Key Aspects of Lisbon Treaty - Essay Example

Lisbon Treaty Few changes in European Union history promise to be as dramatic as those brought in under the Lisbon Treaty. Ratified in 2009, the Treaty makes sweeping changes to the governance of Europe, amending previous treaties and changing institutions. It is a controversial document and in various forms has been rejected by voters in some countries (Duff, 54). Nevertheless, it is now the law of the land. But how will the Treaty shape and change Europes institutions and role in the world? And will it make the EU more democratic and accountable, in particular with regards to one of the big issues of the day: tax harmonization. These questions will be examined in the course of this essay. The institutions of the EU are sure to change due to the Lisbon Treaty, perhaps most dramatically in terms of international affairs. The new High Representative for Foreign Affairs will unify Europes foreign policy. This will have a significant impact. It’s important to ask the question, What is power on the international scene? Part of it must surely have to do with purely military force (Kagan, 12). The US is the lone power in the world with the ability to conduct expeditionary warfare on multiple fronts across the globe whenever it wants to. As was demonstrated in the Balkans in the 1990s, Europeans aren’t able to project a credible military force even within Europe. Therefore the Europeans resort to the only thing they have for managing international conflicts, international institutions such as the UN. The success of European integration and solving the "German problem" has a lot of Europeans, Kagan says, to believe that they live in a Kantian paradise where international institutions can banish war forever (101). Americans have a different historical reality, and think of the world as a Hobbesian jungle where hard power rules. Now because of the Lisbon Treaty, Europeans will be taking more responsibility for their actions as a unified state. Hopefully, this will lead to the EU supporting the US in various actions rather than being a peanut gallery of criticism, with various European foreign minister sniping away (Nergelius, 89). Now Europe is left with two options: either they follow the US or be a silent partner. "Rather than viewing the US as a Gulliver tied down by Lilliputian threads", says Kagan, "American leaders should realize that they are hardly constrained at all, that Europe is not really capable of constraining the US" (100). The main reason he reaches this conclusion is because he thinks of power only in a military sense. But power is also economic power, something he doesn’t spend very much time talking about. Europe is economically strong enough to trouble the US as and when it wants to, especially when it comes to important trade issues that can seriously affect American technologies and industries. Also, nowadays with the American Economy in so much trouble, it is important to look at the ways military power and economic power are interwoven—especially since Kagan thinks "...the US can sustain its current military spending levels and its current global dominance far into the future" (97). With America’s massive debt and deficit it is hard to imagine how it can also continue to police the globe without some serious economic restructuring. If you can’t pay for your military equipment you can’t fight with it. Europe, of course, is in a similar situation. But with unified foreign policy they can pool their international resources more efficiently, projecting more power with less money (Nergelius, 203). There are a lot of good analogies to help paint his picture of the differences in the ways that America and Europe view world-wide threats (A bear roaming in the woods is viewed differently by a man with a rifle as opposed to a man with a knife). And given these acknowledged differences, is it any wonder that America and Europe increasingly find conflict over the way we resolve these problems? America wants to quickly solve the problems with arms (we have lots of over-powering weapons and a strong distaste for any American deaths and boots on the ground); Europe would rather discuss the problems and use international institutions to come to a non-conflict resolution (they dont have the weapons and have come to appreciate the power of discussion). However, with President Obama now leading the United States it is much more likely for a consensus between these two positions to be reached in our lifetime. The Lisbon Treaty will also sharpen these distances, changing the foreign policy institutions of the continent. The next question to consider is whether the Lisbon Treaty will make the EU more transparent and democratic. Unfortunately, this is very unlikely. To begin with, the Treaty was basically rejected by referendum and forced on Europeans. Although the new vote weighting mechanism is helpful there are still a number of pressing issues relating to democracy that the EU must deal with and deal with promptly (Breut, 69). The Lisbon Treaty does nothing to address the issue of tax harmonization which, if implemented, would result