7 maj 2013 Reform agenda Reforms for a competitive business environment in Sweden Blaming the EU Implementation of EU legislation for increased competitiveness # 8
Summary As the economic crisis in Europe continues, the need for growth and increased competitiveness becomes more urgent than ever. Member States are trying everything from the removal of harmful laws to making the right reforms to strengthen their competitiveness. The Swedish government has claimed that more than half of Swedish companies administrative burdens are a direct effect of EU-legislation. And the European Commission estimates that approximately 32% of companies administrative costs for adhering to EU laws are caused by inefficient implementation rather than the legislation itself. Gold-plating is the popular expression used for situations where national implementation of EU legislation exceeds the level required by that legislation, but still stays within legality. This practice is problematic for companies that must deal with different legislation when operating in several EU countries, even though the existence of the European Single Market should guarantee uniform rules. There is thus a clear case for ensuring that Swedish implementation of EU legislation does not unintentionally hamper the competitiveness of Swedish companies or contribute to the further disintegration of the European Single market. This report describes some of the problems that arise due to national over-implementation of EU-legislation and proceeds to make four recommendations to the Swedish government on how promote a more business-friendly approach to implementation that will protect Swedish competitiveness. The issue of gold-plating has a clear European dimension, and even though this report is aimed at putting pressure on the Swedish Government, the arguments are valid across all Member States. The following are our main recommendations. The Swedish government should; 1. Adopt the principle that EU legislation should be implemented in a way that does not disadvantage Swedish companies competitiveness. 2. Decide on a generally applicable Swedish definition of the concept gold-plating that is clear and usable in discussions of alternatives that exceed the minimum level for the implementation of EU legislation. Preferably, this definition should include all measures identified as gold-plating by the Swedish business-community: Extending the scope of the Directive Not taking full advantage of derogations Retaining national requirements more comprehensive than required by the directive. 1
Using implementation of the Directive as a way to introduce national regulatory requirements that fall outside the scope of the Directive. Implementing requirements earlier than stipulated in the Directive Applying stricter sanctions or enforcement mechanisms than necessary to implement the Directive correctly. 3. Decide that the minimum level for implementation of EU-laws should be determined in each individual case, and that, if there are reasons to exceed this level, these shall be clearly described, analyzed and reported in a public document. 4. Promote above-mentioned measures in a European context. 2
Innehåll Introduction... 4 Gold-plating... 5 The Lift Directive a Swedish example of gold-plating... 6 The Single Market and European competitiveness... 7 The EU institutions.... 8 Key proposals to the Swedish Government... 9 References... 11 3
Introduction In these times of economic stagnation and widespread unemployment, it is more important than ever for Europe to defend its position in the global marketplace by competitive advantages compared to other large economies. The European Commission s communication on Industrial Policy 1, pointed out the importance of improving the quality of legislation on the EU, national and local levels for the sake of strengthening European competitiveness. The European institutions have a clear role to play in ensuring that legislative proposals do not have negative impact on companies operations or the European Single Market. But a large part of the laws that companies must adhere to are adopted on a national level, when implementing EU legislation. Gold-plating is the popular expression used for situations where national implementation of EU legislation exceeds the level required by that legislation, but still stays within legality. This way of going beyond the requirements outlined in a directive takes place in all EU countries and the term gold-plating is increasingly used in discussions about reducing administrative burdens and the cost of cumulative legislation. In order for the European single market to function as intended, similar rules for the market are required in all EU Member States. Barriers to trade and free movement in the single market might arise if Governments at national, regional or local levels choose to implement adopted rules in ways markedly different from other Member States. The Swedish government has claimed that more than half of Swedish companies administrative burdens are a direct effect of EU-legislation. It is therefore crucial that the implementation of the laws does not lead to higher costs or more burdensome rules for Swedish industry. 2 Solutions to these problems are of utmost importance for businesses, but also for the Swedish government in its ambition to reduce burdensome regulation and strengthen the competitiveness of both Swedish companies and Europe at large. One reason for the lack of solutions is that clear guidelines on the optimal level of implementation of EU laws in the Swedish context do not exist, and the term-gold plating is therefore not generally agreed upon. With an unclear definition, it is difficult to have a rational discussion on the issue. We would thus like to recommend the Swedish Government to take 4 main actions in order to promote a more efficient implementation of EU legislation in Sweden. 1 An Integrated Industrial Policy for the Globalisation Era; Putting Competitiveness and Sustainability at Centre Stage, European Commission 2012. 2 Att tydliggöra gold-plating ett bättre genomförande av EU lagstiftning. 4
