THE BATTLE OF
THE SINGLE EUROPEAN MARKET
This book studies the history of the single, or internal, market of the
European Union since its beginnings after the Second World War until the end of 2000. The perspective is pluridisciplinary and incorporates several dimensions: historical, political, economic, legal and sociological. Based on several interviews and other sources, the book aims to be the most complete synthesis of one of the major achievements of European integration.
In particular, the author asks: What is the single European market (SEM) and how has it evolved over the years? How does the SEM work? Who have been the stakeholders of the SEM? What has been the articulation between the SEM and the other components of the European integration process? How have economists analyzed and assessed the SEM since its beginnings? What has been the power of economic thought?
This fundamental and timely publication will be of interest to all those concerned with the future of every aspect of Europe.
Gilles Grin is a scientific assistant at the Swiss Federal Office for
Education and Science in Berne. He also worked as a consultant for the
European Commission. He holds a Bachelors degree from the University of Lausanne, Masters degrees from Yale University and the London
School of Economics, and a Ph.D. from the Graduate Institute of
International Studies in Geneva.
www.keganpaul.com KEGAN PAUL
EUROPEAN STUDIES SERIES
THE BATTLE OF THE SINGLE EUROPEAN MARKET Gilles Grin
SEX WORK, MOBILITY AND HEALTH IN EUROPE Sophie Day and Helen Ward THE BATTLE OF
THE SINGLE EUROPEAN MARKET
Achievements and Economic Thought
1985-2000
Gilles Grin
KEGAN PAUL
London • New York • Bahrain First published in 2003 by
Kegan Paul Limited
Reprinted in 2004 with corrections
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© Gilles Grin, 2003
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TABLE OF CONTENTS
PREFACE xi
ACKNOWLEDGEMENTS xv
INTRODUCTION TO THE SINGLE EUROPEAN
MARKET 1
Concepts and Substance 1
Machinery 13
PART ONE. ORIGINS OF THE BATTLE OF THE
SINGLE EUROPEAN MARKET 31
CHAPTER ONE. ORIGINS OF THE SINGLE
EUROPEAN MARKET, 1945-1985 33
Towards the Treaty of Rome 33
Treaty of Rome 35
De Gaulle, the Treaty of Rome and the Failure of the Large
Free Trade Area 45
Establishment of the Customs Union 48
From Customs Union to Common Market? 54
Living in a Disrupted Era 60
CHAPTER TWO. DEVELOPMENTS OF THOUGHT
ON EUROPEAN ECONOMIC INTEGRATION
BEFORE 1985 73
Jacob Viner and the Launch of the Theory of Customs Unions 73
An Increasing Complexity of the Theory of Customs Unions 77
Assessment of the Theory of Customs Unions 85
From Theory to Measurement 87
Problems of Economic Union 92
Birth of the 'Cost of Non-Europe' 99 PART TWO. THE BATTLE OF THE SINGLE
EUROPEAN MARKET AND ITS ACHIEVEMENTS 107
CHAPTER THREE. THE COMPLETION OF THE
SINGLE EUROPEAN MARKET, 1985-1992 109
New Delors Commission 109
New Approach to Harmonization 114
White Paper on 'Completing the Internal Market' 115
Single European Act 121
Wheezy Beginnings 130
New State of Mind 133
The Single European Market Takes Shape 139
Treaty of Maastricht 146
The Single European Market at the End of 1992 151
CHAPTER FOUR. THE MANAGEMENT AND
DEEPENING OF THE SINGLE EUROPEAN
MARKET, 1993-2000 165
New Era for the Single European Market 165
New Treaties for a New Era 174
Developments on the Single Market Front: A Macro View 179
Developments on the Single Market Front: A Micro View 186
The Single Market and Beyond 192
The Single European Market in 2000 202
PART THREE. THE SINGLE EUROPEAN MARKET
AND THE BATTLE OF ECONOMIC THOUGHT 233
CHAPTER FIVE. THE CECCHINI REPORT AND ITS
CONTROVERSIES 235
Origins of the Cecchini Report 235
Content of the Cecchini Report 238
A Huge Debate Unleashed by the Cecchini Report 245
Choice of an Economic and Social Model for Europe 253
Debates on Barriers 256
Methodological Difficulties 268
Economies of Scale, Competition, and Innovation 273
Adjustments in the European Economy 276
viii Allocation versus Accumulation Effects 282
Distribution of Effects 283
External Dimension of the Single Market 289
CHAPTER SIX. THE SINGLE MARKET REVIEW:
AN APPEASED DEBATE? 305
Origins and Content of the Single Market Review 305
The Single Market Review and the Cecchini Report 310
Debates on the Level of Integration of the Single Market and its Benefits 319
The Single Market and Monetary Integration 326
The Single Market and Economic Growth 329
Convergence and Divergence inside the Single Market 331
The Single Market and the Rest of the World 335
CONCLUSIONS 345
BIBLIOGRAPHY 359
INDEX 369
ix
PREFACE
Welcome to the battle of the single European market. The process of contemporary European integration was initiated in the wake of the Second
World War and has deepened considerably since its heroic beginnings. This process has mainly followed an economic path but it has always been guided by both economic and political concerns. Our investigation into the single or internal market of the European Union, which is the object of this work, lies at the core of the integration process and is very widely hailed as one of its most precious jewels. It would indeed have been most difficult, if not impossible, to adopt a single currency, the euro, without the groundbreaking work accomplished within the framework of the completion of the single market. In this work we will deal in great detail with the definition of our object of investigation. This is not an easy task because the single European market has been a dynamic concept and nobody has yet provided a final and unanimously approved definition of it. We endeavor to adopt a clear and coherent definition of it in this work without oversimplifying the complexities of real life: definitions and modeling have to adapt to the real world and not the other way around.
At this point it suffices to say that the single market is a sui generis legal order based on the rule of law and administered by a complex machinery that aims to provide a number of basic freedoms and to establish some general rules while taking into account a number of policy objectives. The basic freedoms of the single market can be enumerated in the following way: free movement of goods, free provision of services, right of establishment, free movement of workers, free movement of citizens and free movement of capital. These six freedoms aim to allow free movement of the products of economic activity and of their production factors but also – and this did not appear in the original Treaty of
Rome which established the European Economic Community – of European citizens in a general sense. The single market also provides for a number of general rules for economic agents and for public authorities. Rules for economic agents concern taxation, competition, company law, and intellectual and industrial property. Rules for public authorities have mainly to do with public procurement and state aids. The single market must be analytically distinguished from the various Community flanking policies but it still takes into account a number of common policy objectives. This explains why the single market acquis communautaire incorporates some measures pertaining to the social, environmental, trans-European networks, energy, public health and consumer policies. The process of market reform may also be considered as a component of st the single market. Since the Single European Act came into force on July 1
1987, the completion of the single market has taken place within the framework of the establishment of an area without internal frontiers. Now, thanks to
European integration, internal frontiers have indeed largely become a thing of the past even if some qualifications thereupon are nonetheless required. The Battle of the Single European Market
This study focuses primarily on the years from 1985 to 2000, but two introductory chapters lay the ground by presenting more briefly the period ranging from the end of the Second World War to the project’s re-launch in 1985.
That year is indeed fundamental for the single market and for European integration more generally and saw the entry into function of a new Commission presided by Jacques Delors, the adoption of a comprehensive program to complete the internal market – the famous White Paper – and the first major overhaul of the European Treaties leading to the signature of the Single European
Act in February 1986. The title of the study contains the word 'battle'. There is more than a splash headline to this choice because the completion of the single market has in no way been an easy task. Even if virtually everybody agreed on the desirability of bringing about more cohesion between the Community's
Member States and of uniting their hitherto fragmented markets, the implementation of the White Paper broke many national protective devices and led to an encroachment of numerous firms on the various individual markets.
What has happened in the Community since 1985 has been spectacular and was not self-evident at the beginning of the process. Even if not everything is perfect today, progress has been impressive. We may hence say that we are studying a success story in this work. The term 'battle' is also appropriate with regard to economic thought. Economists and other actors participating in the intellectual debate underpinning and as the result of realizations in the policy field did not agree on everything and sometimes not even on the premises of analysis.
This research aims at studying the single European market through a multidisciplinary approach. In order to acquire the best possible global understanding of the topic, we must look at it from the points of view of history, economics, law and politics. At the same time, this work cannot be exhaustive with regard to each of the disciplines it uses. This explains for instance, why this dissertation cannot be considered as a legal handbook. Nor is it a detailed piece of research in political science analyzing the positions of all political parties and national parliaments across the Community. With regard to economics, we are not presenting personal models nor are we using highly sophisticated tools. We have opted for a more literal approach presenting economic debates and controversies. In doing so we are endeavoring to emphasize the various hypotheses, mechanisms and conclusions mentioned by authors, and to identify the points of agreement and disagreement between them. The question as to the sort of economic principles that have guided European decision-makers when building the single market will be analyzed and we shall try to investigate the complex interaction between economic thought and achievements. Modern thought on regional economic integration conventionally begins in 1950 with
Princeton Professor Jacob Viner's pioneering work on a theory of customs union
– the abolition of internal tariffs and the establishment of a common external tariff. Thought on regional economic integration, which has also been shaped by the progress of European integration, has developed considerably since 1950. In order to understand more fully what has been achieved in the European
Community, one must be sensitive to the various messages put forward by
xii Preface
economists and analyze the way in which these messages have interacted with conventional economic wisdom. Sometimes, there have been clashes of ideas and battles of economic thought, which have shaped both theory and reality. The ultimate aim of this work is precisely to bring together theory and reality. For a historian of economic thought, economic authors become historical subjects and their work historical objects. The role of the historian is to understand their assumptions, their framework of analysis, their conclusions, the historical and intellectual context of the time and also the evolution of thought through new knowledge or paradigmatic breaches by looking at successive writings over time.
Economics is based on very powerful and elaborate concepts and tools, which the historian will not be able to master completely. However, history can add a new – diachronic – perspective to a science that tends to be otherwise mostly synchronic. Historical and economic perspectives can learn a lot from each other in that they are complementary and not mutually exclusive.
An extensive literature exists on European integration, European economy and national European economies, Member States of the European Union, economic science (whether it looks at the economics of regional integration or trade and growth) and on empirical assessments of economic integration in
Europe. Studies that combine an analysis of the achievements of European economic integration and economic analysis are less numerous and they tend to present each author's personal economic analysis or a work on what is supposed to be the current state of knowledge completed with charts such as those deriving from the theory of customs unions. An exhaustive bibliography of all the literature mentioned above would arguably fill up some thousands of pages. Our own bibliography is hence extremely selective and limited to what we judge to be most relevant. Because of the exponential growth of European and economic literature, the work of scholars dealing with these fields tends to be more and more concerned with exclusion rather than inclusion. As a matter of fact, there is no such thing as a detailed and readable history of economic thought on market integration in the European Community. Regarding the single European market specifically, its definition and substance are very frequently impoverished to the extent that it only encompasses the free movement of goods, the free provision of services, the right of establishment, the free movement of workers and the free movement of capital. Its citizens' dimension, its general rules, its close relationship with flanking policies and the sharing of common policy objectives
(e.g. in the social and environmental fields), the description of the complex machinery that runs it, an historical perspective, its political dynamics and its importance in the integration process and finally its interaction with economic thought are all but gone with the wind. Our ambition in this work is to succeed in the challenge of inclusion rather than that of exclusion and to present a comprehensive overview of what the single European market has been, and is today, and what it means for the process of European integration and for economic thought. At the same time, this research does not aim to be a textbook on European integration and its economics in general or on internal market law in particular.
xiii The Battle of the Single European Market
In addition to the documents mentioned in the bibliography, our source material has been found on a number of selected websites. The website of the
European Union, which can be found under http://europa.eu.int/, is an outstanding reference for the study of European integration and also provides links to various national websites. We have also been very fortunate in being able to benefit from a number of interviews and conferences. All the precise sources of quotations throughout this work can be found in the endnotes. There are also some footnotes which provide relevant complements to what can be read in the core of the text.
