Friday, 14 March 2008

EU TFEU: Free movement of goods

The European Community is more than a free trade area. The EC (in the future the EU) is a customs union with a common customs border in relation to third countries. Once a product has legally entered the EC, it can circulate freely within the Community.

Customs duties between the member states are prohibited. So are all charges having equivalent effect (including penalising taxes) as well as quantitative restrictions (quotas) on goods from member states or emanating from third countries but in free circulation in member states.

The Treaty of Lisbon preserves and protects these fundamental principles of the free movement of goods, with some changes of order and terminology.

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In the Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) added the following light touches to Article 23 of the Treaty on establishing the European Community (TEC), renamed the Treaty on the Functioning of the European Union (Official Journal, OJ, 17.12.2007 C 306/52):

43) Title I on the free movement of goods shall become Title Ia.

44) In Article 23(1), the words ‘shall be based upon’ shall be replaced by ‘shall comprise’.

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The less is said about an amended Article, the more we are dependent on the current provision. Article 23 TEC looks like this (in the latest consolidated version of the TEU and the TEC, in OJ 29.12.2006 C 321 E/51):

PART THREE
COMMUNITY POLICIES

TITLE I
FREE MOVEMENT OF GOODS

Article 23 TEC

1. 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.

2. The provisions of Article 25 and of Chapter 2 of this title shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.

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The context and the contents of the amended Article should be the following when the Lisbon Treaty is consolidated, after replacing ‘Community’ by ‘Union’ according to horizontal amendment 2(a), replacing the words as instructed above and checking the referrals in the second paragraph:

Part Three Policies and internal actions of the Union

Title 1a TFEU (ToL), new numbering Title II Free movement of goods

Article 23 TFEU (ToL), after renumbering Article 28 TFEU

1. The Union shall comprise 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.

2. The provisions of Article 25 [TFEU (ToL, renumbered Article 30 TFEU] and of Chapter 2 [TFEU (ToL), after renumbering Chapter 3 Prohibition of quantitative restrictions between Member States, TFEU] of this title shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.

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For the sake of easy comparison we look up the corresponding Article in the draft Treaty establishing a Constitution for Europe proposed by the European Convention (OJ 18.7.2003 C 169/33):

SECTION 3
Free movement of goods

Subsection 1
Customs union

Article III-36

1. The Union shall comprise 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.

2. Article III-38 and Subsection 3 of this Section shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.

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Without disturbing the contents, the IGC 2004 chose to present the customs union differently, building the equivalent of Articles 23 to 27 TEC and Articles III-36 to III-40 Draft Constitution into one long Article. Although only the first and the second paragraph correspond directly with the provisions we are presenting, offering the full contents of Article III-151 Constitution allows the reader to see a greater whole at a glance (OJ 16.12.2004 C 310/64-65):


SECTION 3
FREE MOVEMENT OF GOODS

Subsection 1
Customs union

Article III-151

1. The Union shall comprise 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.

2. Paragraph 4 and Subsection 3 on the prohibition of quantitative restrictions shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.

3. Products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State, and if they have not benefited from a total or partial drawback of such duties or charges.

4. Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.

5. The Council, on a proposal from the Commission, shall adopt the European regulations and decisions fixing Common Customs Tariff duties.

6. In carrying out the tasks entrusted to it under this Article the Commission shall be guided by:

(a) the need to promote trade between Member States and third countries;

(b) developments in conditions of competition within the Union insofar as they lead to an improvement in the competitive capacity of undertakings;

(c) the requirements of the Union as regards the supply of raw materials and semi-finished goods; in this connection the Commission shall take care to avoid distorting conditions of competition between Member States in respect of finished goods;

(d) the need to avoid serious disturbances in the economies of Member States and to ensure rational development of production and an expansion of consumption within the Union.

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The UK House of Lords European Union Committee has a wonderful introduction, both general and topical, to the single market in its report “The Single Market: Wallflower or Dancing Partner? Inquiry into the European Commission’s Review of the Single Market”.


Ralf Grahn


Recommended reading:

UK House of Lords European Union Committee: The Single Market: Wallflower or Dancing Partner? Inquiry into the European Commission’s Review of the Single Market; Volume I: Report; 5th Report of Session 2007-08; HL Paper 36-I; Published 8 February 2008.

Available at:

http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/36/36.pdf

Read from the Foreword to Chapter 4: General Conclusions (pages 1 – 21). In addition, the report looks in depth at three important sectors: energy, telecommunications and financial services. Volume II (HL Paper 36-I) contains the evidence (which is not restricted to national sources).