Differentiated Integration: Different routes to EU cooperation

December 17, 2015 - nr.98
Summary

Conclusions and recommendations
 

‘Differentiated integration’ appears to be the latest buzzword: a solution to the stagnation afflicting European policy development, a remedy to cure all the prevailing ills. But those who take this position are forgetting that differentiated integration has long been part of the European Union’s history. The Treaties provide for exceptions and opt-outs in the event of treaty change negotiations or enlargement, and an instrument was created almost 20 years ago to make it possible for a small vanguard of member states to engage in enhanced cooperation. The basic principle has always been that member states that did not participate at the time could join at a later stage.

Intergovernmental forms of cooperation have likewise found their way into EU law, or have been formalised in temporary agreements under international law such as the Fiscal Compact, taking EU law into account.

The government’s first question is:
What is the AIV’s view on the expectation that more frequent use will be made of flexible integration for the foreseeable future, and what policy areas warrant specific attention in this connection?

The AIV endorses the expectation that the instrument of differentiated integration will be used more often in the future. This has to do with the size of the European Union, frequent disparities in the state of economic development in member states, and differing views among member states as to both the pace and objectives of integration. The concept of integration held by the six original member states of the European Communities, which envisaged a certain convergence, is being eroded. National feelings and identities are becoming more and more dominant, judging by national debates in several member states. Meanwhile, the crises not only on the EU’s periphery but also within its borders call more than ever before for common policies.

For these reasons, the AIV believes that differentiated integration will acquire more weight. Member states will be quicker to invoke it than in the past, because in a Union of 28 it is sometimes simply impossible to reach agreement. The AIV does not view this as a negative trend, but accepts it as a result of a new political reality that calls for a pragmatic approach. It must be borne in mind that past experience shows that differentiated integration in the form of a lead group (including countries outside the European treaties, such as the Schengen Agreement) may lead to deeper integration in the longer term. In other words, the instrument can also serve to clear the path ahead. But the AIV wishes to stress that a number of conditions must be fulfilled: there must be no tampering with the EU’s core values, and the same applies to the objectives and structure of the single market, which means that there must be no erosion of the freedom of movement of persons. At the same time, decision-making on subjects relating to differentiated integration must rely as much as possible on the existing institutions. Such an approach can only benefit the solidity and consistency of the EU’s institutional framework.

Differentiated integration may develop into deeper integration, but it could also move in the direction of partial disintegration and the shrinking of the acquis. This necessitates a pragmatic assessment of the possibility of a member state withdrawing from existing integration in certain policy areas. The AIV takes the view that any such withdrawal should only be possible by following the formal channels – that is, by treaty changes. Nonetheless, it is conceivable that political agreements might be made with member states that claim an exceptional position: agreements that effectively render inoperative the obligations arising from participation in a particular policy area.

The acquis communautaire is a system of legal rules that must remain intact in terms of objectives. However, the AIV wishes to emphasise that member states do have a certain policymaking freedom as far as the architecture and implementation of European legislation are concerned, and that this freedom should be seen as something positive. The use of intergovernmental agreements, too, may be acceptable in special circumstances such as the economic crisis, although the content of such agreements should be brought under the Community’s umbrella as soon as possible.

The AIV certainly sees policy areas in which differentiated integration is a possible way of achieving progress. These include deepening cooperation within the framework of the EMU, enhanced cooperation on pension and tax policies, employment and working conditions, public health, environment, climate, energy, the implementation of immigration and asylum policy, police and criminal law matters, and permanent structured cooperation in the realm of defence. In this connection, the AIV would note that differentiated integration can be effective provided national and European administrative institutions function effectively. This also applies, by the way, to the regular integration process.

The government’s second question is:
What consequences could an increase in flexible integration have for the EU’s institutional architecture and governability?

