Single Market

1. Single Market

2. 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

3. 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

4. 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)

5. Historical Context(cont’d-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)

6. Historical Context(cont’d-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 (R&D, high technology, etc.) • Divergent economies, especially in dealing with inflation • Monetary policy (interest rates and currency values) • Budget Policy (deficits)

7. Historical Context(cont’d-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

8. Historical Context(cont’d-4) • Constructive Initiatives of Business • Cross-border collaboration in R&D (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

9. Historical Context(cont’d-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

10. Historical Context(cont’d-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

11. 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)

12. Single European Act(cont’d-1) • Process (cont’d) • 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

13. 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

14. SEA Follow-Up (cont’d-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

15. SEA Follow-Up (cont’d-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

16. 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

17. Implementing (cont’d-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

18. Implementing (cont’d-2) • Technical barriers (cont’d) • 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)

19. Implementing (cont’d-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

20. Implementing (cont’d-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

21. Implementing (cont’d-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

22. Implementing (cont’d-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

23. Implementing (cont’d-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”

24. Implementing (cont’d-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

25. Sources • Internal Market • DGs • Bulletin • White Papers • Green Papers