Single Market

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Single Market
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Topics

• What is the meaning?
• How/why did it happen when it did?
• Describe the main initiatives of SEA
• Discuss the modalities of implementation
  (instruments of implementation)
• Analyze in some detail problem areas,etc
• Related topics cohesion, structural funds
• Institutional aspects (QMV, the Court)
• Informal effects business firms
• Major source for lecture
• Loukas Tsoukalis, The New European Economy
  Revisited

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What is the meaning ofSingle Market?

• Non-tariff barriers (NTBs)
• Concrete Measures (initially 300)
• Timelines for Implementation
• New decision-making approach
• Qualified majority voting in Council of Ministers
  (QMV)
• Related areas put on the agenda
• Health and safety at work
• Environmental policy
• Cohesion

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Historical Context Why did it happen when it did?

• Economic conditions 1973-1984
• Worst (longest, deepest) postwar recession,
  related to 2 oil crises (1973, 1978-9)
• Unemployment plus inflation
• EEC performance worse than other major industrial
  areas (Japan, USA, EFTA countries)

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Historical Context(contd-1)

• Signs
• Stagnation of intra-EEC trade
• Decline in world share of manufactures exports
• Falling behind in strong-demand sectors
  especially
• Electrical and electronic equipment
• Office machinery
• Information technology (computers etc)

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Historical Context(contd-2)

• Economic Policies 1973-1984
• Multiplication of protectionist barriers to trade
  through variety of legal means (NTBs)
• National champions as the favored approach to
  New Sector Initiatives (RD, high technology,
  etc.)
• Divergent economies, especially in dealing with
  inflation
• Monetary policy (interest rates and currency
  values)
• Budget Policy (deficits)

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Historical Context(contd-3)

• New Models/ New Thinking of 1980s
• Supply-side economics
• Deregulation
• In a nutshell Thatcher and Reagan
• Dramatic Failure of the Old Model
• Socialist/Keynesian Macroeconomic Expansion
  1981-83
• In a nutshell The First Mitterrand
• The Second Mitterrand (1983 on) as a turning
  point for EEC

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Historical Context(contd-4)

• Constructive Initiatives of Business
• Cross-border collaboration in RD (vs. national
  champions approach)
• Concern about fragmentation of European markets
  (pro-forward movement of EEC)
• Round Table of European Industrialists
• Led and first chaired by head of Volvo (from a
  then non-EC country)
• EEC crucial role in the process
• Etienne Davignon, Commissioner for Industrial
  Affaris since 1979 (DG 3), organizes sectoral
  round tables
• Results ESPRIT, RACE, BRITE, EUREKA

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Historical Context(contd-5)

• Within the EEC The problem
• Eurosclerosis many ideas and proposals
  (especially Commission proposals) and little
  action
• Two huge barriers to forward movement
• Community Agricultural Expenditures need to
  reform CAP
• Budget
• Inadequate own resources
• Excessive net contribution of Britain and Germany

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Historical Context(contd-6)

• Within the EEC Hope for Solution
• Temporary but significant resolution of the two
  barriers (1984 Fontainebleau Summit of European
  Council)
• Margaret Thatcher changes her tune
• Appointment of Lord Cockfield as Commissioner for
  Internal Market affairs (1985)
• Jacques Delors as new president of the Commission
  (Jan 1985 term begins)
• Tour of the 12 capitals the 4 options
• Focus on Internal Market as single objective

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Single European Act

• Process
• Jacques Delors Speech to European Parliament
  (January 1985)
• White Paper Completing the Internal Market
  presented by Commission to European Council in
  Milan (June 1985)
• Central role of Lord Cockfield in preparation of
  White Paper
• Decision of Milan Council to convene
  Intergovernmental Conference (IGC) on Treaty
  Revisions
• Majority decision accepted by the opposition
  (Britain, Denmark, Greece)

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Single European Act(contd-1)

• Process (contd)
• SEA signed (February 1986)
• SEA into effect (July 1987) following referenda
  in Denmark and Ireland
• Provisions
• Removal of NTBs in 3 areas by 1993
• QMV for many measures
• Cooperation procedure with Parliament
• Court of First Instance established
• Recognition of domains needing special attention
  health and safety, environment, cohesion

