Completing the Internal Market

It is worth putting the policy document “Towards interoperability for European public services” (http://ec.europa.eu/isa/strategy/index_en.htm) in historical context.

It is almost exactly 25 years since the Commission issued one of its most important policy documents ever. In an ambitious and ingenious way the White Paper outlined both a strategy and an action plan for Completing the Internal Market (COM(85) 310 Final, http://europa.eu/documents/comm/white_papers/pdf/com1985_0310_f_en.pdf). This laid the foundation for what has become the successful implementation of a single market for industrial goods in Europe.

One of the key areas identified by the white paper was the removal of technical barriers; it stressed that the general principle should be that goods lawfully manufactured and marketed in one Member State could be sold freely throughout the community.

It recognized that “barriers created by different national product regulations have a double-edged effect: they not only add extra cost, but they also distort production patterns /—/ Until such barriers are removed, Community manufacturers are forced to focus on national rather than continental markets and are unable to benefit from the economies of scale which a truly unified internal market offers.”

The prescription that the White Paper identified was that “mutual recognition could be an effective strategy for bringing about a common market in a trading sense”. The Commission opted for this alternative despite the recognized problem that it might prove inadequate for the purpose of generating competitiveness based on a continental-scale uniform market. This was both brilliant and effective.

Today, 25 years later, Europe essentially has a single market for industrial goods that can circulate freely. This has generated large benefits for consumers and producers of manufacturing goods.

The same is unfortunately not true for public services. The European Union is fragmented and significant barriers remain for cross-border consumption of public services. This limits the mobility of European citizens and SMEs. It also adds costs and administrative burdens. Scale economies in development as well as production of services cannot be fully realized.

Stimulating and fostering cross-border production and consumption of public services in Europe is important. The public sector in Europe is a large share of the economy, both in terms of production and consumption (healthcare, education, childcare). Public transfer systems and insurances play a critical and complementary role to the private sector (unemployment benefits, pensions, health insurance). Mobility for citizens – students, workers – as well as companies selling services – professionals, consultants – requires cross-border solutions.

Interoperable ICT solutions play an increasingly important role in this context. But unlike private industry, national, regional and local governments do not naturally strive to create international services.  On the contrary, they are bound by geographical barriers. While multinational enterprises tend to see a business opportunity in global standards; the opposite is too often true for national and local governments.

The European Union can improve economic efficiency by reducing the scope for homemade ICT solutions and national regulations that obstruct rather than facilitate delivery and consumption on a continental-scale of European public services. The EIS and the EIF are steps in this direction. But, they are not likely to be sufficient.