4th Conference of the GCC Institutes for Banking and Finance Abu Dhabi, 45 May 2004

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4th Conference of the GCC Institutes for Banking
and FinanceAbu Dhabi, 4-5 May 2004

• Towards creating a truly Single Market
• - Experience of the European Union -
• Paula Pinho
• DG TradeEuropean Commission

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EU experience of moving from a Customs Union
to the Internal Market

• Overview
• I - Basic concepts and some history
• II - From a Customs Union to a Single Market
• A. The Customs Union
• B. The Single Market Why, how and what to
  expect?
• 1) creation
• 2) implementation the role of a strong
  institution
• 3) enforcement judicial non-judicial means
• 4) efficiency
• 5) What has been achieved What remains to be
  done
• 6) Work in progress
• deepening extending the Single Market

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Basic concepts

• Definitions
• Customs Union Removal of import/export tariffs
  Removal of quantitative trade barriers
  Common External Tariff
• Internal Market Customs Union Four freedoms
  (free movement of goods, services, persons
  capital)
• Economic and Monetary Union Internal Market
  Common currency

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Some history ... (1)
1957 The Treaty of Rome (Art. 2) The
Community shall have as its task, by establishing
a common market and progressively approximating
the economic policies of Member States, to
promote throughout the Community a harmonious
development of economic activities, a continuous
and balanced expansion, an increase in stability,
an accelerated raising of the standard of living
and closer relations between the States belonging
to it.
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Some history ... (2)

• From the Customs Union to the Single Market ...
• 1957 Treaty of Rome signed by 6 states
• Customs Union import/export tariffs and
  quantitative barriers removed common external
  tariff established but non- tariff barriers
  subsist
• early 80s eurosclerosis
• 1985 White Paper on Internal Market
• 1986 Single European Act
• 1992 Deadline for the completion of the Single
  Market

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Some history ...(3)

• Single Market is just one step in the process of
  European integration ...
• 1992 Maastricht Treaty - Economic Monetary
  Union (EMU) framework for economic policy
  co-ordination
• Completion of Monetary Union
• Introduction of (Euro) - notes and coins
  introduced

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From a Customs Union

• Trade has been an area of EC exclusive
  responsibility since 1957
• It all started with
• Customs Union (Treaty of Rome 1957)
• no barriers to trade elimination of all customs
  duties restrictions among Member States
• Common External Tariff
• income was integrated in Communitys own
  resources (Principle of Solidarity)
• - common procedures and rules were drawn
• Single Administrative Document (SAD)
• - replaced the different docs previously used.

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From a Customs Union (3)

• What to expect from a customs union ...
• The basic trade effects of a Customs Union
• Trade creation
• Trade diversion
• Trade expansion
• Dynamic effects
• Scale economies
• Impact on the location and volume of investment
• Effect on economic efficiency and smoothness of
  trade transactions
• These effects are further strengthened in the
  Internal Market

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to a Single Market

• Why to build the Internal Market?
• A) Political reasons
• - strategy to relaunch integration
• B) Economic reasons
• - need to restore business confidence and
• - to improve performance of European enterprises

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to a Single Market (2)From economic to
non-economic means

• 1) open up borders to
• goods
• people
• services
• 2) organise solidarity
• by setting up common policies financial
  instruments
• but by beginning of 80s, progress had been halted
  eurosclerosis

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How to achieve the Internal Market?(1)

• Meanwhile new EC consisted of 12 countries
• For Internal Market to be achieved more than
  political will was necessary
• The Single European Act (1986)
• Introduced more effective decision making
  procedures
• Set the deadline for completion of the Internal
  Market
• 31 December 1992

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How to achieve the Internal Market?(2)

• The 1992 Strategy
• The White Paper
• 282 Measures to abolish barriers between the
  Member States
• Physical barriers
• Technical barriers
• Fiscal barriers

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Internal Market Four freedoms

• Free movement of goods (physical barriers,
  technical barriers, public procurement, networks)
• Free movement of services (technical barriers,
  public procurement, networks, financial services)
• Free movement of capital (financial services)
• Free movement of persons (work, retirement,
  studying )
• Plus
• Citizenship

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Internal Market Four freedoms

• FREE MOVEMENT OF GOODS
• Abolishing physical frontiers
• all routine checks at internal borders
  abolished
• all customs formalities abolished
• Customs services of Member States give up their
  responsibility for collecting excise duties, VAT
  statistical data

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Internal Market Four freedoms

• FREE MOVEMENT OF GOODS (2)
• Tackling technical barriers
• 1) Technical harmonisation
• 2) Mutual recognition
• 3) Protection of intellectual and industrial
  property
• ? Free movement of goods extended to free
  movement of persons, capital and services

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Internal Market Four freedoms

• FREE MOVEMENT OF SERVICES
• - Network industries (liberalisation of energy,
  transport, telecommunications, postal services
  sectors)
• Business and professional services
• - Financial services (banking, insurance, stock
  exchanges and other financial services)

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Internal Market Four freedoms

• FREE MOVEMENT OF PERSONS
• Right of EU citizens to
• move/travel freely - elimination of controls on
  persons crossing internal frontiers
• live
• work
• study
• Freedom of establishment (self-employed)
• Common labour market
• mutual recognition of diplomas but mobility
  still very low need for structural reforms
• - Provisions in the field of social security,
  unemployment and social allowances, portability
  of pensions, health insurance etc.

