Monday 29 June 2009

European Union: Better regulation

On its road to an ever closer union among the peoples of Europe, the European Union has as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities, to promote throughout the European Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States (Article 1 TEC).

Social market economy

Among the modernised aims of the European Union, in the Lisbon Treaty Article 3(3) TEU, we find “a highly competitive social market economy”:

“3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.

It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child.

It shall promote economic, social and territorial cohesion, and solidarity among Member States.

It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe's cultural heritage is safeguarded and enhanced.”


Legislation and regulation

Legislation is an important instrument for the European Union promotes its aims, and the stream of Directives, Regulations and Decisions is impressive.

In principle, the objectives of the legislative acts are worthy, such as improved environmental standards, consumer protection, human safety, health and wellbeing.

While the legislation is often addressed to the member states, much of it targets businesses. Regulation leads to compliance costs for enterprises, and the combined cost of business regulation is too great to ignore at national and European level.

Much can be said for replacing different national rules by common norms for 27 EU member states (or 30 countries of the European Economic Area, EEA), but the economy in the internal market is not meant to be only “social”, but also “highly competitive”.

Given the importance of the European Union, both benefits and costs of business regulation need to be scrutinised carefully, because European level legislation affects about 500 million people.


Better regulation

The European Commission pursues a Better Regulation strategy, with the following courses of action:

 Promoting the design and application of better regulation tools at the EU level, notably simplification, reduction of administrative burdens and impact assessment.
 Working more closely with Member States to ensure that better regulation principles are applied consistently throughout the EU by all regulators.
 Reinforcing the constructive dialogue between stakeholders and all regulators at the EU and national levels

The Commission’s own assessment of its agenda is the Communication Third strategic review of Better Regulation in the European Union (Brussels, 28.1.2009, COM(2009) 15 final).

The Communication presents efforts to cut “red tape” by scrapping obsolete legislation and codifying existing legal acts. The implications of proposed new laws are scrutinised through impact assessments, with new Impact assessment guidelines (since 15 January 2009; SEC(2009) 92).


Open Europe

Open Europe’s publication Out of control? Measuring a decade of EU regulation was published in February 2009, which means that some of the questions it raises may have been addressed in the Communication (and accompanying documents) as well as the new Impact assessment guidelines.

Still, the publication raises valid points about regulatory costs at both national (UK) and European level. (It does not look at the benefits.)

Despite the efforts, the costs of regulation have continued to rise.

Administrative costs have been at the centre of attention, with the EU scrapping obsolete legislation and simplifying existing laws. The wider costs of compliance with regulation, fees and licenses as well as knock-on effects have been less well scrutinised.

Open Europe correctly underlines the importance of European level regulation, meaning that a purely domestic (UK) agenda is too limited in scope.


New Commission

The newly elected European Parliament is starting its work and the legislative engine, the new Commission, will begin to set its priorities from the end of this year (1 November 2009).

Open Europe’s remarks and suggestions need to be taken seriously by the EU institutions, comparing them to the latest Communication and Impact assessment guidelines.

Although Open Europe dealt with national issues from a British perspective, all national governments could profit from many of the suggestions, both with regard to their contributions to Council work and to their domestic agendas on sensible regulation.

A level playing-field within the EU (EEA) is desirable, but far from enough. A highly competitive social market economy needs to be competitive in a global context as well.

Ralf Grahn

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