Select Committee on European Communities First Report



Examination of witnesses (Questions 1 - 19)

TUESDAY 21 JULY 1998

MR DOUG HENDERSON MP, MR EMYR JONES PARRY and MR SIMON GASS

Chairman

  1.  Welcome once again to all of you. This meeting is a bit later than we would have liked but I dare say you have been briefing madly after the Cardiff Summit. I think perhaps we ought to try, if possible, to get a date fixed for our next meeting after the Vienna Summit or wherever it is going to be. When is it?
  (Mr Henderson)  10/11 December.

  2.  Is it in Vienna?
  (Mr Henderson)  Yes.

  3.  Do you want to make an opening statement?
  (Mr Henderson)  Just really to thank you again for your invitation. You did me a favour by having deliberations because I was slightly late. I have been meeting the President of Azerbaijan and I could not find the bicycle lane from the Foreign Office to here, so I had to speed across. I have with me today Emyr Jones Parry who is now Political Director. He has been promoted since the Cardiff Summit. He was formerly Director for the European Union. Simon Gass is the Head of our European Union Department. The last time I met the Committee I think we agreed it would be preferable if you were to lead off on questions rather than me read out a text and I am happy to do that again.

  4.  As usual we want to go wider than just a rerun of the Summit. I think perhaps we might start by asking what do you think were the principal achievements of the UK Presidency and what were the disappointing bits of the Presidency?
  (Mr Henderson)  I think the achievements were many, and you would expect me to say that. You have to separate them into two categories. You have got to separate them into the category of achievement where there was business which whoever was President of the European Union would have had to conduct and there were other issues where we felt there was a priority and therefore we gave them a bit of a push during our six months. On the first category, undoubtedly the establishment of the single currency, or the framework for the single currency, at the beginning of May was a major achievement. I know there has been a bit of press comment about the difficulties on Saturday in Brussels when some of the Heads of Government were kept in the dark for a few hours on the state of negotiations. I think we have managed to subsequently cement relationships with those who were a little concerned at the time. I believe that major achievements were obtained that day. We set up the currency on the timetable that was envisaged, with the tough rules that were envisaged, to the advantage of those who wished to join the currency at this stage on 1 January next year and with the support of those who may wish to exercise their opportunity to join the currency at a later stage. I think that was a major achievement and will have very, very long-term effects on the future of the European Union and indeed beyond that. The second issue was the question of the enlargement of the European Union. I think it would have been easy to have derailed that, it would have been easy to have made mistakes on that. I think the general comment of our European partners is that the Brits did the business on enlargement. We established the European Conference on time in the middle of March and people like the Romanian Foreign Minister described it as an historic day when they could convey to their populations that they were now part of a wider Europe and were in the frame for a date in the future joining the negotiations for accession to the EU and all that kind of thing. At the end of March we had a two day session in Brussels where we had first of all the launch of the accession process for the 11 countries and then we had the opening of the negotiations the next day for the six countries. We actually had six IGCs in the morning. I was told to be terrified of IGCs when I took on this job because once you open them up they are a devil of a thing to shut down. We managed to do six of them that morning. We then quickly opened the screening process, which is the process whereby the 11 countries can identify what they think they need to do to progress towards membership of the European Union and the Commission can identify areas where they think there is a need for change and where they may be able to help with the partnerships which were also concluded in March. I have had one or two foreign officials—not ministers—convey to me that we were too speedy and we got off the mark too quickly and some of their officials were not able to do the necessary preparatory work. I plead guilty to that and I am happy that we have received that criticism. We have now managed to persuade those who were critics on that score that it is very much in their interests that we do act speedily. I think they now appreciate that and if you talk to them a lot of progress has been made. We set up the stage for the Austrian Presidency to consider at some time in the autumn the whole question of when negotiations should begin with the six countries based on the screening that has been done and the number of chapters that have been done so that a recommendation can be made to the Council in December. These were two main achievements. Other achievements where we pushed an agenda which we thought was important, you know of course of our priority given to employment during the Amsterdam Treaty, IGC, also in the Luxembourg Special Conference last November and in the Summit in December. We have kept the momentum of that going. Employment is a key issue in each of the European countries to the extent that the Austrians have made it a top priority during their Presidency. Each country produced plans of how they think they might tackle the particular problems of youth unemployment and middle aged unemployment, in addition to the other questions of equal opportunities to try and raise employment levels and so on. I think there was a major achievement on that score. On the anti-crime front we continue to press and a lot of progress has been made there. On environment we made a number of important breakthroughs from things like a new Directive on Landfill, which of course is important to people throughout the European Union, to dealing with the emissions of light vans and the big issue about how do the European Union countries spread round their obligations under the agreements reached at Kyoto on the reduction of CO2 emissions by 2010. These were major achievements. Regrets that we did not achieve: the main regret was that it was not possible to make progress on Turkey's relationship to the European Union. There has been a little progress over the last couple of weeks of our Presidency and the first couple of weeks of the Austrian Presidency but not nearly as much as we would have wanted. It would have been good for Turkey to have taken part in the European Conference and to have prepared the way for their eventual joining of the accession process. That was not possible and that is a regret.

