Opinion of the European Economic and Social Committee on The future of the Single Market — Going global
Date: 2008-03-12
Institutions: European Economic and Social Committee
Subjects: employment policy, financial market, globalisation, labour market, liberalisation of trade, single market

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III

(Preparatory Acts)

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

443rd PLENARY SESSION HELD ON 12 AND 13 MARCH 2008

Opinion of the European Economic and Social Committee on The future of the Single Market —
Going global

(2008/C 204/01)

On 27 September 2007, the European Economic and Social Committee, acting under Rule 29(2) of its
Rules of Procedure, decided to draw up an own-initiative opinion on:

The future of the Single Market — going global.

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 27 February 2008. The rapporteur was Mr Cassidy.

At its 443rd plenary session held on 12 and 13 March 2008 (meeting of 12 March ), the European
Economic and Social Committee adopted the following opinion by 39 votes to nine with 12 abstentions.

1. Executive summary of conclusions and recommendations

The Single Market Observatory has been set up by the EESC to monitor progress on completion of
1.1
the Single Market and over the years has produced a number of opinions responding to requests for Explora-
tory Opinions from other institutions, such as the Council, the Commission and the Parliament and also
from the EU Presidencies (1), the most recent being the response to the Commission's progress report on the
Review of the Single Market (2). Additionally the EESC has produced a number of ‘own-initiative’ opinions
over the years.

1.2
This own-initiative is timely as the European Council at its meeting on 18-19 October 2007 decided
to make the EU the pacesetter internationally in regulatory matters and in market opening. The EU can
shape globalisation if it connects its model for development combining sustainable growth, social justice
and concern for the environment. The Lisbon Strategy for Growth and Jobs is a better response to globalisa-
tion rather than a retreat in to protectionism.

Employers and trade unions agree that, when negotiated by the social partners,

1.3
create a win-win situation for companies and workers.

‘flexicurity’ (3) can
It therefore provides the right framework for

(1) OJ C 24 of 31.1.2006, rapporteur: Mr Retureau, at the request of the British Presidency.
(2) OJ C 93 of 27.4.2007, rapporteur: Mr Cassidy.
(3) Rapporteur: Mr Janson, OJ C 256 of 27.10.2007.

Interim Report of the Expert Group on Flexicurity 20.04.2007: ‘Flexicurity is a policy strategy to enhance, at the same time
and deliberately, the flexibility of labour markets, work organisations and labour relations on the one hand, and security —
employment security and social security — on the other. The key principles that underpin a flexicurity strategy are that
flexibility and security should not be seen as opposites, but can be made mutually supportive. Encouraging flexible labour
markets and ensuring high levels of security will only be effective if workers are given the means to adapt to change, to
enter into employment, to stay on the job market and to make progress in their working life. Therefore, the concept of flex-
icurity includes a strong emphasis on active labour market policies, and motivating lifelong learning and training — but
also on strong social security systems to provide income support and allow people to combine work with care. This should
also contribute to equal opportunities and gender equality.’

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modernising European labour markets, embracing labour law, effective life long learning systems and
preserved and enhanced social protection. In addition, an effective social dialogue (especially if conducted
through collective bargaining) will contribute to the smooth functioning of labour markets.

The EESC is aware of the Commission Communication on ‘The European interest: Succeeding in the

1.4
age of globalisation’ (4) which it submitted to the Lisbon informal European Council.

1.5
The success of the Single Market in so many internal EU activities has been taken for granted by the
majority of EU citizens. The Single Market is not a ‘fait accompli’ but has been described by Commissioner
McCreevy as ‘work in progress’ (5). Apart from the need to complete the Single Market the EU is now
required to face up to the challenge of globalisation and encourage the open market principles on which the
union is based, a world in which protectionism has no place and competition is genuine.

A part of the EU's global mission is to bring about harmonised standards with a free movement of
1.6
capital, goods, services and people. This means third countries wishing to do business in the EU will not be
allowed to circumvent the rules applied in the Internal Market whether concerning consumer protection,
technical standards, working conditions and respect of the environment.

1.7
An important part of the challenge of globalisation is the role of the World Trade Organisation, the
ILO and the increasingly interdependent world financial markets, an interdependence which has been under-
lined by the crisis on stock markets and other financial markets in the second half of 2007.

