Free Trade Agreements Have Bitten Off More than They Can Chew Analysing the Problematic Allocation of Competences between the EU and the Member States and Suggesting a Way Forward

We analyse the tension surrounding the EU trade policy, with a particular focus on Free Trade Agreements (FTAs) that have recently gained considerable attention. The paper highlights different key trade policy objectives, including economic interests and moral values, and the expansive nature of the EU regarding the allocation of competences vis-à-vis Member States. Based on an a corporate versus FTA-law study regarding the right to establishment, our argument is that Member States may feel pressured by their competitors to change their national laws to implement the signed FTAs. This holds true, even if these changes are not strictly required according to the text of the FTA. The state of affairs can be explained through application of Hill’s capability-expectation gap theory. This framework suggests that the current limited EU competences can scarcely serve the EU’s international behaviour, thus causing a lack of coherence between the internal (protecting Member States’ interests) and external action (promoting trade). In this sense, FTAs have bitten off more than they can chew. Such a situation could negatively affect the EU’s reputation with Member States and citizens as well as its bargaining power with third countries. However, Hill’s framework also indicates how the capability-expectation gap could be reduced. In the short term, this requires a sincere dialogue with EU citizens, clearly signalling what the EU can, and what it cannot do. In the long term, European decision-makers ought to be particularly careful in drawing a clear line between the specific competences of the EU and those of the Member States. One viable option would be to grant the EU additional powers for concluding FTAs, as to prevent competition between Member States to arise.