Transcript Regional Integration and Public Policy Module of Political

Regional Integration
Module of Political Science
Lecture 7-8
Building the EU Internal MarketInternal Market and Competition
Policies
A work in progress…
• Despite being the core goal of European
integration and its main policy
achievement has always been and will be
in the future an unfinished business and a
work in progress.
• According to Nugent and Buonanno
(2012) four reason account for this :
• 1) Government generally agree on the
goal of an open and competitive economy,
but primarily respond to their citizens: in
many occasions they prefer to
accommodate with the goal of the internal
market domestic demands for exceptions
or protection, or even to give preference to
the latter.
• 2) There are differences regarding the extent to
which the internal market should be bases on
liberal (non interventionist) principles or to what
extent it should have also social responsibility
functions.
• A. Michel : two (broad) types of capitalism in
Europe : anglo-saxon and “of the Rhine” or
social market capitalism. Distinctive values and
norms regarding state’s role even if the
difference is much less sharp now, still exists
Member state’s preferences regarding the
Single market and socio-economic national
regimes
• Anglo-Saxon
• Social Market
countries
Economies
(Continental
Europe)
• Northern-European • New member
Countries
states
Social-market economiesContinental Europe
• Germany, France
• Policy legacies: Traditions of protection of labor
and concern that a single market for services
may endanger the consolidated social
entitlements and that unregulated fiscal
competition (free movement of capitals) may
have a negative impact on employment.
• Central role of manufacturing industry in the
economies.
• Critical attitude towards a tight control on stateaids.
Anglo-saxon countries
• UK and Ireland
• In favor of radical liberalization, with special
focus on benefits for the consumers.
• The post-industrial transformation of the
economy taken for granted  service are the
biggest sector of the economy, with a growth of
financial services .
• Low concern about the social entitlements:
main concern is employability
• Resist the coordination of fiscal policies.
Norther- European countries
• Success model, combining high level of
competitiveness of the economies with
high levels of social protection.
• Remarkable capability to attract foreign
investments , despite high levels of
taxation, mainly due to excellence in
education and research and efficiency of
public administration
New member states
• Unconditional support for the single
market because of its potential
implications for growth .
• Few concerns for social protection .
• Strong interests for the free movement of
workers and services and for policies of
infrastructures and regional development.
• They tend to resort to fiscal competition in
order to attract foreign investment.
• 3) There are differences regarding what a
properly functioning EU market needs.
• For instance differences regarding the
liberalization of certain infrastructures such
as energy and transports, or on the
opportunity of having a common currency
or joining the EMU.
• 4) Changing contexts. The basics of the
internal market were negotiated in the midFifties among states of similar level of
economic development. After that: access
of less developed countries, globalization,
competition from new industrialized
countries, knowledge-based economy,
global warming. New challenges.
Removal of barriers …What
barriers?
• - custom tariffs
• -quotas on imports
• Non-tariff barriers (NTB) in particular technical
barriers to trade (TBT) such as those regarding
the standards applied for goods and services.
For services standards are also social
(protection of workers health , rights etc.)
• Fiscal barriers deriving from different levels of
indirect taxation (VAT) or of direct taxation , in
particular on capital and savings.
Negative and Positive integration
• Negative integration regards the removal
of existing barriers to the single market
(tariffs, etc.) elimination of existing
regulation
• Positive integration: the adoption of new
regulation for the integrated economic
area
Institutional asymmetry in the EU between
negative and positive integration in the EU
(Scharpf)
• While the Treaties entrust supra-national
institutions (ECJ, and Commission within
its areas of competence ) of significant
autonomous decision powers to remove
barriers to the single market (negative
integration) , the new regulation must be
adopted (positive integration) through the
joint decision (Community) method 
joint decision trap .
Methods for reducing barriers to
free movement (1)
• Liberalization->goods and services have
an automatic right to enter other m.s.’
markets: goods that don’t rise concerns
about human health or safety (Ex: man’s
shoes)
Methods for reducing barriers to
free movement (2)
• Approximation: laying down regulation that
specifies common standards and requirements
to allow their free movement. Used for high risk
products such as chemicals, pharmaceutical ,
construction goods, foodstuff, automobiles
• Old approach directives specifying in detail
product standards and requirements.
