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Nordic iNNovatioN report 2013:03 // october 2013

Which enforcement barriers are hurting Nordic businesses?

Authors: Christian Jervelund

Amanda Stefansdotter

October 2013

Nordic Innovation Publication 2013:03


Copyright Nordic Innovation 2013. All rights reserved.this publication includes material protected under copyright law, the copyright for which is held by Nordic innovation or a third party. Material contained here may not be used for commercial purposes. the contents are the opinion of the writers concerned and do not represent the official Nordic innovation position. Nordic innovation bears no responsibility for any possible damage arising from the use of this material. the original source must be mentioned when quoting from this publication.


Nordic Innovation Publication 2013:03

© Nordic Innovation, Oslo 2013

ISBN 978-82-8277-053-8 (Print)

ISBN 978-82-8277-054-5 (URL: www.nordicinnovation.org/publications)

All Nordic Innovation publications can be downloaded free of charge as pdf files from

www.nordicinnovation.org/publications

Authors:Christian Jervelund

Amanda Stefansdotter

PublisherNordic Innovation, Stensberggata 25, NO-0170 Oslo, Norway

Phone: (+47) 22 61 44 00. Fax: (+47) 22 55 65 56.

E-mail: [email protected]

www.nordicinnovation.org

Cover photo: iStockphoto.com

Project Participants

DENMARKThe Danish Business Authority

THE NORDIC REGIONNordic InnovationRasmus WendtSenior innovation adviserPhone: +47 469 34 360E-mail: [email protected]

Which enforcement barriers are hurting Nordic

businesses?

4

Table of contents


businesses?

5


businesses?

6

Executive summary1

1 This study is a spin-off of the Copenhagen Economics study for Nordic Innovation entitled ‘Delivering a

Stronger Single Market' from 2012.


businesses?

7


businesses?

8

Chapter 1

1 Main findings

Table 1

Table 1 Comparative advantage

√ √ √ √ √

√ √ √

√ √

√ √

√ √ √ √

√ √ √ √ √ √ √ √

Figure 1


businesses?

9

Figure 1 Overview of Nordic strengths and enforcement barriers

Source: Based on analyses for this current study and Copenhagen Economics (2012).

1.1 Services

Service directive

Service directive/mutual recognition

Mutual recognition

Public procurement/mutual recognition

None

None

None

Services

Transport

Food

Green technology

Sector with advantageEnforcement barrier

Computer and

communications/ICT

Pharmaceutical products

Machinery


businesses?

10

Box 1 Falck

Worldwide revenue (2011): DKK 10.2 billion (approx. €1.3 billion)

Worldwide Employees: 25,262 employees


businesses?

11

Source: Based on CE interview June 2012, company website and other material.

Box 2

Box 2 Swedish waste handling company in Estonia A Swedish waste management company was through its subsidiary a majority owner

of a producers responsibility company’ in Estonia. An Estonian legislative change, how-

ever, limited the Swedish company's ability to hold shares in this organisation. The

new Estonian rules prohibited companies with waste management as their primary

business to be a member of a producers responsibility company, and no company was

allowed to hold an ownership interest exceeding 25 per cent of such an organisation.

The new restrictions on free movement could according to SOLVIT Sweden not be jus-

tified under EU law, and they turned to the Estonian authorities to mend the situation.

The Estonian authorities agreed that the rules constituted a barrier to trade but

claimed that the rules could be justified for reasons of environmental protection. Up-

holding the principle of producer responsibility, could, according to the authority, only

be ensured if packaging producers themselves can control the size of the fees charged

by the producers’ responsibility company. This was not possible as long as the waste

management company could hold a majority ownership in such an organisation. SOL-

VIT Sweden disagreed with the Estonian authorities' assessment that the restriction

could be justified, and claimed that there were less trade restrictive measures that

could ensure the principle of producer responsibility. The case was registered as un-

solved in SOLVIT.

Source: SOLVIT Sweden, annual report 2010

1.2 Food and green technology


businesses?