The AIV reaches the conclusion that more far-reaching differentiated integration would inevitably impact on the EU’s institutional architecture and governability. Transparency, democratic legitimacy and support among member states – which can be classified as opt-outs and pre-ins – should take precedence in the quest for solutions. The EU is already a patchwork, and this situation should not be exacerbated by the addition of unclear, unverifiable agreements concluded by a small vanguard. For instance, the AIV would advise against setting up any more ministerial councils. At the same time, it is important to guard against mixed forms of EU law and intergovernmental action leading to a reduction in the role of the European Parliament and the undermining of the jurisdiction of the Court of Justice in Luxembourg. Equally, it is important to guard against a situation in which greater intergovernmental cooperation erodes the position of the European Commission (although this did not occur with the Fiscal Compact or the ESM Treaty). The AIV foresees that as a result of differentiated integration, the Commission will not only retain its traditional roles of initiator, implementer and supervisor, but acquire the additional role of network manager. Regarding the consequences for the European Parliament, the AIV notes that the fact that representatives of non-euro countries can vote on matters relating to the European currency causes a certain resentment. This will probably increase the pressure to set up a separate parliament for the euro countries. Leaving aside the fact that this would require a treaty change, the AIV is unenthusiastic about this idea. After all, the European Parliament represents citizens, not member states. To split up the representative assembly of all EU citizens would be an unfortunate development. Furthermore, it would exacerbate the existing division between euro and non-euro countries. The AIV therefore repeats its earlier suggestion to set up a separate EP committee for the euro countries.

The government’s third question is:
What consequences could an increase in flexible integration have for the relations between the member states of the EU? Economic and Monetary Union has created a distinction between the countries in the eurozone and other member states. To what extent does this have an impact on the positions they adopt and the coalitions they form in the Council in economic and other policy areas?

The AIV acknowledges that differentiated integration may affect relations between member states. A one-sided composition of groups of member states that strive for closer cooperation in certain areas could disrupt the equilibrium between larger and smaller member states, between old and new member states, and between northern and southern countries. Pro-integration member states will probably find their positions strengthened, because they are likely to take part in all forms of differentiated cooperation. The cohesion of the EU as a whole could be damaged if member states that attach great value to their national sovereignty feel excluded as a result, even in policy areas in which they do participate. The AIV believes that such damaging effects may be prevented, or at least limited, by concluding good agreements about openness, exchanges of information, and regular consultations between participating and non-participating countries. Agreements of this kind are particularly important to the relationship between euro and non-euro countries. As far as the UK’s relationship with the EU is concerned, the AIV believes that more specific agreements on reducing the regulatory burden and preserving the integrity of the single market could remove the UK’s objections to the way the EU currently functions.

Recommendations

  1. The AIV advises the government to accept differentiated integration as a necessary instrument that enables progress to be made in European cooperation in certain policy areas, and in this connection to take account of the legitimate objections or limitations of certain member states to engage in closer cooperation. However, differentiated integration should be contingent on certain conditions. The most important condition is that differentiated integration must not undermine the EU’s core values or the foundations or architecture of the single market, and that closer cooperation must take place through the EU institutions and respect the applicable EU procedures.
     
  2. The AIV advises the government to place the subject of differentiated integration on the Council’s agenda. The informal contacts during the Netherlands’ Presidency provide ample scope for this. The object of such consultations must be to launch an open dialogue on best practices in the member states and to identify the possible pitfalls of differentiated integration.
     
  3. The Netherlands should endeavour to ensure that preference is given to enhanced cooperation when choosing which form of differentiated integration to adopt. In the short term, the government could sound out the views of other member states on modifying the conditions for enhanced cooperation. The AIV would favour such modification. On the one hand, for enhanced cooperation to go ahead, a group larger than nine member states would have to wish to work more closely together, to ensure substantial support, but less than a qualified majority would be required in the Council. In this connection, it should be borne in mind that enhanced cooperation serves the fulfilment of the EU’s objectives, as is stated in the Treaties themselves.
     
  4. Differentiated integration places severe demands on national authorities. They must be able to take part in different vanguards in different policy areas, and to participate in debates and negotiations. This calls for countries – including the Netherlands – to make clear choices at national level. The AIV therefore advises the government to chart the areas in which it considers differentiated integration to be desirable and/or necessary, taking into account the Netherlands’ policy priorities for the next five years. The AIV believes that the following areas or subjects, in any case, should be considered: the deepening of cooperation in the framework of the EMU, enhanced cooperation on pension and tax policies, employment and working conditions, public health, energy, immigration and asylum policy, police and criminal law matters, and permanent structured cooperation in the realm of defence.
     
