The Gazette 1989

GAZETTE

FEBRUARY

1989

1992 - Completing the Internal

Market

1 9 92 has been much discussed in the press of late. What has

happened to make the EEC suddenly so important? What

momen t ous event takes place on 1st January 1 9 92 - or is

it 31st December 1992? This erticle outlines whe t 1 9 92 is

all about and discusses a f ew areas of particular relevance

t o bus inessmen and lawyers.

What is the internal market?

One of the principal aims of the

EEC Treaty, as amended by the

Single European Act, is to create

within Europe:

"An area without internal

frontiers in which the freedom

of movement of goods,

persons, services and capital

is ensured in accordance with

the provisions of this Treaty."

This aim is to be achieved

"progressively . . . . over a period

expiring on 31st December 1992".

As the EC Commissioner in charge

of completing the Internal Market,

Lord Cockfield has pointed out, the

aims are ambitious; it is not merely

a question of simplifying frontier

controls but of creating an area

"without

internal frontiers". The

freedoms to be ensured are not just

for the benefit of individuals, but

also for "goods, services and

capital."

Why is an internal market

important?

The creation of the internal market

is vital for the success of the

Community: it is only by enabling

commerce and industry to make

full use of the vast single market

which the twelve Member States

constitute that the Community can

continue to compete with its main

competitors, particularly from

North America and the Far East.

The opportunities of the internal

market and the costs of main-

taining the present divided status

("non-Europe") are immense: the

European Community has over 320

million inhabitants, nearly as many

as the population of the USA and

Japan combined. More than half of

most EEC countries' imports and

exports are from or to the rest of

the EEC. For example, in the 11

months January - November

1988 74% of Ireland's exports,

amounting to £11.2 billion went to

other EEC countries (38.5% to the

UK and 35.5% to the rest of the

EEC). In the same period of

Ireland's imports came from the EEC.

But the costs of doing business

with eleven other Member States,

each of which still maintain

restrictive national laws and

practices, are immense. The Com-

mission has carried out a detailed

study of the costs of "non-Europe".

These include:

-administrative costs

incurred in

dealing with different national

bureaucratic requirements:

-higher transport costs

due to

border formalities;

Michael Hutchings,

Solicitor,

Lovell White Durant *

-increased costs as a result of

having to apply

different national

standards;

-duplication of costs in

separate

research and development;

- t he high costs of

heavily

regulatedpublic supply policies;

-failure to capitalise on the market

potential

of a much larger

"home" market.

Aside from direct additional costs,

it is estimated that the cost to

industry of being denied the

economies of scale of a unified

internal market is as much as

20-30% of unit costs. Furthermore,

the creation of the internal market

could, it is estimated, lead to the

creation of 1.8 million further jobs

and an increase in economic activ-

ity throughout the Community.

How complete is the Internet

Merket elreedy?

Even before the publication of the

Commission's White Paper pro-

posing the target of 1992 for

completion of the Internal Market,

considerable progress has been

made in removing barriers to trade:

The

common customers regime

applies throughout the EEC for

trade with non-EEC countries

(subject to a few remaining

derogations for Spain and

Portugal). No duties are payable

on trade within the EEC. The

simplified customs form ("single

administrative document")

introduced on 1st January and

replacing hundreds of docu-

ments previously used in differ-

ent countries has further helped

to ease the flow of goods.

The

Sixth VAT Directive

has

gone some way towards har-

monising internal taxation.

Harmonising directives

have

ironed out distortions in trade

created by differing technical,

composition, purity and other

regulations.

The

"Cassis de Dijon"

case

confirmed a basic tenet of EEC

law: once a product is lawfully

marketed in one country, its sale

must not be restricted in other

countries. Only very narrow

health and safety exceptions are

allowed. This principle was

recently confirmed by the

European Court in a case where

German laws which effectively

kept out all imported beer were

condemned.

The Commission's 1985 White

Paper

But despite these achievements,

progress towards the completion of

the Internal Market was slowing

down. The 1985 White Paper set

out the Commission's proposals

for completing the Internal Market

by 1992. It lists detailed proposals

for the removal of physical,

technical and fiscal barriers faced

by goods, persons, services and

capital. Fourteen European 1992

Information Leaflets have been

issued by the European Bureau

outlining the

Commissions

proposals set out in the 1985 White

Paper. Subjects covered include

Insurance, Company Law, Consumer

Protection, Social Dimension of

the Single Market, Public Pro-

curement, etc. They may be

obtained from the Bureau. Tel.

01-601992.

Goods - Physical Barriers

Internal border controls will largely

become unnecessary by 1992.