Opinion of the Economic and Social Committee on the "Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions Working together to maintain momentum — 2001 Review of the Internal Market Strategy"
Date: 2001-05-30
Institutions: European Economic and Social Committee
Subjects: accession to the European Union, approximation of laws, economic growth, euro, national implementing measure, single market

7.8.2001

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Official Journal of the European Communities

C 221/25

Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council, the European Parliament, the Economic and Social Committee and the Committee
of the Regions “Working together to maintain momentum” — 2001 Review of the Internal
Market Strategy’

(2001/C 221/03)

On 19 April 2001 the European Commission decided to consult the Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the above-mentioned
communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 16 May 2001. The rapporteur was Mr Franz.

At its 382nd plenary session (meeting of 30 May 2001), the Economic and Social Committee adopted
the following opinion by 110 votes in favour, with two abstentions.

1.

Introduction

2. General comments

On 29 March 2000,

the Committee adopted an
1.1.
opinion on the Commission communication of 24 November
1999 (1) setting out a strategy for the internal market (rappor-
teur: Mr Little) (2). The first annual review of the strategy,
published on 3 May 2000 (3), was the subject of a Committee
opinion adopted on 19 October 2000 (rapporteur: Ms Sa´nchez
Miguel) (4).

1.2.
On 11 April 2001, the Commission submitted a
second review of the internal market strategy in a communi-
cation entitled Working together to maintain momentum. The
Internal Market Council will discuss this paper and draw
conclusions at its meeting on 30 and 31 May. In submitting
the present opinion, the Committee is seeking to make its
voice heard at an early stage in the debate now being launched
on this review.

The Commission communication retains the four

1.3.
strategic objectives set out in the strategy paper:

— to enhance the efficiency of Community product and

capital markets;

— to improve the business environment;

— to improve the quality of life of citizens;

— to exploit the achievements of the internal market in a

changing world.

1.4.
In its new agenda for the next eighteen months, the
Commission has cut the number of its target actions from the
current 130 to 78. The priority target actions have been
selected largely in the light of the Stockholm European Council
conclusions, but are also based on the Commission’s own
studies and input from other sources, including the Economic
and Social Committee. The Commission’s overall aim is to
focus on consolidating and speeding up implementation of the
Lisbon priorities, since the most important thing now will be
to press ahead with — and implement — the actions already
launched.

(1) COM(1999) 624 final.
(2) OJ C 140, 18.5.2000, p. 36.
(3) COM(1999) 257 final.
(4) OJ C 14, 16.1.2001, p. 13.

2.1.
The strategic goal laid down in Lisbon, namely to make
the EU the most competitive and dynamic knowledge-based
economy in the world, has been repeated so often that it has
almost become something of a mantra. Unfortunately, since
Lisbon, too little headway has been made towards achieving
this goal. In its contribution for Stockholm (5), the Commission
— with welcome candour — laments that fact that many of
its proposals have been delayed or watered down for different
including a lack of political will. The Committee
reasons,
shares these concerns, which the Stockholm European Council
has amplified rather than allayed. What matters this year,
therefore, is not to adopt new strategies or to formulate new
objectives, but to translate existing targets into specific action
within ambitious yet realistic timeframes.

This applies on the one hand to the structural and
2.2.
economic reforms agreed in Lisbon and reaffirmed in Stock-
holm; these form part of the Cardiff process and are moving
forward too slowly in some Member States. Equally, it applies
to the completion of the single market. The Lisbon European
Council rightly noted a point again underlined in Stockholm
— namely the single market’s crucial role in achieving key
Union objectives such as sustainable economic growth, more
and better jobs and greater social cohesion. However, actual
progress on the ground fails — sometimes by a wide margin
— to live up to these fine words.

therein, and the annual review of

2.3.
The Committee has basically endorsed the Com-
mission’s 2000-2004 internal market strategy, the strategic
objectives set out
its
operational target actions. However, the Committee has felt
from the outset that, since legislative processes are known to
take time, the deadlines set for transposing many of the actions
are very optimistic. Accordingly the results presented by the
Commission in its first strategy review in May 2000 were
modest.

(5) Communication COM(2001) 79 final, 7.2.2001, Realising the

European Union’s potential.

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2.4.
The current second review also shows that transpo-
sition of the actions launched leaves a lot to be desired in
many cases. Most of the actions planned for this period were
introduced in good time by the Commission, but,
in the
Council and Parliament, there is often a lack of will — or
political clout — to meet the prescribed deadlines. Thus, of
the 36 target actions scheduled for completion by June 2001,
only 20 are expected to be completed on time.

