularly in comparison with France. However, many regional politicians have recently discovered the attractions of industrial policy, as has Chancellor Gerhard Schröder and his rival in this year's elections, Edmund Stoiber. Now the debate about economic policy has become confused with the one about competences. In contributions to the Convention's deliberations, four of the largest and richest Länder North-Rhine Westphalia, Saxony, Bavaria and Lower Saxony have demanded the removal of Articles 95 and 308 from the European Community treaty. These articles give the Commission its powers in all policy areas connected with the single market. Since nearly all policy fields are in some way related to the single market so the Länder argue these two general clauses extend the Commission's competence too far. But to trim back these powers would jeopardise the EU's greatest achievement the creation of a dynamic and competitive internal market.

Regional leaders are trying to use the debate over competences as a Trojan horse for the re-introduction of protectionism. But Germany needs to modernise its European policy-making instead of rolling back the single market in the name of delimiting competences.

Dr Ulrike Guérot is head of the EU Unit at the DGAP in Berlin.

Copyright CER 2002