Committee Reports::Report No. 29 - Completing the Internal Market::04 June, 1986::Report


1.The Commission White Paper on Completing the Internal Market [COM (85) 310 final] was examined for the Joint Committee by its Sub-Committee on Social, Environmental and Miscellaneous Matters and its Sub-Committee on Statutory Instruments and Legal Affairs.

This Report was prepared by Senator Mary Robinson who chaired the joint meetings of the Sub-Committees. The Joint Committee is indebted to Senator Robinson and her colleagues on the Sub-Committees for their dedicated work.

2.Written submissions were received from the Departments of Health and Industry and Commerce, the Irish Council of the European Movement, and the Confederation of Irish Industry.

The Department of Industry and Commerce furnished its own views and co-ordinated the observations of the many other Departments and State agencies involved. This procedure facilitated the deliberations of the Sub-Committees.

3.The Joint Committee gratefully acknowledges the co-operation it received from the Government Departments and the other bodies who made their views known to it. It gratefully acknowledges also the assistance given to it and to the Sub-Committees by Mr. John Hogan in preparing this Report.

4.The Sub-Committees had consultations with the Department of Industry and Commerce the ICEM and the CII, in thecourse of which representatives of the bodies in question developed and emphasised certain points raised in their written submissions.

5.In the course of a visit by a delegation of the Joint Committee to the Community Institutions, Members had discussions on this matter with Mr. Barry Seal, Chairman of the European Parliament Economic, Monetary Affairs and Industrial Policy Committee. On 12 March delegates also had discussions in the Commission of the European Communities with Helmut Schmitt von Sydow Deputy Head of Division with responsibility for distributive trades, Directorate-General for Internal Market and Industrial Affairs (D-G 111).

6.On 17 april, 1986 Commissioner Peter Sutherland attended a meeting of the Joint Committee. Members availed of this opportunity to discuss inter alia the Commission White Paper. The Joint Committee wishes to express its gratitude to Commissioner Sutherland.


7.The White Paper was prepared by the Commission in response to a call from the European Council at its Brussels meeting of 29/30 March, 1985 for “a detailed programme with a specified timetable” for the achievement of a single market by 1992. The White Paper addressed the question of attainment of this objective by considering in turn the barriers perceived to be substantial ie physical, technical and fiscal.

8.The White Paper was presented to, and welcomed by, the European Council at its Milan meeting of 28/29 June, 1985. The Heads of State or Government instructed the Council of Ministers to initiate a precise programme of action based on the White Paper to achieve the Internal Market by 1992 “in accordance with stages fixed in relation to previously determined priorities and a binding timetable”.

9.The White Paper was considered again by the European Council at its Luxembourg meeting of 2/3 December, 1985. The Council on that occasion took a series of decisions subsequently formalised in a “Single European Act”. The Act has been signed by all Member States and will need to be ratified by the national parliaments. The ratification procedure will no doubt provide the occasion for a full debate on European developments generally in the Houses of the Oireachtas.

10.The objective of completing the Internal Market of the Community is widely accepted by Member State Governments and the Commission as a pre-requisite for the achievement of major Community objectives such as the reduction of unemployment, achieving improved economic performance and ensuring that the Community does not fall further behind its major competitors in such areas as the exploitation and development of new technologies.

11.The European Council has repeatedly supported this objective; successive Council declarations are quoted in Page 3 of the White Paper. In view of these declarations and the Treaty provisions, the Commission takes the case for completion of the Internal Market as agreed, but considers it necessary to point out that the objective has three essential aspects:

1.The welding together of the twelve individual markets of the Member States into one single market of 320 million people;

2.Ensuring that this single market is not static, but growing and expanding;

3.To this end, ensuring that the market is flexible so that resources, both of people and materials, and of capital and investment, flow into the areas of greatest economic advantage.

The Commission suggests that while its Paper is primarily concerned with the first of these aspects, the second and third should be kept constantly in mind.


12.For several years past, the Community has been drifting. The Joint Committee, in its March, 1985 Report on the European Parliament Draft Treaty establishing the European Union, pointed out that the Community “had lost the vibrancy which was inculcated into it by the founding fathers and has a tendency to stagnate. The present institutional structures have all the symptions of fatigue. The internal market has not been completed. Economic convergence and monetary union are far from realisation. The Regional Development Fund has failed to halt the centripetal pull of economic development to the wealthier areas of the Community at the expense of the less favoured peripheral areas, such as Ireland. The Community, instead of representing an integrated social and economic body, has a distinct mosaic appearance”.

