Single MarketSingle Market

TopicsTopics What is the meaning?What is the meaning? How/why did it happen when it did?How/why did it happen when it did? Describe the main initiatives of SEADescribe the main initiatives of SEA Discuss the modalities of implementation Discuss the modalities of implementation

(instruments of implementation)(instruments of implementation) Analyze in some detail problem areas,etcAnalyze in some detail problem areas,etc Related topics: cohesion, structural fundsRelated topics: cohesion, structural funds Institutional aspects (QMV, the Court)Institutional aspects (QMV, the Court) Informal effects: business firmsInformal effects: business firms Major source for lectureMajor source for lecture

– Loukas Tsoukalis, Loukas Tsoukalis, The New European Economy RevisitedThe New European Economy Revisited

What is the meaning ofWhat is the meaning ofSingle Market?Single Market?

Non-tariff barriers (NTBs)Non-tariff barriers (NTBs) Concrete Measures (initially “300”)Concrete Measures (initially “300”) Timelines for ImplementationTimelines for Implementation New decision-making approach:New decision-making approach:

– Qualified majority voting in Council of Ministers Qualified majority voting in Council of Ministers (QMV)(QMV)

Related areas put on the agendaRelated areas put on the agenda– Health and safety at workHealth and safety at work– Environmental policyEnvironmental policy– CohesionCohesion

Historical ContextHistorical Context Why did it happen when it did? Why did it happen when it did?

Economic conditions 1973-1984Economic conditions 1973-1984– Worst (longest, deepest) postwar Worst (longest, deepest) postwar

recession, related to 2 oil crises (1973, recession, related to 2 oil crises (1973, 1978-9)1978-9)

– Unemployment plus inflationUnemployment plus inflation– EEC performance worse than other EEC performance worse than other

major industrial areas (Japan, USA, EFTA major industrial areas (Japan, USA, EFTA countries)countries)

Historical ContextHistorical Context(cont’d-1)(cont’d-1)

– Signs:Signs:Stagnation of intra-EEC tradeStagnation of intra-EEC tradeDecline in world share of manufactures Decline in world share of manufactures

exportsexportsFalling behind in strong-demand sectors Falling behind in strong-demand sectors

especially:especially:– Electrical and electronic equipmentElectrical and electronic equipment– Office machineryOffice machinery– Information technology (computers etc)Information technology (computers etc)

Historical ContextHistorical Context(cont’d-2)(cont’d-2)

Economic Policies 1973-1984Economic Policies 1973-1984– Multiplication of protectionist barriers to trade Multiplication of protectionist barriers to trade

through variety of “legal” means (NTBs)through variety of “legal” means (NTBs)– ““National champions” as the favored approach National champions” as the favored approach

to New Sector Initiatives (R&D, high to New Sector Initiatives (R&D, high technology, etc.)technology, etc.)

– Divergent economies, especially in dealing Divergent economies, especially in dealing with inflationwith inflation

Monetary policy (interest rates and currency values)Monetary policy (interest rates and currency values) Budget Policy (deficits)Budget Policy (deficits)

Historical ContextHistorical Context(cont’d-3)(cont’d-3)

New Models/ New Thinking of 1980sNew Models/ New Thinking of 1980s– Supply-side economicsSupply-side economics– DeregulationDeregulation– In a nutshellIn a nutshell: Thatcher and Reagan: Thatcher and Reagan

Dramatic Failure of the Old ModelDramatic Failure of the Old Model– Socialist/Keynesian Macroeconomic Expansion Socialist/Keynesian Macroeconomic Expansion

1981-831981-83– In a nutshellIn a nutshell: “The First” Mitterrand: “The First” Mitterrand– ““The Second” Mitterrand (1983 on) as a The Second” Mitterrand (1983 on) as a

turning point for EECturning point for EEC

Historical ContextHistorical Context(cont’d-4)(cont’d-4)

Constructive Initiatives of BusinessConstructive Initiatives of Business– Cross-border collaboration in R&D (vs. Cross-border collaboration in R&D (vs.

