Fair, competitive and resilient: EU responds to globalisation

The blog post Reflection paper on globalisation: Opportunity or threat?, which  introduced the European Commission’s reflection paper on harnessing globalisation COM(2017) 240, left me with a desire to present the reasons of the Commission and how it wants to handle the internal and external pressures of globalisation, as part of the discussion about the future of Europe - #FutureOfEurope on Twitter.

Profound changes

We may be well or ill prepared, but profound changes await us. As the EU Commission writes about our interconnected future (page 11):

We are still in the early phase of the transformation where digitalisation, robots, artificial intelligence, the internet of things, 3D printing will revolutionise how we produce, work, move and consume.

The UK and the USA have both upset long traditions of integration, European and global. China increasingly acts like an economic and a military great power, but not based on the values of democracy, human rights and the rule of law many of us believed were becoming universal.

In the emerging tri-polar (or multipolar?) world, the relative weight of Europe in world affairs continues to decrease, to say nothing about the dwindling relative size of individual EU member states (page 12):

In 2025, 61% of the world's 8 billion-population will be in Asia, predominantly in China and India. Europe's relative share of the world population will decline, with the EU27 accounting for 5.5 %. This may bring about a multipolar world order with different political, technological, economic and military powers. But it also means large new markets for European companies.

Isolationism and protectionism - closing minds and borders, building physical and mental walls, creating obstacles to trade and investment - may entice individuals, communities, regions and countries feeling left behind, but the relief is shortlived (page 14):

Changes associated with globalisation can lead to calls for countries to isolate and insulate themselves from what is happening around them. This is particularly acute in regions that have been left behind. Some want to put up barriers and close borders.  

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However, a majority of European citizens recognise that protectionism does not protect. It may provide short-term relief, but history shows that it never had lasting success, and has often led to disastrous outcomes.

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Protectionism would disrupt production and increase costs and prices for consumers. European exports would become less competitive putting even more jobs at risk. An increase in trade restrictions by 10% is estimated to lead to a 4% loss of national income. We would lose access to new products, services, technologies and ideas. By hitting the poorest hardest with price increases, protectionism would have the opposite of its desired effect.

Harnessing globalisation

In a nutshell, for the sake of the citizens of Europe and the world, the Commission sketches the road to follow (page 14):

To better harness globalisation, we need more global governance and global rules. And we need to support that with domestic policies that boost our competitiveness and resilience at home.

Chapter 3 about the EU’s external response is dedicated to promoting a fairer international economic order (pages 15-18). Chapter 4 deals with the internal response of the EU: how to enhance innovation and competitiveness, as well as to bolster the resilience of those who otherwise fall behind (pages 19-23).

The thoughts about life-long learning and active labour market and social policies are closely related to the future of Europe reflection paper on the social dimension, the European pillar of social rights to be proclaimed and the Social Summit for Fair Jobs and Growth the coming week, 17 November 2017 in Gothenburg (Sweden). - For more information you can follow #SocialRights and #SocialSummit17 on Twitter.

EU level action

Individuals and firms make their own choices in a changing world, but the reflection paper is about how the political sphere should tackle globalisation. There are challenges for each political level - local, regional, member state and EU - as summarised on page 24.

Here we are interested primarily in a sketch of how the EU institutions should should invest their time and energy regarding globalisation:

• Trade agreements to open markets and enforce level-playing field
• Measures to ensure global tax justice and transparency
• Promotion of higher global regulatory standards
• Trade Defence Mechanism
• European Budget (such as EFSI, ESIF, GAF, Horizon)
• European External Investment Plan
• Development Assistance
• Product and Food Safety  

If this succeeds in inviting blog followers to read about the EU’s external and internal responses to globalisation - fair, competitive and resilient - it may be better to continue with the expert assessments I promised in a separate blog post.

Ralf Grahn

Internal market mid-term

Behind by design seems to lead the EU to the Sisyphean internal market and other policy areas, where the Juncker Commission is left to practise the art of the possible: Monitoring the European Commission’s progress.

Having found no comprehensive internal market (single market) mid-term review process or document, we turn to elements illustrating mid-life during the current Commission term.

Is the European Commission able to inspire the EU member states and the other European Union institutions to market reforms?

