*ΤΑ ΑΡΘΡΑ ΕΚΦΡΑΖΟΥΝ ΤΙΣ ΠΡΟΣΩΠΙΚΕΣ ΑΠΟΨΕΙΣ ΤΩΝ ΣΥΓΓΡΑΦΕΩΝ ΤΟΥΣ
written by Georgios Emmanouil, General Director of the Ministry of Interior (M-TH) September 2020
EU single market policy was established by the Single European Act (SEA) in 1987 and started being implemented in 1992. It aims mainly -through the Competition Policy and negative integration policies- to the deregulation of national markets, in order to reregulate the markets on EU level through positive integration policies by creating transparent and free of barriers and state aid competition with common environmental standards and efficient markets on EU level. The main results of SEA on a political level was the alteration of the main EU decision-making rule for single market measures from unanimity to qualified majority voting in the Council and the enhancement of the power of the Parliament by introducing the cooperation procedure with respect to single market measures.
The 5 stages of economic integration are:
- Free Trade Area
- Customs Union (initiated in 1968 and foresaw the removal of tariffs in the trade among member-states and the establishment of Common External Tariffs towards the outside world for the protection of domestic produce of EC)
- Common/ Single Market (started with the White Paper in 1985 and the Single European Act 1987. Its main institutional framework started being set in place by the end of 1992)
- Economic Policy harmonization is being promoted through the single currency
- Complete economic union, which is now under formulation. However, fiscal policy, direct taxation and transfers of substantial payments to less developed countries and regions are so far excluded from concrete and coherent EU
The treaty base of the single market1
Article 28 TEC: Prohibition on quantitative restrictions on imports; all measures have equivalent effect Article 39 TEC: Free movement of workers
Article 43 TEC: Right of establishment Article 49 TEC: Freedom to provide services Article 56 TEC: Free movement of capital
Article 85 TEC: Restrictive agreements between firms Article 86 TEC: Abuse of dominant position of large firms
Article 87 & 88 TEC: State aid control given to firms
Article 94 TEC: Procedure for the approximation of laws directly affect the common market Article 99 TEC: Harmonization of indirect tax base & rates
Article 133 TEC: Common Commercial Policy
The TEC targets are:
Main elements of TEC
- The Creation of a Customs Union (this means on a first stage the regulation tariffs and quotas and later on the complete elimination of custom duties among member states and the elimination of technical barriers and NTB to trade and services)
- The creation of a common market with free movement for goods, services, capital and labor
- Since the early 1980s the emergence of neoliberal ideas has taken place, which stress that markets are better suites to generate economic growth than governments and advocate the privatization of state industries and the removal of regulations governing economic competition
- The deregulation of national markets aimed to achieve the long-term benefits of lower transaction costs, higher economies of scale and the creation of European-wide strong industrial and services
- Progress in ESM was impeded by the need of unanimity in the Council of Ministers until the introduction of SEA 1987
The Single European Act, 1986
SEA 1987 added to the Treaty of Rome the following five critical provisions2:
- An explicit definition of the internal market3;
- The introduction of mutual recognition as a regulatory principle;
- Qualified Majority Voting on internal market matters;
- Approximation of health and safety in the workplace; and
- Economic and social cohesion
To that extent the ESM was promoted by starting the deregulation of national markets. The European Council endorsed the Commission’s White Paper, containing 300 measures that would complete the single market, in June 1985. These measures started being set in place by the end of 1992.
The strategy of the White Paper was the complete elimination of custom duties, fiscal barriers and technical barriers by 31st December 1992 and gradually the mutual recognition of technical standards, mainly on goods, and health and safety specifications from specialized European Organizations (CEN), in order to enhance the for unrestricted circulation of goods inside the EC. The White Paper also aimed to
- greater transparency;
- extension of competition on water, energy, transport and telecommunications; and
- convergence in indirect taxation base and rate of
Another action plan for the promotion of the single market was drafted by the Commission and was adopted at the Amsterdam European Council in 1997, in order to monitor the transposition of single market legislation into national law.
SEA 1987 endorsed the 1992 programme in order to complete the single market and altered the main decision-making rule in the Council from unanimity to Qualified Majority. It also enhanced the Powers of the Parliament by introducing the cooperation procedure to single market measures.
Additionally, SEA kept the negative integration of mutual recognition principle mainly on food safety and services standards and promoted the Positive market integration by replacing different national rules mainly in environmental and social policy with common European ones.
The more important principles on the free movement of goods consisting of the following4:
- Non discrimination (between domestic and other EC goods)
- Mutual recognition (health and safety objectives are equivalent among member-states despite any differences in detailed specifications of the relevant national laws)
- Proportionality (is pursued in national regulations and means that labelling requirements are sufficient and import prohibitions are not disproportional)
- Reversing the Burden of proof (justifies a national restriction only by scientific evidence of the member-state creating the Barrier)
TEU Maastricht 1992
The Treaty of Maastricht expanded the QMV principle in EU decision making and introduced the co-decision procedure, thus strengthening the ability of the European Parliament to reject proposals in single market matters. The Competitiveness Council incorporated from 2002 the Internal market Council.
