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SPEECH/07/268
Günter Verheugen
Vice-President of the European Commission responsible for
Enterprise and Industry
Creating a business friendly Europe
British Chambers of Commerce
Brussels, 2nd May 2007
Let me start by giving you some "feel-good" figures, some good news. Perhaps it
will counterbalance the impression you might sometimes get that Brussels is
making life worse for business:
- Growth in Europe this year is forecast at 2.7%;
- 7 million new jobs will be created by 2008;
- Europe continues to be the most attractive investment destination in the world
according to a report by Ernst & Young last week;
- The innovation gap between Europe and the US and Japan narrowed for the
fourth year running in 2006 according to the European Innovation Scoreboard in
February.
I don’t pretend that there is not a lot still to do. Nor do I claim the credit for this
positive outlook. But I am often frustrated that Europe is somehow portrayed as not
business friendly; …that "Brussels" is portrayed as the source of unnecessary
bureaucracy and meddling. Some seem to look out only for scandals while the
success story stability and prosperity, of peacefully uniting a divided continent is not
getting through. Regardless of all problems we still have left to tackle, European
integration is a success, also economically.
"From the Common market to the Single market"
For a success story you need look no further than the single market itself. It is a
remarkable achievement.
Some people tend to forget that the Internal Market rules are here to replace 27
differing national systems and norms. They forget that those rules and norms once
made trade within Europe a far more frustrating and difficult activity, particularly for
small businesses.
In fact the single market it is a perfect example of creating a business friendly
environment.. Let me give you an example:
Until 2000, a company wanting to place radio equipment on the market in all EU
countries would be faced by 1,400 national type approval regulations – and there
were only 15 Member States at the time! The same product would be tested by
each national authority, each time this would take between 2 and 6 months. In April
2000 one Directive replaced all this by a single regime allowing the manufacturers
to test themselves in their factory, once and for all, for the whole Union.
The single market wasn't completed in 1992. Today one-quarter of all intraCommunity trade is still not covered by harmonized rules and will continue not be
governed by harmonized rules with the help of mutual recognition. The "new
approach" allows us to have an even lighter regulatory touch in areas governed by
EU legislation. For example, we estimate that the machinery safety directive would
have taken no less than 80 "old approach" harmonization directives to cover the
same scope.
Increased cross-border trade remains the best way to enhance the competitiveness
of the European economy, and therefore Europe's most effective response to
globalisation. But making markets function properly is an ongoing process.
This is why the Commission has launched its Review of the Single Market to
identify, together with stakeholders and other EU institutions, the most effective
ways to improve its practical functioning.
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Many of the answers are in the hands of the Member States, whom we constantly
push to implement legislation on time and correctly. Transposition deficits of single
market rules are still far above the target of 1%. Technical barriers continue to
spring up like weeds. Only 16% of all EU procurement is publicly advertised and
therefore open to cross-border bidding. Member States must co-operate more with
each other and provide mutual assistance. This will boost confidence in each other's
regulatory structures and controls which is a pre-requisite for an effective Internal
Market.
Many companies, in particular SMEs, are still discouraged from venturing outside
their domestic market because they have to prove that their products fulfill the
technical requirements in the destination Member State. That is why I proposed in
February to facilitate the non harmonised trade by shifting this burden of proof so
that the onus is placed on the Member States' authorities to justify any refusal to
allow a product onto their market.
The Commission continues to drive the process of single market integration
forward. But of course Community regulation and activities are far more wide
ranging and impact in many and varied ways on the business environment.
Our reform project - the Lisbon agenda for growth and jobs – is ambitious and
comprehensive. We aim to be on top of the world. This Commission in particular
has declared its aim as to be business friendly. We are pursuing a modern SME
policy, a new innovation policy, we are committed to boosting employability. We
recognize that reform is needed not only at European level, but also at national
level, and the Growth and Jobs Agenda provides the governance mechanism to
achieve this.
Better regulation is a vital condition for achieving economic reform.
A case in point is our drive for better regulation, which is a vital part of our reform
programme. Studies in Denmark and Holland demonstrate that the majority of
administrative burdens still have their origins at the national level. Frequently these
are additional burdens in the transposition of European legislation – "Goldplating".
Administrative burdens therefore have to be tacked at national and European levels.
I firmly believe Milton Friedman's adage that "the business of business is business".
Entrepreneurs and managers should be free to spend their time creating wealth,
goods, services and jobs, not filling in forms or complying with unnecessary
bureaucracy. Administrative costs alone amount to 3.5% of EU GDP. That is why I
recently presented an Action Programme setting out concrete steps for the
Commission and Member States to take to reduce administrative burdens.
Our better regulation agenda has already led to the withdrawal, reduction or
simplification of many pieces of legislation. Now I am proud to say that we have set
a clear target of cutting administrative burdens on business from EU legislation by a
quarter by 2012. If Member States respect their commitments to meet similarly
ambitious targets at national level this would boost European GDP by 1.5%: that
means 150 billion Euro per year. This impact justifies my decision to make reducing
administrative burdens the cornerstone of our policy to create a business friendly
Europe.
