Memorandum by Mr Malcolm Harbour MEP,
Mr John Purvis MEP and Baroness Wilcox
1. A vibrant and fully functioning single
market is a vital asset in maintaining the European Union's competitiveness
in the global economy. The four freedoms of movement—of
goods, services, people and capital—are the foundations
of the single market and must be sustained. We welcome, therefore,
the inquiry by the House of Lords into this crucially important
project.
THE CURRENT
STATE OF
THE SINGLE
MARKET
2. The economic impact of the recent EU
enlargements has been generally positive. A single market of nearly
500 million consumers is a very attractive investment location,
putting the EU in a strong position in the global economy. At
the same time, the competition from the dynamic new Member State
economies (which are growing faster and generally have more liberal
economic policies) is stimulating modernisation and reform across
Europe.
3. Nevertheless, the inclusion of these
underdeveloped, but high potential economies, has created new
challenges for the single market. Having coincided with increasing
competitive pressures from the emerging global powers, particularly
India and China, enlargement has fuelled public fears over potential
job losses and wage decreases. This leads to mistrust and protectionist
attitudes among some Member States, with calls to slow down the
progress in achieving a genuine single market. (This was most
evident in the debate around the Services Directive, the subject
of two reports by your Committee). Additionally, the fact that
the EU has nearly doubled in size puts extra pressures on the
Commission, as guardian of the Treaty, to ensure compliance by
all Members with single market provisions.
4. Businesses have consistently identified
delays in transposition and ineffective enforcement, as well as
"gold plating", of EU legislation as the most important
obstacles to freedom of movement in the single market. On top
of that, infringement cases are numerous, showing that in addition
to late adoption, the quality of the resulting national rules
poses a serious problem. These time consuming procedures penalise
all Member States, their citizens and businesses, because the
Single Market in the areas concerned is effectively non-existent.
5. For SMEs, in particular, obstacles to
free movement can be prohibitive. Legal uncertainty and the cost
of varying administrative provisions, such as additional testing
requirements, and the need for multiple authorisations, often
discourage smaller businesses from expanding beyond national borders.
6. There is also evidence that consumers
are frustrated in their attempts to take advantage of the single
market. Some on-line marketing sites, offering cheaper prices,
are barred to UK consumers. Consumer protection and competition
authorities should be encouraged to take action in these cases,
unless there are exceptional circumstances (as in the case of
pharmaceuticals, for example).
POLICY INITIATIVES
TO BOOST
THE SINGLE
MARKET
7. Proposals for "fast-track procedures"
to deal with severe problems in transposition and implementation
should be evaluated. We also strongly support measures in the
Services Directive and the proposed Mutual Recognition Regulation
in the Goods Market (currently under the European Parliament's
scrutiny) that require Member States to be completely transparent
in cases where they seek to frustrate citizens or business from
exercising the four freedoms.
8. We have noted that efforts to complete
the single market can be frustrated by internal inconsistencies
within the Commission itself, sometimes proposing legislation
that actually creates more barriers. To address this problem of
lack of coordination, an Internal Market Test, examining the impact
of the envisaged action on the full implementation of the four
freedoms, should be part of all Commission proposals and activities
and integrated into the "Better Regulation" process.
Member States too, within their responsibilities, should promote
a culture in which administrations always take into account the
implications of their actions on the free movement of goods, services,
people and capital.
9. To create a positive environment for
the Single Market, citizens and enterprises have to be more engaged.
Public support would be enhanced if there was a concerted effort
to inform enterprises and customers about the opportunities that
are offered. Two new single market initiatives, the Single Points
of Contact mandated by the Services Directive, and the Product
Centres provided for in the proposed Mutual Recognition Regulation,
will require Member States to take action to provide easily accessible
and comprehensive information for business. These complement the
existing network of SOLVIT centres, which provide assistance with
specific questions and problems of market access and consumer
rights. These low profile operations are already proving very
effective, but should be given more promotion and resources. We
would like to see the UK Government take a lead in setting up
a unified Single Market Centre, combining information and promotion
for service and product markets with the problem resolution network.
10. Significant parts of Single Market legislation
have already been adopted, most recently the Services Directive.
(In the case of services, we endorse the strong recommendations
of your Committee on the need for early, effective and consistent
transposition) They now need to be properly implemented, and the
European Parliament's Internal Market Committee will be reporting
on the Services Directive transposition in early 2008. But there
are still areas where Community action—legislative or otherwise—should
be considered. As already noted, the proposals enhancing the free
movement of goods should be adopted quickly. Other areas to be
progressed are the protection of intellectual property, completing
the liberalisation of the energy market, and tackling remaining
issues in public procurement. There are a number of other proposals
in closely related areas now under review, for instance the revision
of the consumer acquis, appraisal of consumer redress and the
codification of international private law. Here, any new legislative
proposals should aim at simplifying the rules for businesses active
in the single market, enhancing consumer confidence and avoiding
market fragmentation.