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Internal Market Four freedoms
FREE MOVEMENT OF CAPITAL Payments are the oil in
the wheels of the Internal Market! All
restrictions on movement of capital to be
abolished All restrictions on payments to be
abolished. - 1988 Directive provided for
liberalisation of capital movements within the EU
as of 1990 provisions in the areas of banking,
insurance and stock exchanges ? framework for
establishment of liberalised single EU financial
market
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Implementation

• Legal framework of the Internal Market
• 1) Rules set out in the Treaty
• Secondary legislation
• European Commission as guardian of the Treaty
• Rulings of the European Court of Justice

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Implementation and resultsNon-transposition of
Internal Market Regulations
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Enforcement The role of a strong institution
European Commission as the  guardian of the
Treaties  Rules set out in the Treaty
Secondary legislation - European Commission
makes sure that these rules are obeyed. - It
can impose penalties on any firm or EU country
that breaks them. - It can ban an operation
agreed between companies outside the EU if
that operation could affect the Single Market.
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Enforcement (2)

• Infringement proceedings
•  alternative problem solving 
• Infringement proceedings
• - the classical tool to ensure respect for EC law
  
• number of infringement proceedings has increased
  considerably over last decade with enlargement
  nr of infringements set out to rise further.
• Alternative solving mechanisms
• - alternative to infringement proceedings

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Implementation and resultsMeans instruments

• Helping citizens businesses getting the most
  out of the Internal Market
• Dialogue with Business
• Dialogue with Citizens
• SOLVIT assists citizens businesses in solving
  concrete problems within public administration of
  a MS where they have tried to exercise their
  rights
• FIN-NET provides alternative dipsutes
  resolution facilities in the area of financial
  services
• At Governmental level
• IMAC (Internal Market Advisory Committee)
•  Package meetings 
• Cardiff Report

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Implementation and results Multiple gains from
the Internal Market
Businesses More friendly regulatory environment
(simplification, mutual recognition, ) New
export markets Lower costs For
citizens/consumers Greater choice Lower prices
Greater mobility Consumer protection Economic
benefits More integrated market (increases in
trade, FDI and price convergence) Increase in
competitiveness of companies (intra and extra
EU) Gains in wealth (GDP, employment)
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Implementation and results What has been
achieved

• From 1992-2002
• ca. 2.5 million jobs have been created
• GDP 1.8 higher than without Internal Market
• extra prosperity of 877 billion (? 5,700 per
  household on average)
• intra-EU trade cross-border investment grown
  faster than EU GDP
• EU exports increased from 415 billion (1992)
  to 985 billion in 2001
• EU investment abroad increased exponentially
  from 18 billion to 206 billion
• new inflows of FDI into EU 4-times higher in
  2001 than in 1992

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Implementation and resultsWhat has been
achieved

• Achievements so far have been very satisfactory
• obstacles hindering free movement of people have
  been removed (passport checks at EUs internal
  borders abolished, professional qualifications
  recognised)
• public contract markets have been opened up
  (tougher rules requiring transparent procedures
  proper checks for public contracts)
• money markets financial services markets
  liberalised
• company laws have been harmonised, etc.

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Implementation and results What remains to
be done

• Markets of services are not well integrated
• Technical barriers continue to hinder
  cross-border purchases
• Tax obstacles 15 (meanwhile 25) different
  systems of corporate taxation across Member
  States leads to important costs for companies and
  consumers.

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Implementation and results Work in progress

• Services are being liberalised
• liberalisation of telecom - already cut prices
  considerably (end of 2001, long-distance
  telephone calls on average 11 cheaper than in
  2000 and 45 cheaper than in 1998)
• creation of single market for gas electricity.
• Postal services are being opened up to
  competition.

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Deepening the Internal Market

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Implementation and results Need to improve the
functioning of the Internal Market
The new Internal Market Strategy Priorities for
2003-2006 1) Facilitating the free movement of
goods 2) Integrating services markets 3)
Ensuring high-quality network industries 4)
Reducing the impact of tax obstacles 5)
Expanding procurement opportunities 6) Improving
conditions for business 7) Meeting demographic
challenge 8) Simplifying the regulatory
environment 9) Enforcing the rules 10)
Providing more and better information
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Need for further structural reformsThe targets
and objectives of the Spring Councils

• Employment rate of 70 in 2010
• Halving the number of early school leavers by
  2010
• Increase the transposition rate of Internal
  Market directives to 98.5
• Opening up of energy markets for business in 2004
  and for domestic users in 2007
• Increase RD spending to approach 3 of GDP by
  2010
• Reduction in greenhouse gas emissions

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Expanding the Internal Market

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Expanding the Internal Market

• EU Enlargement
• 1st May 2004
• From EU-15 to EU-25
• Internal Market grows from 380 mio consumers to
  455 mio
• ? the biggest Single Market in the world !
  

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The international dimension of the Single Market

• Completing the Internal Market is not an inward
  looking exercise
• Internal Market principles are integrated in the
  trade agreements that EC negotiates with third
  countries, ex
• bilateral trade agreements (ex EU-GCC FTA)
• recently Wider Europe

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Conclusiondespite long difficult way EU
Single Market EU global strength

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GCC Single Market GCC global strength ? This
is another hopefully shorter ! story