Lecture 4

EUROPEAN SINGLE
MARKET
 Single market of the EU

 Single market = Common market = Internal market =

European market

Do you remember when it started?

3
1957 (25 March) - The Six (France, Germany, Italy and Benelux)
sign the Treaties of Rome:
European Community European Economic Community (EEC)
for Atomic Energy (Euratom)
(in force since 01.01.1958)
Your first lecture
-Common market (to be created in the next 12 years)
-Free movement of goods
-Free movement of workers
-Free movement of capital
-Free trade in services

-Common policies with a supranational body (common agricultural policy (Articles 38

to 47), common trade policy (Articles 110 to 116) and transport policy (Articles 74 to 84)

-Customs Union created (customs and quotas abolished, Common Customs Tariff for
third countries introduced)

-A European Parliamentary Assembly, a European Court of Justice, a European

Commission are hereby established

-The institutions of ECSC, EEA and EEC merge (1965)

 The role of the Treaty establishing the European
Economic Community (EEC) (1)
Your first lecture

 Fundamental because it forms the basis of the common market (Article 2 of EEC Treaty)

 Art. 3 of the EE treaty provides:

 Removal of customs duties and quantitative restrictions on imports and exports of goods
between Member States and measures having equivalent effect;
 Free movement of services, people and capital;
 Creation of a customs union with a common customs tariff for third countries;
 Common Commercial Policy;
 Common Agricultural Policy;
 A system ensuring that competition in the internal market is not distorted;

 The common market will be built gradually over a transitional period of twelve
years - until 1 January 1970 (Article 8 of the EEC Treaty).

 It includes four freedoms related to the free movement of goods, labor, services and
capital between the Member States
 Free movement of
goods
▪ To assist economic growth,
competitiveness, employment
and prosperity
▪ Legislation on the single market
for goods aims at ensuring that
products placed on the EU
market conform to high health,
safety and environmental
requirements
▪ Once a product is sold legally
in the EU, it should circulate
without barriers to trade, with a
minimum of administrative
burden
The Customs
Union of the EU
▪ From 1957, the European Commission
and EU Member States concentrated
their efforts on bringing tariffs (customs
duties) down within the newly formed
European Economic Community, which
led to the establishment of the customs
union in 1968
▪ Intra-EU tariffs and quantitative
restrictions to imports (quotas)
disappeared, and the EEC had a
common external tariff for trading with
the rest of the world.
The elimination of customs duties and
quantitative restrictions (quotas) between
Member States was accomplished by
1 July 1968.
Regional economic integration
 Free movement of goods

 Articles 26 and 28-37 of the TFEU

 Elimination of customs duties and

quantitative restrictions to trade,
and the prohibition of measures
having an equivalent effect

 Research indicates that the

benefits arising from the principle
of free movement of goods and
related legislation amount to 386
billion euros annually.
 How was it made possible?

1. The principle of mutual recognition

2. Elimination of physical and technical barriers to
trade
3. Promotion of standardisation
 1. The principle of mutual recognition
The Cassis de Dijon Case (1)

 Rewe was a large German importer and retailer

which wanted to sell a type of crème de cassis, a
fruit liqueur, known as Cassis de Dijon. This was
produced in France and contained between 15-20
per cent alcohol by volume (ABV). Germany,
however, had a law specifying that products sold
as fruit liqueurs be over 25 per cent ABV

 The Bundesmonopolverwaltung für

Branntwein (Federal Monopoly Administration
for Spirits), part of the Federal Ministry of
Finance, informed Rewe that it would not be able
to market Cassis in Germany as a liqueur

 Rewe challenged the decision as a breach

of European law

 The European Court of Justice held that the

German legislation represented a measure
having an effect equivalent to a quantitative
restriction on imports and was thus in breach of
article 34 of the Treaty
 1. The principle of mutual recognition
The Cassis de Dijon Case (2)

 EU jurisprudence, Case 120/78

 It laid down the principle that any product legally

manufactured and marketed in a Member State in
accordance with its fair and traditional rules, and
with the manufacturing processes of that country,
must be allowed onto the market of any other
Member State

 Defining the principle of mutual recognition, operating

in the absence of harmonisation. Even in the absence of
European harmonisation measures (secondary EU
legislation), Member States are obliged to allow goods that are
legally produced and marketed in other Member States to
circulate and to be placed on their markets.
2. Elimination of physical and technical barriers
to trade