3.2.
The Commission thinks that citizens must be better
informed of their rights and given timely help in case of
problems. It considers it essential to improve the integration
of existing structures such as the dialogue and information
centres, the contact points and co-ordination centres estab-
lished within each national administration and the European
consumer information centres (Euroguichets) so that they are
used more productively and more efficiently. The Committee
supports this objective.

The Commission itself has on numerous occasions
2.5.
pointed to the gap — which has become particularly apparent
recently — between rhetoric and reality, between words and
deeds. Clearly, Member States’ policy is too often determined
more by domestic considerations and tactical concerns than
by a desire for compromise, without which all plans for legal
approximation in the single market are doomed to failure.

The coordination centre and contact point network
3.2.1.
for citizens and businesses is up and running in theory.
However, experience so far shows that the network is not yet
efficient enough in all areas, as the ESC’s Single Market
Observatory was able to note for itself in hearings with users
and other contacts in a range of Member States. The findings
and conclusions are set out in the own-initiative opinion on
PRISM 2000 (1).

2.6.
In this paper, the ESC assesses individual target actions
of the single market programme. It follows the Commission’s
breakdown according to longer-term strategic objectives and
focuses on some of the actions it considers to be a priority.

3. Horizontal priorities

3.1.
The communication rightly states that the full transpo-
sition of all internal market legislation is a prerequisite for the
proper functioning of the market. Although this is a legal
obligation on Member States, considerable transposition defi-
cits remain. Only three Member States met the interim target
established in the internal market strategy of reducing their
transposition deficits to 1.5 % by December 2000. Alarmingly,
the Commission notes that nearly 13 % of all internal market
directives have not yet been transposed in one or more
Member States. There are also considerable transposition
deficits in two of the three EFTA countries, which — as
members of the European Economic Area — are also obliged
to convert single market rules into national law. This means
that we only have a partial internal market.

The Committee still feels that the speedy elimination
3.1.1.
of
transposition deficits is a priority objective. This can
be achieved by Member States making stringent voluntary
commitments which must be reviewed regularly. The interim
target laid down in the Commission communication — that
Member States halve their transposition deficits by December
2001 and reach 98.5 % transposition by spring 2002 — does
not seem at all overly ambitious. The half-yearly Single Market
Scoreboards are indispensable since they set out progress made
and delays encountered in achieving this and other single
market objectives and are designed to trigger critical debates
in the Council and Parliament.

3.2.2.
So that existing structures can be put to better, more
efficient use, an improved integrated on-line inter-active
problem-solving network is to be set up by June 2002. Such
networking is designed to provide the capability for tackling
quickly and effectively the full range of problems encountered
in the single market. This is one of the conclusions drawn by
the Commission from the Internal Market Forum, which it co-
staged with the European Parliament in November 2000 and
which discussed grassroots issues. The Committee supports
this plan.

3.3.
By dint of a further scheme — the Interactive Policy-
Making initiative — the Commission is seeking to expand the
dialogue via the Internet with ‘those on the receiving end’ in
order to bring their reactions to bear in the policy-making
process. The scheme is designed to allow economic operators
to evaluate both existing EU policies and new initiatives. The
Committee trusts that it will be involved in the preparation
and implementation of this new consultation procedure and
would also point out that, at the moment, the vast majority of
people are excluded from Internet-based dialogue.

4.

Enhancing the efficiency of Community product and
capital markets

The focus here is on opening up additional key
4.1.
economic sectors to more competition. The Lisbon European
Council rightly pressed for speedier liberalisation of gas and
electricity markets, postal services,
financial markets and
transport. In these areas, the aims of the internal market
strategy coincide with those of the economic reform process
launched at Cardiff, the results of which have now been the
subject of a third Commission report.

(1) OJ C 116, 20.4.2001, p. 106.

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4.2.
Although it is generally agreed that economic reforms
on product and capital markets are the key to achieving the
ambitious targets set in Lisbon, moves to turn them into reality
have so far failed to match expectations. While it is important,
in all measures for opening up the market, also to consider the
implications for workers and, if need be, to rectify any adverse
developments, it would be equally inappropriate to think that
labour market difficulties stand a good chance of being solved
by delaying requisite structural reforms.

4.3.
The Community has made headway in opening up
the telecommunications market and in establishing a legal
framework for e-commerce. These are, however, just the first
links in a chain of requisite measures. Swift action must now
be taken to put into effect the entire telecoms reform package
proposed by the Commission in June 2000.