“national champions” approach)“national champions” approach)– Concern about fragmentation of European Concern about fragmentation of European

markets (pro-forward movement of EEC)markets (pro-forward movement of EEC)– Round Table of European IndustrialistsRound Table of European Industrialists

Led and first chaired by head of Volvo (from a then Led and first chaired by head of Volvo (from a then non-EC country)non-EC country)

– EEC crucial role in the process:EEC crucial role in the process: Etienne Davignon, Commissioner for Industrial Affaris Etienne Davignon, Commissioner for Industrial Affaris

since 1979 (DG 3), organizes sectoral “round tables”since 1979 (DG 3), organizes sectoral “round tables” Results: ESPRIT, RACE, BRITE, EUREKAResults: ESPRIT, RACE, BRITE, EUREKA

Historical ContextHistorical Context(cont’d-5)(cont’d-5)

Within the EEC: The problemWithin the EEC: The problem– Eurosclerosis: many ideas and Eurosclerosis: many ideas and

proposals (especially Commission proposals (especially Commission proposals) and little actionproposals) and little action

– Two huge barriers to forward movementTwo huge barriers to forward movementCommunity Agricultural Expenditures: need Community Agricultural Expenditures: need

to reform CAPto reform CAPBudgetBudget

– Inadequate “own resources”Inadequate “own resources”– Excessive net contribution of Britain and GermanyExcessive net contribution of Britain and Germany

Historical ContextHistorical Context(cont’d-6)(cont’d-6)

Within the EEC: Hope for SolutionWithin the EEC: Hope for Solution– Temporary but significant resolution of the two Temporary but significant resolution of the two

barriers (1984 Fontainebleau Summit of barriers (1984 Fontainebleau Summit of European Council)European Council)

– Margaret Thatcher changes her tuneMargaret Thatcher changes her tune Appointment of Lord Cockfield as Commissioner for Appointment of Lord Cockfield as Commissioner for

Internal Market affairs (1985)Internal Market affairs (1985)

– Jacques Delors as new president of the Jacques Delors as new president of the Commission (Jan 1985 term begins)Commission (Jan 1985 term begins)

Tour of the 12 capitals: the 4 optionsTour of the 12 capitals: the 4 options Focus on Internal Market as single objectiveFocus on Internal Market as single objective

Single European ActSingle European Act Process:Process:

– Jacques Delors’ Speech to European Parliament Jacques Delors’ Speech to European Parliament (January 1985)(January 1985)

– White Paper “White Paper “Completing the Internal MarketCompleting the Internal Market” ” presented by Commission to European Council presented by Commission to European Council in Milan (June 1985)in Milan (June 1985)

Central role of Lord Cockfield in preparation of White Central role of Lord Cockfield in preparation of White PaperPaper

– Decision of Milan Council to convene Decision of Milan Council to convene Intergovernmental Conference (IGC) on Treaty Intergovernmental Conference (IGC) on Treaty RevisionsRevisions

Majority decision accepted by the opposition (Britain, Majority decision accepted by the opposition (Britain, Denmark, Greece)Denmark, Greece)

Single European ActSingle European Act(cont’d-1)(cont’d-1)

Process (cont’d)Process (cont’d)– SEA signed (February 1986)SEA signed (February 1986)– SEA into effect (July 1987) following referenda SEA into effect (July 1987) following referenda

in Denmark and Irelandin Denmark and Ireland ProvisionsProvisions

– Removal of NTBs in 3 areas by 1993Removal of NTBs in 3 areas by 1993– QMV for many measuresQMV for many measures– Cooperation procedure with ParliamentCooperation procedure with Parliament– Court of First Instance establishedCourt of First Instance established– Recognition of domains needing special Recognition of domains needing special

attention: health and safety, environment, attention: health and safety, environment, cohesioncohesion