 The creation of the single market necessitated the

elimination of all remaining obstacles to free
movement of goods

 The Commission White Paper (1985) set out the

physical and technical obstacles to be removed and
the measures to be taken by the Community to this
end. Most of these measures have now been adopted.
However, the single market still requires
substantial reforms if it is to meet the
challenges of technological progress.
 3. Harmonisation of national legislation

 The adoption of harmonisation laws has made it possible to remove

obstacles and to establish common rules aimed at guaranteeing both free
circulation of goods and products and it is good also for the the protection
of the environment and of consumers, or competition.

 The White Paper (1985) aimed at avoiding detailed harmonisation. The

guiding principle is the mutual recognition of national rules.
Harmonisation must be restricted to essential requirements, and is
justified when national rules cannot be considered equivalent and create
restrictions.

 Directives adopted under this new approach have the dual purpose of
ensuring free movement of goods through the technical harmonisation
of entire sectors, and guaranteeing a high level of consumer protection
(e.g. toys, building materials, machines, gas appliances and
telecommunications terminal equipment).
 CE Mark

How to obtain CE marking?

Do you need an independent

assessment?
Certification mark that Check the rules by product category.
indicates conformity with
health, safety, and
How do you affix the CE marking?
environmental protection
standards for products
sold within the European
Economic Area.

The CE marking is also See:

found on products sold https://europa.eu/youreurope/business/pro
outside the EEA that have duct-requirements/labels-markings/ce-
been manufactured to marking/index_en.htm
EEA standards.
15
 Exceptions to the free movement of goods

 Article 36 TFEU allows Member States to take measures

having an effect equivalent to quantitative restrictions
when these are justified by general, non-economic
considerations (e.g. public morality, public policy or
public security)
 Such exceptions to the general principle must be
interpreted strictly, and national measures cannot
constitute a means of arbitrary discrimination or
disguised restriction on trade between Member States
 Member States have to notify national exemption
measures to the European Commission.
 Single market for services

 Services are crucial to the Single

Market

 The services account for around 70%

of all economic activity in the EU and
a similar proportion of its
employment

 Legal basis - Articles 26 (internal

market), 49 to 55 (establishment)
and 56 to 62 (services) of the Treaty
on the TFEU

 Recent research indicates that the

value of the benefits generated by the
free movement of services, including
professional qualifications and retail,
amounts to EUR 236 billion annually
 Freedom of establishment and freedom to
provide services

 The freedom of establishment and the freedom to

provide services guarantee mobility of businesses and
professionals within the EU

 EU companies have the freedom to establish themselves

in other EU countries and the freedom to provide
services in countries other than the one in which they are
established
 Objectives

 Self-employed persons and professionals or legal persons within the

meaning of Article 54 TFEU who are legally operating in one Member State
may:

 carry out an economic activity in a stable and continuous way in

another Member State (freedom of establishment: Article 49 TFEU);
or
 offer and provide their services in other Member States on a
temporary basis while remaining in their country of origin
(freedom to provide services: Article 56 TFEU).

 This implies eliminating discrimination on the grounds of nationality and,

if these freedoms are to be used effectively, the adoption of measures to
make it easier to exercise them, including the harmonisation of national
access rules or their mutual recognition.
 Achievements
 The right of establishment
includes the right to take
up and pursue activities as
a self-employed person
and to set up and manage
undertakings, for a
permanent activity of a stable
and continuous nature, under
the same conditions as those
laid down by the law of the
Member State concerned
regarding establishment for its
own nationals.
Freedom to provide services
applies to all of those services
normally provided for
remuneration. The person
providing a ‘service’ may, in order
to do so, temporarily pursue her or
his activity in the Member State
where the service is provided,
under the same conditions as
are imposed by that Member State
on its own nationals.
 The exceptions

 Аctivities connected with the exercise of official

authority are excluded from freedom of
establishment and provision of services (Article 51
TFEU)

 Exceptions enable Member States to exclude the

production of or trade in war material
(Article 346(1)(b) TFEU) and to retain rules for non-
nationals in respect of public policy, public
security or public health (Article 52(1)).
 The Services Directive (Directive 2006/123/EC)

