$Unique_ID{bob00526} $Pretitle{} $Title{United Kingdom The British Parliament and the Community} $Subtitle{} $Author{Embassy of the United Kingdom, Washington DC} $Affiliation{Embassy of the United Kingdom, Washington DC} $Subject{community member european states market britain council government agreed state} $Date{1990} $Log{} Title: United Kingdom Book: Britain in the European Community Author: Embassy of the United Kingdom, Washington DC Affiliation: Embassy of the United Kingdom, Washington DC Date: 1990 The British Parliament and the Community Ministers representing Britain at the Council of Ministers are accountable to Parliament, which is kept informed about the Community and its policies by select committees; by a six-monthly government White Paper on developments in the Community, which is debated; and by the normal parliamentary question procedure. Parliamentary Committees Both Houses of Parliament have established committees to examine proposals for Community legislation and other Community documents. The two committees receive automatically, via the Foreign and Commonwealth Office, draft Commission proposals for legislation which have been submitted to the Council of Ministers. The British government department concerned also provides an explanatory memorandum describing the subject matter and its implications for Britain. The House of Commons Scrutiny Committee helps Members of Parliament to identify important proposals which might affect matters of principle or policy or involve changes in British law. Government ministers and civil servants may be invited to give evidence to the Committee, and a senior official of the House assists it in dealing with the legal implications of proposals. Further legal advice may be given, where necessary, by the Government's Law Officers. If the Committee recommends that a proposal should be debated by the House, the Government finds time for the debate. The terms of reference of the House of Lords Select Committee are drawn more widely, for it can identify Community proposals of legal or political importance and report on their merits. The proposals are remitted as necessary to one of several specialist subcommittees which may call for oral or written evidence from the Government and appropriate outside bodies. The legal implications of Community proposals are examined by a subcommittee chaired by a Law Lord. Reports are made to the House, some of which recommend debate; as in the Commons, time is found for this. Other Means of Information Every month when Parliament is sitting a report is made by the responsible minister in the Foreign and Commonwealth office listing all the Council meetings due to be held in the coming month and the subjects expected to be discussed at each meeting. After each Council meeting the minister who attended it is expected to report to the House of Commons on the discussions that took place. After meetings of the European Council the Prime Minister reports to the House and is questioned. Every six months the Government publishes a White Paper summarising developments in the Community and giving an indication of the Government's general approach and policy on specific issues. After its publication the House of Commons holds a wide-ranging debate on Community issues. Members of both Houses may table questions on any Community topic for written or oral answer by the appropriate minister. Finance The Community is financed from revenue contributed by member states, known as `own resources'. These consist of levies collected on trade in agricultural products between the Community and the rest of the world; customs duties on imports into the Community; value added tax (VAT) levied at a rate of up to 1.4 per cent on a notional harmonised base; and a share of the Community's gross national product (GNP) up to an amount required to balance the budget within an own-resources ceiling of 1.2 per cent of GNP (see below). About 60 per cent of the budget is devoted to agriculture, the bulk of the rest going to social and regional policy, science and research, and aid to developing countries. The Community budget is denominated in European Currency Units (ECUs). The ECU is a weighted average of Community currencies, the value of which is calculated on a daily basis against all major world currencies. Britain's Contribution Because of an imbalance between Community policies, a problem arose in the late 1970s over the level of Britain's net contribution. By the end of the 1970s it had become clear that this contribution was becoming excessive in relation to its share of Community GNP. Accordingly, Britain sought a correction; following negotiations, refunds were given to Britain for each of the years in the period from 1980 to 1983. At the European Council meeting at Fontainebleau in June 1984 the Community agreed on a more permanent arrangement under which Britain received an ad hoc lump sum abatement in respect of 1984 and, for later years, an annual abatement of 66 per cent of the difference - in the previous year - between Britain's share of the Community's VAT revenues and its share of the Community's allocated budget. The Community's VAT ceiling was raised from 1 per cent to 1.4 per cent in January 1986, partly to meet increased expenditure. By the end of 1989, the cumulative value of abatements agreed at Fontainebleau totalled some 5,759 million Pounds. Further Budgetary Reforms Britain has been a staunch supporter of attempts to