in a massive loss of sovereignty and democracy (Goodspeed, 90). One of the most controversial of the current issues before the member countries of the European Union is taxation. In all countries of the world taxation is controversial and often an unpleasant subject, but in the EU it is more significant than many because member countries have been forced to give up a major aspect of their sovereignty—the ability to set tax rates at whatever they want—to Brussels, the EU capital, where a minimum fifteen per cent value-added tax is required of all countries. This policy has its proponents and its enemies and has developed a life of its own. Some people believe tax harmonization creates unity and a level playing field, some believe its stifles competition and creates a socialist economic bloc. It is important to examine this debate and how policy has evolved over the years with a specific focus on how tax harmonization affects multinational corporations—whether it encourages them to invest in the EU or to pull out. These are key issues overlooked by Lisbon. Part of the basis of the European arrangement was the centralization of monetary policy and this is further enshrined in the Lisbon Treaty (Duff, 56). This was a huge amount of sovereignty for individual countries to give up. The assumption underlying this ceding of power by national governments really is that all economies within the European Union are created equally and the same measures for each economy are the appropriate way forward. This itself was controversial enough, but at the time left the national governments to at least set their own tax rates and compete for business by having differing corporate tax rates. This idea too soon bit the dust. Countries like France and Italy with high corporate tax rates were jealous that a country such as Ireland with a low tax rate was able to drum up so much business. They began to push for a single minimum rate across the whole of the EU. For high tax countries this levelled the playing field, but forcing more competitive countries to become less so—for low tax countries—often with much smaller economies to begin with—they had to punish companies that had come to them in the first place seeking a safe haven for investment. The debate is complex. Proponents argue the following: The simple knee-jerk logic is this: As factor mobility increases within the EU, pressure will be placed on member states to lower their tax rates on mobile factors in order to attract business. This unchecked competition will lead to a race to the bottom in which tax rates will dip so low as to threaten countries abilities to supply public goods. In response, one might argue for the necessity of strict supranational rules that set a harmonized tax rate at a level that guarantees the adequate supply of these public goods (Stults). This argument sounds very strange to American ears where lower taxes and differing tax rates among states are simply par for the course. There are of course strong arguments in favour of tax competition. Indeed the above logic assumes that there is no other quality that companies look at when choosing where to invest. Of course different countries have different advantages and disadvantages and the tax rate is only one of these. The Lisbon Treaty is a transformation document with both positives and negatives. It will change some things for the best and leave other things worse than ever. The EU will change, probably most dramatically with regard to foreign policy and its relationship with the US. The High Representative will see to that. But there are other things that overlooked especially with regards to accountability and democracy. Tax issues are not addressed and this is one of the biggest potential landmines waiting for European policymakers. The Treaty is not the will of the people in this regards, it is the will of the eurocrats. Works consulted Baldwin, Richard and Krugman, Paul. "Agglomeration, Integration, and Tax Harmonization." CEPR Discussion Paper No. 2630. November 2000. Bruel Cornelia, Mokre Monika, Pausch Markus (eds.). Democracy needs dispute: the debate on the European Constitution. Frankfurt: Campus Verlag, 2009. Duff Andrew. Saving the European Union: the logic of the Lisbon Treaty. London: Shoehorn, 2009. Fukuyama, Francis. The End of History and the Last Man. New York: Free Press, 2006 Goodspeed, Timothy J. "Tax competition and tax structure in open federal economies : evidence from OECD countries with implications for the European Union," ZEW Discussion Papers 99-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. 1999 Kagan, Robert. Of Paradise and Power. New York: Vintage, 2004. Krogstrup, Signe. "Are Corporate Tax Burdens Racing to the Bottom in the European Union?" EPRU Working Paper, February 2004 Nergelius, Joakim. The constitutional dilemma of the European Union. Groningen: Europa Law, 2009. Oates, W.E. Fiscal Federalism. New York: Harcourt Brace Jovanovich, 1972. Stults, Tom. Tax Harmonization and Tax Competition. The 2004 Moffatt Prize in Economics. Tsoukalis, Loukas. What Kind of Europe? New York: Oxford University Press, 2003. Read More