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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS 2000 - Review of the Internal Market Strategy

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS - 2000 Review of the Internal Market Strategy

The Lisbon European Council underlined the central contribution of the Internal Market to achieving the Union's objectives of sustained and sustainable economic growth, more and better jobs and greater social cohesion. The Heads of Government considered that the Internal Market Strategy [1], endorsed at Helsinki, provided an effective framework for ongoing review and improvement of current policies [2]. Furthermore, the Internal Market must be seen to improve the quality of life of citizens in practice, especially in their roles as consumers. And in a context of increasing globalisation, the interaction between the Internal Market and the external policies of the Community, including its impending enlargement, cannot be ignored.

[1] COM(1999) 624 Final

[2] SI(2000) 300, para 16

The Internal Market has already changed the face of the European economy by facilitating cross-border economic activity and increasing competition across the European Economic Area. But to make the most of the possibilities it offers, in terms of growth and job-creation, further economic reform is essential. The twin phenomena of globalisation and technological change have the potential to achieve radical improvements in competitiveness, as evidenced by the world's best-performing economies, provided they meet with an appropriate response from legislators and regulators. Seizing that opportunity will depend crucially on the Union's capacity to create - and adapt to - new business opportunities. It will also depend on people's ability and readiness to acquire new skills and willingness to change jobs. Both in part depend on creating a regulatory and institutional framework which stimulates innovation, investment and economic efficiency.

Far-reaching structural reform may be uncomfortable in the short-term but that discomfort can be eased if it is undertaken in a favourable economic climate. Thus the time to act is now. Macroeconomic stability, sound public finances and the impetus of new technology create an opportunity to be seized. As underlined by the Lisbon European Council conclusions, comprehensive structural improvements are essential to meet ambitious targets for growth, employment and social inclusion. This first annual review of the target actions therefore provides a medium through which the conclusions of the Lisbon European Council can be carried forward.

Priorities for Action

Coming only six months after the inception of the Strategy, this review offers an opportunity to identify from amongst new and existing target actions, those priorities with the greatest and most immediate impact in improving the functioning of the Internal Market and consequently maximising its benefits to businesses and citizens alike. The European Council itself asked the Council and Commission to take a certain number of actions to extend, modernise and simplify the Internal Market. The other priorities identified in the present review have been selected on the basis of the analysis in the Cardiff Report [3], the data in the 5th edition of the Scoreboard [4] and in response to opinions on the Strategy adopted by the European Parliament and the Economic and Social Committee. We have also endeavoured to take account of the views expressed by business, consumer and environmental organisations. Since the Broad Economic Policy Guidelines (BEPG) play a central role in the co-ordination of economic policies between the Member States, the recommendations in the BEPG [5] on product and capital market reform form an integral part of the Internal Market Strategy. As such, they should automatically be considered as priority actions to be implemented immediately by Member States. The report on the implementation of the BEPG, which is published at the beginning of each year, will monitor compliance with these recommendations.

[3] COM(2000) 26 Final

[4] SEC(1999) 2043 (http://europa.eu.int/comm/internal_market/)

[5] COM(2000) 214

Each of the priorities identified in the present review has been linked to one of the four strategic objectives defined in the Strategy Communication.

Enhancing the efficiency of Community capital and product markets

* Rewarding innovation and creativity

If we are to stimulate investment in research and innovation, intellectual and industrial property must be properly protected and rewarded. Currently the cost of protecting intellectual property is too high, especially for SMEs. Registering and maintaining a patent for 10 years in just 8 European countries is currently six times more expensive than in the United States. As emphasised by the Lisbon European Council, a key priority must be rapid agreement on a Regulation creating a Community Patent [6].

