To what extent is the EU Single Market resilient?

This blog post is based on the discussion that took place on January 29, 2021, within the JMN EULEN online lunch meetings.

Maciej Bernatt (chairing the discussion): The COVID 19 crisis has brought challenges to the proper functioning of the EU Single Market. These challenges include, among other things, export restrictions among the EU Member States and the closing of borders affecting the free movement of people, products, and food supply. While many of these measures were arguably justifiable, some of them could in practice be protectionist in nature and thus undermine the very foundation of the EU Single Market. The question is how the EU and the EU Member States should deal with the crisis situation and yet ensure the values and freedoms of the EU Single Market. In this context, it is also crucial to ask about the permissibility and the legality of the restrictions imposed by Member States.

Hans Mojet: The Single Market is the economic basis of the competitiveness of the EU. It has been put under severe strain during the COVID-19 crisis, aggravating our European businesses and people. We are still in the midst of addressing this crisis.

In order to draw lessons, it is critical to present a comprehensive evaluation of the crisis so far. The analysis should include developments with regard to the free movement of goods, persons and services from both an economic and a legal perspective. It should focus on both procedures and measures taken by the Commission and Member States and their relation to the Single Market acquis. The evaluation should help us to ensure the Single Market remains resilient, well-functioning and strong during a crisis and maintain a level playing field.

Firstly, a resilient Single Market means keeping our borders open as much as the public health situation allows, avoiding border controls and intra-EU export bans. These bans caused serious disruptions of value chains and led to shortages in the initial stage of the crisis.

Secondly, the implementation of Commission guidelines with regard to the Single Market, including the guidelines on Green Lanes. A potential solution would be to make standard documents, as included in the annex of the Green Lane guidelines, legally binding during times of crisis. The use and uptake of digital documents should be encouraged as well.

It would be desirable to assess the crisis-preparedness of the Single Market rules. At the same time, it would be useful to map positive experiences with temporary exemptions in times of crisis, such as driving licenses and driving hours. Changing legislation in order to be able to use these exemptions in times of crisis would be desirable. At the same time, we should prevent backtracking with regard to social and environmental standards.

Olivier Linden:In a recent paper, the National Board of Trade Sweden draws some preliminary lessons from the impact of COVID-19 on the Single Market. Our focus is on the hundreds of measures adopted by the Member States to fight the pandemic between March and September 2020: export restrictions on medicines and PPEs, border controls and lockdowns. Based on our review of national notifications, trade statistics, and case-studies, we show how these measures impacted the functioning of the Single Market. During the initial phase of the crisis, three of the four freedoms were negatively affected, with people unable to travel abroad, the export of certain health-related products being stopped and a sharp drop in services trade (by 10-20% for Swedish intra-EU export). We then break down these issues into three categories for which we discuss possible improvements.

The first category concerns the lack of transparency surrounding the restrictions imposed by the Member States. This could be remedied by strengthening the notification mechanisms for goods, services and persons.

The second category relates to lawful restrictions. Given the margin of manoeuvre of the Member States in protecting the health of their citizens and the precautionary principle, it is likely that most of the restrictions imposed during the initial phase of the pandemic complied with EU law. Enforcement mechanisms may therefore not be pertinent here. More appropriate are support and coordination measures adopted at EU level. One crucial question, however, is how far the EU can go within the limited scope of its competence in health policy.

The last category refers to unlawful restrictions, i.e., measures in breach of Single Market rules. There are indications that national rules justified under EU law were applied in an arbitrary manner in individual cases. In our view, these occurrences of local misapplication of EU law confirm the need for a decentralised enforcement of Single Market rules.

Sybe de Vries: So far the EU Single Market has proven to be ‘pretty resilient’ despite the various national measures to contain the spread of the coronavirus with unprecedented disruptive effects on free movement. There are at least two reasons for this.

First, the EU Single Market rules – the ‘four freedoms’ – are sufficiently flexible to allow Member States to take action for public health reasons. According to one of the classical judgments of the Court of Justice, De Peijper (C-104/75), the interest of public health ranks first amongst the public interests that Member States may invoke to justify restrictions on cross-border trade.

Second, the EU Single Market has largely constituted the avenue for the EU institutions, and particularly the European Commission, to pursue a more coordinated approach, to reinforce national measures for the benefit of public health but also to mitigate their effects on free movement. One example is the guidelines on ’green lanes’ to ensure speedy and continuous flow of goods across the EU and to avoid bottlenecks at key internal border crossing points.

But the question is whether the EU Single Market is sufficiently resilient? We have seen that some Member States have ‘abused’ the Covid-19 pandemic to protect their own markets, for instance to favour domestic food products, requiring retailers to purchase more than 90 percent of the milk from domestic dairy producers. Strict enforcement of EU internal market rules is indeed required here.

More difficult to deal with are restrictions, such as the reinstalment of border closures which, despite the ‘green lanes’, hugely impact the transit of goods. The European Commission constantly calls upon solidarity, an important EU principle, but fragile. More is thus needed to reinforce the principle of solidarity and to make the EU Single Market more future-proof, also and particularly in times of crises.

Maciej Bernatt: The discussion about resilience of the EU Single Market should also take into account the developments concerning EU competition rules since some of the processes may materialize in similar ways in both areas. In particular, we can observe the challenges related to the promotion of national champions by member states as well as growing role of state as an owner in the economies of some Member States. What’s more is that in some Member States the rule of law crisis and the rise of illiberalism undermine the functioning of national competition law systems. On top of it, the voices are raised, which point out at the need of reforming the EU merger review system so as it better accommodates industrial policy considerations and competiveness of European firms on global scale. These developments may undermine EU competition rules and the role they play for the effective functioning of the EU Single Market and for the European consumers. At the same time, the European SMEs are under growing economic pressure related to Covid-19 crisis what can translate in the long run in growing concentration on some markets.

To sum up, there is certainly a need for public debate on the resilience of the EU Single Market in a time of challenges. Hopefully, Covid-19 crisis may offer a chance for reforms of the EU Single Market to make its functioning even more beneficial for European citizens.