The European Union

The European Union (EU) is the unification of at present twenty-seven independent states based on the European Communities originated to enhance political, economic and social co-operation. Its purpose is to weld Europe into a single prosperous region by eliminating all boundaries affecting the passage of people, services, money and goods amongst Member States, the foremost purpose of the EU, when it was first constituted as the EEC, was to preclude the possibility of another conflict in Europe by developing both a common system of law and making member states economies entirely interdependent. This has been pursued by the fabrication of a single market and then a single European currency and monetary policy, by the coordinated conduct of economic policy by member states, and by joint activity in international trade negotiations. However protectionism and procedures having equivalent effect are detrimental to the interests of the EU the recent economic crisis has had an undesired effect on Member States and their politicians as the level of unemployment and decrease in economy has created anxiety and the temptation to resort to protectionism is revealing hard to oppose nevertheless this assignment will scrutinize the scenarios given in relation to the free movement of goods and determine whether the dilemma at the frontier is one compatible with EU regulations and treaties and to the finest interest of the common market.

The aftermath of World War II and the repercussions of nationalist rivalry generated a cataclysmic Europe which had become the principal victim in the aggression which had occurred, the once prosperous and civilized nations had encountered the devastating economic and social consequences attached to the conflict. Europe had become fragile with little capacity or resources to manage any essential administrative process the remedy sought was the efficient process of European integration which had been considered a necessity, as a supranational foundation which would prevent another war and would reinforce democracy. Europe as a whole needed peace, prosperity, stability a balanced economic and social environment plus development to compete with other nations more urgently than ever before,

the common market was initially established for coal, iron ore and scrap and for steel to prevent the possibility of another war occurring and materialistically impossible this occurred on the 9th May 1950, when the Schuman Declaration proposed the establishment of a European Coal and Steel Community (ECSC) which became reality with the Treaty of Paris on 18 April 1951 which was agreed between the six founding countries (Belgium, the Federal Republic of Germany, France, Luxembourg, Italy and the Netherlands) The ECSC was the first organisation to be based on the principles of supranationalism the aim was to secure peace amongst Europe’s victorious and vanquished states and proceed conjointly as equals, cooperating within mutual institutions. The Treaty of Rome (1957) displayed four economic freedoms which were the free movement of goods, free movement to provide services, free movement of capital and free movement of people.

A further step forward was made in 1979 with a European Court of Justice ruling that created the principle of mutual recognition, the advancement on the other areas was seriously lengthy and it was not until the Single European Act 1986 that a deadline of 1992 was set for the full completion of the single market by means of a considerable legislative agendas of the adoption of hundreds of directives and regulations it also broadened the authority and control of the Community in some policy matters (social policy, research, environment) and the removal of barriers to movement of people, the recognition of national standards, policies on how governments acquire services and goods, the liberalisation of financial institution and European business laws. In 1992, the Maastricht Treaty began the final leg of the Economic and Monetary Union. This came into being in 1999. Since then, the Commission has focused its efforts on liberalising the market for services and improving competitiveness through the Lisbon strategy.

The European Community is a structure of regional economic integration based on the concept of internal market an area without internal frontier’s where goods, persons and capital can move without hindrance. The Single Market is preserved with the ideology that the formula of integration of the economies between member states provides extensive reimbursements The principle of EC competition policy is to stimulate competitive economic activity by EU undertakings and to circumvent from and sanction activity considered detrimental to competition. Thus competition law aims to amplify efficiency by facilitating the finest goods and services to flow freely amongst member states Furthermore the competition rules work conjointly with the Four Freedoms , and in particular with the free movement of goods regulations. The free movement of goods rules are designed to guarantee that the Member States do not impose regulations, measures or practices that hinder the free and unrestricted circulation of goods around the Single Market. Together, the competition and free movement systems of law underpin the economic integrity of the Single Market project and as such they are crucial instruments of the EU legal order. A common market succeeds to increase prosperity, the level of employment, enlarges the opportunities to live, work and study results in decreased prices of goods and services as well as expanding consumer option the benefits are not just limited to the consumer as businesses have a larger potential market plus the accessibility of the products are enhanced.