Single market integration and competitiveness

Instead of the statutory Single Market Pillar of the Annual Growth Survey and the European Semester the European Parliament had called for repeatedly, the European Commission published its latest:

Single market integration and competitiveness report 2016 (European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs; 128 pages)

A few snippets, by way of introduction. We learn that (p. 5-6):

The evolution of productivity is the main determinant of competitiveness in the long run. Despite a relative slowdown in productivity growth in the USA, the correction of macroeconomic imbalances and the introduction of reforms in some EU Member States, the productivity gap between the USA and the EU still persists. The recovery remains tepid and fragile and the subdued aggregate demand is not contributing to stimulate investment and innovation.

This report identifies progress in the introduction of reforms, but there is still considerable scope for improvement in many areas and countries.

The internal market success story is modified (p. 9):

Compared to the USA, the size of EU firms remains relatively stable during their business life. Once established in the market, EU firms are unlikely to grow or shrink in size. This structural difference between the US and the EU seems to be a result of the relatively lower dynamism of EU markets.

However, some progress is noted, according to the World Bank’s Doing Business scores (p. 9):

Public sector regulations define the business environment in which firms operate. The US is considered to have a more dynamic business environment than the EU. According to the World Bank rankings, the EU has improved its business environment and is closer to the global frontier in 2016 than it was in 2010 (by 3.5 percentage points).

Deepening the internal market remains a challenge in three areas relevant for the efficient allocation of resources in the EU (p. 11):

Accounting for over 14% of GDP, public procurement activities have a significant economic impact on national economies and their efficient operation can contribute to improving the quality of public expenditure and reducing budgetary imbalances while contributing to innovation and the modernisation of Member States' economies.

Activities in the construction value chain present low productivity levels with multiple regulatory restrictions and low cross border trade activity.

Productivity improvements are particularly needed in business services markets, where rigidities are still considerable at national and Single Market levels despite some progress in a number of Member States.

A summary of conclusions is presented on page 14.

The business environment in the USA seems to be clearly superior to the EU seen as a whole (p. 55):

The World Bank Doing Business ranking of business environment in over 100 countries reflects the greater dynamism of business in the USA: USA is ranked 7th, while the EU is on the 31st place.

Single market integration

After discussion about competitiveness and growth factors (against the benchmark USA), chapter 6 discusses integration in the single market (from page 68):

Previous sections of this report have shown the importance of market efficiency in the allocation of resources for competitiveness and how it depends, to a considerably degree, on labour and product market regulations.

The characteristics and quality of the common regulatory framework provided by the Single Market also have a considerable impact on the individual and collective competitiveness of EU Member States. This became apparent during the past financial crisis when the regulatory framework applicable to financial markets proved to be insufficient to cope with the requirements of highly complex and integrated EU financial markets under stress.

At a general level (p. 75):

There are three main channels through which the Single Market can be expected to absorb and spread out the impact of asymmetric shocks:

• Labour markets: local labour market dynamics and flows of labour from surplus regions to regions where labour is in demand.

• Capital markets: flows of capital from regions of low to regions of higher return.

• Goods and services: a shift in intra-EU trade patterns in favour of the worst off economies, as a consequence of improving terms of trade.

A potential fourth channel could be exchange rate and interest rate adjustments, but with 19 Member States already having adopted the single currency and most of the remaining nine having pegged their exchange rates against it, the scope for Single Market shock absorption through monetary mechanisms is limited. In relation to third countries though, exchange rate adjustments remain a powerful channel for shock mitigation.

Thus, the effectiveness of the Single Market in absorbing shocks and facilitating an efficient allocation of resources hinges on the elimination of barriers to the free circulation of goods services, people and capital in the labour, capital and goods and services markets.

After finding the current internal market inadequate to resist shocks, the report discusses key areas in more detail: best value for money public procurement (from page 82), rigidities and market failures in the complex construction value chain (from page 94) and partly as a rehash of the 2015 report, services, especially the wholesale and retail distribution sectors (from page 111).  

Just a few random picks among the observations:

• The Single Market for public procurement is not sufficiently integrated and further opening could boost economic efficiency and growth (p. 93),

• In 2015, the Commission launched a fitness check of EU legislation in the fields of Internal Market, Energy Efficiency, Environment and Occupational Safety and Health, which aims at identifying overlaps or inconsistencies between the various relevant legal acts and analyse burdens and benefits for enterprises of the construction sector, including products manufacturers. The results will be presented in 2017 (page 104).

• Retailers wanting to establish in other Member States may face regulatory restrictions. Member States impose requirements relating to the size of retail outlets or to their location which may result in market entry barriers for certain store formats or business models and may affect secondary establishment. Such restrictions can have a negative impact on market structure and dynamics (page 124).

