Single market integration and pillar

After the 2013 and 2014 reports on integration in the single market, we noted the absence in the blog entry Annual Growth Survey 2015 without Single Market integration report. The blog entry Promised report on integration of Single Market reminded us of the promise by the (old) Commission and of the two resolutions of the European Parliament (based on the Andreas Schwab report and Sergio Gaetano Cofferati report) calling for a legal act on a Single Market Pillar of the Annual Growth Survey and the European Semester.

Single Market Pillar study   

The European Parliament has not only called for improvements to the report on single market integration, as part of the Annual Growth Survey (AGS) and the European Semester, but has actively tried to strengthen the intellectual underpinnings through research. In September 2014 the EP published a study:  

Indicators for Measuring the Performance of the Single Market - Building the Single Market Pillar of the European Semester (107 pages)

This study for the  Committee on the Internal Market and Consumer Protection (IMCO) was administrated by the Directorate-General for Internal Policies, Policy Department A: Economic and Scientific Policy, and written by Jacques Pelkmans and other researchers at the Centre for European Policy Studies (CEPS): Andrea Renda, Cinzia Alcidi, Giacomo Luchetta and Jacopo Timini.  

Monitoring and Evaluation tool

After presenting the essential aims of the Andreas Schwab and the Sergio Gaetano Cofferati reports, the study evaluated how far the Commission had progressed with regard to the challenge of identifying which information is best suited as a Monitoring and Evaluation (M&E) tool for the Single Market and designing an M&E tool that is able to trigger policy changes (page 11):

Since the 2013 edition of the Annual Growth Survey, the European Commission has started to address this request. Single Market Reports have been attached to the Annual Growth Survey, focusing on key policy areas. These reports represent a step forward toward better Single Market governance, as they are comprehensive Commission-wide annual reviews of the state-of-the-art of the internal market. However, a comprehensive set of economic and non-economic indicators have not yet been developed to support this analysis. To move one step forward, a systematic set of M&E indicators should be designed by the EU institutions, in order to provide the Single Market governance and policy making process with an as solid as possible evidence base.

Economic and regulatory performance

On page 15 the research team presented an overview of the scope and the contents of the study:

The research team distinguished between economic performance when the assessment concerns the economic outputs, outcomes and impacts; and regulatory performance when the assessment concerns inputs, processes and policy outputs.

This study is concerned with both aspects: namely, how to measure the economic performance of the Single Market, a question that is addressed in Chapter 5, and how to measure the regulatory performance, which is addressed in Chapter 6. Sectoral policies, a topic that mixes both economic and regulatory assessment, are addressed in Chapter 7. As preliminary steps to the analysis of possible M&E indicators, two additional issues are dealt with: the stock-taking exercise of existing M&E tools for Single Market policies and the consequent gap analysis, which is summarised in Chapter 3; and a discussion about the advantages and challenges of composite indicators, which is included in Chapter 4. Chapter 8 concludes the report and summarises the policy recommendations for each of the topics addressed in this study.

EP resolution P8_TA(2015)0067

On its own initiative the European Parliament started a procedure 2014/2221(INI), with Dariusz Rosati as rapporteur for the Committee on Economic and Monetary Affairs (ECON), leading to the:

European Parliament resolution P8_TA(2015)0067 of 11 March 2015 on the European Semester for economic policy coordination: Annual Growth Survey 2015

The EP resolution continued to press the point of a report on single market integration as a part of the Annual Growth Survey, reminding the other institutions of the analytical tool and indicators it had explored:

3. Highlights the importance and added value of the Single Market Integration reports in the previous years, contributing to the overall priorities set in the Commission’s Annual Growth Survey and the identification of country-specific recommendations in the context of the European Semester; finds it, therefore, most deplorable that the Single Market Integration report has been omitted for 2015;

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21. Believes that the Member States and the Commission have not yet delivered on their commitment to complete the single market, especially the single market for services and the digital economy;

