A deeper and more complete the single market in the digital field could raise the long-run level of EU28 GDP by at least 4.0 per cent - or around 520 billion euro at current prices. However, the regulatory complexity of de-compartmentalising the existing markets in this field suggests that such a potential may take a sustained period of time to realise. A plausible assumption is that, with the right policies in place, around half that gain to the European economy could be achieved in coming years. A detailed Cost of Non-Europe Report on this sector has recently been commissioned by the European Parliament’s Committee on the Internal Market and Consumer Protection. It will look at specific dimensions, such as cloud computing and digital payments, and first results of this research are expected in May 2014.
A fully-functioning digital single market would bring significant gains over time, promoting:
However, the current situation in the digital field is still largely one of the fragmentation of an incomplete single market into essentially 28 national markets. There is a relatively low level of cross- border e-commerce at a time when such activity within individual Member States has been growing rapidly, admittedly from a low base. Too many barriers still block the free flow of goods and online services across national borders.
The most serious impediments relate to e-privacy, e-payments, VAT payments, consumer protection and dispute resolution, data protection and geographical restrictions (access to products sold electronically which are restricted to certain geographic areas). There is a clear need to update EU single market rules for the digital era, establishing a single area for online payments, e-invoicing, protecting intellectual property rights, clarifying VAT requirements, generating trust in e-commerce, and affording adequate protection to EU consumers in cyberspace. The complexity of the necessary action means that the full potential of action in this field can only be realised in the long term, but equally suggests that approximately half of the potential gains should be achievable in coming years.
There are several studies which confirm the size of the potential gains to be expected from the realisation of the digital single market. Detailed work undertaken by Copenhagen Economics in 2005, 2007 and 2010 estimates the long-term increase in GDP - as a result of an acceleration of the digital economy, involving increased use of online services, improved digital infrastructure and improved e- skills - to be over 4.0 per cent.
A recent Conference Board study argues that there is an urgent need for an integrated single digital and telecoms market to mobilise the potential of the digital economy, innovation and services. It develops four scenarios that show that information and communications technology (ICT) can be a major source of growth for the European economy (up to half of GDP growth in the Union). Andrea Renda of CEPS points out that the achievement of a more integrated digital single market will require a major re-think of the regulatory framework . The European Commisison estimates that moving from the current stuation where electronic invoices account for five per cent of ‘B2B’ transactions towards widespread acceptance would, of itself, bring benefits of 40.0 billion euro per year. These savings would be enhanced by the operation of the Single European Payments Area (SEPA)
According to the European Commission’s latest Consumer Conditions Scoreboard , EU consumers are still considerably more likely to purchase online from national providers (41 per cent per cent) than from those located in other EU countries (11 per cent). The main issue is one of consumer confidence. A recent study for the European Policy Centre (EPC) by Fabian Zuleeg and Robert Fontana-Reval points to the lack of effective pan-European legislation to protect consumers from fraud, rogue trading and identity theft as a failure in the provision of a public good. They conclude that there is economic justification for intervention by government authorities to put in place a legislative framework to protect consumers at EU level. The should represent a ‘win-win’ situation for both consumers and businesses, since the status quo is sub-optimal for society as a whole.
The European Parliament takes the view that completing the digital single market would be a crucial means to help stimulate growth and create employment in the European economy. It believes that fragmentation and lack of legal certainty are primary concerns in this field, and that inconsistent enforcement of existing EU rules in Member States also needs to be addressed. Fragmentation is also partly due to the poor or late transposition of existing directives by Member States, a factor which should be subject to more rigorous scrutiny by the EU institutions. The Parliament has called for targetted legislative proposals to strengthen consumer access to, and trust in, products and services traded online, and to offer consumers a simple one-stop shop for solutions. It favours developing European standards to facilitate cross-border e-commerce, backed by a European financial instrument for credit and debit cards. It has recognised the potential of cloud computing and called on the Commission rapidly to propose a European strategy in a market worth some 160 billion euro.
The existing single market for goods and services has already contributed significantly to economic growth and consumer welfare in the European Union. The European Commission estimates that progress in this field over the period 1992-2006 raised EU GDP and employment by 2.2 per cent and 1.3 per cent, representing figures of 233 billion euro and 2.8 million persons respectively. It is estimated that a further deepening of this 'classic' single market could still yield very significant additional gains for EU consumers and citizens, raising EU28 GDP by a further 2.2 per cent annually over a ten year period, if remaining barriers could be eliminated.
A research paper on this subject, commissioned by the European Parliament in 2013, is available for download at: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/494463/IPOL-JOIN_ET(2013)494463_EN.pdf The Parliament’s Committee on the Internal Market and Consumer Protection has recently commissioned a set of Cost of Non-Europe Reports on the continuing completion of the single market in public procurement, free movement of goods, free movement of services, and the consumer acquis, as well as in the digital single market (see point 1 above). The first results from this research are expected in May 2014.
