Transcript The EU Budget - Forum of Federations

Adressing Internal Market
Barriers in the EU
Jacques Pelkmans
College of Europe & CEPS, Brussels
Presentation at the conference
‘Adressing Internal Market Barriers’, Toronto,
1st February 2010, Forum of Federations,
C.D. How Institute, Industry Canada
Structure
1.
2.
3.
4.
5.
6.
7.
Purpose and background
EU fundamentals, an introduction
Economic salience of the EU internal market
Constitutional & legal provisions
Major barriers in the internal market
Adressing the barrier’s process and means
Lessons learned
2
Purpose and background
PURPOSE
 Quasi-federal character of EU I.M.
 Vital importance of EU I.M.
 Far-reaching, though incomplete, I.M.
BACKGROUND
 EU is not a ‘country’ (despite selective ‘pooling’ of
sovereignty)
 EU  ‘unity in diversity’
 EU  (mainly) ‘rules, not money’
 MS still huge spending (& taxing) powers
 MS still considerable ‘local’ regulatory powers
 EU centralisation sensitive beyond status-quo
3
EU fundamentals: an introduction
i.
ii.
iii.
iv.
v.
vi.
Building blocks of today’s EU
Economic structure of Rome treaty
Central principles
EU Developments, stylized
Internal Market Diamond
Internal Market ties in Common Policies
4
Building blocks of today’s EU
foreign policy /
defence
justice & home
affairs
common values &
subsidiarity
monetary union, the euro
economic union
inter gov’t
Competitive internal market
cohesion +
coop.
• (cross-border) LIB
flanking
among
• mutual recognition
policies +
MS
• harmonisation
(Lisbon)
• common policies (for IM)
other common
policies
5
Economic Structure of the
Rome Treaty
ECONOMIC AIMS
1. harmonious development
of economic activities
2. continuous and balanced
expansion
3. increase in stability
4. accelerated raising of the
standard of living
MEANS
KEY PRINCIPLES
INSTITUTIONAL FRAMEWORK
common institutions
* Community loyalty
supreme judicial review
* non-discrimination as to
nationality
* widening of powers, only
within the operation of the
common market
Commission: guardian of the Treaty
EU Budget
decision-making rules
COMMON MARKET
Customs Union
free movement of goods
free movement of persons
free movement of services
free movement of capital
APPROXIMATING ECONOMIC POLICIES
common trade policy
common agricultural policy
common competition policy
common transport policy
approximation of fiscal and
economic regulation
other (weak) instruments
right of establishment
6
Central principles
(a) non-discrimination
→ between nationals or
goods/services/companies
of different national origin
→ very powerful principle, ECJ very strict
(b) Subsidiarity
→ functional principle for the (optimal)
allocation of powers to
2 gov.t. levels
→ starting point: close to the citizens, if
objective can still be effectively pursued
→ ultimate decision: political (accountability)
7
Central principles (2)
(c) free movement/ establishment
→ not just free trade or exchange
→ but….. a RIGHT to enter other (EU)- markets
→ establishment: setting up a company or even a
non-profit-centre
→ note: free movement of workers = “unfree”
(d) supremacy of EU Law
→
→
→
→
ECJ acts like a (federal) supreme court
of course only for EU aspects of law
can imply financial sanctions
but… no (federal) army, only political
embarrassment!
(e) the “economic order”
→ micro: free market/open economies
→ macro: (price) stability culture (both monetary &
fiscal)
8
EU developments

DEEPENING
 accomplishments or commitment
with harder binding, fewer exceptions,
more credible
[both MS constraints ; EU policies ]

WIDENING
 larger scope of commitment & policies ;
wider domains, new areas of policies

ENLARGEMENT
 new Member States
[ six enlargements thus far ]
9
INTERNAL MARKET
DIAMOND
liberalisation
(free movements,
establisment)
mutual
recognition
proper
functioning
IM
competition
policy
regulation
(approx; common
policies)
10
The Internal Market: interface with the
EU Common policies
competition policy
(incl. state aids)
A
Trade policy
A
A
A-B
environmental policy
C
Immigration policy
(incl. asylum)
•econ freedoms
•SHEC regulations
•IPRs
A-B
A
Internal Market
•investor protection
•labour market reg.
•public procurement
C
Industrial
policy
A
agricultural &
fisheries policy
B
transport policy
(6 modes)
(incl. TENs)
energy policy
(incl. TENs)
B
B
regional policy
& Cohesion
EU Research
area
= critical for IM
B = important for IM, yet, has other powerful drivers, too
= critical for IM, but partly not at EU level
C = (currently) of minor important for IM
11
Economic salience of EU’s I.M.
success story, with ups and downs
intra-EU trade ratios up, steadily
intra-EU services trade poor, however
East-West intra-EU trade supergrowth
FDI inside EU strong, with NMS growing fast
until crisis
 intra-NMS trade fully recovered
 Declining home bias, though still rather high
 I.M., playground for ‘happy few’ performing
companies





12
Constitutional & legal conditions
greater salience of ‘subsidiarity’ in Lisbon
treaty
 attribution of powers, responsibilities and
objectives
 treaty making and binding effects
 Legal rights with respect to the I.M.
 IM & intergovernmentalism in EU

13
Attribution of powers

principles of conferral, subsidiarity and proportionality

subsidiarity esp. via RIAs
Enumeration of competences
1.
exclusive EU (CU, competition, monetary, trade)
2.
shared EU/MS competences:
IM (but overlaps mostly what follows), social [very
limited], cohesion, agri-fisheries, environment,
transport, TENs, energy, area of FSJ, public health
(contagious diseases only)
3.
Specific coordination: cooperation on economic,
employment and social policies
4.
EU merely supports, help coordinate, supplements MS:
human health, education, industrial competitiveness,
culture, civil protection (disasters)
14
Treaty-making & binding effects