 The objective of the services directive is to realize the

full potential of services markets in Europe by
removing legal and administrative barriers to trade

 The aim is to create an open single market in services within

the EU while at the same time ensuring the quality of services
provided to consumers

 The directive was adopted in 2006 and implemented

by all EU countries in 2009

 The directive contributes to administrative and regulatory

simplification and modernisation.
 Benefits for businesses and consumers

Businesses Customers benefit from:

benefit from:
• strengthened rights of consumers and
 easier businesses receiving services
• higher quality of services
establishment • enhanced information and transparency
 easier provision on service providers

of cross-border
services
 simplified Services directive in practice

procedures and Points of Single Contact (PSC) are one-

formalities stop-shops for service providers to get
information and complete administrative
formalities online in all EU countries
 Points of Single Contact (PSCs)

 Since December 2009 it is a legal requirement to have a PSC in

every EU country

 The aim of the PSCs is to help the European service sector reap the
benefits of the Single Market by making national information on
rules and formalities, and national procedures available online

 PSCs provide national information to help you deal with a wide

range of practical issues:
➢ licences, notifications or permits needed to start a business
➢ requirements for offering services on a temporary basis
➢ recognition of professional qualifications and regulated professions
➢ labour and social laws
➢ rules for public procurement
25
 Free movement of workers

 Includes the rights of movement and residence for workers, the rights of
entry and residence for family members, and the right to work in another
Member State and be treated on an equal footing with nationals of that
Member State. Restrictions apply for the public service

 One of the founding principles of the EU since its inception (Art. 45, TFEU)

 It entails the abolition of any discrimination based on nationality as regards

employment, remuneration and other conditions of work and employment.
Moreover, this article stipulates that an EU worker has the right to accept a
job offer made, to move freely within the country, to stay for the purpose of
employment and to stay on afterwards under certain conditions.
 Mobility in the EU

 At the end of 2017 (Eurostat data), 3.8% of EU

citizens (17 million people along with 1.4 million
commuters) resided or worked in Member States
other than those of which they are citizens

 Mobility is highest among tertiary graduates

 Eastern and Southern Europe are facing an outflow

of a highly educated workforce (‘brain drain’) on
account of growing competition for talent and wage
differentials
 Directive 2004/38/EC
< 3 months
every EU citizen has the
right to reside in the
territory of another EU
country with no conditions
or formalities other than the
requirement to hold a valid
identity card or passport.
> 3 months /certain conditions/:
- the host Member State may
require a citizen to register his or
her presence
- for those who are not workers or
self-employed, the right of
residence depends on their having
sufficient resources not to become
a burden on the host Member
State’s social assistance system,
and on them having sickness
insurance
- Students and those completing
vocational training also have the
right of residence, as do
(involuntarily) unemployed persons
who have registered as
unemployed.
 Directive 2004/38/EC

EU citizens
acquire the The directive has modernised family
right of reunification by extending the definition of
permanent ‘family member’ (formerly limited to
residence in spouse, descendants aged under 21 or
dependent children, and dependent
the host ascendants) to include registered partners
Member State if the host Member State’s legislation
considers a registered partnership to be
after a period of the equivalent of a marriage. Irrespective
five years of of their nationality, these family members
uninterrupted have the right to reside in the same country
as the worker.
legal residence.
 Employment (Regulation 492/2011)
 Any national of a Member State has the right to seek employment in another Member State
in conformity with the relevant regulations applicable to national workers.

 Member States are not allowed to apply any discriminatory practices, such as
limiting job offers to nationals or requiring language skills going beyond what is reasonable
and necessary for the job in question.

 A mobile worker is entitled to receive the same assistance from the national
employment office as nationals of the host Member State, and also has the right to stay in the
host country for a period long enough to look for work, apply for a job and be recruited.

 Nationals of one Member State working in another have the same social and tax benefits
and access to housing as national workers. Moreover, they are entitled to equal treatment in
respect of the exercise of trade union rights.

 Anti-discrimination rules apply also to the children of a mobile worker. Member States
should encourage them to attend education to facilitate their integration.