The single market has already reached a high level of economic integration in what is now the largest combined marketplace in the world – based on the successful removal of most non-tariff barriers to the free movement of goods and services, so eliminating the majority of physical, fiscal, legal and technical (product standard) obstacles to intra-EU trade. Despite the largely successful adoption and implementation of over 3,500 individual single-market measures over the last three decades, there are significant remaining challenges and 'missing links' . These include the potential for:
A cautious analysis of the potential for continued efficiency gains in the European economy suggests lower-bound gains in the region of 1.8 per cent of long-term EU GDP (some 235 billion euro per year), compared with the staus quo. A complementary on-going study on the EU consumer acquis considers that the consumer detriment from not having a ‘complete’ single market is in the order of 58.0 billion euro per year, evidenced in a comparison of price convergence in the EU and United States.
While substantial gains have been achieved so far, a number of studies point out that a fuller and deeper single market could yield even greater benefits. In 2010, the Monti Report suggested that half of all single-market directives face implementation difficulties of some kind. Still significant 'missing links' in the single market included not only those mentioned above – but also the comprehensive implementation of the Single European Payments Area (SEPA) for cross-border financial transfers, which alone could add another 0.9 per cent to GDP
One recent studyon the benefits of the single market estimates that if all remaining barriers to trade in the EU were fully eliminated within the European Union, the level of EU GDP could be as much as 14 per cent higher in the long run relative to a scenario of no further integration. Based on this approach, another study deduces that even a more modest objective of reducing the remaining trade barriers in the EU by only 50 per cent would raise the long-run level of EU GDP by 4.7 per cent. A further study identifies areas in which the single market needs to be further developed and suggests corresponding policy options. Econometric analysis of six key sectors suggests that completing the single market in these sectors could boost them by 5.3 per cent, and EU GDP by 1.6 per cent over the longer term.
The European Parliament believes that freedom of movement of goods, capital, services and people still has an untapped potential for both businesses and citizens in terms of efficiency, growth and job creation. It considers that the single market is in significant need of a new momentum and calls on the European Commission to bring forward legislation accordingly. Such pressure led to the Commission’s proposals for the Single Market Act and Single Market Act II. It is also concerned that the environmental and social dimensions should be properly integrated in the single-market strategy, on the following basis:
EP resolution of 20 May 2010 on Delivering a single market to consumers and citizens (2010/2011(INI))
|Rapporteur:||Louis GRECH (S&D), IMCO Committee|
EP Resolution of 25 February 2014 on Single Market Governance (2013/2194(INI)).
|Rapporteur:||Sergio Gaetano COFFERATI (S& D Group), IMCO Committee|
Other significant reports in this field in the 2009-2014 Parliament include:
A Single Market for Europeans (2010/2278(INI)).
|Rapporteur:||Antonio CORREIA DE CAMPOS (S&D Group), IMCO Committee|
A Single Market for Enterprises and Growth (2010/2277(INI)).
|Rapporteur:||Cristian BUSOI (ALDE Group), IMCO Committee|
Governance and Partnership in the Single Market (2010/2289(INI)).
|Rapporteur:||Sandra KALNIETE (EPP Group), IMCO Committee|
Motion for a Resolution of 14 June 2012 on Single Market Act: The Next Steps to Growth.
|Rapporteur:||Malcolm HARBOUR (ECR Group), IMCO Committee|
Twenty main concerns of European citizens and business with the functioning of the Single Market (2012/2044(INI)).
|Rapporteur:||Regina BASTOS (EPP Group), IMCO Committee|
The Governance of the Single Market (2012/2260(INI)).
|Rapporteur:||Andreas SCHWAB (EPP Group), IMCO Committee|
The establishment and completion of a fully-functioning system of Banking Union has the potential to help avoid siginificant recapitalisation costs and GDP loss in coming years, by playing a key part in averting and containing any future financial crisis. Initial research on this subject suggests that a reasonable assumption is that the potential gain to the European economy, compared to past experience, lies in the area of 35.0 billion euro per year.
A research paper by the European Parliament on this subject is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf
The cumulative GDP loss from the recent economic and financial crisis was very substantial indeed - estimated to have at least 2.12 trillion euro within the EU - over the period 2008-2012. Putting in place effective measures at all levels to avert or attenuate the recurrence of any such a crisis would thus bring considerable welfare gains in the future. The proposals for a ‘Genuine Economic and Monetary Union’, first developed by four Presidents of EU institutions in June and December 2012, involve several major initiatives in this direction. The establishment and completion of a fullyfunctioning system of Banking Union has a critically important part to play in this process.
In a counter-factual analysis on the effect of the crisis if the bail-in rules agreed in June 2013 had already been in place in September 2008, Jacob Funk Kirkegaard of the Peterson Institute concluded, after examining the balance sheets of the two largest bank failures in the eurozone - Bankia (18.0 billion euro) and Anglo-Irish Bank (34.7 billion euro) - that:
Although the overall cost of bank recapitalisation in the euro area since 2008 cannot be construed as an accurate estimate of the cost of averting a further financial crisis, as an approximation, circa 10 per cent of that overall cost would have been avoided had the bail-in rules been in place.
If it is assumed that the discount rate equals the average long-term government bond yield for the euro area over the pre-crisis period, the recapitalisation cost of banks could be 177 billion euro, and if the probability of a repeat crisis is 10 per cent - namely of a crisis roughly every decade - then the annual cost saved would come to 17.7 billion euro.