1.8
The European Single Market is not sufficient itself. The EU needs to trade and develop its relations
with the rest of the world. It also needs to remain competitive with benefit to workers, employers and all
citizens. The Lisbon strategy has been developed in order to achieve this and to enable the EU to become a
more competitive economy on the world scene. The EU itself needs to ensure that remaining internal
barriers are removed.

The object of this own-initiative opinion is to spur the EU into facing globalisation and to take the
1.9
opportunities arising from it. Europe's economic success has not been built on protectionism but on the
four freedoms on which the original European Economic Community was constructed. (The EU still needs
to abolish some of its own trade restrictions.)

1.10
It should also be wary of falling into the American trap of subsidising the production of biofuels.
Unless checked through the WTO these wasteful subsidies will inevitably lead to rising food prices and the
problem of hunger in the developing and underdeveloped parts of the world (6).

1.11
The EESC takes note of and urges the Commission and Member States to heed the recommenda-
tions of the social partners in their joint review and analysis of the key challenges facing the European
labour markets (7).

The EESC welcomes the Commission communication to the Lisbon Informal Council (8). In particu-
1.12
lar it supports the four strategies agreed then for both the Union and the Member States: R&D and innova-
tion: the right business environment, investment in people, and energy and climate change. In all four areas,
however, there is a need to deepen the reform agenda if the real potential for growth and jobs is to be met.

1.13
involved in the design and implementation of the ‘flexicurity’ policy measures at national level.

The EESC calls upon the Commission and the Council to ensure that social partners are closely

(4) COM(2007) 581 final of 3.10.2007.
(5) See the package on the Review of the Single Market adopted by the Commission in November 2007, COM(2007) 724

final.

(6) OJ C 44, 16.2.2008 (rapporteur Mr Iozia).
(7) Social partners: ETUC/CES, CEEP, UEAPME and BUSINESSEUROPE ‘Key challenges facing European labour markets: a joint

analysis of European social partners’, October 2007.

(8) See footnote 4.

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1.14
countries simply because the EU would like to be a standard bearer for advanced environmental practices.

EU firms and workers cannot be put at a disadvantage with those competing with them from third

1.15
tional negotiations on global warming; and that pressure is brought to bear on defaulting countries.

The solution is that a common EU voice needs to be raised insistently and consistently in interna-

2. Succeeding in the age of globalisation — the main elements

2.1
The Commission communication to the October meeting of Heads of State and Government follows
up the informal meeting at Hampton Court in October 2005 where the challenge posed by globalisation in
areas like innovation, energy, migration, education and demography were addressed. 2007 has seen an
agreement to put Europe in the forefront of global efforts to tackle climate change and to put in place a
European policy for secure, sustainable and competitive energy — to put Europe, in fact, on the threshold of
the 3rd industrial revolution.

Public awareness of globalisation and its benefits, as well as the resulting problems, have grown.
2.2
Welcomed by some, feared by others, it has challenged some of the post war assumptions about the world
economy (for example the dominance of the USA) and how governments could help their citizens to accept
change. ‘Globalisation’ is an opportunity as well as a challenge for the EU.

2.3
50 years of European integration have seen the economic prospects of Member States entwined as
never before, bringing unprecedented social progress. The next stage should aim to enable the EU to lead
developing trends in the global economy and bring about international standards based on EU values.

2.4 Monetary union and the success of the euro have been and will continue to be a catalyst to deeper
market integration and a reinforcement of the internal market. An environment characterised by low infla-
tion, low interest rates, cheap and transparent transactions and deeper financial integration is conducive to
cross border trade and investment in the EU, and helps European companies face global competition. Exter-
nally, the euro is providing shelter against current financial market turbulences and its strength alleviates
some of the effects of price hikes on global food and energy markets driven by strong demand, not least
from new emerging giants. However, the strength of the euro must reflect economic fundamentals. A rapid
and marked appreciation of the euro, encouraged by an excessively high ECB reference rate and combined
with monetary policies which are essentially similar to competitive devaluations in other parts of the world,
represents a threat to EU prosperity. Such appreciation is a serious handicap for European business faced by
costs in euros and revenue in dollars, resulting in relocation risks.