Following on from this preface, we will present an introduction to the single
European market. We will first look at the concepts of integration and the substance of the single market then we will describe the complex machinery that manages the single market. After thus setting the scene, we shall move to Part I which is devoted to the origins of the battle of the single European market. Part I covers the period from the end of the Second World War to the re-launch of 1985 and comprises Chapters 1 and 2. Chapter 1 is a historical narrative and analysis whereas Chapter 2 introduces economic thought. Parts II and III, that is to say
Chapters 3 to 6, form the core of this work. Part II presents the battle of the single
European market and its achievements over the period from 1985 to 2000. Inside
Part II, Chapter 3 covers the years from 1985 to 1992 and Chapter 4 the years from 1993 to 2000. The time gap between the two Chapters comes from the 31
December 1992 deadline in the White Paper on the completion of the internal market and the Single European Act. In theory, the single, or internal market, was supposed to be completed by the end of 1992 and managed thereafter. In reality things proved to be more complex and this is precisely what we will try to show.
The last section of Chapter 4, entitled 'The Single European Market in 2000', is based on documentary evidence and interviews with economic actors and
Commission officials whose aim is to provide an assessment of the reality of the single market in 2000. A reader in a hurry and/or with only a weak interest in historical developments should concentrate on this section.
Part III presents the battle of economic thought around the single market during the period from 1985 to 2000. As in Part II, Part III has two Chapters covering respectively the period from 1985 to 1992 and from 1993 to 2000.
Chapter 5, which covers the period from 1985 to 1992 is entitled 'The Cecchini
Report and its Controversies'. The following Chapter – 'The Single Market
Review: An Appeased Debate?' – deals with the years from 1993 to 2000. Both the Cecchini Report and the Single Market Review initiated by the Commission and the Council respectively were very important research projects on the single market that have largely influenced the economic debate. A reader only interested in the historical narrative and the achievements of the single market should thus consult Chapters 1, 3 and 4 covering respectively the years from 1945 to 1985,
1985 to 1992, and from 1993 to 2000. Conversely, a reader only interested in the history of economic thought should read Chapters 2, 5 and 6 covering respectively the periods from 1950 to 1985, 1985 to 1992, and from 1993 to
2000. At the end of this work, we will present some elements of conclusion.
xiv ACKNOWLEDGEMENTS
This book is based on the doctoral dissertation I presented in July 2002 at the
Graduate Institute of International Studies in Geneva. It is dedicated to my father,
Jean-Paul Grin, and to my intellectual master, Professor Pierre du Bois, from the
Graduate Institute in Geneva. Without them, this book would simply never have been possible. My father has always taken good care of me and has provided me with the most congenial working environment one could ever dream of. My only hope is that by now he is not too bored with the single European market.
Professor Pierre du Bois has always been much more than a supervisor; he has been both a master and a friend. Of all the things I owe him, I would like to firstly underline his intellectual probity, which has always been a model for me. At the very outset of this work I would like to stress my admiration and deep respect for all the good things that European integration in general and the single market in particular have, to my opinion, brought to Europe. Still, Professor du Bois has always taught me not to be blinded by our passions. Consequently, I have strived to remain as neutral in this work as possible and to present and assess the single market and economic thought in the most objective way possible. My second debt
I owe to Professor du Bois arises from the fact that he has always encouraged a pluridisciplinary approach to international relations and to European integration, and I am now convinced that this is indeed the ideal way to proceed.
The other two distinguished members of my jury also deserve my praise.
Professor Richard Edward Baldwin, from the Graduate Institute in Geneva, is one of the brightest economists of his generation and he has provided me with great insights into his discipline. In addition, the openness of Professor Baldwin towards a non-exclusively economic analysis of the single market has always impressed me. Finally comes Professor Alfonso Mattera, who has brought me his unique experience as both a practitioner and a scholar – Professor Mattera is deputy director-general of the Internal Market at the European Commission, he is also a professor of European internal market law at the College of Europe in
Bruges and at the University LUISS Guido Carli in Rome. Professor Mattera's two lectures given at the Graduate Institute in Geneva, on 30 March 2000 and 30
January 2001, plus our various conversations, greatly inspired me. Professor
Mattera's secretaries at the Commission, Maria-Filippa Budroni and Véronique
Lafon, have provided me with the greatest help in arranging thirteen of the twenty-one interviews mentioned below.
I have also benefited over the years from contacts and discussions over
European affairs with Professor David Calleo, of the Paul H Nitze School of
Advanced International Studies (SAIS) at John Hopkins University; Professor
Victoria Curzon-Price, of the University of Geneva; Doctor Jennifer Jackson
Preece, of the London School of Economics and Political Science (LSE); Doctor
Howard Machin, former director of the European Institute at the LSE; Doctor
Max-Stephan Schulze, also from the LSE; Professor Marc Trachtenberg, of the
University of California at Los Angeles; Professor William Wallace, of the LSE The Battle of the Single European Market
and Professor Charles Wyplosz, of the Graduate Institute in Geneva. Other professors have contributed to deepen my interest in history and to shape my understanding of it: Professors Mary Habeck (from Yale University), André
Liebich (from the Graduate Institute in Geneva), Philippe Marguerat (from the
University of Neuchâtel in Switzerland), Joshua Rosenbloom (from the
University of Kansas at Lawrence), Frank Snowden, Piotr Wandycz and Robin
Winks (from Yale University). I must also praise Mr. Édouard Savary, who taught me history for three years in high school. Within European institutions, I would like to extend my gratitude to Mr. Joël Le Quément at the European
Commission and Mr. Lutz Goebel at the General Secretariat of the Council of the
European Union for their very precious help. I have also had stimulating discussions on the dissertation with my four friends: Scott Greer, Dorothée Janet,
Marcus Jones and Willem Maas.
I have benefited from invaluable insights thanks to twenty-one interviews with wonderful people who have provided me with their unique understanding and perspective on the single market. I would like to take this occasion to extend my thanks to them and to tell them how much I have enjoyed discussing with them. The following is a list of the people interviewed with their function at the time of the interview and the place and date of the meeting: Mr. Michel AYRAL, director, Energy and Transport DG, European Commission (Brussels, March 12,
2001); Ms. Marisa BANASIAK, civil servant, Internal Market DG, European
Commission (Brussels, June 22, 2000); Mr. Francisco CABALLERO SANZ, head of unit, Internal Market DG, European Commission (Brussels, June 23,
2000); Mr. José CANDELA CASTILLO, member of the European Governance
Team, Secretariat-General, European Commission (Brussels, April 4, 2002); Mr.
Mateo CAPO SERVERA, civil servant, Internal Market DG, European
Commission (Brussels, June 23, 2000); Mr. Michel CATINAT, adviser,
Enterprise DG, European Commission (Brussels, June 21, 2000); Mr. Paolo
CECCHINI, former deputy director-general, Internal Market and Industrial
Affairs DG, Commission of the European Communities; chairman of the
Research on the Cost of Non-Europe (Neuchâtel, Switzerland, July 26, 1996);
Mr. Daniel CLOQUET, director, Industrial Affairs Department, Union of
Industrial and Employers' Confederations of Europe (UNICE) (Brussels, March
19, 2001); Mr. Étienne DAVIGNON, former member and vice-president of the
Commission of the European Communities (Brussels, May 16, 2002); Mr. Willy
DE CLERCQ, member of the European Parliament; former member of the
Commission of the European Communities (Brussels, April 18, 2002); Mr.
Anthony DEMPSEY, deputy head of unit, Internal Market DG, European
Commission (Brussels, June 22, 2000); Ms. Marion DEWAR, civil servant,
Internal Market DG, European Commission (Brussels, June 22, 2000); Mr.
Adrian DIERX, civil servant, Economic and Financial Affairs DG, European
Commission (Brussels, March 23, 2001); Mr. Franck DINTILHAC, civil servant,
Internal Market DG, European Commission (Brussels, June 21, 2000); Mr.
Gérard FUCHS, member of the French National Assembly; vice-president of the
Delegation of the National Assembly for the European Union (Paris, February 13,
xvi Acknowledgements
2001); Mr. Luc HENDRICKX, member of the Secretariat, European Association of Craft, Small and Medium-sized Enterprises (UEAPME) (Brussels, March 23,
2001); Mr. Robert HUTCHINGS, former director at the U.S. National Security
Council and ambassador (Washington, D.C., February 27, 1997); Mr. Jim
MURRAY, director, The European Consumers' Organization (BEUC) (Brussels,
March 20, 2001); Mr. Ulrich PAETZOLD, director-general, European
Construction Industry Federation (FIEC) (Brussels, March 21, 2001); Mr. John
SHEEHY, civil servant, Internal Market DG, European Commission (Brussels,
June 23, 2000); and Mr. Alexander SPACHIS, adviser, Internal Market DG,
European Commission (Brussels, June 19, 2000).
I had the privilege to review this work while doing a stage administratif
(administrative traineeship) in the European Commission in Brussels. Mr.
Francisco Caballero Sanz, my head of unit in charge of the evaluation and monitoring of the internal market in the Internal Market Directorate-General, and
Mr. John Sheehy, my adviser, deserve a special thank for their wonderful cooperation.
Finally, I would like to thank from the bottom of my heart Mr. Peter
Hopkins and his colleagues at Kegan Paul for their most professional work and a wonderful partnership.
xvii INTRODUCTION TO THE
SINGLE EUROPEAN MARKET
Concepts and Substance
In this piece of work we study the 'single European market' through a multidisciplinary approach. Our first mission in this introduction to the work is to try and clarify the meaning of the various concepts pertaining to European economic integration and to present the very rich substance of today's single market. In his book The Theory of Economic Integration published in 1961, Bela * Balassa presented the following typology: 'economic integration, as defined here, can take several forms that represent varying degrees of integration. These are a free-trade area, a customs union, a common market, an economic union, and complete economic integration. In a free-trade area, tariffs (and quantitative restrictions) between the participating countries are abolished, but each country retains its own tariffs against nonmembers. Establishing a customs union involves, besides the suppression of discrimination in the field of commodity movements within the union, the equalization of tariffs in trade with nonmember countries. A higher form of economic integration is attained in a common market, where not only trade restrictions but also restrictions on factor movements are abolished. An economic union, as distinct from a common market, combines the suppression of restrictions on commodity and factor movements with some degree of harmonization of national economic policies, in order to remove discrimination that was due to disparities in these policies. Finally, total economic integration presupposes the unification of monetary, fiscal, social, and countercyclical policies and requires the setting-up of a supra-national authority 1 whose decisions are binding for the member states.'
As interesting as this typology may seem, it bypasses in reality several fundamental features of the process of European economic integration, some of which could however not yet be observed by Balassa in 1961. There is first no sectoral integration in Balassa's typology in spite of the fact that such integration has taken place in reality. A second point is that there has also been in reality cooperation to eliminate some non-tariff barriers and to adopt some general rules inside free trade areas. Third, with regard to a customs union, it is not clear whether the latter includes the abolition of quantitative restrictions between its members, as is the case for a free trade area in the typology. The answer seems positive but in such a case there is a contradiction with the definition of the † customs union provided by the Treaty of Rome. Anyway, does the establishment
* Bela Balassa was at Yale University in 1961.
† Article 9 par. 1 of the Treaty establishing the European Economic Community (renumbered as
Article 23 par. 1 since 1999) states the following: 'the Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member
States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.' The Battle of the Single European Market
of common quantitative restrictions towards non-members constitute a component of the customs union for Balassa? We do not clearly know. And does
Balassa's customs union include some measures to get rid of non-tariff barriers?
We must then consider the common market as defined in the typology. It corresponds to the free movement of goods and factors of production. Services are arguably missing here because they are also the products of an economic activity, but the most troublesome element is that at this stage there are still no measures of positive integration. Hence, for Balassa, the establishment of a common market can be reached through negative integration exclusively (i.e. the dismantling of obstacles without adopting new common rules, legislation or programs). In reality, this is impossible and already with the very first stages of integration there is some need to adopt measures of positive integration.