  5. The AIV considers it desirable for the government to seek to ensure that the intergovernmental Fiscal Compact is incorporated into the legal framework of the European Union. The agreement concerned states that this must be achieved before 2018. This matter needs to be considered and discussed in the Council in a timely fashion, with a view to possible treaty changes.
     
  6. With a view to achieving the cohesion and stability desired, the AIV is opposed to the creation of permanent dividing lines within the EU and urges the government to act accordingly. Member states that initially decline to join in forms of differentiated cooperation should always have the opportunity to do so later, efforts should be made to maximise openness, and there should be regular consultations between participating and non-participating member states. In addition, as recommended earlier, the involvement of the EU institutions in such forms of cooperation is essential.
     
  7. The AIV endorses the government’s desire for the Netherlands to play an active role in the search for a solution to the problem of the UK’s continued membership of the EU in the light of the referendum it is to hold. In this context, the government should try to find as many supporters as possible to reach an inter-institutional agreement between the three European institutions involved to restrict the regulatory burden and to increase the discretion of member states in the implementation and application of secondary legislation.
Advice request

Professor J.G. de Hoop Scheffer
Chairman of the Advisory Council
on International Affairs
P.O. Box 20061
2500 EB The Hague

Date                15 April 2015
Re                   Request for advice on flexible integration in the European Union

Dear Professor De Hoop Scheffer,

In June 2014 the European Council concluded that there should be scope for ‘different paths’ towards EU integration for different countries (EUCO 79/14). This can be seen as an affirmation of the present reality. In the realm of Justice and Home Affairs, the Schengen system is seen as a success story, and the EU has gained broad experience with opt-outs, as exercised by the United Kingdom, Ireland and Denmark. In recent years integration measures taken as a result of the financial crisis have highlighted the divisions between euro and non-euro countries, and German Chancellor Angela Merkel has called in the past for a ‘two-speed Europe’ to facilitate a fiscal union.1 Even the concept of second-tier ‘membership’ for non-member states that wish to deepen their ties with the EU has a place in the debate on flexible integration.

The European Council’s embrace of flexible integration can be read as a concession to member states that cannot support the notion of ‘ever-closer union’. What is more, flexibility – whether via treaty provisions on enhanced cooperation or otherwise – offers a necessary alternative to fully fledged integration of all 28 countries. The member states’ divergent views on the general purpose and ultimate goal of the EU, and the criticism of the trend towards a political union, make it increasingly difficult to achieve consensus on the course EU integration should take. More and more, these dynamics are leading to varying speeds and multiple layers of integration within the EU.

It is not only the gap between the leading and ‘peripheral’ members that raises questions about the desirability of flexible integration, its institutional implications, and about relations between the member states. There is also the matter of the permanent divide that exists between member states based on their participation in the EU’s integration frameworks. The government would therefore welcome an analysis of trends in flexible integration, with a view to exploring the political, institutional and policy-related consequences for the Netherlands and the EU. It would appreciate receiving an advisory report on this matter from the Advisory Council on International Affairs (AIV) by September, addressing the following questions:

  1. What is the AIV’s view on the expectation that more frequent use will be made of flexible integration for the foreseeable future, and what policy areas warrant specific attention in this connection?
     
  2. What consequences could an increase in flexible integration have for the EU’s institutional architecture and governability?
     
  3. What consequences could an increase in flexible integration have for relations between the member states of the EU? Economic and Monetary Union has created a distinction between the countries in the eurozone and other member states. To what extent does this have an impact on the positions they adopt and the coalitions they form in the Council in economic and other policy areas?

I look forward to receiving your report.

Yours sincerely,

Bert Koenders
Minister of Foreign Affairs    

__________________________________

 
1 Interview with Chancellor Merkel in ARD-Morgenmagazin, 7 June 2012.
Government reactions

Government response to the AIV advisory report ‘Differentiated Integration: Different routes to EU cooperation’

Introduction

On 15 April 2015, the government requested the AIV to publish an advisory report on flexible integration in the European Union. In its request, the government noted that flexibility is already a reality in European cooperation and asked the AIV to examine trends in flexible integration, the consequences of an increase in flexible integration for the EU’s institutional architecture and governability, and its possible impact on relations between member states and on the coalitions they form.