4.4.
In contrast, liberalisation of the internal markets in
electricity and natural gas is making no progress at all. The
agreed liberalisation targets have not been met in hardly any
area across Europe. Thus, the Stockholm European Council
again agreed only on the overall objective of opening up these
markets but failed to lay down a specific and binding timetable.
The Committee points out that when the requisite action is
taken to open up the markets more quickly, security of supply
is also an issue that must be borne in mind. The Committee
has issued a detailed opinion on the issue (1).

4.5. With regard to the liberalisation of postal services,
agreement was reached in Stockholm only on the overall
target of adopting the directive by the end of 2001. For the
for further
moment, however,
liberalisation of the postal services market is, the Committee
regrets to note, being blocked in both the Parliament and the
Council because of conflicting national interests.

the Commission proposal

4.6.
As a result, on many fronts, the European single
market is not yet complete. This applies in particular to the
entire service sector, which generates some 70 % of EU GDP.
Fully integrated financial markets are an urgent priority and
must be tackled without delay so that both the single market
and the euro can realise their full potential.

(1) Communication from the Commission to the Council and the
European Parliament — Completing the internal energy market;
Proposal for a Directive of the European Parliament and of the
Council amending directives 96/92/EC and 98/30/EC concerning
common rules for the internal market in electricity and natural
gas; and Proposal for a Regulation of the European Parliament
and of the Council on conditions for access to the network for
cross-border exchanges in electricity.

4.7.
The Lisbon European Council made the point that
effective and transparent financial markets foster growth and
employment by better allocation of capital and lower costs. The
Financial Services Action Plan, which contains 43 individual
proposals for eliminating obstacles caused by differing national
rules, is to be implemented fully by 2005. Work on the action
plan must be stepped up if this key target laid down in Lisbon
is to be achieved. The Committee welcomes the declaration of
intent given in Stockholm to establish an integrated securities
market by the end of 2003. This task could be facilitated by
drawing on the recommendations of the Lamfalussy group for
a new regulatory approach which distinguishes between
framework legislation and implementing measures.

4.8.
The Commission’s recent communication setting out a
comprehensive internal market strategy for removing barriers
to services is important in this connection. This two-step
scheme seeks, first, to accelerate initiatives already planned,
and then, in 2002, to present a further package of initiatives
with a precise timetable, aimed at adapting the single market
to the fundamental changes and dynamics in the service sector.
The Committee backs this initiative and the proposed timetable
and will consider this communication in detail at a later stage.

For many years, there have been complaints about the
4.9.
excessive cost of protecting intellectual property rights in
Europe, particularly for SMEs. Thus, the Lisbon European
Council rightly attached top priority to reaching agreement on
a Community patent. The Committee too, in its wide-ranging
opinion of 29 March 2001 (2) stressed the urgent need to
promote research and innovation through a reasonably priced
and unbureaucratic Community patent. Unfortunately, the
declaration of intent by the Heads of State or Government is
blatantly contradicted by the actions of national governments
on the Internal Market Council, where the discussions about
the Community patent have once again become bogged down.
The impression is that national interests are often deemed
more important than the needs of an innovative economy
which has long been calling for this measure. The regulation
on Community design has also been blocked for months for
similar reasons.

4.9.1.
At the next Internal Market Council, the Commission
should call on Member States to state clearly whether they
want the Community patent, and, if so, at what price. It would
be better to withdraw the proposal if it becomes clear that the
measure would no longer bring businesses any added value
because of the high costs of unnecessary translation into too
many languages or because of calls for assurances that national
patent offices will not close or shed jobs.

(2) Proposal for a Council Regulation on the Community patent OJ

C 123, 25.4.2001.

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5.

Improving the business environment

5.1.
The Feira European Council achieved an initial
important breakthrough in the stalemate surrounding the tax
package (to remove tax-based distortions of competition).
However, the agreement in principle to introduce a Com-
munity capital gains tax is still subject to considerable reser-
vations and no decision is expected before 2002 at the earliest.
This has, however, rekindled the debate on a code of conduct
to combat unfair tax competition and on the taxation of
interest and royalty payments. The Committee hopes that the
work can be stepped up so that, in line with the remit given in
Stockholm, agreement can be reached on the tax package as a
whole, if possible before the end of 2002.

Unfortunately, Nice failed to agree on majority voting
5.1.1.
at least for procedural simplifications relating to VAT. Council
negotiations on the Commission proposals to modernise VAT
legislation in the internal market are dragging on as a result.
Rapid adoption of these proposals would, however, be vital to
remove the burden of red tape on the cross-border movement
of goods and to reduce scope for tax fraud.

