Friday, March 02, 2007

The future of the single market
By Katinka Barysch

The EU puts out a lot of reports, studies, evaluations and announcements. So far this month, the Commission has released around 80 major documents. Many of them are too specialised, too long or simply too dull to attract wider interest.

One recent publication stands out. On February 21st, the economics team of the Commission’s ‘bureau of European policy advisors’ – now headed by Roger Liddle, previously an advisor to Tony Blair and Peter Mandelson – released a report on the future of the single market. Granted, advisors can speak more freely than bureaucrats. But the way this report is written shows how the EU should communicate.

* Accessible. The subject is complex, yet the document is easily understandable for non-economists. The authors steer clear of euro-speak and jargon. Moreover, while many EU documents are abstract, this one is full of examples. No waffle about “reaping the full benefits of the single market”. Instead, a list of examples: the single market allows you to go to hospital in other EU countries; it gives you the right to sue any company that sells faulty products; it has brought you low-cost air travel; it has reduced your mobile phone bill.

* Focus. This paper is about the single market. Period. It is not about social policy, the environment or the future of Europe. Absent is the EU’s unfortunate tendency to placate interest groups by lumping together too many issues. What the report does do is to look at how the context of European economic integration has changed, through globalisation, eastward enlargement and technological change.

* Realism. People tend to be cynical about official information and analysis. Achievements are overplayed, failures omitted. Liddle and his colleagues are honest. “The single market brought real benefits”, they say “but it has not led to a transformation of European economic performance.” Price convergence has stagnated, so has the share of intra-EU trade in total exports and imports. Only if problems are clearly identified can the search for solutions begin in earnest.

* Critical analysis. The intentions of the EU are usually good, but this does not guarantee optimal results. Yet the EU is notoriously bad at abolishing defunct laws and institutions. This report shows that single market legislation often embodies the interests of big companies. It risks becoming an impediment to innovation and competition from smaller rivals.

* Fresh thinking. Politicians and EU officials regularly call for the “completion of the single market”. Wrong, say Liddle and his colleagues. “The single market is an on-going process rather than an event.” It can never be “complete”. The initial rationale was to tear down trade and regulatory barriers to allow European manufacturing companies to reap economies of scale in a larger market. But future EU growth will not come from mass manufacturing. It will be driven by services, high-tech companies and start-ups. For them, removing remaining barriers or harmonising regulations won’t do. Instead, the single market needs to encourage innovation and research, facilitate venture capital and ensure competition.

* To-do list. Here, the bureau of European policy advisors does exactly what its name implies: it advises on policy. If the single market is to deliver benefits in the future, the EU and its governments need to: 1) prioritise and give up the notion that all barriers for doing business are equally important; 2) rely less on detailed directives and more on framework regulations that work in a fast-changing environment and take account of the administrative weaknesses of many new member-states; 3) adopt a sectoral approach that differentiates between the needs of say, the energy sector and healthcare; and 4) properly co-ordinate single market initiatives with policies on competition, trade, environment and so on.

The nature of this report should remind the entire Commission of one of its key roles: to provide independent, fresh and forward-looking analysis and policy ideas. But the European Commission’s own take on the future of the single market – published the same day as the bureau’s report – succumbs to some of the old failings of EU communication. Maybe it should be the advisors’ report rather than the Commission document that goes to EU leaders at their forthcoming spring summit and that forms the basis of the EU’s comprehensive single market review that comes out in the autumn of 2007.

The two reports in the future of the single market can be found on

Katinka Barysch is chief economist at the Centre for European Reform.

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