Opinion of the Committee of the Regions on the "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"

(2001/C 148/05)

THE COMMITTEE OF THE REGIONS,

having regard to the 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 (COM(2000) 257 final);

having regard to the decision of the Commission of 3 May 2000, under the first paragraph of Article 265 of the Treaty establishing the European Community, to consult it on this matter;

having regard to the decision taken by its President on 30 May 2000, to draw up an opinion on this matter and to instruct Commission 6 for Employment, Economic Policy, Single Market, Industry and SMEs to undertake the preparatory work;

having regard to the Communication from the Commission to the European Parliament and the Council - The strategy for Europe's internal market (COM(1999) 464 final);

having regard to the Commission Green Paper - Towards fair and efficient pricing in transport policy - options for internalising the external cost of transport in the European Union (COM(95) 691 final);

having regard to the Communication from the Commission - Public procurement in the European Union (COM(98) 143 final);

having regard to the draft opinion (CdR 311/2000 rev. 2) adopted unanimously by Commission 6 on 4 December 2000 [rapporteur: Mr Bocklet (D/PPE)],

adopted the following opinion at its 37th plenary session of 14 and 15 February 2001 (meeting of 14 February).

1. The Committee of the Regions sees the European internal market as the keystone of economic integration in Europe. Its smooth operation is the basis for the achievement of the EU's and the individual Member States' main policy objectives. The internal market strategy sets out to strike a balance between long-term objectives and the specific implementing measures and to provide a clear picture of what needs to be improved. The COR considers it to be a good basis for the shaping of internal market policy over the next five years. The COR therefore in principle welcomes the Commission's Communications entitled: The strategy for Europe's internal market and 2000 Review of the internal market strategy.

2. While welcoming the definition of the internal market as the keystone of economic integration in Europe, the Committee wishes to state that the internal market's unification and liberalisation strategies will also find justification and prove effective by being dovetailed with regional policy so as to bridge the gaps between Europe's regions. Special attention should also be paid, in the run-up to EU enlargement, to regions on the EU's border with the countries of central and eastern Europe. Cross-border cooperation between cities and regions must be strengthened and special aid for structural adjustments on both sides of this border must be stepped up.

3. The Committee of the Regions generally endorses the distinction made between strategic and operational objectives and target actions, which will make for greater transparency of internal market policy. The plan to assess measures regularly in terms of their effectiveness in achieving the objectives and the system of annual reviews will facilitate the implementation of objectives and timely adjustments. In assessing effectiveness in implementing EU directives in national law it must, however, be ensured that the Member States' scope for action is not curtailed.

4. The Committee endorses the Commission's proactive approach to internal market policy which will promote the efficiency and flexibility of the markets. The COR wholeheartedly supports the strengthening of the internal market, the application of its principles to international trade agreements and the enlargement of the European Union.

5. The Committee stresses that the Commission's four strategic objectives cover the main aspects of the internal market; the COR also approves the operational objectives in principle. There is, however, a need to clarify many of the policy descriptions which - even after being redrafted - are still rather abstract. On the whole the Commission's position on the internal market coincides to a great extent with the COR's views.

6. The Committee points out, however, that the identification of individual measures as target actions and the approval of the strategy by the Council and European Council do not bind the Member States to this specific Commission proposal. The COR regrets that no reference is made to proven principles like subsidiarity and mutual recognition.

7. The Committee considers it important that the Conclusions of the Internal Market Council on the Cardiff process should form the basis for the annual review of target actions.

8. The Committee of the Regions would like to see prominence given to measures for the creation of long-term, competitive jobs in the course of the annual adjustment of the target actions, with a view to improving the efficiency of the internal market. This would at the same time make an important contribution to strengthening social cohesion and underpin public acceptance of the internal market. There is a special need in this connection for an active labour market policy in the Member States and regions which focuses more on skills acquisition and further training, and for targeted support for the service sector, the promotion of innovation and technology and the development of centres of excellence.

9. Under Strategic Objective 2, Enhancing the efficiency of Community capital and product markets, the Commission intends that the financial markets should be fully integrated (Operational Objective 2). The range of competitive and reliable financial products available to the consumer is to be broadened. Access to the capital market is to be made easier for industry, especially small and medium-sized enterprises, and a single, strong and liquid market for investment capital is to be created. Financing agreements are to be made cheaper and more flexible for companies, with investors seeing improved returns.