SEA Follow-UpSEA Follow-Up

Unparalled unity of views and optimism Unparalled unity of views and optimism about Europeabout Europe

Dynamic economy, investment-led, Dynamic economy, investment-led, leading to the impression of strong leading to the impression of strong positive effects of Single Marketpositive effects of Single Market

Special enthusiasm of businessSpecial enthusiasm of business– Pro-active role of “peak organizations”Pro-active role of “peak organizations”– Lobby offices in BrusselsLobby offices in Brussels– Multinationals see opportunityMultinationals see opportunity– Context of mergers and acquisitions (1988-90) Context of mergers and acquisitions (1988-90)

with cross-border perspectiveswith cross-border perspectives

SEA Follow-Up (cont’d-1)SEA Follow-Up (cont’d-1)

The Commission takes an ambitious The Commission takes an ambitious and assertive roleand assertive role– Delors II (1989 re-appointed president; Delors II (1989 re-appointed president;

second time since Walter Hallstein)second time since Walter Hallstein) Key governments/key summits Key governments/key summits

create framework for bold new stepscreate framework for bold new steps– Hannover summit (1988): Germany Hannover summit (1988): Germany

takes the lead to move forward takes the lead to move forward – Kohl-Mitterrand come together on Kohl-Mitterrand come together on

political union and monetary unionpolitical union and monetary union

SEA Follow-Up (cont’d-2)SEA Follow-Up (cont’d-2)

Two New IGCs (“Big Ones”) in 1990Two New IGCs (“Big Ones”) in 1990– IGC on Monetary Union (EMU)IGC on Monetary Union (EMU)– IGC on Political Union (Institutional Reform and IGC on Political Union (Institutional Reform and

Other Areas than Economics)Other Areas than Economics) Conclusion: SEA leads to integration Conclusion: SEA leads to integration

initiatives on a broad frontinitiatives on a broad front– Single CurrencySingle Currency– Institutional ReformInstitutional Reform– European UnionEuropean Union

Implementing the Single MarketImplementing the Single Market

The “three areas” (official, specified The “three areas” (official, specified in SEA)in SEA)– Physical barriersPhysical barriers

Remaining frontier controls based on “rules Remaining frontier controls based on “rules of origin”of origin”

Frontier adjustments due to CAP border Frontier adjustments due to CAP border taxes (MCAs, or monetary compensatory taxes (MCAs, or monetary compensatory amounts)amounts)

Transport restrictions due to national Transport restrictions due to national licensing and quotas for non-national licensing and quotas for non-national carrierscarriers

Implementing (cont’d-1)Implementing (cont’d-1)

– Technical barriers (the “other” category)Technical barriers (the “other” category)Technical standards as indicator of product Technical standards as indicator of product

qualityqualityHealth and environmental standardsHealth and environmental standardsDiscriminatory public purchasing: “national Discriminatory public purchasing: “national

champions,” public procurementchampions,” public procurementState subsidiesState subsidiesCompany lawCompany lawDifferent regulatory frameworks for Different regulatory frameworks for

“services”: insurance, financial services“services”: insurance, financial servicesRestrictions on capital movementsRestrictions on capital movements

Implementing (cont’d-2)Implementing (cont’d-2)

– Technical barriers (cont’d)Technical barriers (cont’d)Obstacles to free movement of labor Obstacles to free movement of labor

– Social security legislation and transferability of Social security legislation and transferability of social benefitssocial benefits

– Professional qualifications (eg, architects, Professional qualifications (eg, architects, lawyers, doctors, accountants)lawyers, doctors, accountants)

– University degreesUniversity degrees

– Fiscal barriersFiscal barriersDifferent tax systems, taxable base, tax Different tax systems, taxable base, tax

ratesratesKey issue of indirect taxes (value added tax)Key issue of indirect taxes (value added tax)

Implementing (cont’d-3)Implementing (cont’d-3)