• New approach- legislation establishes only
essential features of a product , while the
specification of technical standards is delegated
to technical agencies (European Standard
Organizations ESO)
Methods for reducing barriers to
free movement (3)
• Mutual recognition- mid-way. Used for
lower risk goods (ex: office equipment)
• EU member states recognize and accept
the regulatory standards of other m.s.
• ECJ : Dassonville (1974) and Cassis de
Dijon (1978) __> “mutual recognition
principle”
Internal market implementation
• Shared responsibility between EU and
m.s. level:
• M.s. must assure compliance “on the
ground” and the Commission is
responsible for oversight, monitoring and
in case pursuing infringements.
• To improve implementation the
Commission has created a multi-stage
process (SM governance cycle)
Single market governance cycle
ADOPT
MONITOR
EVALUATE
INFORM
SOLVE
ENABLE
CONNECT
EXPLAINING THE CYCLE
• Monitoring: Transposition
» Single market scoreboard (since 1997) -“naming and
shaming” self-correction by m.s.
» Connecting-Solving
» - New problem solving system (SOLVIT)-SOLVIT are units
created in 2002 in Ministries of each the member state.
Complaints over non implementation of SM rules are
addressed to the state of the complainer SOLVIT or to the
European Commission which turn address the case to
SOLVIT unit of the state regarding which the complaint
originated .This must solve the case within 6 days; it can
reject it only if changes in EU legislation are needed.
Internal market for services
• While the single market for goods has reached
an advanced stage in the late 2007 , the single
market for services lagged behind.
• In 2001 services accounted for 56,5% of the
sum of GDP of EU15 but only 20% of internal
trade.
• Re-launch of SM for services a priority for the
Prodi (2000-2004) and Barroso commission
(2004-09)
SM for services
• The liberalization of services brought at the fore
potential tensions between the goal of the single
market and the maintenance of ms’ welfare
models.
• These tensions became more evident after the
enlargement of 2004 .
• These tensions are exemplified by the cases of
the Bolkenstein directive and of the ECJ’s
judgments Laval e Viking
The Bolkenstein Directive
• The proposal of directive of the European Commission adopts
an “horizontal approach” to the creation of internal market for
services the directives set principles for the free circulation
of all services (rather than specific services as former
directives)
• Principle of the country of origin- CoOP) in order to facilitate
the free movement of services across the EU the rules to be
applied are those in force in the country of origin of the
service’s provider ( the “Polish plumber”) .
• Presented as an extension to services of the principle of
mutual recognition.
• The m.s. in which the service is provided gives up the controls
on the conditions at which the service is provided (perceived
risk of social dumping and low consumers’ protection)
The Bolkenstein Directive- political
conflict
• The Commission proposal produced an unprecedented
degree of political conflict , cutting across ideological
divides.
• In the EP European Socialists (mainly in EU 15) were
against while ALDE and EPP(but the less so Christian
Democrats) .
• Against old m.s. (in particular France and Germany) for
the UK and new member states.
• Against ETUC (but not in EE) and for UNICE_ Business
Europe
• The concern that the EU intended to dismantle traditional
workers’ rights in Western Europe is considered one of
the reasons why the French and Dutch referenda
rejected the Constitutional Treaty .
Directive 2006/123
• The Council approved a text very
fundamentally amended by the EP, with
the removal of the principle of the country
of origin.
• The m.s. were given 3 years to implement
it.
Viking and Laval
• Can the Court carry on the project of services
liberalization ?
• Two judgments of ECJ regarding workers (trade
unions) right in the country of for collective
bargaining and collective action (boycott and
strike).
• In both cases the Court judged illegitimate the
behavior of trade unions as infringing the
principle of free movement of services.
• Very controversial judgments: is supra-national
decision challenging fundamental principles of
EU welfare models? Lack of legitimacy
The lessons of the service directive
and of the Viking and Laval
Judgments
• Tensions between the goal of the single
market and different views of capitalism
Lecture 8
Competition policy
Competition policy
• Policies preventing that competition on the sigle
market is not limited in ways such to reduce the
economic welfare.
• Justification is based on the liberal assumption
that the economies where the pressures of
competition are stronger tend to be more
efficient than those in which competition is
limited .