It also decided the promotion of euro area and its European Monetary Union through:
- controlling the states’ deficits of budgets and the public debts
- price stability
- establishment of the European Central Bank The CAP and the ESM
The objectives of the CAP, laid down in Article 39 of the Treaty of Rome, were:
- to raise agricultural productivity;
- to ensure fair standard of living for the agricultural community;
- to stabilize markets,
- to assure availability of supplies at reasonable prices to
Although the CAP was excluded from ESM after the 1992 reforms, the agricultural sector followed the general trend of the WTO liberalization of trade by reducing external tariffs, adjusting prices to the market and reducing the state aid subsidies. The redistributive part of the CAP has been transferred to the rural development policies, which includes the promotion of environmentally friendly small and medium sized farms and enterprises in rural areas and the development of the growing market of agro tourism.
Trade liberalization in WTO and the Precautionary Principle in Lisbon Treaty 2009
- The PP supports stricter social, public health and environmental regulations in favor of consumers
- The PP is included in article 191 of the Treaty. It aims at ensuring a higher level of environmental protection through preventative decision-making in the case of risks, concerning protection of the environment, food and human, animal and plant
The definition of the principle also has a positive impact at international level, so as to ensure an appropriate level of environmental and health protection in international negotiations. It has been recognized by various international agreements, notably by the Sanitary and Phytosanitary Agreement concluded in the framework of the WTO.
Also the Uruguay Round through the GATT on 1994 marked significant progress in freeing agricultural trade, cutting subsidies, particularly on exports, and moving towards tariffication on imports and opening the trade in services
The four problematic areas to complete the single market are:
- Inadequate implementation of directives
- Problematic operation of the mutual recognition principle
- Cultural differences among member states
- Gaps in the legislative programmes in services
The main impacts of ESM5 are
- EU GDP increase 1,8%
- Increase in employment (2,5 million new jobs have been created since 1992)
- Reduction in inflation
- Price convergence in the internal market due to the removal of national quotas, the regulatory barriers and the expansion of open competition on EU level
- Increase of intra EU trade and of exports to third countries from 7 to 11% of GDP
- Inflows of FDI into the EU have more than doubled as a percentage of GDP
- Concentration of large firms in industries related to food and mass consumer goods, to public procurement in transport means, telecommunications and in the financial
The main implications of ESM are
On EMU related to capital controls;
On Justice and Home affairs related to ECJ decisions on common standards and rules;
On external relations for enlargement countries and in the bilateral agreements on trade of EU
The ESM is being affected by the Competition Policy of EU as an attempt to reregulate the markets in order to protect small and medium size enterprises and consumers by the multinationals’ practices and to maintain a process of effective competition so as to achieve a more efficient allocation of resources. (The first Merger Regulation 1989/4064 and its reform 2004/129 have given the power to the Commission to approve or prohibit a merger).
The EU competition policy is setting standards of conduct and includes: i) antitrust restrictive practices and agreements creating oligopolies and monopolies and ii) abuse of dominance, merger and acquisitions control, state aid control including tax breaks, loans, subsidies to industry, etc.
State aids have been slowly declining and policy is now based on economic criteria.
The EU competition Policy should promote both the productive efficiency of and the allocative efficiency of consumers.
EU integration in industrial Policy
The Council delegated to the Commission and to DG COMP extensive power and independence through the regulation 17/1962 and subsequent through regulation 1/2003 in implementing TEC articles for competition policy and in formulating regulatory policies.
The creation of ECJ and the CFI in 1986 contributed to the EU implementation of rules in competition policy.
The EU competition policy is controlling oligopolies, monopolies, restrictive practices and mergers. By promoting privatization programmes it switches less efficient nationalized industries from the public to the private sector. By eliminating the state aid it creates competitive markets and efficient allocation of resources.
The single market has also been extended to electricity. The initial liberalization was proposed in 1992 and is was fully implemented by 2005.
Nevertheless, the EU through competition policy in parallel to regulatory provisions is promoting its technological advances in EU competitive industries, such as chemicals, nuclear power, renewable energy, cyclical economy, industrial machinery and biotechnology and is trying to improve commercially the Research and Development sector and its performance in industrial sectors on which the European Union has poorly performed, in comparison to the USA and Japan, such as in computers, consumer electronics, office equipment, industrial automation, robotics, aerospace industry and in Information and Communication Technologies.
The EC treaties are neutral with respect to ownership of network industries. The internal market for network industries requires a complex two level mixture of regulation and competition. Rules of supervision should ensure effective and undistorted access for new providers to networks, competition between networks and free movement.
Liberalization and gradual deregulation in services has been applied in public utilities such as telecoms, energy, water, post, transport and airlines and are extended to financial services, insurance and media and in public procurement by preventing governments from favoring domestic companies in government contracts. Market services are divided in producer and consumer services. The former are subdivided into financial services (banking, insurance and investment services) and real services (transport, retail, tourism, communication) and business services. Business services include computer activities, R & D services, legal and accounting, market research, management consulting, architecture and engineering, advertising etc.).