control Community expenditure. In December 1984 the Council of Ministers agreed to a system of budgetary discipline designed to ensure that expenditure on agricultural support rose at a rate lower than the rate of increase in the Community's own resources base. Member states also agreed to respect the maximum rate provisions in the Treaty of Rome, designed to restrict the growth of other types of spending. It soon became clear that even more effective measures were needed to curb spending. In February 1988 the European Council agreed a number of measures to restrain the costs of the Community's agricultural policy (see p 24). These include a set of limits on six categories of expenditure for the period between 1988 and 1992. The Council accepted that commitments to the Community's structural funds (see p 22) should rise by about 900 million Pounds (in constant 1988 prices) a year from 1989 to 1992, which would permit the doubling by 1993 of the resources channelled to less-developed regions within the Community. It was also agreed that the ceiling on own resources should be expressed in terms of Community GNP rather than VAT. The Community's overall own-resources ceiling for the 12 member states is 1.2 per cent of Community GNP, an increase of about 25 per cent over the previous figure. This ceiling is to remain in force until at least 1992; within it there are sub-ceilings rising from 1.15 per cent of GNP in 1988 to 1.2 per cent in 1992. The cost of Britain's abatement to other member states is outside the ceiling. Adoption of the Annual Budget The Commission is responsible for drawing up a preliminary draft budget based on its own estimates and those submitted by the other Community institutions, and presents it to the Council of Ministers and the European Parliament, usually in June. The Council then approves a draft budget. The Parliament scrutinises the draft and can propose modifications to `compulsory' expenditure (which accounts for about 70 per cent of the budget) and amendments to `non-compulsory' items. Compulsory expenditure consists of expenditure on policies arising directly out of the Treaties, principally the Common Agricultural Policy, and includes expenditure arising from international agreements, for example some kinds of development assistance. The non-compulsory part covers other policies adopted by the Community, as well as administration. The Council examines the Parliament's amendments. If it rejects modifications to compulsory expenditure, the Parliament has no right to insist on their adoption. If the Council rejects amendments to non-compulsory items, the Parliament can still insist upon amendments, within certain limits. There is provision for consultation between the two bodies to reconcile differences. The Parliament's President is responsible for declaring the final adoption of the budget. The Parliament has power to reject the budget as a whole if consultations with the Council are unsuccessful. It has done so twice, in 1979 and 1984. If the budget has not been approved by the beginning of the financial year, the Treaty of Rome provides for expenditure to be limited each month to one-twelfth of the appropriations for the previous year or one-twelfth of the draft budget, whichever is the lower. This system continues until a new budget is agreed. The European Monetary System In July 1978 the European Council decided to create a European Monetary System (EMS), which came into effect in March 1979. Its purpose is to stabilise exchange rates between currencies, and it consists of an exchange rate mechanism (ERM), a monetary unit known as the ECU (see p 10) and increased credit facilities. Each currency participating in the ERM has a central rate fixed in ECUs, which are used to establish bilateral exchange rates with the other currencies. The monetary authority of each member state intervenes in the exchange markets to ensure that its currency does not fluctuate by more than 2.25 per cent (6 per cent in the case of Spain) against any other currency. If necessary, member states adjust economic policies and/or intervene in order to reduce tensions within the ERM. All member states participating in the EMS deposit 20 per cent of their gold and dollar reserves with the European Monetary Co-operation Fund in return for ECUs of the same value. These ECUs may then be used to settle obligations arising from intervention in exchange markets between the central banks concerned. Britain is a member of the EMS, and has deposited 20 per cent of its gold and dollar reserves with the European Monetary Co-operation Fund, but it does not yet take part in the ERM. The Government has stated that Britain will join the ERM when certain specific conditions are met. In June 1989 the European Council approved the first stage of a three-stage plan for Economic and Monetary Union (EMU), drawn up by a committee of governors of central banks chaired by the President of the European Commission. This includes the strengthening of economic and monetary policy co-ordination, the completion of the single market, the strengthening of competition policy and all member states joining the ERM on equal terms. Further stages of the plan remain under discussion, as are a number of alternative proposals for achieving the progressive realisation of EMU. An intergovernmental conference will begin on 13 December 1990 in order to consider Treaty changes regarding EMU. As part of the preparation for this