22. Reiterates its call on the Commission to improve the governance of the single market; urges the Commission to align the aims of the Single Market with those of the European Semester and to ensure consistency between the monitoring mechanisms of both; believes that a separate analytical tool, composed of indicators measuring the implementation of the single market, can provide useful guidance in relation to country-specific recommendations and the Annual Growth Survey; highlights the importance and added value of the Single Market Integration reports in the previous years, contributing to the overall priorities set in the Commission’s Annual Growth Survey and the identification of country-specific recommendations in the context of the European Semester; finds it, therefore, deplorable that the Single Market Integration report has been omitted for 2015; calls on the Commission to make full use of all existing measures provided for in EU law to enforce the implementation of the European Semester;

EP resolution P8_TA(2015)0069

The same day, with Ildikó Gáll-Pelcz as rapporteur for the Committee on the Internal Market and Consumer Protection (IMCO), the European Parliament closed another own-initiative procedure, 2014/2212(INI), even more closely dedicated to the theme at hand:

European Parliament resolution P8_TA(2015)0069 of 11 March 2015 on Single Market governance within the European Semester 2015

Internal market studies

For those interested in research on the internal market, the European Parliament highlighted three reports published in September of the previous year, the study on indicators we mentioned above and two other papers on the internal market:

• The Cost of Non-Europe in the Single Market, commissioned by the IMCO Committee

• Indicators for Measuring the Performance of the Single Market - Building the Single Market Pillar of the European Semester, commissioned by the IMCO Committee

• Contribution of the Internal Market and Consumer Protection to Growth, commissioned by the IMCO Committee [although the version I linked to is dated December 2014]

Follow-up

The European Parliament mentioned its earlier resolution P7_TA(2013)0054  (Schwab report) of 7 February 2013 with recommendations to the Commission on the governance of the Single Market, and referred to the Commission’s follow-up thereon adopted on 8 May 2013, and the EP mentioned its resolution P7_TA(2014)0130 (Cofferati report) of 25 February 2014 on Single Market governance within the European Semester 2014, and to the Commission’s follow-up thereon adopted on 28 May 2014.

However, in both cases the Commission’s follow-up remained unexplained.

Call for Single Market pillar

The European Parliament renewed its call for a Single Market pillar and adequate analytical tools, and the EP explained its views in detail in paragraphs 1-22. I present only a few of them:

1. Reiterates its call on the Commission to improve governance of the Single Market by developing a set of analytical tools to more properly measure the economic and regulatory performance of the Single Market within the framework of the Single Market pillar of the European Semester; believes that such an analytical tool could provide useful input for the CSRs, the Annual Growth Survey (AGS), the European Council’s guidance to Member States, and the national action plans aimed at implementing the Single Market guidelines;

2. Highlights the importance and added value of the Single Market integration reports of previous years, given their contribution to the overall priorities set in the Commission’s Annual Growth Survey and the identification of CSRs in the context of the European semester; finds it therefore most deplorable that the Single Market Integration report has been omitted for 2015;

3. Further finds the omission of the Single Market integration report regrettable since it comes at a time when Parliament and the Commission have been engaging in developing specific indicators to assess internal market integration and all potential benefits of further targeted integration in key growth areas; calls, therefore, for the stepping-up of efforts to ensure better implementation and enforcement of the rules already in place;

4. Calls on the Commission to clarify the restructuring of the Annual Growth Survey 2015, and to explain why it failed to publish a contribution study on the current state of play of Single Market integration with regard to the key areas with greatest growth potential; asks the Commission to publish at least the data gathered on the Single Market in order to complement this year’s AGS;

5. Calls on the Commission to present, as early as possible in 2015, a report on the state of Single Market Integration so that such a report can set the course for the Single Market pillar of the European Semester 2015; stresses, however, that in the future the timing of the report will need to be reconsidered; is of the view that for maximum impact, also with regard to the CSRs, such a report should be published together with the AGS;  

Commission SWD(2015) 203

To date, I have not noticed or received any information about a formal Article 225 TFEU reply from the Commission, but what happens if we open SWD(2015) 203, the second working document accompanying the single market strategy, with internal market integration and competitiveness analysis, available through the legal portal Eur-Lex in three parts, or alternatively downloadable from a Commission web page as a whole “printed” publication:.