13.The Taoiseach, addressing the inaugural session of the European Parliament in Strasbourg on 25 July, 1984, addressed many of the issues at the heart of the Community’s “immobilism”:

“One cannot ignore the fact that for many of its citizens the Community in recent years has been a disappointment, a fact reflected in the smaller number of people who voted in the second election in many of the Member States......... Must we not be struck, alarmed and even ashamed by the contrast between the potential of this Community which we are failing to realise, and the reality of the disputes about money and milk through which we have been dragging ourselves painfully and irrelevantly during these years of world economic crisis?......... How real, our people want to know, is an economic community, a common market, within which the free movement of people and of goods is still impeded by controls, many of which are seen as bureaucratic and superfluous? What kind of a single market is it within which, at each national frontier post, long queues of lorries are to be seen awaiting clearance of a complex documentation that is an unhappy inheritance from a fragmented continent of national states? Our citizens may understand that there must still be police checks at frontier points, but they find it less easy to understand why it is that in a single market, akin to the United States, so much time and effort must be put into customs controls which do not exist within that vast continental state?......... Nor can we be happy that after almost three decades there remain still serious obstacles to the right of establishment and the right to provide services across the frontiers of the Community ”

14.The sense of disappointment and frustration at the Community’s manifest inability to come to grips with current social and economic problems has, indeed, been so widespread in recent years as to have given currency to what became almost a new vocabulary of disenchantment. Commentators, perplexed and alarmed at the steady worsening of Europe’s position vis-a-vis its major trading partners, the timidity and slowness of its decisions, the institutional wrangling, resorted to the use of such expressions as Euro-sclerosis, Euro-inertia, Euro-scepticism, Euro-pessimism, to describe the unhappy spectacle of a Community run out of steam.

15.The Milan European Council of June, 1985 has, with considerable justification, been seen as marking the beginning of a solid response by the Community to the widespread concerns referred to in the preceding paragraphs. The Secretary General of the European Commission has stated that the Community was “shaken out of its lethargy” in Milan and that “now that the machine has been set in motion, new horizons can be explored”.

16.On 26 June, 1985 Dail Eireann considered the Dooge Committee Report on European Union and European developments generally. On 2 July, 1985 Dail Eireann debated a statement by the Taoiseach on the Milan European Council. A statement by the Taoiseach on the Luxembourg European Council of 2/3 December, 1985 was debated in Dail Eireann on 4 December, 1985.

17.While acknowledging that the results of the Luxembourg Summit and of the Intergovernmental Conference on Reform of the Treaty fell far short of the aspirations of the European Parliament and of those anxious to make an important forward leap towards European Union, the Joint Committee feels that, subject to the reservations set out in Chapter 1 below, the outcome as regards proposals for completion of the Internal Market may be regarded as reasonably satisfactory.


18.Recalling -

(1)that the Treaty clearly envisaged from the outset the creation of a single integrated internal market free of restrictions on the movement of goods; the abolition of obstacles to the free movement of persons, services and capital; the institution of a system ensuring that competition in the common market is not distorted; the approximation of laws as required for the proper functioning of the common market; and the approximation of indirect taxation in the interest of the common market,

(2)that the Community marked up a remarkable achievement in establishing the common customs tariff 18 months ahead of schedule,

(3)that non-tariff barriers multiplied during the recession,

(4)that, “disgracefully”, the Treaty provisions on services have not been respected,

(5)that, under the impetus of successive European Councils, a new commitment to completing the Internal Market has been evidenced,

the Commission,

stating bluntly that the time for action, instead of talk, has come, proposes a series of measures aimed at the removal of impediments to the creation of a single integrated market in the form of physical, technical and fiscal barriers. The adoption of the 300 or so proposals would, the Commission maintains, lead to the realisation of one Community market by 1992. It is clear that the White Paper pre-supposed changes in the Community decision making procedures, with increased recourse to qualified-majority voting in particular.


19.As indicated above, the European Council welcomed the White Paper proposals in Milan and, essentially, adopted them in Luxembourg.

20.The European Parliament welcomed and approved the White Paper, emphasising that it provides an integrated programme which must be implemented as a whole, and that it must be seen in the context of other Community policies - in the regional and social fields, development of the EMS, a common transport policy etc.

21.The Economic and Social Committee gave massive support to the White Paper and called upon Member States to honour the promise they had given on completion of the Internal Market by 1992, on the basis of decisions by qualified majority in the Council. The Committee insisted, however, upon the necessity for completion of the White Paper by a programme for the conception and realisation of a social area. This programme should be “as practical as the White Paper” and, like the White Paper, should contain a timetable, since the completion of the Internal Market would not be possible without the formulation of European policies dealing with growth and employment. The creation of the Internal Market would have an effect on buying power, working conditions and the labour market as well as legal standards in the sphere of work. Measures must, therefore, be adopted to ensure that the realisation of the Internal Market, and the restructuring this would entail, should encourage a revival of economic activity and a decrease in unemployment. Further, the realisation of the Internal Market must be accompanied by a reduction in the gap between the prosperous and less prosperous economies of the Community. This would imply a definitive commitment to the implementation of structural policies, especially regional policies, to accompany the realisation, since otherwise some Member States would not be in a position to accept and bear such a degree of liberalisation.

22.(The Economic and Social Committee, in an “own initiative” opinion on “Prospects for the 80 s” of November, 1981, had identified the completion and development of the Internal Market to stimulate internal demand as one of the Community priorities for the decade).