conference, Britain has suggested the creation of a European Monetary Fund (EMF) to manage the ERM, to co-ordinate exchange rate intervention with external currencies and to promote the use of the ECU. Britain believes that such a fund could encourage more use of the ECU by issuing ECU bank notes for general circulation alongside member states' currencies and backed by EMF holdings of various Community currencies. In time the ECU would be more widely used and become a common European currency. In the longer term, if peoples and governments so chose, it could develop into a single currency. The Single European Market The programme for completion of the single market-the free movement of goods, people, services and capital-is derived from the European Commission's White Paper submitted to the European Council at Milan in June 1985. This document outlined a programme to remove the remaining obstacles and distortions in trade between member states by the end of 1992, and the Council has used it as a basis for single market proposals. About 60 per cent of the single market programme outlined in the White Paper has been achieved. By the end of 1989, Britain had implemented in its national legislation all but four of the internal market directives agreed by the Community. The Government is firmly committed to the completion of the single market. The Community is Britain's largest export market, with half of all British exports going there. The Government believes that the single market will benefit the economy of every country in the Community by reducing business costs, stimulating efficiency and encouraging the creation of wealth and jobs. In its view, consumers of goods and services will gain from increased competition that will lead to greater choice and lower prices. Movement of Goods The first ten member states have eliminated duties on internal trade in manufactured goods and most agricultural products, and these will be abolished throughout the Community in 1992 when the transition period following the accession of Spain and Portugal ends. The common customs tariff, which applies to goods from non-member states, will also be extended to these two countries. Customs duties have already been abolished on most industrial products traded between the Community and members of the European Free Trade Association. Technical Barriers to Trade All member states have their own laws and standards for the packaging, labelling and safety of goods sold in their home market. Such differing requirements and procedures can result in technical barriers to trade. For many years the Community sought to remove such barriers by adopting directives setting out the desired requirements that products had to satisfy before they could be sold freely throughout the Community. This proved a slow process because of the detailed nature of these matters. In May 1985 the Council of Ministers agreed upon a new approach whereby directives are limited to setting essential requirements for health, safety, consumer protection and the environment, leaving the technical details to be worked out subsequently by the European Committee for Standardisation and the European Committee for Electrotechnical Standardisation. The Community is also seeking to encourage the mutual recognition of test results and certificates, and the establishment of a European organisation for testing and certification is currently under consideration. Since 1983 arrangements have been in force requiring member states to notify the Commission in advance of proposals for new technical regulations, giving the Commission and other member states the opportunity to intervene if they believe that the regulation would act as a new barrier to trade. This directive was extended in January 1989 to cover areas previously excluded, such as agricultural products, foodstuffs, pharmaceuticals and cosmetics. The British Government is giving strong support to the Community's attempts to ensure that standards are used to promote competitiveness. At the same time it wants to ensure that standards, once harmonised, can be adapted quickly to reflect later technical progress. This is particularly important in, for example, the case of vehicles, where new research can often indicate substantial scope for reducing road casualties through better construction standards for new vehicles. Physical Barriers to Trade Another obstacle to trade within the Community is controls on the physical movement of goods across frontiers between member states. This problem has been tackled in a number of ways, building on the elimination of customs duties between Community members which was one of the foundations of the common market. Britain has strongly supported the Community's moves to reduce customs formalities in order to speed the flow of goods and reduce administrative costs. In January 1988 the Community and the members of the European Free Trade Association introduced the Single Administrative Document, a common form for imports and exports which replaces some 100 different national forms. Simplified procedures are now followed at inland clearance depots, thereby reducing delays at frontiers. Discussions are also taking place on how best to tackle the complex question of fiscal frontiers in the Community. Intellectual Property While the Treaty of Rome prohibits restrictions on imports and exports between member states, these are permitted when they are justified for the protection of patents, designs, trade