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Barriers to exporting clean technology in the Single Market

Figure 2

Figure 2 Trade value of exported wind technology, 99-08, mil-

lion USD

Source: Nordic Energy Technology scoreboard based on UN Comtrade Database

5 000 10 000 15 000 20 000 25 000

Austria

France

Netherlands

United Kingdom

Portugal

Italy

Spain

Germany

Denmark

Exporting country

Trade value in mill.

USD


businesses?

13

1.3 Policy suggestion I: SOLVIT


businesses?

14


businesses?

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1.4 Policy suggestion II: Change management

2 European Commission (2012), “Communication to the European Parliament and the Council: First Report on

the application of Regulation (EC) No 764/2008 of the European Parliament and of the Council of 9 July 2008

laying down procedures relating to the application of certain national technical rules to products lawfully mar-

keted in another Member State and repealing Decision No 3052/95/EC”, 15.6.2012, COM (2012) 292 final 3 Fernandez & Rainey (2006). 4 IBM (2008). 5 McKinsey & Co (2010).


businesses?

16

Table 2

Table 2 Worlds of Compliance

Criteria World of ob-

servance

World of domes-

tic politics

World of dead

letters

Word of transpo-

sition neglect

1: Transpostion behaviour Respect of rule of

law

Pick and choose Pick and choose Neglect

2: Administrative effectiveness Respect of rule

of law

Respect of rule

of law Neglect

Respec of rule of

law/neglect

3: NEW: Change management ? ? ? ?

Countries DNK, FIN, SWE AUT, BEL, DEU,

NLD, ESP, GBR

IRE, ITA, CZE,

HUN, SVN, SVK

FRA, GRC, LUX,

PRT

Note: Transposition behaviour is our shorthand for the original phrase of 'Process pattern at stage of trans-

position' and Administrative effectiveness is our shorthand for the original phrase of 'process pattern

at stage of practical implementation'.

Source: Falkner and Treib (2008) expanded with micro enforcement through change management

1.5 Policy suggestion III: Standardisation

6 As it reads in Falkner and Treib (2008), "… Since administrations and judiciaries generally work effectively, application

and enforcement of transposition laws are not a major problem in this world…'


businesses?

17

7 Nordic Innovation (2012b).


businesses?

18

Chapter 2

2 Nordic comparative advantages

Box

Box 3 Measure of comparative advantage

2.1 Overview

Table 3


businesses?

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Table 3 Comparative advantage in the world market?

√ √ √ √

√ √ √

√ √

√ √

√ √ √ √

√ √ √ √ √

2.2 Services

Figure 3

Figure 3 Level of regional trade in services in the EU and among

the Nordic countries

Note: The Nordic countries include Denmark, Finland, Iceland, Norway and Sweden.

Source: Copenhagen Economics (2012).

5%

89%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU Nordics

The effects of regional cooperation on trade in services


businesses?

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Table 4

Table 4 Transportation, communication and ICT services, 2010

√

√

√

√ √

√

√ √

2.3 Goods


businesses?

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Table 5 Food, machinery and pharmaceutical products, 2010

√ √ √

√

√

√ √

√ √

The Nordics are strong in some ICT goods

Figure 4 ICT goods, 2009

√

√

√

Source: OECD trade statistics, data from 2009

The Nordics are leaders in green technology


businesses?

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Figure 5 Trade value of exported wind technology, 99-08, mill.

USD

Source: Nordic Energy Technology scoreboard based on UN Comtrade Database

5 000 10 000 15 000 20 000 25 000

Austria

France

Netherlands

United Kingdom

Portugal

Italy

Spain

Germany

Denmark

Exporting country

Trade value in mill.

USD


businesses?

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Chapter 3

3 Enforcement barriers

3.1 Areas affected

Taxation (VAT)

Services

Public procurement

Goods governed by mutual recognition

Table 6

Table 6 Economic impact by areas, EU GDP

Note: *We were not able to come up with an estimate of the potential not reaped from mutual recognition

legislation, therefore we have not included the expected gain in the total. (1). Primarily VAT Directive

2006/112/EC; (2). Primarily services Directive 2006/123/EC;(3). Primarily procurement Directive

2004/18/EC; (4) primarily Regulation 764/2008.