To this should be added:
The above costs averted come to a total of 130 billion euro per year. It is however plausible to assume that, even if the EU were to implement all the measures proposed, there can be no absolute certainty that a crisis could be averted. Equally, not all the expected benefits attributed to EU-wide action might accrue. Applying an appropriate discount rate and taking into the current strengthening of economic governance and other reforms envisaged, the 130 million figure (per year) could sensibly be scaled down very substantially to around a provisional figure of 35.0 billion euro per year.
The European Parliament believes that the governance of the Economic and Monetary Union should take place within the institutional framework of the Union, which is a precondition for its effectiveness and for filling the current political gap between national and European policies. It stresses the need for further integration within the EMU to prevent future crises and sovereign default.
The steps towards a Genuine EMU should combine integrated financial, fiscal and economic policy frameworks, including a Social Pact. The Parliament has called on the Commission to propose measures to address, in a true Community framework and with genuine accountability, the resolution of failing banks, guaranteeing a common rule book, as well as a common set of intervention tools and triggers, whilst limiting taxpayers' involvement to a minimum, through the creation of harmonised, self-financed industry resolutions funds. It also favours a cross-border framework for Insurance Guarantee Schemes across Member States.
EP Resolution of 20 November 2012 with recommendations to the Commission on the report of the Presidents of the European Council, the Commission, the European Central Bank and the Eurogroup "Towards a genuine Economic and Monetary Union", Legislative initiative report under Rule 42 (2012/2151(INI)), based on THYSSEN report.
|Rapporteur:||Marianne THYSSEN (PPE), ECON Committee|
The potential efficiency gain from having a fully integrated and effectively regulated EU-wide set of financial markets could be of the order of 60.0 billion euro per year, measured in interest savings alone.
A European Parliament research paper on this subject is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf
Market integration implies convergence of prices at lower levels, as has been the case in the motor car industry and other sectors. Applying this basic concept to the euro area, convergence could imply interest savings in the residential mortgage market alone of an estimated 63.0 billion euro per year, based on prevailing rates. About 75 per cent of euro-area firms rely on banks for external funding. Savings for SMEs - which account for 99.8 per cent of EU companies and 70 per cent of all employees - could be in the order of 53.0 billion euro, after a successful phasing-in.
However, given that language barriers and some other significant constraints - together with lockingin effects, vertical integration and possible country-risk pricing - will undoubtedly persist, even with the further integration of financial markets, the potential gain of 116 billion euro would need to be significantly discounted, leading to a more modest figure of some 60.0 million euro per year.
The financial crisis has revealed weaknesses in regulatory coordination across the European Union. Research has pointed to how asymmetric policy implementation aggravated irresponsible risk-taking behaviour among financial institutions, while evidence also indicates that those financial institutions deemed 'too big to fail', which operated outside and across national regulatory supervisory regimes, were the ones most prone to engage in highly-leveraged, risky lending.
In the absence of barriers and asymmetric costs, market integration will imply price convergence at lower levels, as shown in a core studyon market integration for cars in the EU, which found that prices tend to converge at purchasing power parity. Another author argues that greater EU financial integration is needed, as the harmonisation of single market rules does not cover all the interventions required to deal with government ‘moral hazard’ when driven by competition for capital. An imperfect banking union can undermine citizens’ welfare in a currency union, thus threatening the stability of the euro area.
The economic, financial and fiscal crisis in the EU has significantly broadened economic and social disparities among Member States and regions, resulting in an uneven distribution of inward and outward investment across the European Union. The European Parliament considers it is necessary to establish a consistent framework of stability within monetary and fiscal and trade policy, in order to facilitate the flow of direct investment in all Member States and EU regions, thereby contributing to correcting the EU's macroeconomic imbalances.
Beyond the establishment of a more secure banking sector through the progressive realisation of a Banking Union, the Parliament considers it important also to reduce structural imbalances in the financial markets. Those imbalances are partly responsible for substantial disparities in interest rates, access to credit and cost of provision of financial services.
It has called on the European Commission to secure a general proposal on legal certainty in securities law to ensure a smoother and more secured functioning of the securities markets and their central depositories. It has called on Member States to ensure the full implementation of Capital Requirement Rules (CRD III), as well as revised rules based on best international standards (CRD IV), with the new set of rules compiled in a single rulebook. It has also addressed the issue of remuneration policies in the financial sector. The overall purpose is to prevent junk financial institutions, using a high level of leverage on limited own assets, to operate in the market and put customers at risk.
The Parliament has stressed the need to adopt and fully implement new rules on financial markets operations aimed at better practices in the management of money market funds and 'short-selling' operations. Such rules seek to address the problem of complex (less liquid) products, which nonetheless a have a vast volume of trade and a potential effect on market volatility: over the counter (OTC) derivatives and Credit Default Swaps (CDS). Finally, the Parliament has recalled the importance of implementing a more transparent framework for state aids to the financial sector (following the temporary framework introduced as result of the financial crisis in 2008) to prevent distortion within the single market, as well as excessive public spending. (The new framework entered into force in August 2013 and has still to be evaluated).