Single Market integration and competitiveness in the EU and its member states - Report 2015; SWD(2015) 203 final (112 pages)?

A footnote I had forgotten provides a de facto even if not de jure reply about the role of this single market integration and competitiveness report, according to the European Commission, nor does it present reasons (page 6):

This report replaces the Report on European Industrial Performance of Member States – produced in the past in the context of Art. 173 TFEU - and the Single Market Integration Report – previously annexed to the Annual Growth Survey. It also incorporates information produced by the Commission in 2014-2015 in the context of monitoring EU competitiveness (including the EU Structural Change Report 2015) and financial market integration (European Financial Integration Report).

Open questions

We are left wondering what the Commission’s follow-up was, as well as waiting for its formal reply.

Also, the new report was assigned enough daunting tasks to raise expectations, but how did the European Parliament take the cold shoulder with regard to the Single Market Pillar of the Annual Growth Survey and the European Semester?  

Ralf Grahn

Single market compliance and enforcement

In the blog entries Evidence-based European market reforms? and  Services in EU single market strategy and European standards, public procurement and intellectual property, we used the analytical staff working document underpinning the promised proposals and actions in parallel with the condensed single market communication:

A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final (22 pages)

Compliance and enforcement

Section 4.1. A culture of compliance and smart enforcement encompasses pages 16-17 of the communication and pages 79-86 of the supporting working document.

The SWD (page 83) makes this remark on implementation plans for new legislation:

As part of the Better Regulation Agenda, the Commission should ensure efficient monitoring of EU law throughout the full regulatory life-cycle from the proposal of new legislation, to its adoption, transposition, notification, implementation, enforcement and evaluation, with the overall objective of ensuring clarity, operability and enforceability of EU legislation.

The SWD paper explains the Better Regulation Agenda, but since we are interested in new legislation connected with the single market strategy, we refer to the more detailed better regulation communication, which was accompanied by two Commission staff working documents:

Better regulation for better results - An EU agenda; Strasbourg, 19.5.2015 COM(2015) 215 final

Regulatory Fitness and Performance Programme (REFIT): State of Play and Outlook; Strasbourg, 19.5.2015 SWD(2015) 110 final

Better Regulation Guidelines; Strasbourg, 19.5.2015 SWD(2015) 111 final

At least with regard to the number of pages, the communication is the mere tip of the better regulation iceberg.

The Commission outlined a new instrument for monitoring the single market and its planned scope, SWD(2015) 202 pages 85-86:

The ability to obtain timely, comprehensive, reliable and robust quantitative and qualitative information directly from affected firms would improve enforcement of the Single Market acquis and help addressing flaws in existing legislation. The introduction of a Single Market Information Tool (SMIT), which will allow the collection of information directly from selected market participants, will help the Commission to ensure the optimal enforcement of the Single Market acquis.

The use of the SMIT by the Commission will be decided on a case by case basis and will be adequate and proportionate to the intended objectives. This tool will not be a blanket right to require information from any firm at any time. First of all, before engaging into such an exercise, the Commission will analyse whether already available data are sufficient to address the issues at stake. Second, information request will only be addressed to a subset of the most affected firms. Third, the data sought through the SMIT will normally be readily available to the market players concerned, such as questions relating to the market behaviour, cross-border trade and business model and will typically cover factual market data (e.g. market size and share, level of imports etc.), company data (e.g. cost structure, profits, volumes, new products, ownership, control, participations in other companies, etc.) and facts-based analysis of the market functioning (e.g. regulatory and entry barriers, entry cost, growth rate of the market, growth perspectives or overcapacity). The Commission will consider existing best practice, including from the competition law domain, when shaping the procedural and administrative process of the SMIT, notably with regard to confidentiality-related issues.

