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Warsaw Pact

The mutual defence treaty, lasting from 1955 to 1991, which gave the Soviet Union the pretext to station troops throughout the Iron Curtain countries, so ensuring its domination until the sudden collapse of East European communism. (See also Brezhnev Doctrine.)

Werner Report

The Werner Report prefigured in 1970 many of the features which marked later efforts to achieve monetary union. It was a period of intense currency instability, with a strong D-Mark and a weak French franc both parting company from the dollar, itself suffering from a US balance of payments crisis. In 1971 the post-war monetary order based on the dollar, known as Bretton Woods, collapsed; and in 1973 the Yom Kippur War in the Middle East led to a quadrupling of oil prices, accompanied by global stagnation and inflation. A less propitious period for introducing monetary union could scarcely be imagined, and the project soon disintegrated, after two attempts at fixing European parities (the 'Snake' and the 'Snake in the tunnel') had fallen apart. The episode was a humiliating failure, but it taught the Commission that Treaty law and a supranational central bank were essential ingredients for success if the plan were ever to be relaunched.

Western European Union

See WEU.

WEU (Western European Union)

More or less defunct for some 45 years, the WEU was designated in the 1992 Maastricht Treaty as the future defence component of the EU. It originated in 1948 as the Brussels Treaty Organisation, of which Britain, France and the Benelux countries were the signatories, changing its name in 1954 with the addition of West Germany and Italy. The stimulus for change was the collapse of the European Defence Community, Jean Monnet's dream of a European army, but the WEU's military function was made irrelevant by NATO, and any broader political or economic role was overshadowed by the emergence of the Common Market. With the ending of the Cold War, however, the EU (and especially France) has become more assertive, doubtless calculating that it now has less need of NATO's protection. Hence a revived interest in developing an independent European military capability, albeit partly under the NATO umbrella, building on the newly formed 60,000-strong Eurocorps and the institutional framework of the WEU.

Portugal and Spain joined the WEU in 1988, and Greece in 1995. In 1992 Iceland, Norway and Turkey became 'associate members' and Austria, Denmark, Finland, Ireland and Sweden (all except Denmark neutrals) became 'observer members'. In 1994 the Baltic states, Poland, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria were made 'associate partners'. But in real terms this amounted to little more than bureaucratic fodder for the meetings of the WEU's Council of Ministers, Permanent Council and Assembly of member state parliamentarians. For despite aspirations of a more cohesive European defence identity, the 1991 Gulf War, the 1992-5 Bosnian crisis and the 1999 Kosovo crisis showed that there were not enough shared aims to underpin a common security policy. Moreover, in an emergency only NATO and individual nations (chiefly the USA, but also France and the UK) could muster the resolve and fire power to take resolute action. Even the limited peace-keeping objectives set out in the Petersberg Declaration of 1992 seemed to stretch the WEU's capacities to the limit.

You can call it Margaret or Mary-Anne if you like, but it is still a European army. Commission president Romano Prodi, 2000

The relationship of the WEU to NATO is ambivalent. NATO's success in deterring Soviet aggression for half a century was based not just on weaponry but on sophisticated command and control systems tested in numerous military exercises. European forces could not mount any sustained action without the help of US surveillance and logistics, a dependence recognised in the Luxembourg Declaration of 1993, in which the WEU defined itself as the European pillar of NATO. It was notable that in the Kosovo conflict, in its own backyard, the Europeans were only able to deploy some 10% of the effective strike capacity of the combined force. Yet the EU longs to prove that it is a genuine world power, with a Common Foreign and Security Policy to match its economic weight and a military arm in support.

Historically, Britain's attachment to NATO and scepticism over the WEU have been both a bulwark of the Atlantic Alliance and a microcosm of the long-running debate about whether the EU is to become a federal state or to remain a confederation of independent democracies. But Prime Minister Tony Blair's gesture of Anglo-French solidarity in 1999, when he offered British support for the Eurocorps and echoed French language about 'autonomous' European forces, set alarm bells ringing. Washington was concerned lest the WEU develop less as a welcome burden-sharing arm within NATO than as a rival, duplicating costs and sowing confusion - after all, France remained even now outside NATO's integrated command structure (in the Gulf War, French airborne capabilities were crippled by not being networked into the allies' enemy-recognition system). The Treaty of Amsterdam had held out the prospect of incorporating the WEU into the EU. These were the sort of developments that could fuel isolationism in the USA.

As a compromise, NATO chiefs had worked out the idea of Combined Joint Task Forces, in which WEU forces could act independently, using US NATO-assigned logistics and lifting capacity, in cases where the alliance as a whole was not involved. It was, however, all too easy to see the potential flaws in this arrangement. The Pentagon would not share intelligence with the WEU - and how would it respond to WEU actions with which it disagreed? From a practical standpoint, recurrent cuts in European defence budgets and the fact that Britain had shared so many dangerous conflicts with the USA probably assured the continuance of NATO-based defence for the EU in the medium term. But the longer term prospects in an increasingly proud and integrationist Europe were difficult to read.