Unless fiscal policies are effectively coordinated, there can be significant negative 'spill-over' effects between the Member States participating in Economic and Monetary Union (EMU), and across the European Union more widely. The upper limit of the size of such spill-over effects has been estimated to be 0.25 per cent of GDP. For the EU as a whole, this implies a potential total cost from poor coordination or non-coordination of fiscal policies of some 31.0 billion euro per year. The relevant EP research paper is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf
In a recent staff discussion note, the International Monetary Fund (IMF) has explored the role that deeper fiscal integration can play in correcting structural weaknesses in the EMU system, reducing the incidence and severity of future crises, and lending long-term credibility to the crisis measures in train. Although country-level adjustment and support via the European Stability Mechanism (ESM), European System of Financial Supervision (ESFS) and OMT backstop, together with progress towards Banking Union, are important achievements, a clearer ex-ante approach to fiscal discipline and transfers is very important to further strengthen EMU and help ensure the stability of the euro area.
The European Parliament has called for a comprehensive overhaul of the framework for economic governance in the EU, with the strengthening of fiscal surveillance and the effective application of strengthened rules for the Stability and Growth Pact. It believes that an integrated fiscal framework is an essential part of a Genuine EMU - based on a functioning Six-Pact and Two-Pack, a Fiscal Compact under the Community method, a European Budget funded by own resources, a gradual roll-over of bad debts in a redemption fund, and measures to fight tax evasion accompanied by better practices in taxation. In a Genuine EMU better ex-ante coordination of economic and fiscal policies (through an improved European Semester process) should also be the rule. A new Social Pact at European level, with binding minimal requirements, is also considered an important element of a new integrated economic framework and a step towards crisis prevention.
EP Resolution of 20 November 2012 with recommendations to the Commission on the report of the Presidents of the European Council, the Commission, the European Central Bank and the Eurogroup "Towards a Genuine Economic and Monetary Union", (2012/2151(INI)).
|Rapporteur:||Marianne THYSSEN (PPE), ECON Committee|
The potential benefit of a instituting a common deposit insurance scheme (DGS) within the euro area is estimated at 13.0 billion euro per year for three vulnerable countries (Greece, Ireland and Spain). This figure could potentially rise to 30.0 billion euro, if other vulnerable states (Portugal, Italy, Cyprus and Slovenia) were included. The relevant EP research paper is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf
As a result of the crisis, bank deposits have decreased significantly in certain Member States since 2010 - by 11 per cent in Spain, 30 per cent in Greece, four per cent in Ireland, and 29 per cent in Cyprus (compared to June 2012). A DGS could help prevent deposit flight and bank-runs, thereby reducing the risk and burden of bank recapitalisation. The impact of a common scheme on preventing deposit transfers outside crisis countries (with their large impact on recapitalisation needs) needs to be further assessed. (Equally, the opportunity cost for Member States or financial institutions providing for the scheme is not discounted). A study in one affected Member State has estimated the cost in terms of lending foregone as a result of the status quo at around 0.9 per cent of GDP.
The European Parliament notes that the eurozone is in a unique situation, with participating Member States sharing a single currency but no common budgetary policy or common bond market. In that context, it proposed an EU financial stability fund for the banking sector and a Common Deposit Insurance Scheme. Schemes at European level are intended to reduce risks for households and to limit the need for national public money to recapitalise failed banks. The use of public money in Member States to recapitalise national banks in turn increases the burden of public debt and the risks of sovereign debt, with important cross-border effects. The Parliament considers it essential to further investigate the feasibility of a Common Redemption Fund for bad debts and the common issuance of eurobonds, suggestions which have not been followed up with legislative proposals so far.
The efficiency gain from closer cooperation at European level in the area of security and defence policy is thought to range from some 130 billion euro, at the high end, to at least 26.0 billion euro per year, on a more cautious estimate. If Member States were to operate in a more integrated manner, they would need to spend significantly less than their current collective defence budget of 190 billion euro. The European Parliament's Cost of Non-Europe Report on this subject - prepared ahead of the European Council of 18-19 December 2013, which was devoted in part to Common Security and Defence Policy (CSDP) - is available for download at: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/494466/IPOL-JOIN_ET(2013)494466_EN.pdf
The cost of non-Europe in security and defence derives, in the first instance, from the lack of integration of the military structures of the Member States. EU armed forces, despite participation in multinational contingents, are organised on a strictly national basis. Secondly, costs arise from the lack of a truly integrated defence procurement market, partially exempted from the single market. The existence of 28 compartmentalised national markets, each with their own administrative burden and regulated separately, hinders competition and results in a missed opportunity for economies of scale for industry and production.
The upper figure of 130 billion euro was calculated in the past by comparing United States and European costs, assuming European efficiency levels to be only 10 to 15 per cent of those in the US. That estimate assumed a hypothetical single EU defence system, with the same cost structure, operating conditions and budget efficiency as the US one. This would have permitted a European budget of 62.9 billion euro, instead of the 193 billion euro actually spent.
|Efficiency gains through greater cooperation||Amount in euro per year (billion)|
|Efficiency gains in industry||10,000|
|Certification of ammunition||500|
|Standardisation of ammunition||1,500|
|Efficiency gains in land forces||6,500|
|Efficiency gains in infantry vehicles||600|
|Efficiency gains in air-to-air refuelling||240|
|Efficiency gains in basic logistic support||30|
|Efficiency gains in frigates||390|
|Total Cost of Non-Europe||26,370|
An alternative ‘bottom up’ figure, used in the Parliament’s Cost of Non-Europe Report, can be constructed by calculating a specific efficiency gains field by field. With 10 per cent industrial efficiency gains, due to greater cooperation, the figure comes in at least 26 billion euro per year (at 2011 prices).
