chapter four the single european market. the importance of sem catalyst of commercial change...

Chapter Four

The Single European Market

The Importance of SEM

• Catalyst of commercial change

• Stimulated re-organisation across borders

• Stresses predominance of liberalism as a response to globalisation

Economic rationale

• Key theme

MARKET INTEGRATION

Fragmentation unified whole

• Removal of barriers– goods, services, capital, labour

• EU = world’s most ambitious and successful example of integration

Stages of economic integration

• Customs union (complete 1968)– no tariffs between members– Common External Tariff– Static effects - trade creation and trade

diversion– Dynamic effects - specialisation,

economies of scale, more competition

• Single market• Economic and monetary union

Roots of SEM

• Treaty of Rome

• Economic crisis

– Competitiveness concerns

– Costs of market fragmentation

– US de-regulation

• Emergence of neo-liberal economics

SEM principles

• Harmonisation = common rules– time consuming, complex, inflexible

• Mutual recognition - Cassis de Dijon

• home country control

• new approach to standards - ‘essential requirements’

• liberalisation

SEM IN PRACTICE

• 1985 Single Market White Paper– almost 300 barriers to go by 1992

• fiscal barriers• physical barriers• technical barriers

• 1987 Single European Act

• Many single market successes

SEM as a process

• A moving target

• SEM will exist when all tradable goods and services are freely traded not when 1985 programme in place.

• Spillover into other areas - e.g. labour, energy, competition, EMU

• Deferral of difficult issues - e.g. taxation

• Need for new policies to make SEM work - e.g. TENs

• Implementation and enforcement

• Evaluation, monitoring and updating

• Impact takes long time to work through

SEM Action Plan

• Phase one: give effect to previous commitments

• Phase two: adopt number of directives - e.g. European Company Statute, gas directive (done)

• Phase three: problematic areas - e.g. VAT modernisation, frontier controls

SEM- EU LANDMARK

• Stagnation - end 70s/early 80s

• New life into policy process - start of policy

activism

• SEM principles underpin most policies

• Spillover into other policies

• Coupled with greater openness to global

markets

• Integral to success of EMU

Impact of SEM Programme

• More market focussed EU

• Promote structural change

• Consolidation

• Created more open Europe to rest of world

• Changed environment of European Business

Issues for a Single Market

• Speed up implementation of regulation - bureaucratic

• Slim down legislation – burden upon business from SEM has been blamed for undermining competitiveness

• Especial concern over labour market regulation

• Lisbon Summit seek to assess business impact of regulation before implemented

Issues for a Single Market

• Excessive regulation imposes costs upon business – these can limit competitiveness

• But need to balance need of consumers/labour vs. business

• Other issues:

- fuller integration of capital market

- Apply SEM to the internet

Where are we now? - the Lisbon Council (2000)

• SEM boosted by Lisbon Council & new strategic goal– ‘to become the most competitive and dynamic

knowledge-based economy in the world’

• Links to earlier SEM aspirations - includes ‘stepping up the process of structural reform for competitiveness and innovation and by completing the internal market’

i.e develop existing processes

Ease/difficulty of trading with:

1. Finland (easiest)

2. Luxembourg

3. Portugal

4. The Netherlands

5. Ireland

6. Belgium

7. Germany

8. Denmark

9. Sweden10. Spain11. Austria12. Greece13. France14. Italy15. UK (hardest)

(Survey conducted on behalf of EU Commission, 2001)

Internal Market Strategy 2003-6

• 10-point plan - addresses key problem areas

• Key objectives:– Facilitate enlargement– Ageing population

1. Enforcing the rules- Some recent deterioration in implementation

and enforcement

Number of directives to be transposed into national law

0

10

20

30

40

50

60

70

I P IRLA G

RF L G

ERNL B UK SP FIN

SP DK

Internal Market Scorecard - May 2003

2. Integrating services markets - 70% of GDP & jobs - little integration- new initiatives - MR, harmonisation, codes of conduct, complete Financial Services Action Plan

3. Improve free movement of goods: standards– Mutual recognition - works well in many

sectors but not foodstuffs, vehicles, financial services and professional qualifications.

– No real SEM yet for construction products and machinery - can still take up to 8 years to agree European standard

4. Meeting the demographic challenge- More efficient SEM - helps pay for

pensions- Pension, benefits mobility

5. Further opening of network services - energy, transport, telecommunications,

post, possibly water- Infrastructure links

6. Simplified regulatory environment

7. More open procurement

8. Improve conditions for business

- Action on state aids, stronger competition enforcement

- Community patent?

- legal, entrepreneurship

- Takeover bids remain unresolved

9. Reduce tax obstacles

- Eliminate double taxation

- Simpler VAT rules

- Common corporate tax base?

10. Provide better information and citizen’s needs

- e.g. cross-border consumer protection

SEM- EU LANDMARK

• Stagnation - end 70s/early 80s

• New life into policy process - start of policy

activism

• SEM principles underpin most policies

• Spillover into other policies

• Coupled with greater openness to global markets

• Integral to success of EMU

• Perfect SEM elusive?