Wednesday, 12 March 2008

EU TFEU: Internal market

Entrepreneurs and businesses may have found little of direct interest in the institutional wrangling over institutional issues of the European Union, except for the realisation that improved workings of the EU provide a better framework for decisions concerning the security of firms and individuals, too.

The Lisbon Treaty preserves and modernises the treaty provisions of more immediate interest to persons who work within the Union, who trade in goods or services within the large free trade area or who invest outside their national borders.

The key concepts are the ‘internal market’ and the ‘four freedoms’.

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In the Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) marked the transition to a new and substantial part of the Treaty establishing the European Community (TEC). Under its new name, the Treaty on the functioning of the European Union (TFEU), sports new headings for the Part and its first Title (OJ 17.12.2007 C 306/52):

39) In the heading of Part Three, the words ‘AND INTERNAL ACTIONS’ shall be inserted after ‘POLICIES’.

INTERNAL MARKET

40) A Title I, with the heading ‘THE INTERNAL MARKET’ shall be inserted at the beginning of Part Three.

41) An Article 22a shall be inserted, with the wording of Article 14. Paragraph 1 shall be replaced by the following:

‘1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties.’.

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In order to understand the intended changes, we go to Part One Principles and the Article being amended, Article 14 TEC (in the latest consolidated version of the TEU and the TEC, OJ 29.12.2006 C 321 E/48-49):

Article 14 TEC

1. The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 15, 26, 47(2), 49, 80, 93 and 95 and without prejudice to the other provisions of this Treaty.

2. 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.

3. The Council, acting by a qualified majority on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

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Our aim is to find out what the amended treaty is supposed to look like. This we do by merging the express and horizontal (points 2(a), 2(b) and 2(d)) amendments with the current text as well as checking the future numbering of the Article:

Part Three Union policies and internal actions

Title I The internal market

Article 22a TFEU (ToL), renumbered Article 26 TFEU

1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties.

2. 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 the Treaties.

3. The Council, on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

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For the sake of easy comparison we take note of the preceding stages of treaty reform. The European Convention, in Part III The policies and functioning of the Union, placed Title III Internal policies and action, Chapter 1 Internal market, Section 1 Establishment of the Internal Market, with Article III-14 (OJ 18.7.2003 C 169/30):

TITLE III
INTERNAL POLICIES AND ACTION

Chapter I
Internal market

Section 1
Establishment of the Internal Market

Article III-14 Draft Constitution

1. The Union shall adopt measures with the aim of establishing the internal market, in accordance with this Article, Article III-15, Article III-26(1) and Articles III-29, III-39, III-62, III-65 and III-143 and without prejudice to the other provisions of the Constitution.

2. 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 Constitution.

3. The Council of Ministers, on a proposal from the Commission, shall adopt European regulations and decisions determining the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

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The IGC 2004 shared this systematic approach, but merged the draft Constitution Articles III-14 and III-15 into one (OJ 16.12.2004 C 310/58):

TITLE III
INTERNAL POLICIES AND ACTION

CHAPTER I
INTERNAL MARKET

SECTION 1
ESTABLISHMENT AND FUNCTIONING OF THE INTERNAL MARKET

Article III-130 Constitution

1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Constitution.

2. The internal market shall comprise an area without internal frontiers in which the free movement of persons, services, goods and capital is ensured in accordance with the Constitution.

3. The Council, on a proposal from the Commission, shall adopt European regulations and decisions determining the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

4. When drawing up its proposals for achieving the objectives set out in paragraphs 1 and 2, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market and it may propose appropriate measures.

If these measures take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market.

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The common market turned from a noble aim to an achievable goal when measures based on qualified majority voting became possible after the (initially twelve year) transitory period.

The original ‘common market’ and the later ‘internal market’ are both in use in the TEC (depending on when a provision was born), but according to horizontal amendment 2(g) of the Lisbon Treaty the words ‘common market’ shall be replaced by ‘internal market’ (throughout the Treaties).

The draft Constitution still mentioned the ‘aim of establishing the internal market’, but it relinquished the TEC mention of the target date ’31 December 1992’, linked to the Single European Act (1986).

The Constitution took the draft text one step further by ‘establishing or ensuring the functioning of the internal market’ in paragraph 1. In essence, the Lisbon Treaty adopts this text.

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The ‘four freedoms’ in paragraph 2 form the core of the internal market, and it is religiously upheld in every version from the current TEC (actually from the Treaty of Rome) to the Lisbon Treaty: 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 (now ‘the Treaties’).

If there is one thing every citizen of the European Union should know about EU law, in addition to the main institutional arrangements, it is the ‘four freedoms’:

The free movement of

Goods
Persons
Services
Capital

The four freedoms were present at the birth of the original EEC Treaty (Rome Treaty), then as the ‘common market’, and given added boost by the Single European Act. The target date of 31 December 1992 was important, but a seamless internal market is a perpetual quest.

The internal market may not work perfectly, and the tens of thousands of pages of secondary legislation may seem like a nightmare, but think of the alternatives.

Fifty years of efforts have brought about unprecedented harmonisation and recognition of standards within the European Community (Union).

The enlargement of the European Economic Community (EEC) of six into a European Community (Union) of 27 member states with the added three members of the European Economic Area (EEA), namely Iceland, Liechtenstein and Norway, has led to the largest and most advanced free trade area of the world.

The ‘tons of EC rules’ (directives) achieve some sort of proportions if you think that you or your firm would have to grapple with 30 different rulebooks.

The attraction of the internal market does not stop at the present EU borders. A few states are officially on course for membership, adapting to the common rules. Then there is a number of prospective applicants pursuing voluntary harmonisation.

Some sort of influence is spread through various cooperation agreements: European Neighbourhood Policy, Mediterranean policy (Barcelona process), and African, Caribbean and Pacific states (APC).

European rules and standards are important enough to merit serious attention from exporters around the world. With existing internal concepts and a common trade policy, the European Union fills the basic requirements to ‘export’ its values in more formal settings, like bilateral and multilateral trade agreements.

Despite its imperfections, the internal market is a global success story, built on the acceptance of supranational rules as means to enhance common prosperity.

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Since the foundation the specific legal bases for ‘measures’ is given in paragraph 1, someone may wonder what the ‘guidelines and conditions necessary to ensure balanced progress in all the sectors concerned’ in the third paragraph are all about.

Paragraph 3 seems to exist as an option for long term strategies or programmes, which would serve to improve the internal market and the balance between different industrial and service sectors. This would offer the Commission a framework for future preparatory work (but may be satisfactorily covered by existing policy and work programmes).

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Even if the main thrust is one, essential, part of the internal market – competition – there is reason to take note of the Protocol on the internal market and competition, annexed to the Lisbon Treaty (OJ 17.12.2007 C 306/154):

PROTOCOL
ON THE INTERNAL MARKET AND COMPETITION

THE HIGH CONTRACTING PARTIES,

CONSIDERING that the internal market as set out in Article 2 of the Treaty on European Union includes a system ensuring that competition is not distorted,

HAVE AGREED that:

to this end, the Union shall, if necessary, take action under the provisions of the Treaties, including under Article 308 of the Treaty on the Functioning of the European Union.

This protocol shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union.

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An introductory tour of the internal market can start from the EU Single Market web pages. Yes, the Commission seems to prefer the concept ‘single market’. Go to:

http://ec.europa.eu/internal_market/index_en.htm

This is a good starting point for ‘everything’, from the general policy framework to topical headlines.


Ralf Grahn