In a nutshell:

Data analytics tool for monitoring Single Market legislation (2017)

Proposal for market information tools allowing the Commission to collect information from selected market players (2016)

Right now, the latest edition of the online Single Market Scoreboard is 07/2016.

Services Directive: notification

An improved notification procedure with regard to the Services Directive 2006/123, section 4.2, communication pages 17-18, SWD pages 86-90, was seen as necessary:

As a result, the additional economic gains to be achieved from reforms carried out in 2012 to 2014 are limited. Of the 1.8 % potential additional GDP growth estimated by the Commission in 2012, reforms adopted by mid-2014 are estimated to yield a limited EU GDP long-term growth of no more than 0.1 %.

This lack of progress shows the need for an improved notification procedure allowing for more preventive enforcement.

In short:

Legislative proposal modelled on the successful features of the current notification procedure under Directive (EU) 2015/1535 for services currently not covered by that Directive (2016)

Single market for goods

Communication pages 18-20 and SWD pages 90-100, section 4.3. Strengthening the Single Market for goods taught us that the Commission was going to present an EU-wide Action Plan to increase awareness of mutual recognition and revise the Mutual Recognition Regulation 764/2008.  

Briefly:

Action Plan to increase awareness of the mutual recognition principle (2016)

Revision of Mutual Recognition Regulation (2017)

Comprehensive set of actions to further enhance efforts to keep non-compliant products from the EU market (including a possible legislative initiative) (2016-2017)

Ralf Grahn

European standards, public procurement and intellectual property

In the blog entries Evidence-based European market reforms? and  Services in EU single market strategy, we saw that the analytical staff working document underpinning the reforms was meant to be used in parallel with the condensed single market communication:

A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final (22 pages)

In this blog post we are going to take a brief look at how these documents deal with European standards, public procurement and intellectual property.  

European standards

Encouraging modernisation and innovation starts with section 3.1 Modernising our standards system, page 12 of the communication and pages 55-58 of the SWD, dealing with a ‘Joint initiative on Standardisation’ and guidance on European service standards.

The aims and benefits of the standardisation initiative were explained like this in the SWD(2015) 202, page 56:

Therefore, the Commission proposes a ‘Joint initiative on Standardisation’ to be concluded with all actors in order to enhance and modernize the current system. The Joint initiative will encompass a joint vision in order to develop solutions to issues arising from servicification, digitalisation and focus on interoperability as a result of the Priority ICT standards plan. It will also explore how the gap between research/innovation priorities and European Standardisation could be analysed in a more systematic and forward looking way and more effectively bridged, as well as how to produce timely standardisation deliverables.

The Joint initiative is a way to enable Europe to become a global standardisation hub. This means keeping a system able to impact on growth (between 0.3 and 0.9 % depending on the current figures registered from different Member States), contributing to the GDP growth, maintaining and increasing competitiveness of the EU economy.

The SWD(2015) 202, page 57, stated that in contrast to goods, the development of service standards has been much more limited, both within member states and at EU level. As a result, service standards account for only 2 % of all EU standards.

Service standards would bring the same kind of benefits as product standards, but national standards may create obstacles to cross-border trade. The Commission promised to explore voluntary European service standards and to issue dedicated guidance as needed:

Dedicated guidance on service standardisation (2016)  

Public procurement

The communication COM(2015) 550 treated More transparent, efficient and accountable public procurement (section 3.2) on pages 13-14, while the supporting SWD(2015) 202 discussed the issues on pages 58-68.  

Despite a new 2014 framework for public procurement, the Commission saw a need for various forms of assistance to authorities in the member states, given the importance of government spending and of procurement aims:

Government expenditure on works, goods and services represents around 19 % of EU GDP, accounting for more than EUR 2.3 trillion annually. Efficient public procurement is key to addressing major policy challenges, including growth and jobs, fiscal discipline, the modernisation of public administration, the fight against corruption and collusion, market access for SMEs, the trust of citizens in public authorities and democracy, innovation and environmentally and socially sustainable growth.

