Opinion of the European Economic and Social Committee on the "Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Internal Market Strategy — Priorities 2003-2006" (COM(2003) 238 final)
Date: 2003-07-16
Institutions: European Economic and Social Committee
Subjects: approximation of laws, enlargement of the Union, free movement of goods, population ageing, public contract, services contract, single market, tax harmonisation, type of business

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Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission to the Council, the European Parliament, the European Economic and Social
Committee and the Committee of the Regions: Internal Market Strategy — Priorities 2003-2006’

(COM(2003) 238 final)

(2003/C 234/15)

On 8 May 2003, the Commission decided to consult the European 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 was responsible for the Committee’s
work on the subject. The Committee appointed Mr Cassidy as rapporteur-general.

At its 401st Plenary Session on 16 and 17 July 2003 (meeting of 16 July), the European Economic and
Social Committee adopted the following opinion by 80 votes to 15, with 18 abstentions.

1. Ten years of an internal market without frontiers

The EESC welcomes the Commission communication
1.1.
and its conclusions and the action plan set out
in the
appendices. It agrees that much remains to be done to achieve
the full potential of the internal market.

1.2.
The internal market is incomplete with major chal-
lenges to be overcome from 2003 to 2006. Various national
constraints on the free movement of goods and people remain.

1.3.
In addition to removing national barriers to the
free movement of goods, services, capital and people, new
challenges and developments, like the changing character of
the EU (from EEC to EU and beyond), the Lisbon strategy and
its broader political approach, upcoming enlargement, the
outcome of the Convention proceedings, a changing inter-
national division of labour and the current economic slump,
influence the environment and the framework conditions for
the internal market.

Spring

Forecast

with a forecast rate of 8,8 %, according to the European
Commission’s
adopted on
Economic
8 April (1). While removing remaining obstacles to the internal
market does open up additional economic opportunities and
thus also potentially creates more jobs, unemployment cannot
be tackled successfully without an employment-oriented
macroeconomic policy and enhanced efforts to implement the
employment strategy at national level.

1.6.
The Commission communication emphasises that
achieving the internal market is a continuing process shared
with Member States. The communication highlights, however,
the increase in regulatory barriers, which arise from the way
in which some Member States transpose European measures
into their national law.

2. The priorities from 2003 to 2006

1.4.
Though there are now relatively few restrictions on
capital movements, progress in implementing the Financial
Services Action Plan has been slow. This is a major challenge
for the European Parliament and the Council to speed up their
co-decision as financial services are the lubricant of business
in the EU. National protection of financial services may also
hinder the internal market in cases where no EU measures yet
exist. In removing these obstacles, account must be taken of
citizens’ interests (consumers, workers and employers.)

2.1.

Facilitating the free movement of goods

Trade with third countries has been growing faster than trade
between Member products manufactured in another country.
Member States should trust each other’s systems. A sound
legal system, high and transparent quality standards and
consumer education initiatives provide the best conditions for
increasing trade in goods between Member States.

1.5.
Progress over the last ten years has been insufficient to
impact on unemployment, which remains too high, at 8 %

(1) European Economy No 2. 2003.

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2.2.

Integrating services markets

in national

2.2.1.
Specific characteristics of services such as the import-
ance of know-how and qualifications for the service-provider,
considerable differences
regulations and the
resulting differences of prices, incomes and standards and the
absence of effective mechanisms at EU level to deal with these
differences as well as a lack of confidence in each others’
regulatory systems have up to now hindered the development
of an internal market in services. Services still account for only
20 % of trade in the internal market — less than a decade ago!
As nearly 90 % of the SMEs in the EU are in service industries,
there is an urgent need for progress.

2.2.2.
Apart from the financial services, where 32 out of
the 42 measures of the action plan have been adopted, other
segments of the services sector have not yet been subject to a
comprehensive internal market policy. As the Commission
now plans action in this field, the Committee would draw
attention to specific requirements in this field with respect to
social,
standards,
especially with respect to integrating the new Member States,
as well as the needs of SMEs, e.g. in sales promotion and the
principle of the country of origin.

and consumer

environmental

safety

2.3.

Ensuring high quality network industries; ensuring high
standards in services of general interest

2.3.1.
Companies offering service of general interest pro-
vide ongoing, high-standard and comprehensive service cover.
The prime concern in any moves towards privatisation,
outsourcing or liberalisation must always be the added value
for the consumer and affordable, generally accessible service
provision. For reasons of safety and to maintain standards,
adequately trained specialist staff must also be on hand in
order to be able to bridge bottlenecks.

