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The Single Market of the European Union

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Title: The Single Market of the European Union


1
The Single Market of the European Union
  • EU Centre-RSIS Summer Programme
  • The European Union in Asia Reflections on
    European Integration, Institutions and Influence
  • 4 30 June 2012

Anne Pollet-Fort EU Centre Associate Fellow
2
Introduction
3
Bedrock of European integration
  • Creation of the common market
  • Fundamental objective of the Treaty of Rome
  • Reflects primacy of economic integration
  • Not an aim in itself but a means to achieve
    economic and political goals.
  • EUs common market comprises
  • A customs union with a common external tariff
  • Free movement of goods, persons, services and
    capital (4 economic freedoms)
  • Common policies such as competition policy,
    enterprise policy

4
Building a Single Market
  • Building a single market means merging national
    markets into one single market by
  • Eliminating various tariff and non-tariff
    barriers to trade
  • Regulatory reform in area of economic regulation
  • Some harmonisation and approximation of laws
  • Ensuring that competition among firms is
    encouraged.
  • The Treaty articles follow same structure
  • Basic prohibition on national rules which impede
    the free movement of goods, persons and services
  • Exceptions on the ground of public health, public
    security, protection of industrial and commercial
    property
  • Negative integration. National rules contrary to
    free movement are invalid. This leads to a
    process of de-regulation at national level.

5
Negative integration reinforced through positive
integration
  • But negative integration insufficient
  • Treaty also contains
  • Articles empowering making of Directives for the
    mutual recognition of qualifications in order to
    facilitate freedom of establishment
  • A general enabling provision for the making of
    directives for approximation of laws of MS
    affecting functioning of common market (unanimity
    required)
  • ?Community legislation needed to fill out
    interstices of Treaty articles. Positive
    integration through re-regulation at EU level.
  • Common policies such as competition policy,

6
EU Single Market main stages of development
7
Evolution of the Single Market
  • Rapid initial progress in the 60s followed by
    period of stagnation of the common market in the
    70s and 80s.
  • Relaunch of European economic integration through
    the Single Market Programme and adoption of
    Single European Act in 1985
  • Beyond 1992, completion and reorientation of
    the Single Market
  • 2010 Relaunch of the Single Market

8
From the Treaty of Rome to the Single European
Act
  • Ten first years of the EEC were years of glory of
    the Customs Union
  • 1 July 1968 intra-community trade was freed of
    customs duties and quantitative restrictions on
    imports and exports
  • Adoption of Common Customs Tariff applicable to
    all imports from third countries. As of 1968, MS
    are not entitled to unilaterally carry out
    customs policy.
  • Adoption of Community Customs Code containing all
    basic rules of common customs legislation
  • But progress in other areas of common market
    difficult if not impossible

9
Obstacles to establishment of common market
  • Several obstacles
  • Reluctance of some MS to go forward with
    implementing the rest of the Treaty
  • Difficult economic situation (stagflation) led
    governments to be sensitive to protectionist
    impulses of domestic interest groups and public
    opinion
  • Legislation harmonisation at EU level difficult
    to obtain because of unanimity requirement
  • Consequence proliferation of Non-Tariff Barriers

10
Types of barriers
  • Physical barriers
  • Such as border stoppages, customs barriers and
    other time-delaying and cost-increasing measures
    involved in mobility between Member States
  • Technical barriers
  • Such as absence of common standards across the
    EU, public procurement practices, technical
    regulations and different business laws and
    practices
  • Fiscal barriers
  • Such as differentials in level of VAT and excise
    duties among Member States

11
Still some progress
  • Commission introduced key legislative
    instruments
  • Establishing substantive rights like Regulation
    1612/68 prohibiting quotas for foreign workers
  • Limiting MS discretion in application of
    exceptions to free movement
  • European Court of Justice acted as legislative
    catalyst
  • Reyners 1974 recognizes direct effect of freedom
    of establishment even though not fleshed out by
    Community legislation as envisaged by Treaty
  • Cassis de Dijon 1979 Once goods have been
    lawfully marketed in one MS, they should be
    admitted into any other MS without restriction

12
Incentives behind the Single Market Programme
  • Pressures from more integrationist MS
  • European Parliament
  • Failure of national solutions to solve economic
    problems in the 70s
  • The Market seen as the solution
  • Japans rapid rise to economic power
  • Changes in Europe/US relations and growing US
    budget and trade deficit
  • New Commission

13
The Single Market Programme
  • ECJ case law reinforces (-) deregulatory
    integration but did not ensure any ()
    integration gt harmonisation still needed
  • At the European Councils request, Commission
    headed by Jacques Delors produced White Paper on
    the freeing of the internal market
  • Aim to remove physical barriers, fiscal barriers
    and technical barriers to the 4 freedoms
  • Lists of 279 measures to be introduced
  • Timetable and deadline for completion 31
    December 1992
  • Objective Push forward Europes competitive
    positioning
  • June 1985 European Council accepts objectives of
    White paper and agrees to set up IGC to consider
    reforms of EU decision-making