23.UNICE has fully supported the White Paper proposals. It has maintained that quick decisions can be taken to reduce physical and technical barriers, the removal of fiscal barriers to be dealt with in the final stage so as to produce a unified area by 1992. UNICE regards the completion of the Internal Market as an absolute priority. “Just as the abolition of customs duties and quantitative restrictions encouraged economic growth in the Common Market’s early days, the abolition, in this new stage, of non-tariff barriers, which are continuing to compartmentalise the Common Market, will lead to renewed growth in the European economies. If, in parallel, EEC countries are able to control inflation, enough jobs will be created to significantly reduce the unemployment figures”. The Community should “recover its capacity to take decisions, in particular by reverting to the rules on majority voting, limiting the cases to which the rule on unanimity would apply, and interpreting very strictly those areas in which the right of veto is permitted”. The achievement of the Internal Market must go hand in hand with the development of the Community’s common commercial policy and resistance to protectionist pressures, especially among the larger trading partners. (In relation to the Milan summit, UNICE pressed for acceleration of the programme for development of the Internal Market, by bringing forward the deadline to 1990. This demand appears to have been dropped in connection with the Luxembourg summit).

24.The ETUC is in favour of the completion of a unified Internal Market provided that at the same time the Commission promotes parallel initiatives in the areas of social policy and democratisation of the economy. If there were no accompanying social measures, the Commission’s proposals on the Internal Market could, in the view of ETUC, lead to even greater unemployment and even more pronounced regional differences. The Community should, therefore, pursue co-ordinated economic policies guaranteeing that no one sector or region would benefit at the expense of another sector or region. The Commission should not stop at abolishing the barriers to the free movement of goods, services and capital, but should also aim to co-ordinate industrial policies. The completion of the Internal Market should not be restricted to the Community countries; the EFTA countries should be encouraged to participate in it to the greatest possible extent.

25.In the social area, concrete results should be achieved particularly in the fields of employment and training, working conditions and the organisation of work, hygiene, health and safety, working hours, income and social welfare and sectoral policies.

26.With regard to the democratisation of the economy, ETUC reaffirmed its support for the Vredeling Directive. As long as this directive is not adopted, the Commission must provide for information and consultation of workers to be made binding in legislation relating to company law.


27.The Commission sees the creation of the unified economic area by 1992 - elimination not just of physical and technical frontiers but also of fiscal frontiers - as its priority task. “Europe is a giant, but a giant bound hand and foot by the fact that Europe remains divided into a dozen separate markets, each very largely with its own rules”.

28.The Netherlands Presidency has given the completion of the Internal Market top priority. “The operation of a free market without any frontier barriers is indeed the keystone of our Community and an indispensable prerequisite for its development and that of the Member States. The Commission’s White Paper provides an excellent basis for taking the necessary decisions. In order to keep to the timetable set down in that paper, it is necessary for decision taking by the Council to be as flexible and smooth as possible, if needs be by means of a majority vote. There is above all a need for the Member States to continue providing an unflagging political impetus towards achieving that end, which involves matters which are far from simple”.


29.Ireland’s general support for the White Paper objectives is indicated in the Taoiseach’s statement to Dail Eireann on 2 July, 1985:

“If the market, which the Community was established to encourage, is not free and unified so that it is a single market like the US or Japan, then it will defeat the very purposes for which it was established”.

30.The general implications for Ireland of the adoption of the White Paper are set out below following the title headings used by the Commission in the document.


31.The Commission’s proposals in the annex to the White Paper relating to easing border formalities for the passage of goods between Member States are broadly welcomed by this country in view of their implications for easier access by Irish exporters to a market now comprising 320 million people. The further speeding up of customs procedures would be of substantial benefit to Irish interests. (Transport proposals are considered below under Title IV Common Market for Services).

Period 1987-1992

32.The statistical harmonisation proposed by the Commission for this period is not seen as involving any major difficulties for Ireland. If, however, the Commission’s aim of abolishing by 1992 national and regional quotas granted by it under Article 115 of the Rome Treaty were to be achieved without a corresponding strengthening of the common commercial policy, this could have serious implications for Irish industries reliant on the existence of such measures. The Commission, however, recognises this problem.

33.The Department of Agriculture is broadly in agreement with the removal of Monetary Compensatory Amounts through the development of the CAP but sees difficulties with the suggestion for automatic realignment of agricultural prices in cases of monetary realignment.

Veterinary and Phytosanitary Controls: Period 1985-92

34.The Commission lists 45 proposals in these areas during 1985/86 and a total of 28 proposals during 1987/92. Of these 73 proposals, 51 (for which no texts exist) are new with the remaining 22 proposals comprising those measures already put forward by the Commission.

35.The Department of Agriculture, which is primarily involved with both areas has indicated that on the Veterinary Proposals it would agree with the Commission that harmonisation is a technically complex and procedurally slow process due to the different disease situations and also the different philosophies on disease control and eradication. The Department states that given the present difficulties that arise from meat substitution and falsification of certificates it will be extremely difficult to draw up and implement a satisfactory system to reduce the present inspection requirements. Veterinary certification is a key element in ensuring the acceptability of livestock and livestock products in the different Member States. It is difficult to see how the health mark could be regarded as a guarantee of the health of animal products. The Department sees a continuing need for Certificates and border checks until such time as all countries achieve the same freedom from disease and operate the same animal health policies.

36.On the plant health aspects the Department of Agriculture has indicated support for the removal of unnecessary duplication and for standardised procedures as far as practicable. However, as with the veterinary proposals the situation in the plant health area is not homogeneous in all regions of the Community and the implications of disease and pest control can vary widely in different climatic conditions, cultivation patterns, and so on. The Department does not therefore envisage the possibility of certification or checks on imported products in the veterinary or phytosanitary areas being phased out in the short term.