There is a growing literature on this subject. A recent study by the Istituto Affari Internazionali analyses the potential for gains from reducing the duplication or multiplication of operational structures, stocks and research activities and programmes at 120 billion euro annually. A study by the Bertelsmann Stiftung argues that there is potential for significant economic gains from having smaller, consolidated land forces: the potential saving to the EU Member States would be some 6.5 billion euro per year.
The European Parliament has requested political action in three dimensions of security and defence policy: visibility, capabilities and industry. Overall, the Parliament has drawn attention to the changing global strategic landscape and to reduced defence budgets, accelerated by the economic and financial crisis. It has urged Member States to reinforce EU industrial cooperation, by developing and producing efficient military and security capabilities, using the most advanced technologies. A European defence industyl strategy should have the aim of optimising Member State capabilities, by coordinating the development, deployment and maintenance of a range of capabilities, installations, equipment and services.
EP resolution of 21 November 2013 on the Implementation of the Common Security and Defence Policy (based on the Annual Report from the Council to the European Parliament on the Common Foreign and Security Policy (2013/2105(INI)).
|Rapporteur:||Maria Eleni KOPPA (S&D Group), AFET Committee|
EP resolution of 21 November 2013 on the European Defence Technological and Industrial base (2013/2125(INI)).
|Rapporteur:||Michael GAHLER (EPP Group), AFET Committee|
There could be significant potential gains for the European economy from the Transatlantic Trade and Partnership (TTIP) Agreement currently being negotiated between the European Union and the United States. Based on an independent report of 2013, the European Commission estimates that the EU economy should be boosted by 0.5 per cent of GDP, or 120 billion euro annually, once such an agreement were fully implemented, bringing a gain to each household of 545 euro.
In this paper, a more cautious approach is adopted, assuming only half of the asserted potential benefits from the TTIP. The final figure retained is thus 60 billion euro per year.
A study published in 2013 by the Commission, in the framework of its impact assessment , reviews the importance of the bilateral economic relationship and provides computable general equilibrium (CGE)- based estimates for the economy-wide impact of reducing both tariff and non-tariff barriers (NTBs).
The analysis uses the non-tariff barrier (NTB) estimates made in an earlier study of 2009 (see below). It investigates different policy options for the deepening of the bilateral trade and investment relationship between the EU and US. These range from partial agreements limited in scope to a fullyfledged free trade agreement with a comprehensive liberalisation agenda, covering simultaneously tariffs, procurement, NTBs for goods and NTBs for services. The results suggest positive and significant gains for both economies. Under a comprehensive agreement, EU GDP is estimated to increase by between 68.2 and 119.2 billion euro, and US GDP by between 49.5 and 94.9 billion euro (under the less ambitious and more ambitious scenarios respectively). EU exports of goods and services to the US would go up by 28 per cent, equivalent to an additional 187 billion euro. Overall, total exports would increase by 6.0 per cent in the EU and by 8.0 per cent in the US. Reducing NTBs would be a key part of transatlantic liberalisation, with as much as 80 per cent of the total potential gains coming from cutting costs imposed by bureaucracy and regulations, as well as form liberalising trade in services and public procurement.
The 2009 Ecorys study estimated that eliminating half of the NTBs caused by regulatory divergence could increase EU GDP by 0.7 per cent in 2018, compared to the baseline scenario of doing nothing. This would represent an annual potential gain of 122 billion euro.
A report for the Atlantic Council estimated that the TTIP has the potential to increase transatlantic trade and investment flows substantially and to create as many as 750,000 new jobs in the US alone. Moreover, by lowering the costs of trade and driving job growth in a range of industries, American households are estimated to gain approximately USD 865 annually, while their European counterparts would gain USD 720 (equivalent to 526 euro).
A 2013 CEPR study in Britain estimated that a successful TTIP would yield an increase GDP in the United Kingdom of between 0.14 and 0.35 per cent (equivalent to GBP 4.0 and 10.0 billion annually). Most of the likely gains are attributed to lowering of NTBs in goods. Aggregate exports (to all countries) would be expected to increase by 1.2 and 2.9 per cent, and imports by 1.0 and 2.5 per cent. The sector most strongly affected would be motor vehicles, where output increases by as much as 7.3 per cent.
A CEPII study, also published in 2013, suggested that that trade in goods and services between the EU and US would increase by approximately 50 per cent on average, including a rise of 150 per cent for agricultural products. Eighty per cent of the expected trade expansion would stem from lowered NTBs. There an annual increase in national income could be USD 98 billion for the EU and of USD 64 billion for the US.
In March 2013, the European Commission sent a draft negotiating mandate to the Council on TTIP. In May 2013, the European Parliament adopted a resolution calling on the Council to follow up on the recommendations contained in the final report of the High Level Working Group on Jobs and Growth which was established by the EU-US Summit in November 2011, and to authorise the European Commission to start negotiations for an agreement with the US. The Parliament also reiterated ‘its support for a deep and comprehensive trade and investment agreement with the US that would support the creation of high-quality jobs for European workers, directly benefit European consumers, open up new opportunities for EU companies, in particular small and medium-sized enterprises (SMEs), to sell goods and provide services in the US, ensure full access to public procurement markets in the US, and improve opportunities for EU investments in the US’.
