Giving business the tools to shape Europe’s future

Date: 14/03/1996

IF you ask a businessman anywhere in Europe about the Intergovernmental Conference which starts on 29 March in Turin, you will be confronted by a virtual lack of information.

Many businessmen believe, having heard or read about this forthcoming event, that this will be one more attempt to reform the structures of the EU or to 'correct' the Maastricht Treaty where it is still incomplete, calling the outcome 'Maastricht II'.

But most will never have heard anything about the 1996 IGC.

Yet they should be aware that at this conference, the 15 governments of the EU member states intend to reach agreement on the future shape of the Union and whether it will remain a reliable political structure, providing a framework for one of the world's biggest markets and paving the way for a political union comprising up to 27 or more member states.

The outcome of this endeavor will certainly be of immense importance for all European citizens, as well as for businesses inside and outside Europe. Furthermore, it might well be the last chance for several years to provide the Union with the stability and flexibility it needs, preventing nationalistic solo runs and a repeat of the situation in the Thirties.

Apart from 'Maastricht I', preparation of the IGC will be accompanied by a broad discussion, at least amongst those who are interested in the future structure of the EU. However, this is not a real public debate, since it is dominated by experts or representatives of public services, as shown during a recent hearing at the European Parliament. Participation by business and business associations still remains more the exception than the rule.

Evidently, the future of the EU is not dependent simply on new rules concerning its decision-making procedures, a new weighting of votes in the Council of Ministers or a slimmed-down administration. The outcome of the 1996 IGC will inevitably have an impact on other important issues, such as economic and monetary union (EMU), future structural policy, the Common Agriculture Policy and, last but not least, the financing of the EU.

Unfortunately, some politicians are already downgrading the IGC. Given the actual situation in the member states, they predict a very modest outcome.

The Chambers of Commerce, speaking on behalf of business, do not seek to make detailed political recommendations on the institutional reform of the EU. But they do expect the IGC to achieve some fundamental goals concerning efficiency, transparency and equity in the implementation of EU legislation.

Decision-making in the Union must become more efficient by reducing the time-scale from the drafting of a proposal and its passage through the different stages of consultation to final agreement in the Council or Parliament; improving the process of assessing the impact of any legislative proposal on business, particularly on small and medium-sized enterprises; and increasing supervision of the execution of European decisions in

the different member states or their transposition in national law.

Decision-making in the EU should also be made more transparent by improving the extent to which the decisions are reached in public and intensifying the consultation of commerce and industry on a European and national or even regional basis.

Finally, the European Commission, as the executive power, should develop new instruments so that across-the-board implementation of European decisions in the member states is really guaranteed. This could be achieved by observing closely the extent to which bureaucratic burdens on business are reduced rather than increased by remaining or newly-created national arrangements, and improving the capacity of the European institutions to enforce the implementation of decisions in an equal way.

A study by Eurochambres of non-tariff barriers to the single market has confirmed that this is a realistic issue.

In spite of the fact that the volume of intracommunity trade has greatly increased, and enormous progress has been made as far as mutual recognition of technical standards is concerned, the single market is still not working properly. Even worse, some member states have started to require additional forms and authorisations, particularly for 'health reasons', which slow down Community trade considerably.

Efforts must therefore be made at Union level to improve and reinforce legal and administrative structures to meet the needs of both citizens and businesses.

The single market is one of the greatest achievements in European history. But it requires stricter control of national application of EU law by the Commission. This implies sanctions if necessary, including fines levied by the Court of Justice, against those member states which systematically fail to respect Union legislation or undermine the single market through illegal state aids.

It is a well-known fact that the single market itself needs to be completed, notably in the field of tax legislation. Tax issues still require unanimity within the Council for approval. This is an exception to the normal majority voting on single market issues. Experience shows that unanimity amongst 12 or 15 finances ministers is a very rare event. Imagine how rare it will become when the Commission faces 27 finance ministers.

Needless to say, the completion of the single market under these circumstances requires the abolition of the unanimity rule for tax issues.

One example is the current VAT system, which is far from ideal for business. Of course, it is not as bad as the customs declaration systems which existed before 1993, but the complex nature of the VAT transitional system currently in force (and probably here for many years to come), variations in rates, different administrative procedures and the lack of cooperation between member states is very often a barrier to the free movement of goods in the EU which is difficult to overcome.

Worse still is the situation in the field of direct taxation. The lack of harmonisation, for example, in the taxation of capital - withholding taxes on interests, royalties and savings - results in undesirable capital movements which do not meet economic or commercial needs.

Taxation problems related to the succession of business are particularly damaging to SMEs. The Chambers of Commerce estimate that 10&percent; of all insolvencies in the EU can be traced directly to succession-related problems. Difficulties with the taxation of the transfer of SMEs may account for the demise of some 30,000 businesses and 300,000 jobs in Europe every year.

Economic and monetary union is a natural complement to the single market. It is absolutely necessary to complete and stabilise the degree of economic integration already achieved - the source of wealth and economic growth, which is the main precondition for tackling the unemployment problem.

The core of EMU will be the single currency to be introduced in 1999, which will replace national currencies in participating countries three years later.

The Chambers of Commerce fully support the creation of EMU. The combination of EMU and a completed single market will give European business an economic advantage which it has never known and which will increase greatly the competitiveness of European companies, particularly SMEs.

Given that the economic benefits of this scenario are as clear as they are, strong, continuous and unwavering political will, political effort and political courage must be shown by every member state.

Based on current evidence, however, business is becoming increasingly hesitant, less than three years away from monetary union. This is the result of little or no information about the modalities of the introduction of the single currency, in which countries this will occur, and how long the transitional period will last.

An overwhelming majority of European businesses know little more about the single currency than its agreed name, the Euro. This is certainly is an intolerable situation.

The Chambers of Commerce believe the European institutions and national governments should not exhaust their political will, effort and courage in running expensive information campaigns.

These, of course, are necessary, but businesses need more than information. They expect a clear and credible action plan for the introduction of the single currency to be discussed and agreed during the forthcoming month, in parallel with the IGC.

The whole business community, including the Chambers of Commerce, is prepared to offer cooperation and advice during this period of crucial decisions.

To quote the former French Prime Minister Clémenceau in a slightly different context: “The European Union is too important to leave it to the politicians alone.”

Antoni Negre i Villavecchia is president of the Barcelona Chamber of Commerce and Industry and acting president of Eurochambres, the Association of European Chambers of Commerce and Industry.