Year XXIX, 1997, Number 3, Page 217
WHY THE SINGLE ACT IS INSUFFICIENT
It is possible to discuss for hours whether the Single Act is indeed a great leap forward for the Community or merely a cosmetic change. The next few years will show whether the extension of the possibility to take a majority vote to a few more Articles of the treaty will really lead to more rapid decision-making in the Council; whether the Commission will recapture its executive role; and whether the Parliament’s influence on Community legislation will increase. Certainly there are still battles to be fought within the confines of the Act. However, the purpose of this article is to argue that, even if the optimistic interpretation of the Single Act is correct — indeed especially if it is correct — the need for further reform will become apparent.
Let us assume that the Single Act will be successful in its priority objective of achieving a genuine internal market by 1992,in the sense that there is total free circulation of goods, services, capital and labour. What would have been achieved would be a single market, but without common instruments to manage, control and organise that market.
Let us first take an obvious example. If the Community has not laid down common standards for consumer protection within the single market, and separate national provisions (albeit mutually recognised) still apply, then the market will be vulnerable to distorted competition which will at the same time threaten consumers. This will be possible because companies could switch production to those member states with less stringent provisions. This problem has already raised its head in such matters as foodstuff additives. In such a situation, consumer protection can be achieved in one of two ways: national provisions, to which all imports must conform (which would destroy the single market) or common provisions applicable throughout the Community. Under the Single Act, there is some scope for harmonizing national provisions under Article l00A, but is this sufficient? The same Article allows national derogations to be applied for matters related to consumer affairs (Article 30, public health, public policy), and no provisions are laid down for the Community to develop a proper consumer policy.
The situation is perhaps worse in the case of the environment. Here, too, distortions in competition can be introduced if national standards diverge. Indeed, some countries may well be tempted to attract industry by imposing less stringent standards (and therefore costs) on companies, especially where they themselves will not be the first victims of environmental damage (as, for instance, with acid rain). Of course, the Single Act includes a chapter on the environment, in which common standards can be laid down. However, unanimity is required to take decisions: a recipe for inadequate compromises based on the lowest common denominator.
More directly in the economic field, differences in indirect taxation (notably VAT rates and excise duties) will either cause frontier controls to be maintained or introduce further distorsions of competition (notably in favour of certain small states which may deliberately undercut their neighbours in this field). Again, the treaties provide for the harmonisation of such taxes, but the method laid down is that of unanimity within the Council — the dictatorship of the minority.
Distortions of competition will arise in capital markets too if there is genuine free circulation without some harmonisation of banking legislation, supervisory standards and access to capital markets. This brings us onto the monetary issue: if, within the single market, the Community is to maintain a dozen competing national currencies then the whole economy will suffer. As the Albert-Ball report put it: “incessant fluctuations in the exchange rates represent, for interdependent economies, a handicap almost as serious as would be the instability of weights and measures. Can we imagine doing business with a ‘floating’ metre and kilo?” The Single Act provides for monetary co-operation in the framework of the EMS. However, it lays down that any institutional development of the EMS requires not only unanimous agreement among national governments but also ratification by each and every national parliament. It would be naive to expect major developments of the EMS with such cumbersome procedures. But even closer co-operation of national currencies within the EMS, if it is achieved, will remain insufficient. Unless there is a common Community currency, businessmen will be hampered by the costs of simply converting currencies from one to another and of paying residual exchange rate risks. Governments will have to maintain separate reserves to defend their national currencies against each other as well as separately towards the outside. A single market without a single currency is an illusion.
The issue of cohesion, which is the latest Community jargon for economic convergence, will also come to the fore in a single market. The tendency for economic production to centralise in certain areas will accentuate. The Single Act pays lip-service to strengthening policies for cohesion, but does nothing to increase the resources of the Community. The total Community budget represents scarcely 1 percent of gross domestic product The structural funds represent less than 20 percent of the Community budget. Any meaningful redistribution of resources requires much larger sums, to which the weaker economies must surely be entitled, having opened their vulnerable industries to unrestricted competition within the single market. Yet, the Community’s resources are exhausted and, under the treaties which the Single Act left unchanged on this point, can only be increased by the unanimous agreement of each national government and each national parliament. A single state can therefore block the development of the Community. Instead of spending money jointly on, for instance, regional policy, member states have separate, competing (and therefore more costly) regional subsidies. The Netherlands Scientific Council has described this as a “subsidy contest between member states which has led to a massive squandering of public funds within the Community”.