14
Single European Act
  • Single European Act signed in 1985
  • Establishment of internal market area without
    frontiers in which the free movement of goods,
    persons, services and capital is ensured
  • Increase number of cases in which Council can
    decided by QMV esp. measures concerning
    establishment of Single Market with exception of
    taxation, free movement of persons and rights and
    interest of employed persons
  • Introduction of cooperation procedure in favour
    of EP
  • Community policy of economic and social cohesion
    (compensation)
  • New provisions relating to monetary policy,
    social policy, RD, environmental protection

15
Implementation
  • Intensive legislative activity
  • focusing on removal of physical, technical and
    fiscal barriers
  • Especially laws harmonising laws of MS on health
    safety. Principle of mutual recognition is at
    the heart of the SM.
  • Situation on 1st January 1993
  • 90 of legislative projects listed in SMP adopted
  • 10 however include very important topics, ie
    total abolition of control on persons, statute of
    European company, and tax harmonisation.
  • Other topics such as liberalization of networked
    industries such as telecommunications, energy,
    postal services not addressed
  • Lack of success in areas of services
  • Problems of implementation and enforcement

16
Beyond 1993
  • Main initiatives in favour of Single Market
  • 1993 Treaty of Maastricht decided on the euro
  • June 1997 Single Market Action Plan
  • To improve the functioning of the Single Market
  • Making the rules more effective Making the
    Single Market relevant for citizens
  • Dealing with key market distortions and removing
    obstacles to market integration (SERVICES!)
  • Focus on enforcement adoption of long awaited
    legislation
  • Proposed by Commission and European Council put
    its considerable political weight behind the
    action plan.
  • 1999 Financial Services Action Plan
  • 2010 Relaunch with Single Market Act

17
The four freedoms
18
Free Movement of Goods
  • Structure of the Treaty
  • general prohibition and exceptions of Articles 34
    to 36 TFEU
  • Harmonisation clause
  • Traditional approach
  • Very detailed harmonisation directives
  • Difficult to adopt (MS tried to impose their
    standards unanimity) and to enforce
  • Overregulation and inflexible legislation
  • Impossible to keep pace with multiplicity of
    national regulations and speed of technological
    change

19
New approach based on mutual recognition
  • Principle of mutual recognition becomes the norm
  • Even in absence of European harmonization, MS are
    obliged to allow goods which are legally produced
    in one MS to circulate and be placed on the
    market (unless mandatory requirements)
  • For certain industrial products, harmonization
    necessary
  • Two-track strategy for harmonisation
  • New approach harmonisation
  • In cases where full harmonization of technical
    standards difficult because of too great
    divergences, harmonization confined to adoption
    of essential safety requirements
  • Development of common standardization policy and
    voluntary European standards
  • Total harmonization for certain sensitive sectors

20
Assessment
  • Advantages
  • Directives more easily drafted, adopted
    implemented
  • Excessive euro uniformity avoided
  • Safety objectives stipulated but flexibility on
    standards
  • Minimal harmonization allows MS to maintain more
    stringent regulatory standards than EU standards
  • But system still not efficient enough
  • Process remains too long. Lack of standards in
    services area.
  • 1 June 2011 Commission announces measures under
    the banner More standards for Europe and
    faster. Target date 2013

21
Single Market for goods
  • Single Market for goods is a mature construction
  • 2007 Single market review all technical barriers
    for goods have been lifted
  • But goods manufacture is an ever-changing
    business
  • Need to regularly update policies and regulatory
    frameworks and fight small-scale bottlenecks
  • Compared with the US, Single Market for goods
    reveals a substantial untapped potential.
  • Challenges for the future
  • Reform standardisation process to make standards
    cheaper and easier to use for SMEs
  • Need to progress on SM in the transport area
  • Need to agree on EU patent

22
Free Movement of Workers
  • Key principles non discrimination and equality
    of treatment
  • EU legislation on many aspects of free movement
    of workers entered into force to large extent in
    June 1992
  • Workers rights of movement and residence
  • Employment workers who are nationals of a MS may
    not be treated differently from national workers
    as regards working and employment conditions
  • Restrictions
  • Right of entry and residence
  • On taking jobs in public service

23
Labour Single Market
  • Overall freedom of workers is a success from a
    legal point of view but
  • Least used of the four freedoms. Only 2.3 of
    Europeans live in a different MS
  • Remaining legal obstacles hardest to overcome
  • Coordination of social security rights and
    portability of pensions rights (esp. Portability
    of supplementary pensions and health insurance
    rights)
  • Recognition of qualifications still limited
  • Inefficient matching of skills with vacancies
    across the Single Market (despite EURES)