marks and copyright. The Community is preparing initiatives on patents, trade marks and copyright that will come closer to the aims of the single market while continuing to protect intellectual property. An important directive has already been agreed covering the legal protection of semiconductor integrated circuits. Movement of People Freedom to work anywhere in the Community is one of the basic rights laid down by the Treaty of Rome. Nationals of member states can enter another member state to look for work or take a job already arranged. Self-employed people can set up and carry out business in a wide range of fields. Until recently, professional qualifications gained in one member state were not necessarily recognised in others. A number of specific directives have now been agreed providing for the mutual recognition of certain qualifications and making it easier for doctors, nurses responsible for general care, dentists, veterinary surgeons, midwives, architects and pharmacists to practise throughout the Community. In December 1988 agreement was reached on a general system for the mutual recognition of higher education diplomas awarded on completion of at least three years' professional education and training. The directive will come into force in January 1991 and the professions that it will cover include lawyers, accountants, engineers, physiotherapists and many others regulated by chartered professional associations. The Community aims to make travel between member states easier for people as well as goods, by relaxing internal frontier controls on Community nationals as far as is compatible with maintaining legitimate checks to combat terrorism, drug trafficking, crime and illegal immigration, and to safeguard animal and plant health. In March 1989 the immigration channel for British and other Community nationals at points of entry into Britain was merged, as a step towards this end. In 1987 members states began discussions on co-ordinating methods of controlling immigration from countries not belonging to the Community. In December 1989 Community immigration ministers agreed to introduce common standards of immigration control at their external frontiers, to harmonise policies and practices regarding the issues of visas, and to exchange information about persons refused access. Member states are also examining the possibility of recognising visas issued by other Community members and of issuing a common European visa. Britain and ten other members of the European Community have signed a new European Convention on Asylum. The Convention sets objective criteria for determining which member state is responsible for examining a claim for asylum when more than one member state is involved. In general, it provides that the country which controlled the entry of the asylum seeker into the Community, or the first country in which an asylum claim is made, should be responsible for determining the claim. This would not happen, however, where other factors, such as family reunion or close associations with another country, made it sensible for the claim to be considered elsewhere. Services The British Government believes that, as foreseen by the Treaty of Rome, there should be a genuine single market in services as well as goods, on the grounds that existing restrictions increase the costs to European businesses unnecessarily. Financial Services Britain attaches particular importance to the liberalisation of regulations concerning financial services, which account for an estimated 10 per cent of the Community's gross domestic product. At present, providers of financial services from one member state can compete with domestic firms in other member states only if they establish local offices in conformity with national rules and regulations and obtain authorisation from each member state in which a local office is established. The European Commission's approach to further liberalising measures in the financial sector is based on the mutual recognition of member states' authorities and supervisory bodies, and the setting of safeguards. Directives concerning investment services (still under discussion) and the co-ordination of banking (approved in December 1989) will enable banks and investment firms that are authorised to operate in one member state to operate throughout the Community, without the need for further authorisation. Insurance Another British priority is a real common market in insurance which would be able to compete with the other leading world insurance markets. Community measures already enable insurers in one member state to set up a branch or subsidiary in another to carry on business there on the same terms as domestic insurers in that state. In June 1988 the rules under which such business can be carried out were set out by a directive on the freedom to provide non-life insurance services across frontiers. The directive is to be implemented by the end of 1992, with transitional arrangements allowing a longer period for Greece, the Irish Republic, Spain and Portugal. In December 1989 the Community agreed on a directive designed to apply similar rules to life insurance. Movement of Capital The Treaty of Rome envisaged the free movement of capital within the Community as an essential complement to the free movement of goods, people and services. Britain abolished all exchange controls in 1979. A directive removing controls from all capital movements in the Community was adopted