Chairman]  Perhaps we might lead on from that into enlargement.

Baroness Hilton of Eggardon

  5.  You mentioned the six and the five. Do you see them as keeping to the timetable that has been laid down? Do you think there will be differences between the six and the progress that they make? What are your feelings? Having been to Czechoslovakia and Romania I am not terribly hopeful about the pace at which they will make progress but perhaps you are.
  (Mr Henderson)  I am optimistic generally about the commitment of those countries to change the way they do things. In summary: to establish a political system that is democratically acceptable to the European Union; to confirm human rights that have not been confirmed, and to get the changes in the economy necessary for them both in a regulatory sense and in a restructuring sense. I have found them all very committed. It is clearly much more difficult for a big country like Romania or Poland to make especially the economic changes which take time. You cannot restructure the whole of the coal industry or the steel industry because of an act of political action, it takes a lot of other effort by a lot of other people usually over a longer period of time. I think there are problems there but I do not think they are insuperable. I find in countries like the Baltic States, countries like Slovenia, smaller countries, a tremendous spirit and tremendous will to change and do things that need to be done. I am generally optimistic. These countries know what they want to do. The other encouraging thing is that it is not a party political thing in any of these countries. I think I am right in saying that. It is largely accepted by all the different political strands that, therefore, they can now make changes in government, as has happened in the Czech Republic in recent weeks and in Hungary, without any real change at all in the relationship with the European Union or without any encumbrance on the work that is currently being undertaken by the European Union on the screening process or whatever. So I think that augurs well. I look forward to a relatively early completion of screening and the negotiation and then there needs to be an assessment of how the actual process and engagement in the European Union takes place.

  6.  The major obstacles are the legislative programme, are they not? They have to change an enormous amount of regulatory law and institute inspection systems and so on, particularly on the environment front, which is what I am interested in. It does seem to me that they are not actually making a tremendous amount of progress in those areas because it is so extremely complex.
  (Mr Henderson)  I think they began to make progress before the autumn of last year, and then as a consequence of the major change in society in 1989 or 1990 or 1991, whenever the change took place in the particular country. I think when you compare the changes that they made then in establishing an embryonic democracy and the scale of those changes compared with what existed before in comparison with the changes that need to be made now, they are actually relatively small, the changes that need to be made now, albeit they are complex. So I think that now they know where they are in either the accession process or the negotiating process, and now that the screening process is under way, they can now turn to the detail of what needs to be done: how do they improve the sanitary regulations in the cities, how do they improve the food regulations, all of this detail which needs to be done, put in place the legislation and put in place the necessary public service to administer the environmental protection at a local level. I think they can do that reasonably easily. The difficulty, in my view, is the economic change that has to be made in the structure of the economies, because these things take time and there are usually short-term costs and often medium-term costs and you have to hold the society together as you make those changes. I think that, certainly in the case of the larger countries, is the biggest challenge that we face.

  7.  You are talking about five years as a minimum?
  (Mr Henderson)  I do not like to put dates on it. I think it is terribly depressing to those countries if people like me make predictions and they are not able to honour them, or they honour them and they are not able to deliver it. What we have to say is that we are all determined to make as much progress as is possible as early as possible.

Chairman

  8.  Do you not fear that there is perhaps a bit of over-optimism in some of these countries in terms of the timing, and that disillusion may set in when they find they are not getting there as quickly as they hoped and when politically their electorate finds it is having to put up with all sorts of stringent penalties to get in and they are not getting in quickly enough?
  (Mr Henderson)  The problem with this Know-how Fund money is it is actually working. It is actually making all their negotiators pretty aware of the way we do things. So they "hype up" their position as a negotiating position. I do not know what their real expectation is but the negotiators are very impressive people who understand the way that you have to set out your stall and there needs to be a bit of modification from it. I think that is what we are currently going through. None of us knows exactly when the political circumstance will be right to say, "Right, the changes have all been made. They can now join the European Union."

  9.  We have had a lot of visitors, of course, during our Presidency, so we have met quite a number of people, particularly from the countries seeking access. There were one or two feelings from some of them that the Austrian Presidency would, in fact, try and slow down the process. Would you give that any credence at all?
  (Mr Henderson)  No. The second Presidency in a year is a short Presidency because by the end of July things slow down and they do not begin to pick up till the end of September and then they slow down about the middle of December. So there are really only about three months of hard work and so second Presidencies do not often get through the detail that gets undertaken in the first Presidency over a year, though sometimes the big decisions are taken in the second Presidency. It depends where they fall. So I do not detect that the Austrians do not want to push the train along the track, which they know has travelled reasonably speedily under the British Presidency. They do not want it to be said of them at the end of their Presidency that they slowed the train down when the train had a good momentum at the beginning of the six months. So I think they will keep it on the track.