10. The COR wholeheartedly welcomes these plans. They should enjoy the highest priority. In particular the Commission should lay the foundations for efficient, low cost cross-border payments. In particular the cost of mass foreign bank transfers should be cut and the directives on company flotations and prospectuses improved. Cheaper and more flexible financing arrangements for companies, particularly young companies, and broader access to risk capital are objectives of great importance to companies.

11. European efforts to integrate financial markets should focus on small and medium-sized enterprises which have to fear structural disadvantages as a result of integration. As the banks wish to secure their future against a background of intensifying European competition by means of rising turnover and mergers, they are losing interest in small and micro-loans to SMEs. But because of their size and lack of financial security, it is these very SMEs which are most dependent on low-cost bank loans.

12. The internal market in insurance is theoretically complete. In practice, however, national laws, e.g. laws on liability or laws to promote private pensions, prevent the development of uniform insurance products which can be offered throughout the EU.

13. The Commission's efforts to maximise the benefits to the internal market of the digital age (Strategic Objective 2, Operational Objective 3) should, the COR feels, be given absolute priority. Delays in this area will hinder the development of information and communication technologies and their acceptance and use by European companies, particularly SMEs. The opening of a dialogue with industry and consumers, which has been built into the development of the overall framework for e-commerce, is welcomed, and a start should be made on it as soon as possible.

14. The most urgent need for regulation is in relation to data protection, uniform, coordinated payment systems and the application of general business conditions to Internet transactions. The COR therefore calls on the Commission to make a special effort to ensure that European companies offering their services over the Internet are not placed at a disadvantage vis-à-vis non-European suppliers. The COR welcomes the Commission's proposals for a framework directive on electronic communications and for four specific directives, as well as the adoption by the European Parliament and the Council of the directive on electronic commerce.

15. The COR supports the Commission in its efforts to encourage creativity and innovation via suitable protection of industrial and intellectual property rights (Strategic Objective 2, Operational Objective 4). Clear rules are needed on the protection of industrial and intellectual property. In particular there is a need for a right to information enabling an injured party to trace intellectual property theft from the seller back to the manufacturer, as well as for the introduction of a Community Patent.

16. The Committee is pleased that the Commission is working for the timely and complete implementation of Directive 96/92/EC concerning common rules for the internal market in electricity and Directive 98/30/EC concerning common rules for the internal market in natural gas (Strategic Objective 2, Operational Objective 5). The Commission has promised a communication on progress on liberalisation of the energy markets for December 2000.

17. In the light of the forthcoming communication on the liberalisation of energy markets, planned for December 2000, the Committee urges the Commission to review the directives on the production of oil and natural gas in Europe.

18. The Committee regrets that implementation of the internal market directives on electricity and gas has so far not produced pan-European competition in the energy sector, but rather parallel competition models. Approximation of these models is urgently needed in order to prevent imbalances to the detriment of market participants in fully liberalised Member States. Apart from significant disparities in the degree of market openness, competition-distorting rules also exist with regard to freedom of establishment for electricity and gas distribution companies. Considerable disparities also exist with regard to the organisation of the energy sector and environmental rules.

19. However, in order to establish a truly viable internal market in electricity and gas, harmonisation of the legal framework is essential. Thus, government regulation must be restricted to the minimum supervision necessary to ensure functioning competition in the market. At the same time, effective environmental rules will be needed to ensure that pan-European trade in electricity is not achieved at the expense of the environment as a result of outmoded and environmentally damaging electricity generation methods, although certain care will have to be exercised in regions that rely on limited modes of generating energy. The process of opening up to competition must be stepped up and accelerated in all the Member States.

20. While the COR fully supports the further gradual and controlled liberalisation of the postal services in the Union, the COR expressed serious concerns about the impact on excluded rural and urban communities. The COR supports the Commission in its intention of pushing ahead with completion of the internal market, including the postal services as agreed at the Lisbon summit. Intensified competition in this area will bring advantages for the customer and businesses in terms of quality and price of services and will strengthen the European economy. Even with open markets, universal postal services must be guaranteed. Priority must be given to people living in upland areas, on islands and in sparsely populated regions, and specific obligations placed on service providers.