 Posted workers are protected by the Posting of Workers Directive (Directive EU 2018/957
amending Directive 96/71 EC), which provides for the same rules on remuneration as
local workers in the host country and regulates the period after which the labour law of
the host country applies
 The mutual recognition of diplomas

 Articles 26 and 53 of the TFEU

 For self-employed persons and professionals to establish

themselves in another Member State or offer their services there on
a temporary basis, diplomas, certificates and other proof of
professional qualification as issued in the different Member States
need to be mutually recognised, and any national provisions
governing access to different professions need to be coordinated
and harmonized

 Article 53(1) TFEU provides that the mutual recognition of the

diplomas and other qualifications required in each Member State
for access to regulated professions can be used to facilitate freedom
of establishment and the provision of services
 1. The sector-specific approach (by profession)
Mutual recognition
after harmonisation
Made possible because professional
requirements, and especially training
courses, did not vary much from one
country to another (unlike in other
professions). It was not difficult to achieve
harmonisation in a number of professions:
- Doctors, nurses, veterinary surgeons,
midwives and self-employed commercial
agents
- Professional qualifications in the
transport sector, insurance
intermediaries and statutory auditors
- Automatic recognition for seven
professions, namely architects,
dentists, doctors, nurses, midwives,
pharmacists and veterinary surgeons
Mutual recognition
without harmonisation
Directive 98/5/EC of 16 February 1998 was
a significant step forward, stating that
lawyers holding a diploma from any
Member State may establish themselves in
another Member State to pursue their
profession, with the proviso that the host
country can require them to be assisted by a
local lawyer when representing and
defending their clients in court. After three
years operating on this basis, lawyers
acquire the right (if they so wish) to fully
exercise their profession, after passing an
aptitude test set by the host country and
without having to take a qualifying
examination. Other directives have applied
the same principle to other professions,
such as road haulage operators,
insurance agents and brokers,
hairdressers and architects.
 2. The general approach

 The drafting of legislation for mutual recognition sector by sector is a long

and tedious procedure

 That’s why, over time, ‘Mutual recognition’ became almost automatic,

under the established rules, for all the regulated professions concerned,
without any need for sector-specific secondary legislation

 The host Member State may not refuse applicants access to the
occupation in question if they possess the qualifications
required in their country of origin

 However, if the training they received was of a shorter duration than in the
host country, it may demand a certain length of professional experience
and, if the training differs substantially, it may require an adaptation
period or aptitude test at the discretion of the applicant, unless the
occupation requires knowledge of national law.
 Free movement of capital
 The most recent but but the broadest freedom of movement
(because it includes third countries, outside the EU)

 Since the Maastricht Treaty (1994), restrictions on capital

movements and payments were removed, both between Member
States and with third countries

 Articles 63 to 66 of the TFEU

 All restrictions on capital movements between Member

States as well as between Member States and third
countries should be removed, with exceptions in certain
circumstances

 The free movement of capital contributes to economic growth by

enabling capital to be invested efficiently and promotes
the use of the euro as an international currency, thus
contributing to the EU’s role as a global player
 Evolution

 The Treaty of Rome (1957) required the restrictions to be removed only to the extent
necessary for the functioning of the common market. The ‘First Capital
Directive’ from 1960, ended restrictions on certain types of commercial and private
capital movements, such as real-estate purchases, short- or medium-term lending for
commercial transactions, and purchases of securities traded on the stock exchange

 Amendments to the ‘First Capital Directive’ in 1985 and 1986 brought further
liberalisation in areas such as long-term lending for commercial transactions and
purchases of securities not dealt on the stock exchange

 Against the backdrop of completing the single market, setting up EMU, and the
envisaged introduction of the euro, capital movements were fully liberalised by a
Council Directive in 1988 which scrapped all remaining restrictions on capital
movements between Member States’ residents as of 1 July 1990.

 In 1994, the Maastricht Treaty introduced the free movement of capital as a Treaty
freedom

 Today, Article 63 TFEU prohibits all restrictions on the movement of capital

and payments between Member States, as well as between Member States
and third countries.
 What is free movement of capital?