• For non-grocery retail e-commerce is completely changing the market conditions. Integration happens through cross-border retail sales. Member States should provide a regulatory framework supportive to the development of e-commerce and ensure a level playing field between physical and on-line retail (page 126).

Food for thought

The Single market integration and competitiveness report 2016 offers national governments and EU institutions elements to contemplate market reforms, but it does not really quantify or assess the adequacy of the current internal market strategy of the European Union:

Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final

Neither does the 2016 report lay the foundation for a mid-term review based on what it would take to catch up with the United States of America, to name the obvious internal market benchmark.

Single EU regulator, single EU rule book

In practical terms, where the Single market integration and competitiveness report 2016 left off, Bruegel picks up the slack ahead of the mid-term’s invitation for the Commission to reflect on the future of the internal market, as on other priorities.  

Bruegel offers a policy contribution paper Making the best of the European single market (2017), which discusses what to do about the lack of growth and fairness when the easy parts of the internal market have been done.

In terms comprehensible to national politicians and administrations, the authors outline how to increase productivity growth, a new investment agenda and how the EU and its member states should promote fairness.

Even if the discussion is conducted within the existing treaties, it is refreshing to see main building blocks examined, instead of swarms of wafer-thin amendments to limited legal acts.

But I wonder if the EU member states are ever going to be able to break out of the Sisyphean internal market they created, if they fail to build the internal market and the digital single market according to the litmus test: each part as good or better than in the federal United States and Canada.

Ralf Grahn

Annual Growth Survey 2015 without Single Market integration report

We took leave of the first and the second Single Market Act, and the second Barroso Commission, through the blog posts Tracing Single Market Act proposals and Latest Single Market Act blog entries.

Still interested in improvement and governance of the internal market, in the entries Single Market integration 2013 report and Second Single Market integration report 2014 we saw that the Council and the European Parliament welcomed the integration reports, while calling for improvements.

The Parliament had even formally requested a legally binding act with detailed data, establishing  a Single Market Pillar for the European Semester and the Annual Growth Survey, as related in my Swedish blog post Europaparlamentet om styrningen av den inre marknaden.   

Juncker Commission: AGS 2015

After the elections to the European Parliament, the new Commission, headed by Jean-Claude Juncker, assumed office 1 November 2014. Soon after that, the Commission started the 2015 European Semester, by publishing its first Annual Growth Survey (AGS):

Annual Growth Survey 2015; Brussels, 28.11.2014 COM(2014) 902 final (20 pages)   

Based on an integrated approach, the Commission recommended three main pillars for the EU's economic and social policy in 2015 (pages 4-5):

• A coordinated boost to investment
• A renewed commitment to structural reforms
• Pursuing fiscal responsibility

But it was not immediately clear what the Commission meant by streamlining and reinforcing the European Semester process (page 5):

To implement the logic of the new integrated approach, the Commission proposes to streamline and reinforce the European Semester of economic policy coordination in support of the three pillars.

The renewed commitment to structural reforms (Section 3, from page 9) started with these general remarks:

Making the European economy more competitive and ensuring the right regulatory environment for long-term investment is crucial for growth. Structural reforms can help to attract private productive investment, particularly in network industries and smart manufacturing where investment needs are high. At EU level, this requires further deepening of the single market and avoiding unduly burdensome regulations, particularly for small and medium sized enterprises, improving access to finance and ensuring the quality of investment in research and innovation. At Member State level, these efforts have to be complemented by an ambitious implementation of structural reforms of product, services and labour markets.

Deepening and widening the internal market (single market) was very much on the Commission’s mind, as presented after each of these paragraph introductions for removing key barriers at EU level:

• Implementing the single market in goods and services is a priority.
• The Digital Single Market is essential for jobs, growth and innovation.
• Further structural reforms in energy markets are necessary to achieve a resilient Energy Union with a forward-looking climate change policy
• Ambitious action is required to ensure an EU regulatory framework supportive of jobs, growth and investment.

Regarding structural reforms at member state level, internal market substance and governance came to the fore in point four (page 13):

4. Improving the flexibility of product and services markets. Modernising the functioning of network industries, upgrading infrastructure capacity and further opening services sectors remains a challenge for most Member States, as shown the country-specific recommendation issued to the Member States in 2014, which put the focus on measures to improve the functioning of their network industries and to enhance competition in product and services sectors, notably as regards regulated professions. Effective enforcement of consumer legislation can also increase trust and create demand in the single market.