Source: Copenhagen Economics (2012) 'Delivering a Stronger Single Market’


businesses?

24

Provision of services is accompanied by language requirements

Member States do not allow providers to acquire insurance in other Member

States.

Businesses (when providing services both online and offline) are often confronted

with additional requirements to those to which they are subjected to in the Mem-

ber State where they are established.

Directive 2004/18/EC (the so-called Public Sector Directive or Classic Directive).

This regulates tender bids and contracts awarded by public bodies, in particular of

supplies of goods and services and some public works

Directive 2004/17/EC (so-called Utilities Directive), which regulates procurement

in four specific areas of activity, namely water, energy, transport and postal ser-

vice.


businesses?

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3.2 Sectors affected

3.3 TRIS


businesses?

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Table 7 Share of detailed opinions, industries

Note: Based on the TRIS database

Source: Copenhagen Economics (2012), Delivering a Stronger Single Market, and CEPS (2012), Enforcement

in the EU Single Market

3.4 SOLVIT cases


businesses?

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Figure 6 Cases in reported to SOVLIT 2011 relating to services

Source: CEPS (2012), Enforcement in the EU Single Market

3.5 ECC centres cases


businesses?

28

3.6 Publicly procured goods and services

Figure 7

Figure 7 Reasons for not bidding cross-border

Source: CEPS (2012)


businesses?

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Chapter 4

4 Matching comparative advantages with barriers

4.1 Overview of strengths and barriers Figure 1

Figure 8 Nordic sectors with comparative advantages and en-

forcement barriers

4.2 Services

Service directive

Service directive/mutual recognition

Mutual recognition

Public procurement/mutual recognition

None

None

None

Services

Transport

Food

Green technology

Sector with advantageEnforcement barrier

Computer and

communications/ICT


Machinery


businesses?

30

Box

Box 4 The case of Falck

Worldwide revenue (2011): DKK 10.2 billion (approx. €1.3 billion)

Worldwide Employees: 25,262 employees

Lack of transparency in procedures

Unfair competition

Discriminatory measures favouring national service providers and legislative

practices seeking to avoid tendering of EMS


businesses?

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Single Market solutions

Increased use of e-procurement to make the procurement process more efficient

by reducing red tape

Removing political and administrative barriers to implementing European public

procurement procedures in EMS-services by EU authorities

Mandatory procurement for EMS-services

4.3 Transport

8 EU Commission (2011) Roadmap to a Single European Transport Area – Towards a competitive and resource efficient

transport system


businesses?

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4.4 Food


businesses?

33

4.5 Green technology


businesses?

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Figure 9 Limitations to green procurement identified by central

government procurement officials (2010)

Other barriers to exporting clean technology in the Single Market

1. No common approach to enforcement

2. Surveillance of green products is not high priority in Member States

3. Testing results are not recognised across borders

4. Court decisions are not recognised in other jurisdictions

No common approach to enforcement

9 IEA (2010) page 11 10 IEA (2008b) 11 Mark Ellis (2010). The authors also mention that a reason for the few available records may also be that authorities are poor

at recording enforcement actions.


businesses?

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Figure 10

Figure 10 Annual costs incurred by Member States in monitor-

ing retailer compliance with Energy Labelling Directive

Source: Fraunhofer et al (2009)

Surveillance of 'green compliance' is not high priority in most Member States

Figure 10

0 100000 200000 300000 400000 500000

PortugalItaly

EstoniaCyprus

RomaniaGermany

FranceSlovakiaAustria

Czech Rep.Spain

SloveniaBelgiumGreece

MaltaBulgaria

LuxembourgLatvia

FinlandLithuaniaHungaryIrelandPoland

UKSweden

DenmarkNetherlands

EUR


businesses?

36

Court decisions are not recognised in other jurisdictions

Ta-

ble 8

12 Fraunhofer et al (2009), page 127. 13 IEA (2010), page 1 14 IEA (2010), page 16 15 IEA (2010), page 13


businesses?