Lord Geddes

  10.  Would you say that that was one of the priorities of the Austrian Presidency?
  (Mr Henderson)  Yes. They have articulated a number of priorities: continuing to make progress on environmental protection, jobs, making sure that the single currency is established properly on 1 January, but also that the enlargement process should continue to make progress. It is very much, of course, tied up with Agenda 2000 issues about the reform of the agricultural policy and structural funds and so on, and they are mindful of their responsibilities in that regard.

Lord Bridges

  11.  One of the more thought-provoking events of the last few weeks has been the speeches made by Chancellor Kohl about his desire to reduce the German contribution to the common budget, and I wondered if you had any reactions to give us to those remarks? Presumably he is thinking of some kind of many-sided version or multilateral version of our own budgetary mechanism, but that could, of course, have a severe effect on the budgetary support needed for enlargement. Do you see this as a serious development in that regard or in other respects?
  (Mr Henderson)  I think you have to separate the issue of who pays what to the budget and the question of how much the European Union existing members consume of the budget and how much of it is available for help and for the countries that wish to accede. On the first question, our position is that we are always happy to talk to people. If there are suggestions about how we can better make our contributions to the budget, then of course we will talk to people about the proposals, but one thing we have made absolutely clear in the negotiation is that, as the eleventh richest country making the fifth largest net contribution, we are not really in the business of making our relative position poorer in that regard and we are firm about that, but we are very enthusiastic that, having come to an agreement on who should contribute what, there should be a significant proportion of the European Union funds set aside for assistance to the countries that wish to accede to the European Union. There are different figures which have been bandied about but we are absolutely clear that we support that principle. What we want to see is a fair share of the resources which are still being spent within the existing Member States.

  12.  But meeting the costs of enlargement was going to be a considerable strain upon the common resource anyway and if the Germans are going to run the risk of Kohl not being able to be elected, if they were to run it hard that would make the problem worse, would it not?
  (Mr Henderson)  There are rules that are currently in place and that has consequences on who pays what. There is also the 1.27 per cent (of EU GNP) budget limit. There may be one or two countries who will not sign up for that right at this moment but I think there is a general consensus. So that is the top limit for expenditure. Obviously the absolute sums are dependent on the wealth of the Community. So the Germans know what their responsibilities are within that. What we also have to decide is of that 1.27 per cent. how much is spent on helping the Central and Eastern European countries and Cyprus as part of their accession process.

Chairman

  13.  But you are getting pressure, are you not, from particularly Spain and Portugal not to dip into the regional funds in order to pay for the enlargement? It seems to me there is a bit of a nutcracker here.
  (Mr Henderson)  I think this is a difficult area of negotiation but if my assessment is accurate, other countries are saying 1.27 per cent is the top whack on budget, so all our arguments have to be resolved within that. I think it would be very disruptive for Spain and Portugal to say, "If that is the case, we veto everything to do with enlargement." It is not long since Spain and Portugal were part of the enlargement process themselves and received funding. I make the point to British industrialists that we have increased our real level of trade with Spain since 1986 by over three times. That is a great marketplace for people. The Spaniards potentially have the same opportunity to penetrate the markets of Central and Eastern Europe but it requires a bit of assistance in the first instance to develop the economies to give them wealth so that they are then purchasers on the European front. That argument has to be made with Spanish colleagues and we frequently make it, but I am not pretending it would be an easy negotiation.

  14.  I gather the Prime Minister announced recently that there is to be a review of European policy. Can you tell us anything about the timing and the scope of that?
  (Mr Henderson)  I think The Financial Times announced it that the Prime Minister had intentions to review. There is an on-going review of European policy and things change quickly in the European Union often, circumstances change, and we must all respond to them. We have all known that we have to respond to potential enlargement of the Union. That raises questions about the size of the Commission, the voting systems, about how you bring people in contact with the institutions of the European Union? These are questions that we have known for many years. When we were in Opposition we discussed these issues and the previous Government discussed these issues. They were largely unresolved in the Amsterdam Treaty where we were committed to some changes under the terms of the Treaty but what we have now got to do is address these issues. That is what we are doing in the build up to first of all the Foreign Ministers' informal meeting in September in, I have forgotten where it is, somewhere in Austria, Salzburg I think it is, secondly the informal meeting of Heads of Government on a lake side somewhere in Southern Austria, the name of which I forget, in the middle of October, and then the Vienna Council in December. That is three opportunities for substantial discussions on those points. I think it is a realistic time perspective. We are talking in the longer term rather than in the shorter term in resolving these matters.

