EU-integration knowledges Prepared by Dr. Endre Domonkos (PhD)

1. EU-integration knowledges Prepared by Dr. Endre Domonkos (PhD) Academic year 2012/2013 Autumn Semester

2. I. The establishment of the single market I. • The fundamental aim of establishing the European Economic Community was to create a common market for its Member States. • The common market: the free movement of four economic freedoms. • Therefore the programme of the single market outlined in the Single European Act (SEA), signed on 18 February 1986. • The legislative process related to the single market continues even today.

3. I. The establishment of the single market II. • EU legislation related to these areas provides the backbone of the acquis communautaire. • Both the TFEU and secondary legal acts focus primarily on ensuring the efficient functioning of the single market. • The four fundamental freedoms are guaranteed on the one hand by negative integration, and on the other hand by positive integration as well. • Technical, financial and administrative hindrances that impeded the realisation of the single market.

4. II. The free movement of goods I. • The free movement of goods is guaranteed by the creation of a customs union and the abolition of quantitative restrictions between Member States. • The abolition of existing customs duties and charges having equivalent effect levied on trade between each other. • Discriminatory taxation is also prohibited in the EU. • Three exceptions when charges having equivalent effect may be levied.

5. II. The free movement of goods II. • The Common Customs Tariff (or Common External Tariff): another important element of the customs union. • The Common Customs Tariff is the main instrument for regulating trade with third countries. • Common customs tariffs are thus a precondition for guaranteeing the free movement of goods within Member States. • In order to guarantee the free movement of goods, in addition to the removal of customs duties, quantitative restrictions (trade and customs quotas) and measures with equivalent effect also had to be prohibited.

6. II. The free movement of goods III. • For a long time, to define measures with equivalent effect was problematic. • Originally, the Commission derived the ban on such measures from a 1970 Directive. • In the Dassonville case of 1974, the European Court of Justice gave a uniform definition of the concept of measures with equivalent effect to quantitative restrictions. • The definition of measures with equivalent effect to a quantitative restriction.

7. II. The free movement of goods IV. • Exception to the ban on imposing restrictions on trade. • Article 36 of the TFEU stipulates that the prohibition of quantitative restrictions and measures with equivalent effect shall not preclude restrictions on grounds of: - public morality, - public policy or public security; - the protection of health and life of humans, - animals or plants; - the protection of national treasures possessing artistic, historic or archaeological value or the protection of industrial and commercial property.

8. II. The free movement of goods V. • The Cassis de Dijon case of 1979: it was a milestone in the entire process of the approximation of legislation. • The Court ruled that a product which has been lawfully produced and marketed in one Member State should be able to circulate lawfully throughout the entire Community. • This is known as the principle of equivalence. • The Cassis de Dijon judgment pointed out the concept of mutual recognition. • Mutual recognition: new harmonisation mechanism.

9. III. The free movement of persons • The universal right of free movement: it was not enshrined in the Treaty of Rome. • The Treaty of Maastricht introduced the freedom of movement as a fundamental right that all EU citizens have, irrespective of whether they have economic activity. • The free movement of these three groups is based on the same underlying principle: non-discrimination. • The freedom of movement for workers is fundamental pillar of European integration.

10. III. The free movement of workers I. • The free movement of workers can be hampered by three conditions: • According to Article 45 of the TFEU, the key rights of workers of the Member States are the followings: • The anti-discriminatory provisions of Article 45: prohibition of discrimination between workers from different Member States in terms of remuneration (including social and tax benefits), or any other conditions of work and employment.

11. III. The free movement of workers II. • Article 48 of the TFEU stipulates that migrant workers can „carry over” the rights acquired. • The aim of the Treaty: the creation of necessary coordination between those systems, instead of harmonisation of the social security systems of the Member States. • Exemptions from the free movement of workers: public policy, public security or public health. • Such limitations can only be an exception to the rule and have to be properly justified.

12. IV. The freedom of establishment I. • Self-employed persons: they form a separate category based on EU law. • This category includes those working in the so-called liberal professions as well as different activities many of whom provide services. • These people are entitled to freedom of establishment. • In the beginning, Member States tried to harmonise certain professions.

13. IV. The freedom of establishment II. • Diplomas, degrees and certificates: the principle of mutual recognition. • The freedom of establishment covers both natural persons and legal entities. • The „secondary establishment”. • The European Company Statute: • Exemptions from the freedom of establishment principle: public policy, public security or public health.

14. V. The free movement of non-economically active persons I. • With the Treaty of Maastricht, the freedom of movement became a fundamental right of every citizen of every Member State of the European Union. • The institution of Union citizenship was created by the Treaty of Maastricht. • Citizenship of the Union means four specific rights. • All citizens of the Union are free to travel to and stay in another Member State for a period of three months.

15. V. The free movement of non-economically active persons II. • Free movement involves not only the right to travel freely, but also the right to stay in any Member State for a sustained period. • This also includes the freedom to work, study, reside and stay in all Member States. • This also means that citizens of the EU are free to choose their domicile in the area of the Union. • If they intend to stay in a Member State for a period longer than three months, they need a residence permit.

16. V. The free movement of non-economically active persons III. • Internal border controls were abolished inside the EU. • The Schengen Agreement and Schengen subsequent legislation became the integral part of community law by the Treaty of Amsterdam. • The Amsterdam Treaty largely removed controls on passenger traffic on borders within the Union, except for the United Kingdom and Ireland. • Citizens of the Union can cross the border with their identity cards (rather than passports).