We have considered so far the cases of sectoral integration, a free trade area, a customs union and a common market. Now, as a fifth point, we should deal with economic union. For Balassa it is a common market flanked by some degree of harmonization of national economic policies in order to remove discrimination. Positive integration comes at last in Balassa's typology. However, as we said, it comes too late. Let us take again the case of the customs union to illustrate this fact. A customs union has three components: first the elimination of internal customs duties, then the establishment of a common customs tariff, finally – and this is forgotten most of the time – the harmonization of customs legislation between the members of the union. A scheme that only possesses the first two attributes is named a tariff union. The abolition of internal customs duties is an act of negative integration while the elaboration of a common customs tariff, if it is different from zero, which it is always in reality, is arguably an act of positive integration. Hence the creation of a tariff union already mixes elements of negative and positive integration. This fact is a fortiori even truer for a customs union because its last component, the harmonization of customs legislation, constitutes positive integration. The last scheme described by Balassa is total economic integration. Here several aspects are problematic. We do not know if total economic integration requires the adoption of a single currency or not. Then, we do not know why the unification of countercyclical policies is a component of total economic integration and not already of an economic union.
In reality, some degree of unification of fiscal and social policies already comes earlier in the process of economic integration. Finally, the presence of a supranational authority needs not wait the stage of total economic integration as the case of the European Coal and Steel Community has proved.
Given all the criticisms we have exposed, we think that Balassa's typology ought to be modified in order to bring it closer to reality. Our revised typology consists of the five following stages that can be connected to each other: sectoral integration, free trade area, customs union, common market, and final process leading towards total economic integration. In the revised typology, we introduce a new first stage, that of sectoral integration. It is of fundamental importance to state that for this stage as well as for the others, measures of negative and positive integration always coexist at the same time. For example, a sectoral integration
2 Introduction to the Single European Market
scheme may mix internal tariff disarmament with legislative harmonization. Then we have the free trade area and hence the scope moves from one or a couple of selected sectors to the whole of the economy of integrating member states, but let us not forget that cross-sectoral integration might be less deep than in the previous sector(s) integrated. The question remains open, from a theoretical perspective, to know if a free trade area should also encompass the elimination of internal quantitative restrictions and other internal non-tariff barriers. The same question applies to a customs union. With a positive answer, a customs union should include, on the external side, not only the establishment of a common customs tariff and the harmonization of customs legislation, but also the setting- up of common quantitative restrictions towards non-members (if such restrictions do exist) and a common position regarding non-tariff barriers towards non- members. The stage of the common market is wider than in Balassa's original typology as it includes free movement for the products of economic activity
(goods and services) and for factors of production (persons and capital) plus the adoption of some general rules and the elaboration of some flanking policy measures. To that regard, our common market is in fact closer to Balassa's economic union than to his common market. The final category, 'towards total economic integration', is more a process than a stage. It could include the adoption of a single currency and the further development of flanking policies.
We speak of a process rather than a stage because there will arguably not be a point in the future (unless in the very long term) when it will be possible to argue that the integration process is complete and that no further actions are needed.
All the five categories can be connected to each other. One must indeed break with the oversimplified idea that there is a linear and unidimensional process going from one category to the next one and that there is hence only one path towards closer economic integration. In reality there can be – and there have been in the process of European integration – parallel developments on several fronts not always in the same category. The metaphor of the building of a house in which the ground floor must be constructed first before going further up does not hold. It would be better to conceptualize plans for a very large house on only one floor. Then construction work would be concentrated first on one side of the house while final detailed plans for the whole house would still not be elaborated, but this would not prevent workers from already starting building other parts of the house in spite of this lack of detailed plans. This most pragmatic way to proceed could probably never be implemented in real construction work... so the metaphor has its limits, but it is still useful in helping us understand the complex and dynamic nature of European integration, which makes it too fluid to be encapsulated into rigid and oversimplified typologies. One would totally misunderstand European integration if one believed that it could be possible to find a grand theoretical scheme from the very beginning of the process that could explain all subsequent developments. In European integration theories always run behind achievements.
A few examples pertaining to European integration can illustrate the complexity of its developments with reference to the revisited version of
3 The Battle of the Single European Market
Balassa's typology. The European Coal and Steel Community issued from the
Treaty of Paris signed in 1951 was a typical sectoral integration scheme. At the same time, within its scope, it aimed to establish a free trade area. Two treaties were signed in Rome in 1957. The first one established the European Atomic
Energy Community (Euratom) and brought another piece of sectoral integration.
The second treaty established the European Economic Community (EEC) and constituted a break with sectoral integration. It aimed to create a customs union
(but defined more narrowly than in the typology we have presented). One of the general aims of the Treaty was to establish free movement of goods, but this aim went beyond the mere creation of a customs union as defined in the Treaty. To this regard, the original Treaty arguably did not provide all the instruments to allow goods to circulate unhampered. The determination in the preamble to the
Treaty 'to lay the foundations of an ever closer union among the peoples of
Europe' could mean that the final aim was to move towards total economic integration but the lack of clauses and instruments in the Treaty meant that the objective would stay an utopia without common political will and Treaty modifications. The expression 'common market' appeared in many instances in the Treaty of Rome establishing the EEC but it was never defined. For many it became a synonym for the EEC itself, but it could also be defined in a narrower sense and come closer to the theoretical definition we have given. Indeed, the
Treaty of Rome had the ambition to implement the four freedoms (free movement of goods, services, persons and capital) while flanking them with some general rules and policies. To make things more blurred, we may argue that the Treaty of
Rome also aimed to promote sectoral integration with its articles regarding agriculture and transport. The conclusion of this very brief skimming through the history of the creation of the European Communities shows us that developments have taken place on different fronts in parallel since the 1950s, which of course does not mean that progress in all fields has been even.
It should be clear by now that it is very difficult to establish relevant and meaningful typologies of economic integration in general and of European integration in particular. Ambiguities in the definition and use of terms do not make things easy. As we have said, many people equated the 'Common Market' with the European Economic Community itself. But for people like Balassa, in spite of the imperfections of their definitions, the common market was only a component of the EEC, centered on the notion of the free movement of the products of economic activity and factors of production. As we have argued,
Balassa's definition of the common market unfortunately bypassed the need for positive and not just negative integration. The essence of the definition is still very interesting for us. The use of the expression 'economic union' finishes to blur things. We have seen that the concept was used by Balassa but not well positioned, explaining why we proposed to drop the concept when we revisited his typology. Still, it was popular at the end of the 1960s to evoke the sequence
'from customs union to economic union', thus equating economic union with the fulfillment of all the aims of the Treaty of Rome. As the customs union had largely been put in place on July 1, 1968, that is to say eighteen months before the
4 Introduction to the Single European Market
expiration of the transition period enshrined in the Treaty of Rome, the essence of the slogan was to go forward with the other and less-advanced components of the project. The two expressions 'common market' and 'economic union' were thus used as synonyms for the European Economic Community. In order to be able to close the discussion, we should hence be able to equate 'common market' with
'economic union', but this is extremely problematic because definitions are not homogenous. In a report to his colleagues of the European Council from 29
December 1975, Leo Tindemans, the prime minister of Belgium, studied the ways and means to establish a European Union. He dealt with several issues, one of which was economic and social Europe. Under the heading 'sectoral policies', he mentioned industrial policies, market opening, respect of competition rules, abolition of fiscal barriers, definition of the statute for a European company, agriculture, energy, and research. Leo Tindemans however did not make a reference to the terms 'common market', 'single market', or 'internal market'.
The conclusion of the matter is that in the pre-1985 era there was no clear definition of the concepts of European integration and there was no term unanimously attached to the achievement of the four freedoms flanked by the adoption of some complementary rules and policies. Of course the terms 'single market' and 'internal market' had already been used since the 1950s, but this to a lesser extent and also without clear and unambiguous definitions. Of the three expressions – common market, single market and internal market – only the first one appeared in the Spaak report of April 1956 and in the Treaty of Rome of
March 1957 establishing the European Economic Community. Let us perhaps specify that the Spaak report synthesized the conclusions reached by the
Intergovernmental Committee created at the Messina Conference in June 1955 in * order to relaunch Europe and bring closer integration between the members of the European Coal and Steel Community. This famous report served as the basis of the negotiations leading to the creation of the European Economic Community. 2 Some twenty-five years later, in its Schul ruling of 1982, the Court of
Justice of the European Communities brought its own definitions: the common market was a stage in economic integration which aimed to remove all the barriers to intra-Community trade with a view to the merger of national markets into a single market giving rise to conditions as close as possible to a genuine internal market. With these definitions, a clear hierarchy appears: the single market is the continuation of the common market, and the internal market is the end point of the process or, put it differently, the common market is a stage on the way to an internal market. However, things become more blurred because the
Delors Commission that took office in January 1985 and launched a program to complete the internal market by the end of 1992, also started to use the expression
'single market', but as a synonym for 'internal market', with the aim of putting its own stamp on the 1992 program. The Single European Act of 1986 that modified the Treaty of Rome officially introduced the expression 'internal market', defined
* These members were the following: Belgium, France, Italy, Luxembourg, Netherlands, and West
Germany.
5 The Battle of the Single European Market
as follows: 'the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.' It is interesting to note that this official definition of the internal market accepted by all the Member States was a setback from the initial proposal of the Commission, which stated that the internal market 'shall comprise an area without frontiers in which persons, goods, services 3 and capital move under the same conditions as inside a Member State.' The requirement of a similarity of free movement inside Member States and between them would have been far-reaching and would not have been subordinated to the existing provisions of the Treaty. With the Single European Act, it was the first time that the expression 'internal market' and a reference to the abolition of internal frontiers appeared in the economic constitution of Europe. All this was consistent with the definition of the Court of Justice but the expression 'single market' did not appear anywhere in the Treaty establishing the European
Economic Community, a situation not changed by the subsequent Treaties of
Maastricht (1992), Amsterdam (1997) and Nice (2001). The use of the expression and the rather well defined definition of the single market respectively the internal market in the post-1985 era have made the term 'common market' * obsolete. Of course it is a kind of paradox to see the expression 'single market' appear nowhere in the European treaties but belong to common parlance, also at the level of European institutions. For any practical purpose, and following the practice of European institutions, this work shall use the expressions 'single market' and 'internal market' indifferently. Given all these definitional issues, this piece of work could either have been entitled 'The Battle of the Single European
Market' or 'The Battle of the European Internal Market'; clearly 'The Battle of the
Common Market' does not qualify for a study for which the emphasis is on the post-1985 period. If we have opted for 'The Battle of the Single European
Market', it is because the expression is more easily associated with the heroic days of the Delors Commission and has appeared more often in the very rich debates – and battles – having occurred since 1985. Even if the term 'internal market' is as adequate as 'single market' and will indeed appear quite frequently in this work, it still sounds more like a legal term to which fewer controversies have been attached.
The European Council, composed of the heads of state or government of
Member States, gave the following definition of the internal market in 1995: 'the internal market is an area within which free movement of goods, individuals, services and capital is ensured and in which a system of transparent competition is guaranteed. It requires a high level of mutual trust and equivalent regulatory 4 approaches.' The novelty of this definition is to include explicitly competition policy. In the Single Market Review of 1996, a significant research project on the effects of the single market commissioned by European institutions, a choice was made to take into account the economic consequences not just of free movement,
* Even if the expression 'common market' has become obsolete, it still appears on many instances in the Treaty establishing the European Community.
6 Introduction to the Single European Market
but also of competition policy and regional policy. So, even if regional policy is a flanking policy, its effects are interweaved with those of the single market and cannot be reasonably omitted from an economic viewpoint. The lesson from all this is that there are a priori several flanking policies to the single market that may, partly or totally depending on their aims and tools, be incorporated from a conceptual point of view into the perimeter of the single market. The exact delimitation of the boundaries of the single market is hence a very delicate question. By flanking policies we mean the following (in 2000): common agricultural policy; transport policy; energy policy; competition policy; tax policy; employment policy; common commercial policy; social policy; education, vocational training and youth policy; cultural policy; public health policy; consumer policy; trans-European networks; industrial policy; regional policy; research policy; environmental policy; market reform; and perhaps even economic and monetary union. It has been indeed a striking feature in the history of the European Community since its inception to see the huge development of flanking policies over the years. So what does the single or internal market of
2000 encompass?