Gold-plating Once a EU directive is adopted by the European institutions, it goes to the Member States governments for implementation into national law. Gold-plating refers to how public authorities and ministries choose to exceed what is required to implement EU legislation correctly and on time. There are several opinions on how to best implement EU legislation throughout the European Union. Such differences of opinion make discussion of single market efficiency and gold-plating complex. Because there is no common understanding of the appropriate level in the various Member States, it is difficult to come to an agreement on how to best avoid further fragmentation of the single market. How can there be a real European single market when there are neither clear guidelines nor a common understanding of how far Member States can and should go in implementing EU legislation in their national contexts? In consultation with representatives for approximately 300 000 businesses, The Board of Swedish Industry and Commerce for Better Regulation 3 have identified the following as excessive measures that should be avoided when implementing an EU directive which impacts businesses. Extending the scope of the Directive. Not taking full advantage of any derogations. Retaining Swedish national regulatory requirements that are more comprehensive than is required by the Directive. Using implementation of a Directive as a way to introduce national regulatory requirements that fall outside the aim of the Directive. Implementing the requirements of the Directive earlier than the date specified in the Directive. Applying stricter sanctions or other enforcement mechanisms than are necessary to implement the legislation correctly. The Swedish business community suggests a definition of gold-plating that encompasses all these measures as they cause increased costs, and causes unfair competition for Swedish companies on the European internal market. We therefore urge the Swedish Government to adopt as a principle, these measures should, as a main rule, be avoided. In cases where politicians have reason to adopt one or more of these measures, they should explain the reasons and an impact assessment in a public document. To be clear, the EU Treaty allows for exceeding the minimum requirement of a Directive, and full harmonization in all areas is not necessarily desirable. However, it is important to be aware of the harmful effects this may have on the European single market and thereby on EU competitiveness at large 3 Clarifying Gold-plating Better implementation of EU legislation. 5
The High Level Group on Administrative Burdens, appointed by the European Commission, recommends that when proposing a transposition or implementing measure, Member States should always clearly identify which provisions in the new legislation are required under EU law and which provisions are proposed at the initiative of the national government, together with a clear explanation of the reason for these additional provisions. Even when there may be good reasons for going beyond the EU legislation, it is important to communicate those reasons. 4 The Lift Directive a Swedish example of gold-plating The European Parliament and Council Directive 95/16/EC of 29 June 1995 on the approximation of the laws of the Member States relating to lifts was proposed in order to decrease the risk of injuries in lifts. The result was the Lifts Directive, which requires new lifts to be equipped with inner doors. Existing lifts should be equipped with warning signs or photocells to protect people from being harmed. Sweden was one of the few countries whose competent authority required existing lifts to be adapted to the requirements for new lifts, thus extending the scope of the Directive. A large quantity of well-functioning lifts had to be changed and to significant costs for those affected. Per-Arne Rudberg, CEO of property company Humlegården reveals that the cost for changing the lifts in properties owned by his company amounted to 5 million euros (45 million Swedish Crowns). For the entire industry of property companies in Sweden, it was estimated to cost 222 000 000 euros (2 billion Swedish Crowns). 4 High Level Group; Europe can do better, 2012 6
