The Cost of Non-Europe in theSingle MarketI - Free Movement

of Goods

STUDY

EPRS | European Parliamentary Research Service

European Added Value UnitSeptember 2014 PE 536.353

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The Cost of Non-Europein the Single Market('Cecchini Revisited')

In May 2013 the European Parliament's Committee on Internal Market and ConsumerPolicy (IMCO) requested a Cost of Non-Europe Report in the field of the European SingleMarket. Cost of Non-Europe Reports are intended to evaluate the possibilities foreconomic or other gains and/or the realisation of a public good through common actionat EU level in specific policy areas and sectors.

In response to IMCO's request, the European Added Value Unit of the EuropeanParliamentary Research Service (EPRS) has produced this Cost of Non-Europe Report,which seeks to analyse the costs for citizens, businesses and relevant stake-holders ofremaining gaps and barriers in the Single Market, building on, and updating, the 1988Cecchini Report which quantified its potential benefits.

In addition to a general paper bringing together the research findings as a whole, theexercise comprises five studies commissioned from outside experts on specificdimensions of the subject, which are published as separate documents:

I Free Movement of GoodsStudy by RAND EuropeThis study uses an econometric model to estimate the potential benefits ofremoving existing barriers to foreign direct investment and non-tariff tradebarriers within the European Union. The removal of existing trade barriers couldboost total intra-EU merchandise exports up to 7 per cent in the long-term. Theseeffects will vary by Member State, and by sector of the internal market.

II Single Market for ServicesStudy by CEPSThis study attempts to take stock of the remaining gaps or deficits in intra-EUmarket access obligations in services, and the related deficits in the properfunctioning of the internal market for services. It also tries to identify thequantitative and qualitative economic gains of overcoming the costs of non-Europe of the remaining fragmentation, insofar as the EU can address suchdeficits.

III Digital Single MarketStudy by GHKThis study analyses the gaps in the European digital single market legislationwhich prevent attaining the benefits of a fully functioning e-commerce singlemarket. It provides a qualitative appreciation of the existing legislation,

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identifying gaps where further legislative action at European level could bebeneficial and quantifying the direct costs of failure to legislate and the potentialbroader economic impact of closing the gaps.

IV Public Procurement and ConcessionsStudy by Europe EconomicsOne of the key benefits of the Single Market was expected to arise in the contextof public procurement. This study updates the analysis presented in the CecchiniReport, estimates the value of savings to the public purse that have beenachieved to date through European legislation on public procurement, anddiscusses the extent to which future savings might be achieved (in particularfollowing approval of the proposals for new public procurement directives inJanuary 2014).

V Consumer acquisStudy by GHKThis study analyses the gaps in European consumer legislation. It provides aqualitative appreciation of the existing legislation, identifying areas wherefurther EU legislative action could be beneficial, and provides tentative estimatesof the costs of failure to legislate. It is not intended as comprehensivequantification, but rather as a snap shot of some benefits which could beattained through completion of the consumer acquis.

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The Cost of Non-Europein the Single Market

- I -

Free Movement of Goods

Studyby RAND Europe

Abstract

Cost of Non-Europe Reports identify the possibilities for economic or other gainsand/or the realisation of a public good through common action at EU level inspecific policy areas and sectors. This Cost of Non-Europe Report seeks to analysethe costs for citizens, businesses and relevant stake-holders of remaining gaps andbarriers in the European Single Market, building on and updating the 1988Cecchini Report, which quantified its potential benefits.

This particular study - the first in a series - uses an econometric model to estimatethe potential benefits of removing existing barriers to foreign direct investmentand non-tariff trade barriers within the European Union. The removal of existingtrade barriers could boost total intra-EU merchandise exports up to 7 per cent inthe long-term. These effects will vary by Member State, and by sector of theinternal market.

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AUTHORS

This study has been written by Marco Hafner, Enora Robin and Stijn Hoorens of RANDEurope at the request of the European Added Value (EAV) Unit of the Directorate forImpact Assessment and European Added Value, within the Directorate-General forParliamentary Research Services (DG EPRS) of the General Secretariat of the EuropeanParliament.

RESPONSIBLE ADMINISTRATORZsolt Pataki, European Added Value UnitTo contact the Unit, please e-mail eava-secretariat@ep.europa.eu

This document is available on the Internet at: www.europarl.europa.eu/thinktank

LINGUISTIC VERSIONS

Original: EN

DISCLAIMER

The content of this document is the sole responsibility of the author and any opinionsexpressed therein do not necessarily represent the official position of the EuropeanParliament. It is addressed to the Members and staff of the EP for their parliamentarywork. Reproduction and translation for non-commercial purposes are authorised,provided the source is acknowledged and the European Parliament is given prior noticeand sent a copy.

Manuscript completed in June 2014. Brussels European Union, 2014.

PE 536.353ISBN: 978-92-823-5545-9DOI: 10.2861/5772CAT: QA-02-14-330-EN-N

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Contents

Figures and tables ......................................................................................................................... 6

Executive summary....................................................................................................................... 7

Acknowledgements .................................................................................................................... 10

Abbreviations .............................................................................................................................. 11

Chapter 1. Introduction.............................................................................................................. 13

I. A study on the potential benefits of further economic integration in the EU .............. 13

II. Objectives and scope of this paper ..................................................................................... 14

III. Research approach................................................................................................................ 15

IV. Caveats and limitations........................................................................................................ 16

V. Structure of this paper.......................................................................................................... 17

Chapter 2. Current state of play of the internal market....................................................... 18

I. Current European legal framework ................................................................................... 18

II. Gaps and barriers in the implementation of the internal market andassociated costs ..................................................................................................................... 20

Chapter 3. A quantitative estimation of the untapped economic potential..................... 25

I. An approach to estimating trade effects of existing barriers to trade ........................... 25

II. Predicting the Internal Markets untapped potential ...................................................... 39

Chapter 4. The untapped potential at sector level: two case studies................................. 45

I. Construction materials sector.............................................................................................. 45

II. Medical devices case study.................................................................................................. 53

III. Key findings from the Construction Products and Medical Devices industry ............ 61

Chapter 5. Conclusions and discussion .................................................................................. 62

References ................................................................................................................................ 68

Appendix A: Countries included in the econometric analysis ........................................... 73

Appendix B: Econometric results Gravity Model ................................................................. 74

Appendix C: Classification of Medical Devices.................................................................... 75

Appendix D: Imputation Missing Country Values OECD PMR Indicator ..................... 76

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Figures and tables

Tables

Table 1: Milestones creation single market and general SM Regulation.............................. 19

Table 2: Overview Content OECD Product Market Regulation Indicators ......................... 32

Table 3: Descriptive Statistics Variables used in Econometric Gravity Model .................... 35

Table 4: Econometric Results Gravity Model ...............