European Parliament resolution of 23 May 2013 on EU trade and investment negotiations with the United States of America, P7_TA(2013)0227.
|Rapporteur:||Vital MOREIRA (S&D Group), INTA Committee|
Infrastructure of single Market
A more economically and physically integrated single market in energy could result in efficiency gains of some 50 billion euro. This figure takes into consideration both the European Parliament's own assessment of the situation in specific four dimensions of the market - amounting to a minimum gain of 15 billion euro - and a series of estimates from other sources detailed below. The Parliament's recent Cost of Non-Europe Report can be downloaded at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22Single+market+in+energy%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit
The European Parliament’s analysis has so far focussed on potential gains in the following four fields:
There is an extensive economic literature on the untapped potential of the closer cooperation in energy policy in Europe. The table below provides a short summary of the most recent calculations, some calculating the gain at almost 200 billion euro:
|Sectors||Amount in euro (billion)|
|Gas and Electricity:|
|Study on the benefits of integrating the energy market||12.5 - 40|
|A report on the cost of not having an integrated EU energy market for gas estimates that full implementation of the third energy package in 2015 compared to 2012 could reach a maximum of 8 billion euro per year||8 - 30|
|EU consumers could save about 13 billion euro in total if they switched to the cheapest electricity tariff they could find||13|
|Savings equivalent to 15 billion euro per year are possible if uncompetitive price differentials between EU MS are addressed||15|
|Gains of 16 billion to 30 billion euro are available in the period 2015-2030 under the coordinated renewable investment scenario||16 - 30|
|Total renewable production could increase to 238 Mtoe by 2020, and with unchanged fuel prices, would enable avoided imported fuel costs of 50 billion euro in 2020||50|
|Total gross value added of the RES sector in the EU in 2020 would amount to 99 billion euro (0.8 per cent of total GDP). Based on the Accelerated Deployment Policy scenario the value would amount to 129 billion euro (1.1 per cent of total GDP) or 197 billion euro by 2030 if combined with optimistic export expectations||99 - 197|
|EU-wide renewable energy trading and achieving the 20 per cent renewable energy target cost efficiently in all MS would reduce costs in overall energy system by up to 8 billion euro||8|
|By 2020 a 20 per cent increase in energy efficiency in buildings could save 32 per cent primary energy in Europe, 2.6 billion barrels of imported oil per year and 193 billion euro per year||193|
|Energy efficiency could cut EU’s energy bill by about 200 billion euro per year.||200|
In November 2012, the European Commission presented a Communication entitled 'Making the Internal Energy Market Work', accompanied by an Action Plan (COM(2012)663). In that context, the European Parliament has stressed the need to progress in the implementation of the Third Internal Energy Market Package, particularly its effective transposition. It also stressed the importance of providing comparison tools for consumers, allowing transparent pricing and billing and emphasised the need to reinforce security of supply, end the physical isolation of several Member States in the energy market, and pay attention to the needs of vulnerable consumers.
In addition to being illegal, tax evasion leads to an inefficient and distorted allocation of resources in the economy. Given the extensive shortfall in VAT receipts, a benefit of around 7.0 billion per year could be credibly anticipated from modest action at EU level in this field, notably by the introduction of a standardised European invoice and/or an EU-coordinated or simplified cross-border taxation system. These actions could facilitate the fight against VAT fraud which affects the Union's financial interests and also facilitate cross-border transactions and reduce costs for businesses and citizens.
Decreasing the size of the EU's shadow economy, estimated to be at around 20 per cent of the official GDP, would increase the efficiency of the allocation of resources in the European economy. However, this is very difficult to achieve without more effective EU-wide tax cooperation. The total impact of an EU coordinated or simplified cross-border taxation system has yet to be assessed.
According to a recent study on the 'VAT gap' in 26 Member States, an estimated 193 billion euro in revenues (or 1.5 per cent of GDP) was lost due to non-compliance or non-collection in 2011. The VAT gap is the difference between the expected VAT revenue and the VAT actually collected by national authorities. While non-compliance is certainly an important contributor to this revenue shortfall, the VAT gap is not only due to fraud. Unpaid VAT also results from bankruptcies and insolvencies, statistical errors, delayed payments and legal avoidance, inter alia. In the absence of a comprehensive study quantifying the economic gains from a stronger and better coordinated EU tax policy, it seems plausible to estimate that limited new measures at European level, such as the introduction of a standardised European invoice, could bring a benefit of around 7.0 billion euro per year.
The European Parliament has called on the European Commission to revise the Savings Taxation Directive to put an end to temporary derogation for certain Member States, increase its scope to cover trusts and various forms of investment income, and extend its provision to jurisdictions favoured for tax evasion. It has also stressed the need to review the Parent-Subsidiary Directive and the Interest and Royalties Directive, to eliminate tax evasion via hybrid financial instruments. It has asked for a standardised European invoice to facilitate cross-border transactions and controls. For the time being, only a non-legislative initiative on VAT has been announced by the Commission.