The arrangement of an internal market is mentioned in Article 2 of the European Community provides “The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Articles 3 and 4,…” and the purposes and intent of the common market is mentioned as; “to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.”

Additionally the European Court of Justice (ECJ) in the Gaston Schul Case 15/81 [1982] ECR 1409 provided that the notion of a common market is definitive with the ‘elimination of all obstacles to intra-Community trade in order to merge the national markets into a single market’

The free movement of goods can be obstructed by protectionist measures the economic policy of limiting trade amongst states, through methods such as custom duties or charges having equivalent effect also known as tariff barriers which apply to imported goods Article 23 of the Treaty on European Union (TEU) “The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect” thus removing any fiscal barriers to free movement of goods. Other tariff barriers include taxes to which discriminate against imports. Furthermore the imposition of restrictive quotas, and other government regulations and measures intended to discourage imports, and prevent the notion of “free trade” such policies is closely associated with anti globalisation, and contrasts with common market, where government barriers to trade and movement of capital are kept to a minimum.

Currently All border controls within the EU on goods have been abolished, together with customs controls on people. The Schenge Agreement, governs police cooperation and a common asylum and immigration policy, so as to make it possible to completely abolish checks on persons at the EU’s internal borders for the majority of products, EU countries have adopted the principle of mutual recognition of national rules. Any product legally manufactured and sold in one member state must be allowed to be placed on the market in all others. It has been possible to liberalise the services sector thanks to mutual recognition or coordination of national rules concerning access to or practice of certain professions (law, medicine, tourism, banking, insurance, etc.).. Tax barriers have been reduced through the partial alignment of national VAT rates. Taxation of investment income was the subject of an agreement between the member states and some other countries (including Switzerland) which came into force in July 2005. Competition policy It is the vital corollary to the rules on free trade within the European single market. This policy is implemented by the European Commission which, together with the Court of Justice, is responsible for ensuring that it is respected Despite its achievements so far, the single market is not yet complete. Indeed, creating a genuinely integrated market is not a finite task, but rather an ongoing process, requiring constant effort, vigilance and updating. Indeed, technological and political developments mean that the environment in which the Single Market functions is changing all the time. Although many obstacles have been removed, other barriers have come to light and will go on doing so. National governments continue to resist single market measures, so the system can’t work properly. A single market can never operate across an area with such different cultures and levels of wealth.

The first complaint to the Commission mentioned is that of a manufacturer of gelatin based in Denmark, in general the EU Commission specified further strenuous European regulations for the manufacture, sale and purity of edible and pharmaceutical gelatin in response to the BSE crisis. In Sweden consignments of the gelatin have been subject to public health checks at the frontier to which payments were demanded. It determined whether the charge levied is for protectionist reasons and compatible with EU regulations. A fiscal barrier is a monetary or financial charge levied on goods inflowing into a EU member state, that is not levied on domestic goods such fiscal barriers are prohibited by the existence of the customs union as set up by Article 23 EC, it is noted that in this scenario such payments levied for the health inspections are required by domestically produced gelatin as well, the two main forms of fiscal barriers are custom duties being a charge levied on goods simply by virtue of crossing a border, and internal taxation, being taxes levied on goods that are not levied on equivalent domestic products.

Article 25 EC (ex Art 12) provides that ‘Custom duties on imports and exports and charges having equivalent effect shall be prohibited amongst Member States. Custom duties inflict a pecuniary burden upon the price of imported and exported goods which hinders trade and displays a barrier to trade custom duties are ordinarily simple to identify Commission v Italy Case 24/64 [1969] ECR 193 as being ‘any pecuniary charge, however small and whatever its designation and mode of application which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier,…even if it is not imposed for the benefit of the state, is not discriminatory or protective.’ As the charge is levied on domestic goods Article 25 EC does not apply if the charge was unilaterally applied to imported or exported goods, in the Van Gend en Loos case , the European Court confirmed the Article 25 is directly effective. This has the effect of granting the right of enforcement directly to individual private EU citizens. This ensures that EU consumers are empowered to take an active role in defending their own interests if they consider that a Member State has acted in contravention to this rule and blocked the free movement of goods.