21. The COR strongly supports the Commission's intention of eliminating tax barriers and unfair tax competition in the internal market (Strategic Objective 3, Operational Objective 2). As early as December 1997 the European Council decided to draw up a tax package aimed at preventing harmful tax competition. This includes:

- a directive on the taxation of savings income

- a directive on the taxation of interest and royalty payments and

- a code of conduct on company taxation.

22. The COR considers competition between systems of direct taxation in the Member States and vis à vis third countries to be desirable as a way of preventing excessive tax burdens and of strengthening the European economy's international competitiveness. But, in order to prevent distortions of competition in the internal market and economically unjustified shifts of capital and investment flows, it is also necessary to eliminate unfair tax competition. This applies in particular to measures pinpointed in the code of conduct on the elimination of unfair tax competition which often benefit non-resident, but not resident companies. The COR also supports minimum harmonisation of taxation of savings income and the abolition of withholding tax on interest and royalty payments between companies belonging to the same group. Implementation of the Commission's tax package should therefore enjoy the highest priority.

23. Public procurement is dealt with in the internal market strategy under Strategic Objective 3, improving the business environment, and Operational Objective 4, eliminating the remaining obstacles to cross-border trade. In order to achieve this goal, public procurement markets are to be further liberalised. The key measure planned is the public procurement legislative package which will in particular codify existing directives governing the award of contracts.

24. The COR welcomes the Commission's efforts to make the legal framework as clear as possible, in particular by bringing together all the relevant provisions in a single text. The Commission is asked, however, to avoid new rules unless they would result in simplification or clarification, rather than in more regulation and bureaucracy with regard to public procurement.

25. The new award procedure ("competitive negotiated dialogue"), which is to be added to the open and non-open procedures, is unnecessarily complicated and is unlikely to provide any greater flexibility in practice. The Committee of the Regions believes that existing provisions for the negotiated procedure should be implemented more flexibly. Nor can the COR support new measures for the implementation of EC law on the award of contracts. They would not be compatible with the subsidiarity principle enshrined in the Treaty of Maastricht or with the objective of "lean government". The COR therefore calls on the Commission not to create any new supervisory bodies.

26. The Commission intends to work for improved integration of service markets and to this end has announced a new strategy for the elimination of obstacles to the trade in services (Strategic Objective 3, Operational Objective 4).

27. With regard to further strengthening of the European services sector, the COR considers the main points to be the following:

- Knowledge-based services lead to a high proportion of graduate employees and ever higher skill requirements for the provision of entrepreneurial services.

- New service areas and information and communication technologies require the vocational training system to foster flexibility, personal responsibility and adaptability.

- Shortcomings in training and high demand for skilled staff are increasingly leading to bottlenecks in the services market.

- As a precondition for the development of a service culture, workers, companies and the state need to change their attitudes to service providers; what is needed is a greater willingness to provide services, greater customer orientation and the recognition that business services create value.

- Three factors relating to location are of the highest importance for information and communication technology companies: the supply of skilled workers, transport links and local costs, and economic conditions in the broadest sense.

- The strengthening and liberalisation of the services must not, however, go ahead at the expense of people living in areas with a low population density. At all levels therefore, actions to further the desired strengthening process must take account of the need to preserve those populations, by means of appropriate constraints on the service providers.

28. The COR notes with regret that, despite the outcome of the November 2000 conciliation proceedings on the railway package, the network access rights provided by Council Directive 91/440/EEC on the development of the Community's railways have so far not produced the desired opening up of the market in international rail transport; nor has Directive 95/19/EC achieved its objective of harmonising the systems for the charging of infrastructure fees. The amendment of these directives proposed by the Commission is therefore welcomed in principle (Strategic Objective 2, Operational Objective 5). Particular attention is drawn here to the obligation on the Commission to propose new measures for the liberalisation of rail passenger transport this year. The aim is to create more intensive competition through broadened network access and thus improve the performance of the railways, as part of the move towards a more sustainable rail system.

