Europe needs to improve the ease with which economic activity can take place across national borders. It must complete the single market to boost GDP and create jobs, writes Mark Spelman.
Mark Spelman is Vice Chairman, American Chamber of Commerce Executive Council , member of the World Economic Forum Global Agenda Council on Europe and is Global Managing Director at Accenture.
Creating a single market was a bold idea and remains one of the great successes of the European Union (EU). More needs to be done to realize its full benefits, which can serve to encourage foreign direct investment, particularly from the US. Although barriers between member states have gradually been removed, the single market has yet to be completed and there is still a case for further attention.
At a time of low – or even zero – growth in many EU countries, it is crucial to keep focusing on realizing the benefits that a completed single market can offer. It is estimated that a full implementation of a single market for services – the services directive – could result in economic gains of € 60-140 billion and generate more than 600,000 jobs. At the same time, liberalization of energy markets will help to address the big disparities in oil and gas costs between the US and Europe, and the digital market could present a major boost to many small and medium enterprises (SMEs), which are the backbone of jobs in the European economy.
Since SMEs are so crucial to creating jobs, helping them with access to finance, reducing administrative burdens and simplifying public procurement processes are positive steps – steps which are necessary but not sufficient. The big priorities can be grouped into three categories: services, energy and digital.
As far as digital is concerned, the data protection rules which the EU is subject to are so fragmented that it’s difficult for firms to provide digital services across EU borders. There is thus no single market for certain digital services, such as data hosting, which is hampering digital innovation. More harmonized regulation is needed, in addition to building on industry codes of conduct and reviewing sanctions for breaches of regulations.
In the energy sector, the many different support schemes – loans, grants, and so on – for renewable energy are creating uncertainty for investors. The problem of monitoring and enforcing energy standards reduces the incentive for firms to develop more energy-efficient products and services. The answers lie in a more consistent EU approach to energy, and more uniform testing environments to deter non-compliance.
As for services, there are initiatives which are enabling progression towards the single market, but they are not going far enough. The Single Euro Payments Area (SEPA), for example, is a European banking initiative that will create a single market for all electronic payments across Europe. The problem is that the significant number of exemptions allows banks in some member states not to migrate certain schemes to SEPA, which will create unequal competition. To reap the full benefits of SEPA, the impacts of these derogations must be minimized, and the migration towards SEPA has to be accelerated, so as to allow for true market harmonization.
It is clear that there are specific opportunities to improve the workings of the single market. In most instances, new legislation is not needed but better enforcement of existing legislation and more effective implementation of European directives into national law would be of considerable value. Inconsistent implementation of single market rules creates major stumbling blocks to foreign investment in the EU, simply because businesses are unable to take advantage of the single market if the regulatory regime is not consistent across borders. Member states have made great strides in improving their implementation in national law, but it is obvious that the compliance toolkit at the Commission’s disposal requires improvement.
Beyond these issues, the most severe impediment to solving the identified problems relates to lack of enforcement, which will require new and powerful tools. A combination of soft instruments, such as benchmarking, and hard legal instruments, needs to be considered. By bringing member states to court for their non-adherence to the single market obligations, the Commission will be able to achieve a higher level of compliance. There should be a concerted effort to use all of the available instruments as part of an integrated approach to timely and efficient implementation of single market regulation.
Completing the single market could help boost the EU’s GDP over the next ten years. It would increase productivity, investment and trade, and help create much-needed new jobs. More importantly, it will help ensure that Europe maintains its position as a global economic centre: to revive the European economy, it is critical to revitalize the single market.
The free movement of goods, people, services and capital has yet to be fully achieved. Europe needs to improve the ease with which economic activity can take place across national borders. A level playing field for regulation both between member states and externally will create the conditions for increased competition and, ultimately, more sustainable economic growth.