11. Citizens moving to live and work in
the single market continue to experience many frustrations. The
SOLVIT centres help to resolve a significant number of personal
complaints by helping to overcome bureaucratic obstacles. There
is a need for closer cooperation among Member States' regulatory
authorities to make the freedom of movement in the single market
operate more smoothly. Adoption of the Commission proposal on
registering cars, for example, would deal with one of the areas
of complaint. Mutual recognition of qualifications needs to be
expanded and existing difficulties resolved. More professions
should be encouraged to develop common platforms as a basis for
mutual recognition.
12. The Country of Origin Principle is a
very useful concept from the point of view of companies and an
important tool for making the single market work, despite differences
in national rules. It is important to point out that Member States
do retain the right to ensure public policy, public health, and
protection of environment under this principle, but we must ensure
that they do not abuse these safeguards. Any interventions must
always be fully justified, proportionate to the problem concerned
and not discriminatory against sellers and service providers from
other Member States. In recent years there has been a troubling
backlash against this principle, which became very evident in
the course of negotiations on the Services Directive. It demonstrated
the need for Member States to cooperate more closely and build
an environment of mutual trust.
13. The concepts of "economic nationalism",
associated with "national champions" promoted by the
state, rather than the market, are extremely detrimental to the
single market. They pose a threat to EU competitiveness, and discourage
the evolution of "global champions", the true pan European
enterprises who are taking advantage of the potential of the single
market. We welcome the intervention by the EU Competition Commissioner
in recent cases of proposed cross border mergers, and encourage
her to be vigilant in supporting the cause of undistorted competition.
14. The EU will only be able to thrive in
the global economy if it matches and even improves on the innovation
capacity of its trading partners. Harnessing the opportunities
of the digital economy, in particular, could boost the Europe's
global standing, in addition to improving the lives of its citizens.
We need specific measures to make the EU single market more innovative,
including continued support for the Framework Research Programmes
and Joint Technology Platforms, the use of public procurement
as a tool for boosting innovation (especially though pre-competitive
procurement) and the creation of a viable IPR framework.
Evidence was requested on the evolution of the
single market in three strategic sectors. The Conservative Spokesman
in the European Parliament has submitted a separate paper on energy
matters. We now submit the following points on Telecommunications
and Financial Services
Telecommunications
15. The current EU Framework for Electronic
Communications, adopted in 2003, still has to be fully implemented
in every Member State. Nevertheless, the basic principles of the
framework—open access, technological neutrality, and independent
regulators close to the market—are fully supported. The
principal problems are related to consistent implementation and
inconsistencies between national regulators. These should, in
our view, be addressed by strengthening the coordination and research
capability of the European Regulators Group.
16. The Framework Directives do not, in
our view, require significant changes, with the exception of the
Universal Service Directive, where its provisions now look very
out of date in relation to the evolution of the market. We broadly
support the limited proposals for reform published by the Commission
in 2006. In particular, we strongly support proposals to encourage
more market based, technology and service neutral spectrum allocation.
17. We consider that the principle of delegating
regulation close to the market, under a common framework, must
be safeguarded, given the national characteristics of each country's
infrastructure or spectrum boundaries. We are not in favour of
a pan-European regulator, although we continue to support the
rights of the Commission to intervene, if national regulatory
behaviour is inconsistent with the single market.
Financial Services
18. Despite complaints about the substantial
increase in red tape, there is a growing realisation that the
FSAP (including MiFID) has contributed to a more real single market
in financial services. Conditions are not more burdensome than
appear necessary and they have provided opportunities for UK-based
Financial Services firms. The Lamfalussy process has provided
ample opportunity for national regulators and other stakeholders
to participate in the detailed implementing measures.
19. Nevertheless, it is true that certain
sectors have been drawn into further regulatory complexities,
in particular smaller and fringe operations. On the other hand,
the risk-based approach of the Financial Services Authority (FSA),
and therefore its concentration on entities of potential major
risk, means that the smaller firms will be less obtrusively regulated.
This is in line with the EU's risk-based and principle-based approach
to regulation.
20. The Lamfalussy scoreboard suggests that
the FSAP is not as yet being implemented consistently enough across
the EU, with certain countries seen to be dragging their feet.
This could be a particular problem with MiFID, with several member
states apparently not likely to meet the 1 November deadline.
21. We have consistently prodded the industry
to go down the Code of Conduct route for Clearing and Settlement,
in order to avoid the need for legislation. We are reassured that
they have finally and belatedly chosen to do so, but it remains
to be seen if it is as effective as would be hoped. The option
for a more interventionist approach is still a possibility.
22. The situation is further complicated
and, in a positive sense, pushed forward by the ECB's proposed
Clearing and Settlement project (Target2Securities). We are not
wholly convinced that the ECB should be entering this arena, but
at least it provides a prompt to the industry.
3 July 2007
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