Control of Individuals

37.Of the eleven proposals listed by the Commission, only four are at present the subject of written proposals. The relevance of these proposals to the goal of a single economic market is tenuous and the question of free movement of persons (other than workers) may prove to be more susceptible to solution at the level of inter-governmental administrative co-operation.

Part Two: Technical Barriers to the Completion of the Internal Market

I Free Movement of Goods

1. New Approach to Standards
Period 1985-1992

38.The Commission’s proposals in the area of Technical Harmonisation and Standards policy are based on the New Approach to Standards which was adopted at the 7 May, 1985 Internal Market Council. Ireland supports this policy not least because of the significant benefits that are to be gained, from an export promotion viewpoint, from the speedy removal of Technical Barriers.

39.The New Approach involves the adoption of framework directives dealing with minimum safety requirements for various products or families of products with the technicalities of the standard being decided on by the relevant European authority expert in the particular area. As the standards authorities are to act on a qualified majority basis it is clear that once the framework for the new approach has been put in place the adoption of technical standards will be quickened appreciably. At present standards are determined unanimously under the Article 100 Directive system and it is not unknown for Directives to take many years to be adopted by this procedure. The ultimate aim of the New Approach is that conformity of products to safety requirements will eventually be by means of attestation of conformity to harmonised European Standards.

2. Sectoral Proposals

40.The Annex to the White Paper provides a detailed list of 90 Sectoral Proposals, 57 of which are completely new, which the Commission would like to see adopted by 1992. While, in general, moves towards standardisation are acceptable, this is not to say that individual proposals might not pose problems as far as Ireland is concerned or indeed that we do not favour greater advances in certain areas over others (speedy standardisation in the pharmaceuticals and chemical products fields would be particularly welcome, for example). However, as a majority of the Commission’s proposals are as yet unpublished and those which are available will more than likely be subject to change before adoption a more detailed assessment of the effects of their adoption, apart from acknowledging the obvious desirability of reducing technical barriers to trade, is not possible at this time.

11 Public Procurement

Period 1985-1992

41.The Commission’s proposals for greater liberalisation and transparency on the public purchasing front would be attractive for Ireland in particular in the information technology and healthcare sectors. Community-wide access to public purchasing contracts has important implications for industrial development policies as it can overcome pressures on industrialists to locate their operation in the main national market to be supplied in order to avoid obstacles to supplying that market. However great care has to be exercised in making progress in the general area to ensure balanced, mutually beneficial and harmonious progress in the community as a whole.

111 Free Movement for Labour and the Professions

Period 1985-1992

42.A wide range of proposals are listed by the Commission under this heading in the Annex to the White Paper ranging from student mobility and comparability of vocational training qualifications to mutual recognition of degrees and diplomas. While measures such as those proposals for promoting student mobility and developing youth exchanges are welcomed by the Department of Education, the eventual effects of other proposals, some of which are as yet unpublished, are not readily quantifiable. It is probable that the original Commission proposals will be amended before adoption. Nevertheless, some comments can be offered on some of the more important measures proposed.

43.The Department of Education has indicated that it will be difficult to reach agreement on the Directive setting up a general system of mutual recognition of higher education diplomas and degrees which would in effect introduce rights of establishment into those professions which are not covered by specific Directives at present. The reason for the difficulty lies in the different ways in which similar type qualifications are obtained. The Department would have serious reservations about mutual recognition in this area without prior harmonisation of the conditions for access to and the exercise of professions. This also involves a reservation about compensating for qualifications by professional experience which is not now acceptable to the Department.

44.The proposals on the comparability of vocational training qualifications and the introduction of a European “vocational training card/pass” provide good examples of proposals which are still under consideration or for which texts have not been published as yet and whose final outcome is uncertain at this stage for these reasons.

IV A Common Market for Services

1. Financial Services

45.The liberalisation of financial services is linked indirectly, in certain instances, to the question of Capital Movements dealt with under Title V. Other than our views on the capital movements aspects of proposals in this area, a number of other points can be made on these measures.

46.The Commission’s proposals for liberalisation in such services as mortgage credit and insurance are based on the principle of home country control. Under this principle, control at foreign branches of financial institutions would be exercised by the authorities in the home Member State subject to controls “in the public interest” in the host Member State. The introduction of this principle in these areas has yet to be agreed and the Department of Finance finds the principle unsatisfactory (for example because supervisory authorities in home or host countries could find it difficult to achieve sufficient familiarity with the legal and other requirements of other Member States).

47.The Commission’s proposal on mortgage credit institutions which was circulated by the Commission in 1984 also has certain failings in the view of the Department of Finance. The operations of such institutions are influenced significantly by legal, fiscal and policy considerations within Member States and mortgage credit is essentially a local issue relating to housing.