EU has treaty-making power
in TRADE and a host of IM-related aspects
(SHEC)
Many RTAs, FTAs and WTO
‘economic’ treaties signed by COM & MS
treaties are binding on MS and economic agents
Negotiations: Council mandate (proposed by
COM); needs Council concent; can require EP
‘consent’; COM keeps in touch with Council
during negotiations
EU bound by many treaties
15
Legal rights in the I.M.
legal rights effectively constitutionalized for
cross-border liberalisation
 consist of:

– free movement (goods, services, capital, labour)
– free establishment
– non-discrimination (as to nationality)
(economic) EU integration = (ever) fewer
derogations by MS  negative integration
 ‘deepening’
 ‘widening’  widening of the scope of rights
 non-economic rights  via ‘EU citizenship’

16
I.M. and intergovernmentalism in EU
 Three forms
 (a) classical intergovernamentalism:
 Lisbon strategy/process
 ad hoc cooperation in EU (education/Bologna, etc..)
 (b) MS in Council
 is the voice of MS
 but… its (co-)decision is part of checks & balances in …. supra
nationalism
 no ‘going back’ or reversal
 (c) in political science, shift to (Eur.) Council power often
called ‘more intergovernmental’ (= less COM power)
 IM (= hardcore EU) is firmly supranational
17
Major barriers in the IM
First, where are we with the IM?
 EU wants a ‘properly functioning IM’ as the principal
means to achieve socio-economic aims
 appropriate combinations of negative/positive integration
 goods market integration close to ‘complete’
[procurement difficult; military out]
 capital market free
 services market integration highly uneven
 labour market integration hardly exists, what exists is
severely distorted
 codified technology, quite far, except patents
18
Major barriers in the IM (2)
Lingering barriers/distortions
 Corporate taxation: highly diverse tax base
(‘rivalry’) despite Primarolo
 no (federal) corporate EU tax (base)
 lingering national REG barriers (esp.
services/labour)
 discriminatory pricing [anti-trust & IM]
 investment incentives [ EU state aids regime]
 land ownership rules ( only Central Europe)
 labour qualification rules (de facto)
 labour union membership
19
Addressing barriers,
processes and means
critical to appreciate how it works in the EU:
‘acquire’ from MS step-by-step
 ‘obvious’ federal powers are NOT central in EU

 taxation
 infrastructure
 (funded) social policy/security




veto removed in Single Act (1985/7)
Council consensus (nonetheless) highly valued
EP genuine co-legislator
ECJ case-law quite important
20
What issues most salient?
Highlights
 at first, goods and direct investment only
 but goods, in a rather ‘incomplete’ fashion
deepening
 after 1985, goods
widening
 3rd gen.n financial, upshot from EMU
 network industries (7x) liberalisation since ± 1989
[plus a range of ‘autonomous’ agencies]
 some progress on labour migration + postal workers
 horizontal services liberalisation (2006/9)
 4th generation Fiancial Services prompted by crisis
21
Who drove the agenda?
political elite and the ‘permissive consensus’
US FDI in the 1960s (note: agenda fixed in treaty)
ECJ in the 1970s
COM + ERT in the 1980s
MS and CBs in the 1990s for EMU
COM, and business customers, for network
industries
 MS + COM (in Lisbon, 2000) for horizontal
services liberalisation, until social protests
emerged
 thereafter, EP only





22
Courts versus political processes

national courts
 can side with economic agents against
national governments
mostly COM, though  and ECJ ‘behind’ it
national courts can ask a ‘preliminary’ ECJ ruling
COM, Council & EP  (re-)act on case-law
Council convicted on transport in 1985
COM occasionally rebuked, but also many
victories over MS (telecoms, hor. services)
 political (co-) decision most prominent, with
COM and the European Council ‘leading’





23
In ECJ, private parties or governments?
the first step of economic agents (or citizens) is
the national courts (if one has standing)
 but most goes via COM (can suffice) to the ECJ
(where standing is more restricted)
 private litigation (e.g. in anti-trust) is still rare,
though COM is now promoting it
 what has helped proper implementation is that
private agents can claims damages from nonimplementation of EU directives in a MS

24
IM agenda:
political drivers and drummers


for drivers forward, see slide 22
sensitive socio-political ‘drumbeats’ on IM
examples:
 recent
 older







REACH; horizontal services lib.n.
issues prompted by Eastern enlargement
agriculture
steel subsidies (1977-1994)
coal subsidies (1952-)
shipbuilding (1957, in treaty)
state-aids to banks since late 2007 have
been much LESS controversial
 IM-related Agencies
25
Decision-making mechanisms






basics today: co-decision (EP + Council)
after COM proposal (COM has monopoly to
propose)
sometimes QMV is replaced by veto in Council
e.g. taxation and social security; patents
unanimity CAN be disastrous for EU, but, still,
many directives (700) had unanimity
new is ‘enhanced cooperation’ – however, to
keep the ‘coalition of the willing‘ open for the
‘laggards’, conditionality is strict  in actual
practice, useless
26
Lessons learned





EU between economic regionalisation & economic
federalism
EU is not a (federal) country, has no government, COM is
not elected, EP does not choose the executive;
EU has no (federal) army; national labour markets and a
tiny common budget, no taxing power
the MS still retain enormous spending power
Still, EU IM much in common with federations






far-reaching (cross-border) economic mobility rights
extensive powers for ‘positive market integration’
many common policies, some strong ones
an emerging culture of EU Agencies (limited power)
centralisation (subsidiarity) is now a key issue
intergovernmentalism in EU is of doubtful effectiveness
27