White Wednesday

On 16 September 1992 a crescendo of currency speculation culminated in the withdrawal of the pound and the lira from the ERM and the devaluation of the peseta. Since this spelled the ruin of Prime Minister John Major's policy of tying sterling to the D-Mark zone, it was initially called Black Wednesday, the more so as millions had been spent on foreign exchange markets trying to prop up the pound. Later, as the new-found freedom assisted the UK's recovery from recession and the predicted inflation failed to occur, the day came to be reassessed and is now equally often known as White Wednesday.


Enlarging the membership of the EU. (See also 'Deepening'.)

Wilson, Harold (1916-95)

As Labour prime minister, Harold Wilson applied to join the EC in 1967. President Charles de Gaulle vetoed the UK's entry, as he had previously vetoed Harold Macmillan's application. Wilson's motives, like Macmillan's, were defensive; he believed the UK to be in irreversible decline and hoped that Europe's economic success might somehow come to the rescue. Having lost the 1970 election to Edward Heath, Wilson won back power in 1974. By now the UK was in the EC, but the Labour Party had become more sceptical. After a token renegotiation of the Tory terms of accession, Wilson held a referendum in 1975, which endorsed continued British membership. The referendum campaign repeated the exaggerated promises and downplaying of risks which had marked Heath's entry negotiations.

'Wine lake'

The vast surplus of wine caused by over-production resulting from EC price guarantees. (See also 'Butter mountain'.)


West Germany's post-war economic miracle, engineered by Ludwig Erhard, Chancellor Konrad Adenauer's free-marketeering minister of economics from 1949 to 1963.

Women's rights

See Discrimination.

Working Time Directive

Adopted by qualified majority voting in 1993, the Working Time Directive was a Commission social measure (to reduce unemployment by cutting working hours) masquerading as a health and safety measure - the difference being that health and safety rules are of universal EU application, whereas social rules are governed by the Social Chapter of the Maastricht Treaty, from which the UK had at the time an opt-out. The UK's appeal against the circumvention of its opt-out was overruled by the European Court in 1996, although Britain's industrial safety record is good and its submission that no genuine medical issues were at stake was not seriously challenged.

The Directive imposes a maximum 48-hour working week together with minimum periods of daily and weekly rest, holidays and breaks. Many suspected the Commission not just of flat earth economics (unemployment in the USA is lower than in the EU, although US working hours are longer) but also of an unspoken agenda - that of preventing British companies from retaining a competitive edge through flexible employment practices. The wider significance of the Directive was that it showed that the Commission, with the aid of the Court, was more concerned with harmonisation than with global competition or respect for the intent of a Treaty-based exemption. (See also 'Social dumping'.)

World Trade Organisation (WTO)


The World Trade Organisation (WTO) was set up in Geneva in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), to add new dimensions of scope and political authority to the regulation of world trade. It is the accepted forum for the negotiation and settlement of trade problems between its member states, and is responsible for administering 29 multilateral agreements in areas as varied as textiles, agriculture, services and 'rules of origin'.

Over a period of nearly 50 years since World War II GATT had been successful in liberalising merchandise trade through a series of eight negotiating 'rounds'. In theory, however, GATT was merely an interim agreement with a secretariat, and the need had long been felt for a more substantial body. The growth of service industries, relating in particular to information technology, intellectual property and international investment, demanded more sophisticated rules; agriculture - a protectorate of Byzantine complexity both in the USA and in the EU - was overdue for reform; and international negotiations were becoming further complicated by concerns over food safety, the environment and exploitation of labour. Moreover, it was widely felt that the consensual GATT system of arbitration and dispute settlement, which had proved slow and ineffective, should be overhauled.

Unilateralism is the enemy and it is American. French prime minister Lionel Jospin, quoted in Le Figaro, 1999

The main diplomatic challenges facing the WTO are the ambitions of China and relations between the EU and the USA. In 1999 China, an emerging great trading nation that had sought membership since the WTO's inception, finally succeeded in overcoming US government objections. But the outcome was not yet certain. China's application needed the approval of Congress and the EU. And doubts remained about the genuineness of its intent to act transparently and to comply with international rules. As for the EU and the USA, the two blocs have frequently been at loggerheads, with the EU becoming more assertive and the USA resorting increasingly to unilateral sanctions. Thus tentative proposals for an Atlantic free trade area, which seemed to many the logical outcome of half a century of liberalisation, have come to nothing (although the EU did reach a free trade agreement with Mexico in 1999). The disputes have ranged from EU tariff preferences for former colonies (the 'banana war') to European restrictions on the broadcasting of American TV programmes (the 'culture war') and US sanctions against European companies trading with countries deemed hostile by the USA. On occasion voices are even raised in the US Congress and in France calling for a reversal of the liberalisation of world trade, though the overwhelming evidence of the prosperity generated by free markets doubtless assures a continuance of current policies.