• Another justification is in terms of benefits for the
consumer (lower prices, better quality) .
The governance of competition in
the EU
• Importance of the supranational mode of
governance  extended powers of the
European Commission and the European
Court of Justice.
• Evolution - growing importance of
modes of governance based on multilevel-cooperation (between competition
agencies at the national level and the
European Commission)
The legal basis of supra-national
governance of competition
• Since the treaty of Rome , the Treaties
(TFEU) in articles 101-109 mention the areas
of competition policy : preventing cartels,
abuse of dominant position, anti-competitive
mergers , non approved state-aid and
liberalization of pulic utilities.
• Strong legal base in the treaties authorizing
autonomous action of the Commission and
the ECJ .
Regulation 17/1962
• Regarding the implementation of rules
regarding cartels and abuse of dominant
position.
• Entrusted DG V (now Competition) of the
European Commission important tasks, to be
carried on autonomously from the Council of
Minister: it made of DG V a true Anti-trust
agency with extended powers of monitoring,
inquiry, codifying,, taking decision on
exemptions, sanctioning .
• The Commission is authorized to make
inquisitions in the enterprises, examine their
files, interrogate the management, fine the
enterprise.
Policy and
Treaty article
Company
practices
Powers of the
Commission
Example
Development
Restrictive
practicescartels
TFEU101
Price fixing
through horizontal
(same industry) or
vertical (supply
chain)
agreements
Issue fines up
to 10% of the
global turnover
of companies
In 2008 of 1,38
billion euro to 4
manufacturers of
glass for the car
industry
First cases in the
60s
Abuse of
dominant
position
TFEU102
Predatory pricing
or similar
Cease-and-desist
orders. Issue
fines .Require the
break-up of the
In 2007 152
million e fine to
Telefònica
First cases in the
70s, first fines in
the 80s
Anticompetitive
mergers
Reg 4064/89
and 139/2004
Fusions intended
to create
dominant
positions that
impede
competition
Must approve
before a merger
takes place
General Electric and
Honeywell 2001,
Enforcement
starts in the 90s
Nonapproved
state-aid
TFEU107-108
Companies may
receive aids that the
government choose
not to interpret as
being aids (tax
exemptions)
Can stop state
aid; can order
companies to
repay state aid
In 212 German
Deutsche Post
had to repay 500
million euros of
illegitimate state
Becomes a
priority in the 80s
tighter regulation
90s
monopoly
Evolution
• EU competition policy followed basically the same
rules since 1964 until 2004.
• Regulation 2003/1 (Modernization package)
introduced new rules for competition and a
decentralized system of governance , devolving
powers of enforcement to national agencies and at
the same time increasing the powers of inspection of
the European Commission.
From supra-national decision to
multi-level cooperation
• Old system: Commission fully responsible for cases of cartels
and abuses of dominant position. Companies had to notify
agreements to the Commission. Work overload, long decision
times.
• With the “modernization package” national authorities for
competition are entrusted the task of implementing the treaty’s
provisions. Companies address themselves to national
agencies. The relations between levels of governments are
between national authorities and DG Competition and through
the European Competition Network that is the network of
national agencies managed by DG Competition.
• The direct DG Competition’s direct jurisdiction is limited to
cases involving 3 or more states or cartels with Europe or
world-wide scope.
Anti-competitive mergers
• Since the regulation of 1989 the Commission is
the only authority to approve mergers over a
certain dimension in terms of European or word
wide turnover.
• Smaller mergers seek authorization at the
national level.
• Normally authorized . Companies can appeal to
the General Court and the ECJ against
decisions of the Commission
State-aid
• The most politicized sector of competition
policy---> targets are governments non
companies.
• States are required to notify to the
Commission the intention to provide aid to
a company. Commission investigates on
the case and authorizes or not.
• If the aid is not notified it is classified as
unlawful.
State-aid: exemptions
• “Block exemptions” for state aid aimed to
promote development of backward
regions, projects of European interest,
development of activities or sectors,
culture or heritage conservation.
• Exemptions in particular circumstances
extension of exemptions after the 2008
crisis to failing banks or insurance
companies.
Competition policy
• Significant progress particularly after
2000s.
• Still critical areas : public procurements
(only 10% are cross-border) , public
utilities particularly energy