3. The external consideration of the Single Market

3.1 Trade liberalisation

The World Trade Organisation is the most important vehicle for delivering liberalisation of international
trade. A successful Doha Round has the potential to open markets for EU exports in over one hundred
countries around the world. The slow progress of the negotiations is highly disappointing. Bilateral trade
agreements have spread in addition to WTO agreements. Companies and workers have an urgent need for
new access to high growth markets in key trading partners. The EU's strategy to negotiate free trade agree-
ments with Korea, ASEAN and India is a positive step. These deals must be as broad and ambitious as
possible, covering goods (including non-tariff barriers), services,
intellectual property rights,
trade facilitation, competition policy, environmental and ILO standards. It is also worth considering a
SOLVIT model into these agreements.

investment,

3.2
In addition to straight free trade agreements the EESC can see other innovative ways of tackling
ongoing problems faced on the ground in a bilateral context by looking at the discussions in the Transat-
lantic Economic Council, set up after the April 30 EU-US summit. The first meeting of the Council on

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November 9 made good initial progress towards resolving problems for improved trade and investment
conditions in the EU's largest economic partner. The issues that are in the balance need not necessarily
interest other trading blocs, and hence the importance of such bilateral deals. (It is said that since April the
two sides have made substantial progress in removing barriers to trade and investment and in easing regula-
tory burdens.)

The issues and areas of agreement relate to:

— Acceptable accounting standards in the US — GAAP — where EU financial statements prepared in
accordance with International Financial reporting Standards have now been accepted for EU companies
listed on US stock exchanges.

— Enhancing of security and facilitation in trade — a road map for reaching mutual recognition in 2009
of EU and US trade partnership programmes will be reached through key performance-based stages.

— Easing of burdens for introducing new drugs for rare diseases by agreement on a common form to

apply for orphan drug designations.

— EU action on a legislative proposal allowing access to information by patients on legal pharmaceuticals.

— The Commission has proposed that the EU will continue to allow importation of products labelled with

both imperial US and metric measurements to reduce costs for transatlantic trade.

— By the next meeting of the Council, the US Occupational Safety and Health Administration (OSHA) will
confer with EU Commission counterparts on progress made to facilitate trade in electrical products with
respect to conformity assessment procedures relating to safety and identify areas on which progress can
be made next year.

— The US Federal Communications Commission (FCC) will review products subject to its mandatory third-
party testing in order to allow suppliers' declarations of conformity for products with a good record of
compliance with relevant standards.

— There is a financial markets Regulatory Dialogue that is considering how and in which areas to establish
mutual recognition in the field of securities and identification of other approaches to facilitate cross-
border trade in financial services. The work has only just started and US — EU summits will work with
stakeholders to identify other priorities.

In addition, the European Union should also deepen and strengthen its economic cooperation with
3.3
neighbouring countries such as Ukraine and with Russia. Russia's WTO Accession, the EU-Russia Common
Economic Space and the new EU-Russia framework treaty are important milestones on the road to a truly
strategic economic partnership. This strengthened cooperation should prepare the terrain for future negotia-
tions on a Common Economic Area that would promote the free movement of goods and services, capital
and people, knowledge and technology.

3.3.1
Since the broad issues of a strategic economic partnership can only be partially addressed by WTO
accession, the EU and Russia should build their future economic relations where possible on WTO+ struc-
tures to create a common economic area for Greater Europe. This requires strong commitment from the EU
and Russia to address a much broader and deeper range of issues than found in traditional free trade agree-
ments.

3.3.2
The EU-Russia agreement should include inter alia common provisions for the national treatment
of cross-border investments, elimination of customs duties, dismantling of non-tariff barriers, regulatory
convergence, mutual recognition of standards and conformity assessment, trade facilitation and customs,
cooperation on competition, services liberalisation, public procurement, sanitary and physo-sanitary regula-
tions, intellectual property rights protection, dispute settlement and the use of international accounting stan-
dards. Examples of issues covered by such a broad agreement can be found, for instance, in the European
Economic Area Agreements.

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3.4 R&D and Innovation

The successful functioning of the Single Market is also a prerequisite to boosting Europe's innovative capa-
city. A true Single Market provides most leverage and an opening for innovative goods, products and
services. Co-ordination is required at European level of efforts on R&D between ‘clusters’ of SME and large
firms, Research Institutes, Universities and the new European Institute of Innovation and Technology. This
will reinforce the overall strength of European industry in achieving higher levels of technology that are
incorporated in their products in the common goal of keeping investment in the EU from relocating and
rendering industry more competitive on higher value-added products and services in the global sphere.

3.5
Globalisation has stepped up the pace of change — for technology, for ideas, for the way we work
and live our lives. The EESC has consistently supported these aims and believes that if Europe can unlock its
potential for innovation and creativity it can shape the direction of change in the world with a distinctive
emphasis on European values and cultural diversity.

