Guide answers to Questions for study and review Chapter 6 From the Single Market to the ‘New Europe’



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Guide answers to Questions for study and review

Chapter 6

From the Single Market to the ‘New Europe’



1. Describe the main barriers causing fragmentation of the European market.
Guide answer

Tariffs had been removed so fragmentation was caused by non-tariff barriers, the most important of which were:



  • frontier controls;

  • differences in technical specifications and standards;

  • restrictions on competition for public purchases;

  • restrictions on providing certain services (in particular financial and transport services) in other EC countries, and

  • differences in national tax systems.


2. What were the expected advantages of the Single Market Programme?
Guide answer

This could be used as a research question using the Cecchini Report or Emerson.

Cecchini, P. (1988) The European Challenge: The benefits of a Single Market, Wildwood House, Aldershot.

Emerson, M. et al. (1989). The Economics of 1992: The EC Commission's Assessment of the Economic Effects of Completing the Single Market, Oxford University Press, Oxford.


See also:

European Commission (2007) A Single Market for 21st Century Europe, COM(2007)724, www.ec.europa.eu/internal_market.

Essentially the Single Market was expected to increase the competitiveness of Community industry by reducing prices and costs. A good reply to this question would present and explain Figure 6.1 (which is taken from Emerson).


3. Indicate the main steps in introducing the SEM Programme.
Guide answer

In March 1985 the new President of the Commission, Jacques Delors, presented his programme for the Single Market to the European Parliament.

Later that year the Cockfield White Paper, ‘Completing the Internal Market’ was presented at the European Council in Milan. This called for the elimination of barriers between EC countries by the end of 1992 and set out 282 measures necessary to achieve this aim. The Milan Summit also had to decide on the intergovernmental conferences to prepare the necessary revision to the existing Treaties.


In 1987 the Single European Act came into effect. This sets out the formal procedure necessary to implement the 1993 programme.


4. What was the significance of the Single European Act in the integration process?

Guide answer


The Single European Act (SEA) represented the first major revision to the Treaties, and launched a new phase in the integration process, spilling over into renewed efforts in political union, institutional reform, economic and monetary union, and reinforced EC social, regional and competition policies. The answer should describe each of these consequences.


5. Describe, with examples, the areas where implementation of the SEM Programme has been particularly slow.
Guide answer

This could be treated as a research question with students being encouraged to look up the Internal Market scoreboard at: http://ec.europa.eu/internal_market/score/index_en.htm


At the EC level rapid progress was made in passing the necessary measures for the Internal Market Programme and, according to the Commission, by 31 December 1992 95 per cent of the legislative programme set out in 1985 was complete. The main exceptions related to company legislation, fiscal harmonisation and intellectual property rights.
The transposition of EC measures into national legislation, and implementation of the measures was more difficult. Progress appears to be slow with regard to public procurement, the recognition of higher education diplomas, and (at least in certain EU states) the liberalisation of financial services, telecommunications, transport, intellectual property and the environment.

6. What measures are necessary to introduce a Single Market for financial services?
Guide answer

Much of the difficulty here lies in different regulatory frameworks for banks and other financial institutions. There is much debate as to whether regulation of the EU securities market should be carried out on the basis of co-operation and mutual recognition among the national authorities of the member states, or whether there should be a single central regulator.

Many of the specific measures to introduce a Single Market for financial services were indicated in the context of the 1999 Financial Services Action Plan (FSAP): creating a single wholesale financial market to allow firms to raise capital on an EU-wide basis, completing a single EU retail market; ensuring state-of-the-art prudential rules and supervision, and eliminating tax obstacles to financial market integration. See http://europa.eu/scadplus/leg/en/lvb/l24210.htm


  1. Why was it so difficult to introduce a common transport policy?


Guide answer
Progress in introducing common transport measures proved slow and controversial for three main reasons:1

  • Differences in interpreting the Treaty;

  • Different attitudes about the form that intervention in transport should take, and

  • Conflicts of interest between the member states.




  1. What developments from the mid–1980s led to acceleration in introducing common transport measures?


Guide answer

Since 1985 progress in introducing common transport measures has been rapid for a number of reasons:



  • Transport was an integral part of the 1993 Programme.

  • In 1985 the European Court ruled that the Council should adopt measures to liberalise transport ‘within a reasonable time’.

  • There was an international trend towards the liberalisation of transport, which was particularly evident in the United States during the Reagan years.

In 1986 in the Nouvelles Frontières case the European Court of Justice ruled in favour of a French firm that had been charging prices below those fixed by the French authorities. This ruling gave leeway to the EC Commission to overrule national agreements.



  1. What measures do you consider necessary for the improvement of the EU transport system, and how far is the EU introducing such measures?


Guide answer

In 2001 the European Commission published the White Paper, European Transport policy for 2010: Time to Decide’, which describes many of the shortcomings of EU transport. These include the need to: reinforce passengers’ rights, improve road safety, encourage sustainable mobility, prevent congestion, develop high-quality urban transport, harmonise taxes on fuel for professional road transport, and improve the trans-European infrastructure networks. The White Paper also sets out the EU programme to realise these objectives. The White Paper and later assessments of EU policy are available on the website of the DG of the Commission responsible for transport: http://europa.eu/pol/trans/index_en.htm.



10. In practice the effects of the Single Market Programme were different from those initially predicted. Explain why you think that this was the case.
Guide answer

The answer should compare the estimates of the Cecchini Report, with later studies, such as European Commission (2007) A Single Market for 21st Century Europe, COM(2007)724, www.ec.europa.eu/internal_market.


The analysis of the effects of the Single Market Programme shares the difficulty of all empirical analysis of integration in that it is almost impossible to separate the integration effect from overall economic developments.
The effects differ from what was initially predicted because the implementation of the Internal Market was subject to substantial delays. Part of the reaction of the EC economy to the programme seems to have occurred before 1993. The Internal Market Programme probably placed too much emphasis on fragmentation as the reason for the poor performance of the Community’s economy.


  1. Why is it probable that the Single Market will never be achieved?

Guide answer

Regulatory and other barriers continue to prevent completion of the Single Market, in particular with regard to services, taxation and public procurement. Resistance to opening of markets may occur at the level of firm, industrial sector(s) or member state and may be backed by strong lobbies. The reply could describe a specific case such as the long battle over the Services Directive, which was finally agreed in a watered-down form in 2006.



RESEARCH QUESTIONS OR TASKS:


  1. Choose a specific EU industry; examine the role of the EU Commission in promoting the achievement of the SEM in that industry; the expected benefits that would come from the SEM in the sector considered and the potential obstacles (short-term and long-term) remaining to completing the SEM in that industry.


Guide answer

A starting point for the research could be the EU home page on the Internal Market: http://ec.europa.eu/solvit/site/about/index_it.htm





  1. Analyse the activities of the Solvit Office in your country, using case studies.


Guide answer

A starting point for the research is the Solvit home page:



http://ec.europa.eu/solvit/site



1 This list follows Hitiris, T. (2003) European Community Economics, 5th ed, Harvester Wheatsheaf, Hemel Hempstead.





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