Within the framework of an area without internal frontiers, the single market consists of six freedoms, general rules, and the relevant components of several policies. The six freedoms of the single market are the free movement of goods, the free provision of services, the right of establishment, the free movement of workers, the free movement of citizens, and the free movement of capital. The general rules of the single market apply to economic agents (taxation, rules on competition, company law, intellectual and industrial property) and to public authorities (public procurement and state aids). Relevant components of the following policies are also part of the single market: social policy, environmental policy, trans-European networks, energy policy, public health policy, consumer policy, and market reform. Beyond the single market, European economic integration in 2000 also consists of the remainder of flanking policies and of market reform together with economic and monetary union.
The Treaty establishing the European Community states that 'the activities of the Community shall include [...] an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of goods, 5 persons, services and capital [...].' We have hence the four freedoms. Professor * Alfonso Mattera, one of the best experts on the question, rather proposes a cutting into six freedoms that we have just mentioned. The match between the two typologies can be described as follows. The free movements of goods and of capital are the same in the two typologies. The free movement of services and the right of establishment in the typology of the six freedoms correspond to the free movement of services in the shorter typology. The right of establishment is also,
* Professor Mattera has been deputy director-general of the Internal Market at the European
Commission since 2001. He is also a professor of European internal market law at the College of
Europe in Bruges and at the University LUISS Guido Carli in Rome as well as editorial director of the
Revue du droit de l'Union européenne (previously Revue du marché unique européen).
7 The Battle of the Single European Market
together with the free movement of workers and of citizens, a component of the free movement of persons in the typology of the four freedoms. When we compare the two typologies, we can notice that there is a one-to-one relationship with regard to goods and capital, but things are more complicated for the other freedoms. The right of establishment in the second (longer) typology is crucial as it matches both services and persons in the first typology. The Treaty establishing the European Community defines the right of establishment with the following words:
'Within the framework of the provisions set out below, restrictions
on the freedom of establishment of nationals of a Member State in
the territory of another Member State shall be prohibited. Such
prohibition shall also apply to restrictions on the setting-up of
agencies, branches or subsidiaries by nationals of any Member
State established in the territory of any Member State.
Freedom of establishment shall include the right to take up and
pursue activities as self-employed persons and to set up and
manage undertakings, in particular companies or firms [...], under
the conditions laid down for its own nationals by the law of the
country where such establishment is effected, subject to the 6 provisions of the Chapter relating to capital.'
With the right of establishment, natural persons can provide services in a country of destination inside the Community. This right is however broader: it can also apply to the establishment of a business producing goods. This is why the right of establishment must also be understood as part of the free movement of persons in the broadest sense: it can concern self-employed persons or companies or firms. The free movement of services in the second typology corresponds to the case where services are provided across internal frontiers. The free movement of persons in the first typology has three corresponding freedoms in the second one: establishment (which we have just mentioned), workers and citizens. The free movement of workers concerns employed persons which are in a dependency relationship towards an employer; the right of establishment concerns self-employed persons and companies or firms, it includes the mutual recognition of diplomas, certificates and other evidence of formal qualifications; the free movement of citizens, which was not part of the original Treaty of Rome, has been progressively developed over the years through the case-law of the
Court of Justice, Treaty revisions and new legislative instruments. The free movement of citizens can be split into two components: first, there is free movement inside the territory of the Union for people who are not economically active (e.g. students, persons of independent means, pensioners); second, there are social and political rights granted to all the nationals of a Member State of the
Union who live in another Member State.
The single market can be conceptually defined as consisting of the six freedoms, a set of general rules for economic agents and for public authorities, and finally relevant components of some flanking policies, all of this in the framework of the establishment of an area without internal frontiers. The
8 Introduction to the Single European Market
distinction between the single market and flanking policies and the delimitation of a boundary between them is a very tricky issue on which debates could be endless. Professor Mattera for instance has a broad conception of the internal market. He defines it as an economic area without internal frontiers in which goods, services, persons and capital move freely, and which includes the following three main elements: the abolition of internal frontiers, the achievement of the six fundamental freedoms and the implementation of flanking policies * ('grandes politiques d'accompagnement'). Michel Ayral, another connoisseur of the question, makes a clear distinction between the internal market and a flanking policy: the former concerns general rules and the four (or six) fundamental freedoms whereas the latter aims to avoid that the application of the principle of mutual recognition leads to a leveling down and distortions of competition between Member States. We have hence a choice between three possible models.
The first is a maximalist model in which the single or internal market includes all Community flanking policies. With such a model, the first pillar of the European Union has two components: the single market and economic and monetary union (EMU). Then, there is a minimalist model in which the single market and flanking policies are considered as distinct. Finally, there is an intermediate model, which we adopt in this work. Indeed we consider that the following flanking policies have relevant components which should be considered as being part of the single market: social policy; environmental policy; trans-European networks; energy policy; public health policy; consumer policy; and market reform. Of course some of the general rules of the single market, which are part of it without any discussion, are also sometimes described as policies: tax policy; competition policy; and public procurement policy. Our choice of the intermediate model is based on the list of internal market measures adopted by the Community. This list, which was first established in 1993 after a consultation of Commission services, has subsequently been updated several times. In practical terms, Commission services were asked to indicate all the legal texts with an impact on the internal market for which they were responsible. The
1993 list revolved around the following elements: free movement of persons; free movement of goods; free movement of services and right of establishment; free movement of capital; public procurement; energy; intellectual and industrial property; company law; taxation; safety and protection of economic interests of consumers. The acquis communautaire regarding the internal market has been further extended after 1993 to encompass citizenship of the Union (added to the free movement of persons), trans-European networks, data protection (added to intellectual and industrial property), the environment and social policy. It may be argued that some texts regarding certain specific agricultural products, telecommunications, competition and energy should also have been incorporated into the nomenclature but were not. We must be very clear about the scope of the
* Michel Ayral is director at the European Commission, in charge of air transport. He is the author of the following book on the internal market: AYRAL, Michel. Le marché intérieur de l'Union européenne : Les règles du jeu. Paris: La Documentation française, 1998; 183 p. (Réflexe Europe).
9 The Battle of the Single European Market
internal market according to the list of the Commission. When for instance the environment and social policy were included in 1995, not all the Community legislation regarding these two fields was incorporated. Commission services in charge of them rather indicated all the texts with internal market relevance. The same is true for other fields: each of them contains at least some texts pertaining to the internal market but not all of the texts supervised by one service necessarily have an internal market dimension. We must hence definitively abandon the wrong idea that the notion of the internal market has been unchanging.
The development of a process of market reform, referred to as the Cardiff * process, is an achievement of the late 1990s. Whereas the purpose of the single market has been to break internal barriers to the free flow of the products of economic activity (goods and services) and of factors of production (persons and capital, but also ideas and trademarks), the process of market reform goes one step further. Its aim is to reform the way markets operate with a view to achieving specific goals, in particular economic growth, competitiveness and employment.
Market reform can also be seen as a bridge between market integration and monetary unification. With the advent of the euro, Member States have definitively lost a tool of economic action and corrective mechanisms between these Member States will rely more heavily on the free flow of factors of production, hence the need for more flexibility. From an economic efficiency perspective, market integration and reform together with monetary unification can all contribute to an improved situation. Because market reform operates through a process of benchmarking between Member States which is not the essence of the way to implement the single market and because market reform has a very special position between the single market and economic and monetary union, it cannot be just simply considered as a component of the single market or economic and monetary union. The best conceptual solution is to consider market reform both as flanking policy and, because at the same time it is so close to the notion of the dismantling of obstacles at the heart of the single market, as a part of the latter.
We should now consider with more details the substance of the single
European market in 2000. The total number of legal instruments concerning the single market was 3,340 in June of that year. The total number of single market directives was 1,459 in November 2000. The difference illustrates the fact that the single market acquis communautaire is composed of four different types of † instruments: regulations, directives, decisions and recommendations. These instruments are defined as follows in the Treaty establishing the European
Community:
'In order to carry out their task and in accordance with the
provisions of this Treaty, the European Parliament acting jointly
with the Council, the Council and the Commission shall make
* The name of this process comes from the meeting of the European Council in Cardiff on 15-16 June
1998.
† Of course there is a slight discrepancy in the comparison between the two figures due to the fact that they were calculated in June 2000 and November 2000 respectively.
10 Introduction to the Single European Market
regulations and issue directives, take decisions, make
recommendations or deliver opinions.
A regulation shall have general application. It shall be binding in its
entirety and directly applicable in all Member States.
A directive shall be binding, as to the result to be achieved, upon
each Member State to which it is addressed, but shall leave to the
national authorities the choice of form and methods.
A decision shall be binding in its entirety upon those to whom it is
addressed. 7 Recommendations and opinions shall have no binding force.'
We can also consider the single market acquis communautaire through basic measures instead of taking into account all the measures. Basic measures, which can be issued by the Council, or the Council and Parliament, or the Commission, exclude legal instruments taken on the base of previous measures, whether they are modifications, derogations, applications or adaptations to technical progress.
The number of basic measures will therefore always be inferior to the total number of measures. At the end of 2000, there were 881 basic single market instruments, of which directives constituted an overwhelming majority of 85%.
The comparison between the total number of legal instruments (3,340) and basic ones (881) means that, on average, for one basic instrument there was close to three derived ones. If we just consider the case of directives, this ratio is equal to one: there were 744 basic single market directives and altogether 1,459 single market directives. An important conclusion so far is hence that directives have been the privileged legal instrument used to edify the single market and that their presence is overwhelming at the level of basic measures. Decisions are typically more used at a secondary level than at the level of basic measures. Always staying at the level of basic measures, it might be interesting to consider, for each field and sub-field, the respective shares of directives, regulations and other instruments. Of course such a calculation clearly suffers from important limits, the most important of which is its insensitivity to the number of measures in each field, but it can allow us to draw some interesting conclusions. The following fields have a rate of use of directives above the general average: public procurement, social policy, free movement of persons and citizenship of the
Union, consumers, company law and commercial law, free movement of goods, and energy. Other fields witness on the contrary a relatively more important use of regulations: free movement of services and right of establishment (because of transport), intellectual and industrial property plus data protection, environment, taxation and trans-European networks. It is only by also looking at absolute numbers in sub-fields that we see that the use regulations is particularly targeted on some of them, particularly transport (37), environment (11), food legislation
(7), indirect taxation (5), intellectual and industrial property plus data protection
(4), pharmaceutical products (3), special regimes of free movement (3), visa and frontier controls (2), and coordination of social security regimes and free movement of workers (2). We can finally look at the shares of the various fields in the internal market acquis communautaire at the level of basic directives and
11 The Battle of the Single European Market
regulations. We see that the fundamental freedoms of the single market represent respectively 76 and 69% of basic single market directives and regulations. These freedoms are hence at the core of the single market. They are then flanked by general rules and policies. One may argue that it is a lacuna not to have included competition policy in the nomenclature of the Commission, which is due to the fact that participation in the inter-service coordination conducted inside it by the
Internal Market Directorate-General is voluntary for other services.
To conclude this section, we should say a few words about the economic versus political nature of the integration dynamics. Since the inception of the
European Communities in the 1950s, both dimensions have been inextricably linked. It has been a key concept of neo-functionalist thought to recognize the existence of spillovers in the integration process so that the latter would deepen.
Spillovers in the integration process can somehow be compared to Adam Smith's invisible hand: they are an invisible and very powerful force bringing progress.
Of course we know that in reality things are far more complex and that each actor of the integration process has its own agenda. As external factors and agendas are not static over time and as actors themselves may change, things are most complex. Still, the following three points are arguably fundamental in order to understand well the process of European integration. First, the Franco-German relationship has always lain at the heart of the integration process and important initiatives such as the 1992 program to complete the internal market or the creation of economic and monetary union could never have blossomed without a
Franco-German boost. In order to fully understand this relationship, a reading of history is absolutely necessary. The Cold War and the division of Europe, the
Second World War and previous events indeed form a part of the big picture. A second important point concerns failed European initiatives in the second part of the 1940s and in the 1950s. These failures showed European leaders of the time that the process of integration could not start with political and military matters because obstacles seemed insuperable. Economic issues however offered a chance to work closely together and to circumvent prevailing obstacles; they were a stepping stone on the way to an 'ever closer union among the peoples of 8 Europe'. We should hence not be surprised that political issues have always been present in the shadow of economic integration. For instance, the concept of an area without internal frontiers in the Single European Act has an obvious economic dimension, but Eurooptimists could also hope that the concept could allow progress on a political front thanks to an implementation of the free movement of persons. And this is exactly what has happened subject to two caveats: first, it has taken longer than the eight years of the White Paper program and safeguard clauses can be invoked by Member States; second, some Member
States have opted out of the scheme. A third and final point to understand about
European integration is that, by and large, it has benefited from approval by both moderate right wing and left wing political parties. Historically, Social Democrats and Christian Democrats have cooperated to allow integration to progress.