3.6 Intellectual Property Safeguards

Europe's efforts in the innovation field have to be supported by appropriate conditions to safeguard the
resultant intellectual property that requires substantial financial and human investment. Amongst other
initiatives, it is desirable, and indeed overdue, for the EU to have a single and unitary protection of the Com-
munity Patent (9). Success in this field translates into market advantages for EU products in the global
marketplace.

In addition, ensuring strong enforcement of intellectual property rights and effectively combating counter-
feiting and piracy is key. The completion of the legal framework at EU level remains an essential condition.
Increased international cooperation is also necessary to address the problem in a global context. The bilateral
IP dialogues conducted by the European Commission with China, Russia and other regions are a useful
instrument to address the problem but they need to produce concrete results. Also, the new proposed Anti-
Counterfeiting Trade Agreement is a positive step in the right direction.

3.7 Working conditions

The least that the EU can do to help European industry to compete fairly in the global field is to ensure that
other countries respect minimum working conditions set by the ILO and other international conventions
concerning individual rights, freedom of association, the right to organise and to bargain collectively,
equality, and the abolition of child and forced labour.

3.8 Market Surveillance of Imported Products

Recent reports of sub-standard imported products that are harmful to health have accentuated the absence
of effective market surveillance in EU. This is another aspect of how unfair terms of trade are further
skewing competitiveness levels for EU firms. The strengthening of market surveillance by Member States
should ensure that quality standards claimed by overseas manufacturers are verified to strike a fair balance
with EU producers and to safeguard EU consumers against sub-standard and unsafe products.

3.9 Security of Energy Supplies — a common EU external energy policy

Recent happenings in the energy field have made it necessary for EU countries to close ranks and hammer
out a strategic energy policy supported by bilateral agreements between the EU and other countries that
need to be negotiated for industry to be able to plan its future investments within the EU. Such a policy will
living for EU consumers. EU Member States will need to develop
also help safeguard the standard of

(9) For further information on what DG Enterprise and Industry is doing on Keeping better guard on intellectual property, see

http://ec.europa.eu/enterprise/library/ee_online/art34_en.htm.

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alternative energy supplies such as renewables or nuclear (10) energy and reduce their reliance on Russia and
the Middle East for the supply of gas and oil (11). The EESC calls upon the Commission to ensure that its
recently published Energy and Climate package (12) ensures predictability, avoids negative economic impacts
particularly on the competitiveness of EU energy-intensive industries, encourages development of European
lead markets in this area and enhances eco-innovation.

3.10 Environment Issues

EU firms and workers cannot be put at a disadvantage with those competing with them from third countries
simply because the EU would like to be a standard bearer for advanced environmental practices. The strategy
whereby the EU outpaces other countries in achieving higher environmental standards does not make
economic sense for three reasons:

1. Global warming cannot be reversed by the EU on its own and the final effect of EU measures will

certainly be neutralised if other countries do not take steps to control use of energy and emissions.

2. The EU should avoid creating an imbalance in competitiveness for EU producers of goods who would
have to increase their operating costs by paying higher environmental taxes, thereby rendering themselves
less competitive on the global stage. Moreover, this would be paving the way for de-location of invest-
ments that could be of strategic importance to the EU Single Market.

3. The EESC is not convinced by the argument that higher environmental standards trigger new demands
for more research into environmentally-friendly products. There is bound to be a huge time-lag before
such products are researched and brought to market. In the meantime the other EU producers of goods
that are energy intensive could be driven off the market by unfair competition from producers in coun-
tries that are not so enthusiastic in taking steps to control their emissions.

3.10.1
The solution is that a common EU voice needs to be raised insistently and consistently in interna-
tional negotiations on global warming; and that pressure is brought to bear on defaulting countries. If the
EU decides to go ahead on its own with raising certain higher environmental standards then it should
consider imposing WTO compliant border measures on products that originate from countries that are
known to be grave sinners against the environment, so that European producers would not operate at a
competitive disadvantage.

An open global trading system is in the interests of the EU. Once the EU needed to protect its citi-
3.10.2
zens, its interests and its values. Today protectionism cannot be the solution. As the world's leading trader
and investor, our openness allows lower cost inputs for industry, lower prices for consumers, a competitive
stimulus for business and new investment. At the same time, it is important for the EU to use its influence
in international negotiations to seek openness from others: the political case for openness can only be
sustained if others reciprocate in a positive manner.