2.3.2.
Network industries — telecommunications, water,
energy, transport, etc. — are an essential part of the EU
internal market. However, though there has been progress in
bringing down prices after liberalisation, notably for compani-
es and to some extent also for consumers, other improvements
for consumers and users have been limited and,
in some
instances, enormous problems have arisen with supply and
safety.

The EESC is monitoring with great interest

2.3.3.
the
Commission’s request to Council and Parliament to speed up
their adoption of the ‘second railway package’ and the package
designed to create a Single European Sky. With regard to
network industries in particular, the Committee is in favour

of achieving a balance between the general
interest and
competition. The Committee also believes there is a need for
the Commission to present a proposal for a framework
directive consolidating the political principles governing ser-
vices of general economic interest and giving Member States
the flexibility they need in this area.

2.3.4.
The larger internal market inevitably leads to an
increase in the volume of transport. The challenge facing EU
transport policy is thus to provide an appropriate framework
for the requisite transportation that also is also environmen-
tally — and socially — compatible and ensures that the various
transport modes (rail, road, water etc.) are used sensibly side-
by-side. At the same time, however, incentives must be put in
place to avoid unnecessary journeys.

2.3.5.
The Committee therefore backs moves to speed up
completion of the Commission priorities (TEN-T). However,
the resources provided to date by the Member States and the
Community are insufficient to achieve these objectives.

2.4. Reducing the impact of tax obstacles

2.4.1.
The principle priority, as it has been for almost
twenty years, is a harmonised system whereby VAT is charged
in the country of origin (the origin principle) rather than in
the country of consumption (the destination principle). Fifteen
different sets of VAT regulations add enormously to the
burdens on business. The EESC emphasises that the question
of VAT rates should remain in the hands of Member States but
the Commission has a role in bringing about a harmonised
system.

The EESC warns the Commission that its proposals
2.4.2.
for phasing out vehicle registration tax will meet objections
from some Member States.

2.5.

Expanding procurement opportunities

Few public procurement contracts are awarded cross-border
in the public procurement market which accounts for 16 % of
EU GDP, i.e. EUR 1 429 billion. So the system is not working
satisfactorily. The EESC is concerned about the slow progress
in the Council and the Parliament in adopting the current
legislative procurement package. Thus, there is still room for
improving the system. As this is a major procurement market,
cross-border invitations to tender involving a larger number
of potential applicants could improve the competitive environ-
factor into their cost
ment. That said, companies must

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calculations the higher transport costs usually entailed and the
technical and commercial challenges of executing cross-border
orders. In that regard, large companies used to international
operations are better placed than SMEs operating on tight
margins. Careful checks must be carried out to obviate the
threat of social dumping through the deployment of workers
from low-wage countries, or other workers paid below the
contractually agreed rate.

2.6.

Improving conditions for business

A key tool for the success of the internal market is
2.6.1.
the community patent. The EU must create an environment in
which business and job creation can thrive. The EESC very
much regrets the delay in full implementation of the recent
Council agreement on the community patent.

2.6.2.
The EESC has frequently expressed its concern about
the impact of EU and national measures (red tape) on European
internal market players. One of the aims of the internal market
programme is to reduce the burden placed on companies and
the public. It therefore urges the Commission and Member
States to produce more detailed ‘impact assessments’ on their
proposals.

2.6.2.1.
The Committee has repeatedly pointed out that
small and medium-sized enterprises are not sufficiently
involved in designing measures to implement the internal
market. It urges that dialogue between the Commission and
SMEs be reinforced. The EESC hopes that, in accordance with
the recommendations of the European Charter for Small
Enterprises, DG Internal Market will establish a system of
consultation and cooperation with the organisations rep-
resenting small enterprises to guarantee their participation in
the entire Community legislative process.

2.6.3.
The Committee, however, draws attention to the
difference between, on the one hand an unnecessary regulatory
the
and administrative burden and, on the other hand,
social, environmental and consumer protection standards
and regulations required to ensure that living and working
conditions are maintained and developed, in accordance with
the common goals of the EU laid down in the Treaties and the
Lisbon strategy.

The EESC looks forward to seeing the Commission
2.6.4.
proposals on corporate governance and hopes that they will be
consistent with worldwide criteria. International Accounting
Standards require legal endorsement throughout the EU in
accordance with the IAS Regulation and urges the Commission
and the Council to move rapidly to the adoption of inter-
national standards on auditing. The interests of all stakeholders
should be taken into account.