5.2.
The Committee is pleased that plans for a European
company statute have also got off the ground again thanks to
an agreement in principle reached in Nice. However, rapid
legislation on this front is being held back by the current
dispute with the European Parliament on the legal base and
the threat of legal action being brought. Further delays should
now be avoided, however, since this new type of company
organisation — which also brings workers major benefits —
is urgently required in an internal market that is growing ever
closer together. Thus, the ESC welcomes the Commission’s
plan to submit a directive on outstanding tax-related issues
before the end of May.

5.3.
The European company statute could be a first step
towards removing the oft-lamented obstacles to company
mobility within the European single market. The Commission
is called upon also to propose appropriate legislation without
delay for cross-border mergers and company transfers.

5.4.
The Commission again notes that, at 1 % of GDP, state
aid levels are still too high and must be reduced in order to
avoid distortions in competition within the single market. It
also wants to make the system more transparent. Against this
backdrop, the Stockholm European Council’s request that
Member States demonstrate a downward trend in state aid by

2003 is considered by the Committee to be too weak. On the
other hand, it is pleased that the Commission has been asked
to ensure that a publicly accessible state aid register and
scoreboard are available online by July 2001.

5.5.
For a long time now, the Committee has advocated a
radical simplification of single market legislation in order to
cut red tape for businesses and create a climate of trust among
both companies and consumers. It recently issued a detailed
opinion on the issue and proposed, among other things, an
independent impact assessment of Community legislation and
codes of conduct for all EU bodies with a view to better
lawmaking. The Committee will be subjecting its own work to
such a code of conduct, which was unanimously adopted by
its plenary assembly in autumn 2000. The Commission has
announced an initiative to promote simpler legislation and is
called on by the Committee to act soon. The Committee notes
the key role of civil society players in ensuring the success of
these reforms.

5.6.
The mutual recognition principle is fundamental to the
optimal working of the single market. The Committee awaits
with interest the Commission report due to be published by
the end of 2001 which will look at steps to enhance this
principle and consider what still remains to be done. The
Committee would point to its opinion of 30 November
2000 (1) and would take this opportunity to reiterate the
readiness of its Single Market Observatory to work together
with the Commission on the issue.

6.

Improving the quality of life of citizens

6.1. Many barriers remain to workers’ and citizens’ mobility
within the single market. Different national tax and benefit
systems, insufficiently transparent conditions for the recog-
nition of professional qualifications and difficulties in transfer-
ring pension and health insurance rights from one Member
State to another are just some of the factors that put a brake
on mobility. Removing these barriers would first and foremost
benefit sectors experiencing an acute skills shortage.

The Committee is pleased to note that the Com-
6.1.1.
mission is planning to present the 2002 spring European
Council with an action plan for developing and opening up
new European labour markets in order to reflect both the
integration of the single market and the dynamism of Europe’s
new economy. It particularly welcomes the Commission’s plan
to put forward, this year, proposals for simplifying the regime
for professional recognition. In its recent opinion on freedom
of movement for workers in the single market (2), the Com-
mittee put forward a number of points and ideas for consider-
ation.

(1) OJ C 116, 20.4.2001, p. 14.
(2) OJ C 132, 25.4.2001.

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6.2.
The Committee also backs the Commission’s plan to
submit a discussion paper before the end of this year, setting
out ideas for a general regulatory framework for consumer
protection and administrative cooperation. The wide diver-
gences between Member States’ consumer protection laws
fragment the internal market and reduce consumer confidence
in cross-border transactions, which e-commerce and the euro
in particular are expressly designed to facilitate.

6.3.
Alternative dispute mechanisms can resolve many
single market problems more quickly and more effectively
without the need for lengthy court proceedings. A top priority
is the Commission’s plan for this year to establish — and have
running — a European extra-judicial network for settling
disputes. This will be done in conjunction with the Member
States and will be along the lines of the financial services
cooperation network (FIN-NET) launched in January.

6.4.
The current crisis in the food sector proves the need
for urgent Community action. Further to the White Paper on
Food Safety, the Commission has proposed the establishment
of a European Food Authority and the laying-down of
procedures in matters of food safety. The Committee recently
issued an opinion on these proposals (1). The Nice European
Council called on both Council and Parliament to speed up
work so that the future European Food Authority can become
operational from the beginning of 2002. The Committee
endorses this call. In the interests of consistency and continuity
of dialogue on food safety issues, the Committee will carry out
regular ad-hoc assessments of developments on this front.