EU legislation provides a framework for modernisation at national level, and for making Europe more attractive and competitive as a whole. Member States have undertaken numerous reforms in the services sector following the entry into force of the Services Directive in 2006, but progress has been more uneven recently. The full implementation of the Services Directive would significantly improve the functioning of the single market for services and could lead to an economic gain of up to 1.6% of EU GDP in the long run on top of the 0.8% of EU GDP under the current level of implementation. The overall persistence of a high number of exceptions to the general principles foreseen by the Directive, together with lengthy reform processes in a number of Member States, are still weighing on the full implementation of the Directive and thus do not allow reaping its full benefits. Stepping up national reforms should focus on removing the following barriers: (i) disproportionate and unjustified authorisation requirements in some Member States, notably legal form and shareholding requirements; (ii) lack of clarity of domestic legislation as to the rules applicable to businesses providing cross-border services; (iii) lack of mutual recognition; (iv) cumbersome administrative procedures, with scope for improving the performance of the Points of Single Contact; (iv) uneven progress on the ongoing mutual evaluation of professional regulations and reforms of regulated professions; (v) remaining obstacles to the free movement of goods. The Commission will continue to work closely with the Member States to remove these barriers.

However, while discussing streamlining and reinforcing the European Semester (pages 16-17), the Commission said nothing about the single market integration report or a single market pillar for the Annual Growth Survey and European Semester. Neither did the more detailed annex on pages 18-19 or the graphic presentation on page 20.  

If we look at the Commission’s Europe 2020 web pages, we find that the Annual Growth Survey 2015 page mentions the following documents besides the 2015 AGS: the Alert Mechanism Report, its statistical annex, the Joint Employment Report, the annexes to the Joint Employment Report, as well as views from the social partners ETUC and European cross-industry employers.

Thus, it looks as if the 2015 report on single market integration as a part of the Annual Growth Survey (and the European Semester exercise) disappeared without a trace, despite the welcome and wishes for further improvement expressed by the Council and the European Parliament regarding the first (2013) and the second (2014) integration reports.

Ralf Grahn

Single Market integration 2013 report

In the communication Better governance for the Single Market; Brussels, 8.6.2012 COM(2012) 259 final; the European Commission promised (page 5) an Annual Report on Single Market integration as part of the Annual Growth Survey, to be discussed by the Council and the European Parliament and be endorsed by the Spring European Council. The Annual report would contribute to the definition of country-specific recommendations, which would be based on a more in-depth analysis of performance in each Member State, in the context of the European semester process.

The European Parliament responded by its resolution of 7 February 2013 with recommendations to the Commission on the governance of the Single Market P7_TA(2013)0054, based on the IMCO report prepared by Andreas Schwab.

Based on the Parliament’s indirect right to propose - Article 225 TFEU - it asked for more:

1. Requests the Commission to submit as soon as possible, whilst considering as the possible legal basis all relevant provisions of the TFEU relating to the internal market, including Article 26(3) TFEU, a proposal for an act aimed at strengthening the governance of the Single Market, following the detailed recommendations set out in the Annex hereto;

Indeed, the annex contains detailed recommendations as to the content of the proposal requested (pages 14-19).  

Single Market integration 2013

At the end of November 2012 the Commission produced its report as a contribution to the Annual Growth Survey (AGS) and the European Semester 2013 exercise:

State of the Single Market integration 2013 - Contribution to the Annual Growth Survey 2013; Brussels, 28.11.2012 COM(2012) 752 final (22 pages)  

The first AGS related Single Market integration report outlined the situation concerning goods, services, capital and labour, before moving on to explain where it thought the Single Market potential was the greatest (from page 7):

Based on a number of economic indicators, services, financial services, transport, digital market and energy have been identified as key areas for priority policy action and enhanced implementation of the Single Market.

The priority sectors were discussed in a more detailed manner, leading to policy priorities for each:

• Services markets (pages 9-13)
• Energy markets (pages 13-16)
• Transport markets (pages 16-18)
• Digital markets (pages 18-21)

Spring European Council 2013

In the Spring European Council conclusions 14/15 March 2013 EUCO 23/13, point  

9, the European Council promised to give specific emphasis to some issues. EUCO hoped the member states would act on the recommendations and it welcomed the Single Market integration report for future AGS exercises (9(b)):

(b) the Single Market continues to be a key driver for growth and jobs. In this context, the European Council invites the Member States to take full account of the recommendations in the Commission's report on the state of integration of the Single Market and welcomes the Commission's intention to integrate such reporting into future Annual Growth Surveys. ---

Ralf Grahn

EU: From expulsions to justice and integration for Roma

The French “Romagate” affair was highlighted dramatically before and during the summit of EU leaders, but the official conclusions were as if from another planet.