Improved data, ex ante assessment of large infrastructure projects, cooperation among review bodies and better detection of irregularities were among the actions the Commission was going to pursue. In a nutshell:

Public procurement: voluntary ex ante assessment mechanism for large infrastructure projects (2017)

Initiatives for better governance of public procurement through the establishment of contract registers, improved data collection and a networking of review bodies (2017-2018)

Intellectual property

Pages 14-15  of the communication and 68-79 of the working paper encompassed section 3.3. Consolidating Europe’s intellectual property framework, not least because:

IP intensive industries account directly for 26 % of all jobs in the EU and generate almost 39 % of total EU economic activity (GDP). They pay higher remuneration than non-IP intensive industries, with a premium of more than 40 %.  

The section discussed intellectual property (IP) use by SMEs, including trade secrets, the unitary patent and national patents, supplementary protection certificates (SPCs), reviewing the intellectual property rights (IPR) enforcement framework (IP infringements), and indications of geographical origin for non-agricultural products.

The bare bones of the promised actions:

Initiatives to modernise the intellectual property rights (IPR) framework, including a review of the EU IP enforcement framework (2016-2017)

On the other hand, copyright is dealt with in the framework of the digital single market:

A Digital Single Market Strategy for Europe; Brussels, 6.5.2015 COM(2015) 192 final

See section 2.4 of the communication, Better access to digital content - A modern, more European copyright framework (from page 6).

Ralf Grahn

Services in EU single market strategy

In the blog entry Evidence-based European market reforms?, we saw that the condensed single market communication could be used in parallel with the staff working document underpinning the reforms:

Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final (22 pages)

A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

(We found that cross-border VAT offered crushing prima facie evidence of failure from the viewpoint of a single market for SMEs, but we left a detailed discussion until later.)

Domestic keys

The many facets of overdeveloped obstacles for (domestic and) cross-border services and the underdeveloped EU-wide markets were discussed in section 2.3, in the strategy COM(2015) 550 on pages 7-10, but in much greater detail in the analysis paper SWD(2015) 202, on pages 13-39.

Restrictions in the retail sector (section 2.4), page 10 in the communication and pages 39-50 in the supporting working paper, raise similar thoughts:   

EU “red tape” is not the only villain. In many cases the improvement of markets for services - to the benefit of consumers and businesses - requires reforms primarily in the EU member states.

The most concrete Commission proposal was a legislative act to create a services passport to demonstrate professional qualifications. Despite enforcement powers regarding clear breaches, increasingly the Commission seems to assume the role of a guiding mentor and motivational coach, hoping to sway local, regional or state authorities.

Discrimination

The discussion about discrimination (section 2.5), pages 10-12 of the communication and pages 51-54 of the evidence paper, turns to annoying geo-blocking and lame excuses, but with burdensome and fragmented VAT and copyright, how much single market can we realistically expect from SMEs (or anyone under contractual freedom)?

Since the Commission refers to Article 20(2) of the Services Directive 2006/123, let us at least take a look at the excuses provided by the non-discrimination provision:

Article 20

Non-discrimination

1. Member States shall ensure that the recipient is not made subject to discriminatory requirements based on his nationality or place of residence.

2. Member States shall ensure that the general conditions of access to a service, which are made available to the public at large by the provider, do not contain discriminatory provisions relating to the nationality or place of residence of the recipient, but without precluding the possibility of providing for differences in the conditions of access where those differences are directly justified by objective criteria.

“Directly justified by objective criteria” is one more question to remember, when we deal with the concrete actions and proposals of the Commission, based on the 2015 strategy for the single market.

Ralf Grahn

Evidence-based European market reforms?

During its first year, the Juncker Commission published a limited number of key proposals, strategic roadmaps for the first years or the rest of the mandate. They included the new single market strategy, available in 23 official EU languages; here the English version:

Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final (22 pages)

The communication takes aim at the goods and services markets. It was accompanied by two staff working documents, with more detailed facts and reasons, but available in English only.