in June 1988 and applies to most member states from July 1990, and in Spain, the Irish Republic, Greece and Portugal from the end of 1992, with the possibility of extension until 1995 for the last two countries. Competition The Community's competition policy is designed to ensure that trade between member states takes place on the basis of free and fair competition, and that when state barriers to trade are dismantled they are not replaced by private barriers. The policy aims to remove restrictions such as price fixing and market sharing and to ensure that dominant market positions do not affect consumers or other competing firms adversely. The European Commission administers competition rules and can act on its own initiative, or on complaints from or notifications by member states, companies or individuals. At the end of 1988 the Commission had 3,451 cases pending, of which 2,909 were notifications, 375 arose from complaints and 185 had been instigated by the Commission itself. Several companies were fined in 1988. State Aids The Treaty of Rome says that all aid granted by member states' governments is incompatible with the concept of the common market if it distorts competition in trade within the Community. However, some kinds of aid are permitted to correct certain economic imbalances in the economy of a member state or to repair damage caused by natural disasters. The British Government accepts that the temporary use of state aids may be necessary to restructure industries and restore profitability, but it is opposed to their use to support industries with no profitable future or to give a competitive advantage to industries that could exist without them. It supports the Commission's view that it is important to reduce state aids in order to ensure a competitive single market. Public Purchasing Purchasing by governments and other public bodies accounts for up to 15 per cent of the Community's gross national product. Two directives, on public supplies and public works, were amended in 1988 and 1989 respectively to open up further opportunities for suppliers to tender for government and other public contracts. A directive for ensuring compliance with these rules was adopted in December 1989. The Council of Ministers has agreed in principle to apply procurement rules to entities in the water, energy, transport and telecommunications industries. The British Government believes that fair competition will give better value for money. Company Law The Commission's programme for company law aims to minimise the difficulties that different national legal arrangements pose to businesses. Directives have already been agreed to co-ordinate safeguards. These measures harmonise certain aspects of company law such as the disclosure of information concerning accounts and the internal organisation of companies. Proposals still under discussion include a draft European Company Statute. A regulation on European Economic Interest Groupings, which came into effect in July 1989, encourages co-operation between businesses in different member states to provide common, non-profit-making support activities. A draft regulation for controlling mergers comes into effect in September 1990. This will enable the Commission to exercise prior control over certain mergers and clarifies the competences of the Commission and national competition authorities in the investigation of mergers; at present, it only has investigative powers. The Commission has undertaken to study the barriers to takeovers which are retained in some member states and which can inhibit the development of capital markets. Deregulation The British Government believes that continued deregulation is the key to the successful completion of the single market, by encouraging a liberal business environment. It believes that the substantial volume of new legislation required to create the single market should avoid adding unnecessary regulatory burdens. This is particularly important in the developing of small businesses. The Commission's Task Force for Small and Medium Sized Enterprises, which was set up in 1986, has been developing a number of proposals to help small firms and improve their understanding of Community programmes and policies. The Task Force is also responsible for operating the fiche d'impact system, which assesses the cost to business of Commission proposals. Britain is continuing to press for the fiche system to be improved and for the Commission to employ is at an earlier stage in the decision-making process. Transport The Treaty of Rome specifies the establishment of a common transport policy as one of its principal objectives. Although progress in implementing such a policy has been slow, fresh impetus has been given to it by the Community's move to complete the single market by 1992. Community transport ministers committed themselves to an in-depth review of the existing inland transport market (roads, rail and inland waterways) and, before 1991, to establish a new system for its organisation, taking into account the needs of users and the need to reduce running costs to a minimum. The British Government believes that a system of deregulated transport should form a vital part of the single market. Roads and Road Safety Although road haulage has grown enormously since the creation of the Community to the point where industry is often dependent upon it, a number of member states have continued to operate domestic capacity controls and