 The aim of liberalisation is to enable integrated, open,

and efficient European financial markets.
 For European citizens, free movement of capital means
the ability to carry out many transactions, such as
 opening bank accounts abroad
 buying shares in non-domestic companies
 investing where the best return is
 purchasing real estate in another country
 For companies, it means being able to
 invest in, and own, other European companies
 raise money where it is cheapest
 Cross-border capital movements
include:

 foreign direct
investments (FDI)
 real estate investments or
purchases
 securities investments (e.g. in
shares, bonds, bills, unit
trusts)
 granting of loans and credit
 other operations with
financial institutions,
including personal capital
operations such as dowries,
legacies, endowments, etc.
 Restrictions

 The only justified restrictions on capital movements in

general, including movements within the EU, are laid down in
Article 65 TFEU

 These include:
➢ measures to prevent infringements of national law (namely for taxation
and prudential supervision of financial services);
➢ procedures for the declaration of capital movements for administrative
or statistical purposes;
➢ measures justified on the grounds of public policy or public security
The latter was invoked during the euro area crisis, when Cyprus (2013)
and Greece (2015) were forced to introduce capital controls in order to
prevent an uncontrollable outflow of capital. While Cyprus removed all of
the remaining restrictions in 2015, capital controls, albeit loosened,
remain in place in Greece.
 Further developments

 Despite the progress

achieved in liberalising
capital flows in the EU,
capital markets have
remained, to a large
extent, fragmented

 Building on the
Investment Plan for
Europe, the Commission
launched, in
September 2015, its
flagship
initiative: ‘Capital
Markets Union’. This
includes a number of
measures aimed at
creating a truly
integrated single market
for capital by 2019

 In addition, the
Commission and the
Member States are
working on eliminating
obstacles to cross-
border investment
which fall within
national competences
 The digital single market
 Articles 4(2)(a), 26, 27, 114 and 115 of the TFEU

 The digital single market boosts the economy and

improves quality of life through e-commerce and
e-government

 Market and government services are evolving from fixed

to mobile platforms and becoming increasingly
ubiquitous. These developments call for a European
regulatory framework to develop cloud computing and
borderless mobile data connectivity, while safeguarding
privacy, personal data and cybersecurity

 Europe 2020 strategy introduced the Digital Agenda

for Europe as one of 7 flagship initiatives, recognising
the key enabling role that the use of information and The digital single
communication technologies (ICT) will have to play if the
EU wants to succeed in its ambitions for 2020 market is essential for
removing national
 The digital single market has been recognised as a barriers to transactions
priority by the Commission in its Digital Single that take place online.
Market Strategy
 The digital single market-> benefits

 More e-commerce generates tangible benefits

for consumers, such as rapidly evolving new
products, lower prices, more choice and better
quality of goods and services, because of cross-
border trade and easier comparison of offers

 More e-government facilitates online

compliance, and access to jobs and business
opportunities for both citizens and businesses

The digital single market has the potential:

➢to improve access to information
➢to bring efficiency gains in terms of
reduced transaction costs,
dematerialised consumption and
reduced environmental footprint
➢to introduce improved business and
administrative models
 The digital single market ->Actions
In 2015, the Commission adopted the
Digital Single Market Strategy,
composed of three pillars:
(1) better access for consumers and businesses
to digital goods and services across Europe;
(2) creating the right conditions and a level
playing field for digital networks and
innovative services to flourish; To measure Europe’s
(3) maximising the growth potential of the progress towards a digital
digital economy.
economy and society, the
Commission created an
New legislative proposals aimed at achieving a digital single
online tool called ‘The
market, concerning: unjustified geo-blocking[11], cross-
border parcel delivery[12], cross-border portability of online
Digital Economy and
content services[13], a revision of the Consumer Protection Society Index’(DESI)
Cooperation Regulation[14], audiovisual media services[15],
contracts for online and other distance sales of goods[16],
and contracts for the supply of digital content[17]. The
Commission has also published communications explaining
future policy approaches, e.g. to online platforms[18].
 Completion of the Single market - key
element in the new EU strategic agenda
 EU leaders acknowledged the single market as a key
element in developing the economic base of the EU

 One of the four main priorities of the newly adopted strategic

agenda for 2019-2024

➢ deepening and strengthening the single market and its four freedoms
➢ designing an industrial policy fit for the future
➢ addressing the digital revolution
➢ ensuring fair and effective taxation

 The EU leaders stressed that the EU cannot afford to under-utilise

the potential of a market of half a billion people, particularly in
the area of services.

A new strategic agenda 2019-2024 (press release, 20/06/2019)

European Council, 20-21/06/2019
Thank you for your attention!