[6] New action under "Markets 4" for December 2001

* Transport and utilities

Opening up public utilities to competition produces significant economic and social dividends, in terms of lower prices, innovative services and, in some cases, new jobs. Newly-liberalised markets need competition rules to be rigorously enforced. The Lisbon European Council asked that liberalisation in areas such as gas, electricity, postal services and transport be speeded up. Member States need to complete the effective liberalisation of European energy markets, including the completion of mechanisms for cross-border tarification in the electricity sector, and in the electronic communications market, as well as agreeing on the next steps in the liberalisation of postal services [7]. In the field of transport, the Commission will adopt a Communication on the revised Common Transport Policy where the key issues are enlargement, the environment, efficiency and safety. Other key issues will be the creation of a single European sky [8] on the basis of a report envisaged for June 2000 by the High Level Group created by the Commission, and the development of a Trans-European Rail Freight Network [9]. The adoption of a package of measures aiming at strengthening social cohesion in the road transport sector is envisaged comprising legislation on working time in road transport and on checks of professional road drivers.

[7] New action under "Markets 5" for June 2001

[8] Existing action under "Markets 5" for June 2001

[9] Existing action under "Markets 5" for December 2000

* Fully integrated financial markets

An integrated European securities market and a dynamic financial sector lie within our reach. Companies will see the benefits of raising capital across the European Union: cheaper and more flexible financing arrangements for corporate borrowers, including innovative start-up companies. Investors should see improved returns. Implementing the Financial Services Action Plan, including the Risk Capital Action Plan, [10] therefore remains a core priority for more efficient financial markets and a more competitive financial services industry.

[10] Existing action under "Markets 2"

Improving the business environment

* Promoting competition

The changing regulatory framework brought about by market integration and liberalisation requires a sustained and vigorous approach to competition policy. The Member States' efforts to reduce the overall level of state aid coupled with a shift in the remaining funding towards horizontal objectives of general interest, such as training, regional development, research and development and environmental protection will be facilitated by enhanced transparency. Such transparency could be provided by a future state aid register and Scoreboard.

* Improving the integration of services markets

One of the main features of Europe's employment deficit is the so-called "services gap". Levels of employment in the services are significantly lower than those in the United States. At the same time market integration in many service sectors lags behind that observed for goods. This is in part explained by the characteristics of some services which traditionally have required physical proximity to the provider. If the remaining economic potential of a fully-integrated services sector could be realised, it would have a significant impact on job-creation. The Commission, responding to the Internal Market Council's intervention and to a request from the Lisbon European Council, has undertaken to put in place by the end of this year a new strategy for removing remaining barriers to trade in services [11] with a view to securing 3% year-on-year growth in this sector. A key element in this strategy will be the completion of the regulatory framework for electronic commerce [12].

[11] New action under "Business 4" for December 2000

[12] Existing and new actions under "Markets 3"

* Reducing the regulatory and administrative burden on business

Whether at Union or national level, the quality of the regulatory framework remains a central concern for business. In the 1999 EU Business Survey, 65% of companies reported an improvement in the functioning of the Internal Market, of which over half (54%) ascribed that improvement primarily to reduced administrative burdens. On the other hand, of the 35% who saw conditions as stagnating or deteriorating, one third complained that European rules could not be applied properly because they were too complex or unclear. The European Parliament [13] also emphasised the importance of a legal framework that creates a climate of confidence for business and consumers; it called for a business-friendly Internal Market which avoids unnecessary bureaucratic burdens. The Economic and Social Committee [14] laid particular stress on improving regulatory impact assessment. Finally, the Internal Market Council itself, in its conclusions on the Cardiff report, called upon the Commission to bring forward a new integrated regulatory and simplification initiative [15] which was endorsed by the Lisbon European Council. Such an initiative would include consideration of alternatives to regulation, soft law, better regulation, and the need for better public administration at both national and Community levels. The Commission will respond to this invitation before the end of June 2001. New proposals to amend the machinery [16] and electromagnetic compatibility [17] Directives will simplify the existing rules. The development of harmonised technical standards, e.g. for construction products which account for 5 % of total trade in all manufactured products in the EU, is a vital element to removing barriers to trade [18]. And the Commission will continue to seek agreement on the European Company Statute [19].