Taxation is another device that can be employed by Member States to give domestic production and advantage over imported goods in national markets and this may well have a direct and negative effect on EU consumer costs and choices if States are allowed to proceed unchecked. For this reason the EC Treaty adds a ban on discriminatory taxation to the basket of rules guaranteeing the free movement of goods.

The second form of fiscal barrier is internal taxation which falls under Article 90 EC which provides that; “No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.” A genuine tax has been defined by the ECJ in Commission v. France Case 90/79 [1981] as “General system of internal dues applied systematically to categorises of products in accordance with objective criteria irrespective of the origin of the products” as illustrated by the case of Bergandi Case 252/86 [1988] ECR 1343 Article 90 will apply whenever a fiscal levy is liable to dissuade imports of goods originating in other Member States to the benefit of domestic production however as similar checks for which payments are levied are required by the Swedish authorities in respect of domestically produced gelatin discrimination or protectionism does appear to be in attendance As provided by Article 90(1) direct discrimination amongst parallel domestic and foreign products are prohibited and must be taxed in identical fashion this scenario replicates that principle and no evidence of supplementary burden occurs onto the foreign imports in contrast to the domestic goods as illustrated in n the early case of Lutticke Gmbh v Hauptzollamt Saarlouis Luttucke was an importer (of powdered milk) who claimed that a tax imposed by the German authorities was discriminatory given that a German produced product would not be subject to a similar demand. The European Court agreed and banned the tax, which would have had the effect of not only impeding trade between Member States, but also increasing the price of the product for consumers in Germany. With a view to protecting the integrity of the Single Market and the interests of EU consumers in general the Court of Justice enforces Article 90 with the same commitment as it applies the competition provisions and the other rules on free movement. It has shown itself typically unconcerned with and undeterred by the political sensitivities of intervening in a Member State’s taxation policy.

The second circumstances deals with inconsistent regulations of selling arrangements thus as a result the individual is to be prosecuted for breaching a Finnish law relevant to the operations which inevitably constructs a functioning boundary in the passage of goods detrimental to the notions of “free trade’ as a common system of law is not present, which is dissimilar to the first boundary and is a non-fiscal boundary that noticeably exists while fiscal barriers where contained in Articles 25 and 90 technical and physical barriers are contained in Articles 28 and 29. Article 28 provides; “Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.” Article 29 provides a similar rule in regard to exports

Concurrently the two Articles disallow absolute import and export bans, quotas, which evidently generate barriers to trade, the inclusion of the idiom ‘measures having equivalent effect’ exponentially increases the number and variety of Member State policies that could conceivably be proscribed It is quite obvious that Member States do not need to establish rules which directly discriminate against cross border trade in order produce the effect of favouring domestic production over foreign imports. Part of the EU’s rationale, just as in the context of the competition law provisions, is that this will be to the disadvantage of the Single Market generally, and in particular to the consumers based in the compartmentalised state, whose economic freedom will be reduced by a limit artificially placed on the purchasing options by the actions of their government.

