WEEK 9: lecture
• Introduction -> Week 9
• Free movement -> Week 10-13
- goods (-> wk. 10)
- persons (-> wk. 11)
- services (-> wk. 13)
- capital (-> wk.13?)
• EU competition law -> Week 14
- state aid
- cartels
- monopolies
Part 1: Why do we have an internal market?
1. Benefits of free trade
‘It is the maxim of every prudent master of a family, never to attempt to make a home what it will
cost him more to make than to buy. […] What is prudent in the conduct of every private family, can
scarce be folly in that of a great kingdom.’ Adam Smith - Wealth of Nations (1767)
‘A farmer may know how to sew, and a tailor may know how to raise chickens, but each can
produce more by concentrating on doing what each can do most efficiently.’ -Leutwiler report
(1985).
Free trade —> Specialisation —> Comparative advantage —> Economies of scale —> Consumer
welfare & efficient use of resources.
Riccardo: comparative advantage (1817)
- What states do:
UK Portugal Total
Cloth 10 yds 3 yds 13 yds
(10 x 5 hrs = 50 hrs) (3 x 10 hrs = 30 hrs)
Wine 4 gallons 10 gallons 14 gallons
(4 x 10 hrs = 40 hrs) (10 x 6 hrs = 60 hrs)
,- What states should do:
UK Portugal Total
Cloth 18 yds 0 yds 18 yds
(18 x 5 hrs = 90 hrs)
Wine 0 gallons 15 gallons 15 gallons
(15 x 6 hrs = 90 hrs)
N.B.: The Spaak Report (1956).
2. But…the world ain’t perfect
UK Portugal Total
Cloth 18 yds 0 yds 18 yds
(18 x 5 hrs = 90 hrs)
Wine 0 gallons 15 gallons 15 gallons
(15 x 6 hrs = 90 hrs)
Why do situations like this hardly ever occur?
- Trade barriers
- Information failure
- Transaction costs
- Buyers and sellers do not always act rationally
- Difficult market due to diverging local regulations.
How can we make the world a little bit more perfect?:
• Market integration
• Banning protectionism
For example:
• Ban on quantitative restrictions and MEQRS
• Ban on custom duties
• Ban on discriminatory national taxes
• Harmonisation of labour law, pensions, diploma requirements
• Ban on anti-competitive behaviour:
- Of states
- Of companies
,Stages of economic integration:
Add. 1. Monetary Union; 2. Full Union.
European Common Market:
White Paper: Completing the Internal Market (1985) (Jacques Delors)
Removing:
- Physical barriers
- Technical barriers
- Fiscal barriers
Single European Act (SEA) - 1986
- A new legal basis: Art. 114 TFEU
- Introduction of QMV
- Name change: from ‘common market’ to ‘single market’ / ‘internal market.
- Deadline for achieving the single market: 31 December 1992 (?)
Understanding the integration process
The Monnet method:
- Neo-functionalism —> spill-over
, Common market:
Negative integration: eliminating obstacles, removal of discriminatory restrictions.
‘The aim of the Treaties is to eliminate all obstacles to Intra-European trade in order to merge the
national markets into a single market bringing about conditions as close as possible to those of a
genuine domestic market.’ – (CJEU, Gaston Schul, case 15/81).
! Positive integration: harmonisation, modification of existing policies, joint exercise of power.
" EU: NOT either, or # both strategies are applied at the same time.
Total vs. Minimum Harmonisation
- Total harmonisation vs. minimum harmonisation
- Different legal consequences
- In practice it is not easy to establish what form of harmonisation is applied in a certain case. —>
judicial interpretation.
Part 2: General principles underpinning the internal market
1. Non-discrimination (within the internal market):
All out-of-state goods, persons, services and capital are to enjoy the same treatment as their in-
state equivalents. (N.B. discriminatory elements of national law have to be set aside; the substance
of the national law remains intact. -> ban on discrimination based on origin or nationality).
Non-discrimination in the TFEU:
Article 18 TFEU:
“Within the scope of application of the Treaties, and without prejudice to any special provisions
contained therein, any discrimination on grounds of nationality shall be prohibited.
The European Parliament and the Council, acting in accordance with the ordinary legislative
procedure, may adopt rules designed to prohibit such discrimination.”
-> the non-discrimination principle means that any national law that has discriminatory elements
can as such stay in place, but that the discriminatory elements of that law need to be set aside.
This very explicit discrimination based on nationality does not happen that often, but it can be seen
for example as covered discriminatory behaviour. -> explicit vs. implicit discriminatory behaviour.
