You Thought We've Got an EU Single Market? Think Again!

You thought we’ve got an EU single market? Think again! Forget Europe’s constitutional crisis or disputes over enlargement. EU member governments’ failure to complete the single market is the greatest threat argue R. Daniel Kelemen (far left) and Anand Menon t’s hard to overstate the importance of it Polish or French attempts to protect the single European market. Its creation ‘strategic’ industries from foreign takeovers, Ihas been the centre-piece of economic or Spanish reluctance to sell its energy integration for 20 years and has provided giants. They are also becoming more brazen the basis for EU expansion into many new in their defiance of the Commission’s efforts policy arenas. These include economic and to ensure fair play. Rhetorical support for monetary union (EMU) and EU social and the single market is being undermined by environmental legislation. An extra two member states’ actions, with legal and and a half million jobs have been created, political obligations being ignored. Moreover, European firms are more competitive in the Europe’s political leaders appear incapable global economy and the Union itself is more of recognising the far-reaching consequences attractive to foreign investment - all thanks of their deeds, which threaten the very heart to the single market. of the integration process. Less than two decades ago, Europe Instead, political debate has been was warned about the grave economic and distracted by the future of Europe’s political risks of failing to complete the constitutional treaty following the French market in a seminal 1988 report by Paolo and Dutch rejections of it. While the failure Cecchini, former Commission deputy director to ratify the treaty delivered a powerful for the internal market and industrial affairs. psychological blow, it was less momentous Yet today the EU’s greatest achievement is for the future of Europe than most in real and present danger. commentators imply. For instance, the text was notably timid over the institutional National governments are being reforms it proposed to help the EU to cope increasingly seduced by protectionism, be with further enlargement. And, despite the 80 | Europe’s World Summer 2007 warnings of doomsayers, the Union has OMMENTARY continued to function remarkably well on C the basis of arrangements established by By Roger Helmer the Nice Treaty. Indeed, significant progress has been made on two ‘pillars’ of EU policy- making – justice and home affairs and the It’s not a single European Security and Defence Policy – and there is no evidence that constitutional market that we gridlock has affected the legislative process need, but a free in key areas related to the single market. trade area So, if treaty reform is not the toughest challenge facing the EU, why are problems ike the curate’s egg, the article by Daniel with the single market process still hidden Kelemen and Anand Menon is good in below Europe’s political radar? Lparts. It is right in its central thesis that increasing economic rivalry and protectionism The economic benefits of the Union are between EU countries in areas like financial often either misunderstood or downplayed services and energy now pose a major threat deliberately by national politicians. When was to the economic heart of the European project. the last time you heard Britain's Chancellor of But the authors fail to get to grips with an ambiguity that runs like a fault line through the Exchequer, Gordon Brown, attribute any their analysis: the dual nature of the EU’s single of the credit for Britain’s economic success market. to its participation in the single market? Yet this political oversight should not blind us to The term is designed to enable left and the scale of its actual impact. right to interpret it in wholly different ways. To the free-market minded, the single market This can be measured in terms of seems to be euro-speak for free trade, and aggregate economic activity. EU Gross we all applaud that. But to the left, it means Domestic Product, for example, is estimated what it is − a Trojan Horse for transfering to have been 1.8% higher in 2002 than it powers from independent, democratic nations would have been without the single market, to unaccountable technocrats in Brussels. according to the Commission. This explains two of the great mysteries of EU history. Why did the British people vote in It can also be seen in the major EU 1975 for the European project when it would policy initiatives that owe their genesis to undermine their self-determination? Because the single market. EMU itself was launched they thought it was simply a matter of trade partly because a single currency promised and jobs. Euro-apologists say we British should to enhance market efficiency. Remember the have read the small print. But if one of the last tale of the American who traveled across surviving architects of the UK’s accession, Lord Europe with $100 and, having changed Carrington, could say as recently as March this money in every EU member state, ended up year that he never realised where it was going, with only $45? National currency regimes how was the average voter to know? Summer 2007 Europe’s World | 81 were also rendered unsustainable by the Despite scoring such significance free movement of capital, which was an advances during its short existence, the integral part of the single market. single market must now overcome perhaps its greatest hurdles. These include issues The single market also provided an outstanding since its inception in the mid- intellectual and legal catalyst for the EU to 1980s. When EU member states decided extend its powers into new policy sectors. to remove barriers to the free movement Many on Europe’s political left argued of goods, services, capital and labour, they that the single market, with its neo-liberal did so in very general terms. Ambiguity was bias, would endanger national regulations the price of agreement between political to protect workers, the environment and leaders as diverse as British Prime Minister public health. But their critique ignored Margaret Thatcher and French President the fact that the creation of the single François Mitterrand. Some 20 years later, market was coupled with the member states are once establishment of common The Commission again trying to sort out the standards in these areas at is unwilling to flex equivocal details, only to the EU level. its full legal muscle discover continued disputes over the appropriate balance Debate continues on the to enforce single between, for example, the degree to which European market legislation state and the market in the rules have or should replace for fear of a national service sector. national regulations that were dismantled in the name backlash In the energy sector, of free trade. However, it is meanwhile, European-wide clear that without single market legislation, restructuring is being stymied by repeated there would have been no legal basis for, government interventions to protect national say, Europe-wide limits on working times or producers from foreign takeovers. Last year, vehicle emissions. following a bid by the German corporation E.ON for Spanish power company Endesa, Environmental policy provides a good Madrid empowered the Spanish electricity illustration of how the single market has and gas regulator to block foreign permitted initiatives in other areas. Member acquisitions. This legislation was passed states have proven willing to sign up to despite the Commission informing the ambitious EU greenhouse gas reduction Spanish authorities that they were violating programmes partly because their multilateral single market legislation guaranteeing nature means that their major trading free movement of capital and freedom of partners are doing likewise. And stringent establishment. Indeed, Spain currently faces targets on car emissions are less painful if, two infringement proceedings brought by the because of the size of the European market, Commission over its behaviour concerning other states apply them as well. Endesa. 82 | Europe’s World Summer 2007 Meanwhile, the French government in OMMENTARY 2006 sought to engineer a merger between C Roger Helmer energy giant Suez and state-owned Gaz de France to prevent a feared takeover attempt by Italian utility firm Enel. French Prime And why did Margaret Thatcher ever sign Minister Dominique de Villepin reacted up to the Single European Act, which virtually angrily to accusations of protectionism, created the single market? Because the euro- enthusiasts at the Foreign Office told her it was defending a policy of “economic patriotism.” a free-market, liberalising treaty. The French approach also included vitriolic and often totally misplaced criticisms of The authors recognise that the single the services directive that contributed to its market has led to the further extension of eventual dilution. EU competences, but they assume uncritically that an extension of the EU’s powers must be Nor is protectionism the preserve of “old unequivocally a good thing. They complain that Europe”. New member states have been Chancellors of the Exchequer, Britain's finance quick learners, as exemplified by the Polish ministers, never remark on the economic government’s efforts to prevent mergers benefits of the EU. But surely even Gordon between Polish and foreign banks. Member Brown (who can announce tax cuts with a states are in effect throwing down a political straight face while actually raising taxes) could gauntlet to the Commission, challenging not pretend that the EU offers net economic benefits. The authors must have forgotten the very principles of the single market. (if they ever knew) that European countries While remaining rhetorically committed to outside the EU like Norway and Switzerland building the single market, they undermine do better economically than its member states, it by their actions.

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