The definition of a quantitative restriction was produced in Geddo v. Ente Nationale Risi Case 2/73 [1973] ECR 865 as; ‘any measures, which amount to a total or partial restraint on imports or exports or goods in transit.’ These include palpable restrictions such as the amount or value of imports permissible such measures are altogether unlawful unless justified by an express Treaty derogation under Article 30 EC. In addition the more extensive authority and scope of the definition of ‘a measure having equivalent effect to a quantitative restriction.’ The Court of Justice dealt with the issue in Procureur du Roi v. Dassonville , where it defined a measure having an effect equivalent to a quantitative restriction as: “all trading rules enacted by Member State which are capable of hindering directly or indirectly, actually or potentially, intra-Community trade” also known as the “Dassonville” formula the decisive component is demonstrating an effect of restricting the movement of goods immaterial as to whether a discriminatory intent exists the measures are distinguished into distinctly or indistinctly applicable measures the presence of a Finnish law making blood pressure monitors merchandisable only in pharmacies indicates that the law applies to both domestic and imported products without distinction as a result it would be categorized as a indistinctly applicable measure defined in Article 3 of Directive 70/50 which is no longer applicable but provided guidance so would a measure which did not differentiate between domestic or imported be illegal? The ECJ decision in Rewe-Zentrale AG v. Bundesmonopolverwaltung fur Branntwein Case 120/78 (Cassis de Dijon) The major outcome of this case is the principle of mutual recognition: the court held that there are no valid reasons why a product that is lawfully produced and marketed in one member state should not be introduced in another member state thus the actuality that James runs a mail order catalogue business in the United Kingdon will generate the presumption that it can also function and operate in another Member State. However this presumption is rebuttable solitary on the foundation of a Member State’s mandatory requirement or rule of reason which may included and relevant to this scenario the protection of public health and administrative practices seen in Commission v France case 21/84. The Keck and Mithourd Cases C-267 & 268/91 [1993] ECR I-6097 drew a distinction between obstacles to the free movement of goods arising from intrinsic characteristics of the goods and selling arrangements of the goods which is significant to this scenario the ECJ stated that selling arrangements are not considered to hinder directly or indirectly trade but are not considered to be a derogation to article 28 but are infact outside its scope altogether.

The third complaint to the commission is a company operating in the UK whom have decided to expand their operations to Germany but have faced difficulties in marketing due to a specific German law detailing compulsory product requirements similarly to the last dilemma a measure which amounts to a total rather than partial restraint on imports has occurred which are unlawful due to the existence of the law which provides that products marketing ‘sausages’ must ensure a meat matter of eighty per cent a distinctly applicable measure has not occurred thus the measures just be questioned as an indistinctly applicable measure it is presumed that the national law applies to both domestic and imported products without distinction. The company produces and markets shrimp and horseradish sausages which contain no traces of meat once again using the Cassis de Dijon rule of mutual recognition it is presumed that the lawful manufacture and marketing in the UK would also permitted in another thus this presumption as mentioned can only be rebuttable on the basis of a Member States mandatory requirement or rule of reason thus a principle that obstacles to free movement resulting from mere differences amongst national rules are caught by Article 28 EC but obstacles arising from ‘intrinsic characteristics of the goods where in Keck and Mithouard it reiterated the notion of mutual recognition where intrinsic characteristics such as the presentation of the product are prohibited by Article 30 (now 28) unless justifiable by a public interest and evidence that the measures are necessary to protect the interest concerned.

Derogations to the prohibition of non tariff barriers which fall within the scope of the Dasonville formula, will not breach Article 28 TEC if they are necessary to satisfy mandatory requirements, a derogation which is likely to be used is the Protection of Consumers to provide a rule of reason as the marketing or labeling or sausages will create confusion relating to its content however this will not suffice to rebut the mutual recognition as illustrated in Walter Rau Lebensmittelwerke v. de Smedt Pvba [1982] Belgian law required all margarine to be marketed in cubeshaped no justification was relevant on the basis of consumer protection, since any consumer confusion could be avoided by clear labelling.which is also the case here.

The last scenario provided is transparently a quantitative restriction or measure having equivalent effect to a quantitative restriction satisfying the definition provided in Geddo v Ente Nationale Risi as it clearly hinders directly intra-community trade. Unlike the previous two quantitative restrictions this measure is applied to imported goods only and not to domestic goods and is therefore distinctly applicable and the definition and examples of distinctly applicable measures are found in Article 2 of Directive 70/50 which is only used a guidance and directs and those that are applicable and relate to this particular case are as provided by Rewe-Zentralfinanz v Landwirtschaftskammer (case 4/75) which contains quality control inspections of imported products not similarly carried out on domestic products as well well as the obligation to meet certain procedures or requirements making the process of purchasing imported goods more troublesome as illustrated in Commission v. UK [1985]

Austrian firms are allowed to manufacture products with the material used in the gnomes reveals a transparent obligation and conditions for imported goods and an extensive burden the promotion of domestic products is contrary to Article 28 as in this case a public health concern is designated to include only imported goods to the advantage of domestic goods the Austrian frontiers actions are incompatible with EU regulations a hinder the notion of free trade.

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