37

Table 8 Range of fines available in EU countries

Source: ATLETE (2010)

Testing results are not recognised across borders

16 Atlete (2008). Delivarable 2.3, page 6


businesses?

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4.6 Computer, communications services and ICT goods

legal uncertainty

non-compliance with requirements

lack of confidence in the implementation of e-Business solutions


businesses?

39

4.7 Health care


Reference pricing – takes the price for a ‘basket’ of countries and sets a price

based on the average, or on the lowest price.

Parallel trade – the core of the Single Market which allows distributors to pur-

chase goods in a Member State where prices are low, and re-sell them in a Mem-

ber State where prices are high.

17 Based on interview with industry representatives from AmCham Europe, June 2012


businesses?

40

Mitigation of parallel trade. For example, pricing policy in Spain supports rebates

for domestic consumption but not for re-exporting, thus offering a possibility to

charge lower prices domestically without risking the products being sold abroad.

Using reference pricing with baskets consisting of ‘equal income’ countries.

Ranking index where companies are rewarded for effort to enhance global access

to drugs, such as the Netherland based Access to Medicine Index.

Swedish health care exports

Box 5 Swedish health care companies abroad


businesses?

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Box 6 The case of Capio

18 London Economics, Ecorys, pwc (2011), Public procurement in Europe – cost and effectiveness.


businesses?

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- CEPS (2012) Enforcement in the EU Single Market, p. 95


43

References

Copenhagen Economics (2012), Appendix – Delivering a Strong Sin-

gle Market, Nordic Innovation, 22 June 2012.

Copenhagen Economics (2012), Delivering a Stronger Single Market,

Nordic Innovation, 22June 2012.

Copenhagen Economics (2012), Kvantificering af Grænsehindringer

Mellem de Nordiske Lande –Hvor stort stort er potetialet i større

integration?, 1November 2012.

Copenhagen Economics (2012), Presentation by Christan Jervelund,

Potentialet i et mere integreret Norden, Nordiska ministerråder 1

November 2010.

Deloitte (2011), The Internal Market for assistive ITC Final report,

June 2011.

European Commission (2012), “Communication to the European

Parliament and the Council: First Report on the application of

Regulation (EC) No 764/2008 of the European Parliament and of

the Council of 9 July 2008 laying down procedures relating to the

application of certain national technical rules to products lawfully

marketed in another Member State and repealing Decision No

3052/95/EC”, Brussels, 15.6.2012, COM (2012) 292 final.

Faulkner and Treib (2008), "Three worlds of compliance of four? The

EU-15 compared to new member states", JCMS 2008, Volume

46, number 2, pp. 293-313.

Frontier Economics (2008), The competition impact of environmen-

tal product standards, Office of Fair Trading October 2008.

Kommerskollegium (2008), SOLVIT Sverige 2008, Ett urval av

principiellt intressanta ärenden under året.



Kommerskollegium (2010), Fakta från Kommerskollegium nr 1

oktober 2010, SOLVIT hjälper privatpersoner och företag att röra

sig fritt i Europa.




44

Kommerskollegium (2011) Cross-border public procurement – an

EU perspective, November 2011.



Mustilli, F. & Pelkmans, J. (2012), Securing EU Growth from Ser-

vices, CEPS Special Report No. 67/October 2012.

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cleantech clusters and competencies – Lighthouse project: Com-

municating Nordic green solutions and competencies, report

2012:04, march 2012.

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service standards at national level in Europe.

OECD (2011), “Detailed Data from the 2010 OECD Survey on Public

Procurement”, in Government at a Glance 2011, OECD Publish-

ing. http://dx.doi.org/10.1787/gov_glance-2011-73-en

OECD (2011), “E-procurement”, in Government at a Glance 2011,

OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-

48-en

OECD (2011), “Government outsourcing”, in Government at a Glance

2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-

2011-54-en

OECD (2011), “Size of public procurement market”, in Government

at a Glance 2011, OECD Publishing.

http://dx.doi.org/10.1787/gov_glance-2011-46-en´

OECD (2011), “Special feature: Green procurement”, in Government


http://dx.doi.org/10.1787/gov_glance-2011-49-en

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livery”, in Government at a Glance 2011, OECD Publishing.