24
Freedom of establishment
  • Right to take up and pursue activities as
    self-employed persons and to set-up and manage
    undertakings
  • Basic principle equality of treatment
  • Direct effect of article 49 TFEU.
  • No legislation required to invoke the right.
  • In practice however, obstacles remained that
    required intervention of Community legislation
  • Exceptions
  • Exercise of official authority

25
Regulated professions
  • Obstacle the interested person has to take a new
    examination for the recognition of his/her
    professional competence
  • EU rules (Directive 2005/36/EC) sets up 3 systems
    for recognition of qualifications
  • Automatic recognition for which the minimum
    training conditions have been harmonized (health
    professions, architects, veterinary surgeons)
  • General system for other regulated professions
    (no automatic recognition possibility of
    adaptation period or aptitude test)
  • Recognition on the basis of professional
    experience for craft, commerce and industry
    sectors professional activities
  • Reform announced as recognition procedures remain
    too long and too cumbersome

26
Single Market for services
  • Crucial sector for EU economy
  • 70 of GDP
  • Most important source of FDI
  • Only l of net job creation in the EU
  • But remain highly fragmented
  • Only 20 of the services provided in the EU have
    a cross-border dimension
  • Least successful part of the Single Market
  • Area of services identified as problematic
  • 2002 Commission report on the state of the
    internal market for services
  • January 2004 Commission proposal for Services
    directive

27
The Services Directive
  • Original proposal
  • Apply the country of origin principle gt if a
    company that provides a service meets the legal
    requirements of the MS in which it is based, it
    could offer the service in other MS
  • Opposition by MS that had the highest wages and
    social requirements. Feared race to the bottom
  • Directive as adopted in 2004
  • Does not affect labour law. Rules of the country
    in which service is provided
  • Provides for national one-stop-shop for foreign
    companies in which to deal with all formalities
  • Implementation still need to be completed
  • Points of single contact not yet all set up

28
Liberalization of regulated sectors
  • In the EU, services in the electricity, gas,
    telecommunications and postal services were
    provided by national monopolies
  • Natural monopolies argument became contested and
    competition rules were used to get independent
    private enterprises in sectors traditionally
    controlled by the State
  • Concept of legally separating the provision of
    the network from the commercial services using
    the network
  • In the railway, electricity and gas industries,
    the network operators are now required to give
    competitors fair access to their networks.
  • Requirement that public services continue to be
    provided

29
Free movement of capital
  • until the mid-1990s free movement of capital did
    not exist in practice in a number of MS.
  • Full liberalisation agreed in 1988 and came into
    effect in 1990
  • Treaty of Maastricht
  • all restrictions on capital movements and
    payments, both between MS and between MS and
    third countries, are prohibited
  • Exceptions primarily linked to taxation,
    prudential supervision, public policy
    considerations, money laundering
  • Capital markets still fragmented esp. Government
    bond markets

30
Challenges
31
New Challenges
  • At the end of 90s, Single Market no longer a
    priority
  • Commitment to the Single Market not as strong as
    before
  • EU concentrates itself on monetary union,
    enlargement, institutional reform
  • EU Single Market far from completed in major
    economic areas
  • But globalisation of the economy and economic
    crisis create new challenges to Europe
  • Globalisation of trade, technological progress,
    emergence of new global players
  • Financial economic crisis had a severe impact
    on businesses and workers
  • Erosion of political social support for market
    integration in Europe

32
Relaunch of the Single Market
  • Reoreintation in line with EU strategies on
    Growth and Jobs
  • Strategic goal EU was to become the most
    competitive and dynamic knowledge based economy
    in the world, capable of sustainable economic
    growth with more and better jobs and greater
    cohesion
  • Completion of internal market is one way to
    achieve this objective
  • Goes together with modernization of European
    Social Model
  • Re-launch market integration and putting citizens
    back at the heart of the SM

33
The Single Market Act
  • Monti report a new strategy for the single
    market, 9 May 2010
  • The 2010 Single Market Act
  • Most ambitious Single Market plan since a decade
  • Exploit any additional and yet untapped potential
    of the Single Market to generate additional
    growth and additional employment
  • 12 key actions such as
  • Modernising legislation on recognition of
    professional qualifications
  • European patent
  • Definition of services standards at European
    level.
  • Target date for adoption of main legislative
    initiatives end 2012

34
Conclusion
  • Single market cornerstone of Europes
    integration and sustainable growth
  • After a period of Single Market fatigue, is
    back as a political priority
  • Necessary to further improve functioning of
    Single Market and to adapt it to new economic
    environment. Enforcement is an issue!
  • EUs market-building policies have profoundly
    affected the political economy of Member States.
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