When we look at the 1990s, we can see that a closer integration of the single market with other Community policies is a logical extension based on an
12 Introduction to the Single European Market
economic rationale, but at the same time this closer integration is also guided by political concerns. The mottos of the 1990s have arguably been to bring the
Union closer to its citizens and to promote growth, competitiveness and employment. Politicians across Europe know that these factors usually play a heavy weight in their reelection prospects and they want to mobilize the
Community potential in this regard. The move from market integration to market reform also makes sense on an economic rationale. Here the aim is again to bring more prosperity and prospects to citizens. The Community dimension can also help pass reforms that otherwise would not on the national stage alone; 'Brussels' can hence become a perfect scapegoat. Alongside the single currency, the triangle between the single market, flanking policies and market reform is the eye of the storm of the choice of an economic and social model for Europe; to that regard, social policy and taxation are fundamental issues of political controversies. The link between the citizens' aspect of the single market and the extra-Community pillar of justice and home affairs can also be very important for the future of the
European Union and its political relevance. Post-1992 developments regarding citizens have projected the single market even more towards its mixed nature, both economic and political. Finally, the transition from the single market to economic and monetary union was guided by both economic and political motives. The adoption of a single currency in the Community could of course be justified by economic arguments alone, but we would be unforgivable to forget the political and geostrategic situation prevailing at the end of the 1980s and beginning of the 1990s, in which German reunification and a deepening of
European integration were inextricably linked. For France in particular, the neutralization of the German D-mark was indeed a top political priority.
Machinery
An introduction to the single European market ought to present the machinery that allows it to exist and to function. The Treaty of Rome establishing the
European Economic Community that was signed in March 1957 created an original machinery inspired by the experience of the European Coal and Steel
Community. Let us specify that by machinery we mean the institutions of the
Community and the processes and interactions between them as well as the complex network going beyond them and including regulatory agencies, standardization bodies and national and regional polities (in particular national courts and administrations). This machinery is fundamental because dispositions in a Treaty alone cannot create a single market. The machinery is what allows a political will to be implemented and to be translated into concrete acts. The single market network has become increasingly complex over the years and has itself many interactions with other entities and actors such as foreign states and international organizations, experts (including economists), lobbies, the media and the public at large. It is this complexity which we would like to present in this section. We shall first present the evolution of the machinery established by the
Treaty of Rome. At that point, we will raise the question of the degree of
13 The Battle of the Single European Market
federalization of the single European market. Then we will look at the complexity of European institutions and the network to deal with the single market, after which it will be time to assess in broad terms the degree of implementation of the rules. We will conclude the section by analyzing the current thoughts of the
Commission included in its White Paper on Governance.
As we shall see in greater detail in Chapter 1, the Treaty of Rome created the following four institutions of the European Economic Community: the
Assembly (later named the European Parliament), the Council, the Commission and the Court of Justice. The machinery put in place by the Treaty of Rome witnessed some important changes and adaptations in the 1958-1984 era. The financing of the common agricultural policy and its connection to the question of the budgetary powers of the European Parliament led to a break between France under General Charles de Gaulle and its partners. The Hexagon practiced an empty-chair policy until a compromise was reached in Luxembourg in January
1966. France had however kept contact with the Community during the crisis and had respected its pledge towards internal tariff disarmament on January 1, 1966.
In spite of an important disagreement with its partners, France had no will to leave or to sabotage the edification of the common market. The venture would continue even it would prove harder to progress for fear that a Member State would invoke the Luxembourg compromise and desert its seat. We may say that as a consequence European integration tilted towards intergovernmentalism and even if votes in the Council slowly started to take place again in the 1970s the
Sword of Damocles of the Luxembourg compromise was very powerful. A corollary was that the Commission of the European Communities (a single body for the three Communities since 1967) was weakened. Enlargement to three new
Member States on January 1, 1973 (Denmark, United Kingdom and Ireland), the first two of which had reservations about the integration process, plus economic and monetary disturbances throughout the 1970s, further weakened the
Community machinery. A new informal body, the European Council, consisting of the meeting of heads of state or government appeared in 1975. Even if the
European Council has arguably been a source of stimulation for the Community, it is at the same time ambivalent because of its intergovernmental nature. The
European Parliament finally saw its budgetary powers increased and was elected for the first time by direct universal suffrage in 1979. From a global perspective, the Community machinery was hence panting in 1984. The prevailing approach until then to search for detailed harmonization between Member States in order to fulfill the aims of the Treaty (subsequently called the 'old approach to harmonization') had also proved very difficult to implement and had not helped either to progress.
A relaunch of integration occurred in 1985 with the entry into function of the new Delors Commission, the adoption of a new approach to harmonization and the launch of the White Paper program aiming at completing the internal market by the end of 1992. An intergovernmental conference was also convened that led to the adoption of the Single European Act (SEA), which entered into force on July 1, 1987. The SEA was the first major revamping of the Treaty of
14 Introduction to the Single European Market
Rome establishing the European Economic Community and was decisive in allowing the completion (or near completion) of the internal market program. The
SEA modified decision-making procedures, in particular with a view to completing the internal market and to giving more powers to the European
Parliament. The scope of qualified majority voting in the Council was greatly increased. With the Single Act, the Luxembourg compromise was not formally affected. It could nevertheless be hoped that in practice the compromise could be relegated to a position of secondary importance by a new momentum in European integration. An extension of the use of qualified majority on as many issues as possible regarding the internal market would greatly ease the implementation of the White Paper. A new cooperation procedure was introduced by the Single * European Act, with the aim of strengthening the European Parliament.
Three different types of decision-making procedures applied to different components of the program to complete the internal market by the end of 1992: qualified majority voting by the Council in cooperation with the European
Parliament; qualified majority voting by the Council without cooperation with the
Parliament; and unanimity in the Council (with by essence no cooperation with the Parliament). This last case would be maintained for some very important issues: for the coordination of provisions concerning the taking up and pursuit of activities as self-employed persons (in some circumstances); for the harmonization of legislation concerning turnover taxes, excise duties and other forms of indirect taxation; for the approximation of fiscal provisions, provisions relating to the free movement of persons and provisions relating to the rights and interests of employed persons. Regarding the powers of the European Parliament, we must add that the Single Act gave it a veto right, to be exercised by an absolute majority of its component members, on the enlargement of the
Community and on association agreements with a third State, a union of States or an international organization. The Single Act also gave for the first time a legal basis to the European Council, increased the execution powers of the Commission and allowed the Council, acting unanimously, to establish a Court of First
Instance in order to disburden the Court of Justice.
The extension of the use of qualified majority voting in the Council – or, to be more accurate, the possibility to use it – has been of tremendous importance in allowing the implementation of the White Paper on the completion of the internal market. Ambassador Philippe de Schoutheete, relying on a ten-year experience as permanent representative of Belgium to the European Communities respectively the European Union, has made some fundamental remarks regarding voting in the
Council. He wrote that a system based on majority vote was more efficient than a system based on the rule of unanimity, but not because votes would take place very often. The mere possibility for the presidency to be allowed to call a vote encouraged everybody to look for compromise, whereas with unanimity each single participant knew he had a right of veto and would hence be less inclined to
* For more details on the cooperation procedure, see the section entitled 'Single European Act' in
Chapter 3.
15 The Battle of the Single European Market
find common ground with its partners. For Ambassador de Schoutheete, there was no doubt that the Single European Act, by extending the scope of the use of qualified majority voting in the Council, allowed the timely implementation of the 1992 program to complete the internal market. On the other hand, roughly
220 of the 260 directives that could have been adopted by qualified majority following the Single European Act were in reality accepted by unanimous 9 * approval. Another connoisseur of European institutions, Gérard Fuchs, has made the same analysis. He agreed that votes rarely took place in the Council even when the use of qualified majority was possible, but the fact that voting was possible was itself an element of progress used by successive presidencies. For
Gérard Fuchs, this was however more than a mere Sword of Damocles because national positions would not evolve without this clause and because votes still took place from time to time. Mr. Fuchs estimated that votes in the Council took place in perhaps one case out of four on average, which was very close to the evaluation made by Mr. De Schoutheete. Gérard Fuchs concluded that European 10 integration needed more majority voting in order to progress.
The Treaty on European Union (Treaty of Maastricht) was negotiated by
European heads of state or government during their Maastricht summit of
December 1991; it was officially signed in February 1992 and entered into force on November 1, 1993, that is to say at a time when the 1992 program to complete the internal market had been largely realized. Two additional Treaties were signed in the post-1992 era: the Treaty of Amsterdam in October 1997, which entered into force on May 1, 1999, and the Treaty of Nice in February 2001. The three Treaties – Maastricht, Amsterdam and Nice – brought additional reforms to the functioning of European institutions without breaking with the principles of the Community method. Even if legislative work on the single market has been less important after 1992 than it had been previously, it has still taken place † within a slightly modified machinery. European institutions and the relations between them have indeed witnessed several important changes since the inception of the European Economic Community on January 1, 1958. The single most important change regarding the single market has arguably been the extension of qualified majority voting in the Council. In a very summarized way, other important changes have taken place over the years: the European Parliament has gained more legitimacy (in theory at least) and more powers; the president of the Commission has received new powers while the influence of the Commission itself is still very important but never granted; the European Council has practically become a key actor and has sometimes even looked like a sort of
'super Council'; the Court of Justice has had an important role in bringing about a legal system based on the rule of law and congenial to the integration process, but
* Gérard Fuchs was a member of the French National Assembly (Lower House of Parliament) from
1997 to 2002 and was vice-president of its Delegation for the European Union; he is an economist at the Centre national de la recherche scientifique (CNRS) and was a member of the European
Parliament from 1981 to 1984 and from 1989 to 1994.
† For more details on the Treaty of Maastricht, see the relevant section in Chapter 3. For more on the
Treaties of Amsterdam and Nice, see the section entitled 'New Treaties for a New Era' in Chapter 4.
16 Introduction to the Single European Market
its influence now seems relatively weaker than it used to be. Today's European
Union is a very sui generis mix of supranationalism and intergovernmentalism.
The second and third pillars of the Union – common foreign and security policy, and justice and home affairs – are intergovernmental in nature and the institution that binds together the three pillars, the European Council, is also by essence intergovernmental. The first pillar of the Union, which is the European
Community, has of course supranational institutions (the Court of Justice, the
Commission and the European Parliament) and witnesses the use of a tempered form of majority voting among ministers in the Council, but at the same time ministers seldom vote, the rule of unanimity is still prevailing in some key areas and ministers tend to be superseded by heads of state or government meeting in the European Council. To summarize our argument, we may say that the core of the machinery in charge of creating and administering the single European market has important federal characteristics, but always blended with an enduring role for Member States and their direct representatives. The substance of the single market, which takes in particular the form of directives and regulations, can bend on the principles of a Community of law and must hence be implemented respecting due process. Public authorities and private persons may always try not to respect Community law, but this is unlawful and means of redress against them do exist. The question of the implementation of internal market law is of course fundamental and we will address it below, but it must be clearly separated from the foundations and general rules of that law. Internal market law, as the rest of
Community law, must be properly implemented and European institutions are endowed with powers to make it happen. In brief, we may say that the acquis communautaire is indeed federalized. The only caveat to this general principle concerns the creation or the modification of the acquis in some fields for which the principle of unanimity is still prevailing in the Council: whereas the existing acquis in these fields is federalized, such is not the case of its process of modification. We may finally specify that, within the internal market acquis, rules on competition, which are administered by the Commission under the legal supervision of the Court of Justice, present the strongest federal character. They arguably share the first place at Community level with the newly created
European monetary union.