The Single Market and European competitiveness The European Single Market is one of the most vital parts of the European Union. Its purpose is to stimulate competition and resource efficiency as well as to create economic integration in Europe, by promoting the so called Four Freedoms; the freedom of movement of, capital, services and people between the Member States. The very fundament of the single market is the existence of uniform rules that remove trade barriers and burdensome administrative procedures for companies operating in several European countries. The European Commission estimates that approximately 32% of companies administrative costs for adhering to EU laws are caused by inefficient implementation rather than the legislation itself. 5 Administrative requirements that go beyond what is required by EU legislation and differ between Member States or even regions can be debilitating for businesses, in particular if competitors in other Member States do not face the same requirements. This causes the level playing field on the single market to be increasingly uneven. Studies have shown that weak or overly burdensome implementation of EU-legislation is especially common in the areas of internal market for services and in public procurement. It is estimated that this inefficient implementation has caused a loss of 0,8 % of potential EU GDP 6. Some policy areas have a significantly higher impact than others on EU growth and competitiveness. It is therefore highly important that all legislative proposals which influence European competitiveness are analyzed in terms of this effect. This is especially crucial for new EU legislation in the context of the European single market. Such an analysis should include investment, cost for industry, and individual sectors, and should also consider how new legislation interacts with existing and planned frameworks. An estimated 8% of EU Member States import and export of goods are a direct consequence of the Single Market. 7 Trade on the European single market is the largest part of Swedish foreign trade and essential for a small, exporting country like Sweden. Fragmented national rules can cause trade barriers for products and services sold in other Member States. Gold-plating is a large contributor to such fragmentation of rules based on EU legislation. Diverging national rules contributed to reducing trade in products on the single market by up to 10% in 2000, according to the EU Commission. 8 5 EC: Cutting red tape overview of reduction measures and illustrative examples 6 Delivering a Strong Single Market, Nordic Innovation, 2012 7 High Level Group; Europe can do better, 2012 8 The European Commission s impact assessment SEC (2007) 7
The EU institutions All EU Member States have set targets to reduce administrative burdens and the European Commission has one for the European level. However, high quality and effective legislation does not start at the implementation level, but needs to be meticulously analyzed throughout the entire legislative process. The European Commission has acknowledged that further steps towards smart regulation at all levels of regulatory intervention and across all policy fields affecting industrial competitiveness is essential. Policy proposals, which will significantly affect European competitiveness single market, financial market, and environmental legislation must undergo thorough analysis. 9 Such analysis includes reporting on investment, cost, and innovation implications for companies and individual sectors as well as potential cumulative effects caused by the interaction between new and existing legislation. The opinion of business should be solicited through stakeholder consultation early in the process, when preparing such significant legislative proposals. The systematic evaluation of legislation should be carried out in all policy areas. Evaluation will lead to more evidence-based and transparent policy-making, contributing to the improvement the quality of legislation, including simplification and reducing administrative burdens. Generally, policy has been evaluated only in terms of the areas they intend to affect. The European Commission now wants to take a more comprehensive approach and ensure that any new legislation is submitted to competitiveness proofing 10, that is to analyze impacts on sectorial competitiveness during the impact assessment of a new policy proposal. The aim is to identify excessive administrative burdens, overlaps, gaps, inconsistencies and that have appeared over time, and to help identify the cumulative impact of legislation. Burdensome regulation was also among the topics discussed at the European Council meeting in March 2013. The Council conclusions emphasize the need to continue actions to reduce the overall burden of regulation at both EU and national levels and that Member States should pay particular attention to avoiding additional burdens in the implementation of EU legislation. 11 In order to reduce the burden of regulation and foster competitiveness, the European Council encourages the Commission to use the REFIT programme to identify and propose in the autumn the withdrawal of regulations that are no longer of use and to pursue the consolidation of existing legislation as part of its simplification work. The European Commission launched its new Regulatory Fitness and Performance Programme (REFIT) in December 2012, to screen all relevant legislation and identify burdens and inconsistencies in order to correct them. The Commission will then suggest legal amendments where appropriate. The identification of the top 10 most burden some EU laws for SME s are part of this approach to make legislation competitiveness-proof. 12 9 An Integrated Industrial Policy for the Globalisation Era; Putting Competitiveness and Sustainability at Centre Stage 10 Director General for Enterprise and Industry: Competitiveness Proofing 11 EUCO Spring Council 2013 conclusions 12 EU Regulatory Fitness 8