Analysis and evidence, the first Commission staff working document is mercifully available through Eur-Lex in one piece:

A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

The second document, with internal market integration and competitiveness analysis, is contained in a Commission staff working document SWD(2015) 203, available through the legal portal Eur-Lex in three parts.

Although I prefer the order and  permanence of the multilingual Eur-Lex when possible, in this case it may be more convenient to download the document from a Commission web page as a whole “printed” publication:

Single Market integration and competitiveness in the EU and its member states - Report 2015; SWD(2015) 203 final (112 pages)

Single market analysis and evidence

Think of the European Union, at least potentially, as a learning organisation aiming at evidence-based structural reforms. This is about to be tested.

We take a closer view of the first Commission staff working document:

A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

The staff working paper is structured like the communication, which had measures falling  into three categories (page 3-4):

1. Creating opportunities for consumers, professionals and businesses by enabling the balanced development of the collaborative economy, giving start-ups the opportunity to scale up and grow cross-border, unlocking investment (in particular for SMEs), creating a ‘services passport’ for companies, modernising the regulation of professions, addressing restrictions in retail establishment and preventing unjustified discrimination against consumers and entrepreneurs;

2. Encouraging and enabling the modernisation and innovation that Europe needs, through more transparent, efficient, sustainable and accountable public procurement, promoting innovation procurement, modernising the EU’s intellectual property framework, and raising quality and promoting interoperability through a modernised standardisation system and European standards; and

3. Ensuring practical delivery that benefits consumers and businesses in their daily lives, by taking a smart and collaborative new approach to enforcement and implementation, improving the delivery of the Services Directive by reforming the notification procedure and strengthening the Single Market in goods

However, the SWD(2015) 202  is more detailed and well documented, laying a foundation for reforms (page 4):

This document is structured around these three categories and provides evidence to underpin each measure. Each measure is complemented by an analysis of the policy context and a description of the problem encountered and the expected impacts. The legislative measures will be subject to further impact assessment work, which will ultimately form the basis for the Commission’s decisions.  

Parallel use

This means that for each section you can consult and profit from the SWD, when you read the condensed internal market strategy communication.

By way of example, where the SWD discusses the development of the collaborative economy (sharing economy) on pages 4-8 (about four A4 pages of text), the strategy communication has boiled down the issue to about one A4 page (on pages 3-4).

Or, the communication helps SMEs and start-ups on a little less than three A4 pages (numbers 4-7), while the working document expands on the equivalent of five A4 pages (numbered 8-13).

Cross-border barriers: VAT

Ask almost any local, regional, national or EU politician ahead of elections about creating growth and jobs. Despite all the talk about helping small and medium-sized enterprises, what do they do when they face the SWD evidence (footnote 32 on page 10)?

Around 75-80 % of respondents mentioned the change in VAT regulations which came into effect in January 2015 as being a significant (or indeed the most significant) inhibitor to cross-border activities. 'Startups and the Digital Single Market, Final Report', NESTA, tech.eu and The Lisbon Council, 2015.

If you want to, you can contemplate the devastating effect of the regulatory burden of national value added tax, while reading the whole paragraph following Barriers to cross-border expansion (here cleaned of footnotes you find on page 10 as well):

Start-ups and SMEs find it difficult to identify and meet the regulatory requirements when trading across borders. Amongst others, SMEs and start-ups complain about a heavy burden that a set of VAT registration and reporting obligations puts on them. Compliance with the VAT rules inevitably becomes more complicated and burdensome when a business engages in online cross-border transactions with customers located in other Member States or third countries. Since VAT is levied in the country of the customer and in accordance with that country's laws, different national VAT rules will apply and different tax authorities will be involved. Overall, 16 % of SMEs that are trading across the borders and 18 % of those that do not trade internationally perceive complicated foreign taxation regimes as a major obstacle to cross-border expansion.

This is a massive collective failure, just the case for evidence-based structural reform.

The Commission seems to have noticed, as shown by the various components of the Action plan on VAT, but is a simple, EU-wide VAT regime going to see the light of day?  

Ralf Grahn