On 24 November 2015, the AIV published its report ‘Differentiated Integration: Different routes to EU cooperation’, answering the government’s questions. In this response, the government comments on the report’s conclusions and recommendations. Where appropriate, the response to different recommendations is presented together.

The government thanks the AIV for its clear analysis of the issue and its answers to the questions, which have made a valuable contribution to the government’s thinking on this issue.

General comments

Differentiated integration is more topical than ever. With the UK’s agenda for reform, the outcome of the Danish referendum fresh in the mind, the recent statements by European Commission President Jean-Claude Juncker,1 and the European Council’s conclusions of June 2014, there is a clear need to reflect on this issue in a broader sense. The AIV’s thorough analysis and useful conclusions offer an excellent starting point.

The conflict between, on the one hand, ideas on variable geometry and the reality of diversity and flexibility and, on the other hand, calls to strengthen the EMU and for the EU’s 28 member states to find joint solutions to the challenges facing the Union, is causing friction in the Union’s institutional architecture. Finding a balanced response to this problem seems to be one of the most pressing institutional challenges facing the EU in the future.

Response to the conclusions and recommendations

Recommendation 1: Accepting differentiated integration as a necessary instrument
Recommendation 6: Preventing the creation of permanent dividing lines

Like the AIV, the government sees a growing tendency to opt for differentiated integration. Examples include differentiated forms of cooperation in the context of the EMU (eurozone and non-eurozone countries) and the Schengen Agreement, opt-ins and opt-outs, enhanced cooperation, and intergovernmental cooperation in lead groups. The annexe to the report offers a clear overview of these different forms of cooperation. The report also makes it clear that differentiated integration is not new in European cooperation, but has a long history. With a Union of 28 countries, uniform integration – in terms of both form and content – is by no means a given; the Union is diverse and has not yet fully converged in many areas. Although convergence towards a higher level remains the ultimate goal in a large number of areas, the Union will continue to be diverse in the future. The associated flexible forms of cooperation are and will remain a reality. But they also offer institutional elasticity. The government does not therefore consider differentiation as negative; in the past, cooperation in lead groups has sometimes been the driving force behind closer Union-wide integration (good examples being Schengen, the Prüm Convention and the euro). In this way, lead groups have been instrumental in deepening European cooperation.

In the debate on the State of the European Union, Bas van ’t Wout, an MP for the People’s Party for Freedom and Democracy (VVD), asked about the possibilities for exploring whether cooperation between a small group of member states could help move the process of achieving a single market forward.

The Netherlands believes that member states themselves have an important responsibility and the potential to improve the functioning of the single market. Eleven member states are taking part in the Frontrunners Initiative, about which the government informed the House previously (Parliamentary Papers, House of Representatives, 21 501-30, no. 327, 21 501-30, no. 328 and  21 501-30, no. 344). At the Competitiveness Council meeting of 2 and 3 March 2015, the Netherlands and the UK presented the results of four Frontrunners projects (Single Market Centre, Points of Single Contact, e-commerce and the recognition of professional qualifications) and called on member states to adopt the projects’ recommendations. The project activities are currently under way in the member states.

Within the Benelux, which is again being seen as the ‘laboratory of Europe’, there are also various ongoing initiatives for enhanced cooperation. As the government informed the House previously (Parliamentary Paper, 34000-V, no. 71), a joint action plan for jobs and growth was adopted at the Benelux summit in Brussels on 29 April 2016 to strengthen our internal market. The starting point of the action plan is to remove the obstacles that still confront our market of 28 million consumers and offer businesses, especially small and medium-sized enterprises, a solid basis for operating on the European market. In the plan, the Benelux countries undertake to strengthen their cooperation by promoting e-commerce and the digital agenda, regulating cross-border waste management, improving coordination on VAT, and stepping up cross-border provision of information. In the field of infrastructure, an agreement has been reached to enable the cross-border use of LHVs (longer, heavier vehicles, also known as ecocombis) within the Benelux and to further expand the trans-European transport network. In addition, at the Pentalateral Energy Forum last June, agreement was reached to further develop regional cooperation on energy, which has been working well for 10 years, as is encouraged within the context of the energy union. As the only regional cooperation platform within the EU, the Benelux Union is able, on the basis of article 350 of the Treaty on the Functioning of the European Union, to go further than existing EU legislation in all these areas.