17. VI. The freedom to provide services • Article 57 of the TFEU defines services as activities provided for remuneration. • They are not governed by the provisions relating to the freedom on movement of goods, capital and persons. • The freedom to provide services: cross-border element + the provider and the recipient of the service reside in different Member States. • Temporary + cross border nature of activity and it is provided for remuneration (private source)!

18. VII. The prohibition of discrimination, the question of educational qualifications and the exceptions to the freedom to provide services • The prohibition on discrimination also applies to the free movement of services. • It is important to note that recipients of services cannot be restricted or discriminated against. • In the field of freedom to provide services the principle of mutual recognition is applied. • Activities that are exempt from the provisions on the freedom to provide services:

19. VIII. The liberalisation of the free movement of services I. • With the programme of the single market, the liberalisation of services gained new momentum in the late ‘80s and early ‘90s. • Consequently, most services (e.g. banking, financial, air transport and telecommunications services) had been liberalised by the turn of the millennium. • Exceptions in the electricity and gas sector.

20. VIII. The liberalisation of the free movement of services II. • The Lisbon summit in March 2000. • It placed the so-called Internal Market Strategy for Services at the Centre of the EU ’s new long-term economic policy. • The new Internal Market Strategy for Services main aim is to create a comprehensive horizontal regulatory framework applicable in all sectors and flexible enough to ensure that services based on new technologies can develop for the benefit of the single market. • The new strategy consists of three elements:

21. VIII. The liberalisation of the free movement of services III. • With the latter, the strategy aims at establishing horizontal rules covering services in all sectors. • The Directive on services in the internal market (in short, the Services Directive). • Its endeavor was to establish a truly single internal market in services by dismantling any remaining unjustified and discriminatory administrative obstacles to cross-border service provision. • The Draft Directive was criticised by the Member States because of the „country of origin” principle.

22. IX. The free movement of capital • Article 63 of the TFEU: the prohibition of all restrictions on the movement of capital, both between Member States and between Member States and third countries. • The Directive, which was adopted in 1988, liberalised capital transfers by abolishing all restrictions on movements of capital. • The Maastricht Treaty set the free movement of capital as a precondition for joining the economic and monetary union. • On 1 January 1994, all payments and capital movements had been fully liberalised.

23. X. Exceptions to the free movement of capital • The general exceptions to the free movement of capital. • The free movement of capital may be restricted on grounds of public policy or public security. • The principle of a restriction being in proportion to the objective to be achieved applies here as well. • This principle is strictly enforced by the European Court of Justice.

24. XI. The single market and taxation I. • In order to ensure the four fundamental freedoms, certain rules on taxation are necessary, pursuant to Articles 110 to 113 of the TFEU. • The aim is not to harmonise taxes or create a single system of taxation. • The Treaty makes a clear distinction between rules on indirect and direct taxation. • Article 113 of the TFEU: it creates very detailed common rules on value-added tax and excise duties.

25. XI. The single market and taxation II. • Value-added tax (VAT) was first introduced in the Community in 1970. • The creation of the single market in 1992 necessitated even closer harmonisation of VAT rates. • The significant differences in VAT rates hindered the free movement of goods and services. • The Directive adopted in 1992 on harmonising tax rates. • The EU’s long term objective is to establish an origin-based EU VAT system.

26. XI. The single market and taxation III. • Excise duties on alcoholic beverages, tobacco products and mineral oils are payable in the Member State of final consumption. • Minimum rates of excise duties are also set at EU level. • In the case of direct taxes, national tax systems must respect the four fundamental freedoms. • To avoid double taxation and facilitate cross-border business activities. • Taxation policy: decisions are taken unanimously.

27. XII. Provisions of the Treaty of Lisbon related to the single market • According to the provisions of the Treaty of Lisbon the following changes should be highlighted: 1. For the free movement of goods; 2. For the free movement or persons; 3. In the field of social security of migrant workers; 4. For the freedom to provide services; 5. Provisions for free movement of capital; 6. Provisions for taxation.

28. XIII. Key novelties in the field of single market I. • The Single Market Act was published by the European Commission in October 2010. • To achieve a closer integration European markets by the 20 anniversary of the creation of the single market in 2012. • Twelve instruments: • The main aim is to be gained the approval from the European Parliament and the European Council before the end of 2012.

29. XIII. Key novelties in the field of single market II. 1. Access to finance for SMEs 2. Worker mobility in the Single Market 3. Intellectual property rights 4. Consumers: Single Market players 5. Services 6. Stronger European networks 7. Digital Single Market 8. Social entrepreneurship 9. Taxation 10.More social cohesion in the Single Market 11. Regulatory environment for business 12. Public procurement.

30. Literature: • Zoltán Horváth (2011): Handbook on the European Union, Chapter 6. The single market and the four freedoms. Hvgorac, Fourth Edition, pp. 243-267. • Zoltán Horváth (2011): Handbook on the European Union, Chapter 14: Industrial and enterprise policy. Fourth Edition, Hvgorac, pp. 431. • Zoltán Horváth – Bálint Ódor (2010): The Union after Lisbon. The Treaty Reform of the EU, Chapter 8, Hvgorac, pp. 235-241. • The homepage of the European Commission. The Single Market Act. In: http://ec.europa.eu/internal_market/smact/index_en.htm