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SEA Follow-Up

• Unparalled unity of views and optimism about
  Europe
• Dynamic economy, investment-led, leading to the
  impression of strong positive effects of Single
  Market
• Special enthusiasm of business
• Pro-active role of peak organizations
• Lobby offices in Brussels
• Multinationals see opportunity
• Context of mergers and acquisitions (1988-90)
  with cross-border perspectives

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SEA Follow-Up (contd-1)

• The Commission takes an ambitious and assertive
  role
• Delors II (1989 re-appointed president second
  time since Walter Hallstein)
• Key governments/key summits create framework for
  bold new steps
• Hannover summit (1988) Germany takes the lead
  to move forward
• Kohl-Mitterrand come together on political union
  and monetary union

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SEA Follow-Up (contd-2)

• Two New IGCs (Big Ones) in 1990
• IGC on Monetary Union (EMU)
• IGC on Political Union (Institutional Reform and
  Other Areas than Economics)
• Conclusion SEA leads to integration initiatives
  on a broad front
• Single Currency
• Institutional Reform
• European Union

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Implementing the Single Market

• The three areas (official, specified in SEA)
• Physical barriers
• Remaining frontier controls based on rules of
  origin
• Frontier adjustments due to CAP border taxes
  (MCAs, or monetary compensatory amounts)
• Transport restrictions due to national licensing
  and quotas for non-national carriers

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Implementing (contd-1)

• Technical barriers (the other category)
• Technical standards as indicator of product
  quality
• Health and environmental standards
• Discriminatory public purchasing national
  champions, public procurement
• State subsidies
• Company law
• Different regulatory frameworks for services
  insurance, financial services
• Restrictions on capital movements

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Implementing (contd-2)

• Technical barriers (contd)
• Obstacles to free movement of labor
• Social security legislation and transferability
  of social benefits
• Professional qualifications (eg, architects,
  lawyers, doctors, accountants)
• University degrees
• Fiscal barriers
• Different tax systems, taxable base, tax rates
• Key issue of indirect taxes (value added tax)

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Implementing (contd-3)

• The heart of the problem
• European postwar tradition of mixed economies
  (lots of government intervention)
• Centrality of regulatory frameworks
• The resort to NTBs as hidden form of protection
  in crisis periods
• The inherently complex world of technical
  standards, especially in high technology sectors
• Citizen concerns for quality living standards
  consumer protection, environmental standards

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Implementing (contd-4)

• Solutions
• Strong reliance on mutual recognition
• Harmonization as a last resort or for the most
  intractable matters
• General rule of decision-making (several
  exceptions and safeguards)
• QMV for physical and technical barriers
• Unanimity for fiscal barriers

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Implementing (contd-5)

• The special matter of technical regulations and
  standards (about 80 of all barriers, according
  to one estimate)
• The new approach adopted by Council just prior
  to White Paper on Internal Market (June 1985)
• Harmonization limited to safety matters
• Standards developed by private standards
  organizations on the European-wide level
  European technical standards
• Highly specific to products and sectors rather
  than general directives

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Implementing (contd-6)

• Results
• By 1995, more than 5,000 European standards
  produced by private organizations such as CEN and
  CENELEC, as well as ETSI (European
  Telecommunications Standards Institute)
• Membership of these standarization organizations
  consists of national standardization bodies of EU
  and EFTA countries
• Development of a European doctrine in terms of
  product safety and the adoption of common
  European standards (Tsoukalis, p. 111)
• Long process

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Implementing (contd-7)

• The crucial importance of mutual recognition
• An action of the Court of Justice in the Cassis
  de Dijon case of 1979
• Principle Whatever meets the technical
  standards and regulations of a member state must
  be accepted as doing so in any other state
• Exceptions Health and safety, restriction
  proportionate to objective

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Implementing (contd-8)

• Some problems and delays
• Allowable derogations
• Reliance on directives for implementation
• implementation deficit due to delays and
  complexities of translating directives into
  national legislation
• Public procurement, insurance, intellectual and
  industrial property, pharmaceuticals, veterinary
  and plant-health controls as the biggest
  delayed sectors

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Sources

• Internal Market
• DGs
• Bulletin
• White Papers
• Green Papers