[13] EP resolution A5-0098/2000

[14] ECOSOC opinion CES 367/2000

[15] New action under "Business 5" for June 2001

[16] New action under "Business 5" for December 2000

[17] New action under "Business 5" for June 2001

[18] Existing action under "Business 4"for December 2000

[19] Existing action under "Business 5" for December 2000

* Liberalising public procurement markets

The sums spent by public authorities on purchases of goods, services and (construction) works were estimated at more than EUR 1.000 billion in 1998. Despite the significant improvement in transparency in the award of public contracts achieved by existing Community rules, there has yet to be any measurable impact on cross-border public purchasing. Indeed the level of intra-EU market penetration is much lower in the public sector than in overall intra-EU trade. The rapid adoption of the new, streamlined rules contained in the public procurement legislative package [20] is therefore essential to the creation of a genuinely liberalised procurement market. At the same time, the Commission will clarify how other policies can be integrated within the existing legal framework. Such an exercise is already being undertaken in relation to the environment.

[20] New action under "Business 4" for June 2001

* Eliminating tax distortions in the Internal Market

Unfair tax competition continues to distort the functioning of the Internal Market. Agreement on the tax package - the code of conduct, and the proposed Directives on the taxation of savings and on interest and royalty payments - is therefore vital.

Improving the quality of life of citizens

* Enforcing Internal Market rights

The Dialogue with Citizens has a proven record of delivering detailed practical information on the exercise of Internal Market rights and providing advice to those who encounter difficulties. Feedback demonstrates that many EU Citizens often find attempts to exercise their Internal Market rights a frustrating and dispiriting experience. Similarly, the 1999 EU Business Survey indicates that businesses, especially SMEs, who encounter difficulties in cross-border trading often fail to seek redress and therefore either forgo the opportunity to expand their markets or adapt their product or service to the national rules of the target country. We need to develop effective, rapid and simple solutions for citizens and SMEs, building on the problem-solving network of coordination centres and contact points set up under the Single Market Action Plan. The Commission therefore plans to act upon the Parliament's suggestion: it will organise an Internal Market Forum [21] bringing together all those with relevant expertise to examine the concerns of citizens and business and to identify what steps can be taken to improve the existing redress mechanisms in relation to national administrations. This will complement the development of the EEJ-Net [22], a network linking out-of-court settlement bodies, enabling consumers to seek redress in cross-border disputes.

[21] New action under "Citizens 3" for June 2001

[22] New action under "Citizens 2" for June 2001

* Enhancing food safety

Nothing demonstrates the reality of the Internal Market more than a crisis concerning contaminated or dangerous foods. To retain consumer confidence in the safety of food, the EU must secure the highest standards. Consumers are entitled to such high common standards, which are also essential for the smooth functioning of the Internal Market. It will therefore be crucial to make progress over the next 18 months on the key priority measures identified in the Food Safety White Paper [23].

[23] New actions under "Citizens 2" for December 2000

* Transport Safety

The sinking of the oil-tanker Erika in December 1999 highlighted the need for an enhanced control of safety on board oil-tankers at European level. The Commission therefore proposed a series of immediate and longer-term actions in order to reduce the risks of such accidents and pollution in the interest of all the European citizens [24].

[24] New actions under "Citizens 1 & 2" for December 2000

* Deepening the Dialogue with Citizens and Business

Information technology not only lends itself to a new range of business applications - it also provides a basis for a more open and interactive approach to policy development. The Dialogue with Business and Citizens uses the internet not only to channel information to citizens but also to harvest their views and experiences, providing a much more complete picture of the working (and weaknesses) of the Internal Market than was previously possible. The importance of the Dialogue in this respect has been recognised by all the institutions. In the coming twelve months, the Commission will expand the Dialogue [25], by making the feedback from the Business Dialogue available online; by entering into a partnership with the national contact points in order to maximise the Dialogue's impact in terms of support and advice; by raising awareness of the Dialogue and its products amongst potential users; and by developing the Dialogue as a tool for shaping policy.