3.10.3
The Commission needs to ensure that third countries offer proportionate levels of openness to EU
exporters and investors and to have ground rules which do not undermine our capacity to protect our inter-
ests and to safeguard our high health, safety, social, environmental and consumer protection.

4. Greater employability and investment in people: creating more and better jobs

Globalisation and technological change risk increasing inequality, opening up the gap between the
4.1
skilled and the unskilled and between rich and poor nations. The best solution is to help each individual
and nation to adapt by improving the quality and the availability of education and training for all ages.

(10) Some countries have declared themselves to be against any form of nuclear energy and do not allow the construction of

nuclear plants on their territory. However, they import vast amounts of nuclear-generated electricity, e.g. Italy.

(11) OJ C 318 of 23.12.2006, rapporteur: Ms Sirkeinen.
(12) The Commission's Energy and Climate Action was issued on 23 January 2008. See: http://ec.europa.eu/energy/climate_ac-

tions/index_en.htm.

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4.2
The EESC and the social partners have commented upon how ‘flexicurity’ should be shaped in order
to help people to manage employment transitions more successfully in times of accelerating economic
change.

The adoption by the 5 December Employment and Social Affairs Council (13) of a common set of
4.3
principles on flexicurity paved the way for integration by Member States of flexicurity in their National
Reform Programmes and subsequent implementation in close cooperation with national social partners.

The EESC would like to see more attention given to active policies to encourage inclusiveness and
4.4
provide equal opportunities for groups encountering discrimination in the work market — over 50's,
women, ethnic minorities and under qualified school leavers.

5. Instability in the world financial market

5.1
The EU is currently experiencing the effects of a global crisis on stock markets and other financial
markets. Monetary union and the prompt reaction of the ECB to the turmoil have played a positive role.
First of all, by injecting large amounts of liquidity on money markets the ECB has contributed to lessening a
crisis of confidence in the banking sector, reducing the risk of significant tightening of credit conditions for
companies and households. Secondly the absence of currency risks and low country specific risk premia
imply that the more fragile EU economies have been able to face financial market turbulences relatively
unaffected.

5.2
The global financial market turmoil and a weakening of the US dollar is affecting Europe, including
through a significant appreciation of the euro due to the ECB maintaining its reference rate at an excessively
high level and monetary policies which are essentially similar to competitive devaluations in other parts of
the world, which will bear damaging consequences for the EU economy and its medium term prospects.

5.3
Recent events in world financial markets show a need to strengthen prudential rules, improve co-
ordination and communication between monitoring authorities and central banks and enhance transparency
and reporting.

Brussels, 12 March 2008.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

(13) Council press release 16139/07, link: http://register.consilium.europa.eu/pdf/en/07/st16/st16139.en07.pdf.

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APPENDIX

to the opinion of the European Economic and Social Committee

The following amendments, which received more than a quarter of the votes cast, were voted together and rejected in the
debate:

1. Point 2.4

Amend the penultimate sentence as follows:

‘(…) A rapid and marked appreciation of the euro, encouraged by an excessively high ECB reference rate and
combined with monetary policies which are essentially similar to competitive devaluations in other parts of the
world, represents a threat to EU prosperity. (…)’

Reason

Such open and harsh criticism of ECB policy, inserted as if it were a ‘precision’, cannot be made until the EESC has
endorsed a specific opinion on that topic. Rates are the subject of lively debate and there are differing views on the
matter, all of them perfectly respectable. It must be remembered that the ECB uses rates to fulfil a task assigned it by the
Treaty, namely to protect against inflation.

2. Point 5.2

Amend as follows:

‘The global financial market turmoil and a weakening of the US dollar is affecting Europe, including through a signifi-
cant appreciation of the euro due to the ECB maintaining its reference rate at an excessively high level and monetary
policies which are essentially similar to competitive devaluations in other parts of the world, which will bear dama-
ging consequences for the EU economy and its medium term prospects’.

Reason

Same as for the amendment to point 2.4, indeed more strongly: Point 2.4 states that the appreciation of the euro has
been ‘encouraged’ by ECB policy, while 5.2 actually says that it is ‘caused’ by it. Such a harsh assessment by the EESC is
unacceptable, and is also inappropriate from a procedural viewpoint.

Outcast

Votes in favour: 22 Votes against: 29 Abstentions: 8