Brussels, 22/01/2004 (Agence Europe) - Too many European industries still operate in fragmented markets due to trade obstacles and differences in standards and regulations. Such is the conclusion reached by the first report of the European Commission on implementation of the Internal Market Strategy 2003-2006. The report, published on Wednesday with a view to the Spring European Council, is part of the Guidelines Package alongside the Broad Economic Policy Guidelines (BEPG) and the Employment Guidelines (EG) (see yesterday's EUROPE).
The Commission recalls that, since internal EU borders were abolished ten years ago, the internal market has boosted EU economic growth by at least 1.8%, adding nearly EUR 900 billion to the EU's collective prosperity and helping to create 2.5 million extra jobs. However, it considers, progress is urgently needed in consolidating this success. Some "economic indicators are flashing red". First, the growth of manufacturing trade inside the EU has begun to falter, which generally means less pressure on companies to improve their performance. This contributes to a second phenomenon, namely that prices across the EU are no longer converging. Thirdly, the EU invests more in the rest of the world than the other way round "a warning perhaps that it is more urgent than ever to reform the EU's general regulatory environment and kick-start its Internal Market once again". In this context, the Commission stresses that enlargement has the potential to stimulate the Internal Market over and above the benefits which removal of existing obstacles could deliver. Trade between current and future Member States has continued to increase rapidly since 1995 and the Commission considers that exports from future Member States could practically double. However, it foresees that existing and future Member States must cooperate closely and avoid actions likely to give rise to new obstacles which would cancel out the advantages so far. In addition to enlargement, the creation of the internal market can be given fresh impetus in other ways to be examined. These ways are:
Making cross-border trade with in the EU easier. The Commission stresses that the future framework directive on services, which reduces red tape, will encourage cross-border economic activity and foster competition, making prices fall for both consumers and business. On the subject of goods, it insists on the need to adopt the regulation aimed at improving the way mutual recognition works, which provides for goods authorised for sale in a Member State to be sold in all the other Member States without additional administrative formalities.
Financial services. The Commission calls for integral implementation of the action plan for financial services (36 measures out of 42 adopted) as any persistent obstacle in the given field of activity will have a contagious effect elsewhere. It mainly hopes that the directive on investment services will be adopted as soon as possible to allow companies to more easily raise funds and strengthen investor confidence. The Commission also recalls that it has launched an action plan on "modernising company law and enhancing corporate governance in the EU", an initiative which will help companies to operate efficiently in the Internal Market and boost confidence in capital markets following recent corporate scandals.
Network industries. The Commission announces that it will pursue the process of market opening in network industries (energy, transport, telecommunications and postal services) in respect of public service obligations, but considers that a last effort is needed with regards measures aimed at opening up rail services. It states, moreover, that it is currently conducting an analysis of the legislative provisions relating to water services (including treatment) as well as the application of EU competition and internal market rules in the sector. The aim is to assess whether there are advantages to be gained from more marked modernisation of the sector.
Public procurement. In order to intensify the deficient competition in public procurement, the Commission stresses that the main goal is to adopt the legislative package on the awarding of contracts.
Intellectual property. The Commission stresses that innovation and creativity are the props for a strong European economy, which would suffer from having no legal framework in this field. It goes on to invite the Council to make progress on the Community patent, the patentability of computer-implemented inventions and the fight against piracy and counterfeiting.
Taxation issues. On the subject of abolition of tax obstacles the Commission recalls that it has presented proposals amending the parent company/subsidiary directive and the directive on mergers, and considers that, to be able to move forward, Member States must work more pragmatically.