Let us now dive into the complexity of the machinery implementing and administering the single market. The internal structure and organization of the
Commission has evolved over the years because European integration itself has evolved considerably. Between 1958 and 1967, the Commission of the European
Economic Community was composed of nine members. In 1985, the Commission had fourteen members (seventeen from 1986 after Spain and Portugal joined the
European Communities). In parallel, the scope of Community activity had increased between 1958 and 1985. Hence, with a changing number of commissioners and an evolving activity, the cutting up of responsibilities was bound to change. The same comment can be applied to the comparison between the Commission in 1985 and in 2000. Since 1995, the Commission has been composed of twenty members. It is interesting to note that with the entry into
17 The Battle of the Single European Market
function of the Prodi Commission in 1999 the wording of portfolios has been shortened in order to make them more intelligible. Commission services are structured into Directorates-General (headed by directors-general), directorates
(headed by directors) and units (headed by heads of unit). Functions of deputy director-general and deputy head of unit also exist even if the latter cannot be found in most units. All the directors-general, who are the top civil servants in the
Commission, report to a member of the Commission (a commissioner). The term
'Commission' is hence ambivalent. It formally refers to the members of the
Commission forming the College of Commissioners (twenty members) but, more widely, it can also include the Commission's services that have a staff of 16,000.
The Commission – in a broader sense – is the largest of the institutions of the
Union. One fifth of its staff is working in the translation and interpretation services. This high proportion should not surprise us given the fact that the Union has had eleven official languages since 1995. The Commission is hence a relatively small and multinational bureaucracy. In the European Commission of
2000, it may be argued that, in addition to the Secretariat General, twelve
Directorates-General have – totally or partially – single market responsibilities; they are: Internal Market; Taxation and Customs Union; Economic and Financial
Affairs; Enterprise; Information Society; Competition; Energy and Transport;
Employment and Social Affairs; Health and Consumer Protection; Environment;
Education and Culture; and Justice and Home Affairs. All these services are supervised by Commissioners Prodi, Bolkestein, Solbes Mira, Liikanen, Monti, de Palacio del Valle-Lersundi, Diamantopoulou, Byrne, Wallström, Reding and
Vitorino; that is to say 11 of the 20 commissioners. Here are the internal market responsibilities of the Secretariat General and the various Directorates-General:
The Single European Market: Responsibilities of Commission's Services in 2000
Commission's Responsible Single Market Responsibilities
Services Commissioner
Secretariat Romano Prodi, Coordination of the work of the
General president of the Commission; application of
Commission Community law; information
Internal Market Frederik Bolkestein Coordination of the functioning of
DG the internal market; monitoring of the
integration process and reform;
dialog and promotion; public
procurement policy; financial
services; free movement of goods;
postal services; regulated
professions; free movement of
information and data protection;
intellectual and industrial property;
media
18 Introduction to the Single European Market
Taxation and Frederik Bolkestein Customs policy; tax policy
Customs Union
DG
Economic and Pedro Solbes Mira Free movement of capital; economic
Financial studies and research; economic
Affairs DG evaluation; economic analyses of
financial markets and capital
movements
Enterprise DG Erkki Liikanen Regulatory environment in several
industries (regulatory coordination,
food, biotechnology,
pharmaceuticals, cosmetics,
automotive industry); conformity,
standardization and new approach;
selected services; commerce; tourism
Information Erkki Liikanen Communications services
Society DG
Competition DG Mario Monti Anti-competitive practices; mergers;
state aids
Energy and Loyola de Palacio Creation of a single market in energy
Transport DG and transport
Employment Anna Diamantopoulou Free movement of workers; social and Social rights; health, safety and hygiene at
Affairs DG work
Health and David Byrne Consumer policy; Food and
Consumer Veterinary Office; legislation on
Protection DG public, animal and plant health
Environment Margot Wallström Technical rules regarding the
DG environment
Education and Viviane Reding Audiovisual services
Culture DG
Justice and António Vitorino Free movement of persons,
Home Affairs citizenship; fundamental rights; visa
DG policy; asylum; judicial cooperation
With a very extensive interpretation of the single market, one could also include the Trade and Enlargement Directorates-General into the aforementioned list by arguing that the Trade DG is working inter alia on external access to the single market and the Enlargement DG on the adoption by applicants of the single market acquis communautaire. In such a case, 14 Directorates-General plus the
Secretariat General would have single market responsibilities. All these services are supervised by 13 of the 20 commissioners. Whatever choice is made, an
19 The Battle of the Single European Market
inescapable conclusion is that the single European market is mobilizing the efforts of several Commission's services and a majority of the members of the
Commission. It would be hence totally wrong to assume that the internal market is just the responsibility of the Internal Market DG. It is interesting to note that there has always been an Internal Market DG throughout the life of the
Commission even if sometimes it had to share the name of the DG with another expression. In 1958 there was an Internal Market DG (DG III). After the merger between the Commission of the European Economic Community, the Euratom
Commission and the High Authority of the European Coal and Steel Community in 1967 to form the Commission of the European Communities, DG XIV was the
Internal Market and Approximation of Legislation DG. In 1973, DG XI was the
Internal Market DG. Other changes occurred subsequently: the internal market formed DG III together with industrial affairs; then, in 1993, the internal market was moved to DG XV that became the Internal Market and Financial Services
DG. With the enthronement of the new Prodi Commission in 1999, all DGs lost their numbers and the Internal Market and Financial Services DG became just the
Internal Market DG (but without losing financial services). All these changes show us that the structuring of Commission's services has been flexible over the years. This should not surprise us given the fact that European integration is an ongoing process.
Structural changes within the Commission are guided by a dynamic of change making the latter more and more comparable to a national administration.
These changes and this evolution were wished in 1992 and the fact that they have arisen has not caused surprise. Changes in the structure and functioning of the
Commission have been inter alia a consequence of the evolution of the single market. Rightly or wrongly, one may say that the single market has become a reality and that one needs to allow it to function. Obstacles are supposed to be gone and the single market must be managed in function of more political objectives. Actions are now less taken to allow free movement per se than to take proper account of public health or other criteria such as environmental protection.
Some rules that were there to break barriers for instance have become public health concerns, which explains why the management of these rules has been transferred to the Directorate-General in charge of health issues. The elimination of technical obstacles (e.g. for automobiles) still largely stays within sectoral and technical units in spite of the fact that safety and environmental objectives should be overwhelming. One may hence conclude that the current structure of the
Commission is different from what it used to be but at the same time it is not yet similar to the structure of a national administration. One can anticipate that, with time passing, the Commission will more and more become similar to a typical national administration.
When looking at the Commission, we should also consider processes and not only structures. Indeed, there are many interactions between the
Commission's various services. We have already said that, with regard to the single European market, the Internal Market Directorate-General has a coordination role. One of the experts we met was however not sure that this DG
20 Introduction to the Single European Market
still had the same global and strategic vision than in the past. For this expert, the
Internal Market DG had its own objectives and instruments and was not any more a real coordination DG. A proof of this was that the participation of other DGs to the elaboration of documents of synthesis by the Internal Market DG took place on a voluntary basis. The conclusion of this expert was that it was desirable to transcend sectoral concerns and to have a vision of synthesis, which meant that the Internal Market DG should receive more powers and have the ambition to be able to coordinate properly all the issues regarding the single European market. In addition to the Internal Market DG, the Secretariat General of the Commission, under the political responsibility of the president of the Commission, also has a broad coordination role, but extending to all the activities of the Commission.
This ultimate coordination role of the president of the Commission is shown by the fact that he has direct authority over the three par excellence coordination services of the Commission: the Secretariat General, the Legal Service and the
Press and Communication Directorate-General. Despite the coordination role of the president of the Commission and because complexity is inherent to every human organization, a detailed analysis of the institution is bound to reveal to us that it is not a completely unitary actor. There are indeed splits between
Directorates-General and even inside them. It is for instance widely acknowledged that the Internal Market and Competition DGs are pro-free market while the position of the Employment and Social Affairs DG is much more muted.
At the top of the Commission – in its broad sense – we find the College of
Commissioners. Its functioning was described in the following way by Lord
Cockfield, who was the commissioner in charge of the internal market between * 1985 and 1989 and one of the fathers of the 1985 White Paper: 'the Commission is a collegiate body. Although Commissioners each have their own portfolio, the whole Commission has to agree with all action which is taken in the name and under the authority of the Commission. The secret of success, to have one's proposals accepted by the Commission without undue argument, lies in securing the prior agreement of the Chefs de Cabinet. [...] the part played by the Chefs de
Cabinet is critical to the smooth and effective working of the Commission.
Normally they "prepare" meetings of the Commission in advance. That is, they go through the agenda and see to what extent prior agreement can be reached and, if not, to identify the points of disagreement. Where prior agreement among the
Chefs is reached, the item still appears on the Commission's agenda but it is described as an "A" point and it is formally agreed without further discussion. If an item is not so designated it is discussed but discussion is limited – or ought to be limited – to the points identified by the Chefs. If agreement can be reached that is the end of the matter: if not, the item will be referred back and will return to the
Commission at a later date. Ultimately in the absence of agreement a vote is taken. The vote is by simple majority but it must be a majority of the whole 11 Commission, not simply of those present.'
* See Chapter 3.
21 The Battle of the Single European Market
The Cardiff process of market reform that was launched in 1998 provides a perfect illustration of the complexity of relations between the various * Directorates-General of the Commission and between the latter and the Council.
The preparation of broad economic policy guidelines is under the responsibility of the Economic and Financial Affairs DG of the Commission but there is an inter-service consultation inside the Commission: various units send working papers to the Economic and Financial Affairs DG which gives them a feedback.
With regard to the elaboration of Cardiff reports, there are relatively close links between the Internal Market and Economic and Financial Affairs DGs. Both the broad economic policy guidelines and the Cardiff reports use national reports as a basis of analysis. Each Member State prepares such a report at the end of every year and submits it to the Commission. We may thus say that national reports give rise to two different tracks, a general one and a country-specific one. As we said, the country-specific track is especially managed by the Economic and
Financial Affairs DG (preparation of broad economic policy guidelines). The general track is managed by the Internal Market DG, but there is a close collaboration with the Economic and Financial Affairs DG. The Community-wide report submitted at the end of each year is called the Cardiff report (report on the functioning of Community product and capital markets). This report is normally discussed in Council committees. A horizontal group on single market affairs in the Council looks at national reports and at the Cardiff report. The general conclusions that are adopted by the group serve as an input for the broad economic policy guidelines. National reports and the Cardiff report also go to the economic policy committee, which discusses how to improve the structural policies of each Member State. All this information is used to draw an implementation report of the previous year's report plus country-specific reports.
There are also inter-service consultations for the Luxembourg process (regarding employment) that was launched in 1997, but here the key actor inside the
Commission is the Employment and Social Affairs DG, which writes national action plans. The advisory committee for coordination within the internal market field is another example of the close relationship between the Commission and national representatives. This committee, which was established in February
1993, consists of representatives of the Commission and of Member States (from the national delegation to the Union and from the national ministry in charge of the internal market). The committee is chaired by the Commission and it aims to
'set up a network of contact points to identify problems and see that they are dealt 12 with by the authorities responsible'.
The committee for coordination within the internal market field is an example of an advisory committee, meaning that national representatives are just advising the Commission but cannot make decisions. In the Community practice there are however two other types of committees: management and regulatory, for which representatives of Member States and not the Commission have a final say.
* For a presentation of the Cardiff process, see the section entitled 'The Single Market and Beyond' in
Chapter 4.
22 Introduction to the Single European Market
This very complex system of committees is called 'comitology' and brings together representatives of Member States and of the Commission in order to oversee the execution of Community policies. The legal basis of committees can be found in Article 202 (ex Article 145) of the Treaty establishing the European
Community that states that the Council shall inter alia, in accordance with the provisions of the Treaty, and to ensure that its objectives are attained, 'confer on the Commission, in the acts which the Council adopts, powers for the implementation of the rules which the Council lays down. The Council may impose certain requirements in respect of the exercise of these powers. The
Council may also reserve the right, in specific cases, to exercise directly implementing powers itself. The procedures referred to above must be consonant with principles and rules to be laid down in advance by the Council, acting unanimously on a proposal from the Commission and after obtaining the Opinion of the European Parliament.' This clause regarding the execution powers of the
Council and the Commission was inserted into the Treaty establishing the EEC by the Single European Act. The Council took a decision regarding that question on
July 13, 1987, thus creating the three types of committees we have mentioned above. Still, the Commission was expressing its concern over its executive powers. Neither is the European Parliament happy with comitology as it is excluded from the system despite the fact of being more and more a co-legislator with the Council. Comitology is a highly technical issue but, at the same time, questions around it are highly political because they contribute to a definition of the nature of the political system of the Union. If the Commission could be recognized as the sole executive power of the Community and the Union, then it would become a real European government and the Council could be considered as one of the Houses of Parliament together with the European Parliament. But we are still far from there and the current Community institutional model mixes rather than separates powers. It is hence a different sort of balance of power than inside Member States.
