Memorandum by Business for New Europe
1. ABOUT BNE
1.1 Business for New Europe (BNE) welcomes
the opportunity to submit evidence to the Lords Internal Market
Sub-Committee inquiry on the European single market (ESM).
1.2 BNE is an independent coalition of UK
business leaders. Our aim is to support the UK's active engagement
in Europe, and to promote a reformed, enlarged and free-market
EU. We recognise the benefits that cooperation with our European
partners brings. Since our launch in March 2006, we have become
a leading pro-Europe organisation in the UK, gaining a good deal
of press coverage for our views.
1.3 This inquiry is particularly relevant
for BNE as we have sought to highlight the benefits to the UK
resulting from the ESM, and believe in the further strengthening
of the ESM.
2. ACHIEVEMENTS
OF THE
SINGLE MARKET
2.1 With the EU celebrating its 50th anniversary
in 2007, the ESM stands as probably the most remarkable of the
Union's achievements. The benefits of the ESM resulting from closer
economic integration are too often overlooked and taken for granted.
It is one of the great successes of international economic cooperation
in recent times, comparing favourably with any other regional
bloc embracing economic integration.
2.2 The Treaty of Rome (1957) identified
the European project with four freedoms, namely goods, services,
capital and labour—and these have produced significant benefits
for the UK and the European economy. In particular, the ESM has
eliminated tariff barriers, abolished border controls and introduced
mutual recognition for product standards.
2.3 The European market has the largest
GDP of any economy in the world. The value of the ESM was $1.2
trillion in 2005 and it accounts for 40% of global trade. With
the EU's enlargements of 2004 and 2007 into eastern Europe, it
now reaches almost 500 million consumers.
2.4 By opening up markets, the ESM adds
significant value to economic dynamism, boosting living standards,
productivity and economic growth. Estimates suggest that the EU's
GDP is 1.8% higher as a result of the ESM than it would be without
it.
2.5 Also across many economic sectors, eliminating
trade barriers has boosted competition and led to a reduction
in prices. This has had a positive impact on leading sectors of
the economy from automobiles and airlines to pharmaceuticals and
telecoms.
2.6 The ESM has had an influence beyond
the borders of the EU. It has enticed non-European firms to invest
in Europe, with the UK in particularly becoming a magnet for foreign
investment which wants to access the rest of Europe. It is estimated
that the single market has boosted FDI into Europe by 1500%.
2.7 Furthermore the rules in place to enforce
the single market in some sectors have often been adopted by non-EU
firms looking to break into the European market. This has positioned
Europe at the forefront of regulatory rules, and will give European
a competitive advantage in instances where the global market has
to move towards adopting their rules.
3. UK AND THE
SINGLE MARKET
3.1 Since its launch on 1 January 1993,
the ESM has brought major benefits to businesses, consumers and
workers. The UK now has a domestic market which reaches across
Europe. Our companies can look beyond the horizons of London and
Leicester to the likes of Lyons and Lisbon too.
3.2 For decades the United States has benefited
from having a domestic market of millions of consumers, now approximately
300 million in total. The European market now outstrips this,
giving UK companies tremendous opportunities to appeal to approximately
500 million consumers.
3.3 It is estimated that the ESM is worth
£20 billion annually to the UK. With well over half the UK's
trade taking place with the rest of Europe, approximately three
million jobs linked to our EU exports and the UK attracting a
good share of the total FDI in Europe, the value of the ESM to
the UK should be in little doubt.
4. BENEFITS TO
THE UK OF
SINGLE MARKET
4.1 Goods
4.1.1 The UK's biggest trading partner,
is by some considerable distance, the rest of Europe. Latest figures
show that the other 26 EU Member States accounted for 62.8% of
UK exports and 58% of our imports. This has increased from levels
of around 43% in 1973 when the UK entered the Common Market.
4.1.2 Even a cursory glance at our top trading
partners by country shows that eight of the UK's top ten export
partners are in the EU. Meanwhile, seven of our top import partners
are in the EU.
4.1.3 The recent enlargements of the EU
have had a positive effect on the UK's trade with eastern Europe.
Since the collapse of communism and the prospect of EU membership,
the UK's exports to the 10 new member states from 2004 have risen
by almost 400%. There is a lack of data at the present time on
how trade has been affected since the enlargements of 2004 and
2007, but it is more than likely that the UK's volume of trade
with eastern Europe has been further boosted.
4.1.4 The EU's free trade rules requires
robust policing and enforcement. There have been increasing signs
of the willingness of the European Court of Justice to bring enforcement
proceedings, thereby forcing Member States to comply with single
market rules. This robust action should be encouraged, though
concerns remain in some sectors about nationally imposed barriers
to the European market.
4.2 Services
4.2.1 Services liberalisation forms a cornerstone
of an effective single market. The recently passed EU services
directive will help to unleash free market forces in the services
sector, and stimulate economic growth. It is particularly important
as services account for approximately 70% of the European economy,
and the UK economy is markedly strong in this area.
4.2.2 The recent services directive is important
for the European economy but not only that. It symbolises the
changing nature of the EU and in particular, the European Commission.
It is estimated that it would create 600,000 across Europe and
up to £5 billion a year for the UK economy.
4.2.3 Whilst supporting the services directive
as a step in the right direction for liberalisation, there was
disappointment in the business community that the text was not
as far-reaching as it could have been, notably through the omission
of the "country of origin principle". However, BNE hopes
that this directive will set down the marker for a future directive
that is even stronger, once apprehensive countries see the benefits.