The “heart of the problem”The “heart of the problem”– European postwar tradition of “mixed European postwar tradition of “mixed

economies” (lots of government intervention)economies” (lots of government intervention) Centrality of regulatory frameworksCentrality of regulatory frameworks

– The resort to NTBs as hidden form of protection The resort to NTBs as hidden form of protection in crisis periodsin crisis periods

– The inherently complex world of technical The inherently complex world of technical standards, especially in high technology standards, especially in high technology sectorssectors

– Citizen concerns for quality living standards: Citizen concerns for quality living standards: consumer protection, environmental standardsconsumer protection, environmental standards

Implementing (cont’d-4)Implementing (cont’d-4)

SolutionsSolutions– Strong reliance on “mutual recognition”Strong reliance on “mutual recognition”– Harmonization as a “last resort” or for Harmonization as a “last resort” or for

the most intractable mattersthe most intractable matters– General rule of decision-making (several General rule of decision-making (several

exceptions and “safeguards”)exceptions and “safeguards”)QMV for physical and technical barriersQMV for physical and technical barriersUnanimity for fiscal barriersUnanimity for fiscal barriers

Implementing (cont’d-5)Implementing (cont’d-5)

– The special matter of technical The special matter of technical regulations and standards (about 80% of regulations and standards (about 80% of all barriers, according to one estimate)all barriers, according to one estimate)The “new approach” adopted by Council just The “new approach” adopted by Council just

prior to White Paper on Internal Market (June prior to White Paper on Internal Market (June 1985)1985)

– Harmonization limited to safety mattersHarmonization limited to safety matters– Standards developed by private standards Standards developed by private standards

organizations on the European-wide level: organizations on the European-wide level: “European technical standards”“European technical standards”

– Highly specific to products and sectors rather Highly specific to products and sectors rather than general directivesthan general directives

Implementing (cont’d-6)Implementing (cont’d-6)

Results:Results:– By 1995, more than 5,000 European standards By 1995, more than 5,000 European standards

produced by private organizations such as CEN produced by private organizations such as CEN and CENELEC, as well as ETSI (European and CENELEC, as well as ETSI (European Telecommunications Standards Institute)Telecommunications Standards Institute)

– Membership of these standarization organizations Membership of these standarization organizations consists of national standardization bodies of EU consists of national standardization bodies of EU and EFTA countriesand EFTA countries

– Development of “a European doctrine in terms of Development of “a European doctrine in terms of product safety and the adoption of common product safety and the adoption of common European standards” (Tsoukalis, p. 111)European standards” (Tsoukalis, p. 111)

– Long processLong process

Implementing (cont’d-7)Implementing (cont’d-7)

The crucial importance of “mutual The crucial importance of “mutual recognition”recognition”– An action of the Court of Justice in the An action of the Court of Justice in the

Cassis de DijonCassis de Dijon case of 1979 case of 1979PrinciplePrinciple: Whatever meets the technical : Whatever meets the technical

standards and regulations of a member standards and regulations of a member state must be accepted as doing so in any state must be accepted as doing so in any other stateother state

ExceptionsExceptions: Health and safety, restriction : Health and safety, restriction “proportionate to objective”“proportionate to objective”

Implementing (cont’d-8)Implementing (cont’d-8)

Some problems and delaysSome problems and delays– Allowable “derogations”Allowable “derogations”– Reliance on directives for Reliance on directives for

implementationimplementation““implementation deficit” due to delays and implementation deficit” due to delays and

“complexities” of translating directives into “complexities” of translating directives into national legislationnational legislation

Public procurement, insurance, intellectual Public procurement, insurance, intellectual and industrial property, pharmaceuticals, and industrial property, pharmaceuticals, veterinary and plant-health controls as the veterinary and plant-health controls as the biggest “delayed” sectorsbiggest “delayed” sectors

SourcesSources

Internal MarketInternal Market DGsDGs BulletinBulletin White PapersWhite Papers Green PapersGreen Papers