48.In the insurance area, the Department of Industry and Commerce feels that the deadlines set for adoption of existing proposals are unrealistic while the setting of deadlines for proposals not yet tabled could lead to unsatisfactory results. In its Report - No. 24 - of 18 December, 1985 the Joint Committee recommended, inter alia, that the case for a derogation for Ireland in respect of the draft Services Directive (Non-Life Insurance) should continue to be pressed in the instances of the Council. A unilateral declaration was entered in the Acts of the Intergovernmental Conference to the effect that the insurance sector in Ireland is particularly sensitive and that special provisions might have to be made to protect insurance holders and third parties.

2. Transport Services

49.The Department of Communications has provided the following assessment of the Commission proposals in the area of transport services:

-Transport of Goods by Road: The Commission’s proposals in this area are listed under the title “Control of Goods” referred to earlier as these measures would have important implications for freeing access to markets throughout the Community. In general, the Department of Communications would like to see advancement in the liberalisation of international road haulage. On the issue of abolition of quota restrictions on road haulage between Member States (at present under consideration) Ireland’s position is one of general support. On the issue of freedom in the field of international transport the Court of Justice has recently found that the Council had infringed the Treaty by not ensuring the provision of conditions under which non-resident carriers might operate internal transport services (cabotage) in another Member State. In the light of the Court’s findings the Commission is now intending to submit revised proposals on cabotage. The Department of Communications recognises that the EEC Treaty provides specificially for the establishment of conditions governing the operation of non-resident carriers. However from an Irish point of view this will require careful consideration of the problems of enforcement of special provisions for cabotage operations by foreign hauliers and also the danger of unequal competition for the Irish haulage industry posed by hauliers from other Member States.

-Air Transport: the text of the Commission’s White Paper in the area of air transport does not cause problems from an Irish perspective. Indeed Ireland has consistently sought more liberal arrangements in the area of market access with little support from other Member States. However the Commission’s proposals differ from Transport Council decisions already taken, not least in the setting of deadlines for the adoption of certain proposals which the Department of Communications feels are perhaps unrealistic given the nature and extent of the issues involved.

-Road Passenger Transport: The Department of Communications has serious reservations about significant increases in the level of liberalisation in this area, particularly in relation to national transport.

-Maritime Transport: Ireland has welcomed in principle the Commission’s proposals for freedom to provide services in this sector. No problems are anticipated with the contents of these proposals.

3. New Technologies and Services

50.On the broadcasting element of the White Paper the Department of Communications supports the open frontier concept for the creation of a “Common Market for Broadcasting”. However as the White Paper itself points out proposals relating to the elimination of the practical difficulties associated with open broadcasting are only now being developed and again the end result is not easily determined at this stage.

51.In the area of new technologies the Department of Industry and commerce supports the Commission in its efforts in the Information Technology and Telecommunications Sectors to ensure compatibility, inter-communication and inter-working between users and operators in the Community. In the realm of interchangeability of credit cards in the Community considerable progress has been made by the successful operation of the Euro cheque system. The Commission’s technical proposals are unlikely to have any appreciable impact on banks who will themselves decide on steps they may wish to take in this area as well as the appropriate timescale.

V. Capital Movements

52.This area was adverted to earlier (Paragraphs 46 to 48) in connection with the indirect consequences on capital movements of proposals in the area of financial services. The Commission also has specific proposals which should lead to greater liberalisation of capital movements in the Community. Ireland at present, along with Italy and France, enjoys derogations from some of the EEC obligations relating to capital movements and the Department of Finance considers it likely that a renewal will be sought when these derogations expire in 1987. Our present policy in relation to capital movements has assisted in ensuring the stability of our currency within the EMS and we would not wish to see this jeopardised by the proposals from the Commission.

VI. Creation of Suitable Conditions for Industrial Co-operation

53.The Commission discusses under this heading its policy on Company Law, Intellectual and Industrial Property (patents and trade marks) and certain taxation measures.

54.The Company Law and taxation proposals suggested by the Commission provide further examples of particularly technical proposals whose eventual outcome and effects on Ireland are difficult to gauge in the absence of specific individual proposals at this stage. On the content of the Company Law proposals in the White Paper the Department of Industry, Trade, Commerce and Tourism sees no great demand in Ireland for many of these measures. In this area also the timetable envisaged is not seen as practical by the Department.

55.The position in relation to the Community Patent Convention remains unclear because of constitutional difficulties in Ireland and Denmark. Proposals from the Commission in the area of legal protection of computer software, micro-circuits and biotechnology and problems in the copyright area have yet to emerge. The introduction of a Community Trademark system would enable Irish firms to obtain community wide protection for their trademarks on the basis of one application. The new system would also have the benefit that a Community Trademark would have the same status and effect in every Member State. Irish firms would therefore be able to secure cheaper, easier and more certain Community-wide protection for the valuable property which their trademarks constitute. Again, though it has to be said that the envisaged timetable for the decisions by the Council appear optimistic, the range, detail and technicalities of the process to be completed, to say nothing of the political difficulties to be solved, are likely to require more time.

VII Application of Community Law

56.The Commission’s proposals in this area deal with

(i)improvement in its procedure for dealing with infringements of Community Law,

(ii)the publication of communications setting out the legal situation in priority sectors in order to improve transparency in these sectors, especially on the subject of Competition rules,

(iii)the publication of an inventory of state aids and a report setting out the implications for future state aids policy.

Such moves are welcome if the Communities’ Laws and their understanding by interested parties are to be improved.