Lord Borrie

  15.  I wonder whether I might refer to the Cardiff Conclusions referring to the President of the Council calling a meeting of Heads of State or Heads of Government together with the President of the Commission. What will be the purpose of that? What will be their agenda? Might it include some of those thorny topics such as the size of the Commission in the longer term?
  (Mr Henderson)  I think the initial discussions will be concerning the general point of what needs to be done. There is a feeling that subsidiarity is a key issue and we have got to get that right and, of course, the Amsterdam Treaty takes us further down that road when it is eventually implemented. That is a key point to many of the governments in the European Union. One of the things that needs to be done is to separate what requires legislative change and what would require co-operation to change. If the items can be divided on that basis by the October Summit then a lot will be achieved. It then allows more discussion of substance at the December Summit. I think that probably is a better time span. There is a bit of a dummy run at the Foreign Ministers' informal meeting. There is then this deeper discussion with the hindsight of the discussion at the Foreign Ministers' level in October preparing the way for further progress in December. It may be that we should look at options, what kind of voting system or alternatives to the current voting system, what kind of Commission structures or alternatives. If we can begin to identify these things then I think a lot will have been achieved.

Chairman

  16.  Will there be any documents prepared in advance of that and, if so, will there be any documents that we can see before you get to the meeting, or is it all done on the back of envelopes?
  (Mr Henderson)  It is all back of envelopes now that people do not have cigarette packets largely. The meeting is of an informal nature. It is not impossible that there will be a formal paper to the December Council, although I think it is probably unlikely. There might be a draft which could become a Conclusion subject to the nature of discussion in December. At that stage the papers will be public and available for discussion.

Lord Geddes

  17.  Minister, what impact either are the German elections having or would you anticipate they will have on all of this?
  (Mr Henderson)  They have affected the timetable. No major change can be made without the German Government having a very big say in it and, therefore, at the time when the German Government are putting themselves up for re-election to the German people and their opponents, particularly in their case it is probably inappropriate that the European Union jumps to major decisions. The next German Government should be in place by the beginning of November. That means that there can then be hard negotiation from then through the Vienna Summit. There is an expectation in the Cardiff Conclusions that the question of the Structural Funds and Agricultural Policy, Agenda 2000 issues, should be brought to a conclusion in March 1999 which then allows the European Parliament to discuss the matters in April 1999 before they break up for their own elections. In some cases the Parliament has to be consulted and in other cases it has to give its consent.

  18.  I am not asking you to anticipate the results of those elections, I do not think that would be fair on anybody, but would it be fair to say that if the current opposition took power in Germany that would in itself slow down the process even more? If the Government is not in being until November it is hardly likely that a Government of a new political persuasion will be in a position to join in radical decisions in December.
  (Mr Henderson)  We were elected six weeks before Amsterdam, the Irish three weeks and the French ten days and we still managed to put a Treaty together. There will be a delay up to the beginning of November but beyond that the general policy outlook of the SPD, if they were the principal partners in another German Government, is not miles away from the attitude of the existing German Government on various positions. I assume that would be the basis of the manifesto to the electorate in September. I think they would be able to get to grips fairly quickly with what had to be done and the real negotiation among the 15.

Chairman

  19.  Just going back to Agenda 2000 for a moment and the thought that there is some sort of deadline now set for March of next year. Frankly that does not seem very realistic, particularly in relation to CAP. I am sorry, incidentally, that none of our Sub-Committee D people, none of our farmers and fishers, are here today, they are all off in Norwich looking at genetically manipulated things. I am sure they would have asked you about the likelihood of there being any movement of CAP in relation to Agenda 2000 by March of next year, which is a fairly short time span.
  (Mr Henderson)  In my 14 or 15 months in this situation I have found it is necessary to set deadlines. They are not always met but if you do not set a deadline it is a general round table discussion. If you set a deadline there is a certain political and moral obligation to try and say your bit before the end of the deadline, make it clear where you stand, which then allows a process of negotiation to take place. This is the biggest one that we have had to deal with over the past year or so. It will be more difficult to achieve. It will be setting out the financial provisions for the first seven or eight years of the next century. I think it will be a difficult job. If we set the deadline minds are concentrated. One has to have optimism that we can get a deal. If we do not get a deal by March and the European Parliament cannot consider the matter at that time then it is likely that it will not be able to consider it until about October 1999 at the earliest, which is pretty tight to the deadline of 31 December 1999 when the current Structural Fund regime runs out. Everybody wants to try and get the job done by March of next year.

Chairman]  You mentioned the institutional question and I do not propose to go into that any further today, we have banged on about the lack of progress on institutional things, but I think Lord Hoffmann would like to ask something.


 
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