Key proposals to the Swedish Government The continued fragmentation of the European Single Market is of great importance to Swedish companies operating in several Member States, but also for European competitiveness more generally. In order for Europe to fully reap the fruits of the Single Market, we must ensure a level playing field and avoid trade barriers in the form of diverging rules between countries. It is the responsibility of each Member State to make sure that the implementation of EU legislation does not influence competition and grown negatively. We urge the Swedish Government to take the following decisions 1. To follow the lead of the United Kingdom and Germany, in adopting the principle that EU legislation should be implemented in a way that does not disadvantage companies competitiveness. 2. To decide, after consultation with stakeholders, on a generally applicable definition for Sweden of the concept gold-plating that is clear and usable in discussions of alternatives that exceed the minimum level for the implementation of EU legislation. Preferably, this definition should include all measures identified as gold-plating by the business-community: Extending the scope of the Directive Not taking full advantage of derogations Retaining national requirements more comprehensive than required by the directive. Using implementation of the Directive as a way to introduce national regulatory requirements that fall outside the scope of the Directive. Implementing requirements earlier than stipulated in the Directive Applying stricter sanctions or enforcement mechanisms than necessary to implement the Directive correctly. There is currently no common understanding of gold-plating among business representatives, politicians and government officials in Sweden nor at the EU level. A clear definition of the practice would help identify and tackle burdensome implementation. 3. To decide that the minimum level for implementation of Directives should be determined in each individual case, and that, if there are reasons to exceed this level, these shall be clearly described, analyzed and reported in a public document. National impact assessments are currently carried out by the Swedish Government Offices, but often towards the end of the legislative process and therefore have little power to influence the actual directive proposal, even if the assessment detects harmful effects to Swedish companies. We would like to see the impact assessment process aligned with the EU legislative process in order to have an impact on the final decision. 9
The Swedish Government should be transparent when they decide to gold-plate and explain the reasons why they are doing it. This procedure would also increase transparency and clarity in terms of national rules that will affect companies operating in those across borders. 4. To promote above-mentioned measures in a European context. In this context there is a strong case for Sweden to take the lead. Sweden and Swedish companies will benefit from having a common European understanding of the impact that fragmented national rules and gold-plating have on the European single market and EU competitiveness. The Swedish Government should therefore also work for agreement on a Europeanwide understanding to be used and applied to various alternatives that exceed the minimum level in implementation of EU legislation. This would preferably include all the above-mentioned measures defined as gold-plating by the Swedish business community. 10
References Board of Swedish Industry and Commerce for Better Regulation, 2012 Clarifying Gold-plating Better implementation of EU Legislation http://www.svensktnaringsliv.se/english/gold-plating-clarified_182573.html European Commission, 2013 Top 10 most burdensome EU laws for small and medium-sized enterprises: How the Commission is helping SMEs http://europa.eu/rapid/press-release_memo-13-168_en.htm European Commission, 2013 EU Regulatory Fitness http://ec.europa.eu/governance/better_regulation/documents/1_en_act_part1_v8.pdf European Commission, 2010 An Integrated Industrial Policy for the Globalisation Era Putting Competitiveness and Sustainability at Centre Stage http://eur-lex.europa.eu/lexuriserv/lexuriserv.do?uri=com:2010:0614:fin:en:pdf European Commission, 2013 Smart Regulation Responding to the needs of small and medium-sized enterprises http://ec.europa.eu/governance/better_regulation/documents/1_en_act_part1_v4.pdf High Level Group of Independent Stakeholders on Administrative Burdens, 2012 Europe can do better report on best practice in Member States to implement EU legislation in the least burdensome way http://ec.europa.eu/dgs/secretariat_general/admin_burden/best_practice_report/docs/ bp_report_signature_en.pdf European Commission, 2009 Cutting red tape overview of reduction measures and illustrative examples http://europa.eu/rapid/press-release_memo-09-474_en.htm Directorate General for Enterprise and Industry, 2012 Operational guidance for assessing impacts on sectoral competitiveness within the Commission impact assessment system http://ec.europa.eu/governance/impact/key_docs/docs/sec_2012_0091_en.pdf European Council Cover note: conclusions of the European Council 14/15 March 2013 http://www.european-council.europa.eu/council-meetings/conclusions 11
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