7.

External aspects of the internal market

7.1.
The prime objective is to press ahead resolutely with
the accession process. From the moment they join the Union,
the accession countries must fully adopt single market rules,
which they must also be in a position to implement. The main
responsibility for that lies with the future Member States
themselves, but the EU can and must provide support. In
future, the existing aid schemes are to be stepped up so as to
improve supervisory, enforcement and judicial structures. The
Committee welcomes this objective. It advocates the speedier
establishment of single market contact points and coordination
centres in the candidate countries.

Technical assistance from the EU and the development
7.2.
of bilateral partnership agreements on single market issues play
a major part particularly in building up efficient administrative

(1) OJ C 123, 25.4.2001.

machinery in the candidate countries. This duty is incumbent
not only on Member States’ government agencies. Banking,
insurance and securities supervisors and other institutions
from the Member States should also not delay the peer review
process with the candidate countries.

7.3.
Preparations for accession must be accompanied by
the creation of civil society structures in the future Member
States. Such structures are essential to a functioning single
market. In some candidate countries, the establishment of civil
society organisations is still in its infancy or is proceeding only
slowly. Also, the governments of these countries are only
gradually getting used to the idea of involving the social
partners and other organisations in opinion-forming and social
dialogue. By working together with partner organisations in
almost all candidate countries,
the Economic and Social
Committee is making a key contribution to launching this civil
dialogue.

Another external aspect is the incorporation of certain
7.4.
legal
internationally agreed rules into the single market
framework. This includes the forthcoming adoption of the
regulation on the application of
international accounting
standards and a directive governing the capital framework for
investment firms in order to secure a level playing field for
EU companies. The Committee endorses these Commission
priorities.

7.5.
That said, the pace of negotiations with certain third
countries on arrangements for the taxation of income from
savings should be quickened. Without such arrangements,
the agreement in principle reached in Feira to introduce a
Community capital gains tax cannot be translated into a
decision. It is therefore essential to bring forward the December
2002 deadline set by the Commission.

8. Conclusions

The challenges of the present and the immediate future
8.1.
require from all players a speedier, more resolute approach
than hitherto to the completion of the single market. The
decisions and reforms that are needed must be adopted now;
they must not be deferred until a later date.

8.2.
A completed, properly functioning single market will
provide the long-term boost to growth that Europe urgently
needs and that will make it less dependent on uncertain world
markets.

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8.3.
A common currency presupposes a common market.
Hence, the forthcoming introduction of the euro is hard to
square with an incomplete single market, particularly since its
weaknesses and shortcomings will then become more rapidly
and more directly visible.

8.4.
Last but not least, a fully functioning single market is
needed to provide a solid basis for the successful integration
of new Member States into the European Union. How are the
candidate countries to be convinced of the need to adopt the
acquis quickly if Community law has not yet been fully
transposed even in the existing Member States?

8.5.
The Committee therefore backs any moves and plans
which can help maintain the momentum behind the internal
market strategy.

8.5.1.
In order to measure and monitor progress even more
closely in the future, the Commission is planning to develop a
comprehensive set of indicators which will make it possible
to gauge progress made towards meeting the operational
objectives set out in the internal market strategy. The indicators
will measure results and will also include an environmental
and consumer dimension. The Committee is awaiting the first
results — due for publication in the November 2001 Single
Market Scoreboard — with keen interest.

Brussels, 30 May 2001.

8.5.2.
The studies launched by the Commission on the
benefits in certain sectors where the performance of the single
market needs to be enhanced are also considered by the
Committee to be useful. Over and above that, the Committee
would welcome the Commission having the costs of non-
integration investigated in certain target sectors of the strategy
where cross-border trade is still seriously hampered. These
costs should be quantified in terms of prices, growth rates and
employment figures.

8.5.3.
All impact assessments must be particularly careful
to monitor the implications of the measures for workers. In
the further implementation of the internal market strategy too,
it must always be remembered that the benefits of the common
market must be enjoyed equally by all groups in society.

8.6.
All the schemes mentioned are important and provide
a further case for pressing ahead with the single market process
without delay. The crux of the matter, however, is and remains
the political will of all those responsible — the Commission,
the Council, governments and players in
the Parliament,
society — to complete the single market and transpose the
rules on time. All stakeholders must therefore use the current
review of the internal market strategy as an opportunity to
examine the reasons for the delays and to commit themselves
to taking swifter action in the future.

The President

of the Economic and Social Committee

Göke FRERICHS