We give an overview of the European Commission's Internal Market Strategy and look what it might mean for business.
1 of 4
Download to read offline
More Related Content
Snapshot 19 15 single market strategy
1. CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting Inc. • 1
The Internal Market is at the heart of the EU project. For many it represents the EU’s greatest
economic achievement but for eurosceptics it represents needless meddling in our daily lives with
regulation after regulation. From the infamous shape of cucumbers to the possible regulation of
candles in time for Christmas – FTI looks at whether the Internal Market Strategy is losing its sparkle
despite the Commission’s Single Market Strategy late October which aims to tackle its shortcomings.
.
High expectations
The Single Market, referring to the free movement of goods and services without
regulatory or other obstacles within the EU, is the EU’s success story and a
cornerstone for the EU’s economic welfare. It has always been the engine for more
economic integration and remains the largest economy in the world in terms of
GDP. However, many aspects of the Internal Market do not work well and are
sometimes ill-adapted to new business models. Needless to say that the
competition outside of Europe never sleeps, as a revitalized India under its new PM
Narendra Modi shows. This is why the Single Market Strategy seeks to adapt the
old rules to new business models, refine fundamental processes of the EU economy and nudge Members States towards further EU
integration. The potential benefits are significant. While the Commission believes a more far-reaching implementation of the Services Directive
will add an additional 1.8 percent to EU’s GDP, the Parliament, taking a more comprehensive approach, values an “upgraded” Single Market
will bring an extra 4.4 per cent in GDP per year.
Internal Market Strategy – Grasping the Opportunities
Arne Koeppel is Head of Research
and Jan Hueckmann is Consultant
at FTI Consulting in Brussels
December 2015
2. CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting Inc. • 2
Adapting old rules to new realities
The sharing economy, or collaborative economy in Commission
speak, has made headlines throughout Europe especially with
protests in Paris against Uber, the ride-sharing app service, even
turning violent. The Commission has reacted in the Single Market
Strategy by announcing a European Agenda for the Collaborative
Economy, which will include guidance on how existing EU law applies
to these new business models. While the Commission did not
announce new legislative initiatives, it did say it will assess whether
any regulatory gaps exist.
Clearly, the Commission is taking a cautious approach on the sharing
economy, trying to find the middle ground between calls from
established businesses to regulate the emerging sharing economy
and calls from the new players and consumers to allow the new
services to develop. However, it is unclear whether this approach is
enough. At the national level, public authorities have responded in
not only diverging, but also opposing ways to the new business
models. In the UK, the ride-sharing app UberPop, which relies on
non-professional drivers, was allowed to continue, but in France and
Germany Uber had to shut it down.
The Commission’s tactic might be more favourable for new services
to develop than new legislation, but whether it is enough to further
integrate the EU’s internal market, the overarching aim of the new
strategy, is another question. Further integration will have to come
from other, more ambitious initiatives.
Geo-blocking
Geo-blocking, a form of geographically-based discrimination to buy or
sell goods and services online, has become a controversial issue in
Europe. While in the offline world it is unthinkable that a customer is
refused a service or product because of his residence, it has become
a reality online. Building on the Digital Single Market Strategy, the
Commission spells out how it wants to tackle un-justified geo-
blocking in the e-commerce sector in its legislative proposal in mid-
2016: to identify and ban specific forms of residence-based
discrimination not grounded on objective and verifiable factors. It
also announced new transparency tools to allow consumers to detect
when they are being discriminated against.
The Commission has to perform a careful balancing act between
fighting discrimination of consumers and preserving entrepreneurial
freedom. On the one hand supporting growth in major new
technologies and on the other hand ensuring consumer confidence
in the Single Market. For Vice-President Andrus Ansip it is also a
question of credibility after he said earlier this year that he hates
geo-blocking. The ongoing public consultation on geo-blocking might
help the Commission to strike this balance. With the powerful and
well-connected retail sector weighing in with concerns that
contractual freedom could be at risk, it will not be an easy task to
eliminat “unjustified” geo-blocking.
I hate geo-blocking.
Fine-tuning the EU economy
To make the EU economy more innovative and competitive, the
Commmission seeks to address inefficiencies in key underlying
processes, such as standardisation, public procurement and
protecting intellectual property.
Modernising the standards system
The Commission claims that the European standardization system is
not well adapted to the transforming economy with its new business
models, global value chains and the growing role of services. To
ensure that the standardization system is able to meet these
challenges and remain relevant in the future, the Commission plans
a Joint Initiative on Standardisation which will bring together the
Commission, industry, and European Standardisation Organisations
with the aim to speed up and better prioritise standard setting.
The joint initiative builds to some extent on the ICT Priority plan
announced in the Digital Single Market Strategy. The plan seeks to
identify those areas which are crucial for the tech industry in terms of
standardisation and regain the initiative in setting ICT standards
worldwide.
An important challenge will be to make a new standardization system
work within a global system. Digital Europe for instance argues that
the current system works well and that any reform must avoid
adopting a top down approach that could lead to protectionism. Also
the ongoing TTIP negotiations will have to be taken into account as
one of its aims is to reduce barriers to trade caused by diverging
standard systems.
Public procurement
Every year public authorities spend around 19% of GDP on the
purchase of services, works and supplies. This makes public
procurement an extremely important part of the economy and a
significant expense of tax money. The Commission wants to tackle
the lack of compliance, bad quality of services and regular
overrunning of costs and time. The focus of the strategy lies on
enabling better data collection and analysis to detect and prevent
irregularities. Concrete actions include the creation of a contract
register, the development of data analytics tools and improving the
procurement remedies system under the Remedies Directives to
ensure a better review of procurement decisions. The Commission
also wants first instance review bodies to better cooperate. Finally
the Commission will provide assistance and advice to Member
States on the legality of the procurement aspects of the project.