We shall come back later in this section to a presentation and an assessment of implementation mechanisms regarding the single market, but let us now continue our exposition of the complexity prevailing inside European institutions with regard to the single market. In the European Parliament, nine of the seventeen parliamentary committees have responsibilities pertaining to the single market. Seven of the thirteen depending entities of the General Secretariat of the
Council deal with the internal market whereas the Council of the European Union met under eighteen different configurations in 2000, of which eleven tackled internal market issues. The lesson of all this is that the single European market is the concern of many administrative units inside the institutions of the European
Community, but the global single market network goes far beyond. It includes many institutions in Member States, decentralized agencies, standardization bodies, lobbies, experts, the media and the public at large. Institutions involved in
Member States include the three branches of government (legislative, executive and judiciary) as well as regional and local institutions. As Community law takes precedence over national rules and is at the same time a part of national legal
23 The Battle of the Single European Market
orders, national courts must apply it; the legislative and executive branches of government must respect and implement Community law. In Member States, rules are often implemented at a decentralized level and regional and local institutions must abide by Community rules. A very interesting case study concerns the origins of legislative proposals made by the Commission. We know that in general, according to the Treaty, the Commission has a monopoly on legislative initiative. It would be completely wrong, however, to assume that the
Commission operates in a vacuum or that it is living in an ivory tower. Various studies on the question reveal that only five to fifteen per cent of Commission proposals really originate from within the Commission. The rest finds its origin in proposals from Member States, from interest groups, from other Community institutions or constitutes an implementation of already agreed principles or 13 programs. This de facto role of Member States in initiating new legislation adds complexity to the Community network.
With regard to the operation of the single market, we should mention the existence of four decentralized Community agencies. There is first the European
Agency for the Evaluation of Medicinal Products (EMEA) that was created in
1995. It is based in London and its role is to scientifically evaluate medicinal 14 products for human and veterinary use. Then, there is the Office for
Harmonization in the Internal Market (Trade Marks and Designs) (OHIM), which came into being in September 1994 and is based in Alicante (in Spain). The role of the Office can be described as follows: 'the Office's task is to promote and manage trade marks and designs within the European Union. It carries out registration procedures for titles to Community industrial property. It keeps public registers of these titles. It shares with the courts in Member States of the
European Union the task of pronouncing judgment on requests for invalidation of 15 registered titles.' Third comes the Community Plant Variety Office (CPVO), which has been operating since April 1995 and manages a system for the protection of plant variety rights. The last decentralized Community agency we should mention here is the European Agency for Safety and Health at Work. It is located in Bilbao (Spain) and has an informational mission, also cooperating with international organizations.
Standardization bodies are also part of the single market network even if they are not decentralized Community agencies. At the European level – but going beyond the European Union – we should mention CEN, CENELEC and
ETSI. The European Committee for Standardization (Comité européen de normalisation – CEN), which was founded in 1961, has its headquarters in
Brussels. Its mission is 'to promote voluntary technical harmonization in Europe 16 in conjunction with worldwide bodies and its partners in Europe'. The European
Committee for Electrotechnical Standardization (Comité européen de normalisation électrotechnique – CENELEC) was set up in 1973 and is also based 17 in Brussels. It is responsible to draw European standards in its field. The
European Telecommunications Standards Institute (ETSI), which is based in
Sophia Antipolis (South of France), finally has the responsibility to draw 18 standards in the field of telecommunications. Community Member States also
24 Introduction to the Single European Market
have standardization bodies that are federated in the above-mentioned European bodies. Until 1985, a traditional approach to technical harmonization and standards was prevailing in the Community. It was based on detailed harmonization by the Council. A new approach was adopted in 1985. It was a political answer to an important set of technical problems to which a judiciary answer had already been given (in the famous 1979 'Cassis de Dijon' ruling of the
Court of Justice of the European Communities). The new approach is based on four fundamental principles. First, legislative harmonization is limited to the adoption of essential requirements (safety or other) for products put on the market, which should therefore enjoy free movement in the single market.
Second, standardization bodies such as CEN, CENELEC or ETSI are responsible to draw up technical specifications for products conforming to the essential requirements decided at political level by the Council. The third fundamental principle is that these technical specifications are not mandatory: an individual producer can always choose not to abide by these specifications if he is ready to prove that his products conform to the essential requirements laid down by the
Council. Finally, national authorities are obliged to recognize that products in conformity with harmonized European standards (or, provisionally, with national standards) are presumed to respect the essential requirements of the Council.
The entry into force of the Single European Act in 1987 has deeply affected the way lobbies have been operating in the Community. In that regard, it is worth quoting at some length Mr. Zygmunt Tyszkiewicz, the secretary-general of the
Union of Industrial and Employers' Confederations of Europe (UNICE), who * declared the following in 1989:
'It is important to understand that in mid 1987 when the Single
European Act came into operation, the rules of the lobbying games
changed completely. In the past, before that act, most legislation
affecting business and industry was passed through the Council by
unanimous vote. What did that mean? That if you had a strong
national federation, or if you were a very large strong company,
you felt secure because if there was something happening in
Brussels that you didn't like, you went to see your national minister.
If you succeeded in persuading him, he went to Brussels and voted
"no", and everything was blocked. So you felt secure. It wasn't a
very good way of building Europe. In fact it led to terrible sclerosis.
But it was a very safe way of stopping anything happening that you
didn't like.
Now you've got a completely different situation, 9 out of 10 pieces
of legislation affecting business and industry now go through by
qualified majority vote. [...] During a boring lecture you can work
out all the permutations of who can ally with whom to block and
who can ally with whom to put a motion through.
* We may add that the increasing powers of the European Parliament have also had an influence on lobbies, which have had to look for a closer contact with the members of the Parliament.
25 The Battle of the Single European Market
That now is the name of the game. You have to identify those
alliances in the Council. The most important thing is that you can
not act on your own. However big or powerful you are nationally,
you cannot on your own hope to influence the outcome.
International coordination has become essential. You must first get
together at the European level. You've got to work out a common
European position and then you've got to coordinate the lobbying
of that position both in Brussels and nationally and if you do that
you will win. So either through your sectoral federation or through
the horizontal organisations, you've got to get together, you've got
to agree a position and than you use it both at Brussels level and at 19 national level. Nothing else will work.'
We have seen that there are complex procedures to adopt Community law, but of course things do not stop there because, once it is adopted, a piece of
Community law must be implemented. The legislative process starts with a proposal by the Commission although we have seen that only a fraction of proposals really originates from inside the Commission. Then the proposal goes to the Council and, in most cases, to the European Parliament. Adopted regulations and decisions have a direct effect but things are more complicated in the case of directives, which must be transposed by Member States into their national legislation. When a Member State has transposed a directive, it must notify its text to the Secretariat-General of the Commission. If it fails to do so, the
Commission will send a formal demand. The Commission, which acts as a guardian of Community law, checks if directives are correctly transposed in a timely fashion. This check has to do with the fact of formally transposing a directive but also with the fact of transposing its content properly. The
Commission must also make sure that transposed directives are properly implemented and respected by everybody. It is not unusual to have a time lag of six to eight years between a Commission proposal and implementation by
Member States. We may add to this that a certain amount of time must also pass between the awareness of a need to legislate at Community level and the effective
Commission proposal given the fact that consultation procedures are necessary and do exist. At the other extremity of the process, when a transposition has not been done or has been done improperly, or when effective implementation is unsatisfactory, the Commission may open an infringement proceeding.
Whereas most cases can be solved in a pre-contentious phase, approximately 1% of them ends up in front of the Court of Justice and when the execution of a judgment of the Court is not done properly, the Commission can go a second time in front of the Court. The Community legislative process is molded by both law and politics. It is in no way a fast process because of the complexity of the procedures and issues at stake and because of the number of actors, but as soon as there is 'sand in the wheels', delays may become very substantial. At the same time, the growing involvement of the European
Parliament allows to take into account European interests in a better way and
Member States do not always have fast procedures either. The right for the
26 Introduction to the Single European Market
Commission to open infringement proceedings against Member States is fundamental to promote proper transposition and implementation of Community rules. The process is the following: the Commission first sends a letter of formal notice to a Member State; then, if the Commission is not satisfied, it will send a letter of reasoned opinion to the Member State. If the Commission is still not satisfied, it can refer the case to the Court of Justice under Article 226 (ex Article
169) that states the following: 'if the Commission considers that a Member State has failed to fulfil an obligation under this Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice.' If the Commission later finds that a Member State has not complied with a ruling of the Court of Justice, it can open an infringement proceeding under Article 228 (ex Article 171). This Article states the following:
'1. If the Court of Justice finds that a Member State has failed to
fulfil an obligation under this Treaty, the State shall be required to
take the necessary measures to comply with the judgment of the
Court of Justice.
2. If the Commission considers that the Member State concerned
has not taken such measures, it shall, after giving that State the
opportunity to submit its observations, issue a reasoned opinion
specifying the points on which the Member State concerned has not
complied with the judgment of the Court of Justice.
If the Member State concerned fails to take the necessary measures
to comply with the Court's judgment within the time-limit laid
down by the Commission, the latter may bring the case before the
Court of Justice. In so doing it shall specify the amount of the lump
sum or penalty payment to be paid by the Member State concerned
which it considers appropriate in the circumstances.
If the Court of Justice finds that the Member State concerned has
not complied with its judgment it may impose a lump sum or
penalty payment on it.
This procedure shall be without prejudice to Article 227.'
We should specify that the second paragraph of Article 228 was introduced by the Treaty of Maastricht. Community institutions, the Board of Directors of the European Investment Bank, the Council of the European Central Bank,
Community servants, Member States and their national courts, and natural and legal persons also have rights to bring a case before the Court of Justice. The implementation of Community law by Member States is definitely not an easy process in all cases and action by the Commission and the Court of Justice is essential. We can see an analogy between legal cases brought before the Court of
Justice and the use of qualified majority voting in the Council in the sense that both allow evolution and success. We have seen that both instances only occur in a minority of situations: around 1% of proceedings opened by the Commission ends up before the Court whereas the Council actually votes in something like 15
27 The Battle of the Single European Market
to 25% of the cases. Still, this possibility – to send a Member State before the
Court or to put it in a minority in the Council – is very precious because it has to be used from time to time and because it acts as a Sword of Damocles in several other cases.
We have seen that directives have been the privileged legal instrument to build the single European market. Directives however need to be transposed by
Member States in their national legislation and there have been some problems to * that regard. As we shall deal in detail with this question later, it is sufficient to mention here a few figures for the second part of the 1990s.
20 Global Rate of Non-Transposition of Single Market Directives, 1995-2000
November 1995 9.6% November 1998 3.9%
May 1996 10.3% May 1999 3.5%
October 1996 9.1% November 1999 3.6%
November 1997 6.3% May 2000 3.5%
May 1998 4.5% November 2000 3.0%
Rate of Single Market Directives not Transposed 21 in All the Member States, 1996-2000
October 1996 45.7% May 1999 12.8%
June 1997 35.0% November 1999 12.6%
November 1997 26.7% May 2000 13.0%
May 1998 18.2% November 2000 12.8%
November 1998 14.9%
These figures show us that things have improved since the mid-1990s but that there is still work ahead. An apparently easy way to solve transposition problems would be to use regulations instead of directives because the former are directly applicable and hence do not need to be transposed by Member States.