Part Three: Fiscal Barriers to Completing the Internal Market

Period 1985-1992

57.In the area of indirect taxes the completion of the Internal Market would, in the Commission’s view, involve the approximation of the VAT rates and excise duties in force in the Community. The Commission’s proposals in these areas are arguably the most radical of the proposals put forward in the White Paper.

58.The Commission’s White Paper foresees that frontier barriers and controls between Member states should be abolished by 1992 not just simplified and reduced, thus creating “a genuine common market with free movement of goods, services and persons”. In the fiscal forum this would require not only the setting up of a Community Clearing House system for VAT and a linkage system of bonded warehouses but also a considerable measure of approximation of indirect taxes. The setting up of an EEC-wide VAT Clearing House and bonded warehouse system would involve a shift in emphasis in Revenue controls particularly in the case of excise duties. The Department of Finance considers it impossible to comment on the feasibility or desirability of such systems before examining the proposals in detail when they become available.

59.The Commission’s approach to VAT and Excise duty approximation requires that in order to achieve this aim the existing proposals on VAT, tobacco, alcohol and hydrocarbon oils tax structures should be adopted quickly. Proposals providing for a standstill ensuring that Member States would not introduce new VAT rates, that the gap between rates would not widen and that no new excise duties would be introduced would also need to be adopted in the near future under the Commission’s scheme. The VAT rates structure and harmonisation of excise duties would also be subject to the Commission making proposals to be adopted by Council by 1987. Eventually, derogations with distortive effects or excise duties not covered by the common system would be abolished and the Clearing House system for VAT and the linkage between national bonded warehouses would be set up.

60.Apart from the fact that the timetable proposed is considered too optimistic, given the problems being encountered in the harmonisation of the tax structures on tobacco, alcohol, hydrocarbons and in the VAT area, this whole area provides serious difficulties for Ireland given our dependence on indirect taxes. The Commission acknowledges Irish and Danish problems on these issues but the Department of Finance believes that substantial transfers would be needed from wealthier Member States in order to compensate Ireland for the losses that would be experienced in the event of the harmonisation of indirect taxes in this way.

Views of Department of Health

61.In general, the Department considers the White Paper proposals reasonable. It points out there may, however, be reservations about the acceptability of specific provisions when more detailed proposals are presented for the implementation of these policies.

62.Paragraphs 29, 51 and 53 of the White Paper recognise that checks at internal frontiers for the purposes of control on illicit trade in drugs cannot be abolished until other and possibly more effective measures to control such traffic have been introduced. The Department emphasises the importance of this proviso and would need to be fully satisfied that any such alternative measures were no less effective than the existing arrangements.

63.The harmonisation proposals (paragraphs 67 to 73 of the White Paper) affect the Department insofar as its responsibilities for foodstuffs directives are concerned. The Department welcomes the delegation of detailed and technical aspects to the Scientific Committee for Food.

64.The mutual recognition of tests envisaged in paragraph 78 of the White Paper is unlikely to constitute a problem for Ireland insofar as pharmaceuticals are concerned. The volume of such testing of medicines in Ireland is not considerable. Informal inspections are carried out as necessary by the National Drugs Advisory Board at the places where such testing takes place from time to time and the Board employs Guidelines which would be in accordance with OECD recommendations. The Good Manufacturing Practice guidelines which have been adopted by Ireland are those of the United Kingdom which conform to the principles of the W.H.O. standards.

65.The Department emphasises that, in the interests of economic spending on medicines, structures to maintain artifically high prices of medicines should be eliminated. Presumably the intended communications referred to in paragraph 156 of the White Paper will tackle this question of variations in price levels charged from country to country within the community. However, at this stage the intentions of the Commission towards this end are not very clear. Meanwhile, the insistence of the Commission on facilitation of parallel importing is designed to combat distortion of competition. The parallel importing arrangement is not entirely satisfactory from a public health point of view since applications for licences for such imports may not undergo the same detailed scrutiny that was given to the first applications for licences for the marketing of the products now being imported in parallel. Perhaps the promised communications of the Commission will constitute more satisfactory arrangements for freer marketing which will diminish the case for parallel importing.

66.On page 2 of the introduction to the Timetable, it is envisaged that all controls on the free movement of pharmaceuticals would be removed by 1990. The present position is that, while reciprocal recognition of licences is an aspiration of the Commission, and there is a procedure in operation involving a committee of national experts (the Committee for Proprietary Medicinal Products) which requires countries to give reason why they may not be prepared to grant authorisations for products which have already been authorised in another member country, each state has the right to grant or withhold licences for marketing of products within its own territory. While some countries would favour automatic reciprocity, e.g. Germany, other countries, notably Denmark and the United Kingdom, are still opposed to the principle of full reciprocity. There would be obvious advantages for a country with the limited resources of Ireland in not having to undertake the detailed assessment of the wide range of pharmaceuticals which come on the market, provided there was assurance of satisfactory assessment before licensing in the country where the original application was lodged. The Department would therefore not wish to express a final view on the principle of reciprocity in regard to pharmaceuticals at this stage.