2.6.5.
The EESC supported the Commission proposals for
cross-border takeover bids. It notes that particular care is
required to ensure a balanced interplay of the various forces
involved so that the same conditions apply to all countries.

Concerning the Commission proposals for a regu-
2.6.6.
lation on a European Private Company Statute for SMEs, the
EESC hopes that this will not impose additional burdens and
points out that there are many large private companies whose
shareholders and workers wish them to remain private.

2.7. Meeting the demographic challenge

Though the Commission has limited scope for
2.7.1.
initiatives in this field, the communication highlights the twin
problems of an ever aging population and ever declining age
of retirement.

2.7.2.
work to support those who are retired) also arouses concern.

The ‘dependency ratio’ (the number of people that

Changing demographic trends call

2.7.3.
for necessary
measures in the labour market as well as in social protection
systems and infrastructure, e.g. in the health system. Within
the Lisbon framework, the decision to boost employment is
the priority objective if economic, social and more specifically,
pension strategies are to be conducted properly (1). In addition
to the non-discrimination of older workers, however, action is
also needed to reach higher employment rates among older
people. Well-targeted employment and macro-economic poli-
cies are necessary to create the jobs needed, otherwise increased
employment rates among older people will have negative
effects on the employment of younger age groups.

The EESC points out (1) that necessary reforms in
2.7.4.
view of a fair and balanced pension system have to take into
account increasing longevity as well as new-style employment
contracts and the effects of the different models of financing
pensions. The Committee would also like to draw attention to
the fact that reforms of social protection systems tend at the
moment to be discussed from the point of view of internal
market and budgetary necessities alone. This may have adverse
effects on the systems as a whole. The pension systems need
reform but must be discussed in overall terms. Moreover,
reform efforts have to involve all the stakeholders concerned,
especially the social partners.

(1) EESC Opinion on Safe and Sustainable Pensions, OJ C 48 of

21.2.2002.

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2.7.5.
The internal market also brings challenges for health
services. On the one hand, worker mobility within the internal
market can help resolve staffing bottlenecks, especially among
the nursing staff. On the other hand, patient mobility may lead
to unequal financial burdens and imbalances in the differently
structured systems. In this case too, discussing the challenges
purely from an internal market perspective may have an
adverse impact. To avoid that, future requirements must be
considered and discussed in overall terms.

The Committee also draws attention to the reform of
2.7.6.
social protection systems undertaken in the incoming Member
States. Reforms in these countries have gone in the direction
of systems
relying heavily on private initiative, private
responsibility and personal risk as well as on funded pillars.
This may create a division and tensions when the countries
join.

2.8.

Simplifying the regulatory environment

Replacing fifteen sets of national regulations with one EU-wide
regulation is one of the objectives of the internal market.
However, Member States continue to add to the requirements
of EU directives (a process known as ‘gold plating’). The
European Parliament has suggested the introduction of an
internal market
‘compatibility test’, a proposal the EESC
supports (1), provided the test criteria take account of the
interests of all citizens in the internal market.

2.9.

Enforcing the rules

2.9.1. Member States do not implement European direc-
tives speedily or accurately. The number of infringement cases
rose from under 700 in 1992 to over 1 500 in 2002 (2). The
resolution of these infringement cases depends very much
upon the work of the European Court of Justice (ECJ). The
EESC would like a speeding up in resolution of infringement
cases and hopes that the SOLVIT arrangements will contribute
materially to this speeding up. The EESC asks the Commission
to report regularly on the achievements of
the SOLVIT
network.

2.9.2.
The EESC believes that a possible solution to the
transposition deficit would be greater use of Parliament and
Council regulations (to be known as EU laws), which are

( 1) The Harbour Report of the European Parliament, A5-0026/2003.
( 2) Source: Internal Market Scoreboard No 11: November 2002.

directly applicable rather than Parliament and Council direc-
tives which are addressed to governments and from which the
main problems of transposition arise.

2.9.3.
Regulations should only be used, however, if there is
strict compliance with the subsidiarity principle and if, at the
same time, standards are respected in social security systems
and in the fields of consumer and environmental protection.

2.9.4.
The EESC welcomes the Commission proposal for a
‘screening mechanism’ whereby Member States must notify
new technical regulations to the Commission before they
come into effect.

The EESC also welcomes Commission suggestions
2.9.5.
for better administrative cooperation and for the establishment
of voluntary EU wide codes of conduct/professional rules.

2.10.