[25] New actions under "Citizens 3" and "Business 5"

Exploiting the achievements of the Internal Market in a changing world

* Preparing for Enlargement

The Internal Market should be streamlined and geared up to servicing an enlarged Union. Candidate countries should be in a position to adopt the whole body of the Internal Market rules at the latest by the time of accession. When, on a very exceptional basis transitional arrangements are granted, they should be few and short. However the enormous challenge, for the candidate countries, the existing Member States and the Commission, is to ensure that the supervisory, enforcement and judicial structures, which will be called upon to apply the rules in practice are in place and function efficiently. Our available instruments, in particular twinning, technical assistance and investment provided by Phare, should now focus on improving the quality of this administrative infrastructure [26],.for example, in the field of banking, insurance and securities supervision.

[26] Existing and new actions under "External 2"

Tracking and updating target actions

Part of the purpose of the annual review is to examine progress in completing existing target actions. However, any attempt to do so at this stage faces a structural problem : the first half-yearly deadline falls on 30 June 2000, a date still nearly three months distant. In the case of this first review, the difficulty is exacerbated by the fact that less than six months have elapsed since the list of target actions was compiled. The problem of the disjunction between the timing of the review and the half-year deadlines will however persist. The Commission therefore invites the Council and Parliament to consider whether it would not be desirable to shift the half-yearly deadlines from June and December to March and September respectively. An additional advantage of such a change would be that the Review could more immediately reflect the priorities set annually by the Spring European Council on economic and social matters [27]. The assessment which follows is based on realistic estimates of likely progress between now and the end of June.

[27] See Presidency conclusions of Lisbon European Council, para 36

Of the 53 target actions identified in the Strategy of last November, the Commission believes that only 26 [28]will be completed by June 30. To fall so far short of the targets set by the Commission in its Communication, which was endorsed by the Heads of Government at Helsinki, is disappointing. It is true that the Commission deliberately set ambitious deadlines in the hope that this would generate momentum. Equally, amongst the target actions expected to be completed by June, there are a number of key legislative proposals - the Public Procurement Package, the Regulation creating a Community Patent, the Directive on the Patentability of Software and the Electronic Communications Package. The Lisbon European Council reiterated the intention of the Member States to conclude the tax package before their next meeting at Feira. The Commission also looks forward to early agreement on the pending proposals relating to e-commerce and late payments. There have been a number of important initiatives on the non-legislative front : the White Paper on food safety mapped out future policy in this area of crucial importance to consumers; the Dialogue with Citizens and Business was further improved; the Commission produced its review of the SLIM (simplification of legislation in the Internal Market) initiative and in May, it will adopt guidelines for the application of the block exemption on vertical restraints.

[28] Cf. Annex 1 for the full list which distinguishes between those actions for which the Commission alone is responsible and those where the outcome lies in the hand of the European Parliament and the Council. More detailed information on the progress of all the target actions scheduled for completion so far will appear in the sixth edition of the Scoreboard which will be presented to the Internal Market Council on 25th May 2000

But none of this can hide the paucity of progress so far. Greater discipline and a more concentrated effort from all of the institutions will be required in future, if the ambitious agenda set out at Lisbon is to be delivered. Of the actions likely to be outstanding at the end of June, most are expected to be completed in the second half of this year. In some cases, the delay is due to lack of progress in the Council and Parliament (this affects, inter alia, the Directive on tobacco products, the Regulations on social security amending Regulation 1408/71 and the Directive on airport charges). In other instances, the definition by the Commission of its priorities, and the consequent establishment of its programme for the year 2000, has resulted in some rescheduling of work. Other actions have been put back to take account of the need for further consultation of other institutions and interested parties, for example in relation to the future amendment of the insolvency Directive and the Communication on commercial communications. The Commission Communication on Counterfeiting and Piracy will be produced once the European Parliament has responded to the Commission Green Paper on that subject.

New target actions have been added to those already identified in the Strategy, partly to take account of the fact that the period covered (January 2000 - June 2001) has now rolled forward (July 2000 - December 2001). Some of the new target actions flow from actions which have been completed but which now require action from other Community Institutions, such as the Regulation on the Community patent or the Electronic Communications Directives. Others are entirely new additions to the list. These include proposals to amend the legislation governing the issuing of marketing authorisations for pharmaceuticals within the EU. Discussions continue between the interested parties (Member States, industry and Commission) about other aspects of the Internal Market agenda in this sector. The Commission is also preparing a new strategy for chemicals with a White Paper to be published during 2000; this will seek to build public confidence in chemical management, give more responsibility to industry, create a coherent and simple legislative framework and ensure a high level of protection for health and the environment. Amended deadlines, together with the new actions (50 in total) are clearly marked in the updated, consolidated list of target actions in Annex 2.