EP Resolution of 21 May 2013 on Fight against Tax Fraud, Tax Evasion and Tax Havens (2013/2060(INI))
|Rapporteur:||Mojca KLEVA KEKUS (S&D Group), ECON Committee|
EP resolution of 13 October 2011 on The future of VAT (2011/2082(INI)) based on the CASA report.
|Rapporteur:||David CASA (EPP Group), ECON Committee|
Infrastructure of single Market
Substantial progress has made over the last quarter century in putting in place a common transport policy within the European Union, by removing barriers, increasing competition, and improving quality of service and safety, especially in the road, rail and air transport sectors. However, substantial further efficiency gains could be made from further action to create a more fully integrated transport sector. Existing studies suggest that the minimum economic benefit from a further deepening of the single market in transport in its various forms would be at least 2.5 billion euro per year. Further work on the subject, in the form of a Cost of Non-Europe Report, is currently being undertaken for the European Parliament’s Committee on Transport and Tourism.
There is at present no comprehensive estimation of the Cost of Non-Europe in the overall single market in transport. However, an assessment is being undertaken by the European Parliament in the form of a Cost of Non-Europe Report, from which a preliminary figure should be available in April 2014. . It will analyse and quantify costs and benefits in selected sectors of transport and tourism, in particular, notably road, rail, air and water transport, and tourism and passengers’ rights.
Existing studies, however, do already point to significant gains from tarhetted action in specific sectors. In railway transport, a quantitative impact assessment69 has estimated the net gains from further market opening, from greater open tendering for public service contracts and from continued unbundling to be in the range between 18.0 and 32.0 billion euro over a 17-years period from 2019 (when the full effect can be expected). If the lower figure is retained for the purpose of a cautious estimate, this would means benefits in the region of one billion euro per year.
Further economic benefits can be expected from the revision of the institutional framework in which the European Railway Agency (ERA) operates and facilitating the creation of a Single European Railway70. Benefits would arise principally from savings in safety certification and rolling authorisation. It has been estimated that the benefits from shared competencies of the ERA and National Supervisory Authorities (NSAs) in these fields could bring 508 million euro over the period from 2015- 2025, or some 50.0 million euro per year.
In water transport, significant benefits are to be expected from the liberalisation of the provision of port services and the increased financial transparency of ports71. The reduction in total port-related costs is estimated to be around 7.0 per cent. This represents savings of about 1.0 billion euro annually. In air transport, a 2011 study72 highlighted a number of problems, including less than full use of capacity at some airports and the difficulties faced by carriers trying to grow their operations at congested airports, in order to provide real competition to incumbent carriers. Also identified were the inadequate operation of the slot coordination process and a lack of consistency with the Single European Sky. The study estimated that a review on European slot allocation rules alone could lead to 5.0 billion euro in efficiency gains by 2025, or 334 million euro per year (over a period of 15 years from 2010 to 2025).
In the road sector, further gains are to be expected from the liberalisation of cabotage. Preliminary analysis points to gains in the tens of millions of euro. A figure of 50 million euro per year is retained for the purpose of this analysis.
By adding the potential gains in these four areas, one can already arrive to a total minimum figure of around 2.5 billion euro per year. However, as this estimation only takes account of specifically identified gaps for which figures are already available, and is by no means comprehensive, it is reasonable to assume that it comes in at the lower end of potential economic gains.
A recent study for the European Commission has identified a number of shortcomings of the EU transport sector, such as the productivity gap in land transport of freight73. This problem is due to factors such as the poor degree of liberalisation, congestion and infrastructure bottlenecks. Although these gaps are not ‘monetised’, the study finds that the productivity gain attainable in the road freight market is estimated at 231 tonne-km per employee, which corresponds to a reduction of the productivity gap from 36 per cent to 10 per cent.
The European Parliament has stressed the importance of a single European transport area, with interconnection and interoperability, based on a genuine European management of transport infrastructure and systems, to be achieved by eliminating 'border effects' between Member States in all transport modes. The Parliament has also made a series of recommendations in the specific sectors of road transport, shipping, air transport, and rail transport - such as proposals on a European airspace, a European Rail Regulator and the opening of national rail markets, as well as the separation of rail transport services from infrastructure.
Currently some 85 per cent of European publicly-funded research is undertaken at exclusively national level, without transnational collaboration, while only 15 per cent is coordinated either in intergovernmental organisations or spent jointly in the EU’s Research Framework Programme74. The European Research Area (ERA) framework is to deepen cooperation, reducing fragmentation and duplication of research efforts. It is reasonable to assume that such deepening could lead to an efficiency gain of at least 1.0 billion euro per year, over a period of 15 years.
The European Research Area (ERA), a political priority explicitly added to the Lisbon Treaty, is intended to promote the best conditions for research in Europe for all the stakeholders involved - researchers, institutes, private sector, Member States and Associate countries. However, it is still far from complete. Strengthening the ERA would mean relocating more national funds to transnationally coordinated research.
The European Commission’s impact assessment75. estimates that the combined effect of the Barcelona target, Horizon 2020 and an increased share of transnational funding would bring about 445 billion euro additional GDP growth and 7.2 million more jobs between now and 2030. This implies an annual growth of an additional 0.25 per cent of GDP. Assuming a uniform distribution of benefits over the years, the potential efficiency gain to the EU economy can be estimated at 2.16 billion euro per year as a result of an integrated European Research Area. However, on a cautious assumption that not all such gains could be easily achieved, a discount rate of one half would bring the final estimation down to around 1.0 billion euro per year.