The government shares the AIV’s opinion that differentiated integration can only be effective if national and European governance institutions function effectively. Like the AIV, the government notes that this also applies to ordinary EU cooperation. This underlines the importance of the government’s support for better governance through a joint effort by the member states to improve the quality of governance at national level. A strong Union calls for strong member states.

As mentioned above, differentiation allows room for diversity within the current Union. That does not by any means imply that it will always lead to further Union-wide integration. As such, flexible integration is a confirmation of reality, in which not all member states aim to move in the same direction or achieve the same goals, but see the Union as a framework within which cooperation can take shape in different ways without leading to uniform, EU-wide solutions.

In the government’s view, both functions of flexibility are valid and useful. We must, however, keep a close eye on whether this leads to a Union that is static, perhaps with arcs of integration, or to a Union that is dynamic and inclusive. The first is fundamentally different to how cooperation was envisaged at the start of the European project and contains the seeds of a non-constructive division into two or three blocs. This warrants further analysis, partly in light of the current discussion on the position of the UK.

The government considers it important to note here that it continues to favour inclusiveness and cooperation for all 28 EU member states. Where possible, the Netherlands prefers the Community method, with the corresponding institutions, so that the larger partners can also be held accountable for adhering to jointly agreed rules. That makes the environment in which the Netherlands operates more predictable and the Netherlands itself less dependent. The challenges currently facing the EU show again the great importance of strengthening the Union as a whole and working to improve solidarity and a sense of responsibility among all 28 member states. Fragmentation and separate institutional structures should be avoided where possible.

The government agrees with the AIV that if, for whatever reason, differentiation is opted for, a number of conditions must be met. For the government, the basic criterion is the greatest possible inclusiveness and involvement of, and transparency towards, non-participating member states and EU institutions. This applies, for example, to strengthening the EMU, which further increases the need for involvement, inclusiveness and transparency. The government especially shares the AIV’s opinion that differentiation must not jeopardise either the EU’s values or the integrity of the single market. Strengthening both of these basic requirements remains the focus of the Netherlands’ EU policy, as can be seen from the efforts of the Dutch EU Presidency in this respect.

In this context, it is important to be aware and acknowledge that a sustainable and stable eurozone requires the coordination of the economic policies of the euro countries and further strengthening of the EMU. To that end, the Eurogroup meets in principle every month to discuss eurozone matters, given their shared responsibility for the euro.

Recommendation 2: Placing differentiated integration on the Council’s agenda

Partly in the light of the above, the government agrees with the AIV that differentiated integration merits being placed on the EU agenda. Not as a stand-alone topic but, for example, as part of the discussion on the UK’s position in the EU and in the context of the outcome of the Danish referendum on the opt-out. The government expects differentiated integration to remain very relevant in the coming years, partly because of how the European Parliament, the European Commission and a number of member states view the issue. The government will continue to monitor their ideas closely and, where appropriate and desirable, it will develop its own ideas to defend the Netherlands’ interests as a medium-sized continental European country with a transatlantic perspective.

Recommendation 3: A preference for differentiated integration based on enhanced cooperation

The government shares the AIV’s view that the preferred route towards differentiated integration is through enhanced cooperation, as set out in the EU treaties. With an eye to reality, the drafters of the treaties devised a mechanism to achieve this, which should be used wherever possible. Here, too, the government has a preference for Community structures. That does not mean that other legally feasible forms of differentiated cooperation may not be realistic and effective options, as the pursuit of the intergovernmental route has shown in the past. After all, enhanced cooperation is not suitable in all situations.