Providing more and better information — An internal
market for citizens

In spite of the progress made so far, citizens are still
2.10.1.
largely unaware of their rights and of the help available to
them through programmes and contact points such as EURES
(for jobseekers) and SOLVIT (for removing obstacles to the
free movement of goods and services).

2.10.2.
Also as far as consumers are concerned, the com-
pletion of the internal market has been a major disappoint-
ment, as they have not enjoyed the hoped-for benefits that
they should have.

2.10.3.
The public remain largely unaware of their rights
and opportunities and of the programmes and contact points
available to help them.
It would therefore be worthwhile
drawing up a blueprint for improving public information and
easing grassroots access to existing programmes and contact
points. The Committee thus recommends that information
be provided about existing problem-solving machinery (e.g.
SOLVIT) and how to access it and that such access also be
made easier. For instance, employers’, workers’ or consumers’
associations could act as contact points for companies and the
public and provide a link to the appropriate problem-solving
offices, such as the SOLVIT centres. However, as this is not
actually part of these organisations’ remit, it could impose an
extra financial burden on them, and might possibly necessitate
their being provided with additional resources. However, there
should be no duplication of structures and resources.

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2.10.4.
Although the free movement of persons is one of
the main objectives of the internal market, there are still
obstacles as the number of complaints addressed to the
Commission shows. Programmes enhancing the mobility of
students have been quite successful. Maybe this is due to the
fact that mobility is not seen as an end in itself. This also has
implications for the geographic development of the internal
market, instead of asking people to go where the jobs are, it
may be more effective and also more compatible with people’s
needs to create the jobs where people are. This necessitates a
comprehensive regional and structural policy as an adjunct to
the internal market.

2.10.5.
In order to be able to take greater advantage of the
opportunities offered by cross border shopping, consumers
need better information and existing barriers have to be
removed. One of the key challenges for the Commission will
be to ensure that Member States’ judicial systems are able to
deal quickly and cheaply with cross-border complaints about
unreliable products or inadequately performed services. The
Commission’s initiatives in encouraging Alternative Dispute
Resolution (ADR) are to be welcomed.

2.10.6.
Knowledge of consumer rights in the internal
market is extremely limited. Similarly, the jurisprudence of the
ECJ and the CFI has too low a level of awareness even among
lawyers. The EESC opinion on PRISM 2002 (rapporteur: Mr
Pezzini) has drawn attention to these failings and the way in
which national and local officials often exploit this ignorance.
The conclusions of this opinion are supported.

2.10.7.
The own-initiative opinion by Mr Hernández Batal-
ler (1) examines in detail the need for the Commission to take
a number of new initiatives in the field of consumer education.
His recommendations are supported.

3. Getting the best out of the enlarged internal market

the
The Commission communication acknowledges that
enforcement of EU law will be even more difficult with
enlargement. It proposes to issue a recommendation setting
out
‘best practices’ which should be applied consistently
throughout the EU to ensure better and faster implementation.
The EESC welcomes this.

( 1) OJ C 133 of 6.6.2003, p. 1.

3.1. Building the internal market in an international context

3.1.1.
The enlarged internal market will bring many econ-
omic advantages and will strengthen the competitiveness of
the EU in the global market, provided that the Union manages
to exploit its existing potential, e.g. the utilisation of the
existing workforce, and to deal effectively with the challenges
associated with the enlargement of the internal market.

3.1.2.
Among these challenges are the following: reducing
economic and social discrepancies, transitional provisions
which cause divisions in the internal market, sufficient admin-
istrative and judicial capacities in order to deal effectively with
the implementation of the EU acquis and the increased volume
of cross-border economic activities, differences in the quality
of goods and services especially in agriculture, special chal-
lenges for border regions, an increasing necessity for adapting
infrastructure to the changing needs, an increasing transport
volume, the challenges of special economic zones, differences
in tax regimes, health and safety standards in the workplace,
environmental standards, reinforced border controls, increased
competition, coping with unemployment due to restructuring,
reforming social systems on the basis of the principles of
economic, social and territorial cohesion and the necessity of
strengthening social dialogue in order to enable social partners
and civil society to fully participate in shaping the future
internal market.

3.1.3.
Effective support for the restructuring process and
the removal of economic and social discrepancies between the
existing Member States and the future Member States — also
after their accession — are key prerequisites for a coherent
economic and social development of the new EU as a whole,
in line with the Lisbon objectives. Efforts need to be made in
all areas of EU policy in order to remove, as quickly as possible,
the differences between the existing regions of the EU and the
new EU regions and assure a coherent internal market.