If the Community, despite the continuing requirements for unanimity in many of these vital fields, nevertheless manages to develop common policies, it will be necessary to strengthen the Community’s institutions in order to carry out these policies effectively. This means in particular strengthening the Commission in its executive role (dare one say governmental role?). Where policies are common throughout the Community it should be up to the common executive body to manage them. Here, the example of the Common Agricultural Policy is instructive. As one of the few genuinely common policies in existence, it has shown up one of the main institutional failings of the Community. As our common executive managing a Common Agricultural Policy, the Commission is clearly better placed than the member states to evaluate the overall needs of this policy. For instance, on price fixing, the Commission is in a far better position to evaluate the overall results of different options available. Nevertheless, the member states have kept the price decision in the hands of the Council. Year after year, each minister comes along to Council meetings to defend national sectorial interests. To achieve unanimity, they make quid-pro-quo deals which inevitably add to the general level of prices proposed. If one looks at the results of this process over the years, the national ministers have year after year adopted a more generous price package than the original Commission proposal. Since 1979, the cumulative difference is some 12-13 percent. In a situation in which many products are in surplus, the impact of price changes on the cost of export restitutions and on stocks is more than proportional. If prices were now 13 per cent lower, the cost of the CAP would be between 3,000 and 6,000 million ECU per annum less (that is well above the amount of the Community’s research budget, currently subject to so much controversy). This would not be so much at the expense of farmers, but rather a reduction of storage costs and export subsidies. The additional burden imposed on the Community budget can be blamed directly on the institutional nonsense of having a common policy but not entrusting it to our common executive.
If one ventures beyond the internal market to other objectives of the Single Act, one can see here too that the Act will soon be demonstrably insufficient. The area of research is already in a crisis, as no individual research programme can now be approved before the adoption of a “framework programme” which requires unanimity. Yet this is an area in which the Community has a vital interest in catching up with the United States and Japan.
The codification of political co-operation procedures in treaty form in Article 30 of the Single Act was perhaps useful in formalising EPC and linking it to the Community. However, few changes were introduced to existing practices. The one significant development was the establishment of a political co-operation secretariat. Although this will no doubt be useful as regards the administering of political co-operation, the establishment of a secretariat separate from the existing Community institutions is a danger. The Community has adequate institutions representing the member states (Council), the electorate as a whole (Parliament) and an executive body acting on behalf of the Community as a whole (the Commission). Why establish a separate inter-governmental body? In the medium to long-term this is a potential source of conflict and must be changed.
A bigger handicap for political co-operation is the fact that it remains a mere co-ordination of national foreign policies, with nothing more than lip-service paid towards the concept of a common foreign policy. Yet our collection of small to medium-size nation-states has no chance of influencing world events, even in areas of direct concern to Europeans, such as the Soviet-US arms control negotiations. Unless a common policy is developed, we may as well have no policies at all.
Last, but not least, is the issue of democracy. It is unacceptable that the legislative powers that national parliaments have delegated to the Community should be exercised exclusively by the Council (i.e. national ministers, meeting behind closed doors, with no collective responsibility). The Single Act, except in two matters where the assent of the European Parliament is now required (Accession of new Member States, and Co-operation Agreements), leaves the role of the Parliament as merely consultative. This must be changed to ensure that Community legislation is subject to the approval of the representatives of the electorate as well as those of national governments.
In all these areas, and others, it is apparent that the Single Act, even if it is successful in some of the objectives which it seeks to achieve, will clearly be insufficient to allow Europe to face the problems of the future. As the Commission put it recently: “the ship of Europe needs a helmsman”. What we are talking about is the government of Europe in those areas in which member states are (reluctantly) relinquishing their national domestic controls. Those who claim that the Single Act will be the last word on the institutional issue this century are surely mistaken.
Richard Corbett