67.As regards the dates set out in the Timetable, the Department points out that these are not realisable in a number of cases because progress with discussions on them have not proceeded as anticipated. The two directives relating to practice of pharmacy (Page 24 of the Timetable) have already been adopted.


68.Subject to the implementation by the Community of suitable compensatory measures (see Paragraphs 79 to 82 below) the Joint Committee welcomes the White Paper, and considers that implementation of the body of proposals outlined in the document would mark an important, even a decisive, step towards European integration.

69.Like the Commission, the Joint Committee feels that the case for completion of the Internal Market has been made over and over again. Accordingly, it sees itself under no obligation to rehearse the arguments from first principles.

70.It is axiomatic, in the Committee’s view that the customs union and the Internal Market are the “twin pillars” upon which the whole structure of the Community stands. The Commission recalls with justified satisfaction that the customs union was completed well ahead of schedule. It is a matter of concern and regret to the Committee that the Internal Market should still be only half built.

71.The laborious process required to bring the Paper to its present degree of acceptance provides a good illustration of one of the views expressed by the Joint Committee in its Report (No. 14) on the European Union:

“Unlike all the earlier efforts to unite Europe by force, the Community’s objective is unity by mutual consent, and it is striving towards a Union based on a freely accepted body of law. By the very nature of things progress is slow and laborious and sometimes made only reluctantly, for it is never easy for any Government to give up its powers and prerogatives and no administration is happy to abandon its traditions”.

Even now, after protracted gestation - the hard core of the proposals embodied in the White Paper was, after all, published by the Commission a good year before the Milan Summit - doubts and uncertainties remain.

72.The Joint Committee is in no doubt that the failure of the Community in recent years to take more substantial action towards completing the Internal Market was largely due to the log-jam of decision making at Council level because of the lack of unanimity and failure to proceed by way of majority vote. This has been widely identified as the supreme cause of Community paralysis. Few persons are as well placed to identify the causes of Community malaise as Presidents of the European Commission; in an end-of-term publication M. Gaston Thorn had this to say:

“The weakness of the Community decision making process has delayed and often diminished the impact of our major achievements and has been the main cause of our many setbacks”.

73.The Joint Committee accordingly welcomes the decision of the European Council at its Luxembourg meeting to move from unanimity to majority in matters pertaining to removal of barriers to trade.

74.The framework, then, has been set for a substantial advance in a crucial area of Community competence which has been too long neglected. Essential as this framework is, it is not in itself enough. The European Council’s decisions in Luxembourg need to be translated into a new approach, and to reflect a new commitment on the part of the Council of Ministers. The White Paper recalls that momentum towards the creation of a single integrated Internal Market was lost following achievement of the Customs Union and the 6th VAT directive in 1977 and explains this loss of momentum by reference partly to the recession and partly to a lack of confidence and vision. In other words, a lack of “political will”. This aspect, in the view of the Joint Committee, is the crucial one: the achievement of the Internal Market on the basis of the Commission proposals can be largely, if not totally effected if, and only if, Member State Governments give real evidence of a genuine and sustained commitment to the objective right through the period to the end of 1992. Whether such determination will be manifested remains to be seen. In this connection, the Committee notes the terms in which the President of the Commission, in his Programme speech to the European Parliament on 19 February, 1986 referred to the Internal Market objective - “Completion of the Internal Market presupposes natural trust between Member States and a readiness on their part to accept essential change. It must be said that this cannot be taken for granted as yet. This no doubt explains why, despite the political will clearly voiced on many occasions, completion of the internal market is proving less than easy”.

75.The Joint Committee is gratified that, as stated in Paragraph 29 above, the Netherlands Presidency has given the Internal Market top priority, and also that arrangements have been made whereby the current Presidency will co-operate with the preceding (Luxembourg) and succeeding (United Kingdom) Presidencies in planning a consistent and continuing approach to achieving progress in this area. The Committee trusts that this arrangement will continue through a system of “rolling troikas” until the Internal Market programme has been implemented.

76.The Joint Committee trusts that, in order to maintain the momentum of work on the Internal Market, the Commission will go beyond the undertaking it gave at the Luxembourg Summit to deliver progress reports before 31 December, 1988 and 31 December, 1990. Given the scale of the enterprise, the Committee feels that bi-annual or, at the least, annual statements should be furnished, preferably on “high profile” occasions such as the annual presentation of the Commission’s work programme to the European Parliament.

77.In general, the Joint Committee accepts the views of the several Government Departments consulted in relation to the White Paper (Chapter G above). As indicated in that Chapter, many of the proposals listed by the Commission have not yet been tabled. Furthermore, the Joint Committee understands that many of the proposals announced by the Commission for 1985 have not yet seen the light of day. In the course of its consultations in preparation for this Report, doubts have frequently been expressed to the Committee as to whether the programme is too ambitious to be realisable within the timescale envisaged. This, in the view of the Joint Committee, depends essentially on the political will forthcoming. However, if the Commission itself falls behind in the timely presentation of proposals, it is self evident that the programme will be seriously jeopardised.

78.In view of Ireland’s particular interest in the Internal Market, the Committee feels that reports by the Government to each House of the Oireachtas on developments in the European Communities under Section 5 of the European Communities Act, 1972 should, in future, contain a specific chapter indicating the state of progress within the period covered by reference to the programme set out in the White Paper, and also by reference to the “Cohesion” provisions of the Single European Act - see Paragraphs 81, 82 and 83 below.

