ec: The price of shoddy practice.

ec: The price of shoddy practice. - The single market will only work if the EC is stricter with its backsliders.

by Peter Wilsher.
Last Updated: 31 Aug 2010

The single market will only work if the EC is stricter with its backsliders.

At midnight on 31 December - or so we were once confidently assured - the European Single Market will transform the business landscape. Even the storm over Maastricht and the disintegration of the exchange rate mechanism (ERM) were not supposed to halt, or even seriously slow down, the wholesale elimination of trade barriers. The promised vista was of a level playing field stretching from Bantry Bay to the Aegean. But now we are actually on the eve of 1993 doubts are starting to accumulate like thunderclouds.

Basically there are three categories of concern: the technical, the political and the philosophical. Will the complex framework of rules and agreements which go under the code name "1992" now ever be bolted together? If they are, will the EC's member governments remain ready to force through the hugely ambitious programme of legislation and enforcement that is necessary to make it all work? And finally, are the Community's industrial and financial managers, once the scheme's most dedicated supporters, still totally happy about what is threatening to evolve? At best, the answers to all three of these questions could no longer be honestly presented as much more than a heavily qualified "yes". And in some important respects they are starting to sound more like a resounding "no".

On the plus side it is possible to point to a considerable list of achievements. Most of the several hundred regulations and directives originally identified as "essence of 1992" have been duly agreed, which is a lot more than the early doubters ever expected. But even at this preliminary stage there are still numerous black holes. Transport liberalisation, for example, has thrown up a whole slew of problems, all so knotty that the participants have been forced to postpone the decision deadline by "several years". Similarly the internationalisation of investment services and insurance, although accepted in principle by ministers, is unlikely to assume any sort of reality before 1994 at the earliest. And there looks to be little hope now for including critical items like energy policy and company law, which were short-sightedly omitted from the earlier "1992" blueprints.

Even when the experts and officials are wholly happy, however, their deliberations mean little until they are ratified and translated into law by the member states. Here progress has been erratic. Of the 175 "1992" clauses which have passed their first technical hurdles, around half are still awaiting approval from one or more of the 12 European parliaments. Ironically the best record has been that of Denmark, the Maastricht derailer, which has voted to accept around 150 of them. Britain has just passed the 120 mark, and Belgium, the most notable slowcoach, has digested barely 100. It is hard to believe there will be much of an acceleration drive until the larger Maastricht-related issues are effectively resolved.

That argument applies equally potently, of course, to the matter of enforcement, which is creating even greater disquiet. Governments can endorse policies to their hearts' content, but they will mean little or nothing unless the will and resources are there to ensure they are obeyed. The greatest threat now facing the single market is that it could wither away in an absence of effective, well-motivated inspectors and prosecutors willing to take backsliders to court.

There was disturbing evidence, even before the Maastricht debacle, that member states were losing some of their free-market commitment. The question of industrial subsidies triggered some very nasty arguments, particularly with the French. So did Brussels's attempts to pronounce on various contentious aspects of competition and mergers policy, where Sir Leon Brittan and his team found themselves hysterically denounced by the very ministers, especially in Paris and London, who had voted them the right and duty to interfere. That attitude hardly bodes well for future co-operation.

The suspicion of cheating, at all levels, is one of the key factors threatening to dilute business's former single market enthusiasm. It is becoming quite hard to find firms who have not experienced at least one flagrant instance of competitors - often with the active collusion of the relevant government department - ignoring or bending the rules.

There are the loudly-publicised pledges to open up public procurement contracts, which mysteriously evaporate with the submission of an actual tender. There is the cheap energy made available - to favoured, and somehow invariably, local customers - by Europe's many still state-owned gas and electricity monopolies. There are the niggling little regulations, on things like hygiene standards, packaging design, labelling, and company registration, that all add up to an almost impenetrable trading restraint.

All these things, of course, are in clear breach of various 1992-related protocols. But in present circumstances, it is usually prohibitively expensive, impossibly time-wasting, or just bad for business, to do anything effective about them. So until Europe's governments sink their differences sufficiently to stamp out such shoddy practices, it is probably sensible to regard the single market as "on hold".

Peter Wilsher is a freelance consultant and writer.

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