The AIV’s call for the conditions for enhanced cooperation to be modified implies a treaty change. As the AIV is aware, the government is not in favour of amending the treaties. If, however, there comes a point where this is necessary, the government will take account of the AIV’s ideas in determining the Netherlands’ position. Experience has shown that the current conditions are not problematic or too strict if the political will for enhanced cooperation exists and there is agreement on what it entails (examples are patent law and matrimonial property law). Given the increasing importance of flexibility in current European cooperation structures, however, the government is open to possible simplification and/or modification of the procedures, so that they remain compatible with the growing need for more cooperation in smaller groups.

Recommendation 4: Charting the areas in which differentiated integration is desirable and/or necessary

As outlined in the recently published Presidency edition of the State of the European Union, the focus on the essentials, which the government favours, means that the European Union must concentrate on what is important for its citizens and businesses. In concrete terms, this means seeking solutions for the most pressing challenges confronting us today, as described in the European Council’s Strategic Agenda. During its Presidency, the Netherlands will work to ensure that the Council stays on track in implementing this agenda. In the context of the Presidency, the government will focus on the following policy priorities: 1. an integrated approach to migration and international security; 2. Europe as an innovator and job creator; 3. solid and future-proof European finances and a robust eurozone; and 4. a forward-looking climate and energy policy. The aim in all these areas is to come up with EU-wide measures to achieve these goals. A single market and shared borders and challenges call for a joint approach. Only where this proves unfeasible can consideration be given to the option of moving cooperation forward in smaller groups through flexible forms of integration. However, the government is not in favour of forming smaller lead groups or initiating enhanced cooperation in advance in the areas suggested by the AIV, or identifying specific policy areas in which this could be done. If a new situation arises in which flexible cooperation is a possible course of action, the decision on whether or not to participate will be made on the basis of political considerations.

Recommendation 5: Incorporating the Fiscal Compact into Community structures

As outlined in the 2013 State of the European Union, the government – like the AIV – is in favour of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (Fiscal Compact) being incorporated into the legal framework of the European Union. This is explicitly called for in article 16 of the Compact. It is, however, not expected to be addressed until a change to the EU treaties is required.

Recommendation 7: Promoting continued UK membership of the EU: arguing for an inter-institutional agreement to restrict the regulatory burden and to increase the discretionary powers of member states in the implementation and application of secondary legislation

This recommendation ties in with the government’s existing efforts. The government considers it of great importance that the UK stays in the EU, for both the EU and the UK itself, and wishes to support solutions for the UK agenda that are good for the EU as a whole. The UK’s wishes – such as strengthening the EU’s competitiveness, reducing the regulatory burden, and the importance of the principle of subsidiarity and the role of national parliaments – closely reflect those of the Netherlands. For the government, however, there are clear limits, such as not tampering with the non-discrimination principle laid down in the EU treaties.

The revision of the Interinstitutional Agreement on Better Regulation (IIA) plays a role in finding these solutions. The agreement addresses a number of issues, including simplifying legislation, redressing the institutional balance, the role of national parliaments, and the discretionary powers of member states. The three main EU institutions recently reached provisional agreement on the IIA, which they still have to formally approve. The government will provide the House with further information on this process through the preparations for and reports on the General Affairs Council.

The chapter on simplification in the draft IIA contains provisions on setting objectives to reduce burdens in specific sectors and, where possible, quantifying the Regulatory Fitness and Performance Programme (REFIT). Preventing and reducing unnecessary regulatory burdens has long been a priority of the government and of the UK. Outside the IIA, the Netherlands and the UK have been working closely in this area for some time, as can be seen from the conclusions of the Competitiveness Council meeting of December 2014.2

The UK and the Netherlands are calling for the position of national parliaments in the EU decision-making process to be strengthened, not least in the context of the IIA. This call has found its way into the IIA. The Netherlands would like to have achieved more in the area of national discretionary powers in the application of EU law. The text on the prevention of gold-plating by member states is acceptable to the Netherlands, as it does not erode these discretionary powers.

 
1 ‘Two-speed Europe is the future of enlarged EU, Juncker says’, Reuters, 18 November 2015.
2 Parliamentary Paper, House of Representatives, 21 501-30, no. 340.
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