79.During the debate in Dail Eireann on 26 June, 1985 the Taoiseach expressed concern at the tendency on the part of the Community to play down or ignore the Treaty objective of reducing the differences between the regions. He also indicated, in the context of removal of barriers to internal trade, that there would be cases where we should be the losers rather than the gainers and that we should be prepared to “take a little of the rough with a lot of the smooth”.

80.In the course of the consultations held by the Committee in connection with the preparation of this report, the point has been repeatedly made that the elimination of existing barriers will lead to increased competition which will threaten the weaker sections of the Irish economy, and that, for that reason, it is vitally important that Ireland secures a firm commitment from the Community to pursue and develop activities aimed at increasing the economic and living standards existing between its various regions and the backwardness of the least favoured regions. Further, in the context of harmonisation of indirect taxes (Paragraph 60 above) the Department of Finance indicates that substantial transfers would be needed to compensate Ireland for the losses that would be involved.

81.Having regard to the consideration set out in the preceding paragraph, the Joint Committee notes with satisfaction the provisions of the Single European Act on the Internal Market and Cohesion. The Committee is, however, under no illusion that what is provided is a framework only, and that unless the Community gives proof of a sincere and sustained intention to complete the Internal Market with all that that implies in terms of meeting the special needs of the peripheral regions especially through the structural funds, the Community will leave itself wide open to the charge that it is strong on rhetoric but deplorably weak in delivery.

82.In this connection, the Committee feels strongly that it is incumbent upon the Government, in consultation with the appropriate national interest groups, to develop structures and strategies to facilitate the identification and development of proposals to be presented to the Commission in the context of the Cohesion provisions of the Single European Act. That is to say that the initiative should be seized by the Government so that, instead of awaiting proposals from the Commission in discharge of the Cohesion obligations, the Government would be in a position to present to the Commission a series of proposed measures, duly documented and costed, which would take account of the specific exigencies of the “peripherality” of the Irish economy. Such an approach would, of course, imply the costing in national economic terms, of measures adopted in course of the Internal Market exercise envisaged in the White Paper. The objective would be to achieve as close a balance as possible between the net cost to the Irish economy of Internal Market measures and the net benefit of measures implemented under the Cohesion undertaking.

83.On the methodology, it has been represented to the Committee in course of its consultations that the Commission approach - establishing a clear programme accompanied by a firm deadline - is the correct one. The Joint Committee, in sharing this view, recalls that, as the Action Committee for Europe pointed out in the Declaration adopted at its constituent meeting on 6 and 7 June, 1985 the Customs Union was completed ahead of time because the Treaty itself contained a programme accompanied by a binding timetable and a procedure for ensuring that the necessary decisions would indeed be taken. The Joint Committee feels that, having regard to its membership, the views of the Action Committee for Europe are especially relevant to this Report.


84.The scene is set for a substantial advance towards European integration, and for the Community to recover some of the ground it has lost. The Joint Committee fervently hopes that Member State Governments will seize the opportunity now offered them. The indications are reasonably positive, but unfortunately the genuineness of the commitment of Member States to make a real and sustained advance remains, at this stage, largely unknown. There is an immense, and urgent, need for political imagination political courage, and above all, political leadership. The very principles upon which European integration was established appear to have been half forgotten; they need to be rediscovered and developed through effective common action.

85.Because of our heavy dependence on intra-Community trade, Ireland has a greater interest on completion of the Internal Market than any other Member State. Economic nationalism and neo-protectionism run diametrically counter to our interests. Subject to the development of serious initiatives by the Community on the “Cohesion” provisions of the Single European Act, the Joint Committee would hope that Irish representatives, at the political and official levels, would promote on every suitable occasion and forum - especially in the instances of the Council - the primacy of the Internal Market objective.

86.The Joint Committee is convinced that, apart altogether from the economic benefits, completion of the Internal Market would demonstrate the relevance of the Community to the daily lives of its citizens in a highly visible way. The consequence must be a serious lessening of the sense of popular disillusionment with the Community institutions.

87.The Joint Committee emphasises the importance it attaches to the completion, or at least the near-completion, of the Internal Market within the time scale specified. The lengthy process required to launch the programme has, in the Committee’s view, served to raise the objective to the status of a test-case. A successful achievement would be a landmark; significant failure would be disastrous for European integration. To quote once more from Mr. Thorn’s end-of-term statement (paragraph 72 above) “the future lies with the Community, now more than ever.… the European process is irreversible.… Europe must decide to survive or accept her decline, and with it the decline of her great member nations”.

88.Finally, the Joint Committee presumes that the procedure for ratification of the Single European Act will provide the opportunity for full debate in the Houses of the Oireachtas. The Committee has previously had occasion to complain about the irregularity and infrequency of parliamentary debates on European affairs. Seeing that one Member State felt obliged to hold a referendum on the provisions of the Act, it would, in the Committee’s view, be unthinkable that the Oireachtas should deal with the matter without exhaustive consideration.


Gerard Collins T.D.

(4th June, 1986.)

Chairman of the Joint Committee.