Member States can request an opinion on the compatibility of the
tender procedure with EU rules.
Modernising the IPR framework
To get the Unitary Patent System to a good start, the Commission will
address possible uncertainties and frictions with the existing national
patent systems. A novelty is the possible creation of a new unitary
title for supplementary protection certificates (SPC). These titles can
extend the protection of patents for products that are subject to long
regulatory approvals namely medical and crop protection products.
The Commission hopes that a unitary SPC title would increase
transparency and certainty on the protection of medicines. The
Commission also explores an SPC manufacturing waiver in order to
stimulate the European generic and biosimilar medicine industries to
manufacture in Europe.
Andrus Ansip, Vice-President Digital Single Market
3. CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting Inc. • 3
In order to improve the fight against counterfeit goods the EU wants
to improve the IPR enforcement framework. A ‘follow the money’
approach should deprive large scale infringers of their revenue flow.
The strategy does not propose a major change of the IPR framework
and the idea of an SPC waiver for SMEs was ultimately dropped. The
Commission will need its political capital for the highly controversial
reform of the copyright system which lies at the heart of the Digital
Single Market Strategy.
Nudging Europe towards further integration
Services now make up the greatest part of the European economy
and in particular in view of online services, the internal market offers
a huge potential. However, the gaping differences between Member
States’ regulatory regimes result in fragmentation and often services
are still restricted to their home country. The Commission focuses on
identifying concrete reform needs in Member States to improve
access and exercise of regulated professions focusing on priority
sectors such as architects, accountants, lawyers, real estate agents
etc. The Commission plans to support Member States by setting out
an analytical framework for reviewing professional services
regulations and make notification in the construction and business
services sectors easier with a legislative initiative on harmonised
notification forms. A real innovation is the planned service passport
which Member States issue upon request and that demonstrate that
the requirements of the Member State are met.
In the services area the Commission aims to make important
changes without new legislation. However, legislative or not it will be
interesting to see whether the Member States are happy with the
Commission making concrete suggestions about their legislation.
Single market for goods
The principle of mutual recognition lies at the heart of the Single
Market as it allows goods that are lawfully marketed in one Member
State to circulate and be sold freely in the rest of the EU. However,
the Commission has identified two obstacles: inadequate
application of mutual recognition because of national practices and
the increased presence of non-compliant products.
The Commission plans to present an EU-wide action plan to raise
awareness of the mutual recognition principle with specific actions
for the sectors of construction, foodstuffs, food supplements and
fertilisers in which problems occur most often.
The Commission will also revise the Mutual Recognition Regulation
to address administrative fragmentation and streamline the
documentation proving that a product has been marketed lawfully in
a Member State. To that end businesses will be allowed to issue self-
declaration that the product has been marketed legally in another
Member State.
Compliance and enforcement
The EU praises itself of having the highest standards of consumer
protection and environmental protection in the world. These
standards are however often undermined by a lack of compliance
which in turn lowers consumer’s confidence in the Single Market.
The Commission therefore plans to step up its efforts to ensure
compliance of national legislation. Actions range from streamlining
the monitoring system to proposing regulation on a market
information tool that enables the collection of information from
selected market players. The Commission also wants to intensify
compliance checks and promote closer cross-border cooperation
among enforcement authorities to increase deterrence.
Helping SMEs
For a long time the EU has been following the mantra of supporting
SMEs and the EU has attempted in many ways to boost the uptake of
new businesses. The success so far is limited and only very few
companies could establish themselves in modern growth sectors.
This time actions relating to SMEs are quite bold, not limited to new
funding priorities but aiming to tackle more structural obstacles.
They include an action plan to simplify the VAT system, making
requirements more manageable, an update of company rules on
cross border mergers and complementing them with procedures for
cross-border divisions, a modernisation of insolvency law in order to
“accommodate failure” for businesses and finally rules on attracting
entrepreneurs.
However, the most ambitious measure, a 3-years safe harbour for
start-ups, allowing them to operate in other EU countries under
selected home country requirements, was ultimately dropped. It
seems as if the Commission became afraid of its own ambition.
The way forward
In its Single Market Strategy, the Commission wants to “upgrade” the
internal market through “concrete and ambitious” measures. While
most action points are concrete, their level of ambition is
questionable. Soft-law initiatives outweigh hard-law ones and some
of the most zealous ideas were dropped from the final proposal.
Although this is in line with the Commission’s better regulation
principle, it is unclear how they will effectively address the concerns
raised. It is also unclear how it will persuade Member States to
abandon their resistance to further integration, often a key reason
for the underlying problems. At the moment, most Member States do
not share a sense of urgency that pushes them to further harmonise.
This illustrates the current dilemma of the EU: Many issues could
only be tackled through more integration but in times when the UK is
contemplating to leave the Single Market there is simply not enough
support for such measures.
Clearly, the Commission cannot succeed on its own. It will need the
help of others, especially the more reform-oriented Member States.
Fortunately, the Dutch made the Single Market a key priority and
announced for their upcoming Presidency that they will start “naming
and shaming” the laggards in Europe, thus supporting the
Commission’s soft-law approach.
Business also plays a crucial role. It will have to hold the Commission
accountable to its goal of upgrading the Single Market and also
needs to hold back Member States in their efforts to undermine the
Commission plans. This means being present and visible in Brussels
and the national capitals. It will also mean that businesses will have
to start their outreach early to counter the informal influence
Member States have in the Brussel’s decision-making process.
Time is, as so often, running out. With most initiatives announced for
2016, businesses will have to identify their priorities quickly and act
upon them, seeking allies within and outside their sectors. They will
have to be ready for 2016, which will determine much of where the
Juncker Commission will be heading for the rest of its mandate.