Economic actors and lawyers however seem to have, other things being equal, an intellectual preference for directives, and in particular framework directives, because they are an expression of subsidiarity and allow a better symbiosis between Community and national laws. Community law can hence be incorporated into national legal orders without upsetting the latter. The transposition of directives is however tricky because Member States can procrastinate or try to reintroduce national concerns not adopted in the
Community text. The answer has sometimes been to adopt very detailed directives so as to leave no margin of interpretation to Member States. It might however be argued that in such a case the desire to look for a symbiosis with national legal orders is anyway lost and that it would be more efficient to opt for a
* See 'The Single European Market at the End of 1992' in Chapter 3 and 'Developments on the Single
Market Front: A Macro View' plus 'The Single European Market in 2000' in Chapter 4.
28 Introduction to the Single European Market
regulation. The adoption of framework directives at Community level may however have the disadvantage of increasing legislative complexity in the
Community and of creating costs for firms which must thus collect a lot of legal information throughout the Community. In conclusion, we may say that, depending on the circumstances, framework directives or regulations can be best.
Framework directives may seem better in an ideal perspective but regulations may sometimes be seen as an 'instrument of last resort'.
We should now move to the last part of this section and analyze the current thoughts of the Commission on the various points we have presented. The
Commission has published its awaited White Paper on European Governance in 22 July 2001. There is clearly a link between the debate on governance and a broader debate on the future of Europe. Heads of state or government of Union
Member States agreed on the Treaty of Nice in December 2000 and the latter was officially signed in February 2001. The Treaty of Nice is however not meant to be the end-point of reforms in the Union as a new intergovernmental conference will be convened in 2004. The debate on governance proposed by the Commission is a component of this broader debate on the future of the European Union but the thoughts of the Commission are first of all targeted at an adaptation of governance under the existing Treaties. We may say that the White Paper of the
Commission on European Governance is a very constructive and well-thought document that may prove to be very important for the future of the single market and of the Community more generally. We must however express three caveats.
First, the problematics of the White Paper is to a large extent inextricably linked to the broader debate on the future of Europe, and here it is very hard to predict yet what will happen in 2004 and subsequently, even more so if the Union then comprises up to 25 or 27 members. The Commission may be or may not be heard at the next intergovernmental conference. Second, this section has abundantly shown that the machinery that manages the single market is complex and that the
Commission, even if it plays a central role, cannot control all the system. We can see that the most important proposals of the Commission in its White Paper are addresses to other members of the network and it is not sure that they will adopt all or most of these proposals. The third caveat prolongs the second one and concerns the wish of the Commission to scratch comitology and to be recognized as the sole executive power of the Community. To many, this proposal makes sense and it would indeed considerably streamline the Community decision- making process and make the functioning of European institutions more intelligible for citizens, but it can in no way be granted that Member States, the unanimous approval of which is needed, will accept to be stripped of further competences.
NOTES
1 BALASSA, Bela. The Theory of Economic Integration. Homewood (Illinois): Richard D. Irwin,
1961; p. 2.
2 15/81 Judgment of May 5, 1982, Schul.
29 The Battle of the Single European Market
3 SCHRAUWEN, Annette. Marché intérieur : Recherches sur une notion. Amsterdam: Université d'Amsterdam, 1997; p. 120.
4 European Council, Presidency Conclusions, DOC/95/6, June 26-27, 1995, Cannes; p. 10.
5 Treaty establishing the European Community, Article 3.
6 ibid., Article 43 (ex Article 52).
7 ibid., Article 249 (ex Article 189).
8 This expression appeared in the preamble to the Treaty of Rome establishing the European
Economic Community.
9 SCHOUTHEETE, Philippe de. Une Europe pour tous : Dix essais sur la construction européenne.
Paris: Éditions Odile Jacob, 1997; pp. 20-21.
10 Interview with Mr. Gérard Fuchs, Paris, February 13, 2001. This point of view was also shared by
Mr. Willy De Clercq, member of the European Parliament and former member of the Commission of the European Communities. Reference: Interview with Mr. Willy De Clercq, Brussels, April 18, 2002.
11 COCKFIELD, Arthur (Lord Cockfield). The European Union: Creating the Single Market. London,
New York: Wiley Chancery Law, 1994; pp. 46-47.
12 Inaugural Meeting of the Advisory Committee for Coordination within the Internal Market Field.
Brussels: Commission of the European Communities, IP/93/69, February 3, 1993; p. 1.
13 NUGENT, Neill. The European Commission. Basingstoke (UK), New York: Palgrave, 2001; pp.
236-242.
14 The address of the website of the European Agency for the Evaluation of Medicinal Products is: http://www.emea.eu.int/
15 Reference: website of the Office for Harmonization in the Internal Market, the address of which is: http://oami.eu.int/
16 Reference: website of the European Committee for Standardization, the address of which is: http://www.cenorm.be/
17 The address of the website of the European Committee for Electrotechnical Standardization is: http://www.cenelec.org/
18 The website of the European Telecommunications Standards Institute can be found at the following address: http://www.etsi.org/
19 Influencing the European Legislator, by Z.J.A. Tyszkiewicz, Secretary General, UNICE (Union of
Industrial and Employers' Confederations of Europe). In: UNICE Positions Papers, 1989, Part II; pp.
241-242.
20 Sources are the following: Commissioner Monti to Outline Single Market Priorities to 23 November
Council. Brussels: European Commission, MEMO/95/154, November 22, 1995; p. 2. Commissioner
Monti to Warn 28 May Council of Need to Deliver Single Market. Brussels: European Commission,
MEMO/96/48, May 24, 1996; p. 1. Single Market Cannot Deliver Full Benefits without Better
Implementation – Commissioner Monti to Caution 25 October Council. Brussels: European
Commission, MEMO/96/100, October 24, 1996; p. 1. Figures since November 1997 have been calculated on the basis of data for Member States as they appear in the Single Market Scoreboard.
21 Sources are the following: Single Market Cannot Deliver Full Benefits without Better
Implementation – Commissioner Monti to Caution 25 October Council. Brussels: European
Commission, MEMO/96/100, October 24, 1996; p. 1. Figures since November 1997 appear in the
Single Market Scoreboard. The figure for June 1997 is mentioned in the second edition of the
Scoreboard (May 1998) on page 1.
22 European Governance: A White Paper. Brussels: European Commission, COM(2001) 428, 25 July
2001; 35 p.
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Pamphlets, Discussion and Research Papers
As for books, the relevant literature is huge. Here is a list of the series we have consulted:
Les rapports du Conseil d'analyse économique (CAE), Paris; papers of the Centre for
Economic Performance (CEP) at the London School of Economics and Political Science
(LSE); papers and reports of the Centre for Economic Policy Research (CEPR), London; papers and reports of the Centre for European Policy Studies (CEPS), Brussels; research memoranda of the Central Planning Bureau (CPB), The Hague; papers of the European
Institute of Public Administration (EIPA), Maastricht; reports of the European Research
Associates (ERA), Brussels; reports of the European Round Table of Industrialists (ERT),
Brussels; reports of the European Trade Union Confederation (ETUC), Brussels; working papers of the European University Institute (EUI), Florence; cahiers de l'Institut français des relations internationales (IFRI), Paris; Kiel discussion papers (papers of the Institut für
Weltwirtschaft, Kiel); papers of the National Institute of Economic and Social Research
(NIESR), London; discussion papers of the Philip Morris Institute for Public Policy
Research (PMI), Brussels; reports of the Royal Institute of International Affairs (RIIA),
London; reports of the Trade Policy Research Centre (TPRC), London; and position papers of the Union of Industrial and Employers' Confederations of Europe (UNICE), Brussels.
Journals
The following journals have been consulted thanks to the clip-files held by the library of the 'Fondation nationale des sciences politiques' in Paris: Aspects de la France; Combat;
Courrier International; Démocratie Moderne; France Soir; Herald Tribune / International
Herald Tribune; Infomatin; Journal de Genève; La Croix; La Lettre de la Nation; La
Nation; La Tribune; La Tribune de l'Expansion; La Tribune Desfossés; L'Aurore; La Vie
Économique; La Vie Française; Le Figaro; Le Journal des Finances; Le Monde; Le Monde
Diplomatique; Le Nouveau Journal; Le Nouvel Observateur; Le Point; Le Quotidien de
Paris; Les Échos; L'Express; L'Humanité; Libération; Lutte Ouvrière; Neue Zürcher
Zeitung; Paris ce Soir; Paris Presse; Politis; Problèmes économiques; Réforme;
Révolution; Rouge; Témoignage Chrétien; The Economist; The Financial Times; The
Guardian; The Independent; and The Times.
The following journals have been directly consulted: Agence Europe (Luxembourg;
Brussels, Belgium); American Journal of Political Science (Detroit, USA); American
Journal of Sociology (Chicago, USA); Brookings Papers on Economic Activity
367 The Battle of the Single European Market
(Washington, DC, USA); Built Environment (London, UK); Business Week (USA);
Cahiers économiques et monétaires de la Banque de France (Paris, France); Centre for
Economic Policy Research (CEPR) Bulletin (London, UK); Common Market Law Review
(London, UK; Leiden, Netherlands); Contemporary European Affairs (Oxford, UK); Die
Weltwirtschaft (Kiel, Germany); Economica (London, UK); Economic Policy (Cambridge,
UK); Economics and Business Education (London, UK); Économie appliquée (Paris,
France); Économie et politique (Paris, France); Économie internationale (Paris, France);
Économie prospective internationale (Paris, France); Espoir (Revue de la Fondation et de l’Institut Charles de Gaulle) (Paris, France); Essays in International Finance (Princeton,
USA); Euro (Brussels, Belgium); European Affairs (Amsterdam, Netherlands); European
Business Journal (London, UK); European Business Review (Bradford, UK); European
Economic Perspectives (London, UK); European Economic Review (Amsterdam,
Netherlands); European Industrial Relations Review (London, UK); Foreign Affairs (New
York, USA); Intereconomics (Hamburg, Germany); International Affairs (London, UK);
International Business Law Journal (Paris, France); Journal de Genève (Geneva,
Switzerland); Journal of Common Market Studies (Oxford, UK); Journal of Economic
Perspectives (Nashville, USA); Journal of European Integration (Baden-Baden, Germany);
Journal of International Economics (Amsterdam, Netherlands); Journal of Political
Economy (Chicago, USA); Le Figaro (Paris, France); Les cahiers de Bruges (Bruges,
Belgium); Les petites affiches (Paris, France); L’Événement européen; Lloyds Bank
Review (London, UK); New Left Review (London, UK); Newsweek (USA); New York
Times (New York, USA); ORDO: Jahrbuch für die Ordnung von Wirtschaft und
Gesellschaft (Bad Godesberg, Germany); Oxford Economic Papers (Oxford, UK); Oxford
Review of Economic Policy (Oxford, UK); Parliamentary Affairs: A Journal of
Comparative Politics (Oxford, UK); Policy Studies (Abingdon, UK); Politique étrangère
(Paris, France); Politiques et management public (Paris, France); Pouvoirs: Revue française d’études constitutionnelles et politiques (Paris, France); Problèmes économiques
(Paris, France); Réalités et perspectives – Banque générale du Luxembourg (Luxembourg);
Reflets et perspectives de la vie économique; Regards sur l’actualité (Paris, France);
Regional Science and Urban Economics (Amsterdam, Netherlands); Relations
Internationales (Paris, France); Review of International Economics (Oxford, UK); Review of World Economics (Jena, Germany); Revue d’économie industrielle (Paris, France);
Revue d’économie politique (Paris, France); Revue d’économie régionale et urbaine
(Paris, France); Revue d'intégration européenne (Montreal, Canada); Revue du droit de l'Union européenne (Paris, France); Revue du Marché Commun / Revue du Marché
Commun et de l'Union européenne (Paris, France); Revue du marché unique européen
(Paris, France); Revue économique (Paris, France); Revue économique de l'OCDE (Paris,
France); Revue française d’économie (Paris, France); The American Economic Review
(Menasha, USA); The Economic Journal (Cambridge, UK); The Economist (London, UK);
The Journal of Economic Literature (Menasha, USA); The Manchester School of
Economic and Social Studies (Manchester, UK); The Political Quarterly (London, UK);
The Review of Economic Studies (Edinburgh, UK); The World Economy (Amsterdam,
Netherlands); Understanding Global Issues (Cheltenham, UK); World Competition
(Geneva, Switzerland; The Hague, Netherlands); World Politics (Princeton, USA); and
Yale Economic Essays (New Haven, USA).
368