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The programme I have presented will measure the cost of administrative burdens in
thirteen areas that are often considered the main nuisances by small businesses.
These include company law, employment relations, taxation and VAT, statistics and
transport. It will identify information obligations in these sectors and make proposals
for removing those which are frankly unnecessary and can be removed, without
jeopardizing the underlying policy objectives.
This process of measurement and identification will take time. But I am committed
to deliver quick results. The demonstration of that commitment is in the 10 concrete
reduction measures that we have already identified for fast-track action. One of
these measures has already been adopted, and all 10 should be passed during the
German and Portuguese Presidencies. These 10 measures alone could, in a single
swoop, reduce the burdens on business by 1.3 billion Euro every year. What are
they? For example we propose:
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To make information requirements voluntary for stockholders in case of merger
and division;
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To remove outdated documentation obligations on tariffs for transport
companies
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To exempt small businesses such as local butchers and bakers from certain
danger analyses in the field of food hygiene, without compromising standards.
Simplification of legislation is another area which might not make the headlines very
often, but the effects are very real and we are just getting on with it.
Our current simplification drive is by far the most ambitious such exercise ever
undertaken by the Commission. It started with about 100 initiatives covering a broad
spectrum of activities, so that every organization and individual can reap the
rewards of better regulation. For example:
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we are currently revising payment services for consumers and firms to make
cross-border payments as easy and cheap as those taking place within national
boundaries.
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we are modernising the European customs code by introducing "paper free"
procedures. These streamlined processes and rules will boost international
trade, with a particular positive impact on smaller businesses.
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again SMEs will particularly benefit from simplification in registration of
pharmaceuticals and consequent reductions in fees.
This is a rolling programme. We added a further 43 new initiatives last November progressively extending the scope of the simplification exercise to all EU policy
areas. We have already achieved one-third of the Simplification programme and 59
initiatives are now planned for adoption in 2007, all of them helping to simplify the
life of European businesses. And our efforts will intensify in the future, particularly
with regard to areas such as construction, business statistics and the environment.
Unfortunately far too many of these, once adopted by the Commission, then
languish in the Parliament or Council: The current count is 33. We must push these
institutions to assume their important responsibility.
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Impact assessments
Better regulation is not deregulation. It is about achieving varied policy objectives in
ways which are proportionate and smart. Parallel with our efforts to reduce
administrative burdens and simplify existing legislation, we are also making sure
that new proposals take into account the costs and benefits of all available policy
options.
All Commission legislative (and significant non-legislative) proposals are now
accompanied by an impact assessment. Already in 2007, 26 legislative proposals
have been accompanied by impact assessments. We have now established an
independent Impact Assessment Board within the Commission. All assessments
must be considered by this Board and all assessments will also be made public. As
a result we expect to see a substantial improvement in the quality of these
assessments. It is now essential that the Council and Parliament follow our lead and
assess the impact of their amendments to Commission proposals.
Balancing policy objectives
Impact assessments must consider many trade-offs. I have instructed my services,
as the primary interlocutor for business within the Commission, to constantly and
consistently apply a competitiveness test in such assessments. This is important in
a world of many legitimate policy objectives, some of which seem to change with
the winds of fashion.
Two years ago everyone was shouting “jobs, jobs, jobs”, now everyone is crying
“climate, climate, climate”. But these are not irreconcilable. We are not playing a
zero-sum game where we either improve our productivity and competitiveness, or
we achieve our environmental, social or ethical objectives.
Saying that these varied objectives can be reconciled does not mean that there is a
"win-win scenario” around every corner. There will always be trade-offs. But I
believe that we are witnessing an increasingly mature and informed approach from
business leaders like you, from civil society in general, and from policy makers. It is
built on increasing consensus that regulation is necessary to serve the public
interest in areas such as safety, health, the environment and so on; but that there
are good and bad ways in which it can do this. A regulation can still serve its public
interest objective and minimize its adverse side effects on businesses. This is what I
call smart regulation.
I also believe that we are seeing European policy makers move away from the
reflex of "if it moves regulate it". I have called this a "cultural revolution", but it is
perhaps accurate to call it a "cultural Evolution" as it is a long process. You cannot
just tell people to change their behaviour and expect it will happen. It is rather easy
to listen, but understanding takes more effort, and if we are to build regulation, or
non-regulation, or smart regulation, on a proper understanding of business I believe
that officials need to experience business for themselves. That is why I have
insisted that every senior official in my services must spend one week in an
enterprise.
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Ladies and Gentlemen, I have painted a very positive picture of Europe as a place
to do business. I think our achievements so far deserve some recognition. But I am
also optimistic for the future. I believe that the combination of a mature attitude of
business to regulatory issues, along with a better understanding by policy makers of
business needs, provides the basis of a positive partnership. But I wish also to
recall your co-responsibility for continuing the success story of EU - do business as
best as you can, driven by our shared values with full responsibility for your
employees and the region you are located in. Continue to increase your investment
in research, innovation and training. Continue to take risks and generate growth,
jobs and prosperity. That is the true meaning of partnership. Upon this basis we
can ensure that the reform process continues.
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