OECD (2011), “Transparency in public procurement”, in Government



OECD (2011), “Uptake of e-government services”, in Government at

a Glance 2011, OECD Publishing.


Pelkmans, J. & Correia de Brito, A. (2012), Enforcement in the Eu

Single Market, Centre for European Policy Studies (CEPS) Brus-

sels.












45

PwC, London Economics & Ecorys (2011), Public procurement in Eu-

rop – Cost and effectiveness, A study on procurement regulation.

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Table of Abstract

Series title, number and report code of publication:Nordic innovation publication 2013:03

Author(s):christian Jervelund, amanda stefansdotter

Organisation(s):Nordic innovation & the danish business authority

Title (Full title of the report): Which enforcement barriers are hurting Nordic businesses?Abstract:this study summarizes the main findings from a previous Nordic innovation study, delivering a stronger single Market (2012) and identifies the areas which have the largest impact upon Nordic business. the areas identified is the service directive, mutual recognition and public procurement. this is especially harmful for Nordic service providers, food exporters and green technology producers. the study points on four areas for action: a stronger soLvit mechanism; a mechanism which should check against parallel national legislation when new eu laws is implemented; increased focus upon common european standardization and certification within services; and finally strengthen focus upon micro level implementation in the member states.

ISBN:isbN 978-82-8277-053-8 (print) isbN 978-82-8277-054-5 (digital) (urL: http://www.nordicinnovation.org/publications)

Language:english

Name of Nordic Innovation funding program (if relevant): Commissioned by (if relevant):

Name of project:Which enforcement barriers are hurting Nordic businesses?

Project acronym (if relevant):

Nordic Innovation project number:p 11100

Pages:50

Date:october 2013

Keywords:single market, enforcement, market barriers, services, public procurement, Nordic region

Publisher:Nordic innovation stensberggata 25, No-0170 oslo, Norway phone: +47 47 61 44 00 [email protected] www.nordicinnovation.org

Main contact person:rasmus Wendt, senior innovation adviser Nordi innovation stensberggata 25, No-0170 oslo, Norway [email protected]

The Nordic region is particularly competitive in services, transport, food, green technolo-

gy, communication services and equipment, machinery and health care services includ-

ing pharmaceuticals. This leads to high exports in these industries which generates

jobs and brings wealth to the region. Barriers to exports in these industries are thus

particularly harmful for growth and wealth creation. We find evidence that a subset

of these industries namely services, transport, food and green technology are facing

barriers due to EU legislation that is not being applied as intended. For example, the

existing public procurement directives ought to pave the way for non-discrimination

between domestic and Foreign Service providers. Yet, it is not always the case, which an

example of emergency service provider Falck demonstrates.

By taking the lead and push for better enforcement of existing EU legislation within

these targeted industries in the other EU countries, the Nordic countries will directly

strengthen the competitiveness of its businesses eventually leading to higher economic

wealth. However, what is at least as interesting, but often overlooked, is that pushing

for better enforcement within the Nordic region may indirectly increase economic

wealth creation. The reason is that a level playing field in the Nordic countries provides

a ‘training’ ground for Nordic businesses sharpening their offerings and production

processes, stimulating innovation and supporting the build-up of larger businesses to

name a few. This allows them to better compete in the EU – barriers or not – and even

more importantly, to compete globally.

Nordic Innovation is an institution under Nordic Council of Ministers that facilitates sustainable growth in the Nordic region. Our mission is to orchestrate increased value creation through international cooperation.

We stimulate innovation, remove barriers and build relations through Nordic cooperationNORDIC INNOVATION, Stensberggata 25, NO-0170 Oslo, Norway // Phone (+47) 47 61 44 00 // Fax (+47) 22 56 55 65

[email protected] // www.nordicinnovation.org // Twitter: @nordicinno // Facebook.com/nordicinnovation.org

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