Conclusion

The creation of the Internal Market, significantly boosted trade, growth and employment in Europe. It has the potential to do so further, particularly in a digital economy in which the importance of physical location is diminished. Internal Market principles should be applied to support innovation and research and the new technologies can be used by the Union to help citizens and businesses, especially smaller businesses, make the most of the Market. The priorities identified above are those which, in the Commission view, are most likely to produce significant improvements in the functioning of the Internal Market. Consequently, The Council and the Parliament are invited :

- to endorse the priorities outlined in this report;

- to commit themselves to rapid progress on the target actions for which they bear responsibility, especially for those identified as priorities;

- to approve the Commission's suggested change to the cycle which would align the six-monthly deadlines for action with the scheduling of the annual review.

ANNEX 1

A. COMMISSION'S TARGET ACTIONS TO BE COMPLETED BY JUNE 2000 [29]

[29] Target actions in italics are expected to be completed by the end of the month indicated in parenthesis

Improving the quality of life of citizens

- Commission White Paper on Food Safety

- Commission Communication on Passenger Protection in Air Transport (May/June)

- Commission Communication on Legal Aid in Civil Matters

- Commission Communication on Priorities in EU Road Safety

- Commission Package of Regulations on a Uniform Format for the EU Passport, Identity Card and Residence Permit (June)

- Commission's "Dialogue with Citizens and Business" Promotion Campaign launched (May)

- Commission proposal to amend the General Product Safety Directive 92/59

Enhancing the efficiency of Community product and capital markets

- Commission proposal for a Directive on the Patentability of Software (June)

- Commission proposal for a Regulation on the Community Patent (June)

- Commission proposals for Electronic Communications Framework Directive and Four Specific Directives (June)

- Commission Interpretative Communication on Concessions (April)

- Commission Communication on Economic Reform - Report on the functioning of product and capital markets in the EU (Cardiff Report)

- Implementation by the Member States of the country-specific recommendations on product and capital market reform contained in the 1999 Broad Economic Policy Guidelines [30]

[30] COM(2000) 143 Final, Report from the Commission on the implementation of the 1999 Broad Economic Policy Guidelines

- Action to support initiatives for on-line out of court redress [31]

[31] This is an ongoing action

Improving the business environment

- Commission Guidelines to the Block Exemption Regulation for Vertical Restraints (May)

- Commission Pilot Project for Community Support to National Initiatives in Administrative Co-operation

- Commission proposal for a Public Procurement Legislative Package (May)

- Commission Reports on the Evaluation of SLIM and the Business Test Panel Projects

- Commission's "Dialogue with Citizens and Business" - Business Feedback Mechanism launched (March/April)

- Commission services paper on Representations to Patent Offices about Patent Agents within the Internal Market (May)

Exploiting the achievements of the Internal Market in a changing world

- Adoption of a Council Decision on ratification of World Intellectual Property Organisation (WIPO) copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT) on behalf of the EC

B. OTHER TARGET ACTIONS WHICH ARE EXPECTED TO BE COMPLETED BY JUNE 2000

Enhancing the efficiency of Community capital and product markets

- Adoption by European Parliament and Council of Electronic Commerce Directive

Improving the business environment

- Adoption by Council of Directive on taxation of savings

- Adoption by Council of Directive on interests and royalties

- Unfair tax competition code of conduct : agreement on roll-back or amendments of harmful tax measures under code

- Adoption by European Parliament and Council of a Directive combating late payments in commercial transactions

ANNEX 2

Consolidated list of target actions up to December 2001

New target actions are in italics and marked //

Priority target actions are in bold and indicated with a //

Those target actions which have been rescheduled are marked //

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