The Spanish journalist and Euroblogger Daniel Basteiro gave a vivid description of the disconnect between the prepared conclusions and the Roma issue, which captured the discussions among the press corps (and the meeting room): Contra Sarkozy… ¡nada por escrito!



Nicolas Gros-Verheyde on the security and defence oriented Euroblog Bruxelles2 found the Roma debate enlivening, because it broke with the EU tradition to seek consensus at any price. President Nicolas Sarkozy attacked violently on the insult front, but did not present a reasoned case of or a view of the real issue: the integration of Roma and their place in Europe; in Les Rom : un sujet de la politique étrangère... eh oui !

According to Gros-Verheyde several European leaders called France to order, with Italy’s Silvio Berlusconi the major exception. France talked much, convinced little and irritated much. Later, in front of the journalists, the president Herman Van Rompuy summarised the understanding between the leaders in five points, which did not figure in the official conclusions. The Commission seems set to initiate two legal proceedings against France.



Herman Van Rompuy


Yesterday, president Herman Van Rompuy spoke about the “unscheduled discussion about the Roma situation”, when he reported on the outcome of the European Council meeting 16 September 2010 at the European Parliament.



On this third topic, the Roma, Van Rompuy reiterated his remarks at the post-meeting press conference (page 4):

During lunch we discussed a topic that interests you particularly. Around the table, there was consensus on five points which was not interpreted as a formal conclusion of the Council

1. A member state has the right and the duty to take action to uphold the rule of law within its territory.

2. The Commission has the right, and indeed the duty, to ensure compliance with Union law by Member States and has the right - and indeed the duty - to conduct investigations.

3. We took note of the declaration that the Commission President made on the eve of the European Council.

4. Respect is the essential rule in the relationship between the Member States and the Commission.

5. In a future meeting of the European Council, we will discuss the issue of the integration of the Roma.

The prohibition of all forms of discrimination based on nationality or ethnicity is a founding principle of the European Union. Respect for human dignity is one of our core values.

Points 1, 2 and 5, at least, put the real issues in view, despite the emotional charges.



Next steps



In The Irish Times, Marie O’Halloran sums up the debate in the European Parliament yesterday: Dispute over Roma dominates parliament debate. Two tracks are discernible: infringement procedures against France and the integration of Roma.


Scales of justice



According to Euronews, Commission president José Manuel Barroso says that the Commission has a duty to make European law respected. The Commission is making an assessment in a very objective and professional manner.



The French government seems to have digested the reality of imminent legal proceedings. According to Expatica (originally AFP), France has supplied an additional document arguing its case ahead of the Commission’s expected decision.



Romania’s president Traian Basescu has asked president Sarkozy to stop Roma expulsions, but did not receive an immediate answer. The Romanian parliament yesterday condemned France for a "serious violation" of its citizens' rights over its crackdown the Roma (sources: EUbusiness).

The actions of the French government will be weighed on the scales of justice with regard to discrimination. In the case of implementation of the so called Citizenship Directive 2004/38 on free movement rights, Paris is one of 15 or 16 capitals the Commission is studying. Both questions, as well as French statements contesting the EU legal order, concern fundamental values and rules of the European Union.


Roma integration



Despite different viewpoints about where the burden should lie, views are converging on the necessity to do something about the abject poverty and exclusion of Roma in Europe.



On 7 September 2010 the European Commission established a Roma Task Force to assess Member States' use of European Union funds for Roma integration. For those who want background information, the Commission published a memo on 25 August 2010.



The Associated Press reports that French prime minister François Fillon has urged the development of a Europe-wide plan to deal with illegal Gypsy camps and to improve living conditions for Gypsies in eastern Europe.



The EU consultative body, the European Economic and Social Committee has called for a participatory EU level strategy for Roma integration, although the resolution acknowledges that the member states bear the main responsibilities.

The integration of 10 to 12 million Roma, mostly in the poor new and prospective member states in Eastern Europe, is a herculean task. Hopefully, the heated exchanges will lead to more resolute action.




Ralf Grahn


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