Recognising that Europe's future growth relies to a large extent on research and innovation, the European Council reaffirmed in March 2010 that the overall investment level for research and development should be increased to 3.0 per cent of EU GDP (the Barcelona target).
Other studies indicate that EU-funded research activity has been characterised by a considerable growth in terms of participating entities and participations across successive Framework Programmes, resulting in substantially large networks (creation of critical mass).
The signatories of a recent, broadly-based ‘Manifesto’ on the subject in the European Parliament advocated that the EU should adopt binding targets for Member States on investment in research and put in place an ERA Framework Directive. The signatories identified the following priorities in this field:
EP Oral Questions and debate of 13 October 2013 on the the finalisation of the European Research Area (B7-0503/2013 and B7-0504/2013), tabled by Mrs SARTORI on behalf of the ITRE Committee.
The European Union and its Member States have in effect three different levels of development policy: i) the European Commission’s supranational development policy; ii) the intergovernmental European Development Fund (EDF), which the Commission coordinates on behalf of the Member States, and iii) the individual development policies of Member States. The potential for European development aid spending is not fully exploited because of duplications and overlaps. Fragmentation and duplication of aid is widespread; competition among EU development agencies and NGOs is still evident; the impact of the EU's development action is not acknowledged or cannot be identified among the populations in beneficiary developing countries; EU procedures are often considered cumbersome and bureaucratic by recipient countries.
These shortcomings involve significant economic and political costs. Economically, it is estimated that as much as 800 million euro (around 1.4 per cent of EU development aid) could be saved annually from improving donor coordination, so reducing ‘donor transaction costs’ 78, on the basis of the current system. These savings could then be used to extend aid activities to the benefit of recipient countries (or for any other purpose). Substantially larger savings could be achieved if the three-tier approach to development aid spending were replaced by coordinated budget.
The recent Cost of Non-Europe Report on this subject, undertaken for the European Parliament's Development Committee, is available for download at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22donor+coordination%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit
The calculation that up to 800 million euro per year could be saved from improved donor coordination is based on an update of a study the Bigsten et al. (2011) entitled The Aid Effectiveness Agenda: the benefits of going ahead, which is the most comprehensive and methodologically sound estimation to date of potential savings and economic gains from a better implementation by the EU of the Paris Declaration on aid effectiveness. It shows that lack of, or ineffective, donor coordination has consequences in terms of transaction costs, uncertainty related to future aid flows and inefficient aid allocation. The effects of better coordination would most directly affect transaction costs. Key elements that contribute to the reduction of such costs are the optimisation of division of labour (by concentrating aid on fewer countries and well-designed activities) and the shifting of aid patterns from projects to budget support (which have less administrative costs).
The analysis started with aggregate estimates of administrative aid costs of the EU27 Member States and the European Commission. All administrative costs that the donors report were been included,using data from the Development Assistance Committee (DAC) database, which are the most precise records available. It was then calculated how much of these costs could be saved if donors coordinated their development assistance, for instance through better division of labour, so that each donor concentrated on fewer countries and activities (without affecting the overall level of aid). This was done in two steps. Firstly, by estimating how much could be saved by reducing the number of partner countries for each donor. At present, the average number of partner countries per donor is 101. It is estimated, that a decrease in the number of partner countries per donor by 37 per cent (a standard variation in economics) would lead to a decrease in annual administrative costs for EU donors (EU27 plus Commission) by about 20 per cent, or 498 million euro in 2012 prices. Second, the potential cost savings were estimated by changing the ‘aid modalities’, i.e. by shifting money from projects to programmes (which have fewer administrative costs). To do this, the target set up in the Paris Declaration regarding the proportion of Programme-Based Approaches (PBA) was used as a reference. It was estimated that by increasing the proportion of PBA from the actual level for 2009, of 44 per cent, to 66 per cent (the Paris Declaration target), the administrative costs related to aid delivery would be lowered by 21 per cent. That would represents an annual cost saving of 306 million euro (for the EU27 plus Commission, at 2012 prices). Thus, total savings in transaction costs resulting from concentration on fewer countries and activities for the EU27 and Commission is about 800 million euro per year in 2012 prices. This is equivalent to about 1.4 per cent of EU development aid.
An earlier study by the Commission80 sought to identify and measure costs of ineffective and fragmented aid and of potential savings in transaction costs. It looked at the costs of donor proliferation, fragmentation of aid programmes, tied aid, and volatility and lack of predictability in aid flows, as well as shortcomings in the donors’ use of country public procurement systems. It suggested that annual savings could be in the range of 3.0 to 6.0 billion euro. The study did not provide a firm assessment of total savings in transaction costs. However, if one adds together the potential savings from reduction in the fragmentation at country and sector levels, as well as in activities (through a better division of labour), on reaches a figure of least 770 billion euro savings per year.
The European Parliament has requested the European Commission to submit, no later than the first semester of 2016, on the basis of Articles 209 and 210 of the TFEU, a proposal for an act concerning regulatory aspects of EU donor coordination on development aid, following the adoption and implementation of a road map of preparatory actions to facilitate the entry into force of these regulatory aspects. The regulation should cover in particular joint programming, so as to avoid unnecessary parallel processes, and division of labour at the country level (for example, by limiting the number of EU donors active in sector policy dialogue and cooperation activities) or between countries (by establishing better geographic concentration taking into account ‘darling’ and ‘orphan’ countries).