to limit the entry of foreign vehicles. The removal of such restrictions has been a major British objective. In June 1988 the Council of Ministers agreed to remove by 1993 all quantitative restrictions on the Community's international road haulage market. A temporary scheme for the provision of transport services wholly within the boundaries of one member state by an operator from another member state-which is known as `cabotage' - came into effect in July 1990, and will be replaced by a permanent scheme in 1992. The British Government is pressing for the full liberalisation of international coach services. The maximum authorised weights and dimensions of commercial road vehicles are laid down by Community regulations. Britain and the Irish Republic, which have lower limits, are exempted temporarily from these regulations pending the strengthening of bridges on trunk roads to take heavier weights. In June 1989 it was agreed that the exemption should expire at the end of 1998. The Commission has proposed a number of measures to improve road safety by making the use of seat belts compulsory for all passengers in cars, and by harmonising the alcohol limit for drivers and speed limits for buses and lorries. The British Government has challenged the competence of the Community to legislate in the field of driver behaviour, which it believes is an issue not directly related to the objectives of the single market and best decided at a national level. Nor is the British Government satisfied that the safety case is properly established in respect of the proposals on alcohol limits and vehicle speed limits. Other subjects under discussion include the taxation of lorries and Community funding for transport infrastructure. In Britain responsibility for the major road networks lies with the Government. A Community directive on the assessment of the environmental effects of public and private projects, which came into effect in July 1988, requires assessments to be made for all motorway and major road construction, and for other road schemes where there is likely to be a significant effect on the environment. Civil Aviation In January 1988 the Community introduced new measures, agreed by the Council of Ministers in December 1987, enabling airlines to offer cheaper fares with fewer restrictions and laying down more liberal regulations on access for Community air carriers to routes between member states, including the provision of the right to operate scheduled air services between member states other than their own state of registration. The Community has introduced a second series of measures allowing a greater degree of competition between airlines on individual routes and more flexibility in the setting of air fares. Britain is fully committed to the creation of a liberal air transport market by 1992, and has also been pursuing more liberal air transport arrangements through bilateral discussions, including agreements with the Netherlands, Belgium, Luxembourg, the Federal Republic of Germany and the Irish Republic. Shipping In December 1986 the Community agreed a common shipping policy, which is to be implemented by 1993. The policy contains measures to liberalise Community international trade; to enable the Community to take concerted action against protectionism by other countries; to counter unfair pricing practices, particularly from state trading lines; and to establish a competition regime for shipping. The Community is now discussing further stages in the development of its common shipping policy, aimed at the harmonisation of operating conditions and improving the competitiveness of Community fleets. Britain is pressing for agreement on the liberalisation of shipping cabotage, and supports the rigorous applications of the Treaty of Rome's provisions on state aids to shipping. Inland Waterways Common policies concerning the Community's rivers and canals, which move large amounts of heavy industrial goods, focus on reducing over-capacity and barriers to transport. Measures currently being considered include those dealing with standards for crew welfare and the safety of traffic, reciprocal recognition of national boatmasters' certificates, cabotage and frontier controls. Railways and the Channel Tunnel The Community recognises the important role of the railways as part of its transport system and has adopted a number of measures aimed at improving their performance and financial position. The Council of Ministers has invited the Commission to set up a working party to advise on the development of high-speed rail links across Europe. Britain welcomes improvements in efficiency, but believes that railways should be autonomous and manage their business in a commercial way. It therefore considers that the Community's role in European railway development will need to be defined carefully. In February 1986 Britain and France signed a treaty agreeing to the development, construction and operation of a fixed link across the Channel. The project, which is being undertaken by the privately funded French/British Eurotunnel consortium, comprises twin single-track rail tunnels (and service tunnel) about 50 km (31 miles) long, with a vehicle shuttle service for cars, coaches and heavy goods vehicles. The journey time between the two terminals at Folkestone and Coquelles will be about 35 minutes, with trains reaching a maximum speed of 160 km/h (100 mph). Passenger and freight services are scheduled to begin in 1993.