WTO principles and the growth of trade

The multilateral trading system is based on six principles: non-discrimination, progressive reduction of trade barriers, transparency, fair competition, special arrangements for developing countries and 'predictability' - the latter principle meaning that participating states should not increase tariffs or bypass the rules through quotas or other restrictions. This régime stands in sharp contrast to the pre-war cartels and protectionism that followed the stock market crash of 1929, reinforcing the slump and destabilising Western society. In the half century since the establishment of GATT in 1948, average duties on manufactured goods have fallen from over 40% to 3%; manufactured exports have grown more than 40-fold; and the share of world GDP represented by international trade has more than doubled to 22%. By the year 2000, the WTO's membership had reached 134, with a further 31 applicants, compared with the 23 original signatories of GATT.

The GATT Uruguay Round

As the last pact entered into before the formation of the WTO, the Final Act of the Uruguay Round represents the current regimen for the governance of world trade. Negotiations started in 1986. The driving force was the USA's desire to bring services into the GATT framework and to anchor the European Community (which had recently passed the Single European Act) into a liberal global trade system. In particular, the USA wanted to free agriculture of subsidies - to the point of being willing to cripple Europe's unpopular Common Agricultural Policy. Eight years later, in 1994, after France had brought the negotiations close to collapse, the Final Act was signed - a comprehensive series of agreements covering services, public procurement, intellectual property, tariff cuts on manufactured goods, a modicum of agricultural reform and the removal of various non-tariff barriers to trade. The Act also established the WTO to implement these agreements.

Administration and dispute resolution

The supreme decision-making body of the WTO is the Ministerial Conference, which consists of all the member countries and meets at least once every two years. The General Council is effectively a board committee of the Conference, meeting as and when needed and also serving as the Dispute Settlement Body. With a budget of under $100 million and a secretariat of 500, the WTO is one of the world's most cost-effective international institutions.

In international law, WTO agreements have the status of treaties. In the GATT era, it proved easy to block the settlement of disputes, whether at the stage when a panel of experts was formed to evaluate a case or when their report was to be adopted by the Council. The resultant delays encouraged the USA to resort to unilateral measures. The WTO has brought in a revised procedure, which aims at mediated solutions but speeds up the panel system if a dispute cannot be resolved voluntarily. There is also a new international appeal body, and ultimate recourse to the General Council. The penalty for breaching the rules is a retaliatory sanction equal to the value of the trade impaired.

In practice, there have been less than 20 disputes a year requiring the formation of a panel. Some $300 million of sanctions have been authorised - all in favour of the USA - but to put this figure in perspective, it is less than 0.005% of annual global trade of nearly $7 trillion.

The WTO and the EU

Trade within the EU is a permitted exception to the general WTO principle of non-discrimination. The Community qualifies as a 'regional trade agreement', being substantially barrier-free internally and not having raised its barriers against the outside world.

Although all the member states of the EU are WTO members in their own right, they are required to cede control of their external trade policy upon accession to the Community. Accordingly, in any negotiation the Commission acts on behalf of the EU (with qualified majority voting in the Council of Ministers, so that no member state has a veto). This rule, however, failed its most severe test in 1993 during the Uruguay Round, when France effectively overturned an agreement on agriculture hammered out by the Commission and the USA. France's tactic was to threaten the nuclear option of vetoing the entire Final Act on the grounds of 'vital national interest' - a move of uncertain validity in terms of Community law, and one which relied on a principle rarely invoked since the days of Charles de Gaulle. Brinkmanship led to a last-minute compromise, but the episode created extreme ill-feeling, not only in the USA but also within the EU, where it highlighted the division between the protectionists and the liberalisers, the latter led by the UK and including Denmark, Germany and The Netherlands. Tension ran so high within the Commission that Ray MacSharry, the Agriculture Commissioner, tendered his resignation.

The question then arose whether it was the member states or the Commission that had legal power to sign the agreements contained in the Final Act. The member states claimed that the Act was subject to 'dual competence' and that under the Treaty of Rome the Commission had exclusive competence only for merchandise trade. The Commission disagreed and sought a ruling from the Court of Justice, which determined that the Commission had exclusive powers with respect to most trade matters, but that it shared responsibility with the member states with respect to certain services. In practical terms EU trade policy is formed by a dialogue between the Commission and the Council of Ministers, in which the Council sets the negotiating parameters and the Commission undertakes the actual negotiations, working with representatives of the member states.

The Seattle Conference

The Seattle Conference of 1999 was intended to launch the WTO with a new round of trade negotiations. The conference soon fell into chaos amid rowdy street demonstrations. The 'green' movement directed much of its wrath against multinational corporations, which were accused of having undue influence over the WTO and being neglectful both of poorer nations' needs and of consumer safety - a dispute over the risks of genetically modified food being but the latest of many such controversies. Free marketeers and development economists found themselves in an unusual alliance. Both were dismayed that demagogues from the advanced countries were pandering to lobby groups by posturing about environmental risks and employment conditions in the third world, when their real aim was to protect their industries against low-cost competition. (Many of the environmental concerns were genuine, but this seemed a hypocritical way to address them.) All in all, the high political profile brought about by the transformation of GATT into the WTO backfired and the conference ended in stalemate. The real tests, however, are yet to come. When the forthcoming round finally gets under way it will be judged by the success or failure of agricultural reform and the liberalisation of services as well as by the effectiveness of the new dispute resolution procedures.


See World Trade Organisation.

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