• Introduction -> Week 9
• Free movement -> Week 10-13
- goods (-> wk. 10)
- persons (-> wk. 11)
- services (-> wk. 13)
- capital (-> wk.13?)
• EU competition law -> Week 14
- state aid
- cartels
- monopolies
Part 1: Why do we have an internal market?
1. Benefits of free trade
‘It is the maxim of every prudent master of a family, never to attempt to make a home what it will
cost him more to make than to buy. […] What is prudent in the conduct of every private family, can
scarce be folly in that of a great kingdom.’ Adam Smith - Wealth of Nations (1767)
‘A farmer may know how to sew, and a tailor may know how to raise chickens, but each can
produce more by concentrating on doing what each can do most efficiently.’ -Leutwiler report
(1985).
Free trade —> Specialisation —> Comparative advantage —> Economies of scale —> Consumer
welfare & efficient use of resources.
Riccardo: comparative advantage (1817)
- What states do:
UK Portugal Total
Cloth 10 yds 3 yds 13 yds
(10 x 5 hrs = 50 hrs) (3 x 10 hrs = 30 hrs)
Wine 4 gallons 10 gallons 14 gallons
(4 x 10 hrs = 40 hrs) (10 x 6 hrs = 60 hrs)
,- What states should do:
UK Portugal Total
Cloth 18 yds 0 yds 18 yds
(18 x 5 hrs = 90 hrs)
Wine 0 gallons 15 gallons 15 gallons
(15 x 6 hrs = 90 hrs)
N.B.: The Spaak Report (1956).
2. But…the world ain’t perfect
UK Portugal Total
Cloth 18 yds 0 yds 18 yds
(18 x 5 hrs = 90 hrs)
Wine 0 gallons 15 gallons 15 gallons
(15 x 6 hrs = 90 hrs)
Why do situations like this hardly ever occur?
- Trade barriers
- Information failure
- Transaction costs
- Buyers and sellers do not always act rationally
- Difficult market due to diverging local regulations.
How can we make the world a little bit more perfect?:
• Market integration
• Banning protectionism
For example:
• Ban on quantitative restrictions and MEQRS
• Ban on custom duties
• Ban on discriminatory national taxes
• Harmonisation of labour law, pensions, diploma requirements
• Ban on anti-competitive behaviour:
- Of states
- Of companies
,Stages of economic integration:
Add. 1. Monetary Union; 2. Full Union.
European Common Market:
White Paper: Completing the Internal Market (1985) (Jacques Delors)
Removing:
- Physical barriers
- Technical barriers
- Fiscal barriers
Single European Act (SEA) - 1986
- A new legal basis: Art. 114 TFEU
- Introduction of QMV
- Name change: from ‘common market’ to ‘single market’ / ‘internal market.
- Deadline for achieving the single market: 31 December 1992 (?)
Understanding the integration process
The Monnet method:
- Neo-functionalism —> spill-over
, Common market:
Negative integration: eliminating obstacles, removal of discriminatory restrictions.
‘The aim of the Treaties is to eliminate all obstacles to Intra-European trade in order to merge the
national markets into a single market bringing about conditions as close as possible to those of a
genuine domestic market.’ – (CJEU, Gaston Schul, case 15/81).
! Positive integration: harmonisation, modification of existing policies, joint exercise of power.
" EU: NOT either, or # both strategies are applied at the same time.
Total vs. Minimum Harmonisation
- Total harmonisation vs. minimum harmonisation
- Different legal consequences
- In practice it is not easy to establish what form of harmonisation is applied in a certain case. —>
judicial interpretation.
Part 2: General principles underpinning the internal market
1. Non-discrimination (within the internal market):
All out-of-state goods, persons, services and capital are to enjoy the same treatment as their in-
state equivalents. (N.B. discriminatory elements of national law have to be set aside; the substance
of the national law remains intact. -> ban on discrimination based on origin or nationality).
Non-discrimination in the TFEU:
Article 18 TFEU:
“Within the scope of application of the Treaties, and without prejudice to any special provisions
contained therein, any discrimination on grounds of nationality shall be prohibited.
The European Parliament and the Council, acting in accordance with the ordinary legislative
procedure, may adopt rules designed to prohibit such discrimination.”
-> the non-discrimination principle means that any national law that has discriminatory elements
can as such stay in place, but that the discriminatory elements of that law need to be set aside.
This very explicit discrimination based on nationality does not happen that often, but it can be seen
for example as covered discriminatory behaviour. -> explicit vs. implicit discriminatory behaviour.