4.3 Capital
4.3.1 Increasingly, foreign companies have
used Britain as a base to access the European market. Some 19%
of inward investment in the EU comes to the UK.
4.3.2 Whilst the UK has been very comfortable
with foreign ownership of its companies, there has been evidence
of economic nationalism being practised by some countries. High-profile
examples of corporate protectionism include the Spanish government
seeking to block Eon's bid for Endesa.
4.3.3 The EU has shown its willingness to
use its powers to take action against miscreant states, and it
should continue to exercise these powers with vigour. Just as
the UK has permitted foreign companies to buy some of its major
companies, continental markets should be open to investment from
overseas. British companies should have the same opportunities
on the continent that foreign companies do in the UK.
4.4 Labour and people
4.4.1 Freedom of movement in the EU has
had a dramatic impact on the UK and its labour market, enabling
people to not only work but to travel, study and live across Europe.
4.4.2 As a result of the principle of free
movement of people, there are now 750,000 British people in Spain,
approximately 300,000 in France and a growing number of British
people in the eastern European countries. Many of them are seeking
fresh economic opportunities in continental markets.
4.4.3 Furthermore, the UK has benefited
from a large number of migrants from other EU Member States. Following
the 2004 accession, 600,000 people from the 10 accession countries
came to the UK in the following two years. In addition, some sectors
of the UK economy have attracted high calibre talent. A high proportion
of the 300,000 French people thought to live in the UK work in
the financial services industry.
4.4.4 Free movement has sparked not only
a surge in the number of tourist visits to the UK, but also an
increase in the number of foreign visits made by British people.
For example, in the course of 2006, a total of 53 million visits
to the rest of Europe were made by British people, an increase
of 50% since 1998. A large number of Britons have grasped the
economic opportunity to own property abroad, with the figure now
thought to have reached 2.2 million.
5. SUPPORT FOR
THE SINGLE
MARKET
5.1 The public at large and the business
community are strongly supportive of the single market. It is
the business community, in particular, which experiences first-hand
the benefits of the single market.
5.2 A Yougov poll commissioned by BNE in
March 2006 showed that 68% of business leaders thought that the
single European market had been good for UK business, with only
12% saying this was not the case.
5.3 More recently, the MORI Captains of
Industry survey (December 2006) showed that 78% of business leaders
saying that the single market has been helpful to UK business
(with only 22% saying it has been unhelpful). In addition, 38%
of business leaders said that the European Commission should have
more powers to fully implement the single market (with 55% saying
that the Commission already had enough powers). Furthermore support
for the ESM in the senior ranks of the British business community
was evident in many of the articles in a pamphlet we published
in March 2007 entitled "A Europe we can do business with".
5.4 As well as broad support from the business
community, the ESM also elicits a strong degree of support from
the UK public. When asked about the impact of the EU, 78% of the
UK public thought it had increased opportunities for business
(Eurobarometer 2006).
6. FUTURE CHALLENGES
Whilst the ESM has achieved a great deal both
for the UK and the European economy, the ESM faces the following
challenges:
6.1 Barriers to trade—There are still
too many barriers to trade. Whilst the services directive was
a step in the right direction, we would like to see further services
liberalisation. In addition, we would like to see Member States
embrace open labour markets as soon as possible, which will require
the UK to open its labour market to all the recent accession states,
including Bulgaria and Romania. One study carried out by the Institut
d'Etudes Politiques de Paris claims that removing existing barriers
to trade could cost European consumers up to 7% of EU GDP.
6.2 Changing consumer behaviour—Consumers
across Europe are not taking full advantage of the ESM. A majority
of Europeans shop and invest exclusively in their own country.
According to the Bruegel think-tank, a European country spends
on average 86% on national products and services against only
10% on those from other EU countries.
6.3 Promoting benefits of the ESM—National
governments and the EU need to carry out further work to promote
the benefits of the single market, including greater choice and
lower prices. A greater appreciation for the tangible opportunities
precipitated by the ESM, would be likely to boost support for
the European Union in Member States.
6.4 EU institutions—The enforcement
of the ESM requires strong EU institutions. There are some Eurosceptics
who wish to see the UK be part of a free trade area and sever
its ties with the EU. Yet it is not possible to have a fully functioning
ESM without a strong European Commission and ECJ to police and
enforce the single market. Resolving the institutional impasse
through the Reform Treaty should also help to give the EU firmer
teeth to take action against recalcitrant Member States.
6.5 Better regulation—The liberal-minded
Commission has introduced impact assessments on new regulations,
and also set targets to reduce administrative burdens. Encouraging
the better regulation agenda will generate a positive impact on
the ESM.
7. CONCLUDING
COMMENTS
The ESM is one of the defining achievements
of the EU. It has evolved to encompass 27 countries, and is likely
to widen in the future. There is lots of potential for it to strengthen
further which requires the Commission to take robust action as
appropriate and also for consumers to further appreciate the benefits
of shopping throughout the whole market rather than continually
opting to shop in their own Member States.
In sum, the ESM is a crucial component of the
EU, and the UK's relationship with it. It is set to remain a central
feature of the EU. In a limited time, it has achieved a great
deal. BNE supports all moves which move the ESM in a positive,
open and outward-looking direction.
16 July 2007
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