3.1.4.
The Committee plays its part by regularly organising
hearings in present and future Member States in order to find
out how the relevant actors cope with developments in the
internal market, which obstacles they encounter and which
measures would help develop the internal market and over-
come the obstacles. It has also developed the PRISM initiative
which collects data on relevant initiatives and thus provides
information.

3.2. Monitoring

The Commission communication acknowledges that no matter
how good the strategy statement may be, it will fail unless
systematically monitored and evaluated. The EESC firmly
supports that.

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4. Conclusions

4.1. While welcoming the Commission communication
and supporting its recommendations, the EESC believes that
there are some significant omissions. In particular, there is
insufficient attention given to job creation. Though the
Commission communication expresses the belief in general
terms that the internal market will create jobs, it does not
provide any evidence.

Furthermore,

the Commission communication vir-
4.2.
tually overlooks consumers and the advantages to which they
have a right through the completion of the internal market.

4.3.
The Committee also points out that, on its own, the
setting-up of the internal market will not resolve the problems
on the European labour market but that additional pro-active
measures will also be required on this front.

The EESC believes that

labour markets are under
4.4.
constant development, jobs disappear in the course of econ-
omic restructuring, changes in the international division of
labour, technological development, etc. New jobs will be
created which require different skills. New businesses may
require different economics and other conditions (infrastruc-
ture, etc.) How to manage change is an important challenge to
the European Commission and especially to the social partners.

Brussels, 16 July 2003.

4.5.
The internal market brings with it challenges for the
social systems and their future development. Any discussion
about the future shape of the social systems must not, however,
focus solely on the internal market and budget requirements
but must look at the systems as a whole and take account of
their objectives.

4.6.
Slow progress with the Lisbon process is beginning to
cause concern. The Commission communication does not
acknowledge that concern.

4.7.
An international threat to the internal market strategy
may arise from deflation spreading to the EU from the USA
and Japan. The EESC is concerned about this, but there is no
reference to it in the Commission communication.

4.8.
Additional welfare benefits within the EU will not be
achieved by market liberalisation and enhanced competition
alone. A supporting macro-economic policy geared towards
growth and employment will do much to help complete the
European internal market.

4.9.
Lastly, the EESC finds it strange that the strategic
priorities for the internal market do not include steps to gain
citizens’ confidence (consumers and workers) and to ensure
that they benefit from the advantages associated with com-
pletion of the internal market.

The President

of the European Economic and Social Committee

Roger BRIESCH

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APPENDIX

to the opinion of the European Economic and Social Committee

The following amendment was rejected but obtained at least a quarter of the votes cast:

Point 2.6.4

Amend as follows:

‘The EESC looks forward to seeing the Commission proposals on corporate governance and urges the Commission
and the Council to check whether the International Accounting Standards and the International Standards on
Auditing are compatible with the European economic model and to make any adjustments as may be necessary,
taking account of the interests of all stakeholders.’

Result of the vote

For: 44, against: 44, abstentions: 12.

Opinion of the European Economic and Social Committee on the ‘Role of civil society in
European development policy’

(2003/C 234/16)

On 17 January 2002 the European Economic and Social Committee, acting under the second paragraph
of Rule 29 of its Rules of Procedure, decided to draw up an opinion on the ‘Role of civil society in
European development policy’.

The Section for External Relations, which was responsible for preparing the Committee’s work on the
subject, adopted its opinion on 3 June 2003. The rapporteur was Ms Florio.

At its 401nd Plenary Session of 16 and 17 July 2003 (meeting of 16 July), the European Economic and
Social Committee adopted the following opinion by 63 votes in favour and 4 abstentions.

1.

Introduction

matched by a growing recognition on the part of international
organisations that non-state actors (NSAs) are key actors in
framing programmes and development policies.

This opinion is intended as a contribution to the debate
1.1.
on the role of civil society in international relations and, more
particularly,
in the European Union’s development policy,
which has grown in importance over recent years. This has
been brought into particularly sharp focus by recent world
events such as the war in Iraq, and by the fundamental role the
European Union should play in the region in reconstruction
and establishing a genuinely democratic society.

1.2.
Against this backdrop, civil society’s increasing interest
in development policy and the international scene has been

1.3.
An awareness of growing economic interdependence
and the recognition that international balances are constructed
on the glaringly obvious North-South divide have prompted
wide sectors of civil society — the NSAs — to take a closer
interest in all development-related issues, and to seek to take a
more active part in the debate on social, economic and cultural
inequality. This process of engagement, which began back in