29. In the context of the impending revision of the guidelines for trans-European transport networks (TEN-T) the Commission is considering, as well as updating the guidelines, setting priorities which would, include inter alia the removal of bottlenecks in the existing network and enlargement of the EU. The COR would like to see priority go to promoting the removal of bottlenecks and enlarging the network to include transport links with the applicant countries.

30. The forthcoming enlargement has not been sufficiently taken into account in the existing TEN-T. Transport flows between the applicant countries and the EU are already growing strongly and will be given a further strong impetus by enlargement. Additional links to the applicant countries should therefore be incorporated into the network.

31. As the weakest link in the chain, bottlenecks restrict the capacity of a whole section of the network. Priority should be given to removing bottlenecks, which can be achieved reasonably cheaply and within a fairly short time period, in order to bring about a rapid increase in the efficiency of the TEN-T. This EU support should, however, be provided within the framework of existing instruments, i.e. through political guidance and limited financial aid. The Member States' primary responsibility for transport routes should not be prejudiced.

32. The COR regrets that liberalisation of the European road haulage market took place without simultaneous full harmonisation of conditions of competition. As a result distortions of competition persist in road haulage. The reasons for this are different national rules or different implementation of the rules, especially disparities in taxation (e.g. tax on petroleum and motor vehicles), different social regulations, different technical standards and different application and implementation of EU rules (e.g. cost advantages for the illegal employment of drivers from CEEC countries). The COR therefore considers it urgently necessary to assess the impact that harmonisation of the conditions for competition will have on different regions of the EU before pressing ahead with such action.

33. The COR points out that eastward enlargement of the EU will have serious implications for road haulage. Current forecasts suggest that the volume of transport between the EU and the CEEC states is likely to double or triple over the next 15 years. There will thus be potential for growth in East-West trade. On the other hand, however, there is also the danger of further worsening of the competitive situation of the transport industry. The main reason for this is the existing disparity in wages and social costs between the central European states and the CEEC states.

34. In order to contain the negative impact of eastward enlargement of the EU, the COR suggests that initially a Community quota be established for journeys between the CEEC states and the EU. This quota should gradually be increased. After full accession, or 3 - 5 years after accession, short haul cabotage should be gradually introduced for domestic transport in other Member States. Only then should full freedom to provide services be introduced.

35. The liberalisation of road haulage is happening with no regard for the contributions that ought to be levied for repairing environmental damage and in payment for using public structures and infrastructures that are currently free of charge. This system, which must be put right as a matter of urgency - seriously distorts competition between road and rail transport, which is effectively penalised. There is no point in calling repeatedly for the development of goods transport by rail unless the existing situation of privilege is addressed.

36. The Committee is critical of the Commission's plans for the Europe-wide opening-up of the market in local public passenger transport. The current draft EC regulation provides for a Europe-wide tender procedure for public service transport. The tender procedure can be dispensed with only where the annual value of the transport service is less than EUR 400000, EUR 800000 in the case of networks, or if this is the only way to ensure that the transport service is provided safely or efficiently. With regard to commercial transport services, the draft regulation lays down rules on transparency requirements, e.g. requiring the date of expiry of concessions to be published in a particular way.

37. These rules are intended to promote EU-wide competition in local public passenger transport. The COR considers, however, that this competition must not be allowed to prejudice universal, high-quality services, particularly in rural areas and isolated islands. In many Member States the competent authorities continue to provide high-quality transport services for reasons of security of supply. To this end they are already able to enter into public-service contracts with operators. If the tender procedure is used, authorities must lay down minimum requirements (e.g. with regard to frequency, fares for various groups, timetables etc.). In principle the COR is in favour of liberalisation of local public passenger transport. But as a precondition for this, the decision on quality standards must continue to rest with the responsible authorities and it must be permissible to offer financial compensation for compliance with these standards. The COR regards EU claims to wide-ranging regulatory powers with regard to local public passenger transport as highly problematic. In future only detailed arrangements, such as the laying down of certain minimum requirements, may continue to be delegated to local authorities.

Brussels, 14 February 2001.

The President

of the Committee of the Regions

Jos Chabert