The economically most important services (financial, telecoms, postal, all transport modes) fall under separate treaty sections, with initially very little progress in intra-EU market access.
The economic justification for regulating services is often met by three market failures: i) internalities such as asymmetric information, ii) market power and iii) externalities, especially in services networks.
Reregulation: Common standards
The ESM promoted reregulation measures in EC in order to protect the environmental and social Policy of EU by formulating common standards.
- In Environmental Policy (climate change, biodiversity, nature and health, management of natural resources and waste, the introduction of ‘polluters pay’ principle), enhanced by SEA, the Maastricht and Lisbon Treaties through the principle of sustainable development, QMV and co-decision with the European Parliament
- In Social Policy (Treaty of Rome, ESF, 1989 Commissions Charter on the fundamental rights of workers, QMV on most social policy issues and unanimity in social security). The social charter of fundamental rights was incorporated in the Amsterdam Treaty and in the Lisbon Treaty and includes: Free movement of workers, health and safety at work, workers’ rights, workers’ consultation, equallity between men and women, antidiscrimination, employment for all .
We can summarize the following outcomes from the current evaluation of ESM implementation:
- The EU single market has changed Europe. The production, distribution and exchange of goods, services and capital are now regulated on EU level through positive integration (QMV, EP cooperation principle, common environmental and social standards) and through negative integration (removal of national rules -obvious in the mutual recognition principle-, the harmonization of VAT, the abolition of frontier controls and the elimination of exchange controls);
- The customs union and the complete elimination of customs duties between member-states on 1st July 1968 was the first driver factor for the creation later on of the ESM that was decided in SEA in 1987 and was implemented by the end of 1992, starting to remove all barriers in the intra EU trade;
- The EU single market liberalized also the services and the public procurement competition on EU level;
- ESM established new relationships and balance of power between the Private and Public sector and between actors and institutions operating on national and EU levels;
- The delegation of EU states trade policy in WTO and in bilateral agreements to the European Commission via the Treaty of Lisbon, that is in force since 2009, facilitated the EU integration in the area of ESM and competition policy;
- Due to ESM national entities are restricted to regulate and define economic and trade policy which has been transferred to EU Institutions and actors, with increasing role of European networks and multinationals;
- ESM gave space for deregulation of national markets, for the reregulation of EU markets and for the development of policies for economic harmonization and institutional integration on EU level;
- The Market deregulation and liberalization has proved helpful to markets integration on EU level and economic activities concentration by large firms, but it has not been the leading factor of EU economic and political integration and cohesion;
- The single market was helpful to the more competitive large firms and states of the central and north Europe. As a retribution, a positive cohesion policy that is helpful to the regions and economies mainly of south Europe has been developed;
- The ESM and the SEA enhanced the role of supranational actors, such as the European Commission and European Parliament (neofunctionalism) and reduced the role of national governments, a trend called intergovernmentalism;
- Due to the ESM and to the QMV new decision-making process, a substantial increase of Eurogroups (pressure groups, firms, regional governments, consultants and NGOs) has been noticed as a response to the limitations of the national governments’ ability to defend their interests on EU level;
- The ESM has supported the two big EU policy initiatives that followed it: the Economic Monetary Union and the Justice and Home Affairs policy;
- The 2000 Lisbon agenda of the European Council for reforms on competition policies in the new era of globalization aimed to make the EU the most competitive and dynamic knowledge-based economy of the world. However, it has proved unsuccessful so far. Due to single market integration, comparative advantage is no longer determined by particular factor endowments of a country but is created through policies directed at sectoral networking on education, research and feasible investments with
- The gap between economic and political integration in EU has been growing wider during the last decades. Economic and political integration in EU requires stronger and more efficient and therefore federal European Institutions in a political system resting on a more solid popular and democratic base;
- The EU Complete economic union and EU integration needs the harmonization of the fiscal policy and direct taxation and transfers of substantial payments to less developed countries and regions should be included in concrete and coherent EU policies in the new Programming Period 2021-27.
The Political System of the EU, Simon Hix and Hoyland, 2011 The single Market, Alasdair R. Young, 2005
Competition Policy, Stephen Wilks, 2005
European Integration, Methods and Economic Analysis, Jackues Pelkmans, 2001 The Political Economy of Integration, Harrop, Jeffrey, 2000
The new European Economy, L. Tsoukalis, 1997
The E.C. between Social Policy and Social Regulation, G. Majone, 1993
Porter: The competitive advantage of Nations, 1990
1 Treaty of Rome 1958
2 European Integration, Jacques Pelkmans, 2001, page 93
3 White Paper comprising the initial EC 1992 programme. See COM (85) 314 of 14 June 1985
4 European Integration, Jacques Pelkmans, 2001 page 81
5 Source: Commission Report 